Legislature(1993 - 1994)

01/19/1994 03:32 PM Senate RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                  SENATE RESOURCES COMMITTEE                                   
                        January 19, 1994                                       
                           3:32 P.M.                                           
                                                                               
                                                                               
 MEMBERS PRESENT                                                               
                                                                               
 Senator Mike Miller, Chairman                                                 
 Senator Loren Leman, Vice Chairman                                            
 Senator Drue Pearce                                                           
 Senator Al Adams                                                              
 Senator Dave Donley                                                           
 Senator Fred Zharoff                                                          
                                                                               
  MEMBERS ABSENT                                                               
                                                                               
 Senator Steve Frank                                                           
                                                                               
  OTHERS PRESENT                                                               
                                                                               
 Representative Joe Green                                                      
                                                                               
  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 - See Resources minutes dated 11/19/93.                                
                                                                               
  WITNESS REGISTER                                                             
                                                                               
 Jack Chenoweth                                                                
 Division of Legal Services                                                    
 Legislative Affairs                                                           
 130 Seward St., #406                                                          
 Juneau, Alaska 99801-2105                                                     
  POSITION STATEMENT:   Commented on SB 215                                    
                                                                               
 Mead Treadwell, Deputy Commissioner                                           
 Department of Environmental Conservation                                      
 410  Willoughby, Suite 105                                                    
 Juneau, Alaska 99801-1795                                                     
  POSITION STATEMENT:   Commented on SB 215.                                   
                                                                               
  ACTION NARRATIVE                                                             
                                                                               
 TAPE 94-1 , SIDE A                                                            
 Number 001                                                                    
 SENATOR MILLER called the Resources Committee meeting to order                
 at 3:32 p.m. and announced  SB 215  (OIL/HAZARDOUS SUBS. RELEASE              
 RESPONSE FUND) to be up for consideration.  He said it was his                
 intent to put this bill into a subcommittee to work on the                    
 bill and bring it back after 10 days or so.                                   
                                                                               
 JACK CHENOWETH, Legal Services, briefed the committee on the                  
 bill which, he said, is a second shot at the 5 cents per                      
 barrel severance tax surcharge on crude oil.  Generally the                   
 bill addresses the surcharge itself and the dispositions of                   
 the proceeds from that surcharge.  It makes other changes in                  
 the area of oil and hazardous substances clean up and                         
 oversight.                                                                    
                                                                               
 Now the surcharge money is made available to the Oil and                      
 Hazardous Substance Release Response Fund.  This bill proposes                
 to split that Fund into two accounts - one called the Oil and                 
 Hazardous Substance Contingency and Abatement Account and the                 
 other called the Catastrophic Oil Release Response Account.                   
 The latter is generally available to cover emergency major                    
 spills of hazardous substances.  It is available immediately.                 
                                                                               
 The Contingency and Abatement Account is intended to cover all                
 the costs that go into preparing state agencies, contractors,                 
 and others to be prepared in the event of an oil spill.                       
                                                                               
 Number 87                                                                     
                                                                               
 Sections 25 - 28 reflect the split into two accounts.                         
                                                                               
 Use of the money for construction of state ferries would be                   
 deleted and the only use for capital improvements would be for                
 equipment that must be placed at the oil and hazardous                        
 substance response depots, MR. CHENOWETH said.                                
                                                                               
 Number 92                                                                     
                                                                               
 Sections 32 - 33 talk about what the Governor may do in making                
 use of the balance of the two accounts, particularly when an                  
 emergency is declared.                                                        
                                                                               
 The following Sections make conforming changes.                               
                                                                               
 Number 129                                                                    
                                                                               
 Sections 9 - 16 of the bill divides the current surcharge                     
 into 3 cent and 2 cent levies -  the 3 cent levy going to the                 
 Catastrophic Oil Discharge and the 2 cent levy being made                     
 available on an on-going basis for the other fund.                            
                                                                               
 MR. CHENOWETH said that one of the reasons this bill is under                 
 discussion is that the on-off trigger for the surcharge has                   
 never been used.  The legislature has drawn on the fund so                    
 much that the $50 million cap has never been reached.  This                   
 on-off trigger is made available in SB 215 to the 3 cent levy,                
 but is lifted from the 2 cent levy so support for the services                
 is on-going.                                                                  
                                                                               
 Section 38 reassigns the Oil and Hazardous Substance Response                 
 Corps from the Division of Military and Veterans Affairs                      
 (DMVA) to Department of Environmental Conservation (DEC).                     
 Section 39 transfers responsibility for maintaining response                  
 depots from DMVA to the DEC.  Section 46 moves the State                      
 Emergency Response Commission to the DMVA from DEC.                           
                                                                               
 In Sections 19 - 21 there are changes to state-wide prevention                
 planning processes and to regional planning processes in                      
 Sections 22 - 23.                                                             
                                                                               
 Number 207                                                                    
                                                                               
 SENATOR ADAMS asked if he had asked if the cost of the two                    
 accounts would be covered by the divided surcharge.  MR.                      
 CHENOWETH said he hadn't asked.  SENATOR MILLER said that                     
 according to DEC, no.                                                         
                                                                               
 SENATOR ADAMS asked if he could make a motion to bring the                    
 surcharge for both to be a total of 6 cents, 3 cents for each                 
 fund.                                                                         
                                                                               
 Number 267                                                                    
                                                                               
 SENATOR PEARCE asked if there was a conditional change in the                 
 definition of oil.  MR. CHENOWETH answered no.                                
                                                                               
 SENATOR ADAMS asked if this bill was a way to pass the cost                   
 of oil distribution to the consumers.  MR. CHENOWETH said he                  
 didn't see it doing that.                                                     
                                                                               
 SENATOR ZHAROFF asked about definitions.  MR. CHENOWETH said                  
 he reworked the definition of catastrophic in Section 15 at                   
 100,000 barrels or less for the Governor to issue a                           
 proclamation.                                                                 
                                                                               
 SENATOR ZHAROFF asked how adequate the 2 cents would be in a                  
 few years with the decline of oil.  MR. CHENOWETH said the                    
 subcommittee should look at that.                                             
                                                                               
 SENATOR PEARCE said "threatened release" needed to be                         
 clarified to include a declaration of emergency or a spill of                 
 under 100,000 barrels for purposes of using the fund. owned                   
 by villages, for instance.  MR. CHENOWETH agreed and said in                  
 some instances it would be ludicrous to have to wait for the                  
 Governor to declare an emergency or for 100,000 barrels to                    
 spill.                                                                        
                                                                               
 Number 378                                                                    
                                                                               
 SENATOR ADAMS asked him to explain what is different on                       
 Section 1 and the method that we presently have.  MR.                         
 CHENOWETH said from his perspective the money has not been                    
 left in the account long enough to build up. It has been                      
 appropriated to DEC and has become another source of revenue                  
 for agency operations.  If a tanker goes aground and there is                 
 another huge disaster, we will all be very embarrassed                        
 thinking there's supposed to be a pot of money with                           
 substantial amounts in it for response and there isn't.                       
                                                                               
 The amount is not growing the way they thought it would when                  
 the statute was put on the books.  He thought the intent of                   
 the fund should be clarified to do what it was supposed to do.                
                                                                               
                                                                               
 SENATOR ADAMS asked if he thought the fund was a federal tax                  
 deduction for the companies anyway.  MR. CHENOWETH answered                   
 that he had no idea.                                                          
                                                                               
 Number 419                                                                    
                                                                               
 MEAD TREADWELL, Deputy Commissioner, DEC, said they have a                    
 letter which represents the Administration's position.  They                  
 would like to work on a consensus approach to modify the                      
 process to suspend and impose the surcharge so the amount                     
 collected is the only amount needed to have a fully funded                    
 prevention and response program.  They propose to look for                    
 other sources of funding to supplement the nickel.                            
                                                                               
 The Administration thinks it is appropriate to eliminate some                 
 legal authority for some Fund expenditures and to                             
 legislatively strengthen Fund management.                                     
                                                                               
 MR. TREADWELL said their goal is to maintain a strong state-                  
 led spill prevention and response program, build and maintain                 
 a $50 million spill reserve, and attempt to develop other                     
 revenue sources for the Fund.                                                 
                                                                               
 Number 450                                                                    
                                                                               
 MR. TREADWELL said they have three major concerns with the                    
 proposed legislation:  1.  The Fund (including the spill                      
 reserve) must remain a vital part of Alaska's ability to                      
 prevent and respond to spills of all kinds of hazardous                       
 substances, not just crude oil.  2.  "Splitting the nickel"                   
 drastically reduces the level of environmental protection now                 
 enjoyed by Alaskans.  The Fund should be kept whole, and other                
 sources added to address equity concerns.  The Commissioner                   
 said we must be cautious in estimating a top limit to the size                
 of state spill prevention and response programs given some                    
 weaknesses that exist in our overall spill prevention                         
 coverage.  3.  As the "nickel" is proposed to be split, not                   
 enough funds are left to maintain current spill prevention and                
 response programs.                                                            
                                                                               
 Number 529                                                                    
                                                                               
 SENATOR LEMAN applauded them for making the effort to find                    
 alternative sources of funding.  But it didn't make a lot of                  
 sense to have a tax on crude operations to be responding to                   
 some of the spills that are not crude.  MR. TREADWELL said the                
 fund has been changed 17 times.  Essentially the fund was                     
 created to take fines and mitigation and leave it there to                    
 respond to other crude and noncrude incidents.  In calculating                
 the crude revenue source, they did not add in cost recoveries.                
 They are looking at language to accomplish that.  Now we have                 
 a very strong capability to respond to emergencies of                         
 different kinds.                                                              
                                                                               
 SENATOR ADAMS asked what priority raising oil taxes would have                
 among all the other of the Governor's proposed raises.  MR.                   
 TREADWELL said he would prefer not to comment directly on                     
 that.  He said that 1 penny of the motor fuel tax increase is                 
 proposed to pay for the underground storage tank program.                     
                                                                               
 Number 574                                                                    
                                                                               
 SENATOR ADAMS asked if the mitigation funds had been collected                
 from the Exxon Valdez Settlement.  MR. TREADWELL answered that                
 it hadn't all been collected.                                                 
                                                                               
  TAPE 94-1, SIDE B                                                            
  Number 583                                                                   
                                                                               
 He said that funds coming in to it would probably be used for                 
 the underground storage tank program.                                         
                                                                               
 SENATOR ADAMS asked since we'll be in a deficit position                      
 within the budget is the Administration looking at replacing                  
 the $44 million into the General Fund that was placed in the                  
 470 Fund.  MR. TREADWELL referred him to page 2, paragraph 3,                 
 that says the fund balance now is approximately $37.5 million                 
 which is derived from a number of different sources including                 
 surcharges, general fund deposits, cost recoveries, fines, and                
 penalties.  He said that some funds from the mitigation                       
 account have been spent on what might be considered general                   
 fund activities.  So in some sense the general fund has been                  
 repaid.                                                                       
                                                                               
 SENATOR ADAMS asked the subcommittee to do the accounting on                  
 that.                                                                         
                                                                               
 Number 562                                                                    
                                                                               
 SENATOR ZHAROFF asked what other sources they would be looking                
 at.  MR. TREADWELL answered besides cost recoveries there are                 
 fines and penalties on noncrude spills.  Also, at this time                   
 they do not charge fees on industry contingency plans which                   
 costs several million dollars.  Financial responsibility                      
 filings do not cost them a lot to maintain, but it's an                       
 important part of their program.  There could be fees on both                 
 of those, he said.                                                            
                                                                               
 They are prepared to discuss the issue of interest on the                     
 spill reserve.                                                                
                                                                               
 SENATOR ZHAROFF wanted to see a breakdown of charges to the                   
 470 Fund.                                                                     
                                                                               
 Number 530                                                                    
                                                                               
 SENATOR ADAMS asked if the Fund does get split would they have                
 an opinion on it.  MR. TREADWELL said they would want to see                  
 more than 2 cents, because it wouldn't cover the cost of the                  
 program.  So they would definitely want input.                                
                                                                               
 SENATOR MILLER said they were running out of time and the bill                
 would be back before them and adjourned the meeting at 4:42                   
 p.m.                                                                          
                                                                               

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