Legislature(1997 - 1998)

04/07/1998 02:10 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                                                                               
             HOUSE FINANCE COMMITTEE                                           
    April 7, 1998                                                              
                          2:10 P.M.                                            
                                                                               
TAPE HFC 98 - 94, Side 1.                                                      
TAPE HFC 98 - 94, Side 2.                                                      
TAPE HFC 98 - 95, Side 1.                                                      
TAPE HFC 98 - 95, Side 2.                                                      
                                                                               
CALL TO ORDER                                                                  
                                                                               
Co-Chair Therriault called the House Finance Committee                         
meeting to order at 2:10 P.M.                                                  
                                                                               
PRESENT                                                                        
                                                                               
Co-Chair Hanley   Representative Kelly                                         
Co-Chair Therriault   Representative Kohring                                   
Representative J. Davies  Representative Martin                                
Representative Grussendorf Representative Moses                                
Representative Foster  Representative Mulder                                   
                                                                               
Representative G. Davis was not present for the meeting.                       
                                                                               
ALSO PRESENT                                                                   
                                                                               
Senator Loren Leman; Annette Kreitzer, Staff, Senator                          
Leman; Diane Barrans, Executive Director, Postsecondary                        
Education, Department of Education; Mike Maher, Director,                      
Student Financial Aid, Postsecondary Education Commission,                     
Department of Education; Al Ewing, Deputy Commissioner,                        
Department of Environmental Conservation; John Stone, Air                      
Program Director, Department of Environmental Conservation;                    
Kyle Parker, Alaska Chapter, International Association of                      
Drilling Contractors (IADC); Russ Douglas, Alaska Chapter,                     
International Association of Drilling Contractors (IADC);                      
Kirsten Shelton, Alaska Conservation Voice (ACV), Juneau;                      
John Shively, Commissioner, Department of Natural                              
Resources; Representative Joe Green; Jeff Logan, Staff,                        
Representative Joe Green; Sam Trivette, Chief Probation                        
Officer, Southeast Region Probation, Department of                             
Corrections.                                                                   
                                                                               
TESTIFIED VIA TELECONFERENCE:                                                  
                                                                               
Patti Saunders, Anchorage; Pamela Miller, Program Director                     
and Biologist, Alaska Community Action on Toxics,                              
Anchorage; Jay Hermanson, Program Director, American Lung                      
Association of Alaska, Anchorage; Cheryl Richardson, Clean                     
Air Coalition, Anchorage; Mike Coumbe, Self, Anchorage;                        
Brian Petty, Senior Vice President, International                              
Association of Drilling Contractors (IADC), Washington D.C.                    
                                                                               
SUMMARY                                                                        
                                                                               
HB 272 An Act to permit a court to order a defendant who                       
receives a sentence of imprisonment for a                                      
misdemeanor to serve the sentence by electronic                                
monitoring; and relating to the crime of unlawful                              
evasion.                                                                       
                                                                               
 HB 272 was HELD in Committee for further                                      
consideration.                                                                 
                                                                               
SB 299 An Act relating to the treatment of well test                           
flares, non-road engines, and aggregated fuel                                  
burning equipment associated with non-road                                     
engines under the state's air quality control                                  
program; defining 'stationary source' for                                      
purposes of the state's air quality program.                                   
                                                                               
 SB 299 was reported out of Committee with an                                  
individuals recommendations and with a fiscal                                  
note by the Senate Finance Committee dated                                     
4/2/98.                                                                        
                                                                               
HB 325 An Act making appropriations for the operating                          
and loan program expenses of state government,                                 
for certain programs, and to capitalize funds;                                 
making appropriations under art. IX, sec. 17(c),                               
Constitution of the State of Alaska, from the                                  
constitutional budget reserve fund; and providing                              
for an effective date.                                                         
                                                                               
 RESULTS BASED GOVERNMENT - Final Committee Action                             
  Postsecondary Education                                                      
  Water Quality                                                                
                                                                               
HB 325 was HELD in Committee for further                                       
consideration.                                                                 
                                                                               
HOUSE BILL NO. 325                                                             
                                                                               
"An Act making appropriations for the operating and                            
loan program expenses of state government, for certain                         
programs, and to capitalize funds; making                                      
Appropriations under art. IX, sec. 17(c), Constitution                         
of the State of Alaska, from the constitutional budget                         
reserve fund; and providing for an effective date."                            
                                                                               
 RESULTS BASED GOVERNMENT - Final Committee Action                             
                                                                               
 Postsecondary Education                                                       
 Water Quality                                                                 
                                                                               
POSTSECONDARY EDUCATION                                                        
                                                                               
DIANE BARRANS, EXECUTIVE DIRECTOR, POSTSECONDARY EDUCATION                     
COMMISSION, DEPARTMENT OF EDUCATION, stated that the                           
Commission had no problems with the proposed mission                           
statement.                                                                     
                                                                               
Representative Foster MOVED to adopt the Postsecondary                         
mission statement.  There being NO OBJECTION, it was                           
adopted.                                                                       
                                                                               
WATER QUALITY                                                                  
                                                                               
Representative Foster MOVED to adopt the proposed mission                      
statement for Air and Water Quality.  There being NO                           
OBJECTION, it was adopted.                                                     
                                                                               
HB 325 was HELD in Committee for further consideration.                        
SENATE BILL NO. 299                                                            
                                                                               
"An Act relating to the treatment of well test flares,                         
non-road engines, and aggregated fuel burning                                  
equipment associated with non-road engines under the                           
state's air quality control program; defining                                  
'stationary source' for purposes of the state's air                            
quality program."                                                              
                                                                               
ANETTE KREITZER, STAFF, SENATOR LOREN LEMAN, stated that SB
299 clarifies that Alaska's air quality control program as                     
it relates to the treatment of stationary and mobile                           
sources of emissions in air quality control permitting.                        
She stressed that the legislation would not create an                          
exemption from the Clear Air Act.  It would simply codify                      
in statute, the federally recognized distinction between                       
mobile and stationary emission sources.                                        
                                                                               
The Department of Environmental Conservation (DEC)                             
regulators do not distinguish between mobile and stationary                    
sources of emissions when determining whether an air                           
quality control permit is required.  Although, State                           
regulations clearly require DEC to take into consideration                     
the mobility of emission sources when determining whether                      
to regulate them.  She advised that DEC continues to treat                     
mobile and stationary sources alike.                                           
                                                                               
Ms. Kreitzer commented that the federal program recognizes                     
that the same emission control technologies used for oil                       
and gas refineries and power plants are not suitable for                       
mobile applications like lawn mowers, snow machines,                           
bulldozers, and marine vessels.  The cost as well as the                       
size and weight of emission control technologies limits                        
their use with mobile source emissions.  All mobile                            
equipment must be manufactured to meet Environmental                           
Protection Agency (EPA) established emission standards.                        
Appropriate emission control technologies are built into                       
the mobile equipment as opposed to requiring modification                      
of the equipment at the time of initiating operations.                         
                                                                               
Ms. Kreitzer commented that the current situation results in                   
confusion when applying laws regarding stationary and mobile                   
sources of emissions regulated under the same permitting                       
program.                                                                       
                                                                               
PATTI SAUNDERS, (TESTIFIED VIA TELECONFERENCE), SELF,                          
ANCHORAGE, testified in opposition to SB 299.  She stated                      
that the bill could effect the health of Alaskan citizens                      
and workers.  She emphasized that it was unfair that                           
testimony in other committees was only heard and considered                    
by the industry.                                                               
                                                                               
Ms. Saunders noted that the Clean Air Act specifies two                        
divisions between mobile and stationary sources which have a                   
different set of regulations designed to take into account                     
the type and amount of solutions that come from the sources.                   
                                                                               
She suggested that this should be regulated in order to                        
protect human health.  Ms. Saunders voiced concern that if                     
the legislation passes, there will be serious implications                     
for the State's regulatory program on air pollution.  That                     
program would then go to the feds.  She recommended that the                   
Committee require testimony from qualified scientists,                         
medical professionals and the people living in the areas                       
which will be affected by implementation of the bill.                          
                                                                               
PAMELA MILLER, (TESTIFIED VIA TELECONFERENCE), PROGRAM                         
DIRECTOR AND BIOLOGIST, ALASKA COMMUNITY ACTION ON TOXICS,                     
ANCHORAGE, noted that Alaska Community Action on Toxics is a                   
program in the umbrella of the Alaska Conservation                             
Foundation.  This group adamantly opposes SB 299.                              
                                                                               
Ms. Miller commented that the bill was moving through the                      
Legislature much too quickly to have appropriate public,                       
medical and scientific input.  She reiterated that testimony                   
from the public had been excluded in most committee                            
hearings.                                                                      
                                                                               
Ms. Miller stated that SB 299 exempts significant sources of                   
air pollution from permit requirements and regulatory                          
oversight.  She added that there is no upper limit to the                      
amount of air pollution exempted by the bill.  Facilities                      
proposed by the bill for exemption include some of the                         
largest producers of air pollutants in the State.                              
                                                                               
Ms. Miller continued, the bill also would have adverse                         
economic consequences including the imposition of a federal                    
highway fund station.  Passage of the bill will cause                          
increased health care costs to the State, as health problems                   
become exasperated.  Ms. Miller stressed that the bill does                    
not take into consideration science or public health.                          
                                                                               
Co-Chair Therriault questioned Ms. Miller's reference to a                     
federal take-over.  Ms. Miller replied that SB 299 would                       
deregulate significant portions of air pollutants at which                     
time the Environmental Protection Agency (EPA) would be                        
forced to take the program over.  Co-Chair Therriault                          
believed that the Clean Air Act would regulate those                           
provisions at the time of production, suggesting that Ms.                      
Miller's assessment was unfair.                                                
                                                                               
Representative Kelly understood that the bill would bring                      
the State into compliance by mirroring the federal act.  Ms.                   
Miller replied that the bill was below the federal minimums                    
required in the Clean Air Act.                                                 
                                                                               
JAY HERMANSON, (TESTIFIED VIA TELECONFERENCE), PROGRAM                         
DIRECTOR, AMERICAN LUNG ASSOCIATION OF ALASKA, ANCHORAGE,                      
testified in opposition to SB 299.  It will adversely affect                   
the health of lungs in the State, particularly for those                       
persons who currently suffer from lung disease.  He noted                      
concern with the high level of sulfur dioxide and nitrogen                     
dioxide emanating from non-road engines.                                       
                                                                               
Representative Mulder inquired if Alaska currently                             
experiences non-road agent problems in relationship to lung                    
disease.  Mr. Hermanson replied that he did not have                           
specific information on that problem, although, he knew that                   
exhaust from city buses could cause respiratory distress for                   
those predisposed to lung disease.                                             
                                                                               
Representative Mulder suggested that the testimony was being                   
aggrandized.  Co-Chair Therriault pointed out that the                         
federal government is taking steps to force manufactures to                    
move toward cleaner burner technology and that those                           
protections would continue to be in place.                                     
                                                                               
CHERYL RICHARDSON, (TESTIFIED VIA TELECONFERENCE), CLEAN AIR                   
COALITION, ANCHORAGE, testified in opposition to SB 299.                       
She stressed that drilling rigs are pollutants and that one                    
drilling rig could equal the pollution of 100 city buses.                      
City buses emit the kind of pollution that causes                              
respiratory disease.  She added that the Clean Air Coalition                   
most recently has been focusing on particle pollution. In                      
order to protect human health, the EPA regulates that                          
concern.                                                                       
                                                                               
Ms. Richardson noted that current monitoring on the North                      
Slope has indicated an unhealthy level of particulents at 50                   
micrograms per cubic meter.  The established federal                           
standard is 150.  It has been found in Anchorage that 50                       
micrograms of particle matter cause respiratory disease and                    
bronchitis during inversion periods.                                           
                                                                               
She pointed out that with passage of SB 299, Alaska would be                   
the only State in the Union which allows its refiners to                       
sell high sulfur fuel.                                                         
                                                                               
Representative Martin questioned the facts presented by Ms.                    
Richardson.  Ms. Richardson responded that information                         
originated from the industry, as provided through DEC                          
permitting process.  She reiterated that the numbers she                       
provided were accurate.                                                        
                                                                               
Representative Grussendorf requested further information                       
regarding the level of sulfur fuel burnt in oilrigs in                         
Alaska.  Ms. Richardson commented that the Clean Air Act                       
amendments of 1990 required that tail-pipe standards be met.                   
That standard was followed by requests that fuel                               
manufacturers produce a lower sulfur gasoline.  Alaska and                     
Hawaii were allowed to seek an exemption.  Hawaii then                         
choose to produce the low sulfur diesel, whereas, Alaska                       
continued the exception.                                                       
                                                                               
MIKE COUMBE, (TESTIFIED VIA TELECONFERENCE), SELF,                             
ANCHORAGE, spoke against SB 299.  He stressed that he liked                    
to breathe clean air and questioned why the Legislature                        
would support legislation polluting it.                                        
                                                                               
AL EWING, DEPUTY COMMISSIONER, DEPARTMENT OF ENVIRONMENTAL                     
CONSERVATION, advised that this Administration has been                        
clear that Alaska is "open" for business.  The area-wide oil                   
and gas leases on the Kenai Peninsula, in Cook Inlet and on                    
the North Slope have caused renewed leasing which has                          
further indicated that commitment.  The Governor has been                      
equally clear that development in the State must be done                       
correctly from an environmental perspective.  Both these                       
concerns must be balanced in all legislation.                                  
                                                                               
Mr. Ewing pointed out that passage of SB 299 would be the                      
exact opposite of doing it right.  If enacted, it would                        
prohibit regulation of oil drilling rigs which are                             
significant sources of air pollution.  Additionally, because                   
of the imprecise wording of the bill, it could be                              
interpreted to prohibit regulation of a wide range of                          
significant sources of air pollution throughout the State.                     
He stressed that the bill would authorize even "mandate"                       
significant backsliding in Alaska's air quality, resulting                     
in dirtier air for Alaska.                                                     
                                                                               
Mr. Ewing continued, even if the interpretation could be                       
limited to oil drilling rigs, it would be unacceptable to                      
the Administration and the people living, working and                          
playing on the Kenai Peninsula, Cook Inlet and in the                          
village of Nuiqsut.  He added that the timing of the bill is                   
bad, having the potential to jeopardize the progress we are                    
making on National Petroleum Reserve-Alaska (NPRA) leasing                     
and the expectations the State has for other development.                      
Air pollution standards are designed to protect human health                   
and the environment.  They are not limited in their scope to                   
protection of people who live in urban areas.                                  
                                                                               
Mr. Ewing advised that state-of-the-art air quality models                     
tell us that if oil-drilling rigs are allowed to operate                       
unregulated, they will, and in many cases will cause                           
violations of clean air standards.  The industry suggests                      
that DEC should not regulate the rigs until it is confirmed                    
that there are air quality standard violations.  The law                       
states that DEC has a responsibility to prevent violations                     
of air quality standards.  He emphasized that it would be                      
unwise to wait until the health and welfare of Alaskans is                     
adversely impacted before taking action.                                       
                                                                               
Oil drilling rigs are mobile and need the flexibility to                       
move quickly from site to site.  The Department understands                    
their need for flexibility in how they operate.  The                           
Department has been working with the industry for the past                     
three years to design regulations that would provide                           
flexibility and necessary air quality controls.  Several                       
alternative solutions have been submitted, although, each                      
has been rejected by the drillers as unsatisfactory.  Their                    
solution is "no" regulation.                                                   
                                                                               
A single rig can emit as much pollution as more than a                         
hundred city buses operating in a single, very crowded                         
intersection.  Mr. Ewing stressed that would not be an                         
insignificant amount of pollution.  State of the art air                       
quality models predict violations of air quality standards                     
if the rigs are allowed to operate without controls.  The                      
Department's objective is to maintain clean air in ways that                   
are consistent with the law and with common sense.                             
                                                                               
Mr. Ewing noted that in conversations with air program                         
managers in other states, the Department has found that                        
drilling rigs outside of Alaska and other non-road engines                     
use low sulfur fuel (.05%) because that is what is available                   
except in Alaska.  He noted that if Alaska were using .05%                     
sulfur fuel, drilling rigs would be insignificant sources of                   
SO2, thus not requiring stringent pollutant regulations.                       
                                                                               
Mr. Ewing pointed out that Alaska's models are the best in                     
the world.  They have a standard assumption used in law and                    
which is used throughout the country.  He concluded, DEC                       
would like to do ambient air quality monitoring in the                         
future to assess air quality conditions of trends on the                       
North Slope and elsewhere in the State.  That would cost                       
money which the Department does not have.  At present time,                    
the State's best tools are the models.                                         
                                                                               
Mr. Ewing concluded that the Department strongly opposes SB
299.  He stated that it is a major threat to the air quality                   
of Alaska.  It would put our citizens and our environment at                   
risk.                                                                          
                                                                               
(Tape Change HFC 98- 94, Side 2).                                              
                                                                               
Co-Chair Therriault asked if the proposed DEC regulations                      
would differentiate between mobile and non-mobile sources.                     
Mr. Ewing replied that the proposed regulations were focused                   
on drilling rigs with intent to provide flexibility which                      
the drilling industry needs to continue operation.                             
Following discussion between Mr. Ewing and Co-Chair                            
Therriault regarding regulations in other states, Mr. Ewing                    
pointed out that engines and drilling rigs in Alaska emit a                    
lot more pollution because they are using non-sulfur fuel.                     
The bill would remove the Department's authority to regulate                   
that concern.                                                                  
                                                                               
Co-Chair Therriault questioned the reference to the "dark                      
cloud" hanging over Prudoe Bay.  Mr. Ewing commented that he                   
had quoted a letter written by the North Slope Borough                         
Mayor.  There is no current monitoring being done on the                       
North Slope Borough.  Representative Mulder inquired why                       
there was no testing currently being done there.  Mr. Ewing                    
explained that in areas that are meeting the standard,                         
regulations are approached so as to avoid violation.  The                      
program is designed to minimize the amount of pollution                        
going into the area, and not to avoid the standards.                           
Representative Mulder asked if industry had been trying to                     
work with the Department for the past two years.  Mr. Ewing                    
replied that the Department has been attempting to work with                   
the industry for the past three years to resolve this issue.                   
Representative Mulder asked for documentation verifying                        
correspondence between the industry and DEC.                                   
                                                                               
Representative Grussendorf questioned if the Department had                    
received a letter from BP, notifying the drilling                              
contractors of their opposition to resolve this issue                          
through legislative action.  Mr. Ewing responded that DEC                      
had received that letter.  Representative Grussendorf                          
pointed out that "industry" as referenced in the proposed                      
legislation, is specifically the drilling contractors.  He                     
noted that they are technically the subcontractors of the                      
oil industry.                                                                  
                                                                               
In response to Representative Martin, Mr. Ewing replied that                   
the letter received from the North Slope Mayor's office was                    
dated May, 1997, a memo written to ARCO.  He reiterated that                   
DEC actions are aimed at minimizing the effect. The                            
Department uses models to predict what is occurring.                           
                                                                               
Mr. Ewing noted that State laws are consistent with federal                    
laws.  If the bill were passed, the Department's ability to                    
regulate a number of other sources would be removed; the                       
State would be subject to a federal government take-over of                    
the program.  He emphasized that the feds would be inclined                    
to do that, since it is a moneymaking endeavor.  He                            
emphasized that their fees would be higher.                                    
                                                                               
Representative Kelly asked if the bill were adopted, would                     
the State be out of compliance with federal requirements.                      
Mr. Ewing stressed that we would absolutely be out of                          
compliance.                                                                    
                                                                               
Representative J. Davies asked how big of a problem would it                   
be for drilling rigs to use low sulfur fuel in Alaska.  Mr.                    
Ewing explained that low sulfur is not generally available                     
in Alaska because of the waiver for mobile source                              
automobiles.  He stated that .15% would be adequate to meet                    
DEC standards.  In order to provide that fuel, BP and ARCO                     
would have to upgrade their topping plants, a cost they                        
claim would be between a $500 thousand to $1 million-dollar                    
expenditure.  They are willing to do that.  For new engines,                   
it is mandatory that provisions be incorporated to address                     
that concern.  The issue is that BACT needs to be applied to                   
older engines.  The Department has proposed that there be a                    
check every five years verifying that the older engines do                     
comply.                                                                        
                                                                               
Representative Foster requested a list of fines and                            
violations which had been issued by the Department regarding                   
this concern.  Mr. Ewing explained that for both Fairbanks                     
and Anchorage, there has been a very specific plan worked                      
out between the State and local governments, approved by the                   
feds.  He added, if a city is not in compliance, the federal                   
government then withholds their transportation funds.                          
                                                                               
Representative Grussendorf questioned why BP and ARCO were                     
not supporting the drilling contractors in the proposed                        
legislation.  Mr. Ewing responded that the oil companies                       
have witnessed a practical example of how this is                              
accomplished through the "Wart hog" project; also, industry                    
knows that if the federal government runs the program, it                      
will cost three to four times the amount it does now.  EPA's                   
regulations and fees are much higher than those issued by                      
the State.                                                                     
                                                                               
Co-Chair Therriault asked the steps which the Department                       
would take when a group is out of compliance with air                          
quality standards.  Mr. Ewing responded that if the                            
legislation were passed, the most likely scenario would be                     
the federal government taking over the administration of the                   
program.  He emphasized that law is established to avoid                       
coming to a non-attainment situation.  Co-Chair Therriault                     
questioned if there would be information indicating that the                   
State was out of compliance before EPA stepped in.  Mr.                        
Ewing explained that the base decisions for EPA to delegate                    
or to leave a delegated program in place, is not the quality                   
of the air, but the quality of the legal structure in place                    
to maintain the quality of the air.                                            
                                                                               
JOHN SHIVELY, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES,                   
reminded Committee members that Al Ewing previously ran EPA                    
for the federal government.  He added that the Knowles                         
Administration has been very active in increasing oil                          
production in the State.  He emphasized that the proposed                      
legislation sends the wrong message to the U.S. Department                     
of Interior and the Alaskan people.                                            
                                                                               
Commissioner Shively pointed out that the legislation would                    
completely exempt one part of the industry from permitting                     
and regulation.  He recommended that there are other options                   
to be considered which could resolve this issue.  In                           
response to concerns noted by Co-Chair Therriault,                             
Commissioner Shively pointed out that there is increased                       
drilling activity on the North Slope.                                          
                                                                               
(Tape Change HFC 98- 95, Side 1).                                              
                                                                               
Representative J. Davies suggested that it would be less                       
expensive and more advantageous for industry to address                        
these concerns up front.                                                       
                                                                               
Representative Kelly inquired about the on site data used to                   
provide the modeling.  Mr. Ewing explained that the modeling                   
checks the emissions coming from a vehicle which at that                       
time, predicts the type of mixing occurring in the air.                        
Based on that information, a conclusion is drawn.                              
                                                                               
Representative Mulder asked how many rigs were operating on                    
the North Slope.                                                               
                                                                               
SENATOR LOREN LEMAN replied, there are 18 drilling rigs in                     
operation at this time.  Commissioner Shively pointed out                      
that the bill does not only address concerns in the North                      
Slope Borough.  He noted that the legislation addressed                        
concerns in the entire State and that air quality problems                     
exist in Cook Inlet, also.  The State is looking toward                        
expansion of the industry in that area.                                        
                                                                               
Representative Mulder voiced resentment that DEC has not                       
been willing to work with the industry or the driller                          
contractors to create a workable scenario to address this                      
concern in Alaska.                                                             
                                                                               
Senator Leman countered comments made by Commissioner                          
Shively.  He stressed that it was not his intent to send the                   
wrong message to the Alaskan people.  He pointed out that                      
thirty other states define non-mobile engines in the way                       
proposed in this legislation.  He admitted that he shared                      
concern with air quality, although, pointed out that there                     
is no hard evidence on ambient air quality.  Senator Leman                     
added that it has been five years since he had worked on the                   
Clean Air Act amendments and that enough time had expired in                   
addressing that concern.                                                       
                                                                               
Representative Kohring noted for the record his concern with                   
a potential conflict of interest in Mr. Ewing's relationship                   
with EPA.  Mr. Ewing replied that he was the Director of EPA                   
in Alaska for twelve years, prior to taking the position at                    
DEC.  He noted that he is on "loan" to the Department which                    
does not tie him to EPA policy.  He stressed that he now                       
works for the State of Alaska, Department of Environmental                     
Conservation.                                                                  
                                                                               
KIRSTIN SHELTON, ALASKA CONSERVATION VOICE (ACV), JUNEAU,                      
stated that ACV opposes SB 299 and views the legislation as                    
one of the Sessions most threatening to the health of the                      
environment.  She commented that the bill, in prohibiting                      
DEC from regulating oil drilling, compromises Alaska's                         
citizens right to breathe clean air.  Ms. Shelton pointed                      
out that DEC has specified that unregulated drilling could                     
emit pollutants in quantities that exceed safe levels.  Air                    
pollution standards are developed to prevent the pollutants                    
from adversely affecting public health.  She urged the                         
Committee's opposition to the legislation.                                     
                                                                               
Co-Chair Therriault spoke to the soil remediation plants in                    
his area and the odors resulting from those plants.  He                        
asked if passage of the bill could eliminate that.                             
                                                                               
JOHN STONE, SECTION CHIEF, AIR QUALITY MAINTENANCE,                            
DEPARTMENT OF ENVIRONMENTAL CONSERVATION, stated that the                      
bill would be interpreted to apply to the exact operation as                   
referenced.  The bill also includes the phrase "associated                     
fuel burning equipment".  The soil remediation unit is an                      
example of something that burns fuel.  The bill would not                      
eliminate the odor prohibition.  It would need to be                           
enforced outside the permit program.                                           
                                                                               
BRIAN PETTY, (TESTIFIED VIA TELECONFERENCE), SENIOR VICE                       
PRESIDENT, INTERNATIONAL ASSOCIATION OF DRILLING CONTRACTORS                   
(IADC), WASHINGTON D.C., spoke to concerns with current                        
regulations.  He commented that IADC's membership includes                     
major and minor producers and services of the drilling                         
contracting community.  He stressed that IADC is concerned                     
with the issues currently being addressed by Alaska as it                      
appears that DEC is assuming a direction radically different                   
from the the rest of the world.                                                
                                                                               
Mr. Petty pointed out that IADC has been involved with EPA                     
over the years.  In working with that agency, the industry                     
is trying to fashion an appropriate definition under law for                   
non-road engines and mobile sources.  Over the last three                      
years, IADC has been involved with EPA processors in                           
Michigan and North Carolina to refine and elaborate the                        
definitions of concern.  Mr. Petty commented that Colorado                     
excludes drilling rigs from the permitting requirements.  He                   
believed that DEC was not operating in good faith.  IADC has                   
been attempting to collaborate with DEC since 1986 in order                    
to establish a reasonable way to work these concerns out.                      
In April, 1997, questions were presented by the industry;                      
IADC then waited eight months for those decisions to be                        
released.                                                                      
                                                                               
Mr. Petty noted frustration in dealing with DEC.  IADC has                     
now carefully crafted, with the help of Senator Leman, SB
299, which would track federal definitions in order to help                    
DEC make the required distinctions.  He reiterated that if                     
this bill were not passed, DEC would be establishing a                         
course different than exists in the rest of the country. He                    
believed that could threaten the Alaskan livelihood.  IADC                     
International is paying close attention to the process                         
occurring in Alaska at this time.                                              
                                                                               
Representative Mulder asked what the result would be if                        
Alaskan contractors were placed under the proposed regime.                     
Mr. Petty explained, that result has already been                              
demonstrated.  There have been situations in which rigs have                   
had to discontinue work which creates severe problems with                     
Alaska's short drilling season.                                                
                                                                               
Co-Chair Therriault questioned if this was a legitimate                        
concern since it is the producers that obtain the permit,                      
not the contractor.  Mr. Petty advised that the producers                      
support what IADC is proposing in this legislation.  The                       
intent of the legislation is to avoid conflict with DEC.                       
                                                                               
KYLE PARKER, ALASKA CHAPTER, INTERNATIONAL ASSOCIATION OF                      
DRILLING CONTRACTORS (IADC), JUNEAU, addressed a couple of                     
points of concern presented before the Committee.  He                          
pointed out that DEC has not worked with IADC in following                     
through on commitments made.  He added, the issue of                           
"primacy" looses in the State if the legislation is adopted,                   
and recommended that we look to what other states have                         
legislatively done to address the concern.  At present time,                   
there are 12 rigs operating in Alaska, while in Texas 373                      
rigs are in operation.                                                         
                                                                               
RUSS DOUGLAS, ALASKA CHAPTER, INTERNATIONAL ASSOCIATION OF                     
DRILLING CONTRACTORS (IADC), JUNEAU, commented that he had                     
checked official records from 1985 through 1995 and that                       
the maximum time of well test flaring was approximately 20                     
days.                                                                          
                                                                               
In response to Representative Grussendorf's query regarding                    
the sulfur content of the fuel used, Mr. Parker stated that                    
there had been suggestion that DEC provide regulations                         
stating that all industry burn low sulfur fuel.  Industry                      
has contested that effort.  He interjected that it had been                    
proven that the benefits gained by reducing the incremental                    
amount of sulfur to that level would not measure up in cost                    
terms.  Mr. Parker agreed that there is a sulfur content                       
exemption in place in Alaska.                                                  
                                                                               
Ms. Kreitzer pointed out that the bill adopts the federal                      
definition of a "stationary" source.  She clarified for the                    
record that the public has been allowed to testify in all                      
Committees in which the bill has been heard.                                   
                                                                               
Representative Grussendorf noted that the fiscal note does                     
not indicate the entirety of the bill.                                         
                                                                               
Representative J. Davies discussed Amendment #1.  [Copy on                     
File].  The amendment would delete two subsections on Page                     
2.  Ms. Kreitzer responded that the bill had been crafted to                   
follow the federal model as closely as possible.  She                          
commented that the well test flare issue is minimal and                        
should be considered an insignificant source.                                  
                                                                               
Representative J. Davies MOVED to adopt Amendment #1.                          
Representative Mulder OBJECTED.  Representative J. Davies                      
stated that the first section of the amendment would deal                      
with non-road engines and fuel burning equipment.  An                          
unintended consequence of the legislation is that it would                     
bring in the possibility of asphalt plants and soil                            
remediation circumstances.  He stressed that the issue of                      
the well test flares was a small piece of the air pollutant                    
situation.                                                                     
                                                                               
In response to a question by Representative Mulder, Mr.                        
Douglas explained that the term "ambient quality analysis"                     
is usually modeled and input would be defined as "potential                    
to omit".  It is modeled as if it were operating at full                       
tilt all the time.  If that situation occurs, the well test                    
flare would then have large potential.  Representative                         
Mulder asked if this were just a model, not an actual test.                    
Mr. Stone replied that the permit applicant provides DEC                       
with the rate at which they intent to operate.  The                            
applicant is not forced to use a particular application and                    
that they are not the drilling contractors.  Mr. Stone                         
added, a permit applicant generally would try to receive                       
authorization for as much of the operation that they need to                   
do under the Clean Air Act.                                                    
                                                                               
Representative J. Davies reiterated that the reason for                        
removing this section would include potential pollution into                   
the air as part of the ambient air quality analysis.  He                       
emphasized that running to the maximum will cause pollution,                   
which exceeds hazardous standards.                                             
                                                                               
Representative Kelly asked what the ambient air quality                        
analysis was used for.  Mr. Stone stated that it was used by                   
the permit applicant in the Department to check to see if                      
the amount of pollution in an area complies with the clean                     
air standards.   Each air quality standard is different.                       
                                                                               
(Tape Change HFC 98- 95, Side 2).                                              
                                                                               
Representative J. Davies stressed that a standard threshold                    
must be established with standards at the minimum health                       
standard. Ms. Kreitzer reiterated that well testers are                        
treated this way in four other states with one specific                        
exemption.  Representative Kelly questioned if EPA would not                   
allow using emissions as part of an ambient quality                            
analysis.  Mr. Stone replied that there is no provision in                     
the Clean Air Act, which allows exempt pollution from any                      
source.  There is flexibility within the act for a state to                    
decide how it wants to regulate the various sources of air                     
pollution in order to meet the Clean Air Act standards.  Mr.                   
Parker pointed out that in the Committee's packet, there is                    
a letter summarizing how other states have addressed the                       
issue.  [Copy on File].                                                        
                                                                               
Mr. Parker pointed out that California recently has                            
experienced a period in which they worked with industry                        
during a three-year course, to develop a drilling rig                          
regulation program.  They have addressed serious air quality                   
problems in that state and have looked at all sources of                       
emissions including drilling rigs.  EPA issued a final rule                    
acknowledging that the program developed by California is                      
appropriate.  EPA then stated that if other states determine                   
that they have emission problems, those states could address                   
these concerns as long as they file the same framework                         
established by California.  The legislation would provide                      
DEC, if they determine that there is an air quality problem,                   
to develop an appropriate framework.                                           
                                                                               
Representative J. Davies asked what framework would be left                    
to DEC if they could not regulate the drillers.  Mr. Parker                    
reiterated that California had created procedures, which the                   
proposed legislation would not eliminate.  Representative J.                   
Davies questioned if California had used a regular air                         
quality analysis.  Mr. Parker replied that the legislation                     
was intended to prevent DEC from regulating mobile source as                   
though they were stationary sources.  It would not prevent                     
them from regulating it if there were a problem.                               
                                                                               
Representative J. Davies pointed out that the California                       
approach used a low sulfur fuel, a proposal put forward by                     
DEC, which was rejected by industry in Alaska.  He                             
emphasized that now they want to be totally exempt.                            
                                                                               
A roll call vote was taken on the motion to adopt Amendment                    
                                                                               
IN FAVOR:  Grussendorf, J. Davies                                              
OPPOSED: Foster, Kelly, Kohring, Martin, Mulder,                               
Therriault                                                                     
                                                                               
Representatives Moses, G. Davis and Hanley were not present                    
for the vote.                                                                  
                                                                               
The MOTION FAILED (2-6).                                                       
                                                                               
Representative Mulder MOVED to report SB 299 out of                            
Committee with individual recommendations and with the                         
accompanying fiscal note.  Representative J. Davies                            
OBJECTED.                                                                      
                                                                               
A roll call vote was taken on the motion.                                      
                                                                               
IN FAVOR: Kelly, Kohring, Martin, Mulder, Foster,                              
Therriault                                                                     
OPPOSED:  Moses, Hanley                                                        
                                                                               
Representatives Moses, G. Davis and Hanley were not present                    
for the vote.                                                                  
                                                                               
The MOTION PASSED (6-2).                                                       
                                                                               
SB 299 was reported out of Committee with individual                           
recommendations and with a fiscal note by the Senate Finance                   
Committee dated 4/2/98.                                                        
HB272                                                                          
HOUSE BILL NO. 272                                                             
                                                                               
"An Act to permit a court to order a defendant who                             
receives a sentence of imprisonment for a misdemeanor                          
to serve the sentence by electronic monitoring; and                            
relating to the crime of unlawful evasion."                                    
                                                                               
REPRESENTATIVE JOE GREEN testified that HB 272 would                           
establish the parameters for an electronic monitoring                          
program in Alaska.                                                             
                                                                               
He noted that electronic monitoring (EM) is a system where                     
around-the-clock surveillance is provided for certain                          
convicted offenders as an alternative to incarceration.                        
The transmitter emits a signal to a field-monitoring                           
device, which receives and records various types of                            
information about the offender, from location to monitoring                    
alcohol consumption, depending on the degree of                                
sophistication.                                                                
                                                                               
He stated that as the number of criminal convictions in                        
Alaska continue to rise, the State is faced with only three                    
alternatives:                                                                  
                                                                               
? Building more prisons to incarcerate offenders;                              
? Exacerbate already overcrowded prisons in                                    
violation of the Cleary decree;                                                
? Allow more offenders to avoid incarceration.                                 
                                                                               
Representative Green pointed out that current estimates for                    
new prison construction has exceeded $100 thousand dollars                     
per bed, making construction of new prisons an oppressively                    
expensive proposition.  At this time, the public is                            
requesting tougher treatment of criminals.                                     
                                                                               
Representative Green suggested that EM is an alternative to                    
that dilemma.  It is used widely throughout the U.S.,                          
Canada and Europe.  Through an EM program, judges can                          
sentence certain, non-violent offenders to house arrest, or                    
other restrictive sanctions which leaves more room in our                      
correction facilities for the violent criminals.  HB 272                       
does not require that judges sentence offenders to wear                        
electronic monitoring equipment; it simply grants authority                    
to the Judiciary Branch to consider EM in sentencing.                          
                                                                               
Co-Chair Therriault inquired about discussions with                            
Department of Corrections regarding the fiscal implication.                    
Representative Green pointed out that the new fiscal note                      
had been significantly reduced.  The trial base would be a                     
half-year rather than a full fiscal year.  He assumed that                     
if 50 beds were relieved with passage of the bill, costs                       
would be freed up.  He reiterated the probable savings                         
given passage of the legislation.                                              
                                                                               
SAM TRIVETTE, CHIEF PROBATION OFFICIER, SOUTHEAST REGION                       
PROBATION, DEPARTMENT OF CORRECTIONS, spoke to the fiscal                      
note.  With the number of new inmates steadily increasing,                     
even local jails are now being used.  Considering all these                    
options, the Department does not anticipate a fiscal                           
savings as jails continue to work over capacity.  Not until                    
the facilities operate below capacity, will there be a                         
change to the fiscal impact.  Co-Chair Therriault stated                       
that there must be some costs reduced when not paying for                      
the inmate's three meals per day cost.                                         
                                                                               
Mr. Trivette believed that the average daily food cost was                     
$3 dollars; not a significant portion of incarceration                         
costs.  Co-Chair Therriault requested further information                      
including an estimate indicating that information.                             
                                                                               
HB 272 was HELD in Committee for further consideration.                        
ADJOURNMENT                                                                    
                                                                               
The meeting adjourned at 4:55 P.M.                                             
                                                                               
                                                                               
H.F.C. 17 4/07/98                                                              

Document Name Date/Time Subjects