Legislature(1993 - 1994)

03/21/1994 08:15 AM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
  The House Resources Committee was called to order by                         
  Chairman Bill Williams at 8:25 a.m.  Members present at the                  
  call to order were Representatives Williams, Hudson, Bunde,                  
  Green, and Mulder.  Members absent were Representatives                      
  Carney, Davies, Finkelstein and James.                                       
  CHAIRMAN BILL WILLIAMS announced there is a quorum present.                  
  He said the meeting is on listen only teleconference.  He                    
  stated the committee was originally scheduled to hear HB 496                 
  but he decided to pull that bill off the agenda.                             
  DRAFT CSHB 238, VERSION Z:  "An Act relating to and                          
  redesignating the oil and hazardous substance release                        
  response fund and to the content of reports relating to oil                  
  and hazardous substances; amending requirements relating to                  
  the revision of state and regional master prevention and                     
  contingency plans and requirements related to expenditures                   
  for oil or hazardous substances; amending the authority to                   
  contract to provide personnel to respond to a release or                     
  threatened release of oil or a hazardous substance;                          
  terminating the nickel-per-barrel oil conservation                           
  surcharge; and levying and collecting two new oil                            
  surcharges; providing for the suspension and reimposition of                 
  one of the new surcharges; and providing for an effective                    
  CHAIRMAN WILLIAMS said the committee has had several                         
  meetings to consider draft committee substitute version Y                    
  and no action has been taken to adopt any of the versions.                   
  He advised since the committee had expressed interest in a                   
  split-nickel approach to revising the 470 fund, he is                        
  submitting another draft version for the committee's                         
  consideration.  He explained that the version presented is a                 
  split-nickel version based closely on the split-nickel                       
  approach proposed by the Administration.                                     
  Number 041                                                                   
  (DEC), testified via teleconference and stated version Z                     
  divides the nickel surcharge into two accounts within the                    
  Oil and Hazardous Substance Release Response Fund and                        
  Prevention Fund:  1) the prevention account which is                         
  allotted 3 cents and funds all of the state's current                        
  operating activities except spill response and 2) a response                 
  account which is allotted 2 cents and funds only responses,                  
  including matching funds for federal cleanup activities, and                 
  cost recoveries.  There is no defining limitation on what                    
  kind of a response may be funded from the response account.                  
  It is essentially a revolving fund in that the costs from                    
  this account will be repaid to the state through cost                        
  MS. ADAIR said in addition to the surcharge funding for each                 
  account, the prevention account also receives all penalties,                 
  fines, interest on both accounts, and program receipts                       
  received by the department for a number of oil and hazardous                 
  substance related activities.  The response account receives                 
  all cost recoveries and natural resource damages.  She                       
  pointed out that the recommendations from the Legislative                    
  Audit have been incorporated into draft version Z.                           
  Number 062                                                                   
  LAW, testified via teleconference and stated when the nickel                 
  is split into a 3 cents surcharge and a 2 cents surcharge.                   
  The 3 cents surcharge goes into the prevention account and                   
  the 2 cents surcharge goes into the response account.                        
  MR. TOSTEVIN said because of the prohibition against a                       
  dedicated fund, any incoming moneys are put in the general                   
  fund account and at that point, are transferred into the two                 
  surcharge accounts, the 3 cents surcharge is deposited to                    
  the prevention account and the 2 cents surcharge is                          
  collected each month and is put into a response surcharge                    
  account.  There is also a prevention mitigation account.                     
  Fines, penalties, fees for services, etc., would be                          
  deposited into the prevention mitigation account.  There is                  
  also a response mitigation account where cost recoveries,                    
  natural resource damages, and other damages are deposited.                   
  The legislature then has the option of appropriating those                   
  moneys into the appropriate accounts of the response fund.                   
  The response fund is broken into two accounts:  the                          
  prevention account to fund ongoing activities and the                        
  response account which funds emergencies declared by the                     
  Governor and also the municipal impact assistance grants.                    
  Number 096                                                                   
  MS. ADAIR said it is important to recognize that in regard                   
  to the municipal grants program, current statute requires a                  
  gubernatorial disaster declaration before that grant program                 
  can take effect.                                                             
  MR. TOSTEVIN stated that from the response account, as under                 
  current law, there will be the investigation, evaluation,                    
  containment, and cleanup of oil or hazardous substance                       
  releases and there is no size limitation. However, the                       
  current limitations in law limiting expenditures to                          
  situations creating imminent threat to human health and                      
  environment is maintained.  The response account also                        
  provides for state cost recovery action and also allows for                  
  restoration of the environment, which is important because                   
  the legal distinction between when cleanup stops and                         
  restoration begins is a very fine line.  The natural                         
  resource damages collected also return to the response                       
  MR. TOSTEVIN said the final purpose of the response account                  
  is matching funds for cleanup activities under the federal                   
  super fund law, Comprehensive Environmental Responses                        
  Compensation and Liability Act of 1980, and the federal oil                  
  response fund.  The 2 cents surcharge which goes into the                    
  response account has a suspension formula which is located                   
  on page 5, Section 9.  The suspension formula involves the                   
  unreserved and unobligated balance in the response account                   
  and includes any appropriations which might have been made                   
  but have yet to be spent.  The second part of the formula is                 
  the surcharge account which is where the surcharge moneys                    
  have been deposited, but not yet put into the fund through                   
  appropriation. Therefore, part of the formula looks to those                 
  yet to be deposited surcharges as part of the balance.  The                  
  third part of the balance is cost recovery of moneys                         
  extended from the response account; moneys originally spent                  
  for a cleanup or restoration which have been recovered by                    
  the state, deposited into the mitigation account and are                     
  waiting to be appropriated by the legislature into the                       
  response account.                                                            
  Number 138                                                                   
  MR. TOSTEVIN stated those three items are added together:                    
  the unreserved balance, the surcharge waiting to be                          
  appropriated, and the cost recoveries waiting to be                          
  appropriated and any appropriations which have been made                     
  from the fund are subtracted from the sum.  There might be                   
  appropriations of money paid from the fund in that year.                     
  What this does is it forwards funds to ensure there is                       
  always a positive balance or a buffer in the fund.  When                     
  making the calculation, you then compare it to $50 million                   
  and if the calculation is above $50 million, the tax is                      
  suspended.  It is done quarterly and on a fiscal year basis                  
  so all the different components of the calculation are done                  
  on a fiscal year basis.  This attempts to get around the                     
  cumulative problems found in current law calculation.  Once                  
  the $50 million point is reached or exceeded, the surcharge                  
  is suspended for the quarter.  The commissioner then                         
  determines the next quarter if the balance has gone below                    
  the $50 million level.                                                       
  Number 160                                                                   
  MR. TOSTEVIN stated Section 1 amends the name of the                         
  response fund to response account which the Governor can use                 
  to respond to disaster emergencies involving oil or a                        
  hazardous substance.  Section 2 amends the name of the                       
  response fund to response account which may be used for the                  
  municipal grants program.  Section 3 is a technical                          
  amendment deleting the reference to the "spill reserve"                      
  which is a leftover piece of some old legislation.  Section                  
  4 is another amendment to the municipal grants program and                   
  includes the reference to the response account.  Section 5                   
  changes the name of the fund and adds the word prevention.                   
  Section 6 involves the Exxon Valdez reimbursement, changes                   
  the name of the fund and allows future reimbursements to be                  
  credited to the prevention mitigation account, which is a                    
  general fund accounting mechanism from which the legislature                 
  may appropriate (indiscernible) prevention account.                          
  Number 192                                                                   
  MR. TOSTEVIN said Section 7 is where the surcharge is broke                  
  into separate surcharges and this section creates the 2                      
  cents surcharge.  Section 8 allows the 2 cents surcharge to                  
  be appropriated to the response account.  Section 9 is the                   
  suspension of the 2 cents surcharge.  Section 10 is the                      
  incentive clause which says the 2 cents surcharge will be                    
  suspended for one fiscal year if the legislature does not                    
  appropriate all of the 2 cents surcharge revenues in the                     
  surcharge account and all of the cost recovered 2 cent                       
  surcharge funds.  The surcharge is also suspended if the                     
  legislature appropriates all of these funds and the Governor                 
  vetoes or reduces the appropriation.  He added that Section                  
  40 provides that the incentive clause only applies once the                  
  fund reaches the $50 million balance.                                        
  (CHAIRMAN WILLIAMS noted for the record that REPRESENTATIVE                  
  JAMES joined the committee at 8:38 a.m.)                                     
  REPRESENTATIVE CON BUNDE clarified that if the legislature                   
  does not appropriate moneys to the spill response account,                   
  then the tax shuts off for a year.  He asked what happens                    
  after that year and also asked if the legislature could not                  
  appropriate the funds for an extended period of time so the                  
  fund never reaches $50 million.                                              
  MR. TOSTEVIN said essentially that is true.  The mechanism                   
  provides that the incentive clause not apply until the fund                  
  reaches an initial balance of $50 million.  The surcharge                    
  shuts off for a year and at the end of the year, it begins                   
  REPRESENTATIVE BUNDE said in reality the legislature could                   
  tough it out for a year and then the tax would start again.                  
  He asked if the surcharge would then last only for a year.                   
  MR. TOSTEVIN responded the surcharge will suspend for a year                 
  and then start again.  If the funds are not appropriated                     
  again, it will suspend.  He stated there are other incentive                 
  clauses built into the calculation for the suspension of the                 
  surcharge including the counting of the 2 cents surcharge,                   
  the general fund account which has money yet to be                           
  appropriated to the fund and also the cost recovery yet to                   
  be appropriated to the fund.  Therefore, the calculation                     
  includes moneys which are not yet in the fund and is a way                   
  of creating an incentive for putting those moneys in the                     
  fund as well.  He said conceivably the surcharge could be                    
  cut off (indiscernible) reach the $50 million level without                  
  those moneys actually being there if they were not                           
  appropriated each year.                                                      
  Number 270                                                                   
  REPRESENTATIVE BUNDE said even though the legislature does                   
  not appropriate the money to achieve the $50 million, there                  
  is a mechanism for the surcharge to eventually shut off.                     
  MS. ADAIR told committee members to look at page 5, line 31                  
  to page 6, line 1 where it says the "balance of the account                  
  maintained under AS 37.05.142 that accounts for the proceeds                 
  of the surcharge..."  She said this is the calculation of                    
  the $50 million and that language is directing the                           
  calculation to the surcharge account even before it is                       
  appropriated.  Therefore, when one is calculating the $50                    
  million cap, you are looking at the 2 cents surcharge                        
  regardless of whether or not it has been appropriated.                       
  MR. TOSTEVIN said Section 11 creates the definitions of what                 
  the response account is and what the response mitigation                     
  account is.  Section 12 establishes the 3 cents surcharge                    
  which funds the prevention account.  Section 13 is an                        
  amendment needed due to the creation of the two surcharges.                  
  Section 14 amends current law by providing that cost                         
  recoveries be deposited into the response mitigation                         
  Number 306                                                                   
  MS. ADAIR explained Section 15 is the language on the state                  
  master plan and similar language is in all versions of HB
  238.  This section requires that the commissioner annually                   
  review the plan and only revise it when necessary.  Section                  
  16 also deals with the plan--submitting it to the public and                 
  to the legislature.  She said it has been determined there                   
  is one addition needed to this section; on line 24, page 9                   
  after the word "plan" the words "or a revised plan" should                   
  be inserted.  This change provides that the additional state                 
  master plan and any revisions thereto go through the review                  
  process which is required by law.                                            
  MS. ADAIR said Section 17 deals with the regional master                     
  plans and it does the same thing as the state master plan.                   
  Section 18 amends the purpose section of the response fund.                  
  It carries forward the idea that the fund have two purposes:                 
  responding to releases and the prevention of those releases.                 
  Section 19 establishes the two accounts - the prevention and                 
  response accounts.  Section 20 amends current statute and                    
  states that money appropriated to either account will not                    
  lapse back into the general fund but rather remain available                 
  for appropriation by the legislature.  Section 21 finances                   
  the prevention account and includes money received from                      
  private sources and all fines and penalties collected as a                   
  result of a release or threat of a release of oil or a                       
  hazardous substances; the interest on the balances of both                   
  prevention accounts and both response accounts; all fees                     
  which DEC may collect for contingency plan review, financial                 
  response review, lab certifications, and oil spill response                  
  action contractor registrations.  It also provides the                       
  mitigation account which goes into the prevention account.                   
  MS. ADAIR explained Section 22 finances the response account                 
  and includes money recovered by the state for its                            
  containment and cleanup activities, but excludes fines and                   
  penalties.  It also includes natural resource or other                       
  damages and the response mitigation account.  Section 23 is                  
  the use of the prevention account and includes everything                    
  which is currently allowed under statute with the exception                  
  of the investigation and evaluation of a release which poses                 
  an imminent and substantial threat.  It also excludes the                    
  matching funds for participation in a federal cleanup                        
  activity.  Also included is a change which attempts to                       
  address one of the audit's concerns and that is taking out                   
  the language regarding the Division of Emergency Services                    
  (DES) and its appropriate documentation.  In the past, the                   
  money for DES has come through DEC and (indiscernible) to                    
  the division.  It does not change the intent, but rather                     
  addresses the confusion on how that money gets to DES or any                 
  other agency.                                                                
  Number 375                                                                   
  MS. ADAIR said Section 24 requires an appropriation for all                  
  uses of the prevention account.  Under current law, the                      
  citizens oversight authorization does not require an                         
  appropriation and this change requires an appropriation.                     
  Section 25 is a technical amendment which directs the                        
  appropriations for the citizens oversight council and the                    
  Department of Transportation to come from the prevention                     
  account not the response account.  Section 26 is the purpose                 
  of the response account.  It includes the municipal impact                   
  grant, release response, cost recoveries to the state,                       
  restoration of the environment, and matching funds for super                 
  fund or federal oil spill cleanup.  It also allows the                       
  Governor to use the response account for a disaster                          
  MS. ADAIR stated on page 16, beginning on line 2, the                        
  authorization in existing law has been carried forward which                 
  says money for emergency response activities does not                        
  require an appropriation by the legislature.  Added is a                     
  requirement that the DEC commissioner within five days of                    
  accessing the response account, provide a written report to                  
  the Governor summarizing the release, what the state is                      
  doing, what the state anticipates doing, what the state has                  
  spent, what the state thinks it will spend and anything else                 
  the commissioner thinks is appropriate.  The Governor may at                 
  any time during the state's response approve, disapprove, or                 
  amend the action DEC has taken.                                              
  Number 414                                                                   
  MS. ADAIR said Section 27 comes from the legislative audit.                  
  The audit recognized that DEC had little authority to                        
  require information from other agencies receiving response                   
  funds to compile a report which is required.  This section                   
  attempts to require agencies to provide DEC with whatever                    
  information the department needs to do the report and                        
  prohibits the department from funding, through a                             
  reimbursable service agreement, an agency that does not give                 
  the department that information.  Section 28 amends the                      
  report to the legislature.  It removes all of the reporting                  
  requirements on those activities which are subject to                        
  legislative appropriations.  All department activities under                 
  the prevention account will not be included in the report.                   
  The report will focus instead on response account                            
  expenditures.  Also included in this section are                             
  requirements that the department report on successful cost                   
  recoveries, recoveries of fines and penalties, natural                       
  resource and other damage collection, and a summary of                       
  municipal participation such as the grant program.  If the                   
  department anticipates particular response activities to                     
  continue and they will be paid for out of the response                       
  account, those activities need to be reported also.                          
  MS. ADAIR stated Section 29 is also an audit recommendation                  
  and it deals with contaminated sites.  She pointed out the                   
  requirement in current law for contaminated sites is                         
  unwieldy as the auditor noted.  Therefore, an attempt has                    
  been made in this section to focus on the number of sites in                 
  the database, whether the site is active or closed, and                      
  requires a prioritization based on the immediate and long-                   
  term threats to the public health or welfare, organized                      
  statewide, as well as by community.                                          
  MS. ADAIR explained Section 30 is a technical amendment to                   
  current law which recognizes that if the Governor has a                      
  disaster declaration and the response account is used, he                    
  must include that information in a submitted report.                         
  Section 31 requires DEC to adopt regulations to implement                    
  cost recovery.  It was felt these regulations are important                  
  for two reasons.  First, it will put the public on notice as                 
  to how the department will do cost recoveries and second, it                 
  will give assurance to people that the department has a                      
  legal process to seek recoveries and will follow it.                         
  Sections 32 and 33 amend the lien provisions which have been                 
  in every version of HB 238.                                                  
  MS. ADAIR stated Section 34 is a technical amendment                         
  changing the name of the response fund.  Section 35 is a                     
  definition section which defines the prevention account,                     
  prevention mitigation account, response account, and                         
  response mitigation account.  Section 36 is the repealer.                    
  The only addition to this list from that in the HB 238 work                  
  draft is AS 46.08.040(b) which deals with the Governor's                     
  requirement to report on the disaster declaration. That                      
  requirement has been put in a different part of the law so                   
  there was a need to repeal the current law.                                  
  Number 488                                                                   
  MS. ADAIR said Section 37 is a clarification that any                        
  appropriations from the former spill reserve which                           
  previously were done in the front section of the budget bill                 
  are not considered an expenditure.  Section 38 divides the                   
  balance of the current response fund at the end of this                      
  fiscal year between the response and prevention accounts                     
  60/40, the same way the nickel surcharge is being split.                     
  MR. TOSTEVIN explained Section 39 attempts to account for                    
  the current nickel surcharge receipts and provides a                         
  transition period.  Surcharge moneys which come in before                    
  June 30, 1994, go to the response fund in the normal way                     
  under current law.  Surcharge money coming in between June                   
  30, 1994, and July 1, 1994, a one day period, will be paid                   
  and split 60 percent/40 percent.  The effective date of the                  
  proposed legislation is July 1, 1994, and from that date                     
  forward the provisions of the new law will apply.                            
  REPRESENTATIVE BILL HUDSON clarified version Z provides that                 
  citizens oversight councils and new vessels heretofore have                  
  been appropriated by the legislature will be authorized                      
  subject to legislative approval but only out of the                          
  prevention account.                                                          
  MS. ADAIR answered that is correct.  She said it was felt                    
  that those are operating expenses of the state and the                       
  legislature could make a determination as to how it wants to                 
  spend the money.                                                             
  REPRESENTATIVE HUDSON clarified there is no retroactivity.                   
  Everything which has been done before is completed on its                    
  own merit.                                                                   
  MR. TOSTEVIN replied that is correct.                                        
  REPRESENTATIVE HUDSON asked where hazardous substances are                   
  funded in version Z.                                                         
  MS. ADAIR replied it would depend.  The ongoing operation of                 
  the department's contaminated site program will come from                    
  the prevention account.  Any response to a release of a                      
  chemical will come from the response account and are costs                   
  which will be recovered by the department.                                   
  Number 565                                                                   
  REPRESENTATIVE HUDSON asked where the money will be replaced                 
  once recovered.                                                              
  MS. ADAIR responded through a series of legislative                          
  appropriations, the money will go back into the response                     
  account.  She said the response account will essentially be                  
  a revolving fund.                                                            
  REPRESENTATIVE ELDON MULDER said it was his understanding                    
  that two accounts were to be set up, but he sees four                        
  accounts in this version, under Section 35.                                  
  BOB POE, DIRECTOR, DIVISION OF INFORMATION AND                               
  ADMINISTRATIVE SERVICES, DEC, replied the four accounts                      
  proposed are the same accounts as proposed in all other                      
  split-nickel versions.  In all versions, there are two                       
  surcharge accounts, two mitigation accounts and a response                   
  account and a prevention account.                                            
  REPRESENTATIVE MULDER asked why.                                             
  MR. POE told committee members to think in terms of buckets.                 
  There is a need to have two buckets to collect the 3 cents                   
  surcharge and the 2 cents surcharge;  two buckets for fines                  
  and penalties, cost recoveries, etc., which go into the                      
  mitigation account; and two funds which the legislature                      
  appropriates the surcharges into the funds and portions or                   
  all of the mitigation account amounts into the funds.  Under                 
  the response account there is a response surcharge account,                  
  a response mitigation account and then a response account.                   
  The response surcharge account is collecting the 2 cents                     
  surcharge; the response mitigation account is collecting                     
  cost recoveries, etc.; and the legislature will appropriate                  
  the surcharge amounts collected in the response surcharge                    
  account and the amount of money which has been collected in                  
  the response mitigation account into the response account.                   
  The same logic works on the prevention side.                                 
  Number 619                                                                   
  REPRESENTATIVE MULDER asked if the 2 cents surcharge goes                    
  directly into the response account or does the legislature                   
  have to appropriate the money.                                               
  MR. POE responded the legislature has to appropriate the                     
  money as it collects in the response surcharge account.                      
  REPRESENTATIVE MULDER asked if it is possible for the                        
  surcharge money to be directly deposited into the response                   
  MR. POE responded no.  The legislature has to appropriate                    
  the money.  He added that is what the incentive clause is                    
  focused on.                                                                  
  REPRESENTATIVE MULDER referring to Section 18, felt this                     
  section expands the focus of the 470 fund or gives                           
  justification for existence in terms of responding to                        
  releases or threatened releases of oil and hazardous                         
  MS. ADAIR replied this section is a technical amendment and                  
  is not necessarily required to include.  This section                        
  recognizes that the fund is used for two things.  The fund                   
  is not only used for the protection of the environment but                   
  also for responding to releases.                                             
  REPRESENTATIVE MULDER stressed that was his point.  It seems                 
  to be an expansion of the scope of what the legislature                      
  intended for the 470 fund to be.                                             
  MS. ADAIR disagreed.  She said the audit also shows the                      
  initial purpose of the 470 fund was twofold:  Give the state                 
  response capability and also to deal with more long-term                     
  threats and prevention activities.                                           
  MR. POE agreed that the audit is very clear on that point.                   
  REPRESENTATIVE MULDER stated before the 5 cents surcharge                    
  was implemented, there were no teeth behind the prevention                   
  fund.  He said the real guts of the whole effort came when                   
  the legislature imposed the nickel surcharge because the                     
  focus at that time was response.  He felt Section 18 is an                   
  attempt to recreate history in terms of expansion of the                     
  scope and he does not support that attempt.                                  
  TAPE 94-37, SIDE B                                                           
  Number 000                                                                   
  REPRESENTATIVE HUDSON stated he is trying to understand at                   
  what point the 2 cents going into the response account shuts                 
  off.  He said in reading Section 10, it says if the                          
  legislature does not appropriate the entire 3 cents                          
  collected for that year, then the 2 cents surcharge shuts                    
  off, but only if the response fund is up to $50 million.  He                 
  asked if the fund could be less than $50 million for the 2                   
  cents surcharge to shut off.                                                 
  MR. POE said the incentive clause relates to the 2 cents                     
  surcharge and the surcharge shuts off if all of the 2 cents                  
  amount collected has not been appropriated and includes cost                 
  recovery.  He explained if the legislature appropriates the                  
  full amount and all of the cost recovery moneys, there is                    
  not a problem unless the Governor decides to veto the                        
  appropriation.  If the Governor decides to veto the                          
  appropriation, the incentive clause kicks in again.                          
  REPRESENTATIVE HUDSON clarified that if the legislature does                 
  not appropriate the 2 cents which goes into the response                     
  fund or they do and the Governor vetoes the decision, the                    
  surcharge shuts off.                                                         
  MR. POE said the surcharge would shut off for one year.                      
  REPRESENTATIVE HUDSON reiterated the incentive for the                       
  legislature in asking the Governor to put those protection                   
  moneys into the response account is the first shut off date                  
  of the 2 cents surcharge is when the $50 million is reached.                 
  REPRESENTATIVE MULDER referring to Section 25 regarding                      
  citizens oversight councils, asked if the legislature is                     
  going to be required to make an appropriation to the                         
  MS. ADAIR replied no.  Under current law, there is no                        
  requirement for an appropriation, but rather the law says                    
  the legislative counsel can give documentation to the DEC                    
  commissioner and the commissioner shall pay it.  It is an                    
  after the fact situation.  She said the Department of Law                    
  has previously given the opinion it is not a legal way to                    
  give money to the councils but there has been no                             
  appropriation.  This section makes it clear that if the                      
  citizens oversight councils are going to be funded, the                      
  legislature is required to do a specific appropriation in                    
  the budget bill.                                                             
  REPRESENTATIVE MULDER asked if earlier versions of HB 238                    
  had a section which deleted the authorization for citizens                   
  oversight councils.                                                          
  MR. POE replied there have been so many versions, he is not                  
  REPRESENTATIVE MULDER referring to Section 28 which relates                  
  to providing reports to the legislature, asked if this                       
  section deletes the necessity for the department to report                   
  on activities related to the prevention account.                             
  MS. ADAIR responded that is correct.                                         
  REPRESENTATIVE MULDER asked why the legislature would not                    
  want to know what is happening on the prevention side.                       
  MS. ADAIR replied the legislature will get that information                  
  through the appropriations process.  The prevention account                  
  requires appropriations completely.                                          
  MR. POE added there will be a budget detail presentation,                    
  overviews and the normal budget process.                                     
  Number 069                                                                   
  REPRESENTATIVE MULDER said this is a special fund and it                     
  would be nice to know where the funds are being spent.  He                   
  felt the public would better understand it if it was in a                    
  special report as opposed to being part of the budget.  He                   
  stressed there is little justification given when included                   
  in a budget and is detailed for only three individuals or                    
  the budget subcommittee.  He said if there is a detailed                     
  report made public, everyone gets to look at it and it puts                  
  greater responsibility upon the department to justify why                    
  they are using the funds and to what end they are using the                  
  REPRESENTATIVE BUNDE agreed with Representative Mulder.                      
  REPRESENTATIVE JOE GREEN clarified that 3 cents will go to                   
  prevention rather than going to the tank which would be                      
  there in case it is necessary and the penalties, fines,                      
  fees, 100 percent of the interest and 60 percent of the                      
  existing tank will all go to prevention, leaving 40 percent                  
  of an unfilled tank, 2 cents and some response mitigation to                 
  build the tank.                                                              
  MR. POE stated most of what Representative Green said is                     
  true.  He noted there were a few things included on the                      
  prevention side that depend on whether or not the                            
  legislature appropriates the money.                                          
  Number 100                                                                   
  REPRESENTATIVE GREEN asked if the plan in version Z was in                   
  place for this year, how much money would go to prevention.                  
  MR. POE said the initial balance into the spill response                     
  account will be $25.3 million and $37.9 million will be in                   
  the prevention account.                                                      
  REPRESENTATIVE GREEN asked if these amounts exceed DEC's                     
  current budget.                                                              
  MR. POE said the 3 cent surcharge would equal $15.7 million                  
  in the first year dropping down to $13.4 million by the                      
  fifth year.                                                                  
  REPRESENTATIVE GREEN asked if interest is being taken off                    
  the total nickel or only that portion which is applied to                    
  MS. ADAIR said in version Z, all interest from all of the                    
  accounts goes to the prevention mitigation account and the                   
  legislature appropriates that amount.  She stated one of the                 
  thoughts in allowing for all of the interest to be put into                  
  the prevention account is for out years when the 3 cents is                  
  no longer enough.  Rather than going to the general fund,                    
  the legislature could identify the interest and appropriate                  
  that to the prevention account.                                              
  Number 146                                                                   
  REPRESENTATIVE JEANNETTE JAMES commented that many of the                    
  hazardous waste cleanups and spills to be dealt with, even                   
  in the out years, are not necessarily related directly to                    
  crude oil and other payers should be considered, such as the                 
  motor fuel tax.  She expressed opposition to a plan which                    
  says the 3 cents/2 cents split will take care of all of the                  
  state's needs.                                                               
  MS. ADAIR said on the response side where emergencies,                       
  investigations, and cleanups would be dealt with, all costs                  
  are required to be cost recovered from the responsible                       
  parties.  She pointed out that often the responsible parties                 
  cannot afford the up-front costs and have the need to repay                  
  the state over a matter of months.                                           
  REPRESENTATIVE JAMES responded there are many cleanups the                   
  state has had in the past where there is no money to be                      
  collected and the state has been solely responsible for                      
  those spills.  She does not anticipate those type of                         
  situations to change.                                                        
  MR. POE agreed there will be orphan spills in the future but                 
  version Z states that requirements should be established for                 
  cost recovery.  He said cost recovery has come into full                     
  swing in the last two years with respect to the response                     
  fund.  There has been a better collection rate on                            
  reimbursements to the fund.                                                  
  REPRESENTATIVE MULDER thought there had been a total summary                 
  given for the $13.5 million which DEC is requesting for the                  
  prevention mitigation side.  He asked if there was $2.5                      
  million included in the summary for underground storage tank                 
  Number 191                                                                   
  MR. POE responded that amount was not in the $13.5 million.                  
  He said this year in the operating budget, the mitigation                    
  account is proposed to be used for underground storage tank                  
  cleanup.  He noted also in the motor fuel tax proposal which                 
  the Governor has, 1 cent is dedicated to the underground                     
  storage tank cleanup.                                                        
  REPRESENTATIVE MULDER said on the particular chart he is                     
  referring to, the top line on the $13.5 million addresses                    
  some sort of cleanup.                                                        
  MS. ADAIR said that is the contaminated sites program which                  
  would come out of the prevention account under version Z.                    
  REPRESENTATIVE MULDER clarified that contaminated sites are                  
  not underground storage tanks.                                               
  MR. POE responded no.                                                        
  Number 200                                                                   
  REPRESENTATIVE MULDER thought it would be useful if the                      
  committee could walk through and understand in real dollar                   
  terms what is being discussed.  He said as a legislator, he                  
  wants to be responsible to ensure adequate funding is being                  
  provided for these programs, but added on the other hand,                    
  the greatest abuser of these funds is not DEC, it is the                     
  Number 212                                                                   
  MR. POE said under the 3 cents/2 cents split the first year,                 
  when the existing $37.4 million is split 60/40 and the                       
  nickels collected in 1994 are split 60/40, the spill                         
  response account will have $25.3 million and the spill                       
  prevention account will have $37.9 million.                                  
  REPRESENTATIVE MULDER clarified from those totals, DEC's                     
  appropriation will be $13.5 million so the surplus in the                    
  prevention account will be $24.4 million.                                    
  MR. POE said that is correct and that money will be there                    
  for the future.                                                              
  Number 230                                                                   
  REPRESENTATIVE MULDER asked Mr. Poe to continue to next                      
  MR. POE said in 1995, there will be $10.5 million collected                  
  from the 2 cents surcharge and $15.7 million from the 3                      
  cents surcharge.  He explained since that is appropriated to                 
  the two accounts at the beginning of 1996, the beginning on                  
  the spill response account will be $35.3 million and the                     
  beginning on the spill prevention account will be $40.1                      
  REPRESENTATIVE MULDER asked what the surplus will be without                 
  any additional appropriations from the prevention side.                      
  MR. POE responded $26.2 million at the end of that year.                     
  REPRESENTATIVE MULDER asked Mr. Poe to go on to year three.                  
  MR. POE said in fiscal year 1996, $10.1 million from the 2                   
  cents surcharge will be collected and $15.2 million from the                 
  3 cents surcharge will be collected.  Therefore, at the                      
  beginning of 1997, the spill response account will be $44.9                  
  million and the spill prevention account will be $41.4                       
  REPRESENTATIVE MULDER asked if the surplus would be $41.4                    
  MR. POE said after the appropriations for that year, the                     
  surplus will be $27.1 million and in that year, the $50                      
  million point will have been reached and the 2 cents                         
  surcharge would be suspended.                                                
  REPRESENTATIVE MULDER clarified the surcharge will shut off                  
  even though the response account is at $44.9 million.                        
  MR. POE responded actually at the end of that year, the                      
  prevention account has $27.1 million.  He told committee                     
  members to remember the calculation does not look at                         
  appropriations, it only considers nickels collected.                         
  Therefore, the calculation to suspend the surcharge                          
  considers the $7.4 million collected during 1996 in 2 cents                  
  surcharge collections and factors in the $50 million                         
  calculation to suspend the surcharge.                                        
  MR. POE stated in 1997, $7.4 million will be collected from                  
  the 2 cents surcharge and $14.9 million from the 3 cents                     
  surcharge.  He said in 1998, the starting balance of the                     
  spill response account will be $51.8 million and the                         
  beginning balance in the spill prevention account will be                    
  $42 million.  After subtracting the appropriations for that                  
  year, the ending balance on the spill account will be $51.0                  
  million which includes $800,000 for emergency cleanups which                 
  DEC assumes will be spent.  The ending balance on the                        
  prevention side will be $27.2 million.                                       
  Number 280                                                                   
  MR. POE stated in 1999, since in 1998 nothing is collected                   
  in the 2 cents surcharge and $14.3 million was collected in                  
  3 cents surcharge, the beginning balance of the spill                        
  response account will be $51.3 million.  He said the reason                  
  for the $.3 million is that cost recovery which happened in                  
  1998 is added in.  The beginning balance for the spill                       
  prevention account will be $41.5 million.  When the                          
  appropriations are taken out from that amount, the balance                   
  at the end of the year is $50.5 million in the spill                         
  response account, because $800,000 was taken out for                         
  emergency cleanup, and $26.3 million in the spill prevention                 
  REPRESENTATIVE MULDER said those figures demonstrate what he                 
  mentioned earlier and that is, there is this account which                   
  sits out there which is open for abuse.  He felt it is a                     
  fund which the legislature will continually abuse.  He                       
  thought the reason for HB 238 is to eliminate the abuse and                  
  put some brakes on the legislature in terms of controlling                   
  its habit of spending the money.  He said this version                       
  allows that to continue.                                                     
  Number 310                                                                   
  REPRESENTATIVE GREEN asked Mr. Poe if the figures he just                    
  gave included the interest of $2.5-$3.0 million and fees,                    
  fines, etc.                                                                  
  MR. POE responded they do not because interest, fines,                       
  penalties, etc., have to be appropriated and the history of                  
  the legislature has not shown these moneys being                             
  appropriated.  Often times the moneys have been appropriated                 
  to other purposes.  He felt an assumption these moneys will                  
  now be appropriated would not be supported by history.                       
  REPRESENTATIVE GREEN said it is in version Z.                                
  MR. POE responded the bill says the legislature may                          
  MR. TOSTEVIN added that fines and penalties are very                         
  speculative and stated although fees for services are                        
  something DEC is authorized to do, they do not currently                     
  collect them.  He said the only money currently collected is                 
  the response action contract registration fee.  He stated in                 
  regard to interest, that is something under current law the                  
  legislature can do but has not chosen to do it yet.                          
  REPRESENTATIVE HUDSON expressed concern that the legislature                 
  has not yet arrived to the point what he thought the                         
  legislature originally wanted to get to when the nickel                      
  surcharge was established and that is the emphasis on                        
  prevention through depots.  He stressed the sooner the state                 
  gets to $50 million in the response fund, the better off the                 
  state will be.  He assumed the Administration is not too                     
  concerned about reaching the $50 million because in version                  
  Z that point is not reached for at least four years.                         
  MR. POE stated the $50 million will be reached in the second                 
  quarter of the third year.                                                   
  REPRESENTATIVE HUDSON stressed that is three years away.  He                 
  added not only will the $50 million point not be reached                     
  until that time, money is also being taken out of the                        
  account.  The $37 million currently in that account, which                   
  in a matter of 2-3 years could reach the $50 million, will                   
  be put in an account which basically sits there and fuels                    
  normal operations.  He has not seen the Administration                       
  indicate strongly that if the moneys are to be taken out of                  
  the spill response fund, there truly will be a prevention                    
  plan along the coast of Alaska which includes depots.                        
  Number 385                                                                   
  MS. ADAIR stated DEC will be conducting a near-shore                         
  demonstration project and has a near-shore capability that                   
  is imminent.  She said DEC is also looking at agreements                     
  with villages along rivers where the villages will provide                   
  river protection with DEC assisting.                                         
  MR. POE distributed to committee members a letter addressed                  
  to Representative James from Mead Treadwell, which outlines                  
  the current status of depots and corps in the state and                      
  those steps which are being taken currently to get to a                      
  firmer depots and corps ability in the state.                                
  MEAD TREADWELL, DEPUTY COMMISSIONER, DEC, stated the                         
  responsibility for depots and corps was a Department of                      
  Military and Veterans Affairs (DMVA) responsibility at the                   
  time legislation was passed.  He said early in this                          
  Administration, DEC had significant discussions with DMVA.                   
  It was concluded that because there would be a significant                   
  number of cooperatives and other entities created under                      
  federal and state laws to respond to the requirements of the                 
  law, DEC would work with the cooperatives to get the depots                  
  established and then assess where the gaps are.  He pointed                  
  out that DEC has worked with the legislature to get the                      
  near-shore demonstration projects started and noted the                      
  projects will start this spring.  He noted the projects will                 
  involve three entities which can become depots.                              
  Number 435                                                                   
  MR. TREADWELL said in the letter to Representative James,                    
  DEC has outlined price tags for establishing more depots                     
  around the state.  He stressed the information has been                      
  shared with every appropriation committee DEC has worked                     
  with in the last four years.  He said originally, depots                     
  were not the only use for the nickels, it was one major use.                 
  Money has been spent to increase the communications                          
  capability.  DMVA has a major communications package now.                    
  The Emergency Operations Center has been upgraded.  DEC has                  
  done some training with communities and there is more which                  
  can be done in the depot area.  He felt DEC has taken a                      
  prudent approach and not just sprinkling the state with                      
  containers of boom boxes without assessing the needs.  He                    
  said it is difficult to come before the committee and on one                 
  hand be accused of spending too much from the response fund,                 
  and on the other hand, where DEC has taken a conservative                    
  and appropriate course, to be criticized for not spending                    
  REPRESENTATIVE HUDSON stated he was present when the                         
  original fund was established and felt the goal was to get,                  
  as quickly as possible, a major potential containment system                 
  up and down the coast of Alaska.  He said his desire is to                   
  ensure the state is protected along the coast with a good,                   
  well-considered response capability.  He stated by taking                    
  the money out of the existing spill response fund and                        
  putting it into an administration slush fund...he asked if                   
  the legislature can use the money for whatever it wants.                     
  MS. ADAIR responded the statute is very clear on what the                    
  prevention account can be used for and it requires an                        
  appropriation by the legislature.  DEC cannot use that money                 
  without an appropriation.  The restrictions in statute do                    
  not apply to fines, penalties, etc., in the prevention                       
  mitigation account and the 3 cents surcharge account which                   
  does not contain an incentive clause.  She said the                          
  legislature could conceivably appropriate the money to                       
  another purpose.  She stressed after the money gets into the                 
  prevention account, it has (indiscernible) sideboards on it,                 
  and presents (indiscernible) as does current law, which                      
  provides that moneys in that account do not lapse, but                       
  remain available for future years for purposes outlined in                   
  statute if the legislature chooses to appropriate some or                    
  all of the moneys for those purposes.                                        
  Number 508                                                                   
  REPRESENTATIVE HUDSON stated he has seen legislatures come                   
  and go and use moneys for whatever they want to.  He                         
  stressed if the money is in the spill response fund, the 2                   
  cents shuts off if the legislature does not appropriate it                   
  and $26 million is out there, with the economic situation                    
  the state faces for the next few years, who knows what the                   
  next legislature will do.  They could take the money,                        
  appropriate it wherever they want and there still will be no                 
  REPRESENTATIVE HUDSON felt if ultimately there is going to                   
  be a $26 million prevention fund which continues on and                      
  grows, there should be restrictions put on the fund so it                    
  cannot be used for anything except for spill prevention and                  
  response, and enhancement of prevention along the coast.                     
  MS. ADAIR said the comment about the economic outlook for                    
  the state is one reason why DEC felt it was important to                     
  have more in the prevention account now than what will be                    
  needed in the next few years, because it was recognized that                 
  general funds will become more and more scarce.  In order to                 
  maintain a credible prevention program, which is the best                    
  defense to spill response, DEC wants to make sure that this                  
  money will be available for the legislature to appropriate                   
  to prevention programs rather than having it go to the                       
  general fund to supplement.                                                  
  Number 567                                                                   
  RESPONSE, DEC, stated in DEC's budget, the only money which                  
  DEC has been given is for the near-shore demonstration                       
  projects.  He said during testimony for the fiscal year 1993                 
  budget where the project was first included, DEC indicated                   
  to the House Finance Committee that the depots and corps                     
  responsibility was with DMVA.  He stressed the committee                     
  consciously made the choice to give the money for the near-                  
  shore demonstration projects to DEC but said before DEC does                 
  depots and corps, do a prototype to determine present                        
  status.  He said that is the first part in the letter to                     
  Representative James.                                                        
  MR. CONWAY stated DEC will be able to have packages which                    
  will have cost figures, feasibility, etc., and the                           
  legislature can work with communities.  He said what                         
  happened in the early days with the depots and corps is                      
  every community along the coast requested money to do that.                  
  He pointed out the only money to come out of the response                    
  fund for depots and corps has substantially paid for staff                   
  for DMVA.  There was an amount the legislature gave to DMVA                  
  to buy equipment and that equipment was the                                  
  telecommunications gear which DES purchased.  An amount was                  
  also used to train first responder volunteers.  He stressed                  
  that has been the extent of the money appropriated by the                    
  legislature to do depots and corps.                                          
  MR. CONWAY pointed out that the original fiscal note                         
  included $20 million with an annual amount of $3 million                     
  thereafter to keep depots and corps going.  That money has                   
  not been made available.  He felt it was an unrealistic                      
  expectation that the depots and corps be out there now.                      
  Number 614                                                                   
  REPRESENTATIVE MULDER asked Representative Hudson if he                      
  would be amenable to a Letter of Intent requesting DMVA                      
  prepare an annual capital improvement plan for depots and                    
  corps and submit it each year to the legislature or would it                 
  be better to include that within the bill.                                   
  REPRESENTATIVE HUDSON felt the bill itself is the vehicle                    
  and did not think Letters of Intent do too much.  He said                    
  the committee needs more information about the                               
  interrelationship between DMVA and DEC in the depots and                     
  coastal near-shore protection plan.  He felt the committee                   
  is being asked to agree to a major change in the statutes                    
  which will establish a plan for both emergency major spill                   
  type situations as well as minor spills, without really                      
  knowing a lot.                                                               
  REPRESENTATIVE MULDER stated the reason he had not looked at                 
  putting the request in the statute was it seemed to be a                     
  temporary condition.  He expressed appreciation for the                      
  figures and information included in the letter to                            
  Representative James.  He is amenable to including more                      
  money on the prevention side for up-front costs for depots                   
  and corps.  He thought the capital program could be funded                   
  through the 3 cents appropriation to the prevention account.                 
  Number 698                                                                   
  REPRESENTATIVE HUDSON felt there will be sufficient funds on                 
  the 3 cents side to take care of plans review, drills, etc.,                 
  and hopefully still have sufficient funds on an annual basis                 
  to implement the entire near-shore plan.                                     
  MR. CONWAY said once the demonstration project is over, the                  
  next process which needs to occur is to have a unit which is                 
  TAPE 94-38, SIDE A                                                           
  Number 000                                                                   
  MR. CONWAY...and sit down with the legislators and the                       
  communities.  He felt community input is something which has                 
  been missing, yet is very important to determine their                       
  concerns, see what the packages are, and develop priorities                  
  based upon a hazards analysis which is going to be completed                 
  at the end of the fiscal year.  He said these are all the                    
  pieces of the puzzle to ensure that DEC does not duplicate                   
  what is already out there, meet the needs of the                             
  communities, and know what substances are out there which                    
  DEC needs to be prepared to respond to.  DEC had targeted to                 
  have that information ready and have a sound basis for a                     
  capital improvement project budget in the fall.  He said if                  
  DEC had put numbers in the capital budget before now, he                     
  would not have been able to tell the legislature what the                    
  money would be used for.                                                     
  MR. POE responded to Representative Hudson's comment in                      
  regard to surplus saying there is a very small surplus over                  
  the normal $13.5 million program coming from the 3 cents                     
  surcharge.  If the funding aspects which Mr. Conway                          
  discussed are reviewed, splitting the fund is an important                   
  Number 023                                                                   
  REPRESENTATIVE HUDSON asked where the vessels are being                      
  MR. CONWAY said they are being built in Washington.                          
  REPRESENTATIVE HUDSON asked why they are not being built in                  
  MR. CONWAY replied Sitka did not bid on the contract.  He                    
  added there is an Alaskan contractor serving as the primary                  
  Number 035                                                                   
  REPRESENTATIVE BUNDE stated if the committee is going to                     
  predicate all hazardous responses on crude oil, some day                     
  there is not going to be any money to pay for it.  He                        
  encouraged committee members to remember that crude oil                      
  should not be the only source of funding for environmental                   
  MR. TREADWELL stated there are two mechanisms to complete                    
  the depots and corps issue being discussed:  1) local                        
  agreements which can go through DEC; and 2) the depots and                   
  corps which can go through DMVA.  He said there have been                    
  many requests from inland communities who are subject to                     
  hazardous substance spills or crude oil spills along the                     
  pipeline.  He pointed out DEC's type A response capability                   
  is very limited, so there will be a need for that as well                    
  and that price tag is not addressed in the letter to                         
  Representative James.                                                        
  Number 063                                                                   
  REPRESENTATIVE MULDER asked how much money is outstanding to                 
  be paid into the mitigation account.                                         
  MR. POE responded approximately $5 million.                                  
  REPRESENTATIVE GREEN asked if in the analysis of response,                   
  is DEC looking at the possibility of using people with                       
  shallow draft boats.                                                         
  MR. CONWAY stated there are two different kinds of                           
  demonstration projects, and work groups were set up which                    
  included people from the industry to ensure DEC did not                      
  duplicate.  He said the demonstration project which is going                 
  to happen next month in Seldovia will have a new barge which                 
  was designed by a work group and the cooperatives are                        
  looking at it to see if it is something they could use.                      
  Fishing vessels of opportunity will manage the deployment of                 
  the barge and that is what will be tested - if wood vessels                  
  can be used, using local volunteers and local fishermen...                   
  He assured the committee there is no duplication of efforts.                 
  MR. CONWAY said the Southeast project includes some rapid                    
  shallow draft vessels that are to be operated where the                      
  water is more protected, enabling more rapid deployment of                   
  boom and they will have to integrate with vessels of                         
  opportunity to be able to recover the oil.  He distributed                   
  several different handouts. (On file.)                                       
  CHAIRMAN WILLIAMS said the committee will not hear HB 238                    
  this week.  He hoped that industry, committee members and                    
  the public will keep in contact with his office regarding                    
  suggested changes.                                                           
  REPRESENTATIVE MULDER stated because there have been so many                 
  versions of the bill, it gets confusing about which draft is                 
  being discussed and the committee recreates the wheel each                   
  time.  He recommended that committee members come to the                     
  next meeting on HB 238, use version Z for suggested                          
  amendments to enable the development of a bill which the                     
  committee can adopt as a working document, and develop a                     
  final product to be submitted forward.                                       
  CHAIRMAN WILLIAMS said that was his intention.                               
  CHAIRMAN WILLIAMS announced the committee will meet                          
  Wednesday, March 23 at 8:15 a.m. to hear HB 259 and HB 443.                  
  He told committee members to note there will be a joint                      
  meeting on Thursday, March 24 at 1:30 p.m. with the House                    
  Finance Committee to get a briefing on the Governor's new                    
  proposal on Mental Health Trust Lands Settlement.                            
  There being no further business to come before the House                     
  Resources Committee, Chairman Williams adjourned the meeting                 
  at 10:10 a.m.                                                                

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