Legislature(2005 - 2006)FBX LIO Conf Rm

04/08/2005 09:00 AM Senate FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Scheduled But Not Heard
<Pending Referral>
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSSB 144(RES) Out of Committee
Moved HCR 2 Out of Committee
Heard & Held
Moved SB 103 Out of Committee
Heard & Held
Moved CSSB 155(FIN) Out of Committee
                     SENATE FINANCE COMMITTEE                                                                                 
                           April 8, 2005                                                                                      
                             9:01 a.m.                                                                                        
CALL TO ORDER                                                                                                               
Co-Chair Green convened the meeting at approximately 9:01 AM.                                                                   
Senator Lyda Green, Co-Chair                                                                                                    
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Con Bunde, Vice Chair                                                                                                   
Senator Bert Stedman                                                                                                            
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
Also Attending:  SENATOR  BEN STEVENS; REPRESENTATIVE RALPH SAMUELS;                                                          
MARY JACKSON,  staff  to Senator  Tom Wagoner;  JOHN KUTERBACH,  Air                                                            
Permits  Program Manager,  Division  of Air Quality,  Department  of                                                            
Environmental   Conservation;   KURT   FREDRIKSSON,   Commissioner,                                                             
Department  of Environmental  Conservation;  DAN  EASTON,  Director,                                                            
Division of  Water, Department of  Environmental Conservation;  EDDY                                                            
JEANS, Director,  School Finance Division,  Department of  Education                                                            
and  Early  Development;  DEAN  GUANELI,  Chief  Assistant  Attorney                                                            
General,  Legal Services  Section - Juneau,  Criminal Division,  and                                                            
Office of Special Prosecutions and Appeals, Department of Law;                                                                  
Attending  via  Teleconference:     From  an  offnet  location:  DAN                                                          
SEAMOUNT, Commissioner,  Alaska Oil and Gas Conservation Commission;                                                            
MIKE  POLLEN, President,  NTL  Alaska,  Inc.; STEVE  BORELL,  Alaska                                                            
Miners Association;  EARL HUBBARD, Vice President,  Trident Seafoods                                                            
Corporation;  From Fairbanks:  CAMERON LEONARD,  Department  of Law,                                                            
testified via  teleconference from  Fairbanks; From Ketchikan:  DICK                                                            
COOSE,  Concerned Alaskans  for  Resources and  Environment  (CARE);                                                            
From Anchorage: STAN JONES,  Legislative Affairs Coordinator, Prince                                                            
William Sound Regional  Citizens' Advisory Counsel; From Kenai: MIKE                                                            
MUNGER, Executive  Director, Cook Inlet Regional Citizens'  Advisory                                                            
SUMMARY INFORMATION                                                                                                         
HCR  2-IN-STATE NATURAL GAS NEEDS                                                                                               
The  Committee  heard  from  the  sponsor  and  the  resolution  was                                                            
reported from Committee.                                                                                                        
SB 144-EMISSION CONTROL PROGRAM PERMITS/REGS                                                                                    
The  Committee  heard  from  the  sponsor   and  the  Department  of                                                            
Environmental  Conservation. The bill  was reported from  Committee.                                                            
SB 103-OIL & GAS: REG. OF UNDERGROUND INJECTION                                                                                 
The  Committee  heard  from  the Alaska  Oil  and  Gas Conservation                                                             
Commission. The bill was reported from Committee.                                                                               
SB 110-POLLUTION DISCHARGE & WASTE TRMT/DISPOSAL                                                                                
The   Committee  heard   from   the  Department   of  Environmental                                                             
Conservation, the Department  of Law, advisory committees, and other                                                            
interested parties. The bill was held in Committee.                                                                             
SB 155-APPROP: SCHOOLS/UNIV/VIROLOGY LAB/MUSEUM                                                                                 
The  Committee  heard  from  the  sponsor   and  the  Department  of                                                            
Education  and  Early   Development.  A  committee  substitute   was                                                            
adopted, and  four amendments were  considered with two adopted  and                                                            
one amended and adopted. The bill was reported from Committee.                                                                  
SB  70-CRIMES INVOLVING CONTROLLED SUBSTANCES                                                                                   
The  Committee  heard  from  the  Department  of  Law.  A  committee                                                            
substitute was adopted and the bill was held in Committee.                                                                      
9:13:45 AM                                                                                                                    
     HOUSE CONCURRENT RESOLUTION NO. 2                                                                                          
     Urging  Governor Murkowski  to  take quick  action to  conduct,                                                            
     approve, or sanction  a study of in-state natural gas needs and                                                            
     take-off  points for intrastate use of natural  gas transported                                                            
     in a North Slope natural gas pipeline.                                                                                     
This  was the  first  hearing  for  this resolution  in  the  Senate                                                            
Finance Committee.                                                                                                              
REPRESENTATIVE  RALPH SAMUELS, sponsor  of the bill, testified  that                                                            
on February 9, 2005, the  federal Energy Regulatory Commission ruled                                                            
that before an open season  design or construction could begin on an                                                            
Alaska  natural gas  pipeline,  a study  of in-state  needs must  be                                                            
conducted by the State.  This resolution provides "encouragement and                                                            
support" to Governor Murkowski to undertake this effort.                                                                        
Co-Chair Green understood  this resolution received a hearing in the                                                            
Senator Resources Committee.                                                                                                    
Representative Samuels affirmed.                                                                                                
Co-Chair Green  asked if any unresolved  issues or questions  exist.                                                            
Representative  Samuels answered there were none.  He noted that all                                                            
members of the House of  Representatives signed on as co-sponsors of                                                            
this resolution.  Development of the  State's natural gas  resources                                                            
would benefit  all communities, regardless of their  location within                                                            
the State. Alaskan's would have access to natural gas.                                                                          
9:15:13 AM                                                                                                                    
Co-Chair  Green asked  if the sponsor  had considered  whether  this                                                            
resolution  should  be  distributed  to other  parties  or  interest                                                            
groups and whether doing so would provide any influence.                                                                        
Representative  Samuels  replied  that  none  were  identified.  The                                                            
resolution is  directed to the Murkowski Administration.  He offered                                                            
to forward  the resolution  to private companies  or other  interest                                                            
groups if the Co-Chair requested.                                                                                               
Co-Chair Green indicated  this would not be necessary. She has heard                                                            
significant support for this resolution.                                                                                        
9:16:20 AM                                                                                                                    
Co-Chair  Wilken offered  a  motion to  report the  resolution  from                                                            
Committee with  individual recommendations  and accompanying  fiscal                                                            
There was no  objection and HCR 2  MOVED from Committee with  a zero                                                            
fiscal note #1 from the Department of Natural Resources.                                                                        
9:16:44 AM                                                                                                                    
     CS FOR SENATE BILL NO. 144(RES)                                                                                            
     "An Act relating to regulations, definitions, and permits                                                                  
     under the emission control permit program; and providing for                                                               
     an effective date."                                                                                                        
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
MARY  JACKSON, staff  to Senator  Tom  Wagoner, testified  that  two                                                            
years prior, the "current  reform package" was passed at the request                                                            
of Governor Murkowski.  One portion of that package  was intended to                                                            
streamline the  air permit process. However, some  deficiencies were                                                            
discovered.  In  order  to comply  with  federal  regulations,  this                                                            
legislation provides  definitions identical to federal  definitions.                                                            
9:17:56 AM                                                                                                                    
Co-Chair  Green  understood  this  legislation   would  bring  State                                                            
statute into compliance  with federal regulations on air primacy and                                                            
"air permitting".                                                                                                               
Ms. Jackson affirmed.                                                                                                           
9:18:20 AM                                                                                                                    
JOHN  KUTERBACH,  Air  Permits  Program  Manager,  Division  of  Air                                                            
Quality, Department of  Environmental Conservation, testified he was                                                            
available  to answer  questions on  this technical  bill. He  stated                                                            
this legislation adjusts  the definitions adopted two years prior to                                                            
comply with federal regulations.                                                                                                
9:18:57 AM                                                                                                                    
Co-Chair Green  asked the consequence  if this legislation  does not                                                            
pass into law.                                                                                                                  
Mr. Kuterbach replied that  the Department would be unable to obtain                                                            
approval of  the permitting process  from the federal Environmental                                                             
Protection  Agency  (EPA). The  "critical  deficiency"  is that  the                                                            
current State  definitions identify  "who needs an operating  permit                                                            
more narrowly  than the  federal regulations  require." The  federal                                                            
regulations  require  that  multi-stationary  sources  under  single                                                            
ownership  be combined in  determining whether  a permit is  needed.                                                            
Alaska laws consider each source individually.                                                                                  
9:19:52 AM                                                                                                                    
Co-Chair  Green  noted  that  with the  exception  of  a  definition                                                            
change, this  legislation amends few  words of the current  statute.                                                            
She asked for  an explanation of the  repeal provision contained  in                                                            
Section 8.                                                                                                                      
Mr.  Kuterbach   explained   the  "repeal   is  the  definition   of                                                            
modification."  Modification  is used "very  precisely" in  "several                                                            
federal  programs that we're  required to  implement." These  differ                                                            
slightly  for each  program.  The initial  intent was  to adopt  the                                                            
correct definition  in statute,  which was  possible for one  of the                                                            
federal  program,  but not  the others.  This  legislation  proposes                                                            
repealing the  definition from statute; another section  of the bill                                                            
would  require  the Department  to  adopt  language  in regulations                                                             
consistent with the federal program implemented.                                                                                
9:20:59 AM                                                                                                                    
Co-Chair  Green noted the  July 1 2005 effective  date and  asked if                                                            
the Department  would  be prepared  to implement  the provisions  of                                                            
this legislation by that time.                                                                                                  
Mr. Kuterbach assured this date was adequate.                                                                                   
9:21:18 AM                                                                                                                    
Ms.  Jackson stated  that  initially  the Department  had  requested                                                            
authority to adopt  definitions. Upon discussion,  it was determined                                                            
that establishing  the definitions in statute was  more appropriate.                                                            
9:21:40 AM                                                                                                                    
Senator  Olson  asked  if  any  party  in  the  private  sector  has                                                            
commented on this legislation.                                                                                                  
Ms. Jackson  informed that  the Department  sent letters to  parties                                                            
that would be  affected by this legislation, particularly  those who                                                            
hold mining  permits.  No responses  were received  and no  concerns                                                            
were  voiced.  She  personally  contacted  the Alaska  Oil  and  Gas                                                            
Association  and the  Alaska Mining  Association,  and was told  the                                                            
organizations had no concerns.                                                                                                  
Co-Chair Green  stated that the mining association  has a history of                                                            
providing input on legislation affecting its membership.                                                                        
Senator  Olson  clarified  the Alaska  Mining  Association  has  not                                                            
voiced any objection to this legislation.                                                                                       
Ms. Jackson affirmed.                                                                                                           
9:22:48 AM                                                                                                                    
Co-Chair Wilken  offered a motion to report the bill  from Committee                                                            
with individual recommendations and accompanying fiscal note.                                                                   
Co-Chair  Wilken objected  to the  motion  to pose a  question.   He                                                            
asked if Mr. Kuterbach  is responsible for all air permits issued by                                                            
the State.                                                                                                                      
Mr. Kuterbach answered he is.                                                                                                   
Co-Chair Wilken asked if  the witness is familiar with the situation                                                            
involving Husky Lumber in Kenai.                                                                                                
Mr. Kuterbach was involved in resolving the issue.                                                                              
Co-Chair Wilken asked if  he was satisfied with the analysis of that                                                            
issue and the resolution reached.                                                                                               
Mr. Kuterbach  was satisfied the issue  has been resolved,  although                                                            
was "sorry that  it turned out the way it did in the  initial stages                                                            
and that we didn't catch it earlier."                                                                                           
Co-Chair Wilken  appreciated the involvement of the  witness and the                                                            
commissioner in resolving the issue.                                                                                            
Co-Chair Wilken removed his objection.                                                                                          
9:24:01 AM                                                                                                                    
Without objection SB 144  MOVED from Committee with zero fiscal note                                                            
#1 from the Department of Environmental Conservation.                                                                           
9:24:30 AM                                                                                                                    
[Pause on the record.]                                                                                                          
9:24:56 AM                                                                                                                    
     SENATE BILL NO. 103                                                                                                        
     "An Act relating to regulation of underground injection under                                                              
     the federal Safe Drinking Water Act; and providing for an                                                                  
     effective date."                                                                                                           
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
DAN  SEAMOUNT,  Commissioner,   Alaska  Oil  and  Gas  Conservation                                                             
Commission,  testified via  teleconference  from an offnet  location                                                            
and referenced  a handout  titled, "Alaska  UIC Issues, What  we do.                                                            
What are the challenges?  What are the options?" [Copy  on file.] He                                                            
stated this outlines the bill.                                                                                                  
Co-Chair Green requested the witness overview the information.                                                                  
9:26:39 AM                                                                                                                    
Mr. Seamount  stated the second page  of the handout summarizes  the                                                            
issue. This page reads as follows.                                                                                              
     AOGCC - EPA UIC Situation                                                                                                  
        · Introduction                                                                                                          
        · UIC and other USDW Responsibilities                                                                                   
        · Senate Bill 103                                                                                                       
        · The problem to solve                                                                                                  
             o UIC Well Classes                                                                                                 
             o Alaska UIC situation - redundancy, confusion, time,                                                              
        · Options/Solutions                                                                                                     
Mr.  Seamount  testified  this  bill  would  allow  the  State,  and                                                            
specifically   the  Alaska  Oil  and  Gas  Conservation   Commission                                                            
(AOGCC), to obtain partial  primacy for oversight of Class 1 type of                                                            
disposal  wells. There are  only seven in  the State. Currently  the                                                            
AOGCC has oversight of  the approximately 1,155 Class 2 wells, which                                                            
are constructed almost  identically to Class 1 wells and are located                                                            
in  the same  areas. The  agency  has inspectors  on  site and  this                                                            
legislation would not cost the State additional funds.                                                                          
Mr.  Seamount  remarked  that  the  current  "redundant"   oversight                                                            
results in  confusion and requires  time and money of both  industry                                                            
and government.  With the  passage of this  legislation, one  agency                                                            
would provide  oversight  and issues  decisions as  to the types  of                                                            
fluids placed in these wells.                                                                                                   
Mr. Seamount  informed that  a task force  has been formed  with the                                                            
federal  Environmental   Protection  Agency  (EPA)  to  address  the                                                            
transfer of this  program. The EPA is "generally on  board with this                                                            
Co-Chair Wilken  directed attention  to the photograph on  the third                                                            
page of the  handout showing caribou  grazing alongside the  Alyeska                                                            
Pipeline.  This picture  counters  the argument  about "caribou  and                                                            
pipelines not getting along."                                                                                                   
Senator Bunde  told of 16 hunting  trips he has made to Prudhoe  Bay                                                            
and reported  that on each  visit he has  seen caribou "standing  in                                                            
the shade" of the pipeline.                                                                                                     
Senator Olson  asked the consequences if this bill  fails to pass in                                                            
to law.                                                                                                                         
9:30:43 AM                                                                                                                    
Mr.  Seamount replied  that  without  enabling statute,  the  agency                                                            
could not assume operation  of the program. The legislation would be                                                            
reintroduced the following legislative session.                                                                                 
Senator Olson asked how this would impact industry operations.                                                                  
9:31:13 AM                                                                                                                    
Mr. Seamount responded  that generally EPA approval is significantly                                                            
slower than  AGOCC approvals. The  confusion about allowable  fluids                                                            
for  the different  well  classes  would  continue. As  an  example,                                                            
fluids could not be deposited  into a Class 2 well unless "they come                                                            
from down  the haul".  Situations exist  in which  a "cement  job is                                                            
being run  on a well"  and the  deposit of some  materials could  be                                                            
made in a Class 2 well  but other materials must be deposited into a                                                            
Class 1  well. Exactly  the same  fluids have  to go down  different                                                            
wells and often these wells are located near each other.                                                                        
9:32:25 AM                                                                                                                    
Senator Olson asked the industry opinion of this bill.                                                                          
9:32:34 AM                                                                                                                    
Mr. Seamount  replied that  the Alaska Oil  and Gas Association  has                                                            
testified  in  support  of  this bill  at  hearings  held  in  other                                                            
9:32:47 AM                                                                                                                    
Co-Chair Green  asked how the original "misclassification"  of these                                                            
wells came about.                                                                                                               
9:33:01 AM                                                                                                                    
Mr. Seamount  recalled that  the passage of  the federal Safe  Water                                                            
Drinking  Act in  approximately  1976  established  five classes  of                                                            
wells. He noted that details  of these classifications are contained                                                            
in  the   aforementioned   handout.  The   federal  government   had                                                            
determined  that class  2 wells  used in  the oil  and gas  industry                                                            
could be managed  by the State; the  federal government must  manage                                                            
the remainder of well classifications.                                                                                          
Co-Chair Green asked about any opposition to this bill.                                                                         
Mr. Seamount had heard of no opposition.                                                                                        
Co-Chair Green noted that no one had signed up to testify.                                                                      
9:34:26 AM                                                                                                                    
Co-Chair  Green noted  the letter  of intent adopted  by the  Senate                                                            
Resources Committee.                                                                                                            
Mr. Seamount had no comment on the letter of intent.                                                                            
Co-Chair Green  highlight that the  letter of intent relates  to the                                                            
oversight of  other class wells in  the future by appropriate  state                                                            
9:35:38 AM                                                                                                                    
Co-Chair Wilken  offered a motion to report the bill  from Committee                                                            
with individual  recommendations, accompanying letter  of intent and                                                            
accompanying fiscal notes.                                                                                                      
There was  no objection  and SB  103 MOVED from  Committee with  the                                                            
Senate Resources  Committee  letter of intent  dated March  7, 2005,                                                            
fiscal note  #1 for $25,000 from the  Department of Administration,                                                             
and zero fiscal  note #2 from the  Department of Natural  Resources.                                                            
9:36:33 AM                                                                                                                    
[Pause on record.]                                                                                                              
9:37:26 AM                                                                                                                    
     SENATE BILL NO. 110                                                                                                        
     "An Act relating to regulation of the discharge of pollutants                                                              
     under the National Pollutant Discharge Elimination System; and                                                             
     providing for an effective date."                                                                                          
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
KURT FREDRIKSSON, Commissioner, Department of Environmental                                                                     
Conservation, read testimony into the record as follows.                                                                        
     Mr.  Chairman,  members  of  the Committee,   I am  pleased  to                                                            
     testify   today  in  support  of  Senate  Bill  110,   National                                                            
     Pollutant  Discharge Elimination System (NPDES)  Assumption. My                                                            
     testimony  will focus on why  Governor Murkowski and  I believe                                                            
     passage  of SB 110 will strengthen  the ability of Alaskans  to                                                            
     protect  the  State's   water  resources  and  build  a  strong                                                            
     economy.  With   me today   is  Dan  Easton,  Director  of  the                                                            
     Department's Division  of Water to provide you with the details                                                            
     of how this bill was developed.                                                                                            
     The  federal Clean Water  Act requires  that all discharges  to                                                            
     surface waters  must be permitted under the National  Pollutant                                                            
     Discharge  Elimination System (NPDES) permit  program to ensure                                                            
     water   quality   protection.   Community    sewage   treatment                                                            
     facilities,  construction  of storm water  drains on more  than                                                            
     one acre, seafood  processors, log transfer facilities, ballast                                                            
     water  discharge  facilities, mining  operations,  oil and  gas                                                            
     operations, and fish  hatcheries all must have NPDES permits to                                                            
     operate.  There  are  currently   over  2300  regulated  permit                                                            
     holders in Alaska under the NPDES permit program.                                                                          
     The federal  Clean Water Act  is founded on the principle  that                                                            
     the  rights of  states  to manage  water quality  within  their                                                            
     borders  should be protected.  The federal  law is designed  to                                                            
     accomplish  uniform  environmental   quality  goals  nationwide                                                            
     using  pollution  controls  tailored  to  each  state's  unique                                                            
     circumstances.  The Clean Water  Act includes provisions  for a                                                            
     state  to  assume   primacy  from  the  federal  Environmental                                                             
     Protection   Agency  (EPA)  for   issuing  NPDES  permits   for                                                            
     discharges to surface  waters within state's borders. In states                                                            
      that do not assume primacy, EPA runs the NPDES program.                                                                   
     The  mission  and duties  of the  Department  of Environmental                                                             
     Conservation to adopt  and enforce standards for the control of                                                            
     water  pollution  is  clearly spelled  out  in Alaska  law  (AS                                                            
     44.46.020).  However, like four other states,  Alaska has never                                                            
     pursued  the opportunity  provided by  the federal Clean  Water                                                            
     Act to shape  the NPDES water pollution control  permit program                                                            
     to fit  our state's  unique circumstances.  SB 110 would  allow                                                            
     DEC  to  develop  a  comprehensive  water  quality   protection                                                            
     program   where  all  program   components,  from  legislative                                                             
     budgeting  and  oversight  to fieldwork  and  enforcement,  are                                                            
     conducted   here  in  the  state,  where  Alaskans   can  shape                                                            
     solutions to fit Alaska's challenges.                                                                                      
     Without  primacy, the federal  Environmental Protection  Agency                                                            
     (EPA)  is  the  water  authority   in  Alaska.  EPA  makes  the                                                            
     wastewater  permitting  rules  in Alaska.  EPA  decides  what's                                                            
     important  and  what's  not.  EPA  decides  the  permit  review                                                            
     timeframes.  EPA decides  what  goes into the  permits and  who                                                            
     gets  inspected.   EPA  decides  how  Alaska's   water  quality                                                            
     standards  will be  applied to  specific  discharges. EPA  sets                                                            
     Alaska's water quality priorities.                                                                                         
     As you  know, Governor  Murkowski has  an ambitious agenda  for                                                            
     the responsible development  of Alaska's natural resources. The                                                            
     Governor  has pledged  to improve permit  efficiency without  a                                                            
     rollback  of environmental protection. However,  as long as EPA                                                            
     runs the NPDES permit  program in Alaska, DEC simply cannot fix                                                            
     what   we  don't  control.  We   can't  establish  appropriate                                                             
     performance  measures  with the legislature  for timely  permit                                                            
     actions,  we  can't establish  the  state's annual  permit  and                                                            
     environmental  protection  priorities,  and  we  can't offer  a                                                            
     timely  appeal process  that allows conflicts  to be judged  by                                                            
     Alaskans in Alaska.                                                                                                        
     A  state run  NPDES  permit program  won't  be  free. When  EPA                                                            
     issues  permits  in  Alaska  the  costs  are borne  by  the  US                                                            
     taxpayer.  A  state permit  program  will shift  authority  and                                                            
     responsibility  to the  state, but it  will also shift  some of                                                            
     the costs to permit holders and the State.                                                                                 
     SB  110  is an  important  investment  in  the  stewardship  of                                                            
     Alaska's environment  and development of our natural resources.                                                            
     It provides  DEC with the human and fiscal resources  to reform                                                            
     the   NPDES  permit   program   to  better   align   regulatory                                                            
     requirements  with real Alaskan  conditions and the  real risks                                                            
     to  Alaska's water  quality.  A state  permit  program will  be                                                            
     based  on Alaska's  priorities - not  national "one-size-fits-                                                             
     all" priorities.  DEC's permit priorities, level  of effort and                                                            
     performance  measures  would be  subject to  annual review  and                                                            
     approval  by Alaskan's through  their elected officials  in the                                                            
     state Legislature.                                                                                                         
     Federal programs do  not adapt easily to Alaska. National goals                                                            
     do not always  address our greatest needs. A  state run program                                                            
     will place permit  decision makers closer to the Alaskan public                                                            
     and regulated permit  holders. Alaska's elected representatives                                                            
     have made clear our  commitment to environmental protection and                                                            
     our  responsibility  to develop  our resource  development,  we                                                            
     must accept  responsibility for  managing our water  resources.                                                            
     That means assuming primacy for the MPDES program.                                                                         
     NPDES primacy means:                                                                                                       
        · A faster, more effective program for protecting our water                                                             
        · Alaskan industries and communities working with Alaskan                                                               
          permitters on permits that reflect our priorities and                                                                 
          unique conditions - permits that make sense for Alaska.                                                               
        · Less emphasis on cumbersome process and more emphasis on                                                              
        · Less emphasis on one-size-fits-all permits and more                                                                   
          emphasis on specific risks to Alaska's environment.                                                                   
        · Permitting accountability - accountability to Alaska's                                                                
          elected officials and the public.                                                                                     
     It's time  to invest in the development  of Alaska's  resources                                                            
     by taking  responsibility for  protecting Alaska's environment                                                             
     from the  federal government. I respectfully  ask that you vote                                                            
     to pass SB 110.                                                                                                            
9:44:18 AM                                                                                                                    
Senator Bunde requested additional information regarding the fiscal                                                             
9:44:32 AM                                                                                                                    
DAN EASTON, Director, Division of Water, Department of                                                                          
Environmental Conservation, read testimony into the record as                                                                   
     Senate  Bill 110 is a result  of years of effort starting  with                                                            
     Senate Bill 326.                                                                                                           
     Senate  Bill 326 was enacted  in 2002 and effective  January 1,                                                            
     2003.  It directed DEC to evaluate  the potential benefits  and                                                            
     consequences  of  the  state  assuming primacy  for  the  NPDES                                                            
     program.  The Department  released its  report in January  2004                                                            
     recommending that the State seek program primacy.                                                                          
     Last year, the Legislature  passed House Bill 546 directing the                                                            
     State  to apply for partial NPDES  primacy just for  the timber                                                            
     sector.  The fiscal  note with  the bill  provided a  full-time                                                            
     position and a combination  of state and one-time federal grant                                                            
     funds for  the effort. As it turns out, DEC has  assumed a more                                                            
     prominent  role in permitting  timber  operations, but  we have                                                            
     been  notified by EPA  that the "partial  primacy" rules  won't                                                            
      allow us to pursue primacy just for the timber sector.                                                                    
     In November  2004, DEC formed the NPDES Primacy  Work Group, an                                                            
     advisory  workgroup tasked with  examining the concerns,  costs                                                            
     and benefits  of state primacy specifically from  the permittee                                                            
     The  work  group   included  members  from  each   major  NPDES                                                            
     permittee groups:                                                                                                          
     The Alaska Oil and Gas Association,                                                                                        
     The Alaska Forest Association,                                                                                             
     The Alaska Miners Association,                                                                                             
     The Associated General Contractors of Alaska,                                                                              
     The Pacific Seafood Processors Association,                                                                                
     The Alaska Water and Wastewater Management Association, and                                                                
     The Alaska Native Tribal Health Consortium.                                                                                
     Public  notice was provided and  the meetings were open  to the                                                            
     public.  Workgroup proceedings,  findings  and recommendations                                                             
     were captures  in a report completed  in January of  this year.                                                            
     In the end,  support for state assumption of  the NPDES program                                                            
     varied   between  permittee   sectors.   Certain  sectors   saw                                                            
     substantial  benefit   and strongly   supported  moving  ahead.                                                            
     Others  saw  less  benefit,  but  would  not  object  to  state                                                            
     primacy.  All sectors  agreed that certain  elements should  be                                                            
     incorporated into a state program.                                                                                         
     Senate  Bill 110 is the product  of the hard work of  our staff                                                            
     and many other Alaskans  all focused on the effort that started                                                            
     with Senate Bill 326  over two years ago. The bill reflects the                                                            
     recommendation  of the NPDES  work group that the State  pursue                                                            
     primacy.  It  also reflects  the  recommendations  of the  work                                                            
     group   as  to   specific   characteristics   that  should   be                                                            
     incorporated into the program design.                                                                                      
     I'd like  to conclude with a few notes on the  fiscal note… The                                                            
     fiscal impact of primacy  raises the two basic fiscal questions                                                            
     of: "How much?" and "Who pays?"                                                                                            
     Starting  with the question  of "How  much?"… The Department's                                                             
     budget  currently  includes  about $3.3  million  and 30  staff                                                            
     devoted  to activities that would  contribute to, and  would be                                                            
     considered a part  of, a state NPDES permitting program. (Those                                                            
     figures  include  the  resources  provided  last year  for  the                                                            
     timber primacy effort.)                                                                                                    
     The Senate Bill 326  report took a hard look at what additional                                                            
     resources  the state  would need to  operate an NPDES  program.                                                            
     Resource  requirements   were  estimated  using  EPA  "workload                                                            
     models" as well as  information from other state programs. This                                                            
     analysis   arrived  at  a  final   figure  for  total   program                                                            
     resources, including  the $3.3 million and 30 positions already                                                            
     devoted to NPDES work, of $4.8 million and 43 positions.                                                                   
     EPA includes  whether a State has devoted sufficient  resources                                                            
     to the  program as one consideration  in whether to  approve an                                                            
     application  for state  primacy. Preliminary  indications  from                                                            
     EPA are that the proposed budget is sufficient.                                                                            
     Bridging  the gap between current  resources ($3.3 billion  and                                                            
     30 positions)  and what is required to operate  a state program                                                            
     ($4.8  million and  43 positions)  will  require an  additional                                                            
     $1.5 million and 13  new positions. Those are the new resources                                                            
     included in the fiscal note.                                                                                               
     As for  the question of "Who  pays?"… The fiscal note  reflects                                                            
     the current  resource agency fee policy of charging  permittees                                                            
     for "direct  costs." This policy was established  in statute by                                                            
     House  Bill  361  in the  year  2000.  Permittees  already  pay                                                            
     substantial  fees for the state  portion of the shared  EPA/DEC                                                            
     program.  With primacy, our direct costs increase  and the fees                                                            
     paid  by permittees  will increase  on average  by a factor  of                                                            
     The  distribution of  funding sources  reflected in the  fiscal                                                            
     note  also reflects the  fact that the  State will not  receive                                                            
     any additional  federal grant  dollars with primacy.  We get as                                                            
      much federal funding now, as we would get with primacy.                                                                   
     The result  of adding the new resources provided  by the fiscal                                                            
     note  to the current  state program will  be a primacy  program                                                            
     that  is funded  roughly half  (44%) through  a combination  of                                                            
     permitting  fees  and  federal  grant  funds,  and  half  (56%)                                                            
     through general funds.                                                                                                     
     We have come  a long ways over the last two years.  The promise                                                            
     of State primacy is  great. We would welcome the opportunity to                                                            
     create  a  truly   all-Alaskan  water  permitting   program  as                                                            
     envisioned by Senate Bill 110.                                                                                             
9:51:20 AM                                                                                                                    
Senator Bunde thanked the Department for its efforts in support of                                                              
achieving State primacy.                                                                                                        
Senator Bunde noted that revenue is anticipated to begin in FY 08                                                               
and continue  to increase  through FY  11. He  asked if the  revenue                                                            
would continue  to increase  beyond  that date and  that the  permit                                                            
fees would provide adequate funding for the 13 new positions.                                                                   
9:52:07 AM                                                                                                                    
Mr. Easton predicted  that unless a statutory change  is made to the                                                            
resource agency  fee policy, the $300,000 shown as  program receipts                                                            
would be the  "steady" revenue amount  generated from this  program.                                                            
Senator Bunde  remarked that the policy  of the legislature  is that                                                            
license  and  permit  programs  be  self-supported.   The  companies                                                            
receiving  these   permits  should  make  a  "healthy   profit"  and                                                            
therefore general funds should not subsidize these efforts.                                                                     
9:53:21 AM                                                                                                                    
Senator  Hoffman  pointed  out  that  the $874,200   cost of  FY  06                                                            
reflected  in the Department  of Environmental  Conservation  fiscal                                                            
note, dated  4/21/05,  would fund  the program for  six months.  The                                                            
annual cost would increase to $1.5 million.                                                                                     
9:53:38 AM                                                                                                                    
Senator Bunde  agreed and noted personnel services  cost of $441,100                                                            
for FY 06.                                                                                                                      
9:54:06 AM                                                                                                                    
Senator  Stedman   commented  that  large  dollar  amounts   receive                                                            
attention.  He requested a  breakdown of the  total revenue  and the                                                            
"draw"  on  general  funds for  this  proposal  to  demonstrate  the                                                            
division of expenses between industry and the State.                                                                            
9:54:48 AM                                                                                                                    
Mr.  Easton stated  that  two issues  are  involved,  one being  the                                                            
fiscal note,  which shows an incremental  increase over the  current                                                            
program. He did not have  the information Senator Stedman requested.                                                            
He informed  that once the  transition of  primacy is completed  and                                                            
the maximum  program receipts were  collected, the annual  operation                                                            
of the  program would be  $4.8 million. Of  that amount, 16  percent                                                            
would be funded from fees,  28 percent from federal fund sources and                                                            
56 percent  would be general  funds. He noted  these figures  differ                                                            
from those reflected in the fiscal note.                                                                                        
Co-Chair Green asked if this is "just the increment".                                                                           
Mr. Easton replied this is the total program.                                                                                   
9:56:14 AM                                                                                                                    
Senator  Hoffman questioned  the report finding  that the  operating                                                            
cost of the program  would be $4.8 million and require  43 positions                                                            
and the fiscal note listing  of the program cost at $1.5 million and                                                            
13  positions.   He   asked  how   the  proposed   reductions   were                                                            
9:57:06 AM                                                                                                                    
Mr. Easton responded that  the Department currently has 30 positions                                                            
and  $3.3  million  appropriated   to the  State's   existing  water                                                            
permitting activities and  that would subsequently be devoted to the                                                            
new primacy  program.  The fiscal  note reflects  the additional  13                                                            
positions and  $1.5 million necessary to total the  43 positions and                                                            
$4.8 million required to operate the program.                                                                                   
9:57:45 AM                                                                                                                    
Co-Chair  Green suggested  that comparison  would  be easier if  the                                                            
fiscal note  contained a column showing  the current increments  for                                                            
FY 05.                                                                                                                          
9:58:12 AM                                                                                                                    
Co-Chair Wilken noted strong  support for this bill and asked if any                                                            
opposition has been raised.                                                                                                     
9:58:36 AM                                                                                                                    
Mr. Fredriksson  replied  that questions have  been posed,  although                                                            
disapproval  has not  necessarily  been voiced.  The questions  have                                                            
related to  the fiscal note  and how the  figures reflect the  total                                                            
9:59:03 AM                                                                                                                    
Mr. Easton was  hesitant to represent other positions.  He had heard                                                            
recommendations  to  amend  the  bill offered,  but  had  not  heard                                                            
9:59:29 AM                                                                                                                    
Co-Chair Green noted that  several people were signed up to testify.                                                            
9:59:36 AM                                                                                                                    
Co-Chair  Wilken   understood  that   the  EPA  imposes   fines  for                                                            
violations  that  total an  average  of approximately  $500,000  per                                                            
year.  While  he   hoped  that  once  the  State  assumes   primacy,                                                            
compliance  would improve and fines  for violations would  decrease;                                                            
however  the   fines  are  not  reflected   in  the  Department   of                                                            
Environmental  Conservation fiscal note. He understood  the revenues                                                            
would be  deposited to the  general fund but  the amounts should  be                                                            
shown as an offset to the program costs.                                                                                        
10:00:21 AM                                                                                                                   
Mr.  Easton  responded  that as  program  compliance  improves,  the                                                            
amount  of  fines   for  violations  collected  is  reduced.   Fines                                                            
generated are difficult  to identify as a revenue source in a fiscal                                                            
note, although those revenues are worth consideration.                                                                          
10:00:50 AM                                                                                                                   
Co-Chair  Wilken   interpreted  the  fiscal  not  to   indicate  the                                                            
Department  did  not  anticipate  any  fines. Enforcement   activity                                                            
should be reflected  in the fiscal note and would  assist in passage                                                            
of  this bill.  The  concern  over the  high  cost of  the  proposed                                                            
program and  the fiscal note should  reflect that the State  and not                                                            
the federal government would receive the fines.                                                                                 
10:01:31 AM                                                                                                                   
Mr. Easton replied  that the revenue collected from  the fines would                                                            
be deposited into  the general fund. The fines are  not accounted as                                                            
program receipts and are  therefore not included in the fiscal note.                                                            
10:01:54 AM                                                                                                                   
Co-Chair  Wilken  countered  that  the  fiscal  note  predicts  that                                                            
program  receipts  would  increase  to  $300,000  per  year.  It  is                                                            
appropriate to  include revenues generated from fines  in the fiscal                                                            
note  unless the  Department  anticipates  that  no fines  would  be                                                            
10:02:24 AM                                                                                                                   
Mr. Fredriksson  asserted  that  the Department  "takes enforcement                                                             
seriously" as one of six  key elements of a good regulatory program.                                                            
Enforcement  processes are  in place for  other Department  programs                                                            
and  would be  utilized  for this  program as  well.  He offered  to                                                            
provide  data on fines  collected by  the EPA  for this program  for                                                            
10:03:23 AM                                                                                                                   
Co-Chair  Green agreed  that  regardless  of whether  revenues  from                                                            
fines  are deposited  to the  general  fund, identification  of  the                                                            
amounts for the record would provide valuable information.                                                                      
10:03:41 AM                                                                                                                   
Senator Bunde  congratulated the commissioner on his  appointment to                                                            
that position.                                                                                                                  
10:03:54 AM                                                                                                                   
Senator Bunde cautioned  against propagating public assumptions that                                                            
State  Troopers  write  speeding tickets  because  the  State  needs                                                            
money. He did not want a similar perception for this program.                                                                   
10:04:33 AM                                                                                                                   
Co-Chair  Green  suggested   the information   be  reflected  as  an                                                            
historical perspective.                                                                                                         
10:04:43 AM                                                                                                                   
Senator  Bunde  noted Section  2  of the  bill on  page  2, line  10                                                            
provides that  the Department "may adopt regulations  that prescribe                                                            
reasonable  fees".  He  asked if  the  intent  were to  impose  fees                                                            
sufficient  to cover  the cost  of operating  this program,  whether                                                            
this could be done through the regulatory process.                                                                              
10:05:17 AM                                                                                                                   
Mr. Easton  replied that  fees could be utilized  to cover  only the                                                            
"direct" costs  as outlined in Section 2. The issue  is how much the                                                            
Department could reasonably charge for the direct services.                                                                     
10:05:48 AM                                                                                                                   
Senator Bunde  asked if  personnel services  to operate the  program                                                            
would be considered a direct cost.                                                                                              
10:05:57 AM                                                                                                                   
Mr. Easton  answered it  is not.  Direct costs  include the  time an                                                            
employee spends  in writing out a  permit, inspecting the  facility,                                                            
etc. Management,  data management, computer systems  and response to                                                            
consumer  complaints  are  examples   of  activities  that  are  not                                                            
considered direct costs.                                                                                                        
10:06:35 AM                                                                                                                   
Senator  Bunde suggested  that a  new definition  of "direct  costs"                                                            
should  be considered.  This  legislation  proposes  to  add 13  new                                                            
positions  to provide  this  service. He  considered  this a  direct                                                            
10:06:59 AM                                                                                                                   
Co-Chair Green recalled  other discussions of direct costs and asked                                                            
if statute prohibits charging  an amount other than proposed in this                                                            
10:07:43 AM                                                                                                                   
Mr. Easton deferred to the Department of Law.                                                                                   
10:08:03 AM                                                                                                                   
Senator Stedman  cited the  percentages of  the funding sources  for                                                            
this program:  16 percent from the  fees collected from the  private                                                            
sector and  84 percent from government  sources. He asked  the staff                                                            
would  only   be  spending  16  percent   of  their  time   directly                                                            
interfacing with applicants and working on the permits.                                                                         
10:08:45 AM                                                                                                                   
Mr. Easton affirmed.  The fiscal note denotes that  approximately 19                                                            
percent of the activities  of the program are direct and "billable",                                                            
the remaining 81 percent  is indirect and not billable. Added to the                                                            
existing  resources of the  Department available  for this  program,                                                            
the ratio changes to 16 percent direct activities.                                                                              
10:09:20 AM                                                                                                                   
Senator Stedman wanted to clarify Senator Bunde's comments.                                                                     
10:09:33 AM                                                                                                                   
Co-Chair  Green asked  if the Department  would  prefer the fees  be                                                            
limited  to direct  costs  or instead  have  the ability  to  impose                                                            
higher fees. She  asked if the Department had calculated  higher fee                                                            
10:09:57 AM                                                                                                                   
Mr.  Easton  replied  the  Department  had  calculated   higher  fee                                                            
structures  and does not proposed  revising the current fee  policy.                                                            
10:10:11 AM                                                                                                                   
Co-Chair Green  asked the amount of  the fees if they were  to cover                                                            
the entire cost of the program.                                                                                                 
10:10:25 AM                                                                                                                   
Mr. Easton answered the fees would increase a factor of four.                                                                   
10:10:29 AM                                                                                                                   
Co-Chair Green asked the amount of the current fees.                                                                            
10:10:34 AM                                                                                                                   
Mr. Easton replied  the fees range from $100 to $150  per year up to                                                            
$4,500 per year.                                                                                                                
10:11:09 AM                                                                                                                   
CAMERON  LEONARD, Department  of Law, testified  via teleconference                                                             
from Fairbanks  that the only other law that pertains  to this issue                                                            
is AS  37.10.058(3) defining  "direct costs".  That statute  must be                                                            
changed to allow the direct  costs to include other activities. That                                                            
statute pertains  to other agencies as well and the  consequences of                                                            
any changes should be considered.                                                                                               
10:12:05 AM                                                                                                                   
Co-Chair Green  asked if it would  be legally possible to  stipulate                                                            
that the fees  cover the applicable  direct cost plus an  additional                                                            
10:12:27 AM                                                                                                                   
Mr. Leonard replied this could legally be done.                                                                                 
10:12:41 AM                                                                                                                   
Co-Chair Green indicated the matter would be further reviewed.                                                                  
10:12:52 AM                                                                                                                   
Senator  Hoffman  asked the  impact  of this  legislation  on  waste                                                            
disposal managed by small municipalities.                                                                                       
10:13:12 AM                                                                                                                   
Mr. Easton replied that  the current fees would increase by a factor                                                            
of 1.8  for all  permittees. In  addition, the  sewage discharge  of                                                            
many small villages  is permitted by the State, but  not by the EPA.                                                            
EPA, "as  a matter of workload  and priority,  hasn't got them"."  A                                                            
"very positive" affect  of primacy is that the State's authorization                                                            
to discharge is  the Clean Water Act therefore all  water discharges                                                            
would be "perfectly legal" under the Clean Water Act.                                                                           
10:14:09 AM                                                                                                                   
Senator Hoffman  asked the estimated collective total  cost to rural                                                            
10:14:21 AM                                                                                                                   
Mr. Easton stated he would provide this information.                                                                            
10:14:30 AM                                                                                                                   
Senator Olson requested this information as well.                                                                               
10:14:43 AM                                                                                                                   
Senator Olson  spoke to issues of the federal EPA  and asked how the                                                            
Department  would avoid the  "same trials  and tribulations"  as the                                                            
federal government experiences.                                                                                                 
10:15:16 AM                                                                                                                   
Mr. Fredriksson  answered that the  legislature is the "key  factor"                                                            
in the enabling  statutes passed.  The program would be accountable                                                             
to the State legislature  rather than the US Congress,  which is the                                                            
current authority.                                                                                                              
10:15:46 AM                                                                                                                   
MIKE   POLLEN,   President,   NTL  Alaska,   Inc.,   testified   via                                                            
teleconference  from  an offnet  location  about  the environmental                                                             
testing company located  in Fairbanks and his 33 years experience in                                                            
the field. He referenced  a letter dated March 15, 2005 that he sent                                                            
to Co-Chair  Wilken  [copy  on file],  noting it  contains  specific                                                            
examples of issues he has  observed with the existing NPDES program.                                                            
He supported  passage of the bill.  This program must be  assumed by                                                            
the State and the State  must "take that level of responsibility" to                                                            
be "penny  wise and  not pound  foolish". Any  of the circumstances                                                             
highlighted  in his letter could easily  have cost private  industry                                                            
or the State much  more than the amount requested  by the Department                                                            
to assume primacy.                                                                                                              
Mr.  Pollen  remarked  that  significant  economic   development  is                                                            
pending   and   each   major   economic   development   enterprise,                                                             
particularly  the mining  activities,  potential for  a natural  gas                                                            
pipeline,  would require an  NPDES permit.  Each case has created  a                                                            
situation   in   which  delays,   errors   and   "serious   economic                                                            
disincentives"  have  occurred. It  is time  the  State assumes  the                                                            
program. This  is both an economic and an environment  issue and the                                                            
State could do better.                                                                                                          
10:18:37 AM                                                                                                                   
Senator Olson  asked if the witness  supports the bill as  currently                                                            
10:18:49 AM                                                                                                                   
Mr. Pollen  responded that although  some minor "fine tuning"  could                                                            
be  done,   he  would  defer  to   the  Department  to  make   those                                                            
determinations. Otherwise, he supported this legislation.                                                                       
10:19:08 AM                                                                                                                   
DICK  COOSE,  Concerned  Alaskans  for  Resources   and Environment                                                             
(CARE), testified via teleconference  from Ketchikan into the record                                                            
as follows.                                                                                                                     
     CARE is a  non-profit that was established by  local businesses                                                            
     to promote access  to our resources. I'm also a retired federal                                                            
     forester  and  served  two terms  on  the  Ketchikan  [Gateway]                                                            
     Borough Assembly.                                                                                                          
     Madam  Chair,  I urge  the  Committee  to  support SB  110.  We                                                            
     support  the stable act of taking  over the NPDES program  from                                                            
     the  federal EPA. This  is only one  of several programs  under                                                            
     which  the federal government  continues to treat the  state of                                                            
     Alaska like  a territory. The state of Alaska  needs to control                                                            
     its own future and not the feds.                                                                                           
     Also, I assume that  you will review the NPDES primacy workshop                                                            
     group  report that  was dated February  24 of  '05. So  I'm not                                                            
     going  to  repeat  any  of  that information,   which  supports                                                            
     basically  State  primacy.  But  I do  want  to make  a  couple                                                            
     The  first one being  that local, that  being State,  knowledge                                                            
     and experience of  and with resource management development and                                                            
     protection  is better  than that  of the feds  or EPA.  Second,                                                            
     DEC, in my  opinion, uses better science and  works better with                                                            
     the people  in the permitting process than EPA.  EPA appears to                                                            
     be here to  say no and delay and DEC tends to  ask, "How can we                                                            
     do it and still meet the intent of the law."                                                                               
     I'd  like to give you  a Ketchikan example  of EPA science  and                                                            
     local knowledge.  Currently, several Ketchikan  fish processors                                                            
     have EPA  permits to discharge fish waste. The  problem is that                                                            
     under the  EPA requirements, the fish waste simply  piles up on                                                            
     the  bottom and does  not decompose in  a timely manner  and in                                                            
     the warm summer weather,  burps a nice healthy smell. These EPA                                                            
     requirements were  established in the mid '80s and they require                                                            
     grinding  of the fish waste up  like flour and then  limits the                                                            
     deposit on  the bottom to a one-acre spot. Before  grinding was                                                            
     required,  this was less of a problem, mainly  because the fish                                                            
     waste  was only chopped up and  the critters on the  bottom ate                                                            
     most of  it. At a meeting within  the last three or  four years                                                            
     with  EPA, they admitted  here in Ketchikan,  that they  had no                                                            
     science  or anything to  support the fine  grinding or  the one                                                            
     acre limitation.                                                                                                           
     The  one-acre limitation  also  affects our  log transfer  down                                                            
     here  so I guess  I have to  ask, "Where  is the science  based                                                            
     [The]  third point and  last point is  on funding. The  natural                                                            
     resource   [indiscernible]  wealth   of  this  State   and  our                                                            
     resources  must be wisely managed,  developed and protected  to                                                            
     provide for Alaska's  long-term financial health. DEC, DNR, and                                                            
     ADF&G are the State  agencies who are directly involved in this                                                            
     management  development  and protection.  The State funding  of                                                            
     these  three key  departments  is a  pittance  compared to  the                                                            
     total  State  budget,  yet  they are  key  to  Alaska's  future                                                            
     financial  health and  economy. You  will need  to fund  DEC to                                                            
     manage the  NPDES program, but it will benefit  the State many-                                                            
     fold.  Consider the  importance of these  three departments  to                                                            
     our  future. All  should have  adequate  funding to  accomplish                                                            
     their  specified required  missions,  but they  should also  be                                                            
     held accountable for the mission accomplished.                                                                             
     Madam Chair, I encourage you to pass SB 110.                                                                               
10:23:04 AM                                                                                                                   
STAN JONES, Legislative Affairs Coordinator, Prince William Sound                                                               
Regional Citizens' Advisory Counsel, testified via teleconference                                                               
from  Anchorage  about  the  non-profit  organization  charged  with                                                            
ensuring  the safe  operation of  industrial vessels  in the  Prince                                                            
William Sound  area. The Valdez Marine Terminal is  a large facility                                                            
that  undertakes  water treatment  and  would  be affected  by  this                                                            
legislation.  He referenced a letter  dated March 30, 2005  from the                                                            
Counsel addressed  to Senator Green,  [copy on file] and  noted that                                                            
although he did not oppose  this legislation, he had concerns. Under                                                            
the  existing program,  the  EPA is  required  to consult  with  the                                                            
Counsel on all permitting  activities, site-specific regulations and                                                            
other  matters  in the  area.  This  is important  in  enabling  the                                                            
Counsel  to fulfill  its  mission  and this  legislation  should  be                                                            
amended  to provide  a similar  requirement  for  the Department  of                                                            
Environmental  Conservation.  If this  does not  occur, the  Counsel                                                            
would request the EPA attach  such a provision as a condition of the                                                            
NPDES transfer.                                                                                                                 
Mr. Jones then  spoke to the fiscal impact. He pointed  out that the                                                            
federal  government is  considering  funding reductions  to the  EPA                                                            
budget.  This would  provide  less  funding to  offer  as grants  to                                                            
state-operated programs.  His concern was that this program would be                                                            
under funded  or that funds would  be diverted from other  programs,                                                            
such as spill prevention and response.                                                                                          
10:28:25 AM                                                                                                                   
MIKE  MUNGER,  Executive Director,  Cook  Inlet  Regional  Citizens'                                                            
Advisory Counsel, testified  via teleconference from Kenai, that the                                                            
Counsel  is  similar  to  the Prince  William  Sound  organization,                                                             
although this  represents affected  parties in the Cook Inlet  area.                                                            
After  reviewing  this  bill,  the  Counsel  offered  the  following                                                            
recommendations, which  are similar to those submitted by Mr. Jones.                                                            
The cooperative  relationship  the  advisory counsel  has  developed                                                            
with the Department  of Environmental Conservation  should continue.                                                            
The Department  agreed to do so, but  the Counsel requests  a formal                                                            
agreement included  in this legislation.  This would ensure  citizen                                                            
oversight in the permitting process.                                                                                            
Mr.  Munger  spoke  to  the  importance   that  the  best  available                                                            
technology  must be used in the monitoring  of the affluence  of the                                                            
oil industry discharges  and that environmental monitoring should be                                                            
required.  He also  recommended careful  analysis  of all  financial                                                            
implications  to ensure that  the program  is adequately funded  and                                                            
staffed,  and not  done  so to  the detriment  of  other  Department                                                            
programs.  He noted the  Counsel submitted  a position statement  on                                                            
this legislation [copy on file.]                                                                                                
10:31:16 AM                                                                                                                   
STEVE   BORELL,   Alaska    Miners   Association,   testified    via                                                            
teleconference  from  an offnet  location that  he was  part of  the                                                            
aforementioned working  group and that the Association supports this                                                            
legislation.  He  referenced a  letter  submitted to  the  Committee                                                            
dated April 4,  2005 [copy on file] and accompanying  article titled                                                            
"Should the State of Alaska  Assume the NPDES Permit Program?" [copy                                                            
on file], written  by Larry Hartig, Attorney. The  article describes                                                            
various reasons  why the Association has determined  that primacy is                                                            
Mr. Borell noted  statute requires that the industry  pay the direct                                                            
costs  of the permitting  activities  and details  how those  direct                                                            
costs would be  determined. Three years were spend  developing those                                                            
statutes and he would be  "extremely disappointed" if those statutes                                                            
were amended.  The provisions of those  statutes were utilized  as a                                                            
basis for  the Association  "coming  to the table"  to consider  the                                                            
primacy issue.                                                                                                                  
10:33:22 AM                                                                                                                   
EARL  HUBBARD,   Vice  President,   Trident  Seafoods  Corporation,                                                             
testified via  teleconference from offnet location  that he oversees                                                            
regulatory  affairs for the company.  He listed his experience  as a                                                            
former state,  federal and United Nations regulator.  Trident is the                                                            
largest and  most diversified seafood  company operating  in Alaska.                                                            
He offered to present his comments at a later hearing.                                                                          
10:34:26 AM                                                                                                                   
Co-Chair Green  indicated the bill would be addressed  again and the                                                            
witness would be heard at that time.                                                                                            
10:34:44 AM                                                                                                                   
Co-Chair Green  noted a committee  substitute would be distributed.                                                             
The bill was HELD in Committee.                                                                                                 
10:35:31 AM                                                                                                                   
     SENATE BILL NO. 155                                                                                                        
     "An  Act  making  appropriations   from  the  earnings  reserve                                                            
     account  for construction of  an integrated science  complex at                                                            
     the University  of Alaska in Anchorage, for replacement  of the                                                            
     virology   laboratory  in  Fairbanks,  for  expansion   of  the                                                            
     Anchorage Museum of  History and Art, for the major maintenance                                                            
     grant fund, and for other capital projects related to                                                                      
     education; and providing for an effective date."                                                                           
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
SENATOR  BEN STEVENS,  Sponsor  of the  bill, indicated  a  proposed                                                            
committee substitute was distributed.                                                                                           
Co-Chair Wilken  moved for adoption of CS SB 155,  24-LS0687\S, as a                                                            
working document.                                                                                                               
Co-Chair Green objected for discussion purposes.                                                                                
10:36:53 AM                                                                                                                   
Senator  B. Stevens explained  the committee  substitute inserted  a                                                            
$1.1  million  appropriation   for  the  completion   of  the  Delta                                                            
Elementary  School to address population  growth resulting  from the                                                            
expansion  of Fort  Greely. The  majority  of the  funding for  this                                                            
project has been received as federal "impact money".                                                                            
Senator B.  Stevens also noted language  inserted on page3,  line 21                                                            
to provide  "design and construction"  for the University  of Alaska                                                            
for additions to the Matanuska-Susitna campus.                                                                                  
10:37:44 AM                                                                                                                   
Senator  Bunde  asked  if the  Department  of  Education  and  Early                                                            
Development provided the  list of all the projects contained in this                                                            
legislation as recommended projects.                                                                                            
10:38:15 AM                                                                                                                   
Senator B.  Stevens replied  that the list  of projects included  in                                                            
Section 2  of the bill  was assembled "mainly  at the indulgence  of                                                            
the members"  and were "pulled off  the current capital improvement                                                             
projects list."                                                                                                                 
10:38:36 AM                                                                                                                   
Senator  Bunde asked  if the  Delta  Elementary School  project  was                                                            
included in the list.                                                                                                           
10:38:43 AM                                                                                                                   
Senator B. Stevens  was unsure, noting the local borough  government                                                            
submitted a  request for these funds.  He offered to distribute  the                                                            
written request.                                                                                                                
10:39:11 AM                                                                                                                   
Senator Bunde  understood  the project was  included in the  capital                                                            
improvement projects list.                                                                                                      
10:39:17 AM                                                                                                                   
Co-Chair Green  removed her objection  and the committee  substitute                                                            
was ADOPTED without further objection.                                                                                          
10:39:45 AM                                                                                                                   
Amendment #1:  This amendment inserts  a new bill section  on page 1                                                            
following line 6 of the committee substitute to read as follows.                                                                
     Section 1.  LEGISLATIVE INTENT FOR SECTIONS 2  AND 3. It is the                                                            
     intent  of the legislature  that schools  funded under  secs. 2                                                            
     and  3  of this  Act  be adequately  maintained  and  that  the                                                            
     Department  of  Education  and Early  Development  enforce  the                                                            
     preventative    maintenance    plan    requirements    of    AS                                                            
     14.11.011(b)(1) and (4).                                                                                                   
Co-Chair Wilken  moved for adoption and objected for  clarification.                                                            
Co-Chair Wilken  offered a motion  to amend the amendment  to delete                                                            
"and (4)" indicating  the amended language was technically  correct.                                                            
10:41:47 AM                                                                                                                   
Co-Chair  Green recalled the  Committee discussed  this matter  in a                                                            
previous  session  in  response   to  the  findings  of  a  deferred                                                            
maintenance task force.                                                                                                         
There was no objection and the amendment was AMENDED.                                                                           
10:42:04 AM                                                                                                                   
Without objection the amended amendment was ADOPTED.                                                                            
10:42:44 AM                                                                                                                   
Amendment  #3: This  conceptual  amendment deletes  the $10,858,662                                                             
appropriation  for Glennallen Elementary School improvement  in REAA                                                            
17, Copper River School  District on page 2, lines 27 and 28 and the                                                            
$1,100,000 appropriation  for Delta Elementary School  Completion in                                                            
REAA 15, Delta/Greely School District.                                                                                          
Co-Chair Wilken  moved for adoption  and objected to the  motion for                                                            
Co-Chair Wilken  remarked that the  two projects identified  in this                                                            
amendment are unique in  that they are located in Regional Education                                                            
Attendance  Areas (REAA).  He "took great  exception" to this  grant                                                            
process that is  offered to "folks who don't pay their  fair share."                                                            
Residents of the  community of Fairbanks contribute  $20 million "to                                                            
have the privilege of getting  State money", Anchorage residents pay                                                            
$70  million this  year for  their  schools, and  Wasilla  residents                                                            
contribute almost $14 million.  Residents of the Copper River, Delta                                                            
and Greely  areas are  "paying nothing",  although both communities                                                             
have that capacity.  State funding  for these projects furthers  the                                                            
argument that local governance  is not in the best interest of these                                                            
residents.  The State should not continue  to "throw money  at folks                                                            
that will not realize their personal responsibilities."                                                                         
Co-Chair Green  and Senator Hoffman objected to the  adoption of the                                                            
10:44:25 AM                                                                                                                   
Senator B.  Stevens remarked that  as sponsor of the bill,  he hoped                                                            
that the amendment would  not be accepted. The amendment sponsor had                                                            
made valid  points, which  he expected would  be addressed  in other                                                            
pending legislation.                                                                                                            
10:44:52 AM                                                                                                                   
Senator Bunde  agreed that  SB 112 might  address Co-Chair  Wilken's                                                            
A roll call was taken on the motion.                                                                                            
IN FAVOR: Senator Bunde, Co-Chair Wilken                                                                                        
OPPOSED: Senator  Stedman, Senator Hoffman, Senator  Olson, Co-Chair                                                            
ABSENT: Senator Dyson                                                                                                           
The motion FAILED (2-4-1)                                                                                                       
The amendment FAILED to be adopted.                                                                                             
10:45:52 AM                                                                                                                   
Amendment #2: This amendment  inserts a $6,200,000 appropriation for                                                            
Noatak School  Relocation for the  Northwest Arctic Borough  on page                                                            
2, line 7.                                                                                                                      
Senator Olson moved for adoption.                                                                                               
Senator Bunde objected.                                                                                                         
Senator  Olson explained  that the  Noatak School  is currently  200                                                            
percent over its capacity  and is projected to have 320 percent over                                                            
capacity  in five  years.  In addition,  SB  142, sponsored  by  the                                                            
Senate Labor  and Commerce  Committee relates  to lands surrounding                                                             
the school.  He  distributed  a map, which  shows  that the  current                                                            
location of the school  is infringing on the aviation clearance area                                                            
according   to  Federal   Aviation   Administration   (FAA)   safety                                                            
regulations. The intent is to relocate the school.                                                                              
10:47:09 AM                                                                                                                   
Co-Chair  Green  asked  if the  future  location  of the  school  is                                                            
indicated on the map.                                                                                                           
10:47:15 AM                                                                                                                   
Senator Olson answered it is not.                                                                                               
10:47:17 AM                                                                                                                   
Senator  Bunde commented  that the  school would  be located  in the                                                            
Northwest  Arctic  Borough,  and  asked  if the  residents  of  that                                                            
jurisdiction contribute to their education funding.                                                                             
10:47:33 AM                                                                                                                   
Senator Olson replied they do contribute.                                                                                       
10:47:37 AM                                                                                                                   
Co-Chair Wilken affirmed.                                                                                                       
AT EASE 10:48:17 AM / 10:49:07 AM                                                                                           
Amendment #4:  This amendment deletes the $10 million  appropriation                                                            
for the  Kodiak College in  Section 2 on page  2, lines 16 -  18 and                                                            
inserts similar  language  in Section 4.  UNIVERSITY OF ALASKA.,  on                                                            
page 3, following line 25 to read as follows.                                                                                   
     (g) The sum of $10,000,000 is appropriated from the earnings                                                               
     reserve account (AS 37.13.145) to the University of Alaska for                                                             
      Kodiak College vocational technology addition phase I.                                                                    
Accompanying explanatory language reads as follows.                                                                             
     This corrects an error in placement of the project. It should                                                              
     have been included under the University section.                                                                           
Co-Chair Green moved for adoption.                                                                                              
10:49:55 AM                                                                                                                   
Senator B. Stevens outlined  the amendment. He stated that the funds                                                            
should  be appropriated  to the  University rather  than the  Kodiak                                                            
Island Borough.                                                                                                                 
Co-Chair Green  asked if the local school district  is involved with                                                            
this project.                                                                                                                   
Senator B. Stevens  responded that only the University  is involved.                                                            
Co-Chair  Green noted  that  at times,  local school  districts  are                                                            
involved in projects in conjunction with the University.                                                                        
The amendment was ADOPTED without objection.                                                                                    
10:51:11 AM                                                                                                                   
Co-Chair Wilken  asked if at any time every project  included in the                                                            
major maintenance list has been completed.                                                                                      
10:51:48 AM                                                                                                                   
EDDY  JEANS,  Director,  School  Finance  Division,   Department  of                                                            
Education and  Early Development, testified he was  not aware of the                                                            
list ever "going to zero".                                                                                                      
Co-Chair  Wilken asked the  length of time  some projects have  been                                                            
included in the list awaiting action.                                                                                           
Mr. Jeans  replied that a  number of the projects  have been  on the                                                            
list for over five years.                                                                                                       
10:52:32 AM                                                                                                                   
Co-Chair Wilken  offered a motion to report CS SB  155, 24-LS0687\S,                                                            
as amended from Committee with individual recommendations.                                                                      
There was no objection and CS SB 155 (FIN) MOVED from Committee.                                                                
10:53:00 AM                                                                                                                   
     CS FOR SENATE BILL NO. 70(JUD)                                                                                             
     "An Act relating to  controlled substances regarding the crimes                                                            
     of   manslaughter  and   misconduct   involving  a   controlled                                                            
     substance;  relating to  listing certain  anabolic steroids  as                                                            
     controlled  substances;   amending  Rule 41,  Alaska  Rules  of                                                            
     Criminal Procedure; and providing for an effective date."                                                                  
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
DEAN  GUANELI,  Chief Assistant  Attorney  General,  Legal  Services                                                            
Section  -  Juneau,   Criminal  Division,  and  Office   of  Special                                                            
Prosecutions  and Appeals,  Department  of Law,  noted the  proposed                                                            
committee substitute.                                                                                                           
Co-Chair Wilken  moved for adoption  of CS SB 70, 24-GS1049\Y,  as a                                                            
working document.                                                                                                               
Co-Chair Green objected for an explanation.                                                                                     
10:53:54 AM                                                                                                                   
Mr. Guaneli noted  the difference between the language  in Section 2                                                            
of this committee substitute  and the committee substitute passed by                                                            
the Senate  Judiciary  Committee. This  provides  that a person  who                                                            
knowingly manufactures  or sells an  illegal drug commits  the crime                                                            
of  manslaughter  if another  person  dies  as  a direct  result  of                                                            
ingesting  that drug.  This  is consistent  with  the definition  of                                                            
manslaughter,  which involves a reckless act that  results in death.                                                            
Mr. Guaneli  informed that the Senate  Health, Education  and Social                                                            
Services  Committee  and  the  Senate  Judiciary  Committee  adopted                                                            
committee  substitutes   that  included  an  "affirmative   defense"                                                            
provision  at the request  of Senator Dyson.  This defense  provided                                                            
that a person  who manufactured an illegal drug, but  kept that drug                                                            
in a safe, locked  place in their home would have  no responsibility                                                            
if the drug  was stolen, and a death  occurred as a result.  This is                                                            
an uncommon  scenario and typically  drug dealers and manufacturers                                                             
do not keep their drugs locked.                                                                                                 
10:55:58 AM                                                                                                                   
Co-Chair Green contended  that the manufacture of methamphetamine is                                                            
illegal and there  is no reason to defend a person  in possession of                                                            
the drug.                                                                                                                       
10:56:18 AM                                                                                                                   
Senator Olson agreed with  Co-Chair Green's position, but understood                                                            
that certain manufacturing of methamphetamine is legal.                                                                         
10:56:37 AM                                                                                                                   
Mr. Guaneli replied that  one company legally manufactures the drug,                                                            
with Federal  Department of Agriculture  (FDA) approval,  for use in                                                            
extreme  weight loss cases.  However, this  legislation pertains  to                                                            
the knowing  manufacture or  delivery of  a controlled substance  in                                                            
violation of  AS 11.71. Possession  of prescription drugs  would not                                                            
be a violation of that statute.                                                                                                 
10:57:01 AM                                                                                                                   
Senator Stedman  asked if a seller  of heroin could be charged  with                                                            
manslaughter in the event a user of that drug dies.                                                                             
10:57:51 AM                                                                                                                   
Mr.  Guaneli responded  this  is the  purpose of  this legislation.                                                             
Heroin and  methamphetamine are the  two drugs most likely  to cause                                                            
"overdose situations".                                                                                                          
10:57:55 AM                                                                                                                   
Senator Stedman surmised  this legislation might "be a little light"                                                            
in the severity  of punishment. He  expressed no sympathy  for these                                                            
10:58:02 AM                                                                                                                   
Co-Chair Green  asked if Mr. Guaneli had any comment  on the changes                                                            
made in the proposed committee substitute.                                                                                      
Mr. Guaneli had none.                                                                                                           
The committee  substitute was ADOPTED as a working  document without                                                            
further objection.                                                                                                              
10:58:21 AM                                                                                                                   
Mr. Guaneli  spoke to the committee  substitute. Section  1 includes                                                            
findings of the legislature  that methamphetamine manufacturing is a                                                            
"particularly dangerous  activity" therefore justifying restrictions                                                            
on bail for  defendants charged with  this offense. This  finding is                                                            
necessary to  enact the provision  of Section 5 requiring  a posting                                                            
of a minimum of  $250,000 cash bond. This provision  was included in                                                            
Section 6 of  the previous version  and is reflected as such  in the                                                            
current  committee  substitute.  The  language  must be  amended  to                                                            
correctly reference Section 5 rather than Section 6.                                                                            
Mr. Guaneli relayed that  the Senate Judiciary Committee adopted the                                                            
language of Section 5 as  a conceptual amendment. The discussion was                                                            
unclear as to whether the  higher bond requirement should apply only                                                            
to offenders  with  previous convictions,  who it  could be  argued,                                                            
would  be more  likely  to continue  these  activities.  In  further                                                            
discussion with the staff  of that committee, it was determined that                                                            
the provision  should only  apply to second  offenders to  correctly                                                            
reflect the intent  of the Senate Judiciary Committee.  However, the                                                            
current language  could also apply to first offenders  in possession                                                            
of a firearm in the course of manufacturing the drug.                                                                           
Co-Chair Green indicated this issue would be resolved.                                                                          
11:00:43 AM                                                                                                                   
Co-Chair  Green relayed  that  representatives  of  the real  estate                                                            
industry  have expressed  interest  in the  provision  of this  bill                                                            
relating  to the designation  of properties  in which manufacturing                                                             
activities have  occurred. Currently, the only way  to learn of past                                                            
activities has  been after a sale is completed and  a neighbor tells                                                            
the new owner  about the previous owner. If realtors  or prospective                                                            
buyers  suspect   methamphetamine   manufacturing  was  done   at  a                                                            
property, authorities  would not provide confirmation.  She asked if                                                            
this could be addressed in this legislation.                                                                                    
11:02:14 AM                                                                                                                   
Mr. Guaneli concluded that  providing such information on a property                                                            
would not  create a liability  for the State.  Whether the  site was                                                            
property cleaned is a different  issue. A registry maintained by the                                                            
Alaska   State  Troopers   or   the  Department   of  Environmental                                                             
Conservation is an option.                                                                                                      
11:02:56 AM                                                                                                                   
Co-Chair  Green  commented  that  some  realtors  "feel vulnerable"                                                             
because  they  are required  to  disclose  any information  about  a                                                            
property  that could  affect  its value.  She asked  if a  provision                                                            
creating  the  suggested  registry  would  be  appropriate  in  this                                                            
11:03:48 AM                                                                                                                   
Mr.  Guaneli was  unsure  such a  provision  would comply  with  the                                                            
single  subject title  requirements  governing  all legislation.  He                                                            
suggested  a  registry  could  be  created  through  the  regulatory                                                            
process, provided  an agency is willing  to undertake the  duty. The                                                            
Committee might prefer statutory language.                                                                                      
11:04:35 AM                                                                                                                   
Co-Chair  Green   stated  that  Alaska  State  Troopers   have  been                                                            
unwilling  to share this  information and she  was unsure if  it was                                                            
due to confidentiality or privacy issues.                                                                                       
11:04:52 AM                                                                                                                   
Co-Chair Wilken cited a  memorandum from the Legislative Division of                                                            
Legal and Research  Services dated April 4 and asked  the witness to                                                            
speak to the matter.                                                                                                            
11:05:07 AM                                                                                                                   
Mr. Guaneli  was aware of the issue  and indicated he would  address                                                            
it at the next hearing on this bill.                                                                                            
11:05:19 AM                                                                                                                   
The bill was HELD in Committee.                                                                                                 
Co-Chair Green adjourned the meeting at 11:05 AM                                                                                

Document Name Date/Time Subjects