HOUSE BILL NO. 264 "An Act providing for a negotiated regulation making process; and providing for an effective date." REPRESENTATIVE JEANNETTE JAMES stated that HB 264 would enable and encourage negotiated regulation (neg/reg) rule making. Currently, neg/reg is in use by the Federal government, Montana and Nebraska. She believed that the citizens of Alaska are clamoring for the Legislature to do something about the regulation process. The proposed negotiated regulation would address the issue. She continued, neg/reg is a voluntary process for drafting regulations that would bring together those parties significantly impacted by a regulation including the government, and would be expected to reach consensus before the rule is formally published as a proposal. An impartial mediator is used to facilitate intensive discussions among the participants who operate as a committee and would be open to the public. Representative James commented that regulations drafted using this process tend to be more technically accurate, clear, specific and less likely to be challenged in litigation than rules drafted by the agency alone. She pointed out that the neg/reg process would cost more money at the front end than a traditional approach. However, Representative James thought that the advantages would outweigh the consideration. Because representation from all interested parties draft the regulations, the formal process of public notice and comment becomes smooth with few comments raised. Lengthy regulation litigation is generally eliminated and compliance tends to be higher. Agency costs for litigation of the rules and enforcing of the standards are reduced. DEBORAH BEHR, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW, commented that she had been assisting with work on the proposed legislation since last year. She believed that the legislation could be workable and less costly in creating the neg/reg process. She pointed out that the process would be volunteer, although, there will be costs associated with the program. Participants will decide if they want to use it or not. Ms. Behr explained in detail the process used in negotiation and supporting the Open Meetings Act. The commissioner will have the authority to add members at any time. The Administration will have one person on the board. The legislation requires that a commissioner not establish a board, unless, from the beginning, there is good faith to use the results of the regulation process. Ms. Behr added, in regard to the administrative procedure process, nothing would be changed. It would allow anyone from the public to testify during the public comment period. The commissioner remains the confirmed cabinet officer who makes the final decision on regulations. The goal is to encourage people to talk up-front to create a practical reality and exchange valuable information for the regulations. The current Administrative Procedure Act does not preclude this. The legislation would establish a framework. She predicted that if the rules were followed, there would not be a follow-up court case. Ms. Behr acknowledged that this is a newly proposed process with a new view. A check and balance would be with the Administrative Procedure Act providing essential public participation. The bill before the Committee contains all the requested changes of the Administration. She summarized, the fiscal note would be indeterminate as all costs are voluntary and some departments will not use it. The legislation is a way to encourage more up-front public involvement. Co-Chair Therriault questioned how utilizing the proposed process could prevent a court test. The legislation would not take the place of the regulatory process, but instead would shift the contention to the beginning. He anticipated that it would build a framework to invite more Court challenges. Ms. Behr acknowledged that any regulation passed would be subject to Court challenge. Although, the proposed bill would bring everyone to the table so that concerns could be addressed in advance. Co-Chair Therriault pointed out that currently, the departments do take the time to gather information. He recommended the balance be shifted through the legislation. Ms. Behr responded that she could not guarantee that there would not be a court case, although, only one case has resulted on negotiated rule making statutes throughout the United States. That case did not defeat the rule. She proposed the key is that the notice is printed on the regulation; anyone can come to testify, after which time, the Commissioner would make the decision. Representative J. Davies referenced Page 1, Line 12. He asked if that point would modify the possibility of lawsuits. Ms. Behr noted that there is a provision in the bill addressing the judicial review, Page 5, Line 30 - 31, Page 6, Lines 1 - 5. That language stipulates how the commissioner sets up the committee. The committee would not be subject to judicial review, although, the regulation itself is given no higher difference. Representative J. Davies questioned whether the rule could be properly balanced at the out-set. Ms. Behr stressed that any regulation released is subject to judicial review. The process is totally open. The regulation review committee could hold meetings on it. Any regulation released under HB 130 is subject to the Lt. Governor's regulation review. The commissioner's budgets are very tight and they would not want to implement a process that would cause more work in the long run. The regulation is subject to court test and scrutiny. She added, the bill has a five-year sunset provision; if concerns happen, they will be addressed. There is no statute requiring negotiated rule making. To date, none of the committees have been stacked, because checks and balance exist. Representative Grussendorf inquired why Representative Berkowitz, as a sponsor of the bill, voted to amend in the previous committee of referral. Ms. Behr advised that Representative Berkowitz had trouble with language used on Page 7, Lines 17 - 18 and had requested to amend the board immunity provision. Most model acts do not have immunity. Representative James pointed out that concern had been addressed. She added, an additional concern, which was not amended, was that more public notice be posted in the beginning of the process. Co-Chair Hanley referenced Page 2, Line 8. He asked if a written finding would be required. Ms, Behr reiterated that the process would be totally voluntary. All the model acts generally lay it out, which the commissioner would use when deciding whether or not to use negotiated rule making. Co-Chair Hanley reiterated to insert "shall" on Page 2, Line 8. Ms. Behr noted that she would be more comfortable using "may", as it is a totally voluntary process. Co-Chair Therriault asked if the determination would be an appeal vote. Ms. Behr reiterated that the commissioner would make that decision. In order to establish an appeal, the act must contain those procedures. DOUGLAS MERTZ, ATTORNEY REPRESENTING PRINCE WILLIAM SOUND REGIONAL CITIZENS' ADVISORY COUNCIL (RCAC), JUNEAU, noted that RCAC is an independent non-profit corporation whose mission it is to promote environmentally safe operations of the Valdez Marine Terminal and associated tankers. Membership is compromised of organizations within the communities and regions affected by the 1989 Exxon Valdez oil spill, as well as commercial fishing, aquaculture, native recreation, tourism and environmental groups. Mr. Mertz continued, while RCAC favors the early involvement of stakeholders in any rule-making process, they believe that HB 264 contains serious flaws that could permit an administrative agency to abuse the authority granted under the bill by biasing the process in favor of selected special interests. The problems could be remedied by a few simple changes without alternating the intent of the bill. The bill provides for notice of committee meetings but does not provide notice that a committee is being formed. An interested party could find that a committee was formed without knowledge of the process. He suggested that there should be a notice provision added to the bill in order that interested parties could request to be a part of the committee. Mr. Mertz added, nothing in the bill requires that a committee's makeup be fair and representative of the broad spectrum of interests. The choice of members could be totally arbitrary and biased. RCAC recommends a simple requirement in that the committee makeup is fair and representative of all interested viewpoints. Nothing in the bill gives members of the public any right to participate in meetings or to make their views known. The bill makes a committee meeting subject to the Open Meetings Act, but it does not create a right to participate. The bill should guarantee that non-members might speak at and participate in any meetings and submit materials to the committee. Mr. Mertz pointed out that the bill states that committee members serve at the pleasure of the agency. That means any committee members who voice opposition to the viewpoint of the agency may be booted off the committee, with no reason given. RCAC recommends limiting the causes for terminating a member to non-attendance. Mr. Mertz noted that there is a technical question whether the provision at Sec. 44.62.750(f), making the Open Meetings Act applicable to the committee, is effective, since the terms of the Open Meetings Act do not apply to committee meetings of a non-decisional body within an agency. (Tape Change HFC 98- 28, Side 1). Co-Chair Therriault echoed concern that there is material in the proposed legislation which could be challenged and open to court review. Mr. Mertz agreed. He pointed out another concern of immunity from judicial review, an issue that should be addressed when applying a standard at the front-end. The proposed bill has no standards. Co-Chair Hanley interjected that if there were a biased commissioner, the same result would occur using the current system or the proposed legislation. He voiced concern that the legislation could create an additional process, which could then bog down the system even more. Representative J. Davies commented that in the proposed legislation, the process could not be reviewed. Co-Chair Therriault understood that the current process litgitimized the stakeholders process. Representative J. Davies asked if adding language to balance would help in a judicial review. Mr. Mertz replied that would provide one more moral constraint on the commissioner. Representative J. Davies voiced concern with the members paying their own expenses, Page 5, Line 10. He pointed out that often times, people representing citizen's viewpoints have limited means; the people who represent the corporate viewpoint have the corporation paying their expenses. To ask a person to certify that they do not have the means is not appropriate or to require the person to participate by telephone would put them at a disadvantage. He believed that in a negotiated process, some of the meetings need to have all members present. Representative James explained the intent of the language was that people pay their own way if they could. She anticipated that there would be people from the rural areas who would not be able to participate without financial support. A decision would be made in determining whether or not the person would be able to participate and pay for their way. The purpose is to provide legislation without a fiscal note associated. Agencies will need to redirect funds or reevaluate the department's financial position in order to make the program work. Co-Chair Therriault commented on how the State would budget for the payment process. Co-Chair Hanley asked in a normal regulatory process, would a department cover any expense of a person wanting to testify. Ms. Behr replied that when the Department of Environmental Conservation (DEC) establishes a negotiation in a rural committee, they specify up front and in advance that the Department is not budgeted to provide funds for any representatives to the meeting. The current process does not provide funding. There is concern that people of little means will have a difficult time participating in the regulation decisions. The goal is to help those that truly can not pay. Co-Chair Hanley voiced concern in establishing a public process and then determining a public need that the State pays the participant's portion. He concluded that gifts and grants create complications. Co-Chair Therriault placed HB 264 in Subcomittee with Representative Kelly as Chair and with members Representative J. Davies and Representative Martin. HB 264 was HELD in Committee for further consideration.