SB 64-UNIFORM ENVIROMENTAL COVENANTS ACT    3:43:02 PM CHAIR KITO announced that the next order of business would be SENATE BILL NO. 64, "An Act adopting the Uniform Environmental Covenants Act; relating to environmental real property covenants and notices of activity and use limitation at contaminated sites to ensure the protection of human health, safety, and welfare, and the environment; and providing for an effective date." 3:43:05 PM SENATOR PETER MICCICHE, Alaska State Legislature, presented SB 64 as prime sponsor. He paraphrased the sponsor statement, which reads as follows [original punctuation provided]: A primary interest of this office is to streamline and remove obstacles that inhibit business, commerce or the transfer of property without reducing expectations for public health, safety and a healthy environment. SB 64 achieves that. In 2003, the Uniform Law Commissioners created a Uniform Environmental Covenants Act to overcome inadequate common law rules. An environmental covenant allows for the sale of property with use limitations to mitigate risk. Alaska is one of only seven states that does not have an environmental covenant law. SB 64 protects the buyer and seller of contaminated property while allowing the fullest and best use of the property until the contamination reaches safe levels. The bill creates a legal mechanism to safely transfer contaminated property through an environmental covenant. SENATOR MICCICHE gave an example of a family in his district who had struggled with the issue for 20 years. He mentioned the historic case of Love Canal in New York State. He continued to read from the sponsor statement, which reads as follows [original punctuation provided]: A covenant provides transparency throughout the life of the property and provides assurances to buyers and sellers that risks will be safely managed. Other states have found that covenants help communities transform blighted property into marketable assets. A simple process for amending or removing covenants is included in the legislation. A covenant would not supplant or impose current contamination removal standards, which will continue to be managed as they are currently. The act would not affect the liability of the principally-responsible parties, but would provide a method for minimizing exposure to third parties. 3:46:36 PM REPRESENTATIVE JOSEPHSON quoted the covenants "would exist until the contamination reaches safe levels" and asked whether remediation would continue through the duration of the covenant or would be discontinued. SENATOR MICCICHE answered it depends on the contamination. The proposed bill would allow property to be transferred while highlighting that contamination exists and would allow for amending and removing covenants when there is no longer contamination on the site. REPRESENTATIVE JOSEPHSON said Senator Micciche had indicated the covenant was voluntary and read from page 4, lines 8 through 11 of SB 64, as follows: (c) In addition to other conditions for the department's approval of an environmental covenant, the department may require a specified person who has an interest in the real property that is the subject of the environmental covenant to sign the environmental covenant. REPRESENTATIVE JOSPEHSON asked, "What if they won't, and they have an interest in the real property?" 3:48:48 PM SENATOR MICCICHE deferred to Kristen Ryan from the Department of Environmental Conservation (DEC) for an answer. CHAIR KITO announced the department would be brought forward for invited testimony. REPRESENTATIVE JOSEPHSON mentioned Love Canal and he said it struck him that would be an example of public notice of harm being caused. He said there was a lot of notice at the time, but he did not see a lot of notice for the next-door neighbor. He asked whether the sponsor was amenable to adding that to the proposed bill. SENATOR MICCICHE answered he was looking for the best outcome for Alaskans and would be amenable to improvements. 3:50:40 PM REPRESENTATIVE KNOPP referenced the site in Soldotna, Alaska, and asked whether "a little bit of contamination is a prohibition to sell any or all" of a property. SENATOR MICCICHE answered that currently the landowners can use institutional controls through DEC because there is knowledge of contamination on that site, but the law does not currently allow for the protection of the buyer and the seller. He stated that currently a scenario in which a buyer is unaware of contamination on a site is possible, whereas the proposed bill would prevent that. REPRESENTATIVE KNOPP asked whether there was anything in SB 64 that would require the environmental covenant to "go away" once the land is deemed to be clean. SENATOR MICCICHE answered the proposed bill would not change how the DEC does business but would help future buyers to know about contaminated property before purchase. 3:53:59 PM REPRESENTATIVE WOOL asked about the sale of commercial and industrial sites such as those on the North Slope in the event of a costly clean-up. SENATOR MICCICHE answered it had been considered and the only opposition to the proposed bill was from the federal government which happens to control 51 percent of the active contaminated sites in Alaska. The proposed bill would allow the state to put land use restrictions on federal property. REPRESENTATIVE WOOL asked what would happen to a depleted field during the transfer with regard to the clean-up responsibility. SENATOR MICCICHE answered that would be part of an agreement between buyer and seller and added the proposed bill would not displace responsibility. He mentioned the Soldotna, Alaska, land and stated the clean-up would be something the owners could not afford, but he opined it was a great location for a resort and the cost of clean-up would be a minor proportion of the planned investment for the entire site. He said clean-up could be part of a side agreement in the sale. 3:57:04 PM REPRESENTATIVE JOSEPHSON referenced language in the bill stating, "The department may maintain a registry that contains all environmental covenants." He said he assumed the covenant would run with the deed, but he thought a website containing information on those properties could be required. SENATOR MICCICHE deferred to Kristen Ryan, Division Director. 3:58:14 PM KRISTEN RYAN, Director, Spill Prevention and Response, Department of Environmental Conservation (DEC), gave a brief overview of the proposed bill. She described the process of managing contaminated sites. She gave the example of a site which was currently a Subway restaurant, but which previously had been a gas station. When the gas station was removed, the gas had leaked, and the contamination was deemed to be safe with institutional controls, meaning the information was entered into a database containing the restrictions placed on the property. She said the buyer was not aware of the contamination as they were unaware of the existence of the database and the information was not included in the deed, which created a larger problem of spreading contamination. She gave examples of situations in which the department would allow contamination to stay on properties with institutional controls. She stated any neighbors would have to be informed of contaminated areas; however, the department did not have a mandate. She remarked the legislation had been proposed over 10 years previously for the transfer of industrial properties with potential contamination. 4:03:32 PM REPRESENTATIVE WOOL asked about the industrial application and where the responsibilities lie for a depleted site. MS. RYAN answered currently industrial sites on the North Slope have a lease agreement which states the land will be returned to its original state as part of the lease arrangement with Department of Natural Resources (DNR). REPRESENTATIVE WOOL asked whether, if a seller could not afford to remediate the contamination but a buyer could, the responsibility would transfer. MS. RYAN answered SB 64 would not change the current legal process, and the person who caused the contamination is responsible. 4:06:21 PM REPRESENTATIVE JOSEPHSON stated his concern that the proposed bill would stop the current process for remediation and would simply ease the transfer of property, with notice of contamination, from one person to another. He said he thought regulators would "just throw in the towel." 4:07:28 PM MS. RYAN answered the proposed bill would not change the current environmental regulation paradigm, just provide a thorough communication tool for future owners. REPRESENTATIVE JOSEPHSON asked for an explanation of the "Notice  of activity and use limitation." [page 9, line 25, of SB 64]. He said it links itself to the environment response project which is part of Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) but "allows the owner to move from one to the other." MS. RYAN answered the entire section is to accommodate the federal government. She added the state is not allowed to put a covenant on federal property. She indicated over the years states have inherited a lot of contaminated federal land and some had developed the specific tool of putting a notice of use restriction, which is the equivalent of a covenant, on federal property. She added native corporations in particular have inherited a lot of contaminated federal lands through trades and that language is important to ensure communication of contamination was clear. 4:10:51 PM CHAIR KITO asked Ms. Ryan to speak to the letters received from the Department of Defense (DoD) and whether DoD is comfortable with the language assuaging their concerns. MS. RYAN answered it had been an ongoing conversation with DoD and they are uncomfortable with the state giving the federal government restrictions. She stated DoD was compliant with similar language in the state of Colorado. She added DoD was nervous about the state having enforcement authority on federal property, but they do recognize the need for it. 4:12:29 PM REPRESENTATIVE BIRCH asked about the current monetary threshold for a Superfund site. MS. RYAN answered that getting a site listed as a Superfund site is a process, and there is no dollar amount restriction. She added there were only two listed in state history and it is not something the state feels is a good process as it has negative connotations. She stated the state has robust contaminated site lands regulations, so historically the Environmental Protection Agency (EPA) has let the state take lead on those sites. She remarked the problem with getting a site listed is that it takes the state out of the driver's seat and puts EPA in it. She underlined that a Superfund listing would still require the state to contribute financially. 4:14:46 PM CHAIR KITO said he thought it would require an Act of Congress to list a Superfund site. 4:15:06 PM CHAIR KITO opened public testimony on SB 64. Upon ascertaining there was no one available to testify, he closed public testimony. 4:15:41 PM REPRESENTATIVE JOSEPHSON asked whether the chair would consider an amendment. CHAIR KITO replied an amendment could be offered. 4:16:10 PM REPRESENTATIVE JOSEPHSON moved Amendment 1, adding language as follows: "Public Comment. Before the commissioner signs an environmental covenant, the department shall provide an opportunity for public comment on the environmental covenant." SENATOR MICCICHE asked for the page and line in which Representative Josephson thought the language would be appropriate. REPRESENTATIVE JOSEPHSON answered Legislative Legal and Research Services recommended page 3, following line 4, and said he thought the amendment would become new section 46.04.303. SENATOR MICCICHE answered the covenant would be a property owner's voluntary decision on whether to place a covenant on their own property and he was not sure of the value of placing a requirement of public comment on the decision. REPRESENTATIVE JOSEPHSON replied that the bill says that registry is optionally required at the department's discretion. He said that in Anchorage he gets public notice for buildings or widened sidewalks being built around his home. He mentioned that those whom he had invited to comment on the proposed bill, such as Alaska Community Action on Toxics (ACAT), had expressed concerns with notice and had recommended ecology law journals such as Ecology Law Quarterly and a Boston College article. 4:19:38 PM REPRESENTATIVE JOSEPHSON read from "The Uniform Environmental Covenants ActAn Environmental Justice Perspective," Andrea Ruiz-Esquide, Ecology Law Quarterly, Volume 31, page 1025, 2004 edition, which read as follows: Early, ongoing, and meaningful public participation is the hallmark of sound public policy and decision making. The community most directly impacted by a problem or project is inherently qualified to participate in the decision-making process. Mechanisms must be established to ensure their full participation, including training and support for community groups, technical assistance grants, community advisory groups, and others. REPRESENTATIVE JOSEPHSON said it struck him that "these are significant covenants that interrupt the normal common law" and he thought notice is reasonable. 4:20:44 PM SENATOR MICCICHE pointed out page 5 of SB64, starting at line 8, and read from Section 46.04.315, which reads as follows: Notice of environmental covenant. (a) A copy of the environmental covenant shall be provided by the persons and in the manner required by the department to (1) each person that signed the environmental covenant; (2) each person holding a recorded interest in the real property subject to the environmental covenant; (3) each person in possession of the real property subject to the environmental covenant; (4) each municipality or other unit of local government in which real property subject to the environmental covenant is located; and (5) any other person the department requires. SENATOR MICCICHE said he wondered if "may" should be changed to "shall" and "be included in the database," to meet Representative Josephson's objective. 4:22:31 PM REPRESENTATIVE JOSEPHSON stated he thought Senator Micciche was referring to page 11, line 29, in the section entitled, "Registry." He deferred to the director for confirmation that the proposed language would make some improvement. MS. RYAN answered the department had every intent to maintain that database and underlined the database was well used by everyone in the state who was researching contamination, so the department had no issue with changing it into a mandate. She remarked the other changes that Representative Josephson was recommending were more problematic. She said she believed the material Representative Josephson was reading pertained to Superfunds and she did not know whether the proposed bill was the right vehicle for that concern. 4:24:24 PM REPRESENTATIVE JOSEPHSON withdrew Amendment 1. REPRESENTATIVE JOSEPHSON moved to adopt Conceptual Amendment 2, turning "may" to "shall" on line 29 of page 11." CHAIR KITO objected for the purpose of discussion. 4:25:04 PM REPRESENTATIVE SULLIVAN-LEONARD asked Ms. Ryan about the effects of the mandate. MS. RYAN answered the department continued to maintain the database and that what the bill corrects is that it references that database from the deeds so an individual who doesn't know of the database would get notified. She emphasized changing the language to "shall" would not change how the division operates. REPRESENTATIVE SULLIVAN-LEONARD surmised that Conceptual Amendment 2 was not necessary. MS. RYAN reiterated the mandate would not change what the department does. CHAIR KITO asked Jennifer Currie of the Department of Law to speak to the Conceptual Amendment. 4:27:09 PM JENNIFER CURRIE, Senior Assistant Attorney General, Environmental Section, Department of Law, testified there was no change except that it requires the department to maintain the registry. CHAIR KITO stated at present the statute did not have environmental covenants identified so they would not have to be registered. He read from page 11, line 11, of SB 64 as follows: Registry. (a) The department may maintain a registry that contains all environmental covenants and notices of activity and use limitation and any amendment or termination of those instruments. CHAIR KITO asked whether, if "may" was changed to "shall", the department would be required to include all environmental covenants in the database. MS. CURRIE answered that with "shall" they are required to include environmental covenants, and with "may" the department can include them. CHAIR KITO stated he saw the benefit of changing "may" into "shall", at least as regards the environmental covenant piece. 4:29:05 PM CHAIR KITO withdrew his objection. There being no further objection, Conceptual Amendment 2 was adopted. 4:29:39 PM REPRESENTATIVE WOOL moved to report SB 64 as amended out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HCS SB 64(L&C) was moved from the House Labor and Commerce Standing Committee.