Legislature(1995 - 1996)

02/23/1996 08:20 AM House RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
 HJR 59 NPDES PERMIT FOR COOK INLET OIL & GAS                                
 JEFF LOGAN, Legislative Assistant to Representative Joe Green, said           
 HJR 59 states the legislature's support of the Environmental                  
 Protection Agency's (EPA) National Pollutant Discharge Elimination            
 System (NPDES) permit for the Cook Inlet oil operations.  He said             
 the NPDES permit is a federal permit for the Cook Inlet operators             
 and is currently being renewed.  He said, as part of this renewal             
 process, the EPA has included some conditions to the permit,                  
 increasing the monitoring and reporting obligations.  He said HJR
 59 supports the NPDES as it exists now, without those additional              
 ALICE BULLINGTON, Senior Environmental Scientist, UNOCAL, was first           
 to testify.  She said the NPDES permits for oil and gas facilities            
 have received attention from the legislature, the general public              
 and from industry.  She said the regulation of water quality, and             
 its impact, has been a hot topic throughout the United States.  She           
 said her discussion would explain the history of the NPDES permit             
 system, how it is applicable to every part of our society, and she            
 would conclude with how it affects the oil industry in the Cook               
 MS. BULLINGTON said NPDES, is a permit system that was created                
 under the Clean Water Act back in the 1970s when the general public           
 became alarmed at the number of polluted water bodies in the lower            
 48 states.  She said catastrophic events, such as rivers catching             
 on fire, caused Congress to regulate the discharge of pollutants              
 into the water system through the NPDES permit.  She said Congress            
 did not understand, at the time, how to regulate water.  She said             
 Congress recognized that banning all pollutants from the water                
 would result in the loss of jobs and create an economic burden for            
 urban areas.  The goal of Congress, in the Clean Water Act, was to            
 have fishable and swimmable rivers by 1983.  She said society has             
 made progress in that goal and she noted that there are many water            
 bodies that have recovered from past pollution.  She said a second            
 goal of the Clean Water Act was to eliminate discharges by 1985.              
 She said the reason this provision was included was because, at the           
 time, there was not a lot of knowledge about environmental science.           
 Environmental science tells us what kind of impacts harm the                  
 environment as well as how much discharge is and is not acceptable.           
 The goal of no discharge has not been met.                                    
 MS. BULLINGTON cited examples in Alaska, such as the municipality             
 of Anchorage, city of Kenai and the city of Homer, which currently            
 have NPDES permits for their municipal sewage treatment discharges.           
 She said eliminating discharge entirely would create an economic              
 burden.  Congress asked the EPA to take a look at the types of                
 technologies that were available, how effectively it would treat              
 the discharges and asked the EPA to provide a cost analysis                   
 determining the economic burden on industry and cities.  Based on             
 those two factors, the EPA developed permit limitations with the              
 end goal being an implementation of technology that was                       
 economically feasible and would allow for, an eventual, zero                  
 MS. BULLINGTON said in the last 20 years, it has been recognized              
 that there is no need to eliminate discharges to clean water                  
 bodies.  She said treated sewage discharge has no impact on the               
 environment, even though cities are continuing to develop towards             
 a zero discharge goal.  She said the municipality of Anchorage,               
 which treats its sewage less thoroughly than the city of Kenai, has           
 had no environmental impact due to its discharges.                            
 MS. BULLINGTON said the NPDES permit is formulated under the Clean            
 Water Act and it is working towards the zero discharge goal.  She             
 said the issue has been diverted from one of environmental impact             
 to an analysis of available technology and their associated costs.            
 A question has arisen from this policy, asking whether regulation             
 of industries and municipalities should occur if no environmental             
 benefits are being seen.  She said the NPDES permit in the Cook               
 Inlet, for oil and gas facilities, is an excellent example where              
 zero discharge is not necessary because the additional costs will             
 not benefit the environment.                                                  
 MS. BULLINGTON said the current oil and gas NPDES permit was issued           
 in 1986 and expired in 1991.  Due to the work load of the EPA, the            
 draft permit was issued in September 1995 and added that hopefully            
 more efficient, stream-lined methods will be developed for this               
 permit process.  She said the current NPDES permit has successfully           
 protected Cook Inlet.  She referred to recent studies, completed in           
 the Cook Inlet regarding water quality, sediment, and biota there.            
 She added that, in addition to those recent studies, 80 other                 
 studies have been conducted on the biota, water quality and                   
 sediment since the late 1960s.  She said, one of the later studies            
 was able to compare the results from the 1993 studies to studies              
 that were preformed by the MMS in the 1970s with no notable                   
 difference between them.                                                      
 MS. BULLINGTON said one of the most interesting studies, preformed            
 within the last few years, was done by Marathon and UNOCAL and                
 targeted the most significant produced-water discharge in Cook                
 Inlet.  She said the Trading Bay production facility, accounts for            
 approximately 95 percent of discharges into Cook Inlet.  She said             
 the study examined whether the water quality standards were being             
 met and whether there was compliance with the mixing zone                     
 requirements.  A mixing zone is an area around a discharge outfall            
 where you can exceed water quality standards as long as the whole             
 water body is not being harmed.  She said the mixing zone utilizes            
 the mixing dynamics of a water body and does not harm the water               
 body.  She said this study found, within the 750 meter mixing zone,           
 no violations of water quality standards were found within 50                 
 meters of the discharge.  She said compliance with the mixing zones           
 is being met.  She said the computer models that determined how               
 much dilution was occurring in Cook Inlet significantly                       
 underestimated what was occurring in that water body.                         
 MS. BULLINGTON said the proposed NPDES permit significantly                   
 increases existing permit limitations.  The proposed permit becomes           
 much more stringent regarding major discharge.  She said most of              
 the proposed requirements are 47 percent to 50 percent more                   
 stringent than the existing permit limitations.  She said there has           
 been a 300 percent increase in the administrative burden associated           
 with the additional monitoring and reporting that will be needed by           
 the new requirements to the NPDES.  She added that additional                 
 planning documents and general studies have also been proposed by             
 the EPA.  She mentioned the irony of these requirements as there              
 has been a lack of evidence on the impact to the environment and              
 the current EPA policy which seeks to reduce, by 20 percent, the              
 amount of monitoring and reporting being done by NPDES permitees.             
 MS. BULLINGTON mentioned the two primary discharges in the Cook               
 Inlet.  One of them is the produced water discharge.  She said                
 produced water comes from a reservoir, and is water that has been             
 in the reservoir for millions of years.  In general terms, the                
 water has been there since the formation of oil and gas.  She said            
 the concentration of metals and hydrocarbons are consistent over              
 time and that monitoring provides no useful information.  She made            
 the analogy to the requirement and requiring that her height be               
 measured on a daily basis.  She said the proposed NPDES permit                
 would implement three new limitations in addition to the two                  
 established limitations.  She said there is more stringent                    
 monitoring of produced water discharges than any other oil and gas            
 facility in the United States which is allowed to discharge.  The             
 EPA based these requirements on metals and hydrocarbon data in                
 produced water.                                                               
 MS. BULLINGTON said another primary discharge, in the Cook Inlet,             
 is the sanitary effluent.  She said EPA has required 50 percent               
 more stringent requirements on two of the parameters that are                 
 regulated and have increased the monitoring from once a month to              
 once a week.  The EPA notes, in the NPDES permit, that sanitary               
 discharge is not harmful.  She said that the current limitations in           
 the Cook Inlet are almost half of what the municipality of                    
 Anchorage is restricted to and the new limitations would be a third           
 of that.  She said the municipality of Anchorage does annual impact           
 studies of sewage discharge on Cook Inlet and has found no impact             
 from the 30 million gallons of discharged sewage.  She said UNOCAL            
 told the state of Alaska and the EPA that there has never been an             
 identified technology that can fit on a platform and achieve these            
 limits.  Recently, the state of Alaska has agreed with UNOCAL on              
 this point.  In the state's certification of the NPDES permit, they           
 asked the EPA to delete these new requirements.                               
 MS. BULLINGTON said the NPDES has received more public comment than           
 any other permit in Region 10.  In September, the NPDES draft                 
 permit was issued and Cook Inlet Region Citizens Advisory Council             
 (CIRCAC), the local watchdog monitoring group,  held a workshop               
 regarding the permit.  Two hearings were held, in Anchorage and               
 Kenai, by EPA on the NPDES permit.  The public comment period on              
 the NPDES permit was extended until the end of January.  The Cook             
 Inlet Keeper Program, a new environmental group based in Homer,               
 held a workshop in late January followed by a hearing in Homer.               
 Currently, the EPA is in the process of reviewing, the over 400               
 comments that were issued on this permit, three-fourths of which              
 oppose the new NPDES requirements.  She said EPA will respond to              
 each and every comment, and that likely there will be another                 
 comment period.  In addition, changes in the proposed permit will             
 cause the whole process to occur again.  A final NPDES permit will            
 be issued between August and December of 1996.  After that time               
 period the permit is open to litigation by the oil industry or                
 other parties who disagree with the permit requirements.                      
 CO-CHAIRMAN GREEN clarified that UNOCAL would want everything to              
 remain the same, as things are going well within the environment.             
 MS. BULLINGTON said the three main points she wanted to emphasize             
 included the fact that the oil industry has been in Cook Inlet for            
 30 years, there is no evidence of any impacts occurring in the                
 inlet and lastly that the EPA, the President and Congress have                
 recognized the burden that the NPDES places on industry and have              
 indicated that there should be reductions in this burden.                     
 REPRESENTATIVE DON LONG asked if there were any incident that                 
 occurred in the Cook Inlet which has caused more stringent                    
 recommendations to be placed in the proposed permit.                          
 MS. BULLINGTON said no, and added that the way in which the Clean             
 Water Act is written, the focus is on technology to reduce the                
 discharge over time which caused the requirements to be more                  
 stringent, regardless of environmental impact.                                
 REPRESENTATIVE ALAN AUSTERMAN asked if the EPA came out with                  
 anything in writing as to why they have set up different                      
 requirements for different industries.                                        
 MS. BULLINGTON said the requirements go back to the way the Clean             
 Water Act was written, which places the emphasis on technology and            
 economics.  She said the EPA looks at each entity differently when            
 determining the NPDES requirements because the oil industry has               
 different economics than municipalities.  The EPA has broken the              
 entities down by category and include mining, oil, municipalities             
 and the timber industry.  She said a balance across the scale is              
 not seen because different industries are able to support different           
 levels of technology.                                                         
 REPRESENTATIVE AUSTERMAN asked if this was due to financial                   
 MS. BULLINGTON said when the EPA becomes aware of new technologies,           
 they estimate the economic impacts on industry and put it out for             
 JOEL COOPER testified via teleconference from Homer. He said he was           
 against HJR 59 and added that the NPDES permit is not written in a            
 strong enough manner.  He said a legislative resolution should be             
 written that listed zero discharge level as its goal.  He said the            
 waters of Cook Inlet must be protected and the importance of                  
 maintaining clean water must be understood.  He referred to the               
 studies done in the Cook Inlet and said there are areas that                  
 haven't been sampled where he believed the pollutants might be                
 settling out.  He said, as the oil wells get older, 20 times more             
 formation waters are being produced.  He believed this fact meant             
 that stricter technologies should be implemented to handle this               
 change.  He said the legislature should encourage the                         
 municipalities to meet the zero discharge limit.  He said if zero             
 discharge limits cannot be met, we should do the best we can.                 
 MARLA McPHERSON testified via teleconference from Homer.  She said            
 that if pollutants are being discharged into the water, it seems              
 both necessary and responsible that reporting and monitoring                  
 obligations should be increased.  She said it will give industry a            
 good and responsible reputation.  She said if the EPA is not                  
 meeting the 25 percent reduction goal of monitoring the Cook Inlet            
 industries, there must be a reason.  She suggested that perhaps the           
 industry has not been responsible in the past with discharges.  She           
 said currently, the industry is allowed to discharge 400 million              
 gallons of waste per year and last year they reported having over             
 4,000 violations of the Clean Water Act.  She said, in Seattle,               
 UNOCAL is being sued for illegal discharge.  She said the EPA                 
 recognizes the importance of monitoring and reporting in order to             
 prevent illegal discharges.                                                   
 MS. McPHERSON reiterated the goal of the Clean Water Act was to               
 meet zero discharge by 1985.  She said, because the goal was not              
 met, it does not mean that we should change the goal.  She said               
 there is not currently enough science to declare that the discharge           
 is harmless.  She said it is not known what the long term effects             
 of chronic exposure to low levels of toxins are and the effects on            
 the food chain.  Current studies have not been up for peer review             
 and there are uncertainties in their findings.                                
 PAMELA MILLER, staff member, GREENPEACE, testified via                        
 teleconference from Homer.  She said the NPDES permit is a license            
 to pollute.  She said the industries in the Cook Inlet and around             
 the Kenai Peninsula have not proven themselves responsible as                 
 evidenced by the thousands of violations the oil industry has                 
 committed during the last nine years of their NPDES permit.  She              
 said her organization believes the NPDES permit to be lax and                 
 unenforced.  She said other oil industries in the United States are           
 required to meet zero discharge standards and Cook Inlet is the               
 only exception to this standard.  She said technology exists to               
 protect against the impacts of discharges and protect the                     
 MS. MILLER said we have an incomplete understanding of the complex            
 physical oceanography and the potential for bio-accumulation of               
 these toxic substances away from the sampled areas.  She said the             
 studies have only looked at a handful of sampling stations in a               
 complex body of water.  She added that the Kenai Peninsula                    
 delegation wrote a letter stating that regulations for the oil and            
 gas industry must be derived from scientific measurement and                  
 MS. MILLER said she was disappointed by HJR 59 and by the                     
 legislature's response reiterating UNOCAL's position.  She said an            
 independent scientist, Dr. Robert Howarth from Cornell University,            
 reviewed the draft.  Dr. Howarth concluded that the scientific                
 basis for issuing a proposed NPDES permit is (indiscernible) and              
 inadequate.  His report states that the current studies are                   
 inconclusive and that the actual risk can not be determined and               
 likely to be far greater than stated.  He said the monitoring                 
 standards, required by the EPA in the draft permit, are inadequate.           
 She asked the legislature to reconsider HJR 59, and asked the EPA             
 to require the oil industry to meet zero discharge limits.                    
 NINA FAUST, Member, Kachemak Bay Conservation Society, and former             
 school teacher, testified via teleconference from Homer.  She said            
 her organization is against HJR 59 and interested in preserving the           
 water quality and the economic subsistence livelihoods which the              
 residents depend on.  She said Kachemak Bay and Kamishak Bay may be           
 depositories for sediments that flow in the current from the upper            
 inlet.  She said in the lower part of the inlet, there are gyres              
 which may concentrate pollutants.  She said the drilling rigs in              
 the upper inlet are permitted to discharge produced waters and                
 drilling sludge into the inlet which include some of the worst                
 types of toxins.  Her organization feels that monitoring should               
 occur where the sediments are collecting and possibly                         
 concentrating.  She said 50 years of discharging may have long term           
 and, as of yet, undetermined effects.  She said it makes economic             
 sense to prevent pollution, rather than have to deal with the                 
 consequences later.                                                           
 MS. FAUST said Kachemak Bay Conservation Society supports zero                
 discharge.  She said the Cook Inlet is the only water body where              
 this type of NPDES permit is allowed.  She said pollution within              
 this water body has been occurring for 30 years despite the                   
 enactment of the Clean Water Act.  She said new drilling rigs                 
 should have zero discharge and that requirement would eliminate               
 monitoring.  She said her global coastal management program has               
 recommended that new rigs meet zero discharge.  She said, in                  
 regards to HJR 59, monitoring and recording should not be reduced             
 and that zero discharge should be the goal.  She reiterated the               
 unknown affects of pollutants and that technology is available.               
 PAUL SEATON, Commercial Fisherman, testified via teleconference               
 from Homer.  He was against HJR 59 and said discharges deemed                 
 acceptable have, sometimes, been found to be harmful to the                   
 environment causing expensive clean-ups.  He reiterated the point             
 about the NPDES permit being allowed here and not in other places.            
 He was concerned about Sale 149 and the effect of this permit on              
 drilling mud.  He said Pacific Cod tends to be found in areas where           
 the drilling mud settles and concentrates and that any impact on              
 the quality of those fish would result in economic hardship.  He              
 referred to a part of UNOCAL's testimony regarding the fact that              
 Congress did not intend for zero discharge and asked Ms. Bullington           
 to provide the legislative history to document this statement.                
 CO-CHAIRMAN GREEN stated that HJR 59 requires monitoring and                  
 reporting requirements remain in current form, not increased by 400           
 percent.  He said the Alaskan Pacific Cod's reputation as being the           
 best fish goes along with the fact that the waters remain clean,              
 despite concern over drilling mud.  He said the state of Alaska               
 might be taking themselves out of the competitive market by                   
 allowing these additional NPDES requirements.                                 
 MS. BULLINGTON said Cook Inlet is not the only oil drilling                   
 platform which allows zero discharge.  She said there are hundreds            
 of oil drilling platforms in the Gulf of Mexico which have NPDES              
 permits allowing discharges to occur.  She said the exception,                
 regarding Cook Inlet, is its being listed as a coastal area.  She             
 said coastal areas, as defined by the EPA, are low energy, shallow            
 environments with large resident species.  She said Cook Inlet does           
 not fit this definition, but it is included in this definition                
 because of how the EPA marked off the map.  She said the Cook Inlet           
 has fifteen offshore platforms and three onshore facilities                   
 compared with the hundreds in the Gulf of Mexico.                             
 TAPE 96-21, SIDE B                                                            
 Number 000                                                                    
 MS. BULLINGTON said zero discharge is not the issue.  She said the            
 issue is one of whether the discharge is having an impact on the              
 environment.  She said, during the evaluation of the Trading Bay              
 discharge, it was found that within 50 meters of the discharge                
 outfall there was not significant levels of contamination.  She               
 said those areas were within compliance of water quality standards.           
 She said pollutants are not going to be found 60 miles or 80 miles            
 away, if you do not find them 50 meters away.  She said pollutants            
 do not jump across areas.                                                     
 MS. BULLINGTON said UNOCAL was fined for approximately 300                    
 violations occurring over a five year period.  She said UNOCAL                
 provided evidence to EPA that the agency has never identified a               
 technology that could meet the proposed limits, let alone the                 
 existing limits.  She said, UNOCAL learned, that 1986 was the time            
 that they should have shown this evidence and because UNOCAL                  
 didn't, they were found to be in violation.  She said, UNOCAL has             
 resolved this issue by zero discharging their sanitary effluent.              
 She said the cost of zero discharge is significant, especially when           
 it is considered that the Anchorage limits are higher than any of             
 the exceedencies that occurred from the platforms.                            
 MS. BULLINGTON said she is opposed to the issue of implementing               
 zero discharge because there is technology available to do so.  She           
 said zero discharge should only be required if there is an                    
 environmental impact.  She referred to the reported mentioned by              
 Pamela Miller, and said she would supply documentation made in                
 response to that report, but in summation said that Dr. Howarth               
 used 15 year old information.                                                 
 CO-CHAIRMAN GREEN said Ms. Bullington was given additional time in            
 response to issues that were raised in her testimony.                         
 NORMA CALVERT, Lobbyist, Marathon Oil Company, was next to testify.           
 She said her company supports the position as stated by Ms.                   
 Bullington.  She said the oil industry's environmentally sound                
 operations have been proven over time and urged support for HJR 59.           
 MARILYN CROCKETT, Assistant Executive Director, Alaska Oil and Gas            
 Association (AOGA) and Member, Resource Development Council (RDC),            
 was next to testify.  She read from a sponsor statement, "let me              
 begin by saying that we do appreciate the significant efforts                 
 required of EPA Region 10 in compiling this complex permit.  The              
 permit does provide for the continued ability to discharge produced           
 water and mud and cuttings.  A zero discharge requirement would               
 force the early closure of many operations because of high costs.             
 However, we are very concerned about the draft permit'                        
 s proposed increase in the amount of monitoring and reporting.                
 These additional requirement s will not result in any benefit to              
 the environment, but they will add cost and administrative burden             
 not only to the operators, but to EPA as well.  Based on very                 
 conservative assumptions, the draft permit requires monitoring the            
 largest number of parameters ever in such a permit.  Additionally,            
 the frequency of monitoring is extreme compared to similar permits.           
 We've estimated that to comply with these requirements will require           
 the expenditure of $1 million annually.  Changing regulations and             
 requirements such as these pose special challenges for these mature           
 fields which are under increasing pressure to maximize production             
 while minimizing expenditure sin order to remain economical.                  
 It is somewhat ironic that EPA would propose significant increases            
 in monitoring and reporting, given the objectives contained in                
 EPA's 1996 National Water Program Agenda as described in HJR 59.              
 The elements of the '96 agenda are not new, but rather are an                 
 extension of President Clinton and Vice President Gore's March 16,            
 1995, report entitled `Reinventing Environmental Regulation.'                 
 Oil and gas exploration and production has occurred in Cook Inlet             
 for almost 30 years. This development has positively affect the               
 lives of all Alaskans and in particular the residents of                      
 southcentral Alaska.  Without it, consumers would not be able to              
 enjoy the benefits of low-cost natural gas and electricity.  The              
 development has coexisted with one of the state's most productive             
 commercial salmon fisheries and active sport fisheries, provided              
 jobs for the area's residents and significantly contributed to the            
 Peninsula's tax base.  They've been conducted in a safe and                   
 environmentally sound manner over the life of the development.                
 AOGA and RDC commend the legislature for consideration of HJR 59.             
 We would like to recommend tow minor technical amendments which I             
 have attached to my copy of the testimony.  I'd be happy to answer            
 any questions you may have about these recommended amendments."               
 MS. CROCKETT said on page one, line eight of HJR 59, "Cook Inlet,"            
 be inserted at the end of line seven so that it reads, "not more              
 rigorous than those requirements of the Cook Inlet NPDES permit in            
 place."  She added, that for Cook Inlet area, the NPDES permit is             
 a single permit for all of the operations in the area.                        
 She asked for the same change to be made on page three, line 12.              
 MS. CROCKETT said on page two, line 14 and line 16, there is a                
 reference that the NPDES permit covers Cook Inlet oil and gas                 
 productions, which it does, but she added that the permit also                
 includes exploration activities as well.  The recommendation is               
 that the word, "production," be deleted from both lines 14 and 16.            
 JIM EVANS, Chairman, Kenai Chapter, Support Industry Alliance, was            
 next to testify.  He supported the testimony of Ms. Bullington and            
 said there should be no changes made to the NPDES permit currently            
 in place.  He said the current NPDES permit has not shown any                 
 detrimental affects to the Cook Inlet, based on the current, on-              
 going information.                                                            
 REPRESENTATIVE RAMONA BARNES made a motion to adopt the amendments            
 are presented by Ms. Crockett.  CO-CHAIRMAN GREEN asked if there              
 were any objections to the proposed amendments to HJR 59.  Hearing            
 none the amendments were so adopted to CSHJR 59 (RES) by the House            
 Standing Committee on Resources.                                              
 DENNIS RANDA, Member, Alaska Council of Trout Unlimited, and                  
 fishing guide was next to testify.  He said his organization                  
 consists of 550 members statewide and said the Cook Inlet ecosystem           
 is complex.  He said there are "giant holes in the returns of                 
 salmon to Cook Inlet."  He said there is no explanation for what              
 happened to the Chinook salmon from the Upper Susitna drainage,               
 those salmon are gone and maybe those problems occur because of               
 this issue.  He said he could not state this accusation                       
 scientifically and added that he didn't believe we would ever have            
 the money to figure it out.                                                   
 MR. RANDA said he hoped the committee would remain objective and              
 said he didn't think that Ms. Bullington should have received the             
 opportunity to rebut the testimony of other people.                           
 MR. RANDA said, "we are talking about dead zones, killing zones               
 here when we look at this NPDES permit and this mixing zone                   
 concept."  The Trading Bay facility has a 16 inch pipe with a dead            
 zone of a 300 meter radius which means that they are going to be              
 able to kill anything that moves within that radius.  He did not              
 say that the industry is directly threatening his job, but there is           
 a reason for the NPDES process.  He referred to a study, sponsored            
 by ARCO, which showed that the Cook Inlet area has significance in            
 providing habitat for salmon.  These salmon use the estuary to grow           
 before they move out to the sea.  He reiterated the 300 meter                 
 radius killing zone.                                                          
 MR. RANDA said there is evidence of accumulation in the sediments             
 around these areas.  East forelands has a toxic level which has               
 shown up in studies.  He mentioned the problem with only using 12             
 sampling sites, when you have a mixing zone of nearly a thousand              
 feet.  He said in winter you do not have the flushing action                  
 because the low water is freezing in the rivers and the pollutants            
 just come and go.  He said studies show an impact, and give us the            
 opportunity to find the depositional zones where contaminants come            
 out of the pipe and grab on to sediments.  He said they should show           
 up with the mixing zone, but added that the Cook Inlet has a                  
 volatile water system.                                                        
 MR. RANDA said that increased development will be occurring from              
 Lease Sale 149 and questioned whether this was being considered.              
 He mentioned that this is a federal government and questioned the             
 involvement by the legislature.                                               
 REPRESENTATIVE AUSTERMAN asked about his reference to "killing                
 MR. RANDA said if the public were allowed to know how much                    
 effluence that the municipalities put into Cook Inlet, we would be            
 more concerned than the amount allowed by the NPDES permit.  He               
 said the municipalities are given a "free ride."                              
 REPRESENTATIVE AUSTERMAN mentioned his experience in the fishing              
 industry and the requirements made by EPA.  He said he found it               
 difficult to judge the value of environmental clean-up even with              
 his direct experience.  He asked for clarification of toxins in the           
 MR. RANDA said there were toxins found in the pilot studies of the            
 Cook Inlet Region Citizens Advisory Council, Environmental                    
 Monitoring Committee, which were conducted around Cook Inlet                  
 between 1993 and 1995 showing evidence of toxicity in the Trading             
 Bay area and one year in the east forelands area.  He said he                 
 didn't think that human waste is a problem, but the problem is one            
 of the household chemicals contained in the sewage.                           
 REPRESENTATIVE AUSTERMAN asked if the toxins he was referring to              
 could be traced back to the oil rigs.                                         
 MR. RANDA said the source of the toxins was unknown, but said it              
 was in the area of the oil rigs.                                              
 CO-CHAIRMAN GREEN asked for specific information regarding these              
 MR. RANDA referred to the study conducted by A. D. Little in 1993             
 and Parametrix Lab in 1995.  He repeated that these pilot studies             
 cannot trace the toxins to a specific location.  He said the "dead            
 zone" he referred to is referred to as a mixing zone by the NPDES             
 permit.  He said those areas are allowed a higher toxicity than               
 that which would sustain life.                                                
 CO-CHAIRMAN GREEN said the mixing zone is a place where the water             
 is allowed to mix with the native waters, and added that it is not            
 a dead zone.                                                                  
 REPRESENTATIVE OGAN said the assertion made that the mixing zone              
 killed off fish and animal life was new to him.  He said it was the           
 first time he had ever heard of it in all his work regarding                  
 resource issues.                                                              
 BILL STAMPS, Board Member, Alaska Support Industry Alliance                   
 Chapter Officer, Kenai Chapter, Alaska Support Industry Alliance,             
 was next to testify.  He said the six studies of the water quality            
 in Cook Inlet have shown no evidence of harm done by the oil                  
 industry in 30 years of operation and discharging into the waters.            
 He said three of these studies were conducted by CIRCAC, one oil              
 industry, one mineral management service and one by GREENPEACE.  He           
 said the results of the GREENPEACE study were not published and               
 inferred that if it had been different from those other studies,              
 then it would have been published.                                            
 MR. STAMPS said the oil industry is important to the Kenai                    
 Peninsula's economy as is the fishing industry.  He reiterated the            
 record fish harvest in recent years.  He said the decline in the              
 Susitna fishery might not have been managed in the same manner as             
 the Kenai fishery and that this was, perhaps, the reason for its              
 decline.  He said in 1994, the oil and gas industry accounted for             
 $292.3 million in revenue for the Kenai Peninsula Borough.  He said           
 in 1994, the top nine out of ten taxpayers in the borough were oil            
 and gas companies which accounted for approximately 33 percent of             
 the borough's assessed value.  He said these figures were obtained            
 from the Department of Labor and the Kenai Peninsula Borough.                 
 MR. STAMPS said special interest groups will attempt to shut down             
 the oil industry in Cook Inlet and deplete the economy of the                 
 region.  He said in letters he has written to the EPA he has asked            
 them to continue monitoring the waters of Cook Inlet.  He asked the           
 EPA to consider the following, "the trustees, through the oil                 
 industry, for discharges in the Cook Inlet, will the trustees file            
 a lawsuit against the fish processors, will they sue the                      
 municipalities of Anchorage and/or the municipalities of Kenai,               
 Soldotna and Homer because each, individual municipality,                     
 discharges more in the Cook Inlet than all the oil facilities                 
 combined.  Or will the trustees in GREENPEACE continue to single              
 out the oil industry."                                                        
 MR. STAMPS said there is no evidence that the discharge by the                
 industry or the municipalities are harmful.  He said zero discharge           
 is not economically feasible for any of the discharges.  He did not           
 support any action that would cause additional or more stringent              
 standards or reporting requirements to be placed on the oil                   
 industry.  He supported HJR 59.                                               
 KATHRYN THOMAS, Chair Elect, Alaska State Chamber of Commerce, was            
 next to testify.  She read from a sponsor statement, "Our                     
 organization represents a direct membership of approximately 700              
 businesses and an indirect membership of more than 6,000 Alaskan              
 firms. Most of our members are small business people with 20 or               
 more fewer employees.  Founded in 1953, we represent Alaskans from            
 Barrow to Ketchikan.                                                          
 I am here to speak with you because we are the voice of Alaska                
 MS. THOMAS, said she was reading from a presentation made to the              
 EPA in Homer on January 25, 1996, "in recent years, Alaska has seen           
 huge business reversals in major industries due to actions taken by           
 the federal government.  The timber industry has closed mills and             
 laid off hundreds of employees because of federal action limiting             
 the use of Alaskan timber for logging.  The fishing industry has              
 seen recent federal action which has halted commercial salmon                 
 fishing in Southeast Alaska because the Pacific Northwest and                 
 Canada were suffering major salmon shortages.  Alaska, on the other           
 hand has managed its resource to see record returns in its waters.            
 We believe that Alaskan's are competent in the care and management            
 of their resources.  We ask that you, the EPA, recognize that the             
 Alaska Department of Environmental Conservation does not include              
 Cook Inlet on the list of impaired water bodies in Alaska, as                 
 defined under the federal Clean Water Act.                                    
 The Alaska State Chamber of Commerce, has a commitment to create a            
 prosperous Alaskan economy; to reduce the cost of doing business in           
 Alaska and to the development of Alaska's vast mineral resource               
 wealth while balancing sound environmental considerations.                    
 For 30 years the oil platforms in Cook Inlet have provided jobs for           
 Alaskans, heated our homes, provided a source of low cost power to            
 keep our businesses competitive and more profitable, and                      
 contributed to the tax base that supports our government and                  
 schools.  And this is a real Alaskan success story, because the               
 recent environmental studies have shown that the major contribution           
 to our economy, that this major contribution to our economy has               
 been achieved without any adverse impact to our Cook Inlet waters.            
 The business community in Alaska is puzzled as to why the federal             
 government wants to fix something that is not broken and that has             
 performed so well.  We ask that you recognize that the Alaska State           
 Chamber of Commerce feels that additional stringent requirement of            
 the NPDES  permitting is not warranted by the data that is                    
 reflected in the most recent studies of Cook Inlet waters.  By not            
 recognizing the environmental success of the development of Cook              
 Inlet's oil resource, the federal government will cause a loss of             
 revenue to large and small businesses and Alaskan will lose jobs              
 that we cannot replace from other sectors."                                   
 MS. THOMAS presented a newspaper article from the Peninsula                   
 Clarion, dated February 23, 1996, to be inserted in the committee             
 DENNIS STEFFY, Director, Mining and Petroleum Training Service, was           
 next to testify.  He said he was representing himself, but has been           
 actively involved in the oil and gas industry as well as in                   
 education with the University of Alaska during the past 20 years.             
 He supported HJR 59 and encouraged its passage.                               
 MR. STEFFY said there is no scientific way to determine the source            
 of any petroleum oils and lubricants.  He said over the years he              
 has spent a lot of time on the waters of Cook Inlet and has seen              
 direct evidence of petroleum oils and lubricants in the water, but            
 in all likelihood it probably is not directly traceable to the oil            
 industry.  He said he would take any such study with a cautious               
 grain of salt because the source cannot be identified.                        
 MR. STEFFY said, in his education career, a large number of people            
 in the oil industry were trained in the reduction and the                     
 elimination of pollution.  He said people were trained on                     
 floatation cells and pre-water knock-outs on behalf of the                    
 industry.  He said those curriculums are available and added that             
 those curriculums, developed by the oil industry, are directed at             
 environmental issues.  He said a tremendous amount of attention has           
 been given in response to the environment, in particular the off-             
 shore operators in Cook Inlet.  He mentioned that the quality of              
 water of the Cook Inlet is as important to the oil industry as it             
 is to anyone else.  He mentioned his experience as a commercial               
 fisherman and that the fish in the Cook Inlet have not been                   
 TAPE 96-22, SIDE A                                                            
 Number 000                                                                    
 NANCY HILLSTRAND, Pioneer Alaska Fishery, testified via                       
 teleconference from Homer.  She mentioned her experience in the               
 fishing industry and the importance of water quality.  She asked              
 that the oil industry maintain water quality.  She mentioned the              
 accumulation of heavy toxins, not the discharges, but in the                  
 drilling mud.  She said we should do whatever we can to protect the           
 waters.  She said the crab, shrimp, clams, and scallops species in            
 the Cook Inlet have been impaired and those fisheries have been               
 closed for 15 years.                                                          
 EMILY JOHNGREN testified via teleconference from Homer.  She said             
 she was opposed to HJR 59.  She added that she agreed with Mr.                
 Cooper, Ms. McPherson and Ms. Miller's testimony and the other                
 witnesses who testified from Homer.                                           
 TIM NAVARRE said he was representing himself.  He said the economic           
 concerns must also be addressed in this issue, especially if there            
 is no scientific evidence which shows a negative impact from the              
 oil industry.  He said the loss of the oil industry would create a            
 economic burden around Cook Inlet.  He supported HJR 59 as it looks           
 at the whole picture.  He believed that the 30 years of testing and           
 the presence of the oil industry in Cook Inlet shows that it has              
 not had a detrimental affect.                                                 
 KEN TURNAGE, General Manager, VECO, said he was representing                  
 himself.  He said he was part of an effort to made recommendations            
 to the EPA.  He read the petition, "we the undersigned citizens of            
 the Kenai Peninsula area feel that there are adequate restrictions            
 and safeguards under the existing NPDES permit.  No additional                
 testing or monitoring should be required as there will be no                  
 environmental benefit derived through more onerous restrictions.              
 Mixing zones are an intricate part of the economic viability of oil           
 and gas facilities.  Since all scientific data and studies                    
 conducted, to date, indicated that no environmental harm has                  
 occurred in over 30 years of oil and gas development in the Cook              
 Inlet the practice of mixing zones should be maintained.  The                 
 economic viability of the Kenai Peninsula area would be unjustly              
 threatened by imposing of increased regulatory restrictions on an             
 already overly regulated industry.  We are pleased to see that the            
 EPA has recognized that there is no significant evidence to warrant           
 zero discharge and propose a (indiscernible).  The livelihoods of             
 thousands of residents are at stake and we encourage the EPA to               
 protect jobs and the economic stability of the area.  No scientific           
 environmental evidence has presented to suggest otherwise as                  
 MR. TURNAGE said in only a week, he collected 500 signatures.                 
 REPRESENTATIVE BARNES made a motion that HJR 59, as amended, be               
 moved with individual recommendations.  Hearing no objections CSHJR
 59 (RES) was moved from the House Standing Committee on Resources.            
 PRESENTATION:  COOK INLET OIL INDUSTRY                                       
 CO-CHAIRMAN GREEN announced that the next item on the agenda would          
 be an overview on the state of the Cook Inlet oil industry by the             
 JOHN DONOHUE, General Manager, UNOCAL, said there were two                    
 different types of operations in Cook Inlet, oil and gas.  He said            
 his presentation would includes the scope, the health and the                 
 potential of oil and gas operations in the Cook Inlet.  He said               
 presently there are about 1,500 employees, primarily on the Kenai             
 Peninsula, who make their living from oil and gas.  He said the               
 industry spends about $250 million to maintain the oil and gas                
 industry in Cook Inlet.                                                       
 MR. DONOHUE said 600 million cubic feet per day of gas is being               
 produced and just over 40,000 barrels of oil.  He compared this               
 amount with the million barrels of oil being produced in the North            
 Slope.  He showed a slide of a map listing the gas producing                  
 properties in Cook Inlet.  It showed the city of Kenai, the UNOCAL            
 chemical plant, Phillips plant, the major fields including the                
 Marathon Kenai field, Beaver Creek, UNOCAL's Swanson River,                   
 Steelhead Platform which is producing gas from the drilling gas               
 sands at the McArthur River field and the Phillip's North Cook                
 Inlet field, ARCO's Beluga River field, and a couple of smaller               
 onshore fields operated by UNOCAL.                                            
 MR. DONOHUE said the gas producers include ARCO, Marathon, Phillips           
 and UNOCAL.  He said the users of gas in Cook Inlet are the                   
 Phillips Petroleum plant, UNOCAL fertilizer plant and the utilities           
 of Southcentral Alaska.  He said gas industry started in the late             
 1950s with "big jumps" in the late 1950s and early 1970s as UNOCAL            
 opened their chemical plant and Phillips opened their liquid                  
 natural gas (LNG) plant.  He said the gas industry in the Cook                
 Inlet is healthy from the point of view of the producers, the                 
 utilities, Phillips, and UNOCAL.                                              
 MR. DONOHUE said there are four fields producing oil in the Cook              
 Inlet including Swanson River which is onshore.  He said the fields           
 offshore include the Middle Ground Shoal, Granite Point field and             
 McArthur River field.  He said west McArthur field is operated by             
 Stewart Petroleum production on the west side.  He said east side             
 oil refers to everything that comes on the east side of the inlet             
 including Swanson River and Middle Ground Shoal field ending up at            
 the Tesoro refinery.  The west side includes Granite Point and                
 McArthur field and comes down the Cook Inlet pipeline to Drift                
 River where it is picked up by tanker and taken out of state.                 
 MR. DONOHUE said all of the oil fields are operated by UNOCAL,                
 except for two platforms which produce from the central part of               
 Middle Ground Shoal and Stewart Petroleum's production.  He asked             
 the committee to keep in mind the infrastructure as it is a                   
 critical part of the oil production in the Cook Inlet.  He said the           
 oil producers include SHELL, UNOCAL and Stewart.  He added that               
 UNOCAL also produces oil for Mobile and Marathon, as they are                 
 working partners of UNOCAL in various parts of the Cook Inlet.  He            
 remarked that the platform the committee viewed on Thursday was               
 partly owned by Mobile.                                                       
 MR. DONOHUE referred to a graph of oil production which showed oil            
 production ramping up very rapidly in the mid to late 1960s and               
 reached its peak in 1969, at just under 175,000 barrels per day and           
 has declined to about 40,000 barrels per day.  He said the oil                
 industry is not a healthy industry, but said the goal is to improve           
 this industry.  He said these fields were first discovered in the             
 1950s and cited an axiom of the oil and gas industry that once                
 production begins, you are in decline.  He said they are high cost            
 fields with low production.                                                   
 MR. DONOHUE said UNOCAL has reduced their total cost of operations            
 in the field, within the last three years, by 30 percent.  He said            
 increasing production amounts must be targeted.  He said capital              
 costs are high, with half of those costs spent on new development             
 every year. He said the average oil decline in Cook Inlet is about            
 18 percent, so every four years you have to reproduce what you have           
 on production.                                                                
 MR. DONOHUE said any regulation implemented must be effective,                
 efficient and cost effective.  He said oil production needs new               
 discoveries and needs to attract new companies to Cook Inlet.  He             
 said the state's role in the oil industry is being realized with              
 the passage of HB 207 last year.  He said UNOCAL is working with              
 the state in formulating an application to use for royalty relief             
 in Cook Inlet.  He said incentives need to occur in order to drill            
 more wells and add new players to increase exploration.                       
 MR. DONOHUE said there is a need for consistent and systematic                
 lease sales in Cook Inlet.  He said changes need to be made in the            
 best interest finding process so that a comprehensive study can be            
 done and be used for five years, rather than "reinventing the wheel           
 every single time."  He said oil and gas production provide                   
 employment to the residents, create tax revenue for the state and             
 the borough, and provide fuel for the community.  He said most of             
 the electricity produced in Southcentral Alaska is produced from              
 Cook Inlet natural gas.  He added that a significant portion of the           
 gasoline, diesel and aircraft fuel used in Southcentral Alaska is             
 refined in Cook Inlet by Tesoro and that the oil and gas industry             
 in Cook Inlet also affects the Fairbanks region.                              
 MR. DONOHUE said a partnership between industry, contract industry,           
 state, local officials and public is needed to keep the oil                   
 industry in the Cook Inlet.                                                   
 REPRESENTATIVE KOTT referred to a slide showing a downward curve              
 reaching towards the zero mark.                                               
 MR. DONOHUE said the spike in production of oil went up very fast             
 and then came down very rapidly.  He said this is typical of fields           
 this size, and added that the largest field in Cook Inlet is                  
 500,000 barrels per day.  He said a system which taps this field              
 will result in a graph that looks this way.  He said the Prudhoe              
 Bay production peaked and remained peaked at a high level because             
 of the transportation factor.                                                 
 TERRY KOVACEVICH, Operations Superintendent, Marathon Alaska, was             
 next to testify.  He referred to a map which showed the Cook Inlet            
 oil and gas fields along with the pipeline network.  He said,                 
 currently, Marathon operates four onshore gas fields on the Kenai             
 Peninsula including the Kenai cannery loop, Beaver Creek and                  
 Sterling gas fields.  Marathon also operates 90 miles of gas                  
 gathering line which transports the natural gas to market.  He said           
 Marathon employs 35 people, with 11 employees working in the Kenai            
 Peninsula.  He said this is a drastic change, since December of               
 1994, when there were 142 Marathon employees in Alaska.  He said a            
 consolidation of operations granted UNOCAL the operation of two               
 offshore platforms and one onshore production facility while                  
 Marathon retained ownership.                                                  
 MR. KOVACEVICH said in 1995, Marathon's net gas production was a              
 131 million cubic feet of gas per day and 8,700 barrels per oil per           
 day as compared to the 1990 gas production rate of 132 million                
 cubic feet per day and 10,100 barrels of oil per day.  He said the            
 majority of oil was sold to UNOCAL with a small amount of produced            
 onshore oil being sold to the Tesoro refinery.  A portion of the              
 gas is sold to ENSTAR for distribution in the Anchorage and Kenai             
 markets and sold to Chugach Power.  Thirty percent of the natural             
 gas is supplied to the Phillips plant for conversion to liquid                
 natural gas (LNG) which is exported to Japan.                                 
 MR. KOVACEVICH said the primary goal, for the future of the Kenai             
 Peninsula, is to explore and develop new supplies of natural gas              
 allowING Marathon to maintain and potentially add to the daily                
 sales volumes.  He said as gas supplies become more difficult to              
 find, the existing infrastructure will allow his company to find              
 and produce more gas in an environmentally sound and economic                 
 manner.  He said, within the next week, an exploration well will be           
 drilled on a recently obtained acreage four miles south of Clam               
 Gulch.  He said Marathon is continuing to evaluate other areas for            
 potential drilling.                                                           
 DAVE PERKINS, Manager, Marathon Alaska said his company established           
 their first Alaskan office in 1959.  He said numerous investments             
 have occurred over that time.  He said Marathon co-exists with                
 other industries such as fishing and tourism and that he believed             
 Marathon was a good steward in environmental issues and in                    
 industry.  He said Marathon can provide natural gas for consumers             
 and continue oil production with UNOCAL.  He said the older oil               
 wells Marathon owns need extra work to maintain profitability,                
 employment and make them environmentally sound.                               
 MR. PERKINS said, in their exploration activities, Marathon decided           
 to keep the wells onshore and "kick them under the inlet" in                  
 consideration of the fishing industry.  He said the drilling                  
 program does not interfere with the recreational activities of the            
 Kenai area.                                                                   
 MR. PERKINS said the issue, from a legislative standpoint, is land            
 acquisition in terms of accessing and utilizing these lands.  He              
 said Marathon likes the concept of areawide leasing and areawide              
 best interest findings.  He said Marathon is concerned about the              
 air quality, Title 5 Acts, adopted by the EPA and the stringent               
 regulations associated with them.  He also mentioned the NPDES                
 permit system.                                                                
 MR. PERKINS expressed concern regarding the business environment in           
 the state and said a tax appeals process should be resolved where             
 businesses can get a de novo type of review when there is a                   
 conflict of interest between the taxpayer and the Department of               
 BETTY J. GLICK, President, Cook Inlet Regional Citizen Advisory               
 Council (CIRCAC), was next to testify.  She said her organization             
 is a non-profit organization and was incorporated in 1990 to meet             
 the mandates of the Oil Pollution Act of 1990 (OPA).  She said the            
 OPA describes the membership, the appointment, the process and the            
 structure of CIRCAC.  She said the thirteen members are from                  
 Anchorage, Kodiak, Homer, Seldovia and Kenai with representation of           
 the Kenai Peninsula Borough and Kodiak Island Borough.  She said              
 there is representation from native groups, commercial fishing                
 groups, aquaculture associations, tourism and recreation and from             
 environmental groups.                                                         
 MS. GLICK said, when CIRCAC was first formed, it had a                        
 representative from the environmental community.  She said because            
 of circumstances and funding agreements, the environmental group              
 resigned and upon that resignation there was not an environmental             
 group participating in CIRCAC until 1994 when she became president.           
 She said this seat comes up for reauthorization this year and                 
 CIRCAC has sent out solicitations to 25 different environmental               
 groups.  She said two of those solicitations were returned as non-            
 deliverable, 23 others chose to not become certified.  She said               
 only four environmental groups responded, and as a result, there              
 was somewhat of a conflict in filling that particular seat. She               
 said the person, who was appointed in 1994, will continue in that             
 capacity until CIRCAC goes through the election process one more              
 time to ensure that the seat is filled by a representative that the           
 environmental groups chooses.                                                 
 MS. GLICK said CIRCAC has "ex-officio" members representing the               
 Department of Environmental Conservation (DEC), Department of                 
 Natural Resource (DNR), Division of Emergency Services, Bureau of             
 Land Management, EPA, Minerals Management Service, National Oceanic           
 and Atmospheric Administration, the United States Coast Guard and             
 the United States Forest Service.  She said there is good                     
 participation from those different agencies at the quarterly                  
 meetings and that these members also serve on the committees.  She            
 said all work is voluntary in manner.                                         
 MS. GLICK said OPA 1990 states that the oil industry utilizing the            
 inlet shall fund the CIRCAC up to $1 million.  She added that there           
 is another regional resource citizens advisory council in Prince              
 William Sound with a similar structure, but different because they            
 contract specifically with Alyeska Pipeline Service Company for               
 their funding, between $2 million and $3 million.  She said CIRCAC            
 deals with all of the oil industries and the charter companies that           
 fund CIRCAC include Cook Inlet Pipeline Company, Kenai Pipeline               
 Company, Phillips Petroleum, Tesoro Alaska Petroleum Company,                 
 UNOCAL, Marathon, Chevron, SHELL, Western E&P Incorporated, ARCO              
 Incorporated and the defense fuel supply.  She said CIRCAC has                
 entered into a three year contract, the first year was for funding            
 of $637,000 and this year the funding will be at $616,000 due to              
 the reduction of MAPCO funds.                                                 
 MS. GLICK said CIRCAC works through two committees which are                  
 mandated through OPA 1990 and include the environmental monitoring            
 committee and the prevention, response, operation and safety                  
 committee (PROPS).  She said these committees utilize funding to              
 the best of their ability.  She read the PROPS mission statement,             
 "the commitment to the prevention of oil spills in Cook Inlet. The            
 committee primary work has involved the development of work plans,            
 projects and studies designed to provide recommendations to                   
 minimize the risk of oil spills.  The secondary mission of the                
 committee is to review and monitor spill response efforts and the             
 best available technology."  Some work topics have included the oil           
 spill contingency review which is an ongoing process within this              
 committee.  She said PROPS also reviews the spill, drill exercises,           
 spill response efforts, evaluation of spill response equipment,               
 near shore response pilot development, dispersant and in-situ                 
 burning.  She said, last year PROPS in conjunction with the Alaska            
 Clean Seas, participated in an in-situ burning demonstration at               
 Prudhoe Bay.                                                                  
 MS. GLICK said the environmental monitoring committee is required             
 to develop a comprehensive monitoring program within the Cook                 
 Inlet, but are limited by their funding.  She said monitoring has             
 been conducted on a regular basis over the last three years, 1993,            
 1994 and 1995.  She said the committee contracted with A. D. Little           
 for 1993 and 1994 and the 1995 report was done by Kinetic                     
 Laboratories, Limited.  She reiterated that these studies are not             
 as comprehensive as CIRCAC would have liked to do, but the same               
 sites were monitored to see if there was any change and different             
 sites were also selected.  She said the studies are not conclusive,           
 but they contain sound science to refute or support other evidence,           
 providing a different view point.  She said CIRCAC is trying to               
 come up with a data base of scientific monitoring of the Cook                 
 TAPE 96-22, SIDE B                                                            
 Number 000                                                                    
 MS. GLICK said CIRCAC has the reputation of "rubber stamping" the             
 oil industry.  She said CIRCAC was created to foster a long term              
 partnership between industry, government and citizens following the           
 Exxon Valdez oil spill.  She said it was also created to provide              
 citizen oversight of terminal and tanker operations.                          
 TAPE 96-23, SIDE A                                                            
 Number 000                                                                    
 MS. GLICK mentioned the 1995 CIRCAC annual report which includes              
 the letter to the EPA regarding the NPDES permit.  She said the               
 NPDES permit was already addressed in the committee meeting, but              
 wanted to show the committee the research that CIRCAC had done.               
 She said two years of research has been done on this project,                 
 including hearings on this issue.  She said the results, concerning           
 the NPDES, are not sided towards or against the industry.  She said           
 some results will favor the industry and others favor a more                  
 stringent application of the NPDES permit, placing the conclusion             
 on the side of the environmental community.  She said this was a              
 major CIRCAC project.                                                         
 MS. GLICK said the report also contains the 1996 environmental                
 monitoring committee's work plan.  She said the majority of funding           
 is going to a monitoring program dealing with sampling in the                 
 Shelikof Strait, located in the Kodiak area.  She said the                    
 intertidal structure will also be monitored in the lower Cook                 
 Inlet, a modified P-450 methods for sediments and tissues, and a              
 contract with the National Park Service to do a joint project                 
 involving sampling on clam beds and other areas of the shore.  She            
 referred to other issues including a public outreach project which            
 educates citizens through "AL," the display board and a brochure.             
 She said the brochure includes a survey to get public response.               
 She added that the Coast Guard, upon recertification, complemented            
 CIRCAC on their outreach program.                                             
 MS. GLICK said the report also contained a work plan for the 1996             
 PROPS committee which includes contingency plan drill reviews, sea            
 plan control group and near shore response.  She said there has               
 been interest in having a near shore response facility in case                
 there is a potential oil spill.  She said a pilot program has been            
 done, regarding this issue, in Seldovia.  She said CIRCAC would               
 like to put near shore response facilities in other areas and they            
 wrote a letter to Commissioner Gene Burden asking for an                      
 expenditure of the 470 Fund for this purpose and said developing              
 near shore facilities would fit well within its intent.  She said             
 involvement by the legislature regarding this issue would be                  
 helpful as it is an important project to CIRCAC.                              
 MS. GLICK said, at their last meeting, CIRCAC developed a                     
 resolution regarding tug boats.  She said, in Cook Inlet, there has           
 been discussions as to whether there should be tug boats or tug               
 escorts.  She said the resolution records CIRCAC's support of the             
 promulgation of a rule and or regulations requiring the placement             
 of a tug boat, capable of year round duty, in the vicinity of oil             
 terminals in Cook Inlet.                                                      
 MS. GLICK said CIRCAC has the ability of entering into a "basic               
 ordering agreement" with the Coast Guard in regards to emergency              
 response.  She said, in 1994 discussions with the industry, CIRCAC            
 mentioned the need for an emergency response plan which was reduced           
 because of funding.  She said, in working with the Coast Guard,               
 CIRCAC's response capabilities would be enhanced.                             
 AL HASTINGS, Director of Oil and Gas, Cook Inlet Region,                      
 Incorporated, (CIRI) was next to testify.  He said Cook Inlet                 
 Region is one of twelve Native Regional Corporations established              
 under the Alaska Natives Claims Settlement Act (ANCSA).  He said              
 CIRI has about 6,700 shareholders, half of which live in the                  
 greater Cook Inlet area.  He said CIRI is the largest private                 
 landholder in Cook Inlet with 924,000 acres of surface land and 1.6           
 million acres of subsurface land.  He said CIRI is both a lessor              
 and a lessee on lands and they act in a similar manner to the state           
 when they are a lessor and act as an working interest owner when              
 they are the lessee.  He said CIRI either has royalty or working              
 interest ownership in 13 active oil fields in Alaska.                         
 MR. HASTINGS said CIRI has been active in the Kenai area for 20               
 years and have formed partnerships with BP, ARCO, Chevron, Exxon,             
 Marathon, Mobile, Phillips, Shell, Union Texas Petroleum and UNOCAL           
 over the years.                                                               
 MR. HASTINGS said he would discuss the exploration aspect.  He said           
 CIRI participated with ARCO in drilling an exploratory well in the            
 north end of Swanson River, the Buffalo Head well and that well is            
 temporarily abandoned.  In 1994, an area of mutual interest                   
 agreement was signed with Union Texas Petroleum (UTP) covering                
 close to 340,00 acres on the Kenai Peninsula.  He said, at this               
 time, UTP has taken about 14,500 acres and have the option on                 
 another 75,000 acres.  Union Texas Petroleum has also been active             
 in the last three state lease sales to consolidate their land                 
 position on their potential land prospects.  He said they have                
 spent about $6 million gathering data, reprocessing data and                  
 preparing to pursue exploration activities.  He said if Sale 85-A             
 continues for December, UTP plans exploratory drilling in 1997                
 MR. HASTINGS said ARCO has 25,000 acres under lease from his                  
 corporation in McCaulty near Tyonek.  He said ARCO is evaluating              
 the oil and gas potential in that area.  He said the state lease              
 sales are very important to CIRI and added that when the land                 
 selection process took place, under statehood and ANCSA, the land             
 received was in a checkerboard pattern.  He said geological                   
 prospects overlap land ownerships, the CIRI lands and the state               
 lands.  He said CIRI supports areawide leasing, as annual leasing             
 is the best way to tap available resources.                                   
 MR. HASTINGS expressed concern over the possible loss of                      
 infrastructure in the Cook Inlet because CIRI would lose their                
 potential resources.  He said this infrastructure includes the                
 mechanical structure, the labor force, service industry and all the           
 other people who provide skills to operations.  He said CIRI is               
 hopeful and optimistic that the increased exploration activity by             
 ARCO, Marathon, Stewart, UNOCAL and UTP will lead to discoveries              
 which will provide jobs, revenues, taxes and continued oil industry           
 life in the Cook Inlet.                                                       
 BILL STAMPS, Board Member, Alaska Support Industry Alliance,                  
 Chapter Officer, Kenai Chapter, Alaska Support Industry Alliance,             
 was next to testify.  He repeated his testimony saying in 1994, the           
 oil and gas industry accounted for $292.3 million in revenue for              
 the Kenai Peninsula Borough.  The oil and gas extraction accounted            
 for estimated salaries of $64.6 million, the manufacturing section            
 accounted for $36.7 million and the service section accounted for             
 $191 million.  He said the oil industry accounts for only 36                  
 percent of the borough's work force, yet account for 41 percent of            
 the work force revenues.  He said in 1994, the top nine out of ten            
 taxpayers in the borough were oil and gas companies, accounting for           
 approximately 33 percent of the borough's assessed value and said             
 the revenue derived from property tax was $8.7 million.                       
 MR. STAMPS said, over the past nine years, from 1986 to 1994 the              
 fish processing industry averaged 1,010 people and the oil and gas            
 section accounted for 995 people with a 61 percent payroll                    
 difference between them.  He said in 1988 there were 77 businesses            
 registered and that in 1996 there are 53 businesses which was a               
 decrease of 31 percent.  He said the employment figures for 1995              
 are predicted to resemble this same downward trend.  He requested             
 that the legislature help the oil industry in any way possible.               
 DREW SCALZI, President, Kenai Peninsula Borough Assembly, was next            
 to testify.  He said oil companies and oil properties add a                   
 tremendous amount of revenue to the borough and reiterated Mr.                
 Stamps view of their importance.  He said, through the economic               
 development district, the assembly tries to enhance every portion             
 of their economy.  He said the Kenai Peninsula Borough is only                
 second in the state with accessed value per capita, somewhere                 
 around $72,000 per capita.  The first area being the North Slope              
 and the third area being Ketchikan.                                           
 MR. SCALZI said the borough supports a tourist industry, it                   
 supports a commercial fishing industry with value "addedness" and             
 supports the oil industry through the economic development                    
 district.  He said the assembly encourages incentives for old and             
 marginal fields.  He said SB 308 and lease Sale 78, which came up             
 in the last few years, brought a lot of adverse attention to the              
 borough.  He said, upon research of the findings, there were good             
 reasons to object to some of the things in SB 308 and added that,             
 from the fishing perspective, there were good reason to object to             
 some of the things in lease Sale 78.  He said the fishing industry            
 did not take an opposition to the oil industry, but to the location           
 of some of the tracts.  He said negotiations, regarding this issue,           
 are continuing today.                                                         
 MR. SCALZI said the borough supports the oil industry.  He said the           
 assembly is following the legislative events and encourages all the           
 support the legislature can provide.                                          
 JOHN WILLIAMS, Mayor, City of Kenai, was next to testify.  He said            
 the tax base derived from the oil industry was more than 50 percent           
 nine years ago, and today it represents less than 35 percent.  He             
 said the peninsula has grown to around 50,000 people and has 38               
 schools to support.  He said the oil industry is the cornerstone to           
 the peninsula's economy.                                                      
 MR. WILLIAMS said the NPDES permit affects the city of Kenai as               
 well as the oil industry.  He said when the city makes                        
 modifications to their sewage and water treatment, there is always            
 the possibility that it will have to be redone or modified whenever           
 the final issue of the NPDES permit gets resolved.  He said the               
 Kenai Peninsula Borough would like some of their waste liquids                
 processed through their plant, but the issue has been unresolved              
 because of the lack of closure regarding the NPDES permit                     
 requirements.  He said the borough supported HJR 59.                          

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