SB 24 - REGULATIONS: ADOPTION & JUDICIAL REVIEW CHAIRMAN KOTT announced the next order of business would be CS FOR SENATE BILL NO. 24(FIN) am, "An Act relating to regulations; amending Rule 65, Alaska Rules of Civil Procedure; and providing for an effective date." A proposed House committee substitute (CS), Version P, had been adopted as a work draft and discussed at the previous hearing on February 2, 2000. Number 0165 REPRESENTATIVE MURKOWSKI made a motion to adopt the new proposed House CS, version 1-LS0274\E, Bannister, 2/7/00, as a work draft. There being no objection, Version E was before the committee. Number 0206 HANS NEIDIG, Legislative Administrative Assistant to Senator Dave Donley, Alaska State Legislature, came before the committee to explain the changes. Noting that he was working from Version P, he said he would try to cross-reference the changes to Version E, which he had just received. He explained the changes as follows: 1) The first change was made to page 2, line 29: the term "mail" was deleted and the term "furnish" was inserted, a change suggested by [Chris Kennedy of the Department of Law (DOL)]. 2) The second change was made to page 4, line 8: the entire subsection (3) was deleted, a change made after considering comments made by the department and members of the House Judiciary Standing Committee. 3) The third change was made to page 5, lines 9-10: language was added to require the [Department of Environmental Conservation] to provide a report explaining their "good faith effort," if they chose to utilize this clause to circumvent the requirements of subparagraphs (i) and (j), a change made after considering concerns expressed by the current committee at the last meeting [February 2, 2000]. That change can be found on page 8, lines 6-13, of Version E. 4) The fourth change added a five-year sunset clause. That change can be found on page 8, Sections 15 and 16, of Version E. 5) The fifth change, a suggestion by Senator Loren Leman, allows the lieutenant governor to require state agencies to use abbreviated public notices in newspapers of general circulation. It recognizes the advances in technology by allowing notices to be furnished rather than mailed, thereby utilizing the Internet. That change is found in Sections 2, 6, 7, 8, 9 and 11, of Version E. Number 0495 JANICE ADAIR, Director, Division of Environmental Health, Department of Environmental Conservation (DEC), came before the committee to testify. Noting that she'd worked for the legislature for four years, then had gone to the DEC to help draft regulations on a bill that she'd worked on for a year, she stated, "I can't tell you how many times I said to myself, 'I wonder what we meant by that,' even though only a few months had passed." Ms. Adair pointed out that writing regulations is a very different process from what most people think it is, which this current draft legislation confirms for her. MS. ADAIR reminded members that regulations rely on a number of statutes. An authority line follows each enacted regulation, and the statutes giving the agency authority to adopt that regulation are all listed there; rarely does a regulation list just one statute. For example, a statute says, "A person may not pollute or add to the pollution of the air, land, subsurface land or water of the state." The intent seems clear that pollution is not allowed. However, that statute is tempered by others that the DEC relies on when adopting a regulation that does allow pollution. That is what most of the DEC's regulations do: they allow pollution in some form to occur. Ms. Adair pointed out it is also difficult for an agency to really understand the intent of one legislature from another when statutes are amended. MS. ADAIR told members the bill before them is very process-oriented but doesn't yield significant public benefits for that process. She believes it attempts to get to frustration with the Administrative Procedure Act (APA) and how regulations are adopted, a frustration she shares. The packet of information she'd provided outlines some things done at the DEC to try to make the regulatory process more meaningful to the public. The notice requirements are written in "legalese" and printed in the legal notice section of the newspaper; therefore, the DEC has created a "quick summary" that gives people, in plain English, an better idea about what the regulations do and whether they are affected personally. The DEC has also created "an amazing guide" to commenting on regulations, including what to do and how the process works. With the draft proposal, the DEC also sends along a "dear interested party" letter outlining, in plain English, what regulations are proposed, the changes, and what the DEC believes the impact will be on that interested party, so that people don't necessarily have to go through the whole regulatory package to see if their interests are being affected. MS. ADAIR next discussed the "responsiveness summary" prepared at the end of the process. She explained that if people take time to read regulations and provide comments, they deserve an answer as to what the DEC did with those comments. The copy she'd provided is from the DEC's recently enacted drinking water regulations, a huge project affecting 3,000-plus drinking water systems across the state. The DEC had made many changes based on numerous public comments received, and then had provided this responsiveness summary to people who commented. MS. ADAIR pointed out the bill's de facto cost-benefit analysis. It says the DEC cannot have a valid or effective regulation if it imposes any material operating or capital cost without yielding significant public benefits; she suggested Mr. Kennedy from the Department of Law (DOL) had pointed out the difficulty with that language. The final item in the packet is a current statute requiring the DEC, whenever proposing a regulation, to give special attention to any public comment they receive regarding the cost to comply with the proposal and any alternate practical methods of complying. If the DEC has received such a comment, the responsiveness summary will explain what it was and what the DEC did about it. A person who had commented could certainly take issue at that point, if the DEC had missed the mark. Number 0960 MS. ADAIR turned attention to another problem with the APA not addressed in this bill, which perhaps exacerbates it. There is an inaccurate perception that when the DEC puts something out for comment, they already know what they will do. However, that is not the case. The DEC really does use the public comment period to solicit ideas from the public about their proposal. MS. ADAIR pointed out the difficulty, when receiving a comment, of being sure of what the person meant or how to change the proposed regulation to meet that concern. Current law bars the DEC from talking to the people that have commented; they have to open the public comment period back up for at least 30 days in order to solicit clarification about what a person was trying to say or what the DEC believes will solve the problem. That has been problematic for the department in any number of instances; she cited solid waste regulations as an example where the proposals went out to public notice four or five times simply to get information back from people who had commented, because it was the only process available. MS. ADAIR expressed concern that adding more process wouldn't be in the state's best interest; that includes expanding what has to be in a public notice, when it is already so difficult to read for lay people, and requiring the DEC to report to the legislature. She said it would be non-value-added activity. MS. ADAIR reported that amendments Senator Leman has offered in the new proposed CS are from a bill that the Governor introduced about three years ago; she was part of the work group that came up with some of those ideas. The irony is that those amendments provide for abbreviated notices because of the recognition that public notices are already too long and convoluted for the public to understand. And now this bill takes the DEC, which often has controversial proposals out there, and says to make the notices longer and more convoluted. Ms. Adair asserted that there just doesn't seem to be a good mesh there in the legislative intent. Number 1142 MS. ADAIR said she believed Chris Kennedy of the DOL had pointed out a lot of the confusion. For example, how would the two-year time line affect regulations where maybe only one of the statutes upon which the regulation relies for its authority has been amended, but the others have not been? If they follow the negotiated regulation process that Representative James had shepherded through the legislature last year or the year before, two years probably isn't long enough. Ms. Adair stated that "reg-neg" is normally done on something fairly controversial, and it is critical to take the time and follow the process through, and to listen to the people that one is negotiating with. To do otherwise violates the spirit of negotiated rule making. MS. ADAIR suggested other questions may be drafting issues. For example, the bill provides that the DEC will give notice to people who have commented. But since they haven't had an opportunity to comment yet, she isn't sure who those people are. Stating her belief that Deborah Behr, a regulations review attorney from the DOL, had testified, she said Ms. Behr is the hurdle that the DEC must get through to adopt regulations. Ms. Adair stated: We've talked about what she would need from us if this bill were to be law to demonstrate ... that we had considered the cost and the benefit; I don't know that we would really be able to get through that. We don't necessarily know costs per se. We can presume that there will a cost, as Chris points out in his letter. Some of those costs are individual business costs, but the benefit may also be an individual benefit and not a public benefit. And that's of concern. Number 1294 MS. ADAIR advised members that it is confusing to the DEC, since every regulation has to list its statutory authorities, how regulation may thwart or circumvent statute. She recalled an instance in which the DEC had proposed to change a seafood processing regulation to clarify that farmed seafood products should be labeled "farmed," with the state of origin noted, so it is clear that the farmed fish did not come from Alaska. However, in reviewing the DEC's authorities to adopt such a regulation, the DOL correctly pointed out that the farmed fish statutes refer only to farmed salmon. Therefore, the DEC was unable to adopt that regulation because they had expanded it from the statute, saying farmed seafood products as opposed to farmed salmon. MS. ADAIR emphasized that those authorities are checked out by the DOL every time the DEC does a regulation. She surmised that the "thwarting" language in the bill has to do with intent, which is very difficult to discern. She said conference committee proceedings may not be recorded, and if a bill has gone through a conference committee, it may be impossible to know the intent. Furthermore, bills may be amended on the floor; she cited an example regarding oil spill legislation where the DOL determined the DEC wasn't able to do what the maker of the amendment had intended because the language hadn't been written to allow for that. She concluded, "So that's another problem that I see with language like this. Your attorneys and our attorneys don't always agree, and that's not uncommon." Number 1479 REPRESENTATIVE MURKOWSKI asked Ms. Adair whether the DOL has an assigned person to review DEC regulations, for example, so that there is an area of expertise. MS. ADAIR answered that there are two processes. There are departmental attorneys who specialize in certain areas; for example, the department will use one attorney for drinking water issues and another for food related issues. She explained that when the comments come back in, the department will work with the same attorney to help draft any changes to the regulations based on those comments. The department will also work with Deborah Behr and Steve Weaver, the regulation attorneys from the DOL, to ensure that the wording is right and that it follows the drafting manual. Number 1554 REPRESENTATIVE GREEN asked Ms. Adair whether there is a chance for error since the attorney may not be involved in the process and aware of the intent. In other words, is that why sometimes the regulations don't comply with a piece of legislation? MS. ADAIR replied there is constant communication between the attorneys involved and the department. For example, the department talks all the time with the regulation attorney to ensure that a drafting change for clarity doesn't change the substance. Number 1621 REPRESENTATIVE CROFT referred to a letter dated 2/7/00 from the DOL. He asked Ms. Adair whether the scenario on page 3 of that letter talks about an ecotour stopping development in the Colville River delta. He further asked whether that refers to page 2, lines 29-30, of Version E of the bill. MS. ADAIR affirmed both. REPRESENTATIVE CROFT asked Ms. Adair how an argument can be made using that language in relation to the Colville River delta example. MS. ADAIR said she would defer to Christopher Kennedy, author of the letter. REPRESENTATIVE CROFT asked Ms. Adair whether she is familiar with the actual permitting of that example. MS. ADAIR said she isn't familiar with that exact one, but she is familiar with that argument having been made in other cases. REPRESENTATIVE CROFT asked Ms. Adair whether she is familiar with the Municipality of Anchorage [Point Woronzof] example on page 5 of the letter. He further asked what section of the bill relates to that example. MS. ADAIR affirmed that she is familiar with it. She said it refers to page 6, line 13, of Version E. The proposal for Point Woronzof was site-specific criteria for total chromium, when the intent was Chromium 6. Although a small change, it is a big change in effect; the DOL and the DEC believe the bill would require renotification in that case. She noted that in the case of Point Woronzof, the department did not go out to a public notice again because it was specific to the Municipality of Anchorage; it was what they wanted, and there wasn't any public comment on the proposal. The department went ahead and made the correction. REPRESENTATIVE CROFT asked Ms. Adair what the current bill would require the department to do in that case. MS. ADAIR replied that the bill would require the department to go back out for public notice before adopting it. REPRESENTATIVE CROFT asked Ms. Adair what kind of time line it would be: 30 days? 90 days? One year? MS. ADAIR said she isn't sure whether the two-year provision would apply. She doesn't believe 90 days would apply because that is for after a statute has been adopted. She thinks it would be 30 days at a minimum, as called for under the APA. Depending on the comments, the department might have to go back out again for public comment. REPRESENTATIVE CROFT said it would be at least 30 days, then, and another publication cycle. MS. ADAIR concurred, pointing out that the department would lose its place in line at the DOL since the regulation attorneys attend to everybody's regulations throughout the state. CHAIRMAN KOTT noted that Christopher Kennedy was online. Number 1890 REPRESENTATIVE CROFT asked Mr. Kennedy to explain how an ecotourism business would have the right to sue to stop development in the Colville River delta example, given the language on page 2, lines 28-30, of Version E. Number 1925 CHRISTOPHER KENNEDY, Assistant Attorney General, Environmental Section, Civil Division (Anchorage), Department of Law, answered via teleconference from Anchorage. He explained that he had used the ecotourism group and Alpine field example simply to demonstrate how the concept of commercial activity is sometimes broader than what is thought. In actual litigation, some have used the ecotourism business as a way of getting standing to sue. The actual Alpine litigation was not a challenge to a DEC regulation. He was just looking for an example of how this sort of thinking has been used in the past. An analogous situation might be transferred to future litigation under the new standard of review that is being proposed in SB 24. REPRESENTATIVE CROFT stated, then, that they would be a commercial enterprise and able to argue that this special water criterion isn't necessarily producing significant and public benefits. MR. KENNEDY agreed. In that litigation, he explained, they said they could no longer use certain channels of the river because of disfigurement from the development activity. Under the bill, they could argue that imposes a cost on them because they would need to travel further or somehow alter their trip itinerary in response to the development. Had there been a DEC regulation at issue in that situation, then that would bring them into the cost-benefit analysis that Ms. Adair discussed earlier. Number 2035 REPRESENTATIVE CROFT asked Mr. Kennedy whether a halibut charter operator in Homer could challenge a platform waste regulation for one of the oil rigs. MR. KENNEDY affirmed that, saying that example has crossed the DOL's mind as well. He thinks all of the discharges are handled through so-called "mixing zone permits," which are not specific regulations but which, in the future, might be handled through site-specific water quality criteria that are regulations. The Municipality of Anchorage example that the committee has been discussing is a regulation of that kind. Number 2077 REPRESENTATIVE CROFT mentioned a big game guide in the Arctic National Wildlife Refuge (ANWR), asking whether there are DEC permits out there. He said he is trying to determine how far this could go. MR. KENNEDY answered, "Yes, I think that's correct." REPRESENTATIVE CROFT noted that the bill sets up two different burdens of proof: one by clear and convincing evidence, and one by a preponderance of evidence. In his letter, Mr. Kennedy makes the argument that these types of legal standards are used in weighing facts. He asked Mr. Kennedy to explain that further. MR. KENNEDY, as an example, said when a regulation is challenged by a litigant, the DOL approaches the court with a motion for summary judgment, asking the court to rule on whether the regulation is valid. This has occurred with DEC regulations in connection with Prince William Sound, where a challenge was brought - by a man living in Whittier as a subsistence fisherman - to regulations pertaining to tanker traffic. The benefit to the department is that these types of challenges can be resolved quickly and inexpensively, which is how the courts traditionally handle them. The courts see the issue of whether a regulation fits with legislative intent as being an objective question, which is resolved by looking at the language of the statute itself, the underlying regulation and the legislative history. In fact, the court may do its own research on the issue and issue a ruling. Although certainly lawyers play a role in bringing information to the court's attention, there is no trial, and the concept of burden of proof doesn't really enter into it at that stage. Number 2200 REPRESENTATIVE CROFT asked Mr. Kennedy whether the burdens of proof work independently. That is, could one sue and a court rule that yes, this meets the intent of the statute but decide to independently review under (B) to see whether it has significant public benefits? MR. KENNEDY said that is the way he believes Version P is drafted. Assuming Version E is the same, the standards are independent, and the regulation would have to meet them. REPRESENTATIVE CROFT remarked that he is pretty sure that portion is the same for both versions. Number 2278 REPRESENTATIVE KERTTULA said she wanted to flesh out a better understanding of what happens when rewriting a regulation that would substantially change the substance but which, under the current situation, wouldn't normally be considered significant enough to require additional notice. Referring to the chromium example, she suggested one could wind up re-noticing a lot of things that everyone had already commented on, because of the change of one word. MR. KENNEDY replied that he thinks it could happen. The Point Woronzof example helps in particular to understand that. The change from chromium to Chromium 6 is one everyone had agreed on. It was a significant change in the sense that, if the limit had remained at chromium instead of Chromium 6, it would have put an onerous burden on the Municipality of Anchorage. Going back out to notice would have served no benefit at all; it would have simply been jumping through a hoop to get through the formalities. Number 2353 REPRESENTATIVE MURKOWSKI referred to testimony the previous week about language in the Forest Practices Act (FPA) that appears similar to that in SB 24; she said she hadn't reviewed that language. She asked whether this is, in fact, the same application of the FPA requirement for yielding significant public benefits, or if there is a difference. MR. KENNEDY said he is somewhat familiar with it but would defer to Kevin Saxby, who works closely with the FPA. He affirmed that the language in the FPA is related to the language in SB 24; it seems to have been the starting point for drafting, but it works differently. The most important difference to him is that under the FPA the underlying standard of review, written into the APA right now, was not taken away from review of forestry regulations. Therefore, AS 44.62.030, the 1959 standard of review, still applies to forestry regulation; the FPA language was added as an overlay to that, to encourage agencies to more closely consider the issue of costs. The language is not the same, however. Mr. Kennedy read [from AS 41.17.080(d)]: The commissioner shall adopt only those regulations necessary to accomplish the purposes of this chapter and shall avoid regulations that increase operating costs without yielding significant benefits to public resources. MR. KENNEDY pointed out that the actual test for the regulations, if they are challenged, remains the 1959 standard that has been worked out over the years. REPRESENTATIVE MURKOWSKI said she would look at the FPA herself. TAPE 00-9, SIDE B Number 0001 REPRESENTATIVE CROFT referred to the language relating to capital or operating costs on industrial, commercial, or other development activity without yielding significant public benefits. He said that part is similar. He asked whether the distinction is really that one is a directive to the commissioner "that one cannot sue on," whereas the other is clearly something that contemplates a lawsuit and a court testing it out. MR. KENNEDY deferred to Kevin Saxby to answer whether it is merely a directive. Number 0039 KEVIN SAXBY, Assistant Attorney General, Natural Resources Section, Civil Division (Anchorage), Department of Law, responded via teleconference from Anchorage that he wouldn't say it is merely a directive. However, as he reads the statutes, certainly the proposed changes in this bill create a greater ability for someone to argue that the standard has not been met. In contrast, under the FPA, the courts are likely to look at the older standard, the "arbitrary and capricious," necessary to meet the statutory purposes. Number 0067 REPRESENTATIVE CROFT asked Mr. Saxby whether anyone has ever sued under Section [080](D) of the FPA. MR. SAXBY indicated he hasn't defended any such cases, and he has been on this almost since the Act was adopted. Therefore, he doesn't think so. REPRESENTATIVE CROFT noted that the committee has written testimony from Richard Harris of Sealaska Corporation that asserts nobody has sued. Number 0104 CHAIRMAN KOTT closed the meeting to public testimony. He announced the intention of holding the bill over to iron out some issues brought up during the past two hearings, as well as to give committee members time to review the new proposed CS. He indicated he had also asked Legislative Legal Counsel [Legislative Affairs Agency] to respond to three issues, which he is still waiting for. [SB 24 was held over.]