Legislature(2003 - 2004)
04/05/2004 03:30 PM Senate RES
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ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
April 5, 2004
3:30 p.m.
TAPE(S) 04-36
MEMBERS PRESENT
Senator Scott Ogan, Chair
Senator Thomas Wagoner, Vice Chair
Senator Fred Dyson
Senator Ralph Seekins
Senator Ben Stevens
MEMBERS ABSENT
Senator Kim Elton
Senator Georgianna Lincoln
COMMITTEE CALENDAR
CS FOR HOUSE BILL NO. 486(FIN)
"An Act relating to reclamation bonding and financial assurance
for certain mines; relating to financial assurance limits for
lode mines; establishing the mine reclamation trust fund; and
providing for an effective date."
MOVED CSHB 486(FIN) OUT OF COMMITTEE
SENATE BILL NO. 378
"An Act relating to regulation of the discharge of pollutants
from timber-related activities under the National Pollutant
Discharge Elimination System; relating to waste treatment and
disposal permits; making conforming amendments; and providing
for an effective date."
MOVED SB 378 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 486
SHORT TITLE: MINING RECLAMATION ASSURANCES/FUND
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/16/04 (H) READ THE FIRST TIME - REFERRALS
02/16/04 (H) RES, FIN
03/01/04 (H) RES AT 1:00 PM CAPITOL 124
03/01/04 (H) Moved Out of Committee
03/01/04 (H) MINUTE(RES)
03/03/04 (H) RES RPT 7DP 1NR
03/03/04 (H) DP: STEPOVICH, GATTO, LYNN, GUTTENBERG,
03/03/04 (H) HEINZE, MASEK, DAHLSTROM; NR: KERTTULA
03/08/04 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/08/04 (H) Moved CSHB 486(FIN) Out of Committee
03/08/04 (H) MINUTE(FIN)
03/09/04 (H) FIN RPT CS(FIN) 9DP 2NR
03/09/04 (H) DP: MEYER, HAWKER, CROFT, MOSES, FATE,
03/09/04 (H) FOSTER, CHENAULT, HARRIS, WILLIAMS;
03/09/04 (H) NR: STOLTZE, JOULE
03/24/04 (H) TRANSMITTED TO (S)
03/24/04 (H) VERSION: CSHB 486(FIN)
03/26/04 (S) READ THE FIRST TIME - REFERRALS
03/26/04 (S) RES, FIN
04/05/04 (S) RES AT 3:30 PM BUTROVICH 205
BILL: SB 378
SHORT TITLE: POLLUTION DISCHARGE & WASTE TRMT/DISPOSAL
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
03/26/04 (S) READ THE FIRST TIME - REFERRALS
03/26/04 (S) RES, FIN
04/05/04 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
Ms. Janet Burleson-Baxter, Legislative Liaison
Department of Natural Resources
400 Willoughby Ave.
Juneau, AK 99801-1724
POSITION STATEMENT: Commented on HB 486.
Mr. Bob Loeffler, Director
Division Mining, Land and Water
Department of Natural Resources
400 Willoughby Ave.
Juneau, AK 99801-1724
POSITION STATEMENT: Commented on HB 486.
Commissioner Ernesta Ballard
Department of Environmental Conservation
410 Willoughby Ave.
Juneau, AK 99801-1795
POSITION STATEMENT: Supports SB 378.
Mr. Owen Graham, Executive Director
Alaska Forest Association
111 Stedman Street, Suite 200
Ketchikan, AK 99901
POSITION STATEMENT: Supports SB 378.
Mr. Jon Tillinghast
Sealaska Corporation
One Sealaska Plaza
Juneau AK 99801
POSITION STATEMENT: Supports SB 378.
Mr. Myrl Thompson
No address provided
POSITION STATEMENT: Commented on SB 378.
ACTION NARRATIVE
TAPE 04-36, SIDE A
HB 486-MINING RECLAMATION ASSURANCES/FUND
CHAIR SCOTT OGAN called the Senate Resources Standing Committee
meeting to order at 3:30 p.m. Present were Senators Thomas
Wagoner, Ben Stevens, Fred Dyson and Chair Scott Ogan. Senator
Ralph Seekins arrived at 3:43 p.m. The first order of business
to come before the committee was CSHB 486(FIN).
MS. JANET BURLESON-BAXTER, Legislative Liaison, Department of
Natural Resources (DNR), stated that the Senate version of this
bill, SB 339, passed out of this committee previously. The House
Finance Committee made one change on page 3, lines 7 and 11.
Chair Ogan acknowledged those. She said the department intends
to draft regulations to address any questions about the
financial instruments that are mentioned in the bill. The
amendment adds that it has to do that and the department
supports it.
MS. BAXTER explained further that there are three changes. State
law says that mining operations have to reclaim disturbed land
and was changed in the 1990s to accommodate predominantly a
placer mining industry. Large mining has evolved over the last
10 years. Currently, the cap for reclaiming disturbed acres is
$750 per acre, which works for the placer industry, but is
inadequate to reclaim a large mine. This bill keeps the $750 cap
in place for the placer industry and allows for a negotiated
settlement for a reasonable reclamation by the industry, the
applicant and the DNR. It also expands the number of financial
instruments the department can use for reclamation.
The state has some bonds in the $26 million range, but that is
on a voluntary basis; the state has no statutory authority to do
that. Thirdly, it provides for a trust that the bonding company
can put money into that over time accrues interest. DNR
anticipates having a number of instruments at the beginning of
an operation, but at the end of the project, predominantly cash
would be used from the accrued interest.
MR. BOB LOEFFLER, Director, Division of Mining, Land and Water,
Department of Natural Resources (DNR), said he was available to
answer questions.
CHAIR OGAN asked what financial tests a company would have to
undergo.
MR. LOEFFLER replied that they would be like a net worth
statement or the ratio of assets compared to liabilities. He
could also use a bond rating from Moody or Standard and Poor.
CHAIR OGAN asked if he anticipated factoring in the fluctuating
price of minerals.
MR. LOEFFLER replied no, because the bonds are to assure that
the state has the ability to reclaim the land should a company
default. The bonds become more important during the times of low
metal prices, because land costs the same to reclaim no matter
what the price of the metal is.
CHAIR OGAN asked if instead of having companies post a bond,
they could opt to provide other financial assurances.
MR. LOEFFLER replied yes and explained that this bill proposes
that they have an opportunity to provide financial assurance in
a variety of ways, the same thing as a bond. They could provide
a letter of credit, certificate of deposit, a corporate
guarantee that meets the financial tests, a surety bond or they
could actually provide cash in a trust fund. Typically, he would
expect a company to use a suite of those to meet the state's
bond requirements.
CHAIR OGAN exhorted him to do a good job.
SENATOR WAGONER moved to pass CSHB 486(FIN), version /D, from
committee with individual recommendations and attached fiscal
note. There were no objections and it was so ordered.
3:47 - 3: 48 - at ease
SB 378-POLLUTION DISCHARGE & WASTE TRMT/DISPOSAL
CHAIR SCOTT OGAN announced SB 378 to be up for consideration.
COMMISSIONER ERNESTA BALLARD, Department of Environmental
Conservation (DEC), presented SB 378. She said it will allow the
department to achieve their environmental goals while continuing
to streamline the department's permitting process. SB 378
instructs DEC to seek primacy for permitting timber-related
waste discharges under the NPDES [National Pollutant Discharge
and Elimination System] program, currently run by the federal
Environmental Protection Agency.
While SB 378 is a partial primacy bill, the department is
interested in full primacy and this is a very good first step.
It allows the department to move forward with primacy for an
industry sector in which it has great expertise and allows the
other industry sectors, seafood, mining, oil and gas and
municipal sewage, to see how the rules and regulations will work
and give them a chance to help develop a full approach to full
primacy by next year.
The Clean Water Act (CWA) is designed to support primacy by
states. Only five states, including Alaska, do not have primacy.
Failure to achieve it has imposed a double permitting burden on
the regulated industry in Alaska. Section 402 of the CWA is the
one that requires industry to have a permit for discharge.
Section 401 requires that permit to be certified by DEC to
maintain state water quality standards. DEC does the
certification for that primacy and EPA writes the permits. So,
the regulated community including all the municipal dischargers,
under the current dual permitting scheme need to deal with two
agencies where one should suffice.
One of the two most important benefits from achieving primacy
even just for the timber industry, is that it moves Alaska
closer to holding Alaskans accountable for environmental
protection. Through the missions and measures and annual budget
process, the Legislature and the Executive have an annual
opportunity where citizens can participate and the department
reports back to them on its effectiveness. That accountability
is not available to permit applicants, permit holders and
stakeholders with the EPA maintaining primacy. The planning and
budgeting for a federally run NPDES program do not offer an
opportunity for state participation and public comment or
control.
The second reason Commissioner Ballard thought it was important
to move forward on this issue is because the state's permitting
program, through its water quality standards, can focus on site-
specific risk-based individual results, not on the process of
permitting - an important difference. If any kind of tailoring
to the site and specific circumstance is required, that is
performed by the state through the 401 certification process.
CHAIR OGAN asked why she started with the timber industry.
COMMISSIONER BALLARD replied that it is her personal goal to
have the state venture into all industry sectors, but she was
unable to touch base with all the stakeholders in the time
available. Legitimate issues were raised throughout the
industries and it was agreed generally and specifically with the
timber industry that because the CWA allows for partial primacy
and that is the industry sector in which DEC has the obvious
superior expertise, that's a good place to start.
CHAIR OGAN asked her to explain what water discharges into the
field would happen in the timber industry.
COMMISSIONER BALLARD replied that log transfer facilities (LTF)
discharge bark into water under the facility and the primary
environmental impact is the smothering of the benthos [flora and
fauna found at the bottom of a sea or lake] community under the
accumulated wood waste; the primary potential impact to the
water column would be whatever breakdown might occur in the
marine environment of that wood waste.
CHAIR OGAN asked what the current protocol is for regulating it.
COMMISSIONER BALLARD replied that EPA has a general permit for
log transfer facilities and there are 98 of those. That permit
has a DEC certification with it. The reason DEC has the
expertise is because it spent three or four years negotiating,
debating and disagreeing and finally resolved what that permit
actually requires of the permit holders. During that time, DEC's
staff professionals had to understand what the impacts would be
and how to permit them.
CHAIR OGAN asked her to explain the fiscal note.
COMMISSIONER BALLARD replied that the principal expense in the
fiscal note occurs during the next two years with $300,000 each
year for temporary staff, Department of Law consultation and
support for those activities. A good deal of work needs to be
done for 10 industries in terms of reaching full primacy. Once
that happens, this is not an expensive program - $132,000 for
operating expenses, primarily one staff member in addition to
existing water program staff (about 25 people).
CHAIR OGAN asked if the department has program receipt
authority.
COMMISSIONER BALLARD replied yes and it also has a grant from
the EPA that is split into two years. Assuming primacy, the
department would have the same opportunity to charge fees for
the permits as with other permitting programs.
CHAIR OGAN asked if she thought program receipts would pay for
the whole program.
COMMISSIONER BALLARD replied that right now program receipts do
not pay the full costs of the other permitting programs. That is
always a subject of budget discussions with the Legislature.
MR. OWEN GRAHAM, Executive Director, Alaska Forest Association,
supported SB 378 for two reasons. One is that it helps insure
site-specific permitting decisions are made that take into
account the local Alaska conditions rather than some national
policy. Secondly, it's an opportunity to achieve the water
quality goals the state has while streamlining the permitting
process.
CHAIR OGAN asked if we would cut more trees with this bill. He
asked what the advantage would be since the feds are already
doing it.
MR. GRAHAM replied that about 100 LTF operations are permitted
through the EPA's general permit that expires next March. A
number of environmental groups tried to make it unusable to the
timber industry and he is nervous about its renewal. He thought
it had a better chance of being renewed if the state had
primacy.
MR. JON TILLINGHAST, Sealaska Corporation, supported SB 378. In
addition to the commissioner's points, he added that under the
status quo, Sealaska needs two permits for the same discharge,
one from DEC and one from EPA. To a large extent, Sealaska looks
at many of the same issues. Aside from the inherent waste in
that process, the problem is exacerbated by the fact that if
someone doesn't like the permit that eventually gets issued,
they can file not one lawsuit, but two. The state permit is
challenged through the state administrative hearing process and
the federal permit is challenged by a direct appeal to the U.S.
Court of Appeals through the Ninth Circuit. This is what
happened to the timber industry when the general permit was
issued.
Of the two processes, the state process is the better process.
It is a trial-type hearing that took about two years where folks
on both sides of the issue put together a collection of all of
the expert testimony that's available on the Pacific Northwest
of the possible harm that is or is not caused by the deposition
of bark on the ocean bottom. The issue had a thorough hashing
over.
At the federal level the same decision was rendered by the court
of appeals for the Ninth Circuit after hearing from the parties
for about 15 minutes per side on the same day as nine other
appeals. The Court of Appeals is not used to resolving factual,
technical and scientific issues.
In addition to what he considered a wasteful process before the
Ninth Circuit, he said there is always the risk of getting an
inconsistent result. DEC could reach one conclusion on the state
permit and EPA could reach a different one on the federal
permit. Lastly, they are dealing with the perception that the
Ninth Circuit has never been exceptionally sympathetic to Alaska
and to Alaska's needs. "All of that goes away with this bill, at
least for the timber industry."
Also, because it defederalizes the permit process, a lot of
other laws that bear upon the permit decision would no longer be
applicable.
The National Environmental Policy Act and the
possibility of having to do an environmental impact
statement on a state permit would go away because
there is no federal action. The Endangered Species
Act, the essential fish habitat statute, which is
driving all upland industries in the state would not
be applicable because there is no federal action to
consult over. The substantive concerns behind those
laws would still be there, because they are built into
the permits, themselves, but the expense and the time-
consuming and overlapping consultation processes would
go away.
MR. TILLINGHAST thought it would be shown to be a good deal for
all industries. Switching programs creates uncertainty and a lot
of other industries know how the process works at EPA, the known
evil, and maybe some aren't sure about what the unknown evil is
if DEC does it all. The timber industry has a simple regulatory
program and is ready to be taken over.
We are willing and happy to be the guinea pig. I think
when other folks look at how it works for us, I think
they'll want it done for them, as well. The other
reason to do it only for the timber industry is
fiscal. Because the state has gone through this two-
year process dealing with precisely the environmental
issues that are raised by timber permitting, they
already have the expertise onboard. They know more
about this issue than EPA does.
MR. MYRL THOMPSON, representing himself, pointed out that on the
streamlining part of the bill, he is assuming there would be
less public process and less chance for public testimony. Also,
LTFs have an acre under water in which to collect bark and they
are built in tidal areas where the bark can be pushed into other
areas. Commissioner Ballard indicated earlier that a hired diver
would inspect the debris to make sure that it would stay within
the one-acre area. He asked if the cost of the diver was
considered in the fiscal note.
MR. GRAHAM pointed out that the permit holders bear the cost of
any divers the EPA or the DEC require.
CHAIR OGAN indicated there were no more questions or comments.
SENATOR SEEKINS moved to pass SB 378, version A, from committee
with individual recommendations and attached fiscal note. There
were no objections and it was so ordered. There being nothing
more to come before the committee, Chair Ogan adjourned the
meeting at 4:10 p.m.
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