Legislature(2003 - 2004)
03/12/2003 03:35 PM Senate RES
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* first hearing in first committee of referral
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+ teleconferenced
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ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
March 12, 2003
3:35 p.m.
MEMBERS PRESENT
Senator Scott Ogan, Chair
Senator Thomas Wagoner, Vice Chair
Senator Fred Dyson
Senator Ralph Seekins
Senator Ben Stevens
Senator Kim Elton
MEMBERS ABSENT
Senator Georgianna Lincoln
COMMITTEE CALENDAR
SENATE BILL NO. 116
"An Act relating to the emission control permit program;
relating to fees for that program and to the accounting of
receipts deposited in the emission control permit receipts
account; and providing for an effective date."
HEARD AND HELD
SENATE BILL NO. 44
"An Act relating to the recovery of the expenses of the
Department of Environmental Conservation that are incurred when
containing or cleaning up a discharge, release, or threatened
release of oil; and providing for an effective date."
HEARD AND HELD
HOUSE BILL NO. 69
"An Act relating to regulation of shallow natural gas leasing
and closely related energy projects; and providing for an
effective date."
SCHEDULED BUT NOT HEARD
PREVIOUS ACTION
SB 116 - No previous action to record.
SB 44 - No previous action to record.
WITNESS REGISTER
Commissioner Ernesta Ballard
Department of Environmental Conservation
410 Willoughby
Juneau, AK 99801-1795
POSITION STATEMENT: Presented SB 116
Mr. Tom Chapple
Director, Air and Water Quality
Department of Environmental Conservation
410 Willoughby
Juneau, AK 99801-1795
POSITION STATEMENT: Answered questions about the Emission
Control Program
Ms. Marilyn Crockett
Alaska Oil and Gas Association (AOGA)
121 West Fireweed Lane
Anchorage, Alaska 99503
POSITION STATEMENT: Supports the concept of SB 116
Ms. Charlotte MacKay
3105 Lakeshore Dr.
Building A, Suite 101
Anchorage, Alaska 99517
POSITION STATEMENT: Testifying on her own behalf in support of
SB 116.
Mr. Tadd Owens
Resource Development Council
121 W. Fireweed, No. 207
Anchorage, AK 99503
POSITION STATEMENT: Supports SB 116.
Mr. John Kuterbach
Division of Air & Water Quality
Department of Environmental Conservation
410 Willoughby
Juneau, AK 99801-1795
POSITION STATEMENT: Gave a sectional analysis of SB 116
Senator Donald Olson
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor of SB 44
ACTION NARRATIVE
TAPE 03-13, SIDE A
Number 0001
CHAIR SCOTT OGAN called the Senate Resources Standing Committee
meeting to order at 3:35 p.m. All members were present except
Senator Lincoln, who was excused. The committee took up SB 116.
SB 116-EMISSION CONTROL PERMIT PROGRAM
COMMISSIONER ERNESTA BALLARD, Department of Environmental
Conservation (DEC), provided the following description of SB
116. This legislation is a proposal to streamline the permitting
process. Over the last 30 years, much has been learned about the
environmental and health hazards associated with air pollution,
emission control technologies, air modeling and, most
importantly, about the necessary protective ambient air
standards. Through national and state legislation, DEC has
recognized shared values of environmental protection, along with
many other core values enshrined by the legislature in state
law. These values form the framework for government regulatory
programs.
COMMISSIONER BALLARD told members that environmental protection
is not incompatible with resource development; it is a
fundamental component of resource development as are labor and
worker safety laws. Governor Murkowski is committed to enhancing
Alaska's economy through resource development and he is equally
committed to protecting Alaska's environment. A strong economy
will generate the revenue needed to continue funding important
regulatory programs. Governor Murkowski and his cabinet
recognize that Alaska's laws form the framework for a successful
resource development program. Environmental laws are one of the
essential pieces of a public policy mosaic. They are no more and
no less important than the other pieces. SB 116 will improve
the process and the function of the underlying state policy to
protect the environment. It will not in any way change the
protective standards.
COMMISSIONER BALLARD told members through DEC's proposed fiscal
year 2004 budget, DEC intends to sharpen its focus on its core
responsibilities, air permitting being one. SB 116 is essential
to achieve the results promised in its budget proposal.
COMMISSIONER BALLARD said the federal Clean Air Act and the
Environmental Protection Agency (EPA) rules have been amended
several times in recent years to establish new programs and
control concepts. Alaska's state permitting program has not kept
pace with the national regime and, more importantly, it has not
kept pace with the needs of Alaskan communities and industry.
Alaska must have a predictable permitting process that is
protective of air quality. In the past, DEC has not been able to
mesh its federal programs well with the needs of the remote,
isolated and small communities in Alaska. DEC seeks to be
flexible and timely enough to take advantage of fast changing
business opportunities, particularly on the North Slope. SB 116
does both. It provides the tools DEC needs to work with Alaska-
specific isolated geography and tools to meet the challenges of
industry.
COMMISSIONER BALLARD said specifically, SB 116 creates a
predictable, timely and rational permitting program. It
differentiates major pollution sources from minor sources. It
regulates minor sources with standardized permit conditions
based on best management practices. DEC's present permit by rule
program works in the oil industry for the drilling rigs. DEC
wants to expand that concept of permit by rule to include more
situations. DEC has more mobile and portable plants and
machinery than most states and issues more Title 5 permits than
Colorado and more PSD permits than the state of New Jersey. DEC
needs appropriate tools to work with Alaska's very unusual but
essential mobile fleet. SB 116 provides those tools and allows
DEC to exempt sources from permitting to the extent allowed
under federal law. It achieves efficiency in permitting through
adopting federal rules by reference, making it easier for DEC to
permit rural power plants. DEC will be able to use the clean
unit test to avoid a detailed site-by-site technology analysis
now required for every rural plant.
COMMISSIONER BALLARD told members that currently, Alaska is
regulating minor sources in the same way it manages major
sources of air emissions. SB 116 establishes a permit program
for minor air pollution sources, when it is needed to protect
ambient air quality and health. This single improvement in
permitting minor sources will be widely recognized as
significant permit streamlining. DEC worked with a stakeholder
work group last fall that recommended this and other changes and
will herald the incorporation of these changes into state law.
SB 116 makes an important revision to the permit fee structure.
It changes the present hourly permit administration fees to flat
fees whenever possible. This single change will allow permittees
to predict in advance both community permittees and industrial
permit applicants. They will know their permit costs in advance
and plan for those costs in their budget cycle.
COMMISSIONER BALLARD told members SB 116 is the result of two
very important efforts DEC concluded at the end of the last
calendar year. The first was a several year benchmarking effort
in which other states' permit programs were evaluated and
compared to DEC's permit programs. DEC determined it needed the
benefit of statutory changes, which will be accompanied by
regulatory changes. DEC will need a staff increase to meet the
standards maintained in other states. The other effort this bill
reflects is the effort of the stakeholder work group, an effort
facilitated by Brian Rogers and concluded in a report made
available to committee members.
COMMISSIONER BALLARD said she is proud to propose legislation
that she believes reflects the best practices in other states
and also reflects the wishes and expectations of the work group
comprised of those who need air permits to succeed in Alaska.
She noted that Tom Chapple and John Kuderbach of DEC were
available to answer questions.
SENATOR WAGONER questioned why SB 116 requires an increase in
the number of staff at DEC if the legislation will make the
permit process more efficient.
COMMISSIONER BALLARD said DEC concluded, from its benchmarking
study, that it has not put adequate manpower into its permitting
programs, both in the field to understand site-specific
circumstances, and in the office to do the work. The tools that
those individuals will require also need to be sharpened through
statutory reform. For example, DEC will need to be able to
incorporate federal rules more quickly and more efficiently.
That is accomplished through a statutory change. In addition,
DEC needs a larger work force to accommodate the very large work
burden of air permitting in the state. Those are both
requirements of DEC's proposed budget and the Governor's
requested legislation.
CHAIR OGAN said he shares Senator Wagoner's concern. He asked if
most of SB 116 contains technical changes to conform to federal
definitions, while the section that will require extra staff is
on page 14. He also asked if the additional costs of the fiscal
note will be recovered from emission fees.
COMMISSIONER BALLARD said those costs will be recovered from
permit fees.
CHAIR OGAN asked if the emission fees are charged on a per ton
basis of the emission of pollutants. He noted the bill changes
the word "contaminant" to "pollutant." He asked her to address
the provision on page 14.
COMMISSIONER BALLARD said the language on page 14 refers to
emission fees. She said the good news is that DEC's emission fee
income is declining because emission fees are based on
emissions. The implementation of better control technology has
lowered emissions throughout the state. The manpower changes
within DEC will be offset by an increase in the permit fee
charged to issue a permit.
COMMISSIONER BALLARD explained that one reason it is so
important for DEC to have adequate field staff is to reflect the
unique circumstances in Alaska. In the instance of air
emissions, those circumstances are particularly unique and do
not apply anywhere else in the country. Alaska has permafrost,
which sometimes results in a larger project footprint than in an
area that only requires digging to construct a single
foundation. Sealift in harbors is also common in Alaska and
requires larger storage capacities. DEC needs to use the
flexibility provided in the federal rule to the maximum and
incorporate it into its standards to reflect its unique
circumstances. DEC found, in its benchmarking study, that to
accomplish that, DEC has less staff than states with a fairly
similar permitting burden. She repeated that DEC's permitting
workload is comparable to or greater than any state in the
nation for its size because Alaska does not have a power grid.
The air emission control program is one of the most important to
economic development and environmental protection in the state.
If Alaska had a power grid, this would be a relatively minor
issue.
CHAIR OGAN noted that Governor Murkowski told the Legislature
that if it increases the budget in any component, it must
decrease it elsewhere. He asked if DEC is planning to offset the
$900,000 fiscal note by raising the cost of processing permits
through an increase in permit fees, which is essentially a user
fee for developers. He referred to the language on page 14, line
2, and pointed out it says "these shall be recovered from
emission fees under AS 46.14.258 for the following services." He
asked if DEC is charging for those services now or whether they
are new charges.
COMMISSIONER BALLARD said DEC charges for those items now. Many
of the permit applications are for community power plants. DEC
does not exclusively provide this service to industry. It is a
necessary component of permitting all sources of emission. The
permit program will cover its costs through permit fees, as it
does now.
CHAIR OGAN asked if DEC is requesting any additional
authorization for program receipts to cover the $900,000 cost.
COMMISSIONER BALLARD said the fiscal note shows exactly what
positions will be necessary.
CHAIR OGAN said that basically, SB 116 appears to contain
technical changes to the law. He suggested requesting additional
positions in the Governor's operating budget.
COMMISSIONER BALLARD said all of the positions are in the
operating budget proposal. However, a statutory change needs to
occur to allow those positions to be as effective as possible.
DEC's present statutes and regulations established a program
that does not meet the needs of Alaska's communities and
industries because they contain terms that are inconsistent with
federal terms. That inconsistency makes it difficult for DEC to
adopt, by rule, federal changes. The inconsistency requires DEC
to go through a lengthy site-by-site or permit-by-permit
process. DEC will charge more to cover the cost of its staff
increase, however it would not be appropriate to charge more for
an outdated program so the statutory changes are necessary. She
explained that in the spirit of the Governor's request that
increased costs to budget components be offset by decreases
elsewhere, DEC's budget contains a fairly significant reduction
of other activities in order to focus on this effort. DEC has
proposed a net reduction of positions in order to accommodate
the growth of this core program.
CHAIR OGAN asked why DEC provided a fiscal note if this
increased cost is being "washed out" by other cost savings.
COMMISSIONER BALLARD said the fiscal note fulfills DEC's
requirement to communicate to the Legislature the precise fiscal
impact of the legislation. Even if DEC raises its permit fees,
it needs the Legislature to appropriate increased revenue. She
noted that a requirement of the federal Clean Air Act is that
the program fees cover the cost of the program.
SENATOR ELTON asked if SB 116 will only cover stationary sources
of emissions and not apply to cruise ship emissions.
COMMISSIONER BALLARD deferred to Tom Chapple for an answer.
MR. TOM CHAPPLE, Director of the Division of Air and Water
Quality, DEC, told Senator Elton that SB 116 does not change
anything relative to cruise ships; it addresses stationary
sources that require permits.
CHAIR OGAN asked if SB 116 makes any substantive changes.
MR. CHAPPLE replied that the terminology changes will change
terms in state law to comport with federal terms. That major
feature of the bill will allow DEC to streamline the program by
both adopting the federal rules and the court cases behind the
federal rules. He explained that whenever a question arises
about what a term means when DEC is implementing a permit,
people do not have to ask whether DEC's terms differ from terms
in the decisions made in four court cases. Using the same
terminology will save costs to both industry and the state.
CHAIR OGAN asked why, in spite of the streamlining, the program
will cost more.
MR. CHAPPLE told members that SB 116 is a step forward toward
timely, responsible, predictable permits. DEC's past record for
construction permits, which are required to build a new mine or
power plant, takes an average of 254 days. That is not timely.
SB 116 will allow DEC to accomplish efficiencies through
streamlining but that alone will not enable DEC to issue permits
in 90 to 120 days, which would be timely.
CHAIR OGAN said his line of questioning reflects his concern
about the "disconnect" between the bill and the fiscal note. The
bill will streamline the permit process by changing terminology
to comport with federal rules, but it necessitates additional
employees.
COMMISSIONER BALLARD said if DEC does not make both changes, it
could not achieve the promised result. Both changes were
presented together because DEC believes they are inseparable. It
would be pointless to put more manpower into the existing permit
program because it is cumbersome and does not achieve for the
permit holder the opportunities to conform to federal programs.
SB 116 alone will not allow DEC to achieve the efficiencies
because it will not have the manpower to use the better tools.
DEC believes they belong together and, in the interest of full
disclosure, they ought to be presented as one piece. SB 116 is
necessary to gain the efficiencies that the manpower will use;
the manpower is needed to make the bill real.
SENATOR SEEKINS asked if SB 116 will enable DEC to use the same
terminology as the federal government so that SB 116 in itself
will not create additional expense, but implementing it to
reduce the permit process time will require additional staff.
COMMISSIONER BALLARD said that is correct. Certain requirements
in the bill will, in and of themselves, require additional
effort, which DEC believes will be beneficial. That entails
reallocating minor sources to a permit-by-rule category and
writing some new general permits. Some of the work associated
with this bill is over and above DEC's current permitting
regime. That alone will not achieve the result expected by the
communities and industries that need these permits.
SENATOR SEEKINS noted the funding source identified on the
fiscal note is the 1093 Clean Air Protection Fund*. He asked
what the asterisk signifies.
MR. CHAPPLE explained that the user fee revenues are deposited
into the Clean Air Protection Fund. That dedicated fund was
created in Alaska law in 1993 because the Clean Air Act requires
the operating permit program to be a dedicated fund. DEC
realized since then that only the operating permit program is
supposed to have dedicated protection. The revenues generated
from construction permits and minor source permits should go
into a different fund - the Emission Control Permit Fund. SB 116
will create that new fund. The asterisk signifies the year 2006
because that is when DEC believes the funds need to be split.
Until DEC accomplishes the permit reforms, it will be impossible
to say how much should go into each pot.
CHAIR OGAN referred to page 2 of the fiscal note and read,
"...the accounting for the air permits will change to align with
requirements of the Alaska Constitution...." He asked what part
of the current program is out of alignment with the Alaska
Constitution.
MR. CHAPPLE answered under the Alaska Constitution, a dedicated
fund can only be established if it is required under a federal
law provision. This change will allow only the fees from the
operating permit program to go into the Clean Air Protection
Fund to align with federal law. Right now, the fees from
construction permits and operating permits go into that fund and
that is not consistent with the Alaska Constitution.
CHAIR OGAN asked why that is being done.
MR. CHAPPLE said DEC is trying to correct the problem.
CHAIR OGAN asked what portion of the bill addresses the
dedicated fund.
MR. CHAPPLE said that is in Section 34 on page 17.
CHAIR OGAN asked if changing the conforming language in
regulation will be a one-time expense.
COMMISSIONER BALLARD said that is correct. She explained that
the fiscal note anticipates DEC's fiscal year '04 budget
request. It is conceivable that DEC will need a different
staffing configuration or number in later years.
There being no further questions, CHAIR OGAN took public
testimony.
MS. MARILYN CROCKETT, Deputy Director of the Alaska Oil and Gas
Association (AOGA), told members that an AOGA representative
participated in DEC's stakeholder work group that put together a
package of recommendations to streamline and enhance the air
emissions permit program. The group met on a regular basis over
a four-month period and wrestled with the problem of reduced
emission fee revenues and the challenge of timely issuance of
permits. Members unanimously supported the work group's report,
issued in December. The commissioner has adopted that report; SB
116 is one result. AOGA has not had the opportunity to
scrutinize the bill, but she understands, from the briefing she
received from Mr. Chapple and Mr. Kuterbach, that the intent is
to implement those recommendations. If SB 116 accomplishes that
intent, AOGA supports it and applauds DEC for proposing it. She
advised members that AOGA might propose some minor changes to
the legislation. AOGA agrees that the statutory changes will
allow DEC to adopt a more federalized-looking permit program,
which will resolve a lot of the problems that come up on
individual permits.
CHAIR OGAN informed Ms. Crockett that the committee will hear SB
116 in about two weeks and asked her to submit comments by that
time.
MS. CHARLOTTE MacKAY, representing herself, told members that SB
116 removes the necessary obstacles to allow DEC to adopt the
work group's recommendations. The work of restructuring is yet
to be done and she believes the fiscal note will help enable the
process to continue. She said DEC has been very open and
receptive to outside suggestions. She believes that by following
the work group's recommendations, DEC will be able to maintain
its high level of protectiveness while concurrently creating a
more responsive and predictable air permit program.
MR. TADD OWENS, Executive Director of the Resource Development
Council (RDC), said that although the RDC did not formally
participate in the work group, several RDC members had direct
participation in that process. The RDC is pleased to see DEC and
the Administration come forward with SB 116 to implement the
recommendations from that work group. The RDC believes SB 116 is
part of a comprehensive effort to streamline the state's
permitting systems. He made two comments in regard to the fees:
It's our understanding that under the old air program,
those fees that were charged on an hourly basis will
now fall under the old HB 361 that was passed several
years ago. Under that fee structure, the RDC supports
very strongly. I would also like to commend DEC for -
the committee has discussed the fiscal note of this
bill and I believe Commissioner Ballard noted that the
overall DEC budget reflects that there's a gain in
this program and they've made adjustments in other
areas to make sure that their overall budget request
has come in flat. We very much appreciate their
efforts on that behalf as well.
CHAIR OGAN asked if he is aware of any discussion about who will
bear the cost of the increase in user fees.
MR. OWENS replied that it is the RDC's understanding that the
fees that were previously charged on an hourly basis for
construction and operating permits will now fall under the
legislation that the RDC and its members spearheaded several
years ago. The RDC feels very comfortable with the sideboards
that legislation puts on fees charged to permit applicants. The
RDC also feels very comfortable with the division between the
costs borne by the private sector and the overhead costs borne
by DEC.
There being no one else wishing to testify, CHAIR OGAN asked for
a sectional analysis of the substantive changes that will be
made if the legislation is enacted.
MR. JOHN KUTERBACH, manager of the Air Permits Program, gave the
following explanation of specific sections of the bill.
Section 12 (page 5) makes two changes. It allows DEC to exempt
operations from getting an operating permit to the extent
allowed under federal law. Under DEC's current statute, if EPA
exempts a source, DEC is to follow suit. However, it does not
specify what to do when EPA's decision is pending. Federal law
allows DEC to exempt an operator under that scenario; Section 12
allows DEC to follow that federal law.
He explained that federal law lists a class of sources for which
EPA is supposed to decide whether a permit is required. EPA has
not yet made a decision on most of those categories of sources
but it allows states to defer permitting.
CHAIR OGAN asked what would happen if DEC takes a more liberal
interpretation of the law than the federal agency and whether
DEC can back-pedal if it has issued a permit.
MR. KUTERBACH explained that would fall under DEC's Title 5
permit program so DEC would submit a proposed regulation to EPA
for approval. He then continued with the sectional analysis.
Section 12 also requires permits for the minor [source] permit
program that are categorized under regulation.
Sections 13 and 14 establish the minor permit program. The
language that requires permitting of minor sources from the
major source permitting programs is removed in Section 13. It is
re-established under Section 14 as the minor permit program to
provide a clear distinction in statute between the major source
permitting program, which will cover construction and operating
permits, and the minor source permitting program.
CHAIR OGAN asked for a description of the differences between
the two programs.
MR. KUTERBACH said the major source permitting programs are
actually set up in the Clean Air Act for operations with a large
potential for major sources of air pollution. The federal rules
contain what is called, "new source review," which includes
prevention of significant deterioration (PSD) permits for large
industrial operations or large increases of pollutants at
existing operations. The permitting process for those operations
is very extensive; the permits are referred to as Title 5
permits. They are for operations with large sources of pollution
or sources subject to federal regulation that may apply to
smaller units. It is on those smaller unit federal emission
standards that EPA must decide whether an operating permit is
required. Those sources would be deferred.
SENATOR BEN STEVENS referred to language on page 5, line 21, and
asked whether the phrase, "has the potential to emit" is in
federal law.
MR. KUTERBACH said it is.
SENATOR BEN STEVENS asked how that determination is made.
MR. KUTERBACH said the evaluation is based on the actual
measured ability of sources to emit pollutant and on some
assumptions about how those sources would operate. The federal
definition, which DEC would incorporate by reference, bases it
on the maximum amount of emissions the facility could emit in
one year based on the design of the equipment and any approved
limitations to that emission.
SENATOR BEN STEVENS expressed concern that the words, "has the
potential to emit" are very ambiguous and asked whether DEC must
follow strict guidelines in that evaluation.
TAPE 03-13, SIDE B
SENATOR BEN STEVENS noted he has the potential to be as wealthy
as Warren Buffett but he doesn't know whether he'll realize that
potential.
SENATOR ELTON said he hopes so.
CHAIR OGAN asked if DEC hires consultants or has engineers on
staff to make that determination.
MR. KUTERBACH said the evaluation is technical in nature and is
based on the engineering design of the equipment and the maximum
ability of that equipment to emit pollutants. He noted that
physical principles are involved.
SENATOR BEN STEVENS thanked Mr. Kuterbach for the clarification.
He then asked why the phrase, "as having the potential to
violate the ambient air quality standards" was deleted on lines
26-27.
MR. KUTERBACH explained that the technical evaluation of having
the potential to violate ambient air quality standards has a
much less technical basis behind it. It is very easy to measure
the exhaust of a boiler and multiply that measurement by hours
and days. It is much more difficult to predict how that
pollution will distribute through the atmosphere and possibly
violate ambient air quality standards.
SENATOR BEN STEVENS commented that in his way of thinking,
having the potential to emit is essentially the same as having
the potential to violate the ambient air quality standards but,
because technical guidelines are used, he would not press the
matter further.
MR. CHAPPLE told members that the language on both lines 17 and
21 that mention the 100 tons per year and potential to emit 250
tons per year are based upon federal law, which defines those as
large sources. The Clean Air Act is based on the premise that
states need to identify what sources have the potential to
violate ambient standards and manage those sources. In the past,
DEC has lumped both small and large sources together under the
construction and operating permit program. Those are being
separated in SB 116. He stated:
And so, ones that have the potential to violate
ambient standards tend to be the smaller ones even
though the bigger ones will too. It's just not as -
the federal law says clearly when you're above this
amount, you have the potential to be a major source
and the potential to violate health standards. It's
the smaller ones - it's where we have done other work
to say a source smaller than 100 tons in this
situation, or this type of source, could violate
public health standards and therefore put them into
the minor source permitting program. We think that's
an improvement because we can streamline the minor
source permitting. That's the separation that's
occurring in this section, Senator Stevens.
SENATOR BEN STEVENS then referred to Section 3(b)(4) on page 2
and noted that a new section AS 46.14.130(c)(2) is being added.
He felt that language is ambiguous. He asked if Section 14 (page
6) contains the reasons for issuing a minor permit and expressed
concern that the phrase, "the potential to violate" gives DEC a
lot of latitude.
MR. KUTERBACH said that language does give DEC a lot of
latitude, however, the language on page 2 deals with those
regulations that must go through special procedures in order to
be adopted by DEC. The special procedures include a peer review
of DEC's determination of the need for that regulation.
SENATOR BEN STEVENS asked if Section 3 on page 2 pertains to
regulations.
MR. KUTERBACH said that is correct. He explained the intent of
Section 3 is to update the cross-reference. DEC currently has
this broad language about the public health effects distributed
both in the construction and operating permits. That is what is
cross-referenced in Section 3 on line 25. It removes the old
cross-reference and puts in a new cross-reference. AS
46.14.010(b) or Section 3 specifies that certain types of DEC
regulations must go through extra procedures in order to be
adopted.
SENATOR BEN STEVENS said it looks to him like SB 116 streamlines
and will be more definitive but yet adds a new subsection, which
is very broad.
CHAIR OGAN suggested that Senator Stevens meet with Mr.
Kuterbach to discuss the matter.
MR. KUTERBACH continued with his sectional analysis.
Section 15 adds a phrase that recognizes that DEC does not want
to use the same processes for minor source permits that it uses
for the major source permits and adds an exception to the types
of regulations that DEC has to adopt in order to implement the
permit program. Minor source permits are exempted. That allows
DEC to decide what is most appropriate for the type of minor
permit that regulations are being developed for.
Section 17 eliminates an application deadline. The current
operating permit program has two application deadlines: one for
existing facilities and another for new facilities that do not
require construction permits. The second application deadline is
not in federal law and it only applies to minor facilities that
need an operating permit but not a construction permit. Since
the minor permits will be pulled out, very few facilities would
fall under this deadline so DEC recommends that it be removed.
Section 20 is new. It adds a deadline for issuing minor permits.
Section 23 recognizes that a public comment process will be
unnecessary for a majority of the minor permits and refers to
the ad judicatory hearing requirement only if a public comment
process is required or solicited.
Section 25 is a new section that specifies requirements for
general minor permits. DEC currently has a section under AS
46.14, which allows general permits. That language comes from
federal rules for major permits and does not recognize
explicitly that the permit can be valid for operations that are
mobile. The intent is to explicitly say that the general permit
can be used for operations that move around. However, because
the other language is important for the major source permitting
program, it was retained.
Section 26 adds a phrase required by federal language for the
major operating program and specifies that is what the
restrictions are for.
Section 28 changes the fee structure from hourly fees to the
flat fees based on AS 37.
CHAIR OGAN asked which are greater.
MR. KUTERBACH said most people would say the hourly fees are
greater. He continued.
The current AS 46.14.240 contains an explicit list of what
services hourly fees can be charged for. Section 28 changes that
to the flat fees. Section 30 says that DEC is not allowed to
directly charge qualified small businesses for some of those
permit services under federal Title 5 mandates. Those services
must be paid for from emission fees.
Section 31 pertains to a change on page 15, line 31. At present,
DEC is supposed to periodically review its fees every three
years. AS 37 requires that review to occur every four years.
Section 31 changes the three-year requirement to four years for
the sake of consistency.
Section 32 changes the current statutory requirement to use
emission fees for cost recovery from operating permits only. It
specifies that emission fees will also support the
implementation of minor permits or construction permits.
Section 34 establishes a new receipts account. When the
construction permit fees and minor permit fees are separated out
of the dedicated fund, they will be placed in this new account.
Section 35 simply adds minor permits to DEC's authority to
terminate, modify, or revoke permits.
Sections 48 through 60 contain the permit definition changes. In
every case, DEC has tried to replace the department term or
definition of a term with its federal equivalent. One exception
is Section 59, which adopts the federal definition of
"stationary source," which corresponds to the Alaska definition
of "facility." However, the Alaska definition has one unique
situation not covered in the federal definition, that being that
Alaska has both floating and onshore processors. DEC's current
statute treats them the same. The state definition explains that
a vessel can also be considered a facility if it is engaged in
an industrial operation. The federal rule does not make that
distinction so it has been retained so that onshore and offshore
processors are treated the same under the permit program.
CHAIR OGAN asked why that is being done.
MR. KUTERBACH said it retains the decision made in 1993 to treat
them the same way.
SENATOR ELTON said his guess is that was done to make sure there
is an equal playing field between those who have invested
onshore and those who have not.
CHAIR OGAN asked if DEC currently gets emission fees from
vessels.
MR. KUTERBACH said this covers what DEC currently does; it will
not add any new facilities. If DEC were to change to the federal
definition without including offshore processors, they would no
longer be regulated under the permit program. He explained that
Sections 61 through 63 provide for the transition period. While
SB 116 removes a lot of impediments to streamlining, DEC will
have to promulgate regulations to get the minor permit program
established and up and running. These sections provide for that
time period. Sections 64 through 66 address the effective dates.
The majority of the changes become effective immediately. The
sections changing the fee from an hourly fee to a flat fee take
effect January 1, 2005 to give DEC time to determine what the
flat fees should be and to establish the necessary regulations.
Section 66 establishes that the separation of the dedicated fund
will occur in 2006.
4:48 p.m.
CHAIR OGAN thanked the DEC participants and closed the hearing
on SB 116. The committee took up SB 44.
SB 44-OIL SPILL RESPONSE COST RECOVERY
SENATOR DONALD OLSON, sponsor of SB 44, said he introduced this
measure in response to concerns that in certain circumstances,
the Department of Environmental Conservation (DEC) needs more
flexibility to recover the actual costs of oil spill containment
and clean up. Under the current statutes, DEC is required to
promptly seek reimbursement for the state's oil spill response
costs from persons or entities that have caused or are liable
for the spill. The current statutes do not allow DEC to adjust
or waive reimbursement requirements in situations where the
costs far exceed the financial resources of the individual or
the responsible entity. The resulting financial constraints
could cause serious social impacts that affect essential local
government programs.
SENATOR OLSON explained that DEC currently utilizes the scope of
the attorney general's authority to waive or reduce oil spill
recovery costs. The attorney general has to determine these
actions without specific regulatory guidelines or standards that
are known or available to the public, resulting in inconsistent
actions. For example, Little Diomede is on a payment program for
34 years for a spill, as compared to Tetlin and Stevens Village
where the attorney general decided not to pursue those cases so
that staff time could be used in a more beneficial manner. SB 44
provides a process whereby DEC can consider waiving or reducing
the reimbursement requirements in special circumstances in a
consistent manner. The process relies on the explicit public
interest findings by DEC where a reduction or waiver is
warranted.
SENATOR OLSON said the provisions in SB 44 allow DEC to consider
waiving costs in the following circumstances:
· where the expenses are not recoverable, such as from a
federal source of funds
· where an individual is responsible for a tank system
containing residential heating fuel for less than five
families
· for an unincorporated community, a village, or a
municipality with a population of less than 5,000
· where the expenses incurred by DEC are less than $3,000
SENATOR OLSON stressed that SB 44 does not allow blanket
exemptions or automatic waivers.
SENATOR DYSON asked if Senator Olson's intent is consistency.
SENATOR OLSON said consistency is one of his goals, as well as
creating a "black and white" way to make determinations. In
addition, his intent is to prevent the attorney general's work
schedule from being burdened by time spent trying to determine
the feasibility of recovering the costs. He noted one community
is on a 34-year payment plan while another, that is more vocal,
is paying nothing.
SENATOR DYSON said his reading of SB 44 is that Senator Olson is
also hoping that some communities will not have to pay the full
cost of any amount of the damage.
SENATOR OLSON said that is an extreme view of what SB 44 does.
However, it gives DEC the discretion to decide whether it is
worth trying to recover the costs, depending on the financial
situation of the violator. He pointed out that DEC will expend
money trying to collect over a protracted time period in some
cases. He said the fact that Little Diomede will be paying
interest for 34 years on a small amount of money does not make
sense. Right now, DEC has no discretion.
SENATOR DYSON said if DEC waived the costs for the two villages,
it must have the capacity to forego charging a community for the
cost of the oil recovery.
SENATOR OLSON noted Senator Dyson's concerns are valid. He said
he cannot find any written guidelines used by DEC to make
determinations, which is the reason for SB 44. He said his
intent is not to exempt someone who is responsible for an oil
spill if that person or entity is capable of paying.
SENATOR DYSON asked Senator Olson if he considered, when looking
for a remedy, bankruptcy protections.
SENATOR OLSON said the original statute does not make it any
easier to shrug the costs associated with oil spill cleanup for
someone who files bankruptcy.
SENATOR BEN STEVENS referred to language on page 2, Section 2,
and questioned why a municipality with a population under 5,000
can be exempted. He pointed out that a municipality of that size
could have very large oil tanks.
CHAIR OGAN then questioned the provision that says, "if the
expenses incurred by the department are less than $3,000," and
asked if that includes the cost of clean up.
SENATOR OLSON noted the thought behind the waiver for a
municipality with a population of 5,000 or less was that a
municipality could be a second-class city.
SENATOR BEN STEVENS said that few communities have a population
above 3,000.
CHAIR OGAN said Palmer just recently broke the 5,000-resident
population barrier within its city limits.
SENATOR BEN STEVENS said he is curious why that number was used
because some areas on the road system have a commercial entity
that operates the distribution network. He asked if such an
entity would be exempt under SB 44.
SENATOR OLSON said any town in Alaska with a population of 5,000
is considered to be sizeable but many of Alaska's rural
communities are poised to grow. However, the intent of SB 44 is
to give DEC broad discretion. He said he assumes Palmer is a
first class city with different requirements and guidelines.
SENATOR SEEKINS asked for the definition of an "unincorporated
community" and whether that could include a commune. He
expressed concern that the bill "opens the barn door wide."
CHAIR OGAN was unsure whether a definition of "unincorporation
community" exists in statute.
SENATOR OLSON said a definition exists but he did not have it at
this time.
SENATOR ELTON said he agrees with Senator Olson's intent to give
more latitude to DEC, but he expressed concern that the
provision that limits DEC's expenses to $3,000 is too
restrictive. He pointed out if a small spill of residential
heating oil occurred in King Cove, the cost of travel and per
diem would run about $3,000. He questioned whether SB 44 will
create a situation where the legislature is telling DEC that if
the cost is over $3,000, it has no latitude and must recover
costs.
SENATOR OLSON agreed that is a valid concern, but said the bill
does not state that DEC must take action if the cost is less
than $3,000.
SENATOR ELTON said if travel costs are $3,200 or $3,300, DEC
will have to make an attempt to recover fees.
CHAIR OGAN asked a representative from DEC to answer questions.
MR. LARRY DIETRICK, Acting Director of the Division of Spill
Prevention and Response for DEC, read the following testimony
into the record.
DEC is required by statute to seek reimbursement for
its expenses in cleaning up or containing the
discharge of oil or hazardous substance. Alaska
statutes, like the federal laws and laws of most other
states, are based on the principle that the spiller
pays for the cost of clean up. It is a self-sustaining
mechanism by which costs incurred by the state are
recovered from the spiller and returned to the state's
response fund to ultimately avoid the use of public
funds for clean up.
CHAIR OGAN asked if that is the 470 fund.
MR. DIETRICK said it is. He continued.
The department very much appreciates being able to
work with the sponsor of this legislation to examine
ways to provide exceptions or guidelines to this
spiller pays, self-sustaining principle established in
the statutes. We have been working with the sponsor.
We appreciate his intent to provide some guidelines.
It's not an easy thing to do and we have been
interactive with him in an attempt to try to get a
system to meet his intent. It will help us all to
provide the clarity that we are trying to see.
This bill would establish, in our opinion, certain
exemptions for certain types of discharges and it sets
a threshold below which the department would not
recover costs. Currently we do take into account the
ability to pay, the potential costs to the state of
pursuing reimbursement or other mitigating factors
when determining whether or not to pursue cost
recovery in any given case. We currently exercise this
discretionary authority on a case-by-case basis.
After careful consideration, we've concluded that
establishing the exemptions as currently proposed, and
the threshold below which no cost recovery is
authorized will shift the cost of clean up to the
state along with the corresponding fiscal impacts.
Exemptions and thresholds we believe remove some of
the flexibility we have right now to seek recovery of
costs based on the circumstances of each case. While
we appreciate the idea of getting good guidelines and
would welcome those guidelines, I think the work that
we've done with the sponsor to date illustrates the
complexity of trying to develop those. There are so
many site-specific circumstances; it becomes a very
big challenge to do that. We appreciate the scrutiny
and the good faith efforts to improve the system, but
we've concluded that the legislation as currently
drafted will increase our costs and eliminate, we
believe, some of the flexibility we have now to take
care of individual site-specific, case-by-case
evaluations. Thank you very much Mr. Chair.
CHAIR OGAN stated that having a cost recovery provision acts as
a hammer and motivates individuals and entities to comply. He
said he recognizes how large an issue leaky tanks are in rural
Alaska and, although the Denali Commission has alleviated some
of the problem, it is still huge. He asked Mr. Dietrick if he is
also concerned that exempting communities will act as a
disincentive to do a good job.
MR. DIETRICK said he believes the system the state has created
has been very sensitive to Alaska businesses and municipalities
with regard to cost recovery and the problems with fuel systems
in rural Alaska. He said a clear example of the compassion shown
is the financial assistance program created by the legislature
for underground storage tanks. The state has also embarked on a
course of action to upgrade leaking above-ground storage tanks
in rural Alaska through the Denali Commission using federal
funding. That problem is estimated to cost $200 million to fix.
TAPE 03-14, SIDE A
MR. DIETRICK said DEC also tries to use a high degree of
compassion based on ability to pay. He noted the reason Little
Diomede has a $200 per month bill is that DEC negotiated a
workable arrangement with that village. In cases where an entity
does not have the ability to pay, DEC waives those costs on a
case-by-case basis. That is part of DEC's challenge. It
recognizes Alaska's unique situation. DEC is not opposed to
guidelines but the circumstances are highly variable.
CHAIR OGAN noted that Little Diomede's payment of $200 per month
will equate to $20 per month in 34 years after inflation.
MR. DIETRICK said those payments were dictated by affordability
and the intent of the statute to seek cost recovery.
SENATOR DYSON asked if interest is being charged on the unpaid
balance in the Little Diomede case.
MR. DIETRICK deferred to the assistant attorney general for an
answer.
SENATOR DYSON asked Mr. Dietrick if DEC's criteria includes
whether cost recovery will exceed the cost of administration.
MR. DIETRICK said that is one criteria used. If the cost of
recovery exceeds the amount to be recovered, it is not pursued.
DEC uses, as a general guideline, a cost threshold of about
$1,000. He said if the recovery cost exceeds $1,000, it is a
prime candidate for pursuing cost recovery.
SENATOR DYSON asked if DEC is comfortable with the 5,000
population cutoff mark.
MR. DIETRICK said DEC would normally conclude that a community
of 5,000 has some ability to pay but other factors would have to
be taken into consideration, such as extraordinary clean up
costs and the facts behind the spill.
SENATOR DYSON asked if DEC considers that a community or entity
acted recklessly and, if so, whether DEC would try to collect
higher recovery costs to teach a lesson.
MR. DIETRICK said penalties apply if a spill was intentional or
willful. Those penalties are considered separately from and in
addition to the clean up cost.
CHAIR OGAN asked if a lack of culpability but negligence is
factored into the cost recovery.
MR. DIETRICK said that would be taken into consideration.
SENATOR ELTON referred to language on page 2, line 24, "or (3)
the expenses incurred by the department were less than $3,000"
and repeated his concern that language would preclude DEC from
waiving cost recovery if department expenses were $3,100. He
gave King Cove as an example and asked if DEC's travel expenses
are $3,500, and DEC determined that King Cove cannot pay,
whether this language would preclude DEC from waiving costs.
MR. DIETRICK said DEC wrestled with that language and
interpreted that provision to mean that the first $2,999 would
be waived. DEC would pursue cost recovery for any costs over
that amount. SB 44 limits the liability of the spiller at the
low end but does not insulate the spiller for costs that exceed
$3,000.
SENATOR ELTON expressed surprise at that interpretation.
SENATOR WAGONER asked if service stations are now required to do
pressure tests on their tanks on a regular basis.
MR. DIETRICK said he believes Senator Wagoner is referring to
underground storage tanks, which are regulated under federal
law. DEC completed the removal and upgrade of 6,000 tanks in
Alaska in 1998. DEC originally had 7,000 on the list, about
1,000 tanks fall into that category now and are subject to the
new requirements for leak detection, overfill, corrosion
monitoring, inventory controls and other controls. All of the
new tanks have to meet those requirements so hopefully that will
result in no future spills.
SENATOR WAGONER asked if the same type of pressure test could be
performed on the tanks that SB 44 applies to before filling the
tank.
MR. DIETRICK said he was referencing commercial tanks that are
subject to those requirements. He believes the sponsor's intent
is to apply SB 44 to non-commercial tanks, which are not legally
required to follow the federal requirements.
SENATOR WAGONER said he assumed that Little Diomede's tank was
not commercial but a centralized system for the village.
MR. DIETRICK said the Little Diomede tanks are above-ground
storage tanks, which are not regulated by DEC unless they exceed
420,000 gallons.
CHAIR OGAN announced that he would hold SB 44 in committee.
SENATOR OLSON told members that DEC's interpretation of Section
2 on page 2, as described by Mr. Dietrick, regarding the
expenses of $3,000, was not his intent. Regarding the incident
at Little Diomede, he noted the tanks did not leak, a valve on a
line downstream ruptured. The tanks had nothing to do with the
spill and the spill was not even discovered until the snow began
to melt. He noted that Mr. Dietrick said there was a threshold
level of the cost recovery that DEC would not go after, however,
he did not intend to put any minimum amount in the bill. He
asked Mr. Dietrick to respond.
MR. DIETRICK said that DEC's understanding is that the first
criteria would be that the expenses that would be incurred would
not be recoverable from the federal fund.
SENATOR OLSON asked Mr. Dietrick to cite the language that
applies to the federal funds.
MR. DIETRICK said that language is on page 2, line 13. He then
stated:
Criteria number one then - that is being carved out
here - is the person here that would qualify would be
an individual. The fuel would have to be residential
heating oil. And the tank, from which the fuel leaked,
would have to serve fewer than five families and the
spill would not be the result of overfilling. That
would be the criteria that would be met there for them
to waive costs.
The second one then, as we understand it, the
responsible party would be a municipality, i.e.
unincorporated community, village, or municipality
with a population under 5,000. It again applies only
to residential heating oil. There [are] no limitations
- it presumably is from any tank system as opposed to
number one, which is explicit that it would be
residential oil for fewer than five families. This
could be any tank and we have a lot of tanks in rural
Alaska with residential fuel that may be serving a lot
of different uses - and, again, the discharge was not
the result of a tank overfill. So, in any given case,
we would apply these given criteria and, if they fit,
if the circumstances fit these then we understand - we
would conclude then that the cost recovery would be
waived, if we properly understand your intent.
SENATOR ELTON said he reads it to mean that DEC can then make a
determination to waive, but DEC is not required to waive.
MR. DIETRICK said he would agree.
SENATOR OLSON said Mr. Dietrick testified that SB 44 will limit
DEC's flexibility and asked him to elaborate. He said that was
not his intent.
MR. DIETRICK said he was saying that DEC has a lot of
flexibility to consider these and other criteria now. DEC sees
SB 44 as limiting what it can consider in any given case.
CHAIR OGAN announced that he would hold SB 44 in committee and
that the committee would not meet during the following week. He
then adjourned the meeting at 5:30 p.m.
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