Legislature(2003 - 2004)

03/27/2003 01:37 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 160                                                                                                            
     "An  Act   relating  to  the  emission   control  permit                                                                   
     program; relating  to fees for  that program and  to the                                                                   
     accounting  of   receipts  deposited  in   the  emission                                                                   
     control  permit receipts account;  and providing  for an                                                                   
     effective date."                                                                                                           
ERNESTA BALLARD, COMMISSIONER, DEPARTMENT OF ENVIRONMENTAL                                                                      
CONSERVATION testified in support of the legislation.  She                                                                      
read from prepared testimony as follows:                                                                                        
     Mr.  Chairmen and  members of the  committee, thank  you                                                                   
     for the  opportunity to testify  today on behalf  of the                                                                   
     Governor's air permit reform legislation, HB 160.                                                                          
     Governor  Murkowski is committed  to enhancing  Alaska's                                                                   
     economy  through resource  development.   He is  equally                                                                   
     committed  to protecting  Alaska's environment.   It  is                                                                   
     not  an either/or  proposition.   A strong economy  will                                                                   
     generate  the  revenue  base  to  continue  funding  our                                                                   
     important  regulatory   programs.    Without   a  strong                                                                   
    economy we cannot hope to have a strong government.                                                                         
     Over the last  30 years, we have learned  much about the                                                                   
     environmental  and health  hazards  associated with  air                                                                   
     pollution.   We have  also learned  much about  emission                                                                   
     control  technologies,   air  modeling   and  protective                                                                   
     ambient  air  standards.   Through  national  and  state                                                                   
     legislation  we  have  recognized  our shared  value  of                                                                   
     environmental protection  along with the many other core                                                                   
     values   that   form  the   framework   for   government                                                                   
     regulatory  programs.  Environmental  protection  is not                                                                   
     incompatible with  resource development.   Rather, it is                                                                   
     as fundamental  a component  of resource development  as                                                                   
     are labor and worker safety laws.                                                                                          
     Governor Murkowski and members  of his Cabinet recognize                                                                   
     that  Alaska's laws  taken together  form the  framework                                                                   
     for   a  successful   resource   development   strategy.                                                                   
     Environmental   laws  are  one   of  the  many   equally                                                                   
     important pieces of the public  policy mosaic.  They are                                                                   
     no more, and no less important.   This bill will improve                                                                   
     the process  and function of underlying  state policy to                                                                   
     protect  the  environment.    It  does  NOT  change  the                                                                   
     protective standards  already in place  and administered                                                                   
     by the Department through existing regulation.                                                                             
     Through  DEC's  proposed  FY  04  budget  we  intend  to                                                                   
     sharpen our  focus on our core responsibilities.   House                                                                   
     Bill 160 is essential to  achieving the results promised                                                                   
     in our budget proposal.   HB 160 achieves permit reform.                                                                   
     As you  can see - reform  requires attention  to detail.                                                                   
     The bill  is long with  many reference changes.   Reform                                                                   
     means  re-engineering the  way  we do  business.   These                                                                   
     proposed  changes in law  will substantially  change the                                                                   
     mechanisms of permitting.   Moreover, the bill makes way                                                                   
     for  many more changes  that we  can accomplish  through                                                                   
     revised  regulations.   The  ultimate result  will be  a                                                                   
     timely, predictable and rational  program that will meet                                                                   
     business and  development needs without  sacrificing air                                                                   
     Our  legislative  proposal  is based  on  two  important                                                                   
     developments  of the  last  several years.    One was  a                                                                   
     benchmarking  study  conducted by  the  department.   We                                                                   
     reviewed  the funding  and workforce  allocation in  the                                                                   
     air programs  of states that  we consider  comparable in                                                                   
     workload  and  complexity  to  Alaska.   Alaska  has  an                                                                   
     unusual  air   program.    Although  we   have  a  small                                                                   
     population,  we have a  high number  of air permits:  as                                                                   
     many operating permits as  the State of Colorado, and as                                                                   
     many major new  permits as the state of New  Jersey.  We                                                                   
     discovered  in our  benchmarking  study  that we  simply                                                                   
     have  not  funded,  staffed  or  organized  our  program                                                                   
     adequately to do the job  applicants expect.  House Bill                                                                   
     160 and the program increase  proposed in the Governor's                                                                   
     budget will  allow us to  remodel our permit  program in                                                                   
     line with successful programs in other states.                                                                             
     The second development that  guided our proposal was the                                                                   
     Air  Permit Work  Group - a  stakeholder group  convened                                                                   
     last  year.    The Work  Group  carefully  reviewed  our                                                                   
     program against  the federal Clean  Air Act and  the EPA                                                                   
     rules that have been amended  several times establishing                                                                   
     new   programs  and   control  concepts.     Our   state                                                                   
     permitting program  has not kept pace with  the national                                                                   
     regime   or  the  needs   of  Alaskan  communities   and                                                                   
     industry.  The Work Group  report is in your packets and                                                                   
     the work group recommendations  are incorporated into HB
     Specifically, this bill:                                                                                                   
   · Creates a predictable, timely and rational permitting                                                                      
   · Changes how we regulate minor sources using more                                                                           
     standardized permit conditions  based on best management                                                                   
     practices.   Our present "permit by rule"  program works                                                                   
     for  the oil  drilling  rigs.   We  want  to expand  the                                                                   
     concept  and  apply it  to  more  situations.   For  our                                                                   
     population size, we have many more mobile and portable                                                                     
     plants and machinery than most states.  We need the                                                                        
     tools to work with this unusual but essential fleet.                                                                       
   · Exempts  sources from permitting  to the extent  allowed                                                                   
     under federal law.                                                                                                         
   · Streamlines permitting  for the major sources  in Alaska                                                                   
     by matching our procedures to those in federal rules.                                                                      
   · Achieves  efficiency through  adopting federal  rules by                                                                   
     reference  - this  will make  it much  easier for  us to                                                                   
     permit rural power  plants - we will be able  to use the                                                                   
     so-called "clean unit test"  to avoid a detailed site by                                                                   
     site technology analysis.                                                                                                  
   I want to take some time to explain  our zero fiscal note.                                                                   
   The bill itself  does not  warrant a significant  increase                                                                   
   in staffing.  However, reform and streamlining  alone will                                                                   
   not obtain the  desired result.   On-time permitting  in a                                                                   
   fast changing  resource development  climate  can only  be                                                                   
   achieved through  a combination  of reforming the  process                                                                   
   and  increased  staff.    Without  additional  staff,  the                                                                   
   important changes achieved through the  legislation cannot                                                                   
   be delivered.                                                                                                                
   We are asking for an  increment in the Governor's  FY 2004                                                                   
   Operating Budget to  increase staffing for  permitting and                                                                   
   field functions and to  hire contractors to  handle fluxes                                                                   
   in  permitting  demands  -  both  critical  components  to                                                                   
   achieving overall success.                                                                                                   
   The direction  in which  I  am leading  the department  is                                                                   
   based on my  commitment to  develop sound,  understandable                                                                   
   standards, spend  time in  the field and  enforce the  law                                                                   
   when it is necessary to achieve compliance.                                                                                  
   I have  proposed additional  staffing in  this program  to                                                                   
   fulfill my commitment.   A well run air permit  program is                                                                   
   essential to  the economic  and social  well being  of our                                                                   
   state.   I  also  want  you  to know  that  while  we  are                                                                   
   increasing this  very important  program,  we have  looked                                                                   
   closely at our  mission and have  reduced our  services so                                                                   
   that we are  only providing  those that  are essential  to                                                                   
   our  mission   of  protecting   public   health  and   the                                                                   
   environment.   With  this  increment  as well  as  several                                                                   
   other small  increases  in  core permitting  programs  the                                                                   
   department  still has  an  overall  net  reduction  of  13                                                                   
   positions and $153,000.                                                                                                      
Co-Chair Harris MOVED to adopt the Committee Substitute for                                                                     
HB 160 (FIN), Work Draft (23-GH1059\D).  There being NO                                                                         
OBJECTION, it was so ordered.                                                                                                   
Co-Chair Harris referred to the fiscal note (#1, DEC,                                                                           
3/3/03) and asked if the numbers were correct.                                                                                  
Commissioner  Ballard  clarified  that  the new  fiscal  note                                                                   
(3/26/03)  was actually a  zero fiscal  note.  She  explained                                                                   
that in  preparing the  initial fiscal  note, the  department                                                                   
followed  instructions   to  reflect  that  the   amount  was                                                                   
included in the  FY 04 budget and would therefore  be "zeroed                                                                   
out".   She  noted that  a subsequent  meeting with  Co-Chair                                                                   
Williams'  staff clarified  that  the appropriate  course  of                                                                   
action was actually to prepare a zero fiscal note.                                                                              
Co-Chair Harris asked   if  positions  would  be   added  and                                                                   
pointed  out  that  seven  new  positions  reflected  in  the                                                                   
previous fiscal  note did  not now appear  on the  new fiscal                                                                   
Commissioner  Ballard  responded   that  new  positions  were                                                                   
intended to implement  the new program.  She  maintained that                                                                   
the  legislation could  not be  properly implemented  without                                                                   
additional staff  and that staff  needed the new  legislation                                                                   
to improve the permitting program.                                                                                              
Co-Chair  Harris referred  to  the previous  fiscal note  and                                                                   
asked  about  funds  to  be  received   from  the  Clean  Air                                                                   
Protection Fund.                                                                                                                
Commissioner  Ballard clarified  that the  Federal Clean  Air                                                                   
Protection  Act  established   a  permit  program,  paid  for                                                                   
through permit  fees.  She  stated that collected  fees would                                                                   
offset the entire cost of the  budget request increment.  She                                                                   
did not feel  it was appropriate for the Department  to raise                                                                   
fees in order to upgrade the program.                                                                                           
Co-Chair Harris contended  that  the previous  note was  more                                                                   
appropriate.   He noted, however, that although  the spending                                                                   
was  increased,  the  program  did not  seem  to  impact  the                                                                   
overall governmental budget.                                                                                                    
In response  to a question  by Co-Chair Harris,  Commissioner                                                                   
Ballard  responded that  the seven new  positions would  work                                                                   
with existing positions in an entirely new program.                                                                             
Co-Chair Harris asked  for a definition  of a major  versus a                                                                   
minor source.   Commissioner Ballard  responded that  a major                                                                   
source might be  a power plant, whereas a minor  source might                                                                   
be an asphalt plant.                                                                                                            
Representative Joule asked about  the differences between the                                                                   
Committee  Substitute and  the original  bill.   Commissioner                                                                   
Ballard deferred to Mr. Chapple.   She noted the Department's                                                                   
review and support of the Committee Substitute.                                                                                 
TOM CHAPPLE,  DIRECTOR,  DIVISION OF AIR  AND WATER  QUALITY,                                                                   
DEPARTMENT    OF    ENVIRONMENTAL    CONSERVATION    provided                                                                   
information   regarding   key   changes  in   the   Committee                                                                   
Mr.  Chapple  referred  to  Section  12, on  page  5  of  the                                                                   
Committee   Substitute,   sub-section  (f),   pertaining   to                                                                   
facilities  exempt from  permitting.   He noted the  language                                                                   
change of "exempt  or defer", since some federal  rules speak                                                                   
of deferring  a source if a  permit were required at  a later                                                                   
point.  He also  referred to Section 13, line  12 of the same                                                                   
page,  pertaining to  construction  permits.   He noted  that                                                                   
current  statute  indicates numbers  regarding  quantity  per                                                                   
year of emission,  but left some criteria to  regulation.  He                                                                   
explained  that  the  changes specified  the  federal  cutoff                                                                   
values, linking it to the federal regulation.                                                                                   
Mr. Chapple also referred to page  7, Section 15 of the bill,                                                                   
line 21, where  a new sub-section (2) is added,  dealing with                                                                   
monitoring, record  keeping and  reporting requirements.   He                                                                   
noted  that the  new  provisions  linked with  federal  rules                                                                   
about monitoring permits.                                                                                                       
Mr. Chapple  then referred to  Section 25, on page  12, under                                                                   
"General minor  permits". He  briefly defined these  permits,                                                                   
and  stated that  the  section  allowed general  permits  for                                                                   
minor sources.   He noted previous confusion  over the permit                                                                   
holder.    He maintained  that  the  language  clarified  the                                                                   
permit user.                                                                                                                    
Mr.  Chapple also  referred  to  Section 26  under  Temporary                                                                   
operations. He referred to line  27, changing the number from                                                                   
thirty to  ten days.   He  noted that  federal rules  had not                                                                   
been drafted at  the time of the original bill,  and that the                                                                   
federal rules  now specifies  ten days,  a time period  which                                                                   
also corresponds to industry needs.                                                                                             
Mr. Chapple  referred to Section  54, page 23,  which defines                                                                   
the  term "modification".   He  noted that  the citation  was                                                                   
more  specific  in  federal regulations,  and  that  the  new                                                                   
language corresponds to federal regulation.                                                                                     
Mr. Chapple  referred to Section  59, on page 25,  which adds                                                                   
definitions  of "major  modification"  and "major  stationary                                                                   
source".   He also  referred to  Section 62,  page 25,  which                                                                   
adds a new  sentence placing a requirement on  the department                                                                   
to adopt  regulations recently  adopted by the  Environmental                                                                   
Protection Agency (EPA).  He emphasized  that the regulations                                                                   
were important to the state of Alaska.                                                                                          
Co-Chair  Harris   asked  if  the  Department   had  received                                                                   
statewide   feedback  from  various   groups  regarding   the                                                                   
Mr. Chapple responded that they  had heard predominantly from                                                                   
the  Stakeholder  Group, representing  the  oil  and gas  and                                                                   
mining  industries,   as  well  as  members   of  the  Prince                                                                   
Williams' Sound and  Cook Inlet advisory councils.   He noted                                                                   
that those  parties engaged  in substantive discussion  about                                                                   
the bill throughout the late summer and early fall.                                                                             
Co-Chair  Harris  asked  about the  differences  between  the                                                                   
modified  Alaskan  statute  and   federal  law  in  terms  of                                                                   
emission standards.                                                                                                             
Mr.  Chapple stated  that the  bill  did not  change "out  of                                                                   
stack"  limits, which  still exist  along  with ground  level                                                                   
limits, also  known as ambient  public health standards.   He                                                                   
stated  that the  bill  merely  streamlined the  process  for                                                                   
timely  permitting   and  attained  efficiencies   by  better                                                                   
imitating  federal   standards.     He  explained   that  one                                                                   
efficiency  moved  "minor  sources"  from  the  major  source                                                                   
permitting program and created a new, streamlined program.                                                                      
Mr.  Chapple  also  stated  that   the  Committee  Substitute                                                                   
reflected   conversations  between   the   Sponsor  and   the                                                                   
Department, and that provisions  had been thoroughly examined                                                                   
by DEC staff and the Department of Law.                                                                                         
MARILYN  CROCKET,   DEPUTY  DIRECTOR,  ALASKA   OIL  AND  GAS                                                                   
ASSOCIATION  (AOGA) testified  in support of  the bill.   She                                                                   
explained that  her organization  was a trade  association of                                                                   
seventeen oil and  gas companies in the state  of Alaska. She                                                                   
observed  that  the  oil  and  gas  industry  had  long  been                                                                   
involved  in  the  air  permitting   process  and  an  active                                                                   
participant in  the aforementioned discussions  to revise the                                                                   
state's  regulatory  program.   She  noted that  the  revised                                                                   
process allowed timelier permitting  and more clearly defined                                                                   
fees.   She also observed that  the new program  more clearly                                                                   
resembles the federal program.                                                                                                  
Ms. Crocket noted two changes  in the Committee Substitute to                                                                   
which AOGA  took exception.   She noted  a citation  error in                                                                   
referring  to  federal  rules:    page 25,  lines  2  and  5,                                                                   
referring  to 40  CFR.165 and  .166, should  read 51.165  and                                                                   
Representative Foster  MOVED to accept the  technical changes                                                                   
[CFR  51.165 and  CFR 51.166]  to  the Committee  Substitute.                                                               
There being NO OBJECTION, it was so ordered.                                                                                    
Ms. Crocket also referred to page  7, lines 21-25, pertaining                                                                   
to monitoring and reporting requirements.   She noted the new                                                                   
language  "but  which  may  be   supplemented  by  additional                                                                   
requirements that".  She suggested  that the language was not                                                                   
consistent with the  recommendations of the Work  Group.  She                                                                   
noted  the  great  challenge   of  monitoring  and  reporting                                                                   
requirements.    She  observed   that  Alaska's  terrain  and                                                                   
climate  might  sometimes  result   in  additional  or  other                                                                   
monitoring  requirements.   She summarized  that the  oil and                                                                   
gas  industry  did not  anticipate  that  the  recommendation                                                                   
would  add  additional monitoring  requirements,  but  rather                                                                   
enhance flexibility to take into  account Alaska's situation.                                                                   
Mr. Chapple noted  that the words that were  developed in the                                                                   
Work   Group  were   "take  into   account  Alaska's   unique                                                                   
conditions".  He suggested that  a change had occurred in the                                                                   
drafting process.  He suggested  that the words "supplemented                                                                   
by additional requirements that" be omitted.                                                                                    
Representative  Croft  suggested   "additional  or  different                                                                   
requirements" as a possible solution.                                                                                           
After further  discussion by  Committee members,  Ms. Crocket                                                                   
suggested  that the  sentence might  read "but  which may  be                                                                   
modified   to  take   into   account  this   state's   unique                                                                   
STEVE MULDER, ASSISTANT ATTORNEY  GENERAL, DEPARTMENT OF LAW,                                                                   
testified  via   teleconference.    He  stated   that  either                                                                   
solution would  be acceptable, but recommended  the option of                                                                   
"additional or different".                                                                                                      
Co-Chair Harris  recommended the  solution of "but  which may                                                                   
be  modified  to take  into  account",  as suggested  by  Ms.                                                                   
Representative  Whitaker  asked  whether  the intent  was  to                                                                   
establish a limitation as to compliance  with record keeping,                                                                   
reporting and  monitoring requirements.   He speculated  that                                                                   
the goals were for specificity and clarity.                                                                                     
Mr. Chapple  clarified that the  intent was to  be consistent                                                                   
with  federal  regulations,  while  allowing  flexibility  to                                                                   
respond to Alaska's unique conditions.                                                                                          
In response  to a  question by  Representative Whitaker,  Mr.                                                                   
Chapple confirmed  that this would provide more  certainty to                                                                   
applicants as to requirements.                                                                                                  
Representative Croft emphasized  that the bill did not change                                                                   
the overall  standards.  He referred  to Page 9,  which lists                                                                   
the  substantive  standards,  and  differentiated  this  from                                                                   
reporting  requirements, which  required more flexibility  in                                                                   
Co-Chair Harris  pointed out that  "modify" did  not preclude                                                                   
additional requirements.                                                                                                        
There  being  NO  OBJECTION,  the  Committee  Substitute  was                                                                   
amended  to read  "but which  may  be modified  to take  into                                                                   
account  this state's  unique conditions"  (page 7, lines  24                                                                   
and 25).                                                                                                                        
TADD OWEN,  EXECUTIVE DIRECTOR, RESOURCE  DEVELOPMENT COUNCIL                                                                   
(RDC)  testified via  teleconference in  support the  amended                                                                   
version  of  the  Committee  Substitute.    He  read  from  a                                                                   
prepared statement as follows:                                                                                                  
    Thank  you, Mr. Chairman. For the record  my name is Tadd                                                                   
    Owens,  I  am  the  executive director  of  the  Resource                                                                   
    Development   Council.  RDC  is  a  private,  non-profit,                                                                   
    business   association   representing   individuals   and                                                                   
    companies  from  Alaska's oil  and  gas, mining,  timber,                                                                   
    tourism  and fisheries  industries.  Our membership  also                                                                   
    includes   electric  utilities,  local   communities  and                                                                   
    Native  regional and village corporations.  RDC's mission                                                                   
    is   to   help   grow  Alaska's   economy   through   the                                                                   
    responsible    development   of   the   state's   natural                                                                   
    RDC  supports the amended  version of House Bill  160 and                                                                   
    we   ask  the  House   Finance  Committee  to   move  the                                                                   
    legislation  forward. I would  like to thank DEC  for not                                                                   
    only   establishing  a   Work  Group   to  evaluate   the                                                                   
    department's   air  permitting  program,   but  also  for                                                                   
    taking  action  on  that group's  recommendations.  While                                                                   
    RDC  did  not formally  participate  in  the Air  Program                                                                   
    Work  Group, several  of our members  did and  we endorse                                                                   
    their recommendations.                                                                                                      
    Working  in  cooperation  with the  regulated  community,                                                                   
    DEC   has  successfully   addressed   many  of  the   air                                                                   
    program's  major  weaknesses and  inefficiencies. HB1  60                                                                   
    provides    DEC    with   additional    flexibility    in                                                                   
    administering  the  air  program  and it  simplifies  the                                                                   
    permitting   process   for   those   in   the   regulated                                                                   
    Specifically, this bill accomplishes the following:                                                                         
     • It allows DEC's program to remain consistent with the                                                                    
       federal program on a long-term basis                                                                                     
     • It differentiates between major and minor source                                                                         
       permits and standardizes the requirements for minor                                                                      
     • It restructures the program's fee schedule making the                                                                    
       costs more transparent and predictable for applicants                                                                    
    In  or  view,   this  legislation  will  result  in  more                                                                   
    efficient  review of permits  allowing agency  staff more                                                                   
    time  and  resources  for  the field  work  necessary  to                                                                   
    protect  Alaska's  air quality.  HB1  60  also creates  a                                                                   
    much more user-friendly process for those in the                                                                            
    regulated community. The legislation has RDC's strong                                                                       
HENRIK WESSEL, ENVIRONMENTAL OFFICER,  GOLDEN VALLEY ELECTRIC                                                                   
ASSOCIATION testified in support  of the Committee Substitute                                                                   
and thanked the Working Group  for their recommendations.  He                                                                   
noted that his group was a non-profit  cooperative serving 90                                                                   
thousand  residents.    He  commended   the  legislation  for                                                                   
streamlining the  permitting process, while  still protecting                                                                   
the environment.                                                                                                                
Representative Foster  MOVED to report CSHB 160  (FIN) out of                                                                   
Committee with the accompanying  fiscal note.  There being NO                                                                   
OBJECTION, it was so ordered.                                                                                                   
Committee  Substitute  HB  160  (FIN)  was  REPORTED  out  of                                                                   
Committee  with a  "do pass"  recommendation and  a new  zero                                                                   
fiscal note from Department of Environmental Conservation.                                                                      
TAPE HFC 03 - 39, Side B                                                                                                      

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