Legislature(2001 - 2002)

04/04/2001 03:40 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                      SB 139-STATE WATER USE                                                                                
CHAIRMAN TORGERSON announced SB 139 to be up for consideration.                                                                 
MR. BOB  LOEFFLER,  Director, Division  of Mining,  Land and  Water,                                                            
Department  of Natural  Resources  (DNR),  said he  wanted to  first                                                            
describe the problem  this bill solves and then go  through what the                                                            
bill does  and explain how  it's one part  of the solution.  He told                                                            
     In order  to withdraw a significant  amount of water  from                                                                 
     the  state, you  need a water  right if  it's a permanent                                                                  
     withdrawal  and  a temporary  water use  authorization  if                                                                 
     it's temporary for five years.                                                                                             
     The  basic problem  we have  is right  now  the system  is                                                                 
     broken.  We  cannot issue  the  water rights  that people                                                                  
     request.  We  don't provide  the  services  that Alaskans                                                                  
     need.  At the peak, this program  had $1.6 million in  the                                                                 
     program  and 39  full-time people.  Two years  ago it  was                                                                 
     down to $325,000 and four  people and quite frankly that's                                                                 
     not  enough  to run  the  program that  we  have  now -  a                                                                 
     program   that  maintains  21,000   water  rights  files,                                                                  
     receives  250  applications   for  water  rights  and  150                                                                 
     applications for temporary water use permits.                                                                              
     The consequences  of those four  people not being able  to                                                                 
     run the system is a backlog.  We now have a backlog of 600                                                                 
     -  700 water  right  applications  and  a total  of  3,000                                                                 
     actions -  transfer, extensions and things like  that. The                                                                 
     consequences  of that backlog  are threefold: people  call                                                                 
     me up  and say, 'When am I going  to get my water right?'                                                                  
     and I have  to say, 'Well, given our back log,  it's going                                                                 
     to be two to three years.'  And then they say, 'I can't do                                                                 
     my  development  for two  to three  years? If  I withdraw                                                                  
     water,  I'm  going  to break  the  law for  two  to  three                                                                 
     That's  not the way  government should  be run and that's                                                                  
     not a service that I'm proud to provide.                                                                                   
     The  second  consequence  is  because of  a  staff that's                                                                  
     trying  to do things  with shortcuts,  we're targeted  for                                                                 
     litigation  and we almost  lost a year  of exploration  at                                                                 
     The third consequence, of  course, is that people go ahead                                                                 
     and withdraw water without  a permit. Often, that probably                                                                 
     does very  little harm to the  resource. Occasionally,  it                                                                 
     does  risk  a resource.  That's  the  problem we  need  to                                                                 
     solve.  It's a  problem  of a group  that cannot  run  the                                                                 
     program that we have today.  It's not a problem created by                                                                 
     a particular  legislature or  administration. We have  had                                                                 
     declining  budgets for 20 years. This bill is  one part of                                                                 
     a  three-part solution.  I would  like to  describe  again                                                                 
     those three parts so you  can see how the bill fits in and                                                                 
     then I would like to go to what the bill does.                                                                             
     The three parts of the solution  we envision are first, we                                                                 
     cannot  continue to administer  a program designed in  the                                                                 
     early 80s with budgets for  this millennium. So we need to                                                                 
     find  a way to do  more with less and  perhaps to provide                                                                  
     less service  for less money,  which will run the program                                                                  
     on  a  smaller   budget.  To  that  end  we're  proposing                                                                  
     regulations  in the next  two to three  weeks that should                                                                  
     significantly  streamline  the  program  and  allow  those                                                                 
     water  withdrawals  that are  least likely  to affect  the                                                                 
     environment  or other users go  much quicker. We think  65                                                                 
     percent of our caseload will fall into that category.                                                                      
     The second  is even a streamlined program needs  more than                                                                 
     four  people  to  run it.  So  to  that end  there  is  an                                                                 
     increment   in  this  year's  budget  for  an  additional                                                                  
     $300,000  to both  run the  program  and in  four or  five                                                                 
     years  rid us of the backlog.  The performance measures  I                                                                 
     put  down  for that  increment  was  that  we would  do  a                                                                 
     typical   water  right  within  60  days  and  a  typical                                                                  
     temporary water use permit within about 15 days.                                                                           
     The third part - streamline  program - more money, is this                                                                 
     bill does  two things. The first  thing it does is try  to                                                                 
     provide  a long term  income source  to fund the program.                                                                  
     I'm easy.  Any way we get the money, we'll take  it to run                                                                 
     the program to provide the  services that I think Alaskans                                                                 
     need.  But this bill tries to  provide a long-term income                                                                  
     source  to do that and it does  that through recommending                                                                  
     water use  fees. When you get a water right, it's  a right                                                                 
     forever.  You never  need to  touch it  again. This  scale                                                                 
     would  assess a  sliding scale  water use  fee. I've  been                                                                 
     shopping  that  around  and  I'd  like  to  tell  you  the                                                                 
     reactions  I get from people about that. But first  let me                                                                 
     tell  you what  the  second part  of  the bill  does.  Our                                                                 
     temporary  water use program,  which we use for temporary                                                                  
     water uses,  has been the subject of a significant  amount                                                                 
     of litigation  on the  North Slope. It  is a program  that                                                                 
     was implied  by statute, but created in regulations.  This                                                                 
     bill   would,  in  fact,  provide   explicit  legislative                                                                  
     authority  for how  the program  has been  working for  20                                                                 
     years.  Some  validated  permits  have  been  called  into                                                                 
     question  by some of  the North Slope  rulings. So that's                                                                  
     what  the  bill does.  It  does two  things,  a long-term                                                                  
     income  source for  the program and  explicit legislative                                                                  
     authorization  for a temporary  water use fee program.  It                                                                 
     does not change how we run the water use program.                                                                          
Number 1500                                                                                                                     
MR. LOEFFLER said he produced  a proposed amendment as the result of                                                            
the reactions  he received after showing  this around in  the mining                                                            
community,  the agriculture  community, the  Alaska Water  Resources                                                            
Association,  the Resource  Development  Council  and environmental                                                             
groups. The  groups came  to the consensus  that this is a  problem.                                                            
The state  is  not providing  services  that people  demand and  the                                                            
problem needs to be fixed. He said:                                                                                             
     With respect  to charging it  through temporary water  use                                                                 
     fees,  although  there was  some  agreement, that  is,  an                                                                 
     annual  fee on your  property right,  the reaction ranged                                                                  
     from reluctant approval  to disgust to outright hostility.                                                                 
     In a sense,  people were saying, 'You have a problem,  but                                                                 
     this is a silly way to fix it.'                                                                                            
     What  they were suggesting  was a number  of things:  one,                                                                 
     that  an  annual  fee  on a  property  that  you  own  was                                                                 
     inappropriate  and  no  other  state works  that  way  and                                                                 
     second,  they were  concerned, quite  frankly, that  there                                                                 
     were no bounds to how much  I could charge in the bill nor                                                                 
     did existing  permitees want to fund the 20-year  backlog.                                                                 
     So  what  was suggested  instead  is  that they  said  you                                                                 
     should  charge people  for the services  you provide.  You                                                                 
     should  charge people  the reasonable  direct cost of  the                                                                 
     permit  application and that  suggestion was pioneered  by                                                                 
     the legislature  in HB 361 last year, commonly  called the                                                                 
     DEC fees bill.                                                                                                             
MR. LOEFFLER  said the proposed amendment  is the DEC fees  bill. It                                                            
puts  into  statute a  framework  that  directs  DNR to  charge  the                                                            
reasonable direct costs  of processing those applications and that's                                                            
the long-term income source.                                                                                                    
MR.STAN FOO, Alaska Miners  Association (AMA), stated support for SB
139.  He  said the  AMA  appreciates  the  department's  efforts  to                                                            
address  this issue  that involves  all  water users.  The AMA  also                                                            
supports the  technical amendments  and is encouraged by  the effort                                                            
to use the DEC fees bill  in the framework for this effort. However,                                                            
he expressed  concern that  water fees should  not be necessary  for                                                            
uses such as suction dredges  or water that's collected and released                                                            
back into a stream.                                                                                                             
MR.  BOB  STILES,   President,  DRven   Corporation,  said   he  was                                                            
testifying  on behalf of the DRven  Corporation. Drven supports  the                                                            
technical amendments  to this bill and recognizes  the problems that                                                            
DNR faces.  DNR is charged with managing  a resource that  often has                                                            
no constituency.  One of the main reasons he is present  today is to                                                            
illustrate that  water rights, while they are not  flashy, do have a                                                            
MR. TADD  OWENS, Executive  Director, Resource  Development  Council                                                            
(RDC), said  the RDC  worked for about  2 1/2  years with a  diverse                                                            
group of industry  representatives, the legislature  and DEC to pass                                                            
HB 361 and  they support the department's  recommendation  that this                                                            
program be  added into that structure  for fees. It distributes  the                                                            
burden of the program's  costs fairly between the private sector, in                                                            
terms of  industry applying  for these  permits,  and the public  at                                                            
large. He stated, "Another  critical issue this bill solves is DNR's                                                            
backlog.  There are  a  lot of  folks out  there who  are  operating                                                            
essentially  without their  authorization  and we  do support  DNR's                                                            
request for funding to take care of that backlog."                                                                              
MS. PAM MILLER,  an Anchorage resident, said she is  concerned about                                                            
SB 139  as Alaska has  the best  water statutes  in the nation  that                                                            
were set up to protect Alaska's clean water, fish and wildlife.                                                                 
MR. BILL  WARD, Ward Farms,  opposed SB 139,  and said he came  from                                                            
states where  water was a very valuable  commodity and water  rights                                                            
were sought  after. They were handled  with very little bureaucracy                                                             
and overhead.  He said the bureaucracy in Alaska is  quite large; to                                                            
get water  rights  he had  to go through  ADF&G,  the Department  of                                                            
Environmental  Conservation  and  Coastal  Zone  Management.  He  is                                                            
concerned  that "reasonable  fees" is  more for  government than  it                                                            
would be for the private  sector. He said he uses half the amount of                                                            
water exempted  from a residential household, or about  800 gallons.                                                            
He is  stuck between  the big  commercial rigs  and the residential                                                             
users. He warned,  "If you want to make money for  the general fund,                                                            
that's okay,  but please  don't set up a  level of bureaucracy  over                                                            
nothing more than people to shuffle papers."                                                                                    
MR. GARY  SONNICHSEN,  a Big Delta  resident,  supported Mr.  Ward's                                                            
testimony and  opposed SB 139. He  said the department's  plan is to                                                            
charge  more fees  to  add a  lot more  government  and  a lot  more                                                            
paperwork, which will create more problems.                                                                                     
MR. BILL  MICHEL, a Delta  Junction resident,  said he didn't  think                                                            
the  state  had any  surface  or subsurface   rights to  the  water.                                                            
Therefore, they have no business to tax it.                                                                                     
MR. KEITH  WARREN, a Delta  Junction resident,  said in the  private                                                            
sector, if you  can't make your budgets for whatever  reason, you've                                                            
got to  dole it  out. He  thought the  government  should take  this                                                            
lesson from the private sector. He opposed SB 139.                                                                              
MR. JOHN  WENGER,  a Copper Center  resident,  supported Mr.  Ward's                                                            
testimony 100 percent and  said what really concerns him is that the                                                            
next  largest user  group  is the  public  water supply.  If  Copper                                                            
Center's  water supply  falls  under  the department's  over  15,000                                                            
gallon a day category  and the people have to start  paying fees, it                                                            
would put a lot of people back financially.                                                                                     
MR. HARVEY  LEONARD, a Copper  Center resident,  opposed SB  139. He                                                            
thought it was  another attempt by bureaucracy to  make them pay for                                                            
something they don't have the money to pay for.                                                                                 
MR. AL ROIG,  a Copper Center resident,  opposed SB 139.  He thought                                                            
the  bill was  poorly written  and  would do  nothing  but create  a                                                            
larger bureaucracy.                                                                                                             
MR. ERIC  NASHLUND, a Copper  Center resident,  said that SB  139 is                                                            
just a revenue-generating source.                                                                                               
TAPE 01-27, SIDE B                                                                                                            
MR. SAM LIGHTWOOD,  a Copper Center  resident, said the legislature                                                             
is requiring  fees and  other small  amounts for  services that  the                                                            
state normally  provides for its citizens.  Mr. Ward said  he had to                                                            
apply for four  different water rights permits. That  is duplicative                                                            
and makes the process so  complicated. He noted, "It was much better                                                            
when we  had a little  more adequate  funding  from the legislature                                                             
directing to provide  these services to people. The  answer to that,                                                            
of course, is the legislature  needs to find better sources of their                                                            
funding.  They are  nickel  and diming  everyone  to  death and  the                                                            
overall plan has to be worked out."                                                                                             
He thought  the  legislature  should reinstate  the  income tax  and                                                            
said, "I hope I get out of here alive."                                                                                         
MR. JOHN KUNIK,  a Glennallen resident, said the bill  would require                                                            
water meters,  meter readers, installation  crews, law enforcement,                                                             
etc. He asked  what would happen to individuals who  live on federal                                                            
lands who use water and how all the water would be metered.                                                                     
MR. MATT  KRINKE, a  Glennallen resident,  opposed  SB 139. He  said                                                            
[he] can't afford the money to pay for the bureaucracy.                                                                         
CHAIRMAN  TORGERSON asked if  the bill will  affect water rights  on                                                            
federal land.                                                                                                                   
MR. LOEFFLER  answered  that  all water  is reserved  by the  state.                                                            
There is an implied  federal water right that the  feds have a right                                                            
to for certain  federal lands, but it is determined  through a joint                                                            
process that is very complicated  or typically they just come to the                                                            
state for a water right.                                                                                                        
CHAIRMAN TORGERSON  asked if the state could bill  them more than it                                                            
does Alaskans or whether they are billed at all.                                                                                
MR. LOEFFLER  replied that they are  billed an application  fee like                                                            
everyone else.                                                                                                                  
MR. DANIEL BOONE,  a Chitina resident, said, "I don't  think this is                                                            
a good bill.  One of the  main reasons is  that a few years  ago the                                                            
State of Alaska  left us millions  of dollars in hydro projects  for                                                            
small communities  around the state, like Bradley  Lake. By charging                                                            
a fee to the electric  companies and the small private  utilities to                                                            
generate cheaper  electricity, the  rates will immediately  increase                                                            
probably twofold."  He  said the other reason he is against the bill                                                            
is that too many places  in Alaska have "public wells" and this bill                                                            
would increase the fees on them.                                                                                                
SENATOR ELTON referenced  the language on page 5, line 24, and asked                                                            
if AS  46.15.080 applies  to the  issuance or  extension under  this                                                            
section  of an authorization  for  temporary use  of water. He  said                                                            
"Temporary"  is defined as  five years and  possibly 10 years  under                                                            
the extension according  to a conversation he had with Mr. Loeffler.                                                            
He did not  understand why Mr. Loeffler  didn't want the  provisions                                                            
of that to apply  when the provisions say that the  commissioner has                                                            
to consider  the effect on  fish and game  resources, public  health                                                            
and economic activity resulting from the activity.                                                                              
MR.  LOEFFLER  responded  that  they consider  the  effect  on  fish                                                            
resources  and public  health before  they prioritize  water  users,                                                            
"but a  temporary water use  does not convey  a property right.  OAO                                                            
gives  us a best  interest  criterion before  we  convey a  property                                                            
right.  This is  part of  making clear  that a  temporary water  use                                                            
authorization  is, in  fact, a  revocable authorization  - does  not                                                            
convey  a property  right or  anything  like a property  right.  But                                                            
certainly  we work  very closely  with Fish  and Game  to take  into                                                            
account  any  affect  on fish  resources,  wildlife,  or,  for  that                                                            
matter, prior water right holders."                                                                                             
SENATOR  ELTON  said,  "I  understand   that  you  want  to  make  a                                                            
distinction between  a permit and a temporary water  authorization."                                                            
He asked where  in statute it compels  Mr. Loeffler to consider  the                                                            
effect  on  fish  and game  resources  or  public  health  or  other                                                            
economic  activities   for  a  temporary  authorization   if  he  is                                                            
exempting himself from those provisions.                                                                                        
MR. LOEFFLER  answered that  he is required  to consult with  ADF&G.                                                            
Under  subsection  (f),  he  is  expected   to  put  limitations  on                                                            
protecting the  rights of other people and the public  interest. The                                                            
methods and regulations  he has been dealing with  for 20 years also                                                            
require  him to do  that and that's  been the  department's  mode of                                                            
operation. He said he would  have to get back to him with a complete                                                            
SENATOR ELTON  asked, "I  took a look at  the public notice  section                                                            
that is  repealed under  this bill  and it seems  to me that  I know                                                            
that public notice can  be onerous, but the public notice provisions                                                            
here  provide that  within  15 days  of  publication  of notice,  an                                                            
interested  person may file an objection  and that the commissioner                                                             
has to consider  that objection within  30 days, can extend  that to                                                            
180 days, if the commissioner  thinks there's enough there to have a                                                            
hearing  -  AS  46.15.133,  the  section  that  they  are  exempting                                                            
themselves from."  He said if NorthStar is exluded,  he wondered why                                                            
giving  notice with  15 days  to file  an objection  and giving  the                                                            
commissioner  30 days to  make a determination  has been onerous  in                                                            
the past.                                                                                                                       
MR. LOEFFLER answered:                                                                                                          
     Most  of the temporary  water use permits  are for things                                                                  
     like construction  camps and  when the agencies determine                                                                  
     there  is no environmental  harm, a 15  to 40 day wait  to                                                                 
     halt  construction in  mid-summer is  a problem. In  areas                                                                 
     where we think  there is likely to be harm, we  can public                                                                 
     notice  it and we are  not prohibited  from doing it.  The                                                                 
     practice for  the last 20 years has been not to  [indisc.]                                                                 
     things   and  everyone  imagines   a  5-year  or  10-year                                                                  
     facility, but often we used  them for DOT, which is one of                                                                 
     our   major   consumers.   In   the   middle   of  summer                                                                  
     construction, yes Senator  and Mr. Chairman, a 15 - 30 day                                                                 
     delay is a problem.                                                                                                        
     When we  are giving a state resource  away forever,  which                                                                 
     is a water  right, we're constitutionally  required  to do                                                                 
     public notice. But for something  that we believe that we,                                                                 
     the  agencies, determine  won't  harm the  environment  or                                                                 
     other  water users and  is temporary  and is revocable  if                                                                 
     there is a problem that  delay often will cause a problem.                                                                 
SENATOR ELTON responded:                                                                                                        
     When you get to be my age,  10 years can seem like forever                                                                 
     and  the second comment  would be that  I understand  that                                                                 
     you may have  a problem with DOT or someone wanting  water                                                                 
     rights  for  two days  to  make concrete  or  cement,  but                                                                 
     that's already  covered in AS 46.15.133, because  it says,                                                                 
     the   Commissioner    may  designate    types   of   water                                                                 
     appropriations that are  exempt from this section. So, the                                                                 
     commissioner   isn't   precluded  from   making  a   quick                                                                 
     decision, because there  is a provision that allows him to                                                                 
     do that.                                                                                                                   
Number 1900                                                                                                                     
SENATOR LINCOLN  asked Mr. Loeffler  to expand on the fact  that DNR                                                            
expects to  discount fees  for non-consumptive  use. She also  asked                                                            
what the impact  of these fees would be on the previous  speaker who                                                            
was a farmer and,  therefore, had the 800-gallon exemption  per acre                                                            
for 6,000 acres.                                                                                                                
MR. LOEFFLER said:                                                                                                              
     Let me answer the second  one first - what are the impacts                                                                 
     of the  fees. Under  the bill as written,  the fees  would                                                                 
     range from $50 to $500 for  a water right. So if you had a                                                                 
     water  right, if  you had a  number of  water rights,  you                                                                 
     could  have   multiples  of  $500  each  year.  Although,                                                                  
     typically  we try to consolidate  them for that reason.  I                                                                 
     will say that  under the amendments that I suggested  that                                                                 
     you  would pay  the reasonable  cost of  adjudicating  the                                                                 
     water right and then there  would be no more fees. So, for                                                                 
     the person  in Delta who has  a farm, the bill as written                                                                  
     would provide an annual  fee that is a sliding scale based                                                                 
     on  the amount  of  water  right. For  the  amendment,  we                                                                 
     suggested  a  one-time  application   fee  that  would  be                                                                 
     related  to the  cost of adjudicating.  In  an area  where                                                                 
     there's  not a  lot of people  and not  much problem  with                                                                 
     adjudication, you would  expect to have a reasonably small                                                                 
SENATOR LINCOLN asked if that would be less than $1,000.                                                                        
MR. LOEFFLER  said he didn't know,  but he thought most small  water                                                            
right holders  would be less  than $1,000.  He said he would  get an                                                            
CHAIRMAN  TORGERSON  said they  had heard  the fear  out there  that                                                            
people just  don't trust government  to do a reasonable fee,  "and I                                                            
sort of agree with that…I'd like to see what your intent is."                                                                   
SENATOR LINCOLN  asked him to get  back to them on fees for  a miner                                                            
replenishing the water  source that goes right back into the stream.                                                            
CHAIRMAN TORGERSON  said he thought  that was a suggested  amendment                                                            
instead of just being mentioned in a fiscal note.                                                                               
SENATOR TAYLOR said: "If  we're going to set any fees at all, I have                                                            
voted for  my last  fee bill in  this legislature  after the  blood,                                                            
sweat and  tears that  you, Mr. Chairman,  and I  have put into  DEC                                                            
just trying to  get a handle on how they were going  to charge every                                                            
hotdog  cart out  there  to go  inspect  them and  never  did get  a                                                            
straight  answer in  two years. I'm  not about  to start  increasing                                                            
fees so as to support your agency."                                                                                             
CHAIRMAN TORGERSON  noted that they  had exempted the hotdog  carts.                                                            
He said  he intended  to work  more on  the bill  starting with  the                                                            
North Slope.                                                                                                                    
SENATOR ELTON  said he thought  part of the  problem was that  there                                                            
aren't as many people doing  permits now as there used to be. One of                                                            
the sad  things about the  testimony is that  people have said  they                                                            
are willing  to pay just  to speed the process  up, because  waiting                                                            
for two years or longer  is a significant economic drain. He stated,                                                            
"This is one  approach. Another would  be to restore funding  closer                                                            
to a level we had 15 or 16 years ago."                                                                                          
CHAIRMAN  TORGERSON  added,  "Or  exempt  the users  and  widen  the                                                            
brackets a  little bit more instead  of worrying about the  guy that                                                            
carries the canteen from Anchorage to Mat-Su.                                                                                   

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