Legislature(1999 - 2000)
05/14/1999 01:27 PM House RES
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
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SB 128-STORAGE TANK ASSISTANCE FUND CO-CHAIRMAN OGAN announced that the next order of business would be CS FOR SENATE BILL NO. 128(FIN) am, "An Act moving the termination date of the Board of Storage Tank Assistance to June 30, 1999; relating to the storage tank assistance fund, to financial assistance for owners and operators of underground petroleum storage tank systems, and to discharges from underground petroleum storage tank systems; and providing for an effective date." Number 2630 GARY WEBER, Secretary, Alaska Underground Tank Owners and Operators Association, testified via teleconference from Wasilla. CO-CHAIRMAN OGAN informed Mr. Weber that he has a proposed amendment which would increase the limit on the net worth to $1.5 million. MR. WEBER said that he did not know if that was appropriate or not. These service stations carry high asset values. What is located above ground at a service station amounts to about $250,000, while below ground amounts to about $1 million. Mr. Weber noted that this depends upon the size of the station, the type of the investment required to build the facility to which he could not speak. Mr. Weber said that he would like to here from Senator Torgerson's office regarding why net worth needed to be redefined. CO-CHAIRMAN OGAN commented that he was interested in helping small, independent operators which led to his idea to create a single-site exemption, however there were some difficulties. He asked if Mr. Weber could address that issue. In response to Representative Barnes, Co-Chairman Ogan said that a "mom and pop" operation would be a single site location in which an individual bases his/her entire livelihood. REPRESENTATIVE BARNES pointed out that on that single site there might be a motel, a grocery store, and the gas station all of which could be tied together. She expressed the need to make the "mom and pop" definition more narrow. CO-CHAIRMAN OGAN recognized that as one of the struggles being faced. Number 2815 DARWIN PETERSON, Legislative Administrative Assistant and Senate Finance Committee Aide to Senator John Torgerson, Alaska State Legislature, said that he would address Mr. Weber's question regarding the current definition of net worth. Mr. Peterson explained that Senator Torgerson and the Senate Finance Committee did not want owners or operators of underground petroleum storage tanks to use other business ventures or liabilities for other business ventures for inclusion in this definition of "tangible net worth." If the state is going to provide grants to these owners and operators, the liabilities associated with the contamination should be only the liabilities deducted for their tangible net worth. CO-CHAIRMAN OGAN asked if there was a way to craft language to address that issue. MR. PETERSON hesitated to make any recommendations because Senator Torgerson is reluctant to make any changes to the bill as crafted. He offered to respond to suggested amendments with regard to how Senator Torgerson may view such amendments. REPRESENTATIVE BARNES asked if Mr. Peterson had reviewed the proposed analysis to the proposed amendment. MR. PETERSON acknowledged that he was shown a copy of that, but he had not had a chance to review it or have Senator Torgerson review it. CO-CHAIRMAN OGAN asked if the reference to "department" referred to the Department of Law. MR. PETERSON said he believed that to be referring to the Department of Law. TAPE 99-35, SIDE B STEVEN DAUGHERTY, Assistant Attorney General, Natural Sections Division, Civil Division, Department of Law, explained that the department's first amendment would provide additional authority by allowing the Department of Environmental Conservation to adopt regulations. Currently, the bill allows the board to adopt regulations. He pointed out the way the authorities are split between the department and the board, a full regulations package would not be provided. Without the amendment, the Department of Law does not believe it possible to place regulations into effect for the 1999 season under the current legislation. CO-CHAIRMAN OGAN noted that the 1999 season is upon us. Is there even the possibility of getting regulations in place? He commented that it took three years for one of his bills to receive regulations from the Department of Natural Resources. Number 2878 MR. DAUGHERTY stated that there will be much money sitting until the regulations are in place. He believed there will be quite a bit of motivation to get the regulations in place. Under the Administrative Procedures Act (APA), the minimum amount of time to produce regulations is about two-and-a-half months. That would include the 30 day public notice and regulation review. If this amendment were adopted, the regulations could be started as soon as the bill is passed, however the regulations would not be effective until the rest of the bill becomes effective. Even still, Mr. Daugherty projected late July or early August for the regulations to be in place. That time frame would be sufficient to allow some work to proceed during the 1999 season. He noted that even when the regulations are in place, interested persons would have to apply and the department would have to act on those applications. Therefore, he projected that about a month of work would occur. MR. DAUGHERTY cited the second problem with the legislation. The current legislation only looks at the net worth of the owner, not the operator. The department views that as a large loop hole. The department has suggested language which would require certification from the owner and the operator that their net worth is below $1 million. He pointed out that the amendment provides one exception for tanks owned by the state or municipality. Under the current legislation, if a tank is owned by the state or a municipality, even with an individual operator with a negative net worth, that operator is responsible for that tank. However since the state is the owner, that operator would not be allowed to receive a grant or a loan. MR. DAUGHERTY pointed out that under the current bill, the net worth certification requires regulation. He noted that the third insertion of Amendment 2 provides an exception to the Administrative Procedures Act for adoption of the certification of the net worth form. The department has to develop a form for that. He stressed that the department would still be required to provide public notice. He informed the committee that the department would probably use the seven day notice and may only notice those on the list for these grants rather than going through newspaper publication. Therefore, the regulations would be adopted as non-APA regulations which would allow grants to proceed quickly for probably most of the season, if not the entire season. Number 2685 MR. DAUGHERTY identified the fourth problem as the definition of "net worth" which is not consistent with its definition elsewhere. The common understanding of "net worth" is assets minus liability. The department's Amendment 3 would change the definition by inserting, ",including liability" after the word "liability." Therefore the definition of "net worth" would be assets minus liability, including liabilities associated with cleanup. Under the existing legislation, the definition is unenforceable. He explained that in order to prove perjury, it would have to be proven that someone knew he/she was making an incorrect statement which would be difficult. There is also a problem in that the liabilities associated with cleanup are varied and indeterminate. Those costs are unknown until an initial release investigation is completed. That initial release provides a rough estimate of the cleanup costs. He explained that someone could be approved and qualified, work could begin, and a site assessment could result in discovering that the contamination is not as bad as thought or worse than predicted. If the contamination is not as bad as originally predicted, that individual could be ineligible half way through the process. The same scenario could occur during the corrective action process. Mr. Daugherty stated that those problems would be greatly reduced with a straight definition of net worth. CO-CHAIRMAN OGAN requested that Mr. Peterson speak to the department's amendments. He asked if Amendment 3 was adopted and the threshold of the net worth was lowered somewhat, would that alleviate part of the net worth concern. MR. PETERSON commented that Amendment 2 is the least contentious of the three amendments. Mr. Peterson believed that the Senate Finance Committee would oppose Amendments 1 and 3. The Senate Finance Committee took out the language in Amendment 1. MR. PETERSON informed the committee that he was speaking on behalf of one member of the Senate Finance Committee. He pointed out that Annette Krietzer, staff to Senator Leman, is present and may have comments. Number 2451 ANNETTE KRIETZER, Legislative Assistant and Senate Finance Committee Aide to Senator Leman, Alaska State Legislature, commented that she is in the oddest position she has ever found herself. CO-CHAIRMAN OGAN asked how this problem could be fixed. He commented that he understood and supported what the Senate is doing. He expressed concern that perhaps, large companies have benefitted from this, while some honest, hard-working people have suddenly found themselves with a large liability. Therefore, he requested comments on how to make this user friendly for the smaller operator while staying within the parameters of the constitution. MS. KRIETZER informed the committee that the program has been going on for 10 years and there were no income limits initially. The upgrading closure lists and the cleanup lists are included in the committee packet. No one else can be added to those lists. Ms. Krietzer stated that the Board of Storage Tank Assistance has done a good job ensuring that the true "mom and pop" operations have already received grants or worked through the system. She pointed out that all upgrades and closures had to be completed by December 22, 1998. The fiscal year (FY) 2000 completes the upgrade and closure program. Therefore, what is at hand is mainly the cleanup program. MS. KRIETZER pointed out that there is $24 million worth of cleanup remaining in addition to the money already spent. There is a $1 billion deficit which is what the Senate was reviewing. With regard to the $1 million net worth, that is the amount the Senate Finance Committee agreed upon, although there was one amendment to increase that amount which failed. CO-CHAIRMAN OGAN commented testimony has indicated the $1 million net worth amount to be unenforceable and not from traditional accounting means. MS. KRIETZER said that discussion occurred in the Senate Finance Committee. The Senate Finance Committee reported the legislation out of committee with that language. There were amendments which attempted to change the language which were not adopted. With regard to the Department of Law's Amendment 1, she noted that the Senate Finance Committee specifically removed the Department of Environmental Conservation (DEC) language. Ms. Krietzer indicated that the Department of Law's Amendment 2 would be consistent with Senator Leman's understanding of how this legislation would work. One of the concerns is regarding how the grant portion of this program can be least effected which the Department of Law's Amendment 2 would accomplish. The Department of Law's Amendment 3 was not accepted by the Senate Finance Committee. Number 2108 CO-CHAIRMAN OGAN inquired as to what would happen if this legislation does not pass. MS. KRIETZER stated, "I don't want to mislead the committee. The Senate Finance Committee and the Senate together have made a determination. There was a motion on the floor to remove the funding, the actual transfer of the money from the Oil and Hazardous Substance Response Fund into the Storage Tank Assistance Fund. So, it no longer appears in the front section of the operating budget." She understood that on the House side the money remains. The Senate views this legislation as the funding for the storage tank program. In response to Co-Chairman Ogan, Ms. Krietzer affirmed that the Conference Committee has not yet made that decision. CO-CHAIRMAN OGAN inquired as to what would happen if the Conference Committee does not put in the money and the bill does not move. MS. KRIETZER said in that case there would be no money for the Storage Tank Assistance Program. There would be no grants and no capitalization for the loans because the $5 million transfer from the Oil and Hazardous Substance Fund which capitalizes the Storage Tank Assistance Fund is encompassed in a fiscal note that accompanies this bill. REPRESENTATIVE JOULE asked if this bill has a Finance committee referral where some of these questions could be better addressed. Number 1958 JOHN BARNETT, Executive Director, Board of Storage Tank Assistance, Division of Spill Prevention & Response, Department of Environmental Conservation, noted that he testified on Wednesday regarding the faults encompassed in this legislation. Mr. Barnett informed the committee that he has been involved in the business end of regulations during his 20 years in the mining industry. He noted that he is essentially the drafter of the regulations and therefore, he expressed the need to have regulations that are at least workable. MR. BARNETT said that he did some research and determined that the definition of "net worth" in this legislation is contrary to every definition currently on the books. He found definitions of "net worth" in statute and regulations which he provided to the committee. Mr. Barnett said, "I see that as a dangerous precedent to define tangible net worth as two completely diverse different definitions within the state regulations." He urged the committee to change the definition of "net worth." Furthermore, he did not know how the liability associated with contamination would be defined. There are 250 sites on the cleanup list and it is unknown who will fall off the list, however all of those listed will submit information. Mr. Barnett said that it will be difficult to estimate these numbers. That could be solved with a simple "net worth" definition. MR. BARNETT indicated that putting the regulations into place would be a problem. Although there have been indications that all the "mom and pop" organizations have been taken care of, that is not necessarily the case. As Mr. Weber's seven years of cleanup illustrates, it takes a long time to cleanup contamination. There are a number of ongoing cleanups as well as a number of cleanups that have not even started. Mr. Barnett informed the committee that when this legislation was first proposed, he offered language that would have reduced the list in half. With the current language, Mr. Barnett said that he would not really know who needs assistance. Mr. Barnett believed that it would have been appropriate to receive input from the tank owners before this bill was drafted. This legislation, SB 128, was introduced the last day of March without any input from the industry or the consulting industry. There are enough flaws in the current legislation to make it difficult for this program to work. Mr. Barnett supported the Senate's concept of the elimination of large companies from the program. He indicated that the bill appears to be on its way. Therefore, he requested that the "net worth" definition be made consistent with existing state and federal law. REPRESENTATIVE BARNES inquired as to the content of existing law. MR. BARNETT reiterated that he provided the committee with information regarding the current "net worth" definitions found in Alaska's statutes and regulations. Those definitions seem to be consistent with the common use of "net worth" in the banking industry and general accounting principles which is assets minus liabilities. REPRESENTATIVE BARNES commented that there are many different definitions for various terms depending upon the statute being reviewed. MR. BARNETT recognized that, but "net worth" is utilized by everyone and he indicated the need to be consistent. In further response to Representative Barnes, Mr. Barnett clarified that he presented the Senate with the federal definition of "net worth" as a proposed amendment. That original language was briefly in the Senate Finance Committee, but was amended by Senator Torgerson to eliminate the language "minus liabilities." Number 1520 LARRY DIETRICK, Acting Director, Division of Spill Prevention & Response, Department of Environmental Conservation, remarked that he has been working on the legislation to make it acceptable. He understood the policy call of trying to define the threshold in the "mom and pop" operations which the department fully supports in concept. He explained that there are three components that are necessary which are the legislation, the operating budget for implementation, and the capital budget to capitalize the grant and loan program. He pointed out that the department has attached a fiscal note. The department's fiscal note indicates that the department can implement the legislation without an increase in the DEC proposed budget. However, there have been substantial cuts proposed for this program to the department's proposed budget. Those cuts would amount to 33 percent of the program or 10 of 33 of the existing positions in the program. The reduction is substantial enough that there will be a significant impact to the implementation of SB 128 as well as to the ongoing cleanups. MR. DIETRICK explained that such cuts have the effect of allowing the contamination of the existing sites to migrate and continue creating larger areas of contamination. Therefore, there would be a significantly higher cleanup cost later since such cleanup would be deferred into the future. That is particularly difficult for the smaller operators that are already facing a substantial burden to deal with this problem. Mr. Dietrick pointed out that the reduction also would decrease the engineering staff who have been in this program for some 10 years and are very well versed in the complexities of underground contamination. This staff reviews and closes out the cleanups and are responsible for issuing the "no further action" letters which are critical for lending institutions, property transfers and returning these properties to economic reuse. Therefore, the cuts the program faces would impact SB 128 as well as those operators, the majority of which are cleaning up without financial assistance. Basically, the legacy of abandoned service stations in Alaska will continue. MR. DIETRICK concurred with the statements made at the last meeting with regard to accomplishing this work without the use of general funds. He confirmed that the funding is coming from the prevention account which he indicated was a good use for the fund. Mr. Dietrick identified the following four technical issues: the "net worth" definition, the transitional provisions which need to be in place in order to do the rule making, the board retention to June 30, 2000, and the effective date of July 1, 2000. Number 1270 MR. DIETRICK mentioned the impacts of these cuts should the transfer not occur. Of the current cleanups, about 30 receive financial assistance while 250 do not. The small operators who are doing cleanup without financial assistance are those who will be impacted. He identified the three people in rural Alaska who are working on aboveground storage tanks as an inadvertent reduction in these cuts. These three people are attempting to keep aboveground storage tanks in compliance until the tanks can be upgraded. He also noted that the last of the grants are being processed under the 1999 program. These operators, upgrades, and close outs are operating under a compliance order by consent issued by the state that keep the Environmental Protection Agency (EPA) in Seattle until the upgrade and closure is complete. With those reductions, the EPA would assume enforcement in the last year and the department would not be able to audit the grants of about $4 million for work which will continue in 2000. REPRESENTATIVE BARNES requested that Mr. Dietrick review his comments regarding the rural Alaska positions. MR. DIETRICK explained that under the Oil Pollution Act two years ago, the Coast Guard threatened to shut down fuel deliveries on Alaska's inland waterways to facilities with aboveground storage tanks. Aboveground storage tanks are mainly utilized in the interior of Alaska. He informed the committee that he and the Division of Energy worked to estimate the total cost to upgrade those facilities which is estimated to be $200 million. The new Denali Commission has taken on that issue. Mr. Dietrick anticipated receiving federal dollars through that route and to place it towards upgrades to those rural facilities. Therefore, the attempt is to hold the federal government at bay in order to make permanent corrections to avoid the discontinuance of fuel deliveries. REPRESENTATIVE BARNES recalled that the problem with those storage tanks was identified about six to eight years ago and at that time there was federal money available. Are the same problems remaining today? MR. DIETRICK explained that the Division of Energy completed a survey of the number of tanks that existed in the state was completed about two years ago. Since that time, the Division of Energy has put in a capital budget from the prevention account. He believed that the division is on its third allocation of $1.6 million per year in order to actually do capital improvements at some of the selected sites. He said that $3 to $4 million has been appropriated to date for that problem which just scratches the surface. CO-CHAIRMAN OGAN passed the gavel to Vice Chair Masek. REPRESENTATIVE BARNES informed the committee that when the legislature rewrote the energy legislation, there was about $200 million worth of existing problems with storage tanks. She said, "Since that time when we rewrote it and got rid of all those employees that was living off the rural Alaska Division of Energy...the Division of Energy has now put themselves back another eleven employees that's coming directly out of energy appropriations,...." She was appalled by the fact that all the time and money spent thus far in this area has only accomplished an inventory of the tanks. Number 0920 JAMES HAYDEN, Program Manager, Storage Tank Program, Division of Spill Prevention & Response, Department of Environmental Conservation, noted that he worked directly with the Department of Community & Regional Affairs in implementing the limited aboveground storage tank program which is included in this funding. He acknowledged that a small amount of state dollars has been expended in the last three or four years, however that money has been utilized to match federal dollars, about $10 million. The Division of Energy has made it a high priority to obtain federal funding in larger amounts which appears to have been accomplished this year through the Denali Commission. REPRESENTATIVE BARNES emphasized that the Denali Commission has just begun. She said that she was referring to all the money it received prior to this of which she indicated there were large amounts. She reiterated that she was appalled at this situation and intended to determine how much money was spent and where that money went. MR. DIETRICK said, to his knowledge, there have been three allocations of $1.6 billion from the capital budget. Beyond that, Mr. Dietrick was unfamiliar with the Division of Energy's budget or positions. Therefore, to date, there has been a capital contribution of about $3 million to $4 million. Mr. Dietrick said that the [division's] assistance has focused on technical assistance because of it's contingency plan expertise. There is a federal requirement for those facilities to have a contingency plan. The operators are worked with in order to overcome the violations with their contingency plans because fuel delivery stops when an operator is in violation of the contingency plan. Mr. Dietrick pointed out that it is a small staff of three that work with those rural tank farms to bring them into compliance. VICE CHAIRMAN MASEK returned the gavel to Co-Chairman Ogan. CO-CHAIRMAN OGAN called an at-ease at 3:07 p.m. and called the meeting back to order at 3:08 p.m. CO-CHAIRMAN OGAN announced that Amendment 1 by the Department of Law would be left up to the discretion of the committee. Amendment 1 was not offered. CO-CHAIRMAN OGAN called an at-ease at 3:09 p.m. and called the meeting back to order at 3:10 p.m. Number 0530 REPRESENTATIVE HARRIS moved that the committee adopt Amendment 2 which reads as follows: Page 5, lines 9-12 Delete all material and insert: "(4)certifies under oath and subject to penalty for perjury, on a form required by the department, that the tangible net worth of the operator is &1,000,000 or less as of the effective date of this section, and unless the tank is owned by the state or a municipality, that the net worth of the owner is &1,000,000 or less as of the effective date of this section." Page 7, lines 25-28: Delete all material and insert: "(2)unless the owner or operator certifies under oath and subject to penalty for perjury, on a form required by the department, that the tangible net worth of the operator is $250,000 or less as of the effective date of this section, and unless the tank is owned by the state or a municipality, that the net worth of the owner is $250,000 or less as of the effective date of this section;" Page 9, following line 7: Insert a new subsection to read: "(c)AS 44.62(Administrative Procedure Act) does not apply to the development of the form for certification of net worth required under AS 46.03.420(c) enacted by section 8 of this Act, and AS 46.03.430(c) enacted by section 11 of this Act" REPRESENTATIVE WHITAKER objected in order to review Amendment 2. MR. DAUGHERTY explained that Amendment 2 closes a loophole by requiring a statement of net worth of both the owner and operator of a facility. Under the current language, only the owner's net worth is reviewed. Amendment 2 would also eliminate the statement from the APA regarding net worth. Therefore, the department would be allowed to adopt regulations without going through the APA to receive certification mentioned in these two amendments. MR. BARNETT explained, in response to Co-Chairman Ogan, that joint and several liability speaks to everyone, therefore, the owner and the operator would both be liable. The original federal program has always been owner and operator. If there is an operator, the operator would be as liable as the owner. REPRESENTATIVE BARNES asked if the tort reform law negates the problem with joint and several liability. MR. BARNETT said he was not sure that it does, but on the federal level the owner and the operator are liable. REPRESENTATIVE BARNES asked then if the federal law was being utilized versus state law. MR. BARNETT indicated that the federal law would be followed for liability for pollution. MR. DAUGHERTY noted that he did not deal with much tort law, but rather with strict liability. Under state law, both the owner and operator are liable. Number 0246 CO-CHAIRMAN OGAN asked if there was objection to Amendment 2. There being no objection, Amendment 2 was adopted. REPRESENTATIVE KAPSNER moved that the committee adopt Amendment 3 which reads as follows: Page 8, line 5: Following "liabilities": Insert ",including liabilities" REPRESENTATIVE HARRIS objected. MR. DAUGHERTY explained that Amendment 3 would change the definition of "net worth" to the standard definition: assets minus liability. REPRESENTATIVE BARNES requested that the prime sponsor's representative respond. MS. KRIETZER informed the committee that Senator Torgerson, prime sponsor, is opposed to Amendment 3. REPRESENTATIVE HARRIS inquired as the reasoning behind Senator Torgerson's opposition to Amendment 3. MS. KRIETZER indicated that Mr. Peterson spoke to that earlier. TAPE 99-36, SIDE A MS. KRIETZER said, "...talking about the state giving grants to cleanup contamination caused by an underground storage tank." REPRESENTATIVE WHITAKER requested clarification of Representative Harris' objection. MS. KRIETZER explained that the program was specifically established to deal with contamination and now it is being changed to a loan program. The legislature has the expectation that when someone's assets are reviewed (indisc.). Number 0076 REPRESENTATIVE WHITAKER indicated his agreement. He asked if the current legislation, restricts assets to only those assets adherent to the cleanup. MS. KRIETZER clarified that it would be the liabilities to the cleanup. REPRESENTATIVE WHITAKER inquired as to Mr. Barnett's thoughts on Amendment 3. Number 0184 MR. BARNETT posed the scenario of a gas station with $1.2 million in assets for that facility. That gas station has $150,000 worth of cleanup. Under this definition, only the total assets of that facility and the estimated cleanup cost can be considered. Therefore, subtracting the $150,000 from the $1.2 million in assets and that individual would not qualify under this legislation. However, under the "net worth" definition they may have $400,000 and $500,000 in notes and mortgages which would normally be deducted and allow the individual to qualify. REPRESENTATIVE WHITAKER asked if that would be adherent to the property in question only. MR. BARNETT said that was correct. REPRESENTATIVE WHITAKER surmised then that the preference would be to adopt Amendment 3. MR. BARNETT supported Amendment 3. REPRESENTATIVE KAPSNER withdrew Amendment 3. Number 0360 REPRESENTATIVE WHITAKER moved that the committee adopt Amendment 3. REPRESENTATIVE BARNES objected. CO-CHAIRMAN OGAN inquired as to Mr. Daugherty's interpretation of the liability of assets. MR. DAUGHERTY understood that this refers to all assets, not just assets connected with the contaminated property. Upon a roll call vote, Representatives Whitaker, Joule, Kapsner and Masek voted in favor of the adoption of Amendment 3. Representatives Morgan, Barnes, Harris, and Ogan voted against the adoption of Amendment 3. Representative Sanders was not present. Therefore, Amendment 3 failed to be adopted by a vote of 4-4. Number 0544 CO-CHAIRMAN OGAN moved that the committee adopt Amendment 4 which reads as follows: Page 5, line 12: Delete "$1,000,000" Insert "$1,500,00[0]" CO-CHAIRMAN OGAN explained that Amendment 4 would increase the total assets from $1 million to $1.5 million. REPRESENTATIVE BARNES objected. Upon a roll call vote, Representatives Kapsner, Joule, Masek, Morgan, Harris, Whitaker, and Ogan voted in favor of the adoption of Amendment 4. Representative Barnes voted against the adoption of Amendment 4. Representative Sanders was not present. Therefore, Amendment 4 was adopted by a vote of 7-1. Number 0642 REPRESENTATIVE BARNES moved that HCS CSSB 128 be reported out of committee with individual recommendations and attached fiscal note(s); she asked unanimous consent. There being no objection, HCS CSSB 128(RES) was reported out of committee.
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