Legislature(2001 - 2002)

05/02/2001 09:43 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
     SENATE BILL NO. 139                                                                                                        
     "An Act  relating to fees for  certain uses of state  water and                                                            
     the  accounting and  appropriation of  those fees; relating  to                                                            
     authorizations  for the  temporary use  of state water;  making                                                            
     other  amendments to  the Alaska Water  Use Act; and  providing                                                            
     for an effective date."                                                                                                    
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
BOB  LOEFFLER,  Director,  Division   of  Mining,  Land  and  Water,                                                            
Department  of Natural Resources,  informed this  bill is part  of a                                                            
two-part  solution  to  solve  the problem  of  providing  water  to                                                            
industries  and citizens  in the state.  He stressed  the state  has                                                            
been unable to  keep up with water right permits that  allow for the                                                            
withdrawal  of  significant  water  quantities  from  a  source.  He                                                            
detailed  the  number  of  backlog  requests  for  permits  and  the                                                            
ramifications  of  the backlog.  He  said  this bill  addresses  the                                                            
permitting problem, which is causing the backlog.                                                                               
Mr. Loeffler specified  that the first of the two components of this                                                            
bill  provides  for  three  things:  allows  the  Department  to  do                                                            
business   faster  and  more   efficient   by  way  of  streamlined                                                             
regulations; provides  more funding for the process;  and allows the                                                            
Department  to  establish   a fee  process   that  charges  for  the                                                            
reasonable direct costs of providing the service.                                                                               
Mr.  Loeffler  explained  that  the second  component  of  the  bill                                                            
reestablishes  the  temporary  water  use  program  by establishing                                                             
explicit statutory authorization.                                                                                               
Mr. Loeffler  informed that this program  has been "reasonably  non-                                                            
controversial,  except  in  the North  Slope  region,"  has been  in                                                            
existence  for twenty years,  and has "performed  well for  Alaskans                                                            
and in protecting the resources."  He said that the language of this                                                            
bill  clarifies  portions of  the  program that  have  been open  to                                                            
"judicial interpretation"  because of the lack of explicit statutory                                                            
Co-Chair  Kelly   asked  for  further  explanation   on  the  second                                                            
component of the bill.                                                                                                          
Mr.  Loeffler  reiterated  that this  bill  would  provide  explicit                                                            
statutory authorization.  He informed  that the Department  provides                                                            
temporary water  rights permits for  such things as the water  roads                                                            
in the  North Slope.   He said  that numerous  permits in the  North                                                            
Slope region have been  appealed and taken to court by entities such                                                            
as Green Peace  and other plaintiffs. He announced  to the Committee                                                            
the  Department  lost a  portion  of  one decision  last  year  that                                                            
provided  some additional  procedures  that the  Department did  not                                                            
think were  necessary, and  in fact, threatened  exploration  on the                                                            
North Slope by "almost  costing the state a year of exploration." He                                                            
stressed  this bill provides  explicit statutory  authorization  for                                                            
the temporary  use of  water; not  a property  right or irrevocable                                                             
permit for  the use of water. He said  that this explicit  statutory                                                            
authorization  is  consistent  with  how  the  Department  has  been                                                            
administering the program for twenty years.                                                                                     
Senator Hoffman asked how  this bill would apply to an individual in                                                            
a rural area who wants to drill a well.                                                                                         
Mr. Loeffler  replied  that the bill  provides for  the charging  of                                                            
reasonable  direct costs  of services,  and because  there is  "very                                                            
little competition  for use  of water in rural  areas," the  cost is                                                            
relatively  small. He said  this bill encourages  the Department  to                                                            
not lump someone  in rural areas in with oil companies.  The current                                                            
cost would be  $50 to individuals, and that "cost  would probably go                                                            
up but not very much."                                                                                                          
Co-Chair Kelly asked where  in the bill the limitations on costs are                                                            
Mr. Loeffler  informed  that the limitations  on  cost are found  in                                                            
Section 1 (b), Section  3, and Section 4. He informed that Section 1                                                            
(b) details  what costs  are allowed when  determining a  reasonable                                                            
cost of service.  He said that the process clearly  defines what the                                                            
authorization is for determining fees using this methodology.                                                                   
Senator Hoffman  asked how long it  would take to bring the  backlog                                                            
of permit applications current under the new system.                                                                            
Mr. Loeffler  responded  that the  Department has  committed to  new                                                            
performance  measures  that  specify  a "typical  new  water  rights                                                            
permit would be issued  within sixty days; a typical temporary water                                                            
use permit  within fifty days; and  the backlog would be  eliminated                                                            
within four  or five years." He clarified  that much of the  backlog                                                            
is  comprised  of  amendments  and  transfers  that  are  not  "time                                                            
critical." He continued  that a permit of "critical matter" would be                                                            
addressed accordingly.                                                                                                          
Senator  Austerman noted  several  references to  "withdrawals  less                                                            
than significant"  in the bill, and asked if the definition  of that                                                            
term is in Regulation, and what the term meant.                                                                                 
Mr. Loeffler explained  the current regulation specifies  any entity                                                            
that withdraws  500 gallons of water a day must apply  for a permit.                                                            
He continued that the Department  proposes to streamline the program                                                            
by changing this  regulation by allowing for two thresholds  for the                                                            
permits: one would define  "significant" as the use of 5,000 gallons                                                            
a day  for anadromous  streams and  up to 50,000  gallons a  day for                                                            
groundwater  or non-anadromous  streams;  the other  would be  "less                                                            
than significant" meaning 500 to 5,000 gallons of water a day.                                                                  
Mr.  Loeffler   clarified  that  in   the  "withdrawals   less  than                                                            
significant"  scenario, the permit  "would just get agency  review,"                                                            
and  only  if  the   agency  finds  there  is  "the  potential   for                                                            
environmental  problems would a full adjudication  be administered."                                                            
He stressed this would  streamline the operation, and while everyone                                                            
would have to  apply for a permit in order to ensure  the protection                                                            
of anadromous  fish streams, the process would help  concentrate the                                                            
staff on those permits that are critical.                                                                                       
Senator Leman  moved to adopt the committee substitute  22-GS1087\J,                                                            
Cook/Luckhaupt as a working draft.                                                                                              
There being no objection, the working draft was ADOPTED.                                                                        
AT EASE 10:55 AM/11:00 AM                                                                                                       
Senator  Leman  noted   the  committee  substitute  contains   three                                                            
changes: in Section 1 (a)  language relating to unnecessary findings                                                            
was deleted  to reflect more appropriate  language for the  purposes                                                            
of the  legislation; a wording  change of  "policy of the state"  to                                                            
"policy  of  the  "legislature;"   and  page  3,  lines  11-13  were                                                            
rewritten to "clearly  state what the Department has  done regarding                                                            
issuance of irrevocable permits."                                                                                               
Co-Chair Donley  asked for clarification  on whether fiscal  note #2                                                            
replaces fiscal note #1.                                                                                                        
Mr. Loeffler responded yes.                                                                                                     
Co-Chair  Donley  asked  Mr. Loeffler  to  clarify  the differences                                                             
between the two fiscal notes.                                                                                                   
Mr. Loeffler  informed  that fiscal  note # 1  contains a  permitted                                                            
water rights royalty fee  system based on a sliding scale. He shared                                                            
that significant  objections were  raised to that fee structure  and                                                            
the  Senate  Resources  Committee   changed  the  fee  structure  to                                                            
"reasonable  direct costs." He advised  that revenue generated  from                                                            
the sliding  scale fee structure would  have been greater  than that                                                            
generated  from  the reasonable  direct  costs  structure,  and  the                                                            
Department  Expected Water  Resources Income  account reflects  that                                                            
Mr. Loeffler continued  that fiscal note #2 reflects the deletion of                                                            
any FY 02 funding  request as the  House of Representatives  and the                                                            
Senate funded the Department with $300,000 general funds.                                                                       
Co-Chair Donley asked why  there is a five-person increase for FY 02                                                            
included in  fiscal note #2 if the  money is already in the  budget.                                                            
Mr. Loeffler noted that is an error in fiscal note #2.                                                                          
Mr.  Loeffler  informed  that  the  Department  currently   receives                                                            
$135,800  in  general fund  program  receipts  consistent  with  the                                                            
intent  of this  bill.  He continued  that  these  program  receipts                                                            
increase, in two years,  to $320,000 reflecting the increase in fees                                                            
based on  the reasonable  direct costs  fee structure.  He said  the                                                            
$300,000  general  funds  increment  reduces  to $115,000  once  the                                                            
reasonable  direct costs fee  structure is  in place. In FY  07, Mr.                                                            
Loeffler  noted,  the  backlog  of permits  would  be  finished  and                                                            
several positions  that were needed to address the  backlog would be                                                            
eliminated. He summarized  that the Department is funded in FY O2 by                                                            
general  funds, FY  03 is a  transition  year, FY 04  through  FY 06                                                            
would be combinations of  general funds and program receipts, and in                                                            
FY 07,  when the  backlog  of permits  is brought  current,  general                                                            
funds would not be necessary  as the program would be totally funded                                                            
with program receipts.                                                                                                          
Senator  Green   informed  that  numerous   people  in  the   state,                                                            
especially  those in the  agriculture business,  have concerns  with                                                            
the often  costly process  of arranging for  water access while  not                                                            
knowing if their  permit for water would be granted.  She questioned                                                            
if  water and  resource  conservation  district offices  around  the                                                            
state  that have  received  federal funds,  could  assist people  in                                                            
those districts get their permits in order.                                                                                     
Mr.  Loeffler  replied   that  any  help  of  this   sort  would  be                                                            
appreciated.   He  also  informed  that  the  Department   would  be                                                            
establishing on-line permit applications in the future.                                                                         
Mr. Loeffler said  the soil and water conservation  district offices                                                            
could  not  be  the  regulator,  but  could  help  people  with  the                                                            
permitting  information needed by  the Department, thereby,  helping                                                            
the entire system be more efficient.                                                                                            
Senator Green  asked to clarify  if the term  "regulator" meant  the                                                            
agency that issued the permit.                                                                                                  
Mr. Loeffler replied that was correct.                                                                                          
Senator  Green asked if  there was  an advisory  role the water  and                                                            
soil conservation  agencies could  serve in advising the  Department                                                            
that a permit was in order.                                                                                                     
Mr. Loeffler responded  it would be helpful to have information from                                                            
the water and  soil conservation agencies  indicating that  a permit                                                            
was in order.                                                                                                                   
Senator  Green   asked  if  there   was  anything  needed   in  this                                                            
legislation to help further  the relationship between the Department                                                            
and the water and soil conservation agencies.                                                                                   
Mr. Loeffler  replied that  he did not think  anything needed  to be                                                            
addressed  in the Legislation;  that the  Committee's encouragement                                                             
was enough.                                                                                                                     
Senator Green  said the Committee could present an  amendment if the                                                            
Department felt it necessary  to further the interaction between the                                                            
Department and the water and soil agencies.                                                                                     
Co-Chair  Kelly asked  for clarification  as to  whether the  groups                                                            
Senator Green referred to are federal or state agencies.                                                                        
Mr.  Loeffler  responded  that  they  are  actually  local  district                                                            
Co-Chair Kelly  mentioned that in the regulatory permitting  process                                                            
there  is  a  comment  area  through  which  various   groups  could                                                            
participate as part of the process.                                                                                             
Mr.  Loeffler responded  that  yes, in  the permitting  process  for                                                            
water rights, there is a comment area.                                                                                          
Co-Chair Kelly  concluded that this  comment area would be  the area                                                            
through which these agencies  "would naturally emerge as someone who                                                            
would be involved in the process."                                                                                              
Senator  Green  asked  if  these  local  district  groups  had  been                                                            
included in the development of this legislation.                                                                                
Mr. Loeffler  replied that the Department  had been in contact  with                                                            
various  agricultural   groups  in   some  the  water  conservation                                                             
districts but not specifically the district groups.                                                                             
Senator Wilken voiced general  support of the bill, but inquired how                                                            
the word  "temporary"  is defined  as detailed  on page  4, lines  3                                                            
through 9, "Section 6,  46.15.155 Authorization for temporary use of                                                            
water (a). Notwithstanding  any contrary provision  of this chapter,                                                            
the commissioner  may authorize the  temporary use of a significant                                                             
amount of water, as determined  by the department by regulation, for                                                            
a period of time not to  exceed five consecutive years, if the water                                                            
applied  for has  not  been  appropriated  in accordance  with  this                                                            
chapter.  The commissioner  may extent an  authorization under  this                                                            
section for one additional term of five consecutive years."                                                                     
Senator  Wilken  stated this  language  implies  a permit  could  be                                                            
issued for  five years, and  unless there  has been a disregard  for                                                            
the water  use application,  there is an  automatic renewal,  making                                                            
this temporary permit a  ten-year permit. He voiced that some people                                                            
could decipher this as  a permanent permit. He asked Mr. Loeffler to                                                            
explain  the  basis  of  the  five-year  permit  and  the  five-year                                                            
extension,  and whether  it should  be  longer or  shorter. He  also                                                            
inquired  about   the  history  behind  the  verbiage   on  page  4,                                                            
subsection  (f) lines  25 through  27 "The commissioner  may  impose                                                            
reasonable  conditions   or limitations   on  an authorization   for                                                            
temporary use of water  to protect the water rights of other persons                                                            
or to protect  fish and  wildlife habitat,  public health,  or other                                                            
public interests."                                                                                                              
Mr. Loeffler  responded  that a  five-year temporary  permit with  a                                                            
possible five-year  extension has been an established  authorization                                                            
of the Department for approximately  twenty years. He continued that                                                            
this does not necessarily  mean it is the correct approach, but that                                                            
it does  address the  need for the  Department to  be able to  issue                                                            
"permits for the duration  of construction." He informed that of the                                                            
200  permits  that are  currently  in  effect,  only three  or  four                                                            
involve a construction timeframe of longer than five years.                                                                     
He commented  that if the Committee  wished to delete the  five-year                                                            
extension  clause, it would  not negatively  affect the program.  He                                                            
reiterated  that  the  intent  of  the temporary  permit  is  to  be                                                            
Mr.  Loeffler  said   that  subsection  (f)  is  supported   by  the                                                            
Department  in the following manner:  where habitat resources  are a                                                            
concern,  the application  is reviewed with  the Department  of Fish                                                            
and Game and  the issues are addressed;  if a road construction  job                                                            
is in a neighborhood,  such things  as the construction start  times                                                            
would be addressed.  He stressed that  the Department is  very aware                                                            
of protecting resources.                                                                                                        
AT EASE 10:15 AM/10:15 AM                                                                                                       
Senator  Hoffman  asked  how  this bill  addressed  water  usage  by                                                            
Mr. Loeffler answered that  miners are one of the major consumers of                                                            
both water  rights and temporary water  use permits. He stated  this                                                            
bill would allow the Department  to provide miners a better level of                                                            
Co-Chair Kelly  informed that public  testimony would now  be taken.                                                            
SY NEELEY,  testified via teleconference  from Glennallen  and noted                                                            
he was looking  at the working draft and some other  backup material                                                            
and wished  to  clarify that  this bill  only deals  with  temporary                                                            
water  use,  as some  of  the  earlier  backup  material  referenced                                                            
private water wells.                                                                                                            
Mr. Loeffler  responded  that this  bill only  deals with  temporary                                                            
water use, however  the fee portion would apply to  all water usage.                                                            
The re-authorizing  statute applies  to temporary water usage  only,                                                            
he stated.                                                                                                                      
Mr. Neeley  asked  for clarification  that the  Department would  be                                                            
charging  a fee based  on the gallons  of water  used for a  private                                                            
Mr.  Loeffler  responded  that  for  private  home  water  use,  the                                                            
Department   would  only   charge  an  application   fee  plus   the                                                            
established $50 annual fee.                                                                                                     
Co-Chair  Kelly reiterated  a private home  annual fee would  be $50                                                            
and there is  not a fee based on gallons.  He also informed  that an                                                            
application fee was applicable.                                                                                                 
Mr. Neeley asked how much the application fee would be.                                                                         
Mr. Loeffler  responded  that it is  now $50 and  would be going  up                                                            
marginally to between $50 and $100.                                                                                             
Mr. Neeley  inquired  about the  fee structure  on commercial  wells                                                            
used by public entities  such as homeowners' associations and towns.                                                            
Co-Chair Kelly replied that the same fees would apply.                                                                          
Mr. Neeley  asked if  the gallon  usage costs  would apply to  these                                                            
types of water uses.                                                                                                            
Co-Chair  Kelly replied  that the  costs for  towns and homeowners'                                                             
associations did not include a gallon usage fee.                                                                                
Mr.  Neeley  summarized  there  would  be a  $50  annual  fee  "plus                                                            
whatever  is determined  to  be  the application  fee."  Mr.  Neeley                                                            
stated this  verbal exchange "has  cleared up" the questions  he had                                                            
about the bill.                                                                                                                 
HARVEY BASKIN,  dairy farmer, testified  via teleconference  off-net                                                            
from Wasilla  that the drought  conditions  of the past three  years                                                            
that  have affected  Wasilla  and  Delta are  a critical  issue.  He                                                            
informed that  four farmers in the  Wasilla area are each  investing                                                            
$100,000 to upgrade to  pivot irrigation systems, and that he had to                                                            
purchase $35,000 of hay to feed his cows this year.                                                                             
Mr. Baskin stressed there  is "no way that a small farmer can invest                                                            
that  kind  of money  without  a  guaranteed  certificate  of  water                                                            
appropriation."  He stated  that a temporary  permit is "absolutely                                                             
nothing but trouble  ahead for a person who is investing  in a pivot                                                            
irrigation  system because if the  temporary permit expires  in five                                                            
years, the  investment made in that  system has not had time  to pay                                                            
for itself."  He expressed  support for the  bill and commended  Mr.                                                            
Loeffler and  his staff at the Department  of Natural Resources  for                                                            
attempting to get the issue of water rights "cleared up."                                                                       
BILL TEGOSEAK,  Interim Executive  Director of Inupiat Community  of                                                            
the Arctic  Slope (ICAS), testified  via teleconference from  Barrow                                                            
and expressed  concern regarding the  proposed bill. He stated  that                                                            
"subsistence is  a way of life in rural Alaska," and  "the health of                                                            
our environment and the  prudent use of resources such as water" has                                                            
"significant  bearing  on the  health  and continuing  existence  of                                                            
other natural resources"  the Rural people depend on for "livelihood                                                            
and cultural  preservation."  He informed that  the prior week,  the                                                            
Committee   received  written  comment   from  ICAS,  "a   federally                                                            
recognized  regional tribal government"  in opposition to  SB 139 as                                                            
it relates to temporary water use permits. [Copy on file]                                                                       
Mr. Tegoseak  restated  the ICAS concerns  about SB  139 and  SB 185                                                            
particularly as  they relate to the issuance of temporary  water use                                                            
permits.  He warned this  bill represents  "the continuation  of the                                                            
Department  of  Natural  Resources'   "illegal  practice  of  giving                                                            
billions  of gallons  of North Slope  water resources  away with  no                                                            
public notice,  no tribal consultation, no scientific  analysis, and                                                            
no access  to  traditional  knowledge about  the  water bodies  from                                                            
which the  water is  being taken."  He voiced  that the criteria  to                                                            
"protect fish  and wildlife habitat, public health,  or other values                                                            
are specifically  not applied  to temporary  water use permits."  He                                                            
stated  he is concerned  that the  issuance of  temporary water  use                                                            
permits  under provisions  of SB 139  will exempt  all such  permits                                                            
from public  notice, and that the  Department of Natural  Resources'                                                            
current  permitting  practice and  this bill  are  "contrary to  the                                                            
water  management  policy interests"  as  established  in the  North                                                            
Slope Water Management Policy.                                                                                                  
Mr.  Tegoseak  detailed  the need  for  SB 139  to  more  thoroughly                                                            
address  a better  analysis  of  the "water  withdrawal  impacts  on                                                            
subsistence resources in the region."                                                                                           
Mr. Loeffler replied the  North Slope Borough has the opportunity to                                                            
require public  notice through the coastal zone program,  and stated                                                            
that  the requirement  of giving  public  notice does  not apply  to                                                            
temporary water  use permits because  they have a limited  impact on                                                            
resources.  He informed  that the  Department  of Natural  Resources                                                            
issued  public notice  for  eleven  permits this  year  and did  not                                                            
receive any comments from any communities or tribes.                                                                            
Mr. Loeffler commented  that he would investigate  the status of the                                                            
North Slope Water  Management Policy but commented  that he was sure                                                            
it had been revoked. He  shared that the average water withdrawal on                                                            
the North  Slope is  approximately  one billion  gallons, and  while                                                            
this  may  seem like  a  large  amount,  it is  a  relatively  small                                                            
percentage of the sources.                                                                                                      
Co-Chair Kelly ordered the bill HELD in Committee.                                                                              

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