Legislature(2003 - 2004)

04/05/2004 03:30 PM Senate RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
     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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