Legislature(1993 - 1994)

03/09/1994 08:15 AM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
  HB 238  Oil/Hazardous Substance Release Response Fund                        
  CHAIRMAN WILLIAMS stated it is the committee's fifth hearing                 
  on HB 238.  He said the committee met the previous Wednesday                 
  and discussed draft version Y.                                               
  Number 224                                                                   
  MEREDITH MARSHALL, KETCHIKAN, testified via teleconference                   
  and stated she is not an expert nor does she fully                           
  understand the proposed legislation.  She stated there is                    
  not a benefits clause in the legislation and she felt there                  
  is a need to set up monitoring and spill response standards                  
  along the coast as well as trained personnel in spill                        
  response.  After that has been accomplished, (indiscernible)                 
  a front for major incidents, the fund should                                 
  Number 238                                                                   
  COUNCIL OF PRINCE WILLIAM SOUND (RCAC), testified via                        
  teleconference and stated there are two points RCAC wants to                 
  emphasize.  First, the current system works for responding                   
  to spills and accessing the Oil and Hazardous Substance                      
  Release Response Fund.  The second is to clarify                             
  misinformation regarding the adequacy of a 2 or 2.5 cent                     
  surcharge to fund the DEC spill prevention and response                      
  programs.  He pointed out that in hearings on SB 215 and HB
  238, no reasons were given for limiting access to response                   
  funds for catastrophic spills.  There is no evidence that                    
  DEC has misused response funds in the course of responding                   
  to spills.  He said in the last five years, less than one                    
  percent of response fund expenditures have been used by DEC                  
  to pay for spill response.  All other expenditures of                        
  response funds have been by legislative appropriation for                    
  uses authorized in statute.                                                  
  MR. STEPHENS stated most spills in Alaska are below the                      
  catastrophic threshold of 4.2 million gallons.  The Exxon                    
  Valdez spill is the only spill which exceeded that amount                    
  and approximately 2,000 spills occur each year.  He noted                    
  DEC responds to half of those spills each year.  With the                    
  spill prevention and response programs developed since the                   
  Exxon Valdez spill, hopefully the state will never                           
  experience another catastrophic spill.  He stressed it is                    
  certain that the state will continue to experience the                       
  smaller, chronic spills as long as Alaska is an oil                          
  producing, refining, and transporting state.  Therefore, to                  
  protect the health of residents and the environment, on                      
  which the tourism and fishing industries and subsistence                     
  users depend, the state must continue to diligently prevent                  
  and respond to spills.                                                       
  Number 267                                                                   
  MR. STEPHENS stated the quest to reduce response fund                        
  expenditures by reducing access to response funds for spill                  
  response has no justifiable basis.  It also is contrary to                   
  one of the primary purposes for which the fund was                           
  established and the surcharge was enacted.  He said despite                  
  some revisionist history by proponents of the concept, the                   
  surcharge was not intended to fund exclusively catastrophic                  
  spill response.  He stressed the current system works well.                  
  If anything, it is likely that most communities would                        
  criticize DEC for not utilizing the response fund more often                 
  in responding to more spills.                                                
  MR. STEPHENS said he would like to address misinformation                    
  regarding the adequacy of a 2 or 2.5 cent surcharge to fund                  
  spill prevention and preparedness programs.  He noted the                    
  Exxon Corporation has been distributing a chart and                          
  testifying as to the adequacy of a 2 or 2.5 cent surcharge.                  
  In their chart and testimony, they cite a report prepared in                 
  December 1992 for RCAC as justification for the adequacy of                  
  a 2 or 2.5 cent surcharge for spill prevention and                           
  preparedness programs.  He stated the use of the RCAC report                 
  to justify the adequacy of a 2 or 2.5 cent surcharge for                     
  spill prevention programs is, at best, a complete misuse and                 
  manipulation of information presented in the report.                         
  MR. STEPHENS continued that the RCAC report merely presents                  
  appropriations for fiscal years l991 through 1993 for a                      
  portion of DEC programs.  There was no attempt to analyze                    
  the actual costs of running a fully implemented spill                        
  prevention and response program.  Instead, the report shows                  
  that despite the existence of the response fund, funding for                 
  spill prevention and preparedness programs has remained                      
  relatively constant.                                                         
  Number 294                                                                   
  MR. STEPHENS stated the Exxon chart shows all response fund                  
  appropriations for all authorized uses of the fund for                       
  fiscal year 1990 through 1994, but compares it only to a                     
  portion of the fiscal notes of those authorized uses.                        
  Absent is the fiscal note for the ferry despite the jump in                  
  the appropriation line reflected by that use.  He stressed                   
  the chart compares apples and oranges and is both incorrect                  
  and misleading.  In the chart presented by the Exxon                         
  Corporation, the RCAC report is cited as the source which                    
  suggests that RCAC produced the chart.  He noted there is no                 
  identification of Exxon as the chart preparer or the source                  
  of most of the information in the chart.  He felt it is                      
  unprofessional to produce false information and cite another                 
  entity as the source.  He thought the Exxon Corporation                      
  should apologize to RCAC and withdraw the misinformation                     
  from the legislative record.                                                 
  MR. STEPHENS said accurate budget information presented in                   
  DEC fiscal notes shows that neither a 2 or 2.5 cent                          
  surcharge provides sufficient funding for prevention                         
  programs at current oil production levels and the problem                    
  becomes more acute as North Slope production declines.  The                  
  splitting of the nickel proposal will force a continued                      
  reduction in DEC programs or the supplementing of general                    
  fund money at the same time state revenues are also                          
  declining.  He reminded committee members that interest on                   
  the response fund balance is merely general funds by another                 
  REPRESENTATIVE CARNEY stated he cannot identify the chart                    
  prepared by Exxon which Mr. Stephens discussed.                              
  MR. STEPHENS said it is the chart which they have been                       
  showing at other committee hearings.                                         
  REPRESENTATIVE CARNEY asked Mr. Stephens to send the House                   
  Resources Committee a copy of the chart.                                     
  Number 329                                                                   
  REPRESENTATIVE MULDER asked Mr. Stephens to comment on local                 
  depots and response corps.                                                   
  MR. STEPHENS stated DEC is getting to the point of looking                   
  at putting them in place.  Communities like Kodiak, Cordova,                 
  and Native villages are all at the point where the response                  
  depots and training are necessary, but he thought it is                      
  (indiscernible) in the coastal areas.                                        
  REPRESENTATIVE BUNDE stated that part of the 470 fund was                    
  established for other DEC tasks such as underground tank                     
  storage rehabilitation, hatcheries, etc., and to maintain                    
  the system as it is will undermine the spill response                        
  capability.  He asked Mr. Stephens if by testifying in                       
  support of keeping the 470 fund as it is, is he endorsing                    
  spending money for projects not closely related to crude oil                 
  MR. STEPHENS replied yes and felt the 470 fund should come                   
  from the tax on the oil industry.                                            
  REPRESENTATIVE BUNDE stated another place to tax is the                      
  users of the petroleum products.                                             
  MR. STEPHENS did not agree.  He stressed if one looks at the                 
  overall use of fuel and where the major problems could                       
  occur, overseeing a small leak in a tank is very small                       
  compared to other jobs needed.  He felt the oil industry                     
  needs to be responsible for all fuel spills throughout the                   
  Number 395                                                                   
  TOURISM ASSOCIATION, testified via teleconference and stated                 
  the association does not believe any legislation is needed                   
  to change the management or funding of the 470 fund.                         
  However, if the legislature is determined to pass a bill,                    
  the association feels version Y is appropriate.  She was                     
  involved with many teleconferences in connection with the                    
  original 470 fund bill and recalled limiting the fund to                     
  catastrophic spills was discussed.  However, that was just                   
  one perspective on the issue.  The prevailing legislation                    
  left it open to use for a large variety of other things.                     
  MS. LETHCOE stated HB 238, version Y goes a long way toward                  
  continuing to adequately fund the state's spill prevention                   
  and response program while (indiscernible) the oil industry.                 
  She said current U.S. law does not give tourism businesses                   
  any legal standing to file for economic damages sustained as                 
  a result of a spill.  Tourism businesses eat the money which                 
  is lost.  Therefore, strong spill prevention response                        
  programs are the tourism industry's only protection.  She                    
  noted on the concern about spill prevention and clean up of                  
  contaminated sights in rural Alaska, there are not many jobs                 
  for people living in rural Alaska.  A growing number of                      
  rural communities have contacted the association for                         
  information on ecotourism, in hopes of getting ecotourism-                   
  type businesses.  She pointed out that contaminated sites                    
  and the potential for oil spills poses problems for their                    
  MS. LETHCOE stated drinking water contaminated by fuel                       
  spills poses problems for some communities.  In one                          
  particular community, a restaurant is importing water                        
  because of a fuel spill in that community which raises costs                 
  and the difficulty of doing business.  Another community                     
  inherited a contaminated site when it was relocated                          
  following the 1964 earthquake.  The village is located in an                 
  area with tremendous tourism potential, but before it can                    
  develop tourism facilities it must clean up the contaminated                 
  site.  In rural Alaska, there are many aging fuel storage                    
  areas which are often located adjacent to rivers.  She                       
  stressed funding is needed to repair or replace them before                  
  they cause spills which will create economic, social, and                    
  environmental disasters for the local residents, communities                 
  downstream, and tourism businesses along those streams.                      
  MS. LETHCOE said the 470 fund provides funding for the clean                 
  up of contaminated sites and the prevention of oil spills.                   
  It makes good economic sense for the state to continue the                   
  present funding mechanism for that program.  The association                 
  also supports depots and volunteer response corps.  Both                     
  were strongly recommended by the Alaska Oil Spill                            
  Commission.  She stressed the state does (indiscernible) for                 
  volunteers.  As the state budget declines, volunteers are                    
  one way to make up budget shortfalls and help the people                     
  most likely to be adversely affected by spills, if they are                  
  themselves well trained, adequately equipped, and prepared                   
  to respond.  She stressed trained volunteers are important                   
  for local villages where it may take time to get spill                       
  response teams from the state or a spiller into those                        
  Number 475                                                                   
  THEA THOMAS, CORDOVA, testified via teleconference and                       
  stated she did not feel any legislative action is needed                     
  concerning the 470 fund.  She felt the present system works                  
  but if the legislature finds it necessary to provide tax                     
  relief for oil companies, version Y is the only fair and                     
  balanced option concerning the issue.  She stated version Y                  
  addresses the oil industry's request for tax relief while                    
  maintaining the state's ability to prevent, prepare for and                  
  respond to oil and hazardous substance spills.  Version Y                    
  also provides an atmosphere of cooperation and compromise                    
  between the oil industry and the people of the state.                        
  REPRESENTATIVE BUNDE said he also sees the responsibility of                 
  the oil companies to provide financial support for the clean                 
  up of oil spills but wondered if Ms. Thomas would agree that                 
  the people who ultimately use the fuel also have a                           
  responsibility and should pay increased taxes to cover                       
  potential spills.                                                            
  MS. THOMAS stated she agrees with Mr. Stephens that most                     
  spills are chronic small spills not connected with users.                    
  The spills are connected with the transport of oil and in                    
  the production and development of oil.                                       
  Number 509                                                                   
  REPRESENTATIVE FINKELSTEIN stated there are many people                      
  including himself and the Administration who do support an                   
  increase in the fuel tax, but that does not translate that                   
  another tax has to be replaced.  He felt the state is in a                   
  position where new taxes are going to be needed.                             
  REPRESENTATIVE JAMES agreed, but stated she would like to                    
  see a portion of any fuel tax go into the 470 fund.                          
  KELLY WEAVERLING, CORDOVA, testified via teleconference and                  
  stated during the Exxon Valdez oil spill, he organized and                   
  operated the wildlife rescue fleet.  He is very aware of the                 
  value of the 470 fund and stated the current legislation is                  
  fine, requiring no change.  If a change is necessary, he                     
  prefers version Y.                                                           
  SALLY KABISCH, HOMER, testified via teleconference and                       
  stated she supports the existing structure of the oil and                    
  hazardous substance release response fund.  She said there                   
  has been talk about splitting the nickel and she opposes                     
  splitting the nickel, because it will limit response to                      
  spills which are not catastrophic.  She pointed out that the                 
  less than catastrophic spills account for most of Alaska's                   
  spills and can often be devastating.  Limiting cleanup for                   
  large spills puts Alaska's natural resources at great risk.                  
  Rather than splitting nickels, doubling the dollars going                    
  into the hazardous and oil response fund should be                           
  discussed.  She noted that coastal communities like Homer,                   
  are locally unprepared to respond to a spill.  She urged the                 
  committee to reject revisions to the 470 fund and focus on                   
  the real business, which is not arguing over nickels, but                    
  ensuring that Alaska's preparedness and response to spills                   
  matches the value of the resources vulnerable to those                       
  MS. KABISCH felt there is a need to continue to require that                 
  spill contingency funds are up to date at least on an annual                 
  basis, and also felt there is a need to free up the Division                 
  of Spill, Prevention, and Response to do the work it is                      
  supposed to be doing, preventing spills and cleaning them                    
  up.  She said there is a need for well trained and fully                     
  funded response and prevention programs in all coastal                       
  communities and other communities as well.  She pointed out                  
  that people have been waiting since 1986 for the volunteer                   
  corps and depots to be put in place.                                         
  REPRESENTATIVE MULDER thought it is hypocritical when people                 
  say it is not broken, do not fix it but on the other hand,                   
  they are saying the state is no more prepared today than it                  
  was six years ago.  He stated the committee's mission is to                  
  try and evaluate what progress has been made in the last six                 
  years, if the state is more prepared and try to revisit the                  
  issues to ensure the state is more prepared and putting the                  
  470 funds to the appropriate end.                                            
  MS. KABISCH agreed and stated there is a need to free up DEC                 
  and other state agencies to do the work they are charged to                  
  do.  She felt you do not fix it by cutting taxes on the oil                  
  industry and cutting the funding to the program.                             
  REPRESENTATIVE FINKELSTEIN stated the whole issue of whether                 
  or not the state is using the 470 fund most appropriately is                 
  also an issue before the DEC subcommittees.                                  
  Number 638                                                                   
  PAUL SEATON, HOMER, testified via teleconference and stated                  
  having been through the Exxon Valdez spill, he knows that                    
  spill prevention is the most important aspect.  He said the                  
  (indiscernible) of catastrophic spills is not the way to do                  
  it and if anything, more money should be spent on spill                      
  prevention, spill training, spill response, and equipment in                 
  local areas.  He expressed opposition to changing the 470                    
  fund with the restrictions being sought for only                             
  catastrophic response.                                                       
  testified via teleconference and stated although she                         
  supports version Y, she does not feel there is a need for a                  
  bill since DEC is administratively fixing the real problems                  
  identified with the use of the 470 fund.  She said of all                    
  the versions proposed thus far, version Y is the most                        
  reasonable in addressing public protection issues and the                    
  industry's concerns.  She expressed concern that version Y                   
  gives the oil industry credit for everything presently in                    
  the 470 fund, including the (indiscernible) non-nickel fund.                 
  MS. STAHL-JOHNSON is also concerned that version Y gives                     
  credit for penalties and fines paid toward the fund which is                 
  an anti-incentive for avoiding penalties.  She stressed DEC                  
  needs the latitude to build strong prevention, preparedness,                 
  and response centers around the state and the centers need                   
  to be integrated with what the coastal and small communities                 
  need in (indiscernible) programs.  In regard to comments                     
  made that the communities are not any better prepared to                     
  respond to spills than five years ago, she said DEC has been                 
  hamstrung by what can and cannot be done with the 470 fund                   
  because of the issues being debated.  There is a need to be                  
  able to fully implement the programs and she stressed there                  
  is preparedness and response capabilities in all regions.                    
  She commented in regard to the purposes of the funds and who                 
  should be paying for the response capabilities, the                          
  Hazardous Substance Spill Technology Review Council Report                   
  stated that 80 percent of spills in Alaska, which have been                  
  responded to, involve petroleum products and 20 percent are                  
  hazardous substance spill responses.                                         
  TAPE 94-29, SIDE A                                                           
  Number 000                                                                   
  MS. STAHL-JOHNSON said she does not believe there is a need                  
  for a bill to change the problems, but rather there is a                     
  need to tighten up, focus the programs, and (indiscernible)                  
  to the protection that the 470 fund supposedly promises                      
  testified via teleconference and stated the 470 fund does                    
  not need changing.  He said the fifth anniversary of the                     
  Exxon Valdez oil spill is March 24 and he felt that what was                 
  learned from that spill is that once a spill happens, there                  
  is not a lot one can do about it.  He stressed one can do a                  
  lot to prevent spills and that is one of the reasons the                     
  spill prevention response fund established the nickel a                      
  barrel tax.  The spill prevention response fund was                          
  established before the spill and the tax came as a result of                 
  the crisis which emerged.  He said often it is much easier                   
  to motivate public policy after a crisis.  He expressed                      
  concern that everyone is forgetting the lessons of the                       
  MR. HARUN stated his organization opposes Representative                     
  Green's version of HB 238 and commends Chairman William's                    
  attempt to balance the public's desire for spill prevention                  
  and response with the industry's desire for tax relief.  He                  
  felt the legislature's role is to advance the public's                       
  interest.  He said the industry should not be given credit                   
  for fines and penalties and the industry should not be given                 
  credit for all of the money which is currently in the fund,                  
  because 40 percent of the funds came from non-nickel                         
  sources. He pointed out that DEC has fixed most of the                       
  region's problems.  He added that his organization does not                  
  perceive most of the money for spill prevention and response                 
  coming from the nickel a barrel tax and he asked where the                   
  money will come from.                                                        
  Number 042                                                                   
  RANDY MCGOVERN, FAIRBANKS, testified via teleconference and                  
  stated he is not convinced that HB 238 is necessary.  The                    
  current version of SB 215 and all versions of HB 238, except                 
  version Y, are unacceptable.  He said more vigilant                          
  (indiscernible) should be implemented especially for                         
  (indiscernible) spills.  He pointed out that a recent spill                  
  of 2,500 gallons occurred during a spill drill; another                      
  spill released 15,000 gallons and what is scary is the pipe                  
  was only two years old and the weight had not been placed in                 
  the pipe to alleviate a problem already known to exist; and                  
  even more scary is that the alarms were turned off and the                   
  spill was discovered by accident.  He stated also scary is                   
  that the well was producing mostly gas for production for                    
  oil from another well, and had that well been producing oil,                 
  a massive catastrophic spill would have occurred.                            
  MR. MCGOVERN stated it has been said that $112 million has                   
  been collected from the nickels and stressed that is not                     
  correct.  At the inception of the 470 fund, $30 million had                  
  already been acquired before the Exxon Valdez spill through                  
  fines, cost recoveries, general funds from 1986 through                      
  1989.  For every dollar spent for prevention (indiscernible)                 
  $100 for response or remediation.  If the (indiscernible) of                 
  the 470 fund was done four times by legislation and 17 times                 
  by appropriation.  He said one fact sheet illustrated that                   
  DEC has spent 0.9 percent of the available fund but progress                 
  still went forward.  It was accomplished by dedicated,                       
  informed, compassionate people.  Without knowledge and                       
  training, terrestrial spills will result from pesticides and                 
  petroleum products.  Visions in the future gave the state                    
  double hulled tankers.   Visions of the future gave the                      
  state command and control vessels.  Visions beyond the                       
  future gives the state (indiscernible) technology.  He asked                 
  where are the visions for terrestrial spills.                                
  MR. MCGOVERN said the drafter of the Y version at least                      
  recognizes that you do not throw the baby out with the bath                  
  water.  He stressed that present versions of both SB 215 and                 
  HB 238, not version Y, should be killed.  (Indiscernible) of                 
  HB 238 would create a bookkeeping nightmare and added that                   
  four separate accounts would have to be established and                      
  supervised.  (Indiscernible) the 470 fund presents another                   
  problem.  Consumers, the public, and small businesses would                  
  have to pay the bill.  He stated glamorous, glitzy, feel                     
  good television commercials do not give the state the                        
  ability to protect the life and health of its citizens.                      
  Maintaining the 470 fund as is will.  He urged committee                     
  members not to pass HB 238.                                                  
  Number 079                                                                   
  HILLARY SCHAEFER, FAIRBANKS, testified via teleconference                    
  and expressed concern with the array of bills moving so                      
  quickly through the legislature.  She is disappointed with                   
  what SB 215 and early versions of HB 238 have to offer.  She                 
  appreciated Chairman Williams looking at the protection                      
  which pollution prevention and response programs offer now                   
  and in the future.  (Indiscernible) hazardous waste, it is                   
  crucial that these programs remain in place for oil spill                    
  response and prevention, as well as for hazardous waste                      
  spill response.  She stressed that Chairman William's                        
  version is the only version which is (indiscernible) for the                 
  state pollution prevention and response programs and to the                  
  oil industry.  She said if passage of a bill is necessary,                   
  she supports the Y version of HB 238.                                        
  Number 090                                                                   
  CONSERVATION ALLIANCE, testified via teleconference and                      
  stated he is incredulous that on the fifth anniversary of                    
  the Exxon Valdez oil spill the state is contemplating                        
  weakening the provisions of the 470 fund.  He felt it is                     
  dangerous to do that at this time.  If anything, the state                   
  should be looking at more secure ways to protect the                         
  environment from oil and other hazardous substance spills.                   
  He stated there is no reason to tamper with the present 470                  
  fund but if the legislature is determined to do something,                   
  he strongly endorses Chairman William's version Y.                           
  Number 126                                                                   
  DAN DEL MISSIER, HOMER, testified via teleconference and                     
  stated he is dismayed that consideration is being made to                    
  change the 470 fund.  He urged committee members to leave                    
  the 470 fund as is.                                                          
  ALAN PARKS, HOMER, testified via teleconference and said he                  
  would like to see the 470 fund left as is.  He stressed                      
  there is a need to concentrate on prevention and                             
  preparedness.  He felt the nickel surcharge is needed.  He                   
  described a drill which took place in Homer and pointed out                  
  that proper equipment and proper vessels are not in place to                 
  handle any spills.                                                           
  CHAIRMAN WILLIAMS announced that HB 404 will not be heard on                 
  Friday because the sponsor has asked it to be held.  He                      
  stated the committee will hear HB 447 on Friday, March 11 at                 
  8:15 a.m.                                                                    
  There being no further business to come before the House                     
  Resources Committee, Chairman Williams adjourned the meeting                 
  at 10:03 a.m.                                                                

Document Name Date/Time Subjects