Legislature(1993 - 1994)

11/19/1993 09:23 AM Senate RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                    SENATE RESOURCES COMMITTEE                                 
                       Fairbanks, Alaska                                       
                       November 19, 1993                                       
                           9:23 A.M.                                           
                                                                               
                                                                               
 MEMBERS PRESENT                                                               
                                                                               
 Senator Mike Miller, Chairman                                                 
 Senator Loren Lehman, Vice Chairman                                           
 Senator Dave Donley                                                           
 Senator Fred Zharoff                                                          
                                                                               
  MEMBERS ABSENT                                                               
                                                                               
 Senator Drue Pearce                                                           
 Senator Steve Frank                                                           
 Senator Al Adams                                                              
                                                                               
  COMMITTEE CALENDAR                                                           
                                                                               
 SENATE BILL NO. 215                                                           
 "An Act relating to and redesignating the oil and hazardous                   
 substance release response fund and to its use in the event of a              
 disaster emergency; repealing the authority in law by which marine            
 highway vessels may be designed and constructed to aid in oil and             
 hazardous substance spill cleanup in state marine water using money           
 in the oil and hazardous substance release response fund; amending            
 requirements relating to the revision of state and regional master            
 prevention and contingency plans; altering requirements applicable            
 to liens for recovery of state expenditures related to oil or                 
 hazardous substances; amending the authority to contract to provide           
 personnel to respond to a release or threatened release of oil or             
 a hazardous substance and to contract to conduct spill related                
 research; reassigning responsibility for the oil and hazardous                
 substance response corps and for the emergency response depots to             
 the Department of Environmental Conservation, and for the operation           
 of the state emergency response commission and its attendant                  
 responsibilities for the local emergency planning commissions to              
 the Department of Military and Veterans' Affairs; and modifying               
 definitions of terms relating to the preceding provisions;                    
 terminating the nickel-per-barrel oil conservation surcharge;                 
 levying and collecting two new oil surcharges; and providing for              
 the suspension and reimposition of one of the new surcharges; and             
 providing for an effective date."                                             
                                                                               
  PREVIOUS SENATE COMMITTEE ACTION                                             
                                                                               
  SB 215 - No previous action to record.                                       
                                                                               
  WITNESS REGISTER                                                             
                                                                               
 Jack Chenowith                                                                
 Division of Legal Services                                                    
 Legislative Affairs                                                           
 130 Seward St., #406                                                          
 Juneau, Alaska 99801-1795                                                     
  POSITION STATEMENT:   Provided sectional review of SB 215.                   
                                                                               
 Maria Gladziszewski                                                           
 Legislative Research Agency                                                   
 130 Seward Street, Suite 218                                                  
 Juneau, Alaska 99801-2196                                                     
  POSITION STATEMENT:   Provided review of memo regarding SB 215.              
                                                                               
 Shelby Stastny, Director                                                      
 State Office of Management & Budget                                           
 P.O. Box 110020                                                               
 Juneau, Alaska 99801-0020                                                     
  POSITION STATEMENT:   Provided review of DOA memo regarding SB 215.     .    
                                                                               
 Craig Tillery                                                                 
 Department of Law                                                             
 1031 West Fourth Avenue, Suite 200                                            
 Anchorage, Alaska 99501-1994                                                  
  POSITION STATEMENT:   Testified regarding reimbursement of Exxon             
 Valdez Settlement monies to the "470 Fund."                                   
                                                                               
 Mead Treadwell, Deputy Commissioner                                           
 Department of Environmental Conservation                                      
 410 Willoughby, Suite 105                                                     
 Juneau, Alaska 99801-1795                                                     
  POSITION STATEMENT:   Commented on SB 215.                                   
                                                                               
 Ardie Gray, Public Affairs Manager                                            
 Alaska Oil & Gas Association                                                  
 121 West Fireweed Lane, ¦Suite 207                                            
 Anchorage, Alaska 99503                                                       
  POSITION STATEMENT:   Supported SB 215.                                      
                                                                               
 Walt Furnace                                                                  
 Alaska Support Industry Alliance                                              
 4220 B Street, #200                                                           
 Anchorage, Alaska 99501                                                       
  POSITION STATEMENT:   Supported SB 215.                                      
                                                                               
 Richard Mullen, Manager                                                       
 South East Alaska Petroleum Resource Organization                             
 3350 Denali                                                                   
 Ketchikan, Alaska 99901                                                       
  POSITION STATEMENT:   Commented on SB 215.                                   
                                                                               
 Charles McKee                                                                 
 7800 East DeBarr Road, #63                                                    
 Anchorage, Alaska 995-4                                                       
  POSITION STATEMENT:   Opposed SB 215.                                        
                                                                               
 Chip Thoma                                                                    
 2 Marine Way                                                                  
 Juneau, Alaska 99801                                                          
  POSITION STATEMENT:   Opposed SB 215.                                        
                                                                               
  ACTION NARRATIVE                                                             
                                                                               
 TAPE 93-24, SIDE A                                                            
 CHAIRMAN MILLER called the Resources Committee meeting to order at            
   9:23 a.m. and announced  SB 215  (OIL/HAZARDOUS SUBS. RELEASE               
 RESPONSE FUND) to be up for consideration.                                    
                                                                               
 SHELBY STASTNY, Director, State Office of Management & Budget, gave           
 an overview of the First, Second, and Third Quarter Reports for the           
 Oil Surcharge Account (dated 4/2/93, 8/20/93) issued by the                   
 Department of Administration which are required by AS 43.55.230               
 (b).  He acknowledged there is concern that the balance of the fund           
 is a negative number.                                                         
                                                                               
 He referred to a memo from his office included in a packet                    
 submitted by the Department of Environmental Conservation (DEC) to            
 the House Resources Committee hearing last week, dated November 5,            
 1993, regarding similar legislation (House Bill 238).  He explained           
 that the statute requires that the quarterly reports simply show              
 the cumulative surcharge, or total collected through the nickel-              
 per-barrel tax, minus the total cumulative expenditures, which                
 produces a negative balance of $15,105,728 according to his 11/2/93           
 memo.  The amount actually available in the Response fund as of               
 that date, however, was $37,229,669.                                          
                                                                               
 The difference between the Fund balance prepared by DOA and the               
 Fund balance prepared by OMB occurs because funding for the                   
 cumulative expenditures is provided by the nickel-per-barrel tax as           
 well as program receipts and other general fund contributions from            
 the oil industry.  Therefore, based on the statutory calculation,             
 the ending balance will never reach $50 million unless there is               
 $125 million in the Fund.                                                     
                                                                               
 The Administration would like to see some sort of correction so the           
 quarterly reports reflect the true Fund balance.  He stated that if           
 the Legislature's goal is to provide a $50 million fund, then there           
 should be a better way of calculating when the tax "turns off."               
 the administration's position is that the state should accumulate             
 a $50 million fund that will always be available to respond to                
 disasters and other significant spills, releases, etc.                        
                                                                               
 SENATOR MILLER asked Mr. Stastny to clarify if and when the tax               
 would cease based on the $15 million and $37 million figures                  
 presented in the OMB memorandum.                                              
                                                                               
 MR. STASTNY said he believes the tax would stop when the figure in            
 the right hand column ($37 million reached approximately $125                 
 million due to the $75 million in expenditures which come from                
 revenues other than the nickel-per-barrel tax.  He noted that when            
 the present administration took office the balance of the fund was            
 between $8 and $9 million and has increased to the present $37                
 million.                                                                      
                                                                               
 SENATOR LEMAN asked why the figures reflecting the Cumulative                 
 Surcharge Collected were different under the columns titled AS                
 43.55.230 (b) Calculation and Response Fund.                                  
                                                                               
 MR. STASTNY said the Response Fund figure is an amount appropriated           
 by the Legislature annually.  However, the state continually                  
 collects the surcharge (reflected in the AS 43.55.230(b)                      
 Calculation column) even though it has not yet been appropriated by           
 the Legislature.                                                              
                                                                               
 CRAIG TILLERY, Department of Law, explained the process for                   
 reimbursements of Exxon Valdez Settlement monies to the Fund.  He             
 testified that Exxon is required to pay $900 million in settlement            
 money.  Of that amount, the state and federal governments are                 
 entitled to take their reimbursements from certain Exxon Valdez oil           
 spill related expenses.  The remainder goes to the Exxon Valdez               
 Trust Fund where it is spent under the direction of the joint                 
 federal and state trustees.  The governments determine what their             
 restoration needs will be for a given year, then look at how much             
 will be left and from that, take the appropriate amount due.                  
                                                                               
 That money does not go through the trust Fund, but straight to the            
 governments via the General Fund.  The money being reimbursed from            
 the Response Fund goes into the Mitigation Account from which the             
 Legislature may, as it always has done, appropriate it back into              
 the Response Fund.                                                            
                                                                               
 He pointed out that under the  proposed bill, the money would go to           
 the Oil & Hazardous Substance Release Contingency and Abatement               
 Account (OHSRCAA) from which the Commissioner may spend money.  He            
 views this as bypassing the process of legislative appropriation of           
 the money into the OHSRCAA which could be viewed as setting up a              
 dedicated fund.  He suggested the committee explore the possibility           
 of running the money through the Mitigation Account, then allowing            
 the Legislature to appropriate it into the OHSRCAA.                           
                                                                               
 MARIA GLADZISZEWSKI, Legislative Research Agency, reviewed her memo           
 dated 11/18/92 in response to questions posed by Senator Miller.              
 The first asked for the current balance in the Spill Response Fund            
 and the emergency spill reserve.  She said the committee heard from           
 Mr. Stastny regarding the balance of the fund and referred to the             
 flow chart (Table One) attached to her memo.  She also referred to            
 Table Two in the memo which explains the process discuss by Mr.               
 Tillery regarding reimbursements.                                             
                                                                               
 The second question asked was if a legislative appropriation to the           
 emergency spill reserve is considered an expenditure for the                  
 purpose of AS 43.55.230(b) (suspension and reimposition of the                
 $0.05/pbl surcharge).  She referred to a memo by Mr. Breck                    
 Tostevin, Department of Law, which concludes that money                       
 appropriated to the spill reserve is not considered an expenditure            
 for the purpose of calculating whether to suspend the surcharge.              
                                                                               
 The third question asked for (1) the current status of the Exxon              
 Valdez Settlement reimbursements to the State of Alaska and the               
 Response Fund, (2) the amount that has been reimbursed so far and             
 (3) how much is likely to be reimbursed in the future.  A detailed            
 response is contained in Ms. Gladszizewski's memo.                            
                                                                               
 JACK CHENOWETH, Legislative legal Services, gave a sectional                  
 summary of SB 215.                                                            
                                                                               
 The principal changes occur with respect to the structure and                 
 objects of expenditure of the Oil & Hazardous Substance Release               
 Response Fund.  It is divided into two accounts; the release                  
 Contingency and Abatement Account, and the Catastrophic Oil Release           
 Response Account.                                                             
                                                                               
 Sections 25-27 identify the division of the current fund into two             
 accounts.                                                                     
                                                                               
 Section 28 adds in the proviso that equipment that can be used in             
 substance response depots may be purchased out of the Fund and that           
 the current authorization of expenditure for marine ferries is to             
 be repealed.                                                                  
                                                                               
 Section 29 discusses the composition of the Oil & Hazardous                   
 Substance Release Contingency and Abatement Account (OHSRCAA);                
 Section 30 discusses the composition of the Catastrophic Oil                  
 Release Response Account (CORRA) and essentially requires what is             
 currently required of the fund as a whole.                                    
                                                                               
 Section 31 makes changes in what the two accounts may be sued for.            
 The Catastrophic Release Account may be used for major oil                    
 releases; the Contingency and Abatement Account is used for events            
 that fall short of catastrophic or threatened catastrophic oil                
 releases.                                                                     
                                                                               
 Sections 32 and 33 are companion measures which both discuss what             
 the Governor may do with the balance of funds in the Catastrophic             
 Release Account.  Following the passage of Senate Bill 90 in 1993,            
 Section 32 is no longer necessary in SB 215 and Section 33 would              
 become the operative section.                                                 
                                                                               
 Section 34 speaks to the use of monies from either account and                
 requires a specific appropriation for most purposes except for                
 immediate response action currently authorized in law.                        
                                                                               
 Sections 8 and 35 reflect the division of the Fund into two                   
 accounts.                                                                     
                                                                               
 Sections 42 and 43 reflect revisions of definition of the terms               
 "release" and "threatened release."                                           
                                                                               
 Sections 35 and 37 make conforming changes.                                   
                                                                               
 Sections 1,4, 6, 7 and 41 make reference to the renamed accounts.             
                                                                               
 Section 5 refers to the two accounts and touches upon grants to               
 municipalities for disaster emergencies.                                      
                                                                               
 Sections 44 and 49 reflect changes in the definition of                       
 "catastrophic oil discharge" in an effort to explain that                     
 definition's applicability.                                                   
                                                                               
 MR. CHENOWETH summarized that all the above sections make changes             
 that reflect the fact that the current 470 Fund would be divided              
 into two accounts, and the purpose of the accounts would differ in            
 that the Catastrophic Release Account would be used for major oil             
 releases, and the Contingency and Abatement Account would handle              
 other purposes spelled out in the bill revisions.                             
                                                                               
 Sections 9 through 16 reflects a revision in the Oil & Gas                    
 Conservation Surcharge, or nickel-per-barrel surcharge. A 3 cent              
 levy would be deposited into the Catastrophic Release Account and             
 be subject to suspension or termination when the balance of the               
 fund reaches $50 million.  A 2 cent levy would be deposited into              
 the contingency and Abatement Account and continues without                   
 limitation.                                                                   
                                                                               
 Section 38 reassigns the Oil & Hazardous Substance Response Corps             
 to DEC.                                                                       
                                                                               
 Section 39 transfers responsibility for maintaining the response              
 depots to DEC.                                                                
                                                                               
 Section 46 moves the State Emergency Response Commission from DEC             
 to Department of Military and Veterans Affairs (DMVA).                        
                                                                               
 Section 51 holds harmless the terms of persons serving on the                 
 Response Committees despite the agency transfer.                              
                                                                               
 Sections 2 and 3 address the Governor's authority to declare                  
 disaster emergencies.                                                         
                                                                               
 Sections 32 and 33 make changes that relate to the Governor's use             
 of money in the Oil and hazardous Substance Release Prevention &              
 Response Fund in the face of a disaster emergency.                            
                                                                               
 Sections 17 and 18 make conforming changes.                                   
                                                                               
 Sections 19 and 20 make changes in the statewide prevention and               
 contingency master planning process.                                          
                                                                               
 Sections 22 and 23 make changes in the regional prevention and                
 contingency master planning process and eliminate the Oil &                   
 Hazardous Substance Response Office's ability to conduct spill                
 technology research.                                                          
                                                                               
 Section 24 amends the definition of "catastrophic oil discharge" to           
 include the declaration of a disaster emergency by the governor.              
                                                                               
 Section 40 assigns the Oil & Hazardous Substance Response Office              
 the authority to contract to provide personnel for certain release            
 related work.                                                                 
                                                                               
 Sections 43 and 45 revise the definition of "threatened release."             
                                                                               
 MR. CHENOWETH suggested that some technical drafting changes should           
 be considered to "clean up" the bill based on action taken during             
 the first session of the 18th Legislature before reporting the                
 measure from committee.                                                       
                                                                               
 MEAD TREADWELL, Deputy Commissioner, Department of Environmental              
 Conservation, referred to a draft package submitted to the                    
 Committee entitled "DRAFT 11/12/93:  Principles for Consensus on              
 the Response Fund Funding."  He emphasized the Department's desire            
 to work with all interested parties in maintaining a strong spill             
 response program.  He also emphasized that DEC does want to build             
 and maintain a $50 million spill reserve and believes that will be            
 achieved this year.  Finally, he pointed out that DEC agrees that             
 greater equity should be achieved in funding sources for the non-             
 crude and hazardous substance prevention and response aspects of              
 the program.                                                                  
                                                                               
 The Department's strategy is to look at other ways to expand                  
 response fund sources including cost recovery.  The fund is owed              
 approximately $30 million from Exxon Valdez expenditures and DEC              
 estimates the recovery schedule on page 6 of the draft.  DEC is               
 also increasing, in cooperation with the Department of Law, cost              
 recovery efforts.                                                             
                                                                               
 Damages and fines currently collected by the Mitigation Account               
 could possibly be figured in when determining suspension of the               
 tax.                                                                          
                                                                               
 Fees to be paid by non-crude facilities for contingency plan                  
 review, as well as fees for financial responsibility submissions,             
 could be imposed.  Loading fees as a source of UST funding has been           
 discussed.  Substitution of General Funds, including interest ont             
 the spill reserve and use of other tax revenues, were suggested as            
 other possible funding sources to cover the program.                          
                                                                               
 Suggestions regarding the surcharge include: 1( amending the tax              
 law to reflect that the tax is collected when the balance of the              
 fund, less obligations appropriated by the Legislature or spent               
 from the spill reserve, is less that $50 million and 2) adopting an           
 incentive clause stating that the tax will not be collected in such           
 a year unless other named sources are also appropriated to the                
 fund.                                                                         
                                                                               
 DEC has reviewed methods to further limit fund expenditures                   
 including: removal of full funding for the SERC by making an all-             
 hazards SERC, repeal of the provision that allows ferries to be               
 built with the Response Fund, review of expenditures by a body such           
 as the SERC in case of spill prevention and response plans and the            
 HSSTRC, in case of research.                                                  
                                                                               
 MS. ARDIE GRAY, Public Affairs Manager, Alaska Oil and Gas                    
 Association (AOGA) said they were concerned that money from the 470           
 Fund was being appropriated for activities other than oil spill               
 emergencies.  She said it was being used extensively for other                
 activities including funding one third of the ADEC's operating                
 budget.                                                                       
                                                                               
 MS. GRAY also noted that there was no consensus on how to account             
 for the money in the 470 Fund and this needs to be clarified.                 
 Also, there is a significant question about the money appropriated            
 by the legislature to the emergency spill reserve and whether it              
 counts toward the $50 million cap on the Fund.                                
                                                                               
 Because of the confusion over what the balance in the 470 is,                 
 whether appropriations to the spill reserve are considered                    
 "expenditure", and the differing views over what are appropriate              
 uses of the money in the 470, she said AOGA believes it is                    
 necessary to look at a new approach to the Fund.  For this reason             
 they strongly support SB 215.                                                 
                                                                               
 This proposal would ensure there is an independent source, the 3              
 cents per barrel, for the $50 million in case there is an                     
 emergency.  It would also insure, with the 2 cents per barrel levy,           
 that there is a secure source of funding for state prevention and             
 preparedness programs as long as oil is being produced in Alaska.             
 While this would not provide the amounts ADEC currently needs for             
 the operating costs, they have indicated that the need will                   
 decrease after the "start up".                                                
                                                                               
 This proposal, she said, would provide tax certainty for the                  
 industry and for the State.                                                   
                                                                               
 MS. GRAY said that AOGA does not think it is appropriate to use the           
 state's supposed oil spill emergency fund to pay for the                      
 underground storage tank cleanup assistance program.  They do                 
 support using the mitigation account money to fund it, but with               
 future Exxon Valdez settlement reimbursement payments which should            
 be adequate.                                                                  
                                                                               
  TAPE 93-25, SIDE A                                                           
                                                                               
 CHIP THOMA, Juneau, testified that the 470 Fund is, for the most              
 part, the crude and non-crude producers' profits.  He stated these            
 producers are behind the proposed gutting of the 470 Fund.  Very              
 large profits are also being made by the refiners and transporters.           
 He believes anti-trust fraud and price fixing practices exist in              
 the fuel industry and hopes it will be curtailed.  He pointed out             
 that a recent BLM audit of the TAPS, Alyeska, and the owner                   
 companies shows the management responsibility for serious                     
 operational shortcomings is practically nonexistent.  He does not             
 believe any of the owner companies have taken steps necessary to              
 prevent another large spill, nor have they made the improvements              
 necessary to protect communities and river systems in Alaska that             
 depend on refined products.  he stated this is why the 470 Fund               
 exists, and should remain, in its present size and form.                      
                                                                               
 RICHARD MULLEN, Manager, Southeast Alaska Petroleum Resource                  
 organization (SEAPRO), said he believed the Fund has not                      
 accomplished what the Legislature originally intended.  They                  
 believe the Fund is valuable, yet it is regionally limited, it                
 targets only a small segment of the potential global pollution                
 threat, and is not necessarily available to the public.  the                  
 Legislature should look at what is available and determine methods            
 to make better use of those sources to protect the general public.            
 SENATOR MILLER said the committee would consider SB 215 within the            
 first two weeks of session, work with the concerned parties, and              
 move it from committee before the end of the first month.                     
                                                                               
                                                                               

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