Legislature(1993 - 1994)
03/21/1994 08:15 AM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 date." 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 JANICE ADAIR, COMMISSIONER'S REPRESENTATIVE AND REGIONAL ADMINISTRATOR, DEPARTMENT OF ENVIRONMENTAL CONSERVATION (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 recovery. 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 BRECK TOSTEVIN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF 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 account. 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 again. 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 account. 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 emergency. 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 account. 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 substances. 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 councils. 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 sure. 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 funds. 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 prevention. 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 cleanup. 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 legislature. 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 year. 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 million. 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 million. REPRESENTATIVE MULDER asked if the surplus would be $41.4 million. 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 account. 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 appropriate. 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 enough. 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 depots. 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 MIKE CONWAY, DIRECTOR, DIVISION OF SPILL PREVENTION AND 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 compatible... 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 element. Number 023 REPRESENTATIVE HUDSON asked where the vessels are being built. MR. CONWAY said they are being built in Washington. REPRESENTATIVE HUDSON asked why they are not being built in Sitka. MR. CONWAY replied Sitka did not bid on the contract. He added there is an Alaskan contractor serving as the primary contractor. 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 protection. 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. ANNOUNCEMENTS 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. ADJOURNMENT There being no further business to come before the House Resources Committee, Chairman Williams adjourned the meeting at 10:10 a.m.