HB 78-REGULATION OF DREDGE AND FILL ACTIVITIES  1:37:50 PM CO-CHAIR FEIGE announced that the next order of business is HOUSE BILL NO. 78, "An Act establishing authority for the state to evaluate and seek primacy for administering the regulatory program for dredge and fill activities allowed to individual states under federal law and relating to the authority; and providing for an effective date." 1:38:07 PM LARRY HARTIG, Commissioner, Department of Environmental Conservation (DEC), on behalf of the governor, co-introduced HB 78 with Dan Sullivan, Commissioner of the Department of Natural Resources (DNR). Mr. Hartig said HB 78 would allow DEC and DNR to explore and assess the pros and cons of the state pursuing primacy of the Section 404, [Clean Water Act], dredge and fill program. The bill would provide a two-step process: first, an evaluation phase and, then, authority to the two agencies to pursue primacy. He clarified, however, that the legislature would still be the gatekeepers because after the assessment period the agencies would be back to the legislature at least once, which would be to get the budget for a program should that assessment say the state should pursue this. The agencies may also be back to the legislature prior to that for additional authorities because, as the assessment explores the pros and cons of taking on the program, the state would be building its application - building the state capacity - by identifying any gaps with existing state law that would have to be filled for the state to have a complete application. 1:39:36 PM COMMISSIONER HARTIG said his presentation today will define the Section 404 program, outline the process for putting together and filing an application with the Environmental Protection Agency (EPA), and discuss the anticipated pros and cons of acquiring primacy of this program. Commissioner Sullivan will talk about how the administration views primacy in the bigger context - how it fits in with some of the other objectives that the state administration and legislature are pursuing - and will give examples of what happened recently on some 404 permits and how things might have happened differently had some of the decision making been made at a local level. 1:40:48 PM COMMISSIONER HARTIG explained there are two large permitting programs in the federal Clean Water Act: Section 402, the wastewater discharge permitting program, and Section 404, the dredge and fill program. The state received primacy for the 402 program in 2008 and received final authority to run the last phase of that program in November [2012]. For the 404 program, the U.S. Army Corps of Engineers issues permits for projects that want to place fill material into surface waters of the U.S., which includes lakes, ponds, shorelines, and wetlands. He pointed out that Alaska has 65 percent of the nation's wetlands, which partially explains why the state should be one of the first in line to pursue primacy. Types of projects that would need 404 permits include large mine or oil and gas projects, as well as small projects such as home or school foundations. Anytime construction occurs on a wetland or fill material placed in surface waters, chances are that a 404 authorization will be necessary. 1:42:49 PM COMMISSIONER HARTIG explained that the 404 program is not there just to issue permits because wetlands have a lot of value. Therefore, the state should be interested in pursuing primacy on this program to ensure that those values are protected and realized in the state. Wetlands provide runoff control, settle and filter potential contaminants in runoff, and provide valuable habitat for certain species. Alaska is fortunate in that it has only lost about 1 percent of its wetlands as compared to other states that have lost 50 percent or greater. It is important to protect these wetlands and manage them at a local level so as to have some decision-making control over this program. 1:43:35 PM COMMISSIONER HARTIG also pointed out that the 404 program is a detailed, science-based program. Some of the analyses that are performed to determine whether to issue a permit and what terms under which it might be issued require identifying the least environmentally damaging practicable alternative (LEDPA), which he likened to a mini National Environmental Policy Act of 1969 (NEPA) analysis. Under the program a 404(b)(1) analysis is performed that considers the potential long- and short-term effects that a proposed discharge or fill material might have in both the disposal areas and around it. Again, the goal of the 404 permitting program is to review how to avoid or minimize impacts to these valuable aquatic resources, including wetlands. Under the existing 404 program in the federal government, the U.S. Army Corps of Engineers issues the permits with the aforementioned analysis but the EPA retains oversight and actually has veto authority over the U.S. Army Corps of Engineers. The EPA would maintain oversight and have veto authority with 404 permits that DEC/DNR would issue even with primacy, which is the same with the permits DEC issues for wastewater discharge. 1:45:31 PM COMMISSIONER HARTIG explained that it is a two-stage process with HB 78. First, there would be review of what a state program would look like, cost, and take to staff the program and then evaluate the potential benefits of the program before seeking additional resources from the legislature to implement the program. He then turned attention to some of the requirements that would have to be part of the application, which is analogous to the application done for the 402 program. The application is lengthy as it includes a formal request by the governor, a detailed description of the program as the state will run it, a statement by the attorney that the state program as proposed is consistent with the federal program, a negotiated memorandum of agreement with both the EPA and U.S. Army Corps of Engineers in terms of how everyone will work together, a description of staffing and the budget, and copies of all applicable statutes, regulations, and guidance documents. Therefore, the entire program has to be built prior to submitting the application, which means the legislature would have a clear picture of the entire program including the budget, personnel, and program details. He anticipated that there would be a component of permit fees and all the interested parties would be able to review the program and comment on it prior to hiring personnel and forwarding the application. Commissioner Hartig acknowledged the rumors in the capitol building that HB 77 is Pebble Mine legislation, but refuted those rumors. 1:49:34 PM REPRESENTATIVE HAWKER surmised then that this is a two-stage process under which DEC would have the authority to build the resources within the state in order to administer and operate a primacy program and then return to the legislature seeking resources to implement and pursue the official primacy designation. COMMISSIONER HARTIG responded that is partially correct. The fiscal note starts out with five positions at DEC in fiscal year 2014 (FY14) that would perform the study and build the application. The number of personnel would increase [the next year] to a total of eight people, which would not be enough people to run the program. He noted that at DNR the number of positions would start at three and increase to five. He predicted that in 2016, DEC would return to the legislature with the number of people necessary to run the program at which time DEC would make a fiscal note request and the position control numbers (PCNs). REPRESENTATIVE HAWKER remarked that this is just the tip of the iceberg in terms of growing government and it is a policy call as to whether it is worth it. He then reviewed his understanding that for this proposal in DEC there would be five personnel in FY14 that would increase to eight in FY15 and in DNR there would be two personnel in FY14 that would increase to four in FY15. 1:52:11 PM COMMISSIONER HARTIG informed the committee that during this assessment period, DEC would review another aspect of primacy. With regard to taking the entire authority to issue 404 permits from the U.S. Army Corps of Engineers, there are geographical limitations such that the U.S. Army Corps of Engineers under the federal Clean Water Act has to retain authority on certain wetlands. Those wetlands would be the tidal influenced areas and the adjacent wetlands as well as interior waterways that are or may be used in interstate or international commerce. Therefore, one cannot review the federal government's costs for the program in Alaska today and equate that to what the state might pay. 1:53:08 PM COMMISSIONER HARTIG then related that DEC would pursue at the same time another aspect of authority that is less than primacy. There are state programmatic general permits that may be issued for activities that would happen with enough regularity to issue a statewide general permit covering multiple parties rather than individual permits for individual parties. The impact of such projects would be relatively minimal and the state could take over the authority to implement and enforce those permits from the federal government. The assessment phase would include which types of permits might benefit projects, such as a shale gas project, that would have multiple projects in the state that would need 404 permits. Whether the state could work with the U.S. Army Corps of Engineers jointly to issue those permits and then take over the management and enforcement of those permits, which could be accomplished with or without full primacy, is something the department would assess during the same time as primacy. 1:54:29 PM CO-CHAIR FEIGE related his understanding that the U.S. Army Corps of Engineers, given its 404 authority, already issues general permits. COMMISSIONER HARTIG clarified that there are a number of different types of general permits and these [404 permits] would be fairly low impact type projects. He noted that [404 permits] have not been issued in Alaska for the types of projects he just described. The assessment phase could consider whether more could be done with general permits, which would save the U.S. Army Corps of Engineers, the state, and the project proponent money and time because it is much easier to go through the general permit process than the entire permitting process for an individual permit. 1:55:25 PM REPRESENTATIVE SEATON related that as Homer has worked on building the natural gas line distribution system it has been working with the U.S. Army Corps of Engineers on a regional general permit. Therefore, he opined that the benefit being discussed is already available when working with the U.S. Army Corps of Engineers for regional general permits. He asked if there is any reason why those general permits have not or cannot be pursued similar to what is occurring in Homer on the wetlands. He asked whether that can be pursued currently. COMMISSIONER HARTIG replied no. There is authority for DEC to work with the U.S. Army Corps of Engineers and others to determine where there are opportunities in the state to do general permits like this under federal law. He clarified that as part of this work, DEC would perform a targeted assessment to determine what other opportunities there are. He said that the term permit reform evokes thoughts of efficiencies and priorities, which he believes will be discussed with [HB 78]. He predicted there will be discussions determining the priorities for the state in terms of resource development and how to use the 404 program more efficiently while saving state and federal funds. Although the department has the authority, the department has not performed a complete assessment. Perhaps, a complete assessment should be done, he remarked. 1:57:40 PM COMMISSIONER HARTIG pointed out that this idea of 404 primacy is not new and goes back about 15 years. About 10 years ago, 404 primacy was considered, but the decision was to pursue 402 primacy first. It took about five years to put together the application and about five more years of phase-in to get the program. That experience will be helpful with the 404 primacy. Furthermore, the federal government budget is declining and Alaska has a hard time competing for the available federal dollars. He emphasized the need to make set priorities and be timely with the permitting program in Alaska. 1:59:11 PM COMMISSIONER HARTIG turned to HB 78, stating it will perform an assessment/evaluation that will provide a very clear picture of the program. At the same time, the department will evaluate the programmatic general permits and capacity building. The advantage of capacity building is that DEC will work with the U.S. Army Corps of Engineers to write the permits. Even if the department ultimately does not take the program, it will learn more about the 404 program. In Alaska, when a project results in the destruction of wetlands, mitigation has to occur. Typical mitigation means that wetlands lost are restored or impacted wetlands are enhanced. That has not really occurred very much in Alaska, rather there has been preservation of existing wetlands that might otherwise been developed. Since there is little private land in Alaska, there is not much opportunity for mitigation. Therefore, perhaps the department could work with the U.S. Army Corps of Engineers regarding mitigation options that make more sense in Alaska. Commissioner Hartig reiterated that [HB 78] will provide the opportunity to learn more about the 404 program, inform others about Alaska's needs, and spotlight the U.S. Army Corps of Engineers program. 2:01:51 PM DAN SULLIVAN, Commissioner, Department of Natural Resources (DNR), provided the committee with a copy of his 1/22/13 PowerPoint presentation to the Senate State Affairs Standing Committee regarding federal overreach into resource development in Alaska. One of the significant concerns with the state's relationship with the federal government involves regulatory activities. For large projects, he highlighted the following trends related to primacy: delay on significant projects with regard to federal regulatory activities and permits; a lack of input from the state despite the fact that the state is the other sovereign entity [and has some of the best experts in the world] with respect to these issues. The permitting issues the federal government takes in Alaska have an enormous impact for the future of the state's citizens. Referring to slide 8 of the PowerPoint entitled, "Federal Overreach into Resource Development in Alaska," he highlighted the mention of primacy as an approach to address federal overreach. This fits within the idea of broad-based regulatory reform and modernization for more timely, efficient, and certain permitting as well as a way in which to address some of DNR's significant concerns with the state's relationship with the federal government. As mentioned by Commissioner Hartig, the CD-5 permit by ConocoPhillips Alaska, Inc. (ConocoPhillips) was a 404 permit through the U.S. Army Corps of Engineers to enable ConocoPhillips to move into National Petroleum Reserve-Alaska (NPR-A) to expand its oil and gas operations. The aforementioned would be an important and strategic development for the state and ConocoPhillips. State agencies, the North Slope Borough, the U.S. Army Corps of Engineers, and various other stakeholders spent many years coming together, so almost everyone in Alaska was surprised when that permit was denied because of a veto by the EPA and the U.S. Fish & Wildlife Service. Although many, including legislators, federal agencies, the state, and the governor worked to reverse the decision, it was time wasted, he said. 2:06:16 PM CO-CHAIR FEIGE inquired as to how many years that particular development was delayed. COMMISSIONER SULLIVAN replied it took two years to get it reversed, and thus he would say the delay was two years. CO-CHAIR FEIGE asked whether there is any way to estimate how much money that has potentially cost the state or deferred to a later date. COMMISSIONER SULLIVAN opined that once the project is online the amount of oil it produces will be known, although he acknowledged that some of the oil will come from federal lands. Strategically, this development is important because it is the first development focused on production in the NPR-A. Although he could not provide an estimate at this point, he stressed that a two-year delay on that project was not in the state's best interest. 2:07:21 PM REPRESENTATIVE JOHNSON asked whether primacy would have stopped the EPA and the U.S. Fish & Wildlife Service from vetoing the permit. COMMISSIONER SULLIVAN said he could not say, adding that there is still federal oversight on these even when the state assumes primacy. However, he emphasized that by assuming primacy the state has a much better chance of controlling its destiny on some of these permitting issues while maintaining [the state's] high standards. 2:08:12 PM COMMISSIONER SULLIVAN related that on almost every major 404 environmental impact statement (EIS) permitting process that the U.S. Army Corps of Engineers and others undertake, some state agency applies for cooperating agency status that is typically coordinated through Office of Project Management & Permitting (OPMP). Despite that notion of cooperating agencies, the state has not been included in the actual participatory role when decisions are made, such as was the case in CD-5, the Tanana River bridge, Point Thomson, and the Izembek EIS. Primacy is not complete disentanglement with the federal government and oversight, but it makes the state a decision maker. He noted that the Clean Water Act contemplates primacy for states and two have obtained primacy. In the last four years, amorphous administrative executive branch declarations of policy have been put forth. There have been instances in which those policies in Washington, D.C., have influenced [decisions], such as with wildlands. Although there has been about a 20 percent reduction in the staff of the U.S. Army Corps of Engineers, the department is hopeful that there will be a number of resource development projects throughout the state. The pace of the regulatory and permitting issue can be frustrating because it is a recipe for delay when the state increases responsible resource development projects at the same time the U.S. Army Corps of Engineers makes significant cuts to its staff. The aforementioned is another important reason for the state to seek primacy. In conclusion, Commissioner Sullivan opined that the primacy issue and HB 78 are important in terms of the broader perspective of having more efficient, timely, and certain permitting, and having another tool to address federal overreach or federal regulatory delay. As mentioned by Commissioner Hartig, it is a long process, but it is well worth starting. 2:12:25 PM REPRESENTATIVE SEATON requested the departments provide the committee with maps as this moves forward, particularly since he understands that even if the state obtains primacy, the U.S. Army Corps of Engineers retains jurisdiction over all tideland ebb and flow and anything that could be used in interstate commerce waters, navigable waters, and adjacent wetlands. He inquired as to where primacy would provide the state authority versus what is maintained by the federal government. COMMISSIONER HARTIG pointed out that identifying those areas would be part of the discussion with the U.S Army Corps of Engineers. He then pointed out that there is not a geographic limitation for the programmatic general permits as they could apply to the navigable waters and adjacent tidelands. COMMISSIONER SULLIVAN added that it could also have a positive impact on the state's ability to control its own destiny, such as promoting shale oil development. He did not believe it would cover some of the things Representative Seaton mentioned, but rather would be the territory of the state. 2:14:59 PM REPRESENTATIVE SEATON requested the departments to provide the committee with the number of U.S. Army Corps of Engineers personnel working on 404 permits in Alaska so as to get a handle on the number of additional personnel the state would need. COMMISSIONER HARTIG said that he would have to [determine] what the state would get with primacy. He mentioned that he has spoken with the two states that have primacy with regard to how they staffed up. Again, the amount of staff would be dependent upon the interpretation as to what the state would get and how much the state would want to pursue. 2:15:52 PM REPRESENTATIVE HAWKER requested, if the chair desires, an extended fiscal note that would explain the ultimate, all-in costs after 2016 of implementing the 404 program. He further requested, if the chair desires, that an extended fiscal note reflect necessary inflation in human services costs. CO-CHAIR FEIGE requested the commissioners follow up on that. He further requested, acknowledging that it will require a fair amount of speculation, the impact on the Alaska economy as a benefit of [obtaining primacy for 404 permits]. [HB 78 was held over.]