SB 27-REGULATION OF DREDGE AND FILL ACTIVITIES  1:42:36 PM CO-CHAIR FEIGE announced that the first order of business would be SENATE BILL NO. 27, "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." 1:43:41 PM REPRESENTATIVE TARR moved to adopt Amendment 1, labeled 28- GS1750\A.2, Nauman, 3/19/13, which read, as follows: Page 4, following line 23: Insert a new bill section to read: "* Sec. 4. AS 46.03 is amended by adding a new section to read: Sec. 46.03.021. Dredge and fill permitting  program report to the legislature. The commissioner, in coordination with the commissioner of natural resources, shall provide to the legislature, on or before December 31 of each year, an annual report of the cost of administering the state dredge and fill permitting program described in AS 46.03.020(14)." Renumber the following bill sections accordingly. REPRESENTATIVE JOHNSON objected for the purpose of discussion. 1:43:51 PM REPRESENTATIVE TARR understood concerns about the potential costs for the Section 404 program. She stated it would take several years for the application to be completed. Amendment 1 requests the department provide an update to the legislature on the cost of the program. REPRESENTATIVE JOHNSON asked the department to answer questions. 1:45:17 PM LARRY HARTIG, Commissioner, Department of Environmental Conservation (DEC), stated he understood the importance of keeping the legislature apprised of expenditures. However, the administration doesn't see the need for Amendment 1. He said he has interpreted the Amendment 1 differently than presented by Representative Tarr. He understood Amendment 1 would require the department to provide an annual report of the cost of administering the state dredge and fill permitting program. However, the department would not administer the program for 5- 10 years. Prior to expenditures occurring, the department would request the funding authority from the legislature. If the intent of Amendment 1 is to have the department provide a progress report, he responded that the department presents its budget. Further, to submit a report seemed a little premature until the information had been gathered, assessed, and evaluated. Otherwise, the legislature would receive a report with a lot of contingencies. Although he understood the need for accountability, he felt this was not necessary. 1:47:18 PM REPRESENTATIVE P. WILSON inquired whether the commissioner is saying that the information would be provided anyway, just to the Finance Committee rather than the legislature as a whole. COMMISSIONER HARTIG responded that is correct if the language is read to report at the beginning of the next calendar year. He elaborated that the program wouldn't be up and running, but the department reports details to the Finance committee on its activities. REPRESENTATIVE JOHNSON offered his belief this would require reporting for the previous year, which he understood would be presented at the time the department requested funding for the future year. He did not see the necessity of the requirements in Amendment 1. 1:49:05 PM REPRESENTATIVE SEATON expressed his concern that the fiscal note spans five years. He further expressed concerned that a process is being set up which would require $2.5 million each year over the next four years. He suggested a report on the progress could be helpful and perhaps Amendment 1 should be changed to "progress on the analysis of the Section 404 primacy process." Otherwise, an open-ended $2.5 million commitment exists. 1:50:08 PM REPRESENTATIVE SEATON moved to adopt Conceptual Amendment 1 to Amendment 1, which would require the annual report to indicate any progress that has been made on implementing or analyzing implementation of the 404 permit. 1:50:47 PM CO-CHAIR FEIGE objected for the purpose of discussion. He said he is unsure of the sponsor's intent; however, the bill would authorize the department to investigate whether or not the state should assume primacy of the 404 program. He didn't think requesting an annual report about the cost to administer the state dredge and fill permitting program seemed to correspond. REPRESENTATIVE TARR stated that Amendment 1 is intended to provide a progress report, as stated by Representative Seaton. She said the committee has been reviewing the fiscal notes for the next four years, without knowing the costs to actually administer the program. She also said the legislature could consider authorization of funding for positions necessary to prepare the application; however, if primacy of the 404 program will mean hiring 40 new staff members, given the current budget situation, the legislature might decide now is not the time to do so. Therefore, it might not be wise to consider continuing with the applications. The purpose of Amendment 1 is to receive a progress report. In fact, looking back at the department's work on primacy for 402, at some point the department had to submit the number of positions. Besides preparing the application, the department will need to administer the program and she could see the value to also obtain a fiscal impact for administering a program. 1:53:52 PM REPRESENTATIVE TARR agreed with the Conceptual Amendment 1. She also said on line 7 to add "projected cost" so it would read, "...annual report of the projected cost of administering the state dredge and fill permitting program ... ", which is what she was intending. This would provide the legislature with a full picture of the 404 process. 1:54:11 PM CO-CHAIR FEIGE suggested Representative Tarr and Representative Seaton work on the conceptual Amendment. 1:54:28 PM The committee took an at-ease from 1:54 p.m. to 2:00 p.m. 2:00:44 PM REPRESENTATIVE SEATON referred to Amendment 1, line 7. He made a motion to revise Conceptual Amendment 1, which would read, "Annual report of the progress in the development of assuming the state dredge and fill permitting program described in AS 46.03.020 (14) and the estimated cost of administration of the program." 2:01:34 PM REPRESENTATIVE JOHNSON asked whether a motion was on the floor for a previous Conceptual Amendment 1 that needs to be withdrawn prior to proceeding. REPRESENTATIVE SEATON suggested he merely wished to clarify the language for Conceptual Amendment 1 to Amendment 1. CO-CHAIR SADDLER objected for discussion purposes. He understood the intent is to allow the department to indicate progress on the 404 primacy. He did not want to use an estimate for the one-year process as the basis for not proceeding with further evaluation. He clarified he understood it would be a progress report and not a final decision point. Further, how accurate an estimate needs to be, he suggested leeway given that it's a new process. 2:02:52 PM REPRESENTATIVE SEATON responding to Co-Chair Saddler, answered yes, this would be a written progress report on the development of the 404 permitting process to the legislature. He assured members it is not his intention that the report must be complete; rather, the department would submit a progress report that includes any known estimates. REPRESENTATIVE TARR echoed that Conceptual Amendment 1 to Amendment 1 is not intended to prevent the application from going forward, but would provide an opportunity to obtain additional information for the decision-making process. 2:03:55 PM COMMISSIONER HARTIG allowed this body can ask DEC to come back before it at any point. He expressed several concerns. First, that any amendment will require the bill to go back to the other body, yet the information is available to the legislature at any time. Second, the DEC anticipates by 2015 it will have a good idea of what primacy would entail and any costs and benefits so essentially the effect of the amendment is to provide one additional report prior to the DEC coming before the legislature. Basically, the DEC would receive funding on July 1, but will report at the end of the calendar year on five- months of activity. Realistically, the legislature will receive a solid report on the costs and benefits two years out. However, if the legislature really wanted additional information, the DEC could present the committee with an update at any time it so desires. Finally, while he did not think the reporting concept is wrong, his concerns stem from the practicality. 2:05:36 PM REPRESENTATIVE SEATON said he did not see any provision in the bill that would requires a final report to the legislature in 2015. In fact, he noted the fiscal note extends to 2019. Even though it's true that the department can come before the committee, it's quite different to have a presentation than a written report that details what has been accomplished to date. Anyway, as often happens, projects are delayed and Conceptual Amendment 1 would be in place to require an annual progress report. Nothing in the amendment affects the program, but it assumes the fiscal note is "real" and the process is planned to extend through FY 2019. In conclusion, once the final report is complete, the reporting would discontinue since the state will have assumed primacy. 2:06:59 PM REPRESENTATIVE TUCK remarked that he did not think it is too much of a burden to ask for a written report given the amount of funding involved. Further, the justification to seek primacy is absent; instead, the arguments are anecdotal. Further, given the fiscal constraints, the 404 permitting primacy may not always be a priority [for the department]. Thus it would help to have accurate information to study to ensure that the state is making a good investment and moving in the right direction. He offered his support for Conceptual Amendment 1 to Amendment 1. CO-CHAIR FEIGE, in response to a question, clarified the committee is on [Conceptual] Amendment 1 to Amendment 1. 2:08:00 PM CO-CHAIR SADDLER maintained his objection. 2:08:07 PM A roll call vote was taken. Representatives Seaton, P. Wilson, Tarr, Tuck, Johnson, Olson, Saddler, and Feige voted in favor of Conceptual Amendment 1 to Amendment 1. Therefore, Conceptual Amendment 1 to Amendment 1 was adopted by a vote of 8-0. 2:09:25 PM CO-CHAIR FEIGE stated that Amendment 1, as amended, is before the committee. REPRESENTATIVE JOHNSON maintained his objection. REPRESENTATIVE JOHNSON explained that he voted for the Conceptual Amendment to Amendment 1 since it would give more guidance than the original amendment. However, he characterized the whole bill as a report. To begin with, it seemed to him that Amendment 1 asks the department to do the legislature's job. When the department comes before the legislature in a [Finance] subcommittee, this is the type of information the committee needs to consider. The subcommittee can always make recommendations to the finance committee with respect to funding. Additionally, the department could better spend its time evaluating the process rather than writing reports. Further, it doesn't make any sense to him to obtain a five-month report. In conclusion, the committee just needs to do its job, he said. 2:10:47 PM REPRESENTATIVE SEATON offered his support for Amendment 1, as amended, stating it's important to obtain sufficient information in order to do the job. Moreover, to defer to the subcommittee, which is a much smaller group not focused on the natural resources aspects would mean the focus will be on the fiscal implications, not on the resource policy decision-making process. Also, the committee would need to specifically request updates on the 404 permitting. Amendment 1 would ensure that in future years no matter what the committee membership, a report will come back to the committee, which is why he supports Amendment 1. 2:12:14 PM REPRESENTATIVE TUCK stated that unlike the 402 permit process which was phased in, the 404 permit would be a "hard decision all at once," which is why it's prudent for the legislature to have ongoing information to make a solid decision. Also, having the report would allow the legislature a better opportunity to evaluate the 404 permitting primacy process. He offered his support for Amendment 1. 2:12:41 PM CO-CHAIR SADDLER said Amendment 1 seems to short-circuit the process. Again, the whole purpose of the bill is to authorize the departments to evaluate and formulate information. Certainly, the commissioners can provide progress reports at any time. Previously, the committee heard testimony on another bill that good project management entails planning only once and it is a costly process to revisit planning. He recalled from water and air quality permitting processes that the DEC has the expertise to move forward with the 404 permitting. In the meantime, the legislature has the opportunity at this point as well as for the final sanction of the 404 primacy. He said he was not likely to support Amendment 1. COMMISSIONER HARTIG clarified that the DEC's fiscal note is for $1.4 million, which includes the DNR costs via the reimbursable services agreement (RSA). He pointed out he heard other figures being used. EDMUND FOGELS, Deputy Commissioner, Office of the Commissioner, Department of Natural Resources (DNR), said he did not have anything more to add in terms of the department's position on Amendment 1. 2:14:23 PM REPRESENTATIVE SEATON read from the fiscal notes [DEC, fiscal note 1, Water Quality dated 1/11/2013], for FY 15, at $1,854.3 for eight new employees; DNR, Administration & Support [fiscal note 2, dated 1/14/2013], for FY 15 at $566.7 with four new employees. He said that combined, the fiscal impact is close to $2.5 million. He asked for further clarification. COMMISSIONER HARTIG said he believes the fiscal notes are being wrongly interpreted. He clarified the intent of the fiscal note is to begin in FY 14 with $1.434.7. He explained the fiscal note such that DEC would have add five fulltime positions in FY 14 and add three more in FY 15. In FY 14 the personal services line is for $495.4 which is in the form of an RSA to DNR, and the amount increases to $883.5 in FY 15. The DNR would add two new positions in FY 14 and two more positions in FY 15 for a total of four new positions. 2:16:30 PM REPRESENTATIVE SEATON read from the DNR fiscal note, which in FY 15, indicates personal services at $425.6 and a total of $566.7. He said he was unsure of how this corresponds. Once more, the overall fiscal impact represents a lot of money when the legislature is struggling to avoid adding to the state's operating budget base. He anticipated a report on the $2 million to determine if the [404 primacy] makes sense. 2:17:59 PM REPRESENTATIVE P. WILSON understood that as DEC proceeds, any additional funding requests and authorization will have to come before the legislature. COMMISSIONER HARTIG said the short answer is yes, that it would come before the legislature in terms of budget request for personnel costs. Additionally, he anticipated requesting statutory changes as the DEC continues to work with the federal agencies. On the 402 primacy, the DEC requested two bills, in addition to budget requests. Again, he anticipated the 404 process would be similar. 2:19:21 PM REPRESENTATIVE P. WILSON said she does not think Amendment 1 is necessary. She anticipated the DEC would be before the legislature and viewed additional reporting as onerous. REPRESENTATIVE JOHNSON maintained his objection. 2:19:55 PM REPRESENTATIVE TARR pointed out that statutory changes might not have fiscal implications. She recalled the budget subcommittee process as not allowing for significant detail. She did not expect the report required under Amendment 1 would be a lengthy report that would require a significant amount of staff time, but rather would consist of an executive summary progress report that would be informative, perhaps prepared in an afternoon. She identified her frustration with the bill is due to the missing information. She wished she had some overall estimates today to help determine whether the [404 primacy] is the right move. Certainly, given some of the conversations with respect to fiscal constraints means the legislature will have some tough decisions to make. This information would assist the legislature in its decision-making process. 2:21:28 PM CO-CHAIR FEIGE stated the question is whether Amendment 1, as amended, should be adopted. 2:21:58 PM A roll call vote was taken. Representatives Tarr, Tuck, Seaton, and Feige voted in favor of Amendment 1, as amended. Representatives Johnson, Olson, Hawker, P. Wilson, and Saddler voted against it. Therefore, Amendment 1, as amended, failed by a vote of 4-5. 2:23:00 PM CO-CHAIR SADDLER moved to report SB 27 out of committee with individual recommendations and the accompanying fiscal notes. REPRESENTATIVE SEATON objected for the purpose of discussion. He stated that only two other states have undergone Section 404 primacy. In fact, every other state has rejected it. Virginia studied the 404 primacy and reported on it in December 2012. He recalled that their stakeholders had objected based on the cost benefit analysis. Equally important, the cost to industry would be less under the federal program than anticipated under the state program. Further, the applicants must bear the costs; however, the state must also acquire substantial staff to process permits, which is the reason Virginia's stakeholders did not support it. In any case, the statewide programmatic general permits were found to provide almost all the benefits without the costs associated with the assumption of the 404 primacy. Finally, in Alaska, the DEC already has the ability to issue statewide programmatic general permits. He preferred the agency do so rather than go down this "rabbit trail" that could result in hiring 49 new state employees and spending substantial time and costs to obtain the 404 primacy for dredge and fill permits. He suggested that effort could better be spent on statewide programmatic permits, which will allow for coordination on federal waters. This bill will not move the state forward or allow input on the dredge and fill permits. For these reasons, he opposes passage of SB 27. 2:27:00 PM REPRESENTATIVE JOHNSON offered his belief that Alaska is a resource development state and its future rests with resource development. He stated his biggest concern is a fear that the federal government may grind to a halt. Granted, some people don't want to see any development in Alaska. Further, it's difficult to obtain permitting due to staff and costs. However, Alaska must be prepared to "step into the breach" or resource development will not happen. He thought that this may be the first "arrow" the state will be absorbing, but the further along the path the state is the better it will be. He surmised the legislature will view the $4 million as the best investment it has made. In any case, he predicted it wouldn't take much resource development to make up the cost. For these reasons he offered his support for SB 27, stating the state needs to control its own destiny every chance it can. He concluded by offering his wholehearted support for the state to take control of its destiny. 2:28:54 PM REPRESENTATIVE HAWKER echoed Representative Johnson's comments. He said the language in the bill is permissive. This bill would permit the executive branch of state government to pursue the 404 primacy, to review and study it to determine whether it is the best course of action for the state. In fact, this bill does not establish a 404 permit program. It does not mandate that the state adopt a program. For all the reasons Representative Johnson mentioned, this appropriating body ought to investigate this avenue or the legislature will never know [if it should have pursued the 404 primacy]. He offered his support for SB 27 because he agrees the legislature should be considering its future. He emphasized that once a decision is made to implement a program - if it is made - it will still require an appropriation and funding. At the end of the day, the legislature still holds the purse strings. It is not "our last bite at the apple" but will move a very important, very sound, and very wise process forward. 2:30:25 PM REPRESENTATIVE TUCK offered his belief that some of the comments made would also be good arguments for Coastal Zone Management, which the state did have control over at one time. In fact, the state was able to make decisions "in our own backyards" on projects that were moving forward. He worried that the trend has been going the other way instead of taking control of the state. While he isn't opposed to taking control, right now he doesn't feel like the committee has enough information to justify spending so much money [on the 404 primacy]. Besides, the state doesn't have information on the federal backlog and how much of the federal backlog the state could control or reduce even if the state does have the 404 primacy. Moreover, the U.S. Army Corps of Engineers still has the authority it will continue to retain so it can override the state at any time. At this time, he couldn't support the bill because he needs more information. Finally, the state is not exercising statewide programmatic general permits, which could reduce part of the backlog, and is the first step the state should take. The department has the authority to issue statewide programmatic general permits and it should do so. "Taking such a big bite into growing state government" and doing something the federal government is already doing doesn't make sense, he said. 2:32:03 PM CO-CHAIR SADDLER commented he wondered what the state's founding fathers would have thought if it had been said it would be cheaper to let them manage the fish traps. Specifically, with the amount of wetlands the state has, Alaska is a special case. With the critical nature of permitting wetlands dredge and fill activities in Alaska, as well as the importance it is to the primary revenue generator, it seems prudent to "give a hard look" at the benefits and costs of assuming wetlands primacy under Section 404. First, the state has undergone this process successfully for water quality and air quality. Second, it would result in fewer departments for coordination purposes. Third, it would result in Alaska-based decisions, which would not be less strict than the federal standards. Fourth, Alaska courts would adjudicate disputes, and finally, the mitigation measures would be Alaska-designed measures. Granted, the state will be giving the departments significant funding to perform a difficult job, but the [departments] anticipate "good answers" and "good information" to inform the legislature as it moves forward. For these reasons, he offered his support for SB 27. 2:33:21 PM REPRESENTATIVE TARR remarked that unfortunately the committee did not hear from the [U.S. Army Corps of Engineers] but nearly 80 percent of the Corps' individual permits are granted within 120 days and less than "one percent of one percent" of all permits has been denied. Therefore, the idea that the Corps' program is not working is questionable. She recalled the Alaska Oil and Gas Association letter [dated February 4, 2013], which read, "And while a majority of the nation's wetland are in Alaska, many of these may be non-assumable by the State under the Clean Water Act's geographical limitations and would remain subject to federal jurisdiction and duplicative Corps permitting." Furthermore, the legislature did not receive answers about where this process would apply. Although she spent time on their website, she couldn't find many areas this bill would apply. Even the CD-5 example brought up several times would not have been impacted by this bill since it would still be under federal jurisdiction. Generally, she wished that the committee had more information on where this would apply. She pointed out the individuals in the Alaska U.S. Army Corps of Engineers office making these decisions are Alaskans, they understand Alaska's issues and development, which is why she surmised the success rate is so high. Besides, she didn't think the system is broken. While she could have supported the bill with the amendment since it would give the legislature more information as the state moves forward, she said she is not comfortable with the expenditure with so much uncertainty about the commitment. 2:35:23 PM COMMISSIONER FOGELS asked to respond to some of the points raised. First, whether a problem exists: yes there is a huge problem, such that a federal agency controls permitting on one of the most important sectors of our lands. On the contrary, it is not about the Corps' backlog. Even if the Corps had a zero backlog, the state should be looking at the costs and benefits of assuming the 404 primacy. In fact, this is about Alaskans having control, with Alaska's agencies having control over permitting of natural resource development in Alaska, and having those challenges resolved in Alaska and not in Washington D.C. In terms of the concerns about limited wetland exclusions, it is a big issue, he said. 2:36:12 PM COMMISSIONER FOGELS emphasized the committee must understand the DNR/DEC will go into this 404 process with a strong position that the state will receive primacy over most of the wetlands in Alaska. In fact, the EPA has in past guidance documents basically agreed. He read from a 1980 document specifically addressed to primacy for states. He read, "By assuming the 404 program, states will gain clear jurisdiction on most of the nations' lakes, small rivers, streams, and inland wetlands." Consequently, the state believes it will gain jurisdiction over most of the wetlands in Alaska, which is very significant. COMMISSIONER FOGELS, with respect to the state programmatic general permits and the reason to pursue primacy, the answer is simple. The state programmatic general permits represent a different tool for a different purpose; however, primacy is a different tool. He stressed that wetlands permitting in Alaska is very complex and primacy is only one tool. He highlighted that this bill's fiscal note will allow the state to pursue the opportunity to seek the other tools, as well as primacy. At the end of the day, if the state decides not to "go for primacy" the state will still have hopefully acquired some of the other tools and the state will benefit greatly. 2:38:06 PM COMMISSIONER HARTIG, with respect to some of the comparisons to Virginia and other states that have not pursued the 404 primacy, related the deputy commissioner is currently attending a conference underway in Washington D.C. state wetland administrators and the U.S. Army Corps of Engineers. The topic of this conference is how to obtain primacy and numerous states are actively pursuing this. This isn't something that "everyone else" looked at and rejected. He pointed out that states like Virginia have considerably less wetlands than in Alaska. He surmised that fewer permits are being sought in Virginia than in Alaska so this tool would have less value to Virginia. This bill considers what Alaska needs, but not from the perspective of Virginia or Oregon. He concluded that Alaska should not compare itself to other states. CO-CHAIR FEIGE said he does not care how other states do it. The legislature's job is to look at what's best for Alaska and the question of whether or not to seek the 404 primacy is a worthy question to consider. He acknowledged a number of options have been raised in testimony, which have advantages and disadvantages. However, Alaska is a resource development state and projects are part of Alaska's future. In conclusion, he said that the status of 404 permitting program will have an impact on those projects. 2:40:21 PM REPRESENTATIVE SEATON maintained his objection. 2:40:24 PM A roll call vote was taken. Representatives Hawker, Johnson, Olson, P. Wilson, and Feige voted in favor of reporting SB 27 out of the House Resources Standing Committee. Representatives Tarr, Tuck, and Seaton voted against it. Therefore, SB 27 was reported out of the House Resources Standing Committee by a vote of 5-3.