HOUSE BILL NO. 167 "An Act relating to air quality control and the prevention, abatement, and control of air pollution; relating to civil and criminal penalties, damages, and other remedies for air quality control violations; clarifying the definition of `hazardous substance' to include releases and threatened releases to the atmosphere; amending the lien provisions relating to the oil and hazardous substance release response fund; relating to inspection and enforcement powers of the Department of Environmental Conservation; and providing for an effective date." Representative Hanley noted that the federal Clean Air Act was passed in 1990. States must meet minimum requirements of the Act by December 1993 or lose state highway funding and control of the program. He asserted that the state can run the program cheaper than the federal government. Federal law requires that fees be assessed to pay for the program. He gave a history of the legislative working group. TOM CHAPPLE, PROJECT MANAGER, PERMITTING GROUP, AIR QUALITY, DEPARTMENT OF ENVIRONMENTAL CONSERVATION provided members with an overview of the Clean Air Act (Attachment 1). He discussed page 2, Attachment 1. He noted that the Clean Air Act is the first major revision of air quality standards in 20 years. It creates a relatively uniform program across the nation by placing the burden of compliance on the states. The current state permitting program does not incorporate all Environmental Protection Agency (EPA) standards. Smaller industries will be regulated. The Clean Air Act mandates that states form Small Business Assistance Programs. Alaska is exempt from acid rain provisions. He observed that there are 189 hazardous air pollutants. Mr. Chapple discussed page 3, Attachment 1, "Who needs a permit". He noted that the Department of Environmental Conservation will have to issue permits to approximately 450 installations. Mr. Chapple stressed that the reason permit issues will increase from 170 to 450 is due to fuel burning equipment that currently exist but was not previously covered. He discussed page 4, Attachment 1. He noted that the greatest increase in permits are for electric utilities. Rural and small communities will be most affected. Mr. Chapple reviewed page 5, Attachment 1. He stressed the 2 need to: * Retain state jurisdiction of the program; * Revise the program to include all federal requirements; * To design the program to require accountability. Mr. Chapple explained that the fee cost will be lower if the applicant "puts together a good application" and if compliance is readily achieved. There are provisions for public participation. Mr. Chapple emphasized that the program must be based on knowledge and understanding of the requirements. He stressed the need to further define the program through regulations. Co-Chair MacLean asked for an explanation of how the bill goes further than federal law requires. Mr. Chapple explained that the issuance of permits on offshore activities are not mandated by federal law. He added that the bill contains provisions to allow authority to regulate air pollutants not regulated by federal law, in sections .010 and .015. Co-Chair MacLean asked which provisions are optional. Mr. Chapple stated that general permits are optional. He added that provisions authorizing the Department during emergency to allow expansion of permits are optional. Mr. Chapple clarified, in response to a question from Co- Chair MacLean, that the bill meets minimum sanctions imposed on violations. LEANN FERRY, STAFF, PRINCE WILLIAM SOUND REGIONAL CITIZEN'S ADVISORY COUNCIL (RCAC) spoke on behalf of the RCAC Terminal Operations and Environmental Monitoring Committee (TOEM). She stated that the TOEM Committee is responsible for monitoring chronic pollution emitted from the Alyeska Marine Terminal and the environmental effects of pollution. She asserted that the Alyeska Terminal emits more volatile organic compounds into the air than any other facility in North America. These emissions include air toxins like benzene and hexane. Ms. Ferry stressed that it is unclear if the bill would allow the Department of Environmental Conservation to regulate air toxins and volatile organic compounds emissions from tank vessels such as the oil tankers at the Valdez Terminal. She added that it is unclear whether emissions 3 from vessels could be attributed to the Alyeska facility and regulated under the bill. Ms. Ferry maintained that the bill would preclude the state from enacting air pollution rules more strict than the minimum required under the federal Clean Air Act, unless the state meets an "unusually" high standard of scientifically demonstrated need. She noted that the process of scientifically demonstrating a health risk can be protracted. She observed that it is difficult to conclusively demonstrate a health or environmental hazard. She noted that technology-based standards are the norm in many other states and that much of the federal Clean Air Act amendments are devoted to technology-based emission standards. Technology-based standards require polluters to control emissions over certain threshold amounts if such controls are feasible and economically reasonable. She asserted that the bill would tie the Department of Environmental Conservation's hands in adopting standards stricter than federal standards. Ms. Ferry reminded the Committee that the Alyeska Marine Terminal is the third-largest source of benzene air pollution in the United States. She noted that there are no federal standards regulating benzene emissions. Ms. Ferry maintained that the legislation shifts the burden of proof to the victims of pollution. She alleged that the legislation would preclude local entities from enacting clean air regulations. Ms. Ferry expressed concern that the recommendations of the Alaska Air Quality Advisory Committee were not considered. She concluded that: "In light of the Legislature's current action to slash the Department of Environmental Conservation's budget, it's questionable whether the Department would have the funding or staff to administer new clean air regulations in any case." NANCY LETHCOE, PRESIDENT OF THE ALASKA WILDERNESS RECREATION AND TOURISM ASSOCIATION spoke in opposition to HB 167. She stated that the Alaska Wilderness Recreation and Tourism Association promotes the recognition and use of Alaska's recreation and tourism resources. Ms. Lethcoe stressed that the Alaska Wilderness Guides Association is concerned about air pollution. She noted that tour and lodge operators at Denali National Park and Fairbanks based tour guides and out fitters are concerned about the proposed Healy Power Plant. She asserted that the business climate will be enhanced by regulations which 4 provide for maximum use of our resources and the creation of more jobs. Ms. Lethcoe alleged that the bill tries to minimize the cost to polluters rather than looking to ways to use the permit structure to encourage reductions in pollution and increased business activity in all sectors of the economy. Ms. Lethcoe maintained that the effects of polluters on small, non-polluting businesses was not considered. She requested that the bill be amended to encourage polluters to reduce their pollution. She noted that a recently MIT study, published in The Nature Conservancy of Alaska Newsletter, Spring, 1993, "Environmentalism and Economic Policy," found that, "States with stronger environmental policies consistently outperformed the weaker environmental states on all matters." According to project leader Stephen Meyer, "If stringent environmental policies have negative economic effects, they are so marginal and transient that they are completely lost in the noise of much more powerful domestic and international economic influences." Ms. Lethcoe asserted that the bill makes it difficult and virtually impossible for small non-polluting businesses to participate in the public process. She stressed that public participation is made difficult by section .285 on page 20. She requested that the word "may" at line 19 be changed to "shall." Ms. Lethcoe observed that section .200 on page 12 makes it difficult to appeal decisions. She emphasized that "private" and "substantive" have not been defined in environmental law. She requested that this section be changed to guarantee that other businesses and business organizations which could be adversely affected by a permit be allowed to appeal. Ms. Lethcoe recommended the following changes: * Sec. 015. p. 3. delete the section or cover costs through emission fees; * Sec. .240 on page 15, amend item 1 to shift costs to emission fees. In this way, those who pollute the most would pay the most. It also encourages companies to reduce their pollution, which would reduce conflict with their business neighbors. Ms. Lethcoe observed that small businesses in local communities have the best chance of protecting their natural resources through local ordinances. However, the fee structure established on page 24 under (d) places an undue 5 financial burden on local communities. Studies envisioned in section .010 could cost millions of dollars. Local communities would have to wait perhaps a year or more to recover these costs from the state. She asserted that they should be allowed to bill the polluter directly. She maintained that without the power to bill polluters directly and recover their costs in a more timely manner, local governments and hence local business communities are effectively deprived of their right to set regulations. Ms. Lethcoe expressed support for section 010 on page 2, but requested that the words "in written findings" be inserted after the word "demonstrate" one line 26. ERIC MEYERS, ALASKA AIR QUALITY ADVISORY COMMITTEE noted that the Advisory Committee was created by the Department of Environmental Conservation to build consensus. The working group consisted of members of industry, with the exception of the timber industry which chose not to be involved, and environmental concerns. He noted that the deliberation of the working group was difficult but that they achieved unanimous support. He expressed his disappointment that the hard work of the group has been set aside by the legislature. He expressed concern with section .010. He gave examples of difficulties which could occur due to inclusion of provisions in section .010. He did not feel that regulation of volatile organic compounds at the Valdez terminal has been adequately addressed. (Tape Change, HFC 93-105, Side 2) RUSSEL HEATH, EXECUTIVE DIRECTOR, ALASKA ENVIRONMENTAL LOBBY stressed that Alaska's environmental community was asked to join the Advisory Committee in an effort to develop legislation which would bring Alaska into conformity with the 1990 amendments to the Federal Clean Air Act. He noted that the legislation proposed by the Committee gained the support of the Alaska Environmental Lobby. He alleged that legislation proposed by the Advisory Committee was set aside in favor of legislation drafted in response to timber industry concerns. He stated that the Alaska Environmental Lobby opposes HB 167. Mr. Heath maintained that HB 167 fails to protect the quality of Alaska's air; restricts the public's right to influence public policy and restricts the rights of local governments to control the quality of the air in their own communities and neighborhoods. Mr. Heath stressed that the fee structure subverts the key intent of the Clean Air Act, to reduce emissions. He felt that the size of the fee should be tied directly to the 6 amount emitted in order to provide a powerful incentive to the polluter to reduce its emissions. He noted that the fee structure in HB 167 ties the bulk of the fees to the per hour cost to the Department of Environmental Conservation to process the permit application. He asserted that, "the incentive to the polluter then becomes to submit a letter perfect, permit application. Because the faster the Department of Environmental Conservation can process the application, the cheaper it becomes for the polluter." He alleged that, "this fee structure disembowels the entire act; rendering it an expensive exercise in paper shuffling." Mr. Heath noted that the fee structure is self supporting. He maintained that the fee burden has been transferred to small emitters. Mr. Heath referred to the general permit process. He noted that the general permit was developed to reduce a portion of the burden. A general permit is a blanket permit which applies to all emitters of a similar type. An individual emitter need not go through the entire expensive permitting process. At the time that a general permit is developed, public review is solicited state wide. He observed that the public is not allowed to comment when a specific business in a specific neighborhood is granted a general permit. He stressed that judicial standing is narrowed beyond current Alaskan statute in HB 167. Standing is the legal criteria which an aggrieved party must satisfy before being legally eligible to obtain judicial review of a permit. He asserted that standing was narrowed in order to protect the polluting industry from lawsuits challenging their permits. He reiterated that the legislation is closing the public process. He emphasized that businesses formed after the initial public process would not be allowed an opportunity to challenge a permit. Mr. Heath observed that duration is fixed at five years. He noted that this is a substantial departure from current administration policy. Currently, if a business is an historical violator, its permit is written for a shorter period of time so that the public has a chance to comment more frequently on its impact on the safety of the community. A shorter permit period also provides the state the chance to incorporate the best permit stipulations possible to assist a business in coming into compliance with its permit. Mr. Heath favored the permit duration developed by the Department of Environmental Conservation's Advisory Committee. It allows businesses without compliance problems to receive the maximum permit term of five years. Repeat 7 and gross violators who cannot follow state laws are given permits with shorter duration. As soon as a violating business achieves compliance, it is given the same privilege of a five year permit as complying businesses have. He maintained that varying the permit's duration, provides an excellent incentive for compliance. Mr. Heath asserted that provisions in the legislation make it effectively impossible for state or local governments to require standards more stringent than those required by the federal Clean Air Act. He observed that requirements for peer review of studies demonstrating that local conditions vary from those on which the federal standards were based, are so complex and so expensive that it would render a municipality powerless to address local needs and concerns. STEVE TOROK, CHIEF, STATE OPERATIONS, ENVIRONMENTAL PROTECTION AGENCY expressed concern with section 46.14.560. He stressed that the section raises enforcement concerns. He stated that the section could render the state's implementation plan unacceptable. Mr. Torok reiterated EPA's concerns regarding the funding level of the Department of Environmental Conservation. He noted that the Senate has reduced program receipt authority by $700.0 thousand dollars. He emphasized that the Department of Environmental Conservation must demonstrate the fiscal capability to implement the program. He stated that the legislation generally meets the minimum federal requirements. Representative Brown asked the implication of subsection (e) page 3, line 6. She interpreted the language to require that anything generally applicable must be in regulation prior to inclusion in a permit. She noted the difficulty of setting in regulations all requirements prior to implementation of the program. Mr. Torok noted that an implementation plan must be submitted to EPA. Representative Martin noted that legislation needs to be passed this session. Representative Brown noted that EPA expressed concern with the legislation in a memorandum dated 2/18/93 (Attachment 2). She noted their concerns with section 46.14.540 on page 29. She asked their concern. Mr. Torok replied that federal law does not take into account the possibility of a natural disaster. Congress envisioned that EPA would have discretion to operate under a natural disaster. He noted that the Commissioner of Department of Environmental Conservation could waive requirements under the provision of 8 46.14.540. He stated that the state could submit its plan minus the provision. Representative Brown noted that EPA questioned language on page 12, line 22, regarding permit review. ROBERT REGES, ASSISTANT ATTORNEY GENERAL clarified that the issue has been resolved. Representative Brown provided members with a memorandum from Terri Lauterbach, Legislative Counsel (Attachment 3). Ms. Lauterbach believes CSHB 167 (JUD) does not comply with federal law. Mr. Reges disagreed with Ms. Lauterbach's assessment of CSHB 167 (JUD). He stated that the legal position is not definitive. He discussed applicable law. He conceded that the language contained in sec 46.14.200 narrows standing. Representative Brown stressed that to request an adjudicatory hearing an individual would have to be a "owner and operator, a person who participated in the public comment process or a person who has a private, substantive, legally protected interest under state law". She interpreted the language to be modified by "adversely affected by the permit action". Mr. Reges agreed. He noted that the interpretation is furthered narrowed by the language, "private, (and) substantive". He stated that, as currently written, "an individual who did not participate in the public comment process, and is neither the owner or the operator, would have to show that his interest was private, substantive and that it was legally protective and may adversely be affected." Representative Brown asked the definition of "private interest". Mr. Reges replied, that in his opinion, "private" would be juxtaposed against associational interests. He added that an organization may be required to bring the action in the nave of one of its members. Standing would have to be demonstrated through an individual. Representative Brown asked if it would require that the individual live next door to the source or could they be a citizen of the community. Mr. Reges stressed that standing is a concept created by courts. He stated that the basic premise is that a legally redressable interest be ascertained. A "personal stack in the outcome" is often used by the courts. He emphasized that the State of Alaska Supreme Court has generally taken the broader interpretation. 9 Representative Brown referred to page 3, subsection (e). She asked what would be required in regards to the initial issuance of permits by the Department of Environmental Conservation. Mr. Reges stated that "when incorporated into a permit," would signify that standards which are generally applicable must be adopted by regulation. He maintained that at least one permit could be issued with the standard in it prior to adoption in regulation. He suggested that "when incorporated into a permit" be changed to "when incorporated into one or more permits". The Department would be required to adopt into regulations when it is evident that a standard has a broader application to be in subsequent permits. Representative Brown agreed that Mr. Reges' interpretation represents the intent of how the legislation would work. She expressed concern that the language seems to say that standards must be in regulation prior to issuance of permits, if it is generally applicable. She asserted that it would be impossible to address every permit condition in regulation prior to issuances of permits. Representative Brown and Mr. Reges continue to discuss language regarding conditions of permit issuance. Previous remarks were reiterated.