Legislature(1993 - 1994)
03/24/1993 08:00 AM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 238: OIL/HAZARDOUS SUBS. RELEASE RESPONSE FUND CHAIRMAN WILLIAMS explained that there had been a large number of persons who responded to the announcement of a teleconference hearing on HB 238. Because of the complexity and public interest in the bill, he announced that the committee would take as much time as needed to hear all public testimony, and that the bill would not be moved at this meeting. He explained that the bill had been sponsored by the House Special Committee on Oil and Gas, and would be summarized by the chair of that committee, Representative Joe Green. He noted for the record that Representative Cliff Davidson was in attendance at the meeting, as well. Number 438 REPRESENTATIVE JOE GREEN, spoke as the CHAIRMAN OF THE SPONSORING COMMITTEE, THE HOUSE SPECIAL COMMITTEE ON OIL AND GAS. He stated that HB 238 was not about the oil industry, but rather was about fiscal responsibility and accountability. He noted that the date of this meeting was the fourth anniversary of the Exxon Valdez oil spill. He called the response to the spill a series of bureaucratic bumbling, indecision and lack of coordination. He said there had been no cohesive plan backed up by equipment, technology and personnel to carry it out. Also lacking was a readily available, accessible fund that could be used by the Department of Environmental Conservation (DEC) to respond to a spill. Number 460 REPRESENTATIVE GREEN said the spill had sparked legislation in 1989 that initiated a spill response fund. One of the bills imposed an assessment of five cents per barrel on the oil industry to generate a fund. He explained that at the time the fund was established, it was to have a cap of $50 million. However, he said that the oil industry had already paid in excess of $80 million into the fund, which had also been added to by general funds in almost the same amount. He referred to a House Research report in members' packets that showed the amount currently in the fund could be almost as high as $23 million, or as low as $100,000, depending upon how the figures are interpreted. REPRESENTATIVE GREEN questioned how the money had been spent, and said that the DEC's records are insufficient to account for expenditures from the fund. He acknowledged that some of the funds had been spent cleaning oil and hazardous waste, and stated that the DEC is obligated by statute to recover those expenditures from the spiller. He read from a letter from the Alaska Environmental Lobby written in response to HB 470, enacted in 1986, which called for clear direction to the state to pursue reimbursement from parties responsible for spills. REPRESENTATIVE GREEN told the committee that a 1991 DEC internal audit showed the DEC had recovered just over half of the money spent on spills. He then referred to the most recent DEC report, which states "full cost recovery of the majority of incidents has not occurred." One of the causes for poor rates of recovery, he said, relates to poor documentation of expenses when the Department of Law goes to court to try to recover. Number 509 REPRESENTATIVE GREEN also complained of poor tracking of money from the fund that is transferred to other departments. He referred to a recent DEC Finance Subcommittee meeting, where he said the director of the Division of Spill Prevention and Response told the subcommittee, "We've created a public trough, but we watch it closely." Representative Green said it was not watched closely enough. He then referred to a report from a governor's task force on organizational efficiency, and quoted, "The liberal use of the fund appears to be driving up total state spending with little concern for efficiency." REPRESENTATIVE GREEN related again the $80 million contribution of the oil industry to the fund, and said that was not the extent of the industry's financial commitment. He noted that Alyeska Pipeline Service Company had invested in an inventory of spill response equipment and trained personnel. He pointed out that the world's largest accumulation of spill response equipment is in place in Prince William Sound, as well as a work force of hundreds. Number 546 REPRESENTATIVE GREEN referred to Alaska Clean Seas, a consortium of oil producers, and said the group has an inventory of over 70 miles of response booms. He also pointed to the great steaming capacity of the industry. In addition, he said that approximately $14.5 million was being spent on response equipment and storage facilities in strategic locations to respond to spills in Prince William Sound or the North Slope. He referred to 1989 legislation that called for the fund to finance response depots in other parts of the state. He said that these have not been established. He said HB 238 or something like it must be passed this year to respond to these problems. Number 570 REPRESENTATIVE GREEN said the response fund had turned into a trough, and "when you pull the critters who have become dependent on a trough away from that trough, they squeal." He suggested that if the state did not learn from history, it would be doomed to repeat it. If another spill occurred in Alaskan waters, he hoped that the fund would not be found empty because of unauthorized extravagances. House Bill 238 was submitted, he said, to prevent further pirating and possible legal action for improper administration of the fund. Number 580 REPRESENTATIVE DAVID FINKELSTEIN objected for the record to the remarks made by Representative Green referring to certain parties as "squealing." Representative Finkelstein said that members of the public are trying to work together to find solutions to the oil spill threats faced by Alaska. He called Representative Green's remark rude. Number 586 JANICE ADAIR, ASSISTANT COMMISSIONER OF THE DEPARTMENT OF ENVIRONMENTAL CONSERVATION (DEC), told the committee there seemed to be a great amount of misinformation surrounding the use of the spill response fund. She explained that at the time of the Exxon Valdez oil spill in 1989, the legislature took quick action in passing a number of bills. Three of particular importance were SB 260, SB 261, and SB 264. The DEC's Division of Spill Response was established by SB 264, she said, and SB 261 mandated the preparation, review and revision of state and regional master plans for oil contingencies, and directed the restoration of the environment after a release. MS. ADAIR explained that SB 260 was the funding source for those activities, and created the nickel a barrel oil surcharge account. She related that throughout the testimony on those three bills (the minutes for which she had supplied to the committee), it was very clear the legislature intended for the nickel a barrel to fund the DEC programs that relate to spill response. Within the statutory provisions of the response fund in Title 46, she said, there is a list of activities for which the fund can be used. All uses of the fund, she said, require legislative appropriation except when there is an emergency where the DEC has to take a first response activity. MS. ADAIR said the DEC was absolutely not able to go into the fund to use it however they wanted to. She said the DEC spends hours going over the uses of the fund in excruciating detail with the DEC finance subcommittee, including what other agencies get money from the fund and what they would do with it. In previous years, she said, money was appropriated directly from the fund to different agencies, without the DEC's knowledge of where or how the monies were being spent. Since that time, Ms. Adair explained, the DEC and its finance subcommittee have worked with the Office of Management and Budget to run all of the expenditures from the fund through the DEC in the form of Reimbursable Services Agreements (RSA's). MS. ADAIR clarified that the balance remaining in the fund is just over $23 million. She said this figure is not in dispute, contrary to Representative Green's statements, and that there is no subterfuge involved. Number 635 MS. ADAIR related that the figure of $100,000 that Representative Green had mentioned is the difference between all of the appropriations out of the fund and all of the appropriations into the fund. The spill reserve is an appropriation out of the fund, and so the amount left over after the legislature appropriates the money for use by the DEC for spill-related activities according to the laws passed by the legislature. There is an amount, she said, that is called the Spill Reserve, which is appropriated to give the DEC access to funds for emergency first response. It has been used, she said, although not very often, because the Contaminated Sites Program deals with contaminated sites as they come up, and the Spill Reserve is available in case of an emergency. MS. ADAIR said she had provided the committee with a break down of the funding of the spill reserve, which she said shows how over the past several years it has gone from $5 million to $23 million in FY 93, and is expected to be more than $25 million in FY 94, based on the DEC's proposal for expenditures from the fund for FY 94. Any amount not expended for the requested activities, she said, would go to the spill reserve. Number 660 MS. ADAIR stated that HB 238 does more than just change what the spill reserve fund can be used for. She said it was important to recognize that one of the reasons the legislature wanted a funding source for the spill program was to ensure there would always be money available to the state to properly implement those programs. She said the DEC is typically at the top of everyone's list for general funds' budget cuts. It was one of the reasons cited for the fact that the DEC had not done as good a job as hoped in reviewing contingency plans and making sure the capabilities exist to respond to a spill. MS. ADAIR explained that the legislature, in establishing the fund, had wanted to ensure that no matter what else was going on with state finances on a year to year basis, there would always be money available for spill programs. MS. ADAIR, in describing the effect of HB 238, said it also changes the definition of containment and clean-up to remove the requirement that the polluter restore the environment. She said she had asked Craig Tillery of the Department of Law where clean-up ends and restoration begins. Under the provisions of HB 238, she said, the state can no longer require a polluter to restore the environment. She raised the question of where the line between clean-up and restoration is drawn. Mr. Tillery's response, she said, was that it is an arbitrary line. MS. ADAIR cautioned the result of not requiring restoration when there is no clear definition of the difference between clean-up and restoration, is that a polluter who does not want to repay the state can argue that an activity was not clean-up, but was instead restoration of the environment. House Bill 238 will create tremendous ambiguity, she said, as well as the fact that prevention and clean-up is a term that is used throughout the state pollution statutes and the fundamental change would make Alaska the only state in the nation that did not require a polluter to restore the environment. She called this a significant policy change. MS. ADAIR explained that another major change in HB 238 is the way the $50 million cap is calculated. She presented the committee with a flow chart of the response fund. There are two funds within the general fund, she explained, that are appropriated into the response fund each year. One is the Oil Surcharge Account (where the five cent a barrel surcharge goes), and the other is the Mitigation Account, where monies the state receives from fines, penalties, settlements, and cost recoveries are accounted for. This Mitigation Account, she said, receives monies from a variety of sources, not just oil companies. MS. ADAIR continued her explanation, and said both the Oil Surcharge and Mitigation accounts are appropriated on an annual basis into the Spill Response Fund. Under current law, she said, only the amount attributable to the oil surcharge account is counted toward the $50 million cap. TAPE 93-35, SIDE B Number 000 MS. ADAIR said that under HB 238, all the money going in or coming out, including the mitigation account, would go against the $50 million cap. The DEC would no longer be able to use the fund to generate the money that goes into the mitigation account, she explained. The fund would no longer be able to be used to pay legal expenses to seek reimbursement, fines, or penalties. The fund could not be used to clean up or restore the environment. The cap would get the benefit of money that comes from the general fund, and from other funding sources, she said, under HB 238. Number 059 MS. ADAIR concurred with Representative Green's statements that the oil industry, through the oil surcharge account, had paid about $80 million into the account. The total fund balance, adding up all the appropriations that have gone into the fund, she said, was just over $161 million. The oil industry had paid just about half of that, and Exxon had paid in $30 million in program receipts in 1989-1990. The balance of the money in the fund had come from the general fund, she said. Money being repaid to the state now through the mitigation account, she noted, could be either mitigation income or the surcharge. MS. ADAIR said the state had used the mitigation account in the past to fund other programs not related to the oil and hazardous substance release response fund, because the mitigation fund is a general fund account. It has been used to pay for the underground storage tank program, to clean up contaminated sites of particular concern in rural Alaska, and to do fuel assessment related to storage facilities. She said the fund is not restricted to clean up of oil spills, but applies as well to releases of other hazardous substances. MS. ADAIR, referring to the nickel a barrel surcharge, said she had heard it interpreted to apply only to crude oil activities. After reading the minutes of the 1989 meetings on the subject, she said this was absolutely not the case. The legislative intent was very clear for the nickel a barrel to be used for hazardous substance releases as well as crude oil releases. There was discussion in 1989 about refined products, she said, relating to an incident shortly before the Exxon Valdez accident where a rail car rolled over. The resulting release of formaldehyde required the evacuation of the community of Moose Pass. MS. ADAIR stated the legislature in 1989 acknowledged the need for the state to be able to respond to and prevent the release of hazardous substances. Some of those substances are extremely toxic, she said. Number 099 CHAIRMAN WILLIAMS noted that Senator Kerttula had joined the meeting. REPRESENTATIVE BUNDE asked for clarification of the provision to cap the response fund at $50 million. He said that whenever there is a pool of state money, it will generate a number of enthusiastic users. He asked Ms. Adair if she foresaw that the potential uses of the fund would ever allow the fund to reach $50 million. Number 126 MS. ADAIR said the DEC believed the fund would reach $50 million, but that there would always be appropriations out of the fund. Under current law, she explained, the ongoing programs in the DEC and other agencies that are related to spill prevention and response will be funded. The nickel a barrel contribution declines based on production, she clarified, so if production picks up, there would be more nickels in the fund. When SB 260 was first considered in 1989, she said, it was anticipated the nickel a barrel would generate about $32 million per year. In fact, its highest contribution has been $28 million, she noted. MS. ADAIR explained that the DEC is now at the peak of implementing the programs called for in 1989, and once fully in place, they would go into a maintenance phase which would allow a somewhat decreased level of funding. REPRESENTATIVE BUNDE asked when it might be expected the fund could reach the $50 million cap, barring any major incident. Number 157 MS. ADAIR said a projection on that topic had been done, and she had been unable to find it. She told the committee that she would provide it to them when she found it. SENATOR JAY KERTTULA commented that Ms. Adair's summary of the intent of the 1989 legislation was correct. He said that he had been involved in two of the three pieces of legislation which HB 238 now proposes to affect. Number 163 REPRESENTATIVE JEANNETTE JAMES related a concern that she had heard from people outside of the legislature, surrounding the possibility of a major spill while the response fund is short of its $50 million goal. She asked Ms. Adair whether it was important to have a readily available $50 million fund to be protected from any consequences of a spill such as the one in 1989. MS. ADAIR replied that it was very important to have a readily available fund. Whether the balance in that fund is $25, $50, or $75 million will depend on the circumstances, she added. Having a fund, but no state programs through which the response can be carried out would do no good at all, she stated. The programs instituted after the 1989 Exxon Valdez spill, she said, that are funded by the nickel a barrel surcharge, are intended to assure that the state has the ability to respond. She said a result of the hearings on the 1989 legislation was an understanding that the state could no longer rely on industry to protect the state. REPRESENTATIVE JAMES questioned how the state could respond to a spill if the programs were in place but there was insufficient money in the fund. Number 215 MS. ADAIR replied that if a circumstance arose where there was no money, as happened in 1989, there were other funding sources available, such as the budget reserve account, in the event of a catastrophic event. REPRESENTATIVE JAMES noted that such funds were subject to a legislative appropriation, and we could not count on a spill happening in the first four months of the year. MS. ADAIR agreed that it is important to have funds available in the event of a spill, but the amount of money needed in the fund would vary with the circumstances. She pointed out that there is an additional funding source available that did not exist in 1989, which is a federal fund created under the Oil Pollution Act of 1990. That fund is accessible through the Coast Guard and is a one billion dollar account. Number 246 REPRESENTATIVE FINKELSTEIN addressed the issue of when the fund might reach the cap of $50 million, and mentioned that he has been a member of the DEC finance subcommittee. He said it was his recollection that the figures on expenditures before the full committee were approximately $2 million less than what the DEC proposed. He said other small changes in the budget are being proposed. The lesson taught to the state by the spill, he suggested, is "What did we learn?" He said the state still does not have the ability to clean up tens of millions of gallons of oil, especially in bad weather. REPRESENTATIVE FINKELSTEIN said that from the DEC's point of view, preparedness and prevention are the key points to learn, and he commented that with HB 238, the state would seem to be going in the opposite direction. Number 288 MS. ADAIR agreed with Representative Finkelstein that prevention was the linchpin, and that was why research had been authorized and was to be funded from the release response fund. She pointed out that oil spill response is an evolving field and not everything is known. The legislature had wanted to be able to keep on top of the changes going on in the response area, she explained, while keeping in mind that prevention was the highest priority. Number 295 REPRESENTATIVE FINKELSTEIN requested of the Chairman that before taking more public testimony, the sponsor might give some explanation of the bill in detail to help the committee understand the complex issues. CHAIRMAN WILLIAMS replied that more testimony and questions would be taken first, and that there would be more meetings scheduled to address HB 238. Number 300 REPRESENTATIVE JOHN DAVIES commented that one lesson learned from the Exxon Valdez spill was that all the money in the world could not have helped while the equipment and trained personnel were lacking. Even with the "deep pockets" of a corporation like Exxon, he said the response could not be carried out quickly enough. Number 318 VICE CHAIRMAN HUDSON suggested part of the problem was that the oil surcharge account and the mitigation account funds are commingled, and the legislature has appropriated from the oil and hazardous substance release response fund, which he said has had money pouring in from settlements and repayments of past expenses. Meanwhile, he said, the nickel a barrel surcharge continues to add to the fund. He said the reason Alaska is more prepared today than in 1989 is because the state has had access to the funds, and has underwritten planning and programming, equipment and training and other prevention activities. VICE CHAIRMAN HUDSON said prevention is the only thing we would have going for us in an oil spill. He wanted to see a strong prevention program established and he believed we were doing that. He described the problem with HB 238 is that it seems to react to problems with the initial phases of the spill account. There was loose handling of the funds, he said, and how they were used. A major audit led to the DEC tightening up control of the fund, he said, and if anything, the legislature should now look at splitting the mitigation and the surcharge accounts and provide for separate accounting. Then the legislature could decide which particular programs it wanted to fund, he added. Number 358 VICE CHAIRMAN HUDSON said that while Prince William Sound is in good shape in the event of a spill, he was concerned about what would happen if a spill occurred in Southeast Alaska waters. He mentioned the establishment of remote site depots, and said not much has been done to further response capability in those areas. Number 365 SENATOR KERTTULA mentioned that funding a state ferry had been part of that plan. VICE CHAIRMAN HUDSON commented that a ferry could be hauling 500 passengers and 300 vehicles and the state could not just dump them in the event of a spill, especially without remote response depots. Number 372 MS. ADAIR noted that the DEC had been given a special appropriation in 1992 of $1.2 million to do a near-shore demonstration project, looking at Southeast Alaska and lower Cook Inlet going down toward Kodiak. She said the Request for Proposals (RFP) would be ready to go out on that project within the next week. She noted that there are a great many miles of Alaskan coastline that are unprotected. The response depot concept recognized the need to have equipment available to move to the scene of a spill quickly. MS. ADAIR said that in the bill that created the state's master plan, amendments were made in Senate Finance to require that the master plan identify where the depots should be established. In 1989, she explained, things were happening so fast that it wasn't known where those depots should be or what they should consist of. Since that time, through the master planning process, she said the state had learned that it probably does not make sense to have booms sitting on a dock somewhere with no one paying attention to them. MS. ADAIR said it would make more sense to have a standby contract, with an organization that purchases the necessary equipment with state help and then they would be on call in case they were needed. That was the direction now being taken, she said, and it has been called the "near-shore demonstration project." She said the DEC believes that this is the right direction to take and it was anticipated that two of them would be operational in another year. Number 413 REPRESENTATIVE ELDON MULDER asked Ms. Adair what percent of the DEC's operational budget is derived from 470 funds. MS. ADAIR responded that she would estimate approximately one-third. In FY 94, she said, the DEC's request was $14 million, and about that same amount comes from general funds, with another $8 million in federal funds, as well as $3 million in program receipts. Number 427 REPRESENTATIVE GREEN offered to hold his comments until after further testimony and questions. Number 436 CRAIG TILLERY, ASSISTANT ATTORNEY GENERAL, told the committee that Ms. Adair had covered most of the financial implications of HB 238. There were a couple of areas which did strike him regarding the finances. He prefaced his remarks by saying the bill is complicated and makes some wholesale changes in definitions of things like containment and clean-up that reverberate throughout the statutes. He mentioned that the Department of Law recently figured out that HB 238 would tend to gut the ability to use the underground storage tank program assistance for restoration. As MR. TILLERY understood the statute it would not allow the state to use funds for cost recovery actions or for restoration. Those kinds of actions then, would be done through general funds, he said. He continued by saying that once cost recoveries are made, the state would presumably recover the cost of litigation. Those would then go into the mitigation account, under HB 238, he said, and the mitigation account would be used to offset the nickel a barrel surcharge. The result would be that general funds would go into what is now the nickel a barrel account. He called it an anomaly. MR. TILLERY said there had also been comments made that there were problems with the Department of Law getting the DEC's accounting for cost recovery. Mr. Tillery noted that he had been working on the Exxon case since March, 1989, and that had been a major problem with the Exxon case, so that an independent outside accounting firm had to come in to do the cost recovery. MR. TILLERY noted that since that time a much better working relationship had been established with the DEC, and a program has been initiated to create a systematic DEC/Department of Law cost accounting system. This would allow the state to make the polluters pay for every cent spent by the state. Number 491 MR. TILLERY turned to the effect of HB 238 on the environmental laws. At the heart of what HB 238 does, he said, is the deletion of the restoration requirement. As he understood the legislation, he said, it appears to say the polluter or contingency plan holder is no longer required to restore the environment. This would make Alaska, he said, an anomaly in the United States. Moreover, he said, HB 238 eliminates the DEC's ability to restore the environment by taking away that authority. It would appear to eliminate the ability to do restoration work through the underground storage tank systems program. This is a policy decision, he said, that the legislature should carefully consider, of whether it wants to take restoration out of the kinds of activities that someone who causes pollution is required to pay for. MR. TILLERY then said that as a lawyer, he gets worried because HB 238 creates a difficult legal situation for the state. By taking away the ability to use funds to restore the environment, the bill puts the burden on the state to decide what is clean-up and what is restoration. The courts would be faced with a polluter coming in and saying an activity is restoration instead of clean-up, knowing that if something is classified as restoration they would not have to pay for it. He noted that there had already been a disagreement with the Coast Guard on the question of clean- up versus restoration. MR. TILLERY called the distinction a fuzzy area. Under the current statutory scheme, he said, it doesn't matter because both are required and the state recovers its costs for all activities. Number 533 MR. TILLERY said there is a provision in HB 238 to change the aspects of 760(e) which refers to the recovery of costs incurred for restoration, to "only if feasible." This takes the burden off the polluter, he said, and puts it on the state as to whether something is or is not feasible. This could lead to litigation, he said, where the polluter could start "nickel and diming us down." Strictly from a legal perspective, he was worried about the litigation aspect and the ambiguity of the definition of "threatened release." These were important policy questions, he said. MR. TILLERY also pointed out fiscal and litigation considerations as to whether the burden should be on the state to make the up-front decisions that could result in litigation. He cautioned against creating ambiguities. Number 559 REPRESENTATIVE BUNDE said that the committee seemed to agree on the overriding goal of prevention, with clean-up second. He referred to the summary report of Governor Hickel's Organizational Efficiency Task Force regarding the DEC. On page 2, marked IV-34, in response to a question about appropriate expenditures from the fund, he quoted, "Liberal use of the fund appears to be driving up total state spending with little concern for efficiency." He asked Mr. Tillery if HB 238 addresses those concerns. Number 576 MR. TILLERY said he did not know whether the bill would make the state more efficient at what it does. It would eliminate some of the options the state has, he said, and he added that he assumed that if you eliminate some spending you would then naturally eliminate some inefficiencies. He said that what the Department of Law and the DEC were trying to do was tighten up cost recoveries so the state would get its money back from polluters. REPRESENTATIVE BUNDE referred to the "liberal use" of the fund by the DEC, and asked Mr. Tillery whether, in his opinion, the DEC was using the fund efficiently to achieve the goals agreed upon. Number 599 MR. TILLERY said the accounting problems he was referring to were strictly related to cost recovery. He said he had not been involved with DEC's other fiscal activities. In his experience, he said, DEC was not an inefficient organization in spill response and cost recovery. Number 605 MS. ADAIR noted that the DEC's total requested expenditures for its own operations from the response fund at the highest point, following the Exxon Valdez spill in FY 90, was $25 million. As she stated earlier, the DEC's FY 94 request from the fund was $24 million. She said the characterization of the DEC as having a liberal use policy was not accurate. Number 626 REPRESENTATIVE FINKELSTEIN referred to the OMB efficiency review, and said there had been a chart handed out in the DEC finance subcommittee that showed the fact that the state is now spending much less than previously out of the 470 funds, and that indications are that the trend will continue. As an example, he said there are five legislators on the DEC finance subcommittee who spent hours trying to find any place to cut the DEC budget request. The programs are difficult to reduce, he said. Number 638 REPRESENTATIVE MULDER asked Mr. Tillery if it was fair to say most of his testimony centered around the state's ability for cost recovery in a policy call of restoration versus clean-up. MR. TILLERY replied that the serious policy call required is whether to throw out the requirement that the polluter must restore the environment. Even if the state does that, he said, we need to ask if, by doing that, we are throwing out both restoration and the ability to recover clean-up costs because of the fuzziness between restoration and clean-up. REPRESENTATIVE MULDER asked what would be accurate definitions of clean-up and restoration. Number 660 MR. TILLERY said that those definitions are not clear. There are some activities that clearly fit within one or the other category. For example, if some oil is spilled and skimmed off the surface, that would be clean-up. If fish were killed and are replaced, that would clearly be restoration. He pointed out that a number of other activities don't fit cleanly into one or the other category. That ambiguity is one of the problems he had with the statute, he said. Number 670 REPRESENTATIVE MULDER suggested it would be a legitimate policy question for the legislature to determine or clarify those definitions, so it is clear what the polluters are liable for. MR. TILLERY said that if the state decides that it will not require restoration of a polluter, then by all means the definition should be made more clear. There is no problem he said, the way the statute is written now. The end of restoration is clear, but the line between clean-up and restoration is unclear. As long as both are required, there is not a legal problem with the definition, he explained. REPRESENTATIVE MULDER asked Mr. Tillery to explain where restoration ended. Number 680 MR. TILLERY gave an example of a fish hatchery built on Prince William Sound as evidence that restoration was completed. In essence, he said, restoration is completed when no further action is required to ameliorate the effects of an oil spill. CHAIRMAN WILLIAMS noted that Representative Gary Davis had joined the meeting. Number 687 REPRESENTATIVE CLIFF DAVIDSON asked Mr. Tillery, in regards to HB 238, in terms of public policy and resource allocation, where is the pain, who gets it, what does it apply to, and who gets the gain. Number 692 MR. TILLERY replied that from a legal perspective, potential polluters benefit from HB 238 because their responsibility is diluted. TAPE 93-36, SIDE A Number 000 REPRESENTATIVE DAVIES expressed concern with using general fund dollars for restoration. He asked Mr. Tillery to clarify statements made regarding underground storage tanks. MR. TILLERY referred to AS 46.04.020, and a provision whereby if the DEC determines that containment or clean-up activities are inadequate, they may direct the person to cease and take up those activities itself. As he understood HB 238, it would change the definition of containment and clean-up. The result would be that where previously the DEC had the authority to undertake restoration if the polluter was not doing it correctly, the bill would appear to take away that authority. Number 041 REPRESENTATIVE GREEN stated that it was not the intent of HB 238 to allow a polluter to avoid making payments after a spill. He had hoped to introduce the bill, raise the concerns of people, and then go to a subcommittee and make revisions. The intent was to shore up the problem of determining who is responsible, get that party to pay, and not charge a certain entity a broad scope of concerns. He suggested that after testimony at the meeting, HB 238 be assigned to a subcommittee to work out the problems. Number 078 CHAIRMAN WILLIAMS stated that HB 238 presented a substantial policy decision and the committee would have more hearings on the bill to determine which direction to go with it. Number 089 JOHN RINGSTAD, ASSOCIATE DIRECTOR OF GOVERNMENT AFFAIRS FOR BRITISH PETROLEUM (BP), told the committee that when the nickel a barrel surcharge was proposed in the 1989 legislative session, BP did not oppose it, and agreed with the intent of assuring adequate response to spills. He said it was BP's understanding that the surcharge would stop at $50 million. He remarked that only $23 million had been saved for an emergency. This year's budget proposal, he said, was to add only $2 million to the fund. British Petroleum, he said, supports HB 238 in its effort to return to the original purpose of the surcharge. Number 132 REPRESENTATIVE BUNDE asked Mr. Ringstad if he saw the $50 million cap ever being achieved, from an industry point of view. MR. RINGSTAD responded that it could perhaps be reached, technically, but that realistically, it probably would not. As an example, he remarked that with $27 million going into the fund in 1993, only $1.6 million of that would be saved. He explained that the trend has been that the uses of the fund have consistently changed and increased. Number 167 REPRESENTATIVE MULDER asked Mr. Ringstad to explain his understanding of the original intent that the 470 funds were to be used for. MR. RINGSTAD replied that initially, one of the senate bills in 1989 established the nickel a barrel surcharge, and the others established regional and statewide contingency plans, as well as remote depots with a corps of trained personnel. As he recalled, the discussion at that point was that the state would spend around $5 to $7 million a year to accomplish those goals. Number 185 REPRESENTATIVE MULDER commented that Ms. Adair had said one- third of the DEC's budget comes from the spill response fund. He asked Mr. Ringstad, in his recollection, what percentage of the DEC's operating budget actually is done to administer or oversee the programs related to spill prevention and response. MR. RINGSTAD did not know the exact percentage. He said there were two policy issues involved: First, how much of the responsibility rests with the crude oil producers? He questioned whether it was the crude oil producers' responsibility to finance the program that approves contingency plans of the U.S. Navy, for example. The other question, he said, was whether it was the oil producers' responsibility to pay for activities directly related to Prudhoe Bay. He said there were different extremes, and also a legitimate question regarding the total expenditure from the fund beyond those of the DEC. MR. RINGSTAD added that every year there are a number of requests for funding out of the fund from various agencies, not just the DEC. Number 225 REPRESENTATIVE FINKELSTEIN asked Mr. Ringstad, what the general categories were of things BP feels it should or should not be paying for. MR. RINGSTAD said the two extremes were easier to identify, while the middle ground was fuzzy. For example, he said it was very clearly the oil companies' responsibility if crude oil were spilled. A situation where a gas station has a gas leak somewhere, he said, that is not so clearly the oil industry's responsibility. He said that underground storage tanks should not be the oil companies' responsibility. Number 254 REPRESENTATIVE FINKELSTEIN asked Mr. Ringstad why, in light of his testimony, BP would support HB 238, rather than just go to a user-fee system. He noted that HB 238 eliminates a variety of other uses of the 470 fund, some of which might meet BP's criteria for what is an appropriate use of the fund. MR. RINGSTAD responded that Rep. Finkelstein's suggestion does not totally accomplish the goal if all it does is add additional money, while spending from the fund still prevents it from reaching the $50 million cap. REPRESENTATIVE FINKELSTEIN asked Mr. Ringstad if the fund was properly apportioned so that the causers of costs were the payers of costs, his concerns would be met. MR. RINGSTAD replied that it would address a big part of his concerns. Number 278 REPRESENTATIVE DAVIES asked Mr. Ringstad if he could provide a list of expenditures that he thought were inappropriate uses of the fund since it was implemented. MR. RINGSTAD replied that he would try to do that. Number 286 REPRESENTATIVE WILLIAMS thanked those testifying at the meeting and said another meeting would be set to take public testimony on HB 238 before any action was taken on the bill. He suggested that testimony be submitted in written form for inclusion in members' bill packets.