Legislature(1993 - 1994)
03/09/1994 08:15 AM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 (indiscernible). Number 238 STAN STEPHENS, PRESIDENT, REGIONAL CITIZENS' ADVISORY 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 name. 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 spills. 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 state. Number 395 NANCY LETHCOE, PRESIDENT, ALASKA WILDERNESS, RECREATION, AND 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 development. 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 communities. 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 spills. 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. KRISTIN STAHL-JOHNSON, CITY OF KODIAK'S REPRESENTATIVE, REGIONAL CITIZENS' ADVISORY COUNCIL OF PRINCE WILLIAM SOUND, 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 them. KEVIN HARUN, DIRECTOR, ALASKA CENTER FOR THE ENVIRONMENT, 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 spill. 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 KARL BECKER, REPRESENTATIVE, PRINCE WILLIAM SOUND 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. ANNOUNCEMENTS 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. ADJOURNMENT There being no further business to come before the House Resources Committee, Chairman Williams adjourned the meeting at 10:03 a.m.