SB 50 - Act making appropriations for capital projects; and providing for an effective date. FY 94 Capital Budget Overviews were conducted for: Dept. of Law Dept. of Natural Resources Dept. of Environmental Conservation DEPARTMENT OF LAW DICK PEGUES, Director, Administrative Services, Dept. of Law, came before committee. He advised of two capital projects for the department: one for the civil division and one for the criminal division. The projects, totaling $1.2 million, would establish local area networks and extend the network between Juneau and Anchorage to Fairbanks. Most of the department's attorneys, paralegals, and secretaries use word processors. At this time, however, there is no networking like in other departments and the legislature. The proposal will make information sharing and transfer automatic. As an example of need, Mr. Pegues said that the department is currently handling eight major and a dozen minor subsistence cases. The cases are being handled by attorneys in Anchorage and Juneau. A happening in one case impacts the others. The transfer of information has not been smooth nor timely. Mr. Pegues directed attention to a handout (Attachment A) setting forth the local networks and number of users in each office. In response to a question from Senator Rieger concerning the number of terminals, Mr. Pegues advised of "in excess of 300." They are primarily 286 models with servers to transfer information to 386 and 486 models. Senator Rieger requested a more detailed breakdown, and Mr. Pegues agreed to provide it. (Senator Sharp arrived at the meeting at this time.) DEPARTMENT OF NATURAL RESOURCES GLENN OLDS, Commissioner, Dept. of Natural Resources; and NICO BUS, Chief, Financial Services, Dept. of Natural Resources, came before committee. The Commissioner observed that by virtue of both the constitution and the statehood covenant, natural resources are the state's capital. They have generated the permanent fund and 80% of the operating budget revenues. The irony is that while natural resources represent the state's chief assets, the tending of those assets has not been a major effort. Over the last ten years, the department budget has been reduced by approximately $50 million. The department operating budget represents 2% of "our investment," while the capital budget represents 4%. That strategy in the private sector would lead to a loss of assets. Directing attention to a list of capital projects, Commissioner Olds explained that the department's strategic plan is characterized by four missions: 1. Consummation of the state compact. 2. Enhancement of state resources through economic development. 3. Streamline the bureaucracy and reduce impediments and restrictions that make management and enhancement of resources difficult. 4. Empower local communities as partners in development. The first four capital projects all relate to the top priority of consummating the statehood compact. As of last July, the state had not yet filed for 22 million acres in land selections. Those claims have since been made. That, however, is only the first stage. Refinement of the owner- state assertion and land selection is the largest item of capital expenditure. The state land selection audit relates to the foregoing project. A critical part of the statehood compact is the question of possession of land under water. Approximately 62 million acres are tideland or submerged. Commissioner Olds explained that under the navigability determination of the compact, the state has ownership of all navigable waters. A further element of the compact is state assertion of ownership of right of ways and/or traditional roads and access under RS 2477. The second priority is seismic data acquisition and evaluation. With respect to its resource base, Alaska has mapped only 7% of the state. Seismic measuring is one of the cheapest and most swiftly accessible methods of determining resources in Alaska's fourteen fossil fuel basins. Only one basin has been systematically explored. Additional information is needed to effectively lease land and develop exploration. The request for basin analysis packets relates to utilization of seismic information for attracting potential exploration. The energy basin assessment will be equally important to future exploration. In addition to Alaska's resource base of gas and oil, the state has enormous energy potential in its water and geothermal resources. The department intents to assert more graphically and effectively the extent to which Alaska is key to the new, federal administration's emphasis on energy independence. Senator Kerttula asked if the department intended to conduct a lobbying effort in Washington, D.C. Commissioner Olds answered affirmatively. He said that the department is working closely with the Dept. of Commerce and Economic Development office of international trade. In the course of further comments on the issue, Commissioner Olds voiced his belief that "Money is not a clue to the access of educating Washington." What is required is to provide Washington with an understanding of the critical role of Alaska in a broad spectrum of energy capability. Commissioner Olds next spoke to efforts to garner Alaska Foundation for Science and Technology support for new technology linking coal and water to create a non-polluting fuel. Coal reserves in Alaska are equivalent to 1,600 Prudhoe Bays. The new technology would provide a new kind of fuel comparable to oil. The geological/geophysical inventory is part of the foregoing assessment. Over the past several years, the department has requested $7.5 million a year to conduct state mapping. The current request is related to that strategy. The request for $330.0 for the land status, GIS, relates to the recent land selection. The filing on 23 million acres is tantamount to "filing on the state of Washington." There is need for information providing a quick and graphic portrayal of Alaska's land status. Funding for parks - water, toilets, and dump stations, relates to health concerns. Many parks do not have adequate water supply. Old water and toilet systems are in need of replacement. Commissioner Olds stressed need to provide basic services to visitors. He reiterated statistics provided at an earlier meeting, indicating that Alaska spends 75 cents per visitor (through its 131 state parks) while the federal government spends $15.00 per visitor. Senator Frank noted that, last year, the legislature provided the division of parks several million dollars for sanitation upgrades. He then voiced frustration that in his district, where approximately $500.0 is being expended, $200.0 to $300.0 is being spent for paving in campgrounds. Commissioner Olds advised that he would look into the issue. Referring to the $750.0 request for rehabilitation and expansion of tourist facilities, Commissioner Olds advised of $20 million in deferred maintenance needs for parks. The OGRA system upgrade relates to royalty accounting. Commissioner Olds noted department responsibility to account for all royalty revenue before transmission to the Dept. of Revenue. The $175.0 for land settlement projects pertains to obstacles (legal and otherwise) to the sale, lease, and development of land. This effort will attempt to swiftly address those problems in an attempt to move land into revenue generating status. The $350.0 for forest inventory represents the department's attempt to render forests a revenue source for the state. Alaska has not had a significant timber development program for approximately fifteen years. Many mistake the Tongass (a national forest program) for a state initiative. The state does not have an inventory of its timber resources, particularly those resources located in the interior. Discussion followed between Senator Frank and Commissioner Olds regarding restrictions to forest development. The Commissioner noted requirements for a five-year plan and advised that he did not know why the state had not previously inventoried this resource. He suggested that failure to do so more than likely corresponds to budget cuts over the past ten years. Senator Kerttula voiced his recollection that cuts were taken in areas where redundancies occurred. The Commissioner explained that the $450.0 for the forest health initiative, Tanana Valley resource development, and reforestation, relates to timber development. Speaking to the $200.0 request for preservation of records within the recorder's office, Commissioner Olds said that pre-statehood records are beginning to deteriorate. They are important to support the state's claim to certain lands and must be permanently and properly preserved. The $150.0 for fire radio communication equipment is a critical safety item. The department, in conjunction with the federal government, is responsible for forest fire fighting. Given Alaska's vast distances, radio equipment must be updated for critical communications. The $100.0 for information system efficiencies involves the department's attempt to "do more with less." In response to a question from Senator Kelly, NICO BUS, Chief, Financial Services, Dept. of Natural Resources, advised that funding would cover staff time involved in designing the data base. It does not cover hardware. The Commissioner explained that the $250.0 for new recreation/tourism facility development addresses need to open access to some of the state's most heavily used parks. Subsequent discussion followed between Senator Frank and Commissioner Olds regarding projects to be funded by the $250.0. Mr. Bus directed attention to pages 299-300 of the budget detail. Speaking to the $300.0 for coalbed methane programs, Commissioner Olds explained that seams in coalbeds across Alaska generate methane. It may be possible to discover a means of accessing these reserves for utilization in nearby villages and communities as well as providing a revenue source for the state. Evidence points to resources in excess of 2,000 trillion cubic feet of methane. Senator Kerttula voiced concern that fire might spread from methane seams back into the coal beds. The Commissioner concurred in need for caution. The $150.0 for commercial recreation offerings - Hatcher Pass results from need to support development in one of the prime recreation areas of Alaska. There is significant private interest in development of the area. This effort would address needed infrastructure. Senator Frank subsequently raised questions regarding proposed improvements at the Chena Pump Road House (page 320, detail budget), asking why the state would put money into improvements for which there is no demand. The Commissioner ultimately advised that the noted campground was no longer part of the request now slated for projects at Denali and Ester Island. Co-chair Pearce suggested that detailed questions be addressed to the director of the division of parks when he appears before either the full committee or the subcommittee overseeing the DNR budget. She requested that the Commissioner ask the director of parks to be prepared to speak to the Ester Island project as well. Senator Frank further questioned the proposed project designated Denali East. He attested to the shortage of private land in the area and resulting increases in land value. The Senator then asked why $150.0 would be needed for an economic feasibility study, suggesting that state land simply be leased out. Commissioner Olds noted need to meet constitutional requirements for public hearings, best interest findings, proper title review, etc. Speaking to the $250.0 for hydrological network evaluation, Commissioner Olds explained that the state is under critical obligation to assess the water flow of Alaska's rivers and streams. Development of this information is critically important to state claims relating to navigability as well as requirements for fish resources. The U.S.G.S. stream gaging coop program is the second part of this development. Completion of the STORET system for $125.0 relates to the electronic storage data base for state water resources. It is critically important to the permit process, development of the potential water sale process, and the monitoring of various uses. End, SFC-93, #23, Side 1 Start, SFC-93, #23, Side 2 The $100.0 for agricultural land disposal relates to the report from the Governor's task force. The Commissioner acknowledged that past experience with larger projects had not been happy. He then advised that he had instructed the department to move half a million acres from general land use into the agricultural category. He then told members that the division of agriculture would henceforth work more closely with the farming community to move "in the direction of agricultural land disposal at a faster pace and at a more prudent pace." Commissioner Olds attested to ongoing research at the plant materials center at Palmer on developmental seed for environmental renewal in various areas of the state. The center badly needs the $80.0 for equipment replacement. The $60.0 for wetlands investigation and classification relates to Alaska's exemption from national wetlands policies and provisions which is now being challenged by the new administration. The state must establish the difference between wetlands in Alaska and elsewhere. Speaking to the $50.0 for mining projects Commissioner Olds noted that Alaska has enormous mineral resources but has given little attention to value-added development. The state has focused on description, inventory, and development but has not looked at the possibility of a smelter or other refining to keep jobs in Alaska. Crude ore income is 50% of the value. Requested funding would explore the possibility of adding refining as an instate industry. Commissioner Olds next addressed reconstitution of mental health trust lands and stressed the importance. Senator Kelly noted a recent announcement regarding a proposed gas line across Alaska and asked that the Commissioner comment. Commissioner Olds explained that it represents a private initiative to transport gas via pipeline from the MacKenzie Delta into Fairbanks then parallel to the Steese Highway down to the Kenai for refinement as natural gas to be marketed in the Pacific Rim. The proposal reflects what has happened on the worldwide energy front. A radical shift in the world economy has led to a widespread environmental reaction to oil, coal, and other heavy polluting energy sources. Further, since incidents at Three-Mile Island and Chernobyl, there has been a dramatic "pull back from nuclear power." In response to further questions, Commissioner Olds advised that he would be surprised that announcement of the proposed project would have been made without a substantial bases for believing that a market for the liquid natural gas exists. The proposal has potential for accelerating movement of Alaska's gas to market. Movement of natural gas down a pipeline through the railbelt also presents the possibility of "taking off clean, relatively cheap fuel for the whole railbelt area," as well as potential value-added development of other resources that require a cheap and steady source of energy. Responding to a question from Senator Frank asking how Alaska's natural gas reserves compare to Prudhoe Bay oil reserves, Commissioner Olds observed that while he could not respond with precision, he had heard that they are comparable or larger. Co-chair Pearce directed that the meeting be briefly recessed prior to commencing review of the budget for the Dept. of Environmental Conservation. RECESS - 10:10 a.m. RECONVENE - 10:15 a.m. DEPARTMENT OF ENVIRONMENTAL CONSERVATION JOHN SANDOR, Commissioner, Dept. of Environmental Conservation, came before committee accompanied by KEITH KELTON, Director, Division of Facility Construction and Operation, Dept. of Environmental Conservation. The Commissioner explained that village safe water projects represent the department's highest priority. The administration has placed great emphasis on both village safe water and municipal matching grants as evidenced by the following funding: FY 93 FY 94 Village Safe Water $24.5 million $ 2 5 . 9 million Municipal Matching Grants $17.2 million $ 1 6 . 1 million More recent appropriation levels are more than double the average of prior years. The Commissioner stressed need to upgrade water systems, particularly in rural Alaska. Approximately 135 water systems in rural communities do not have safe water. A new outbreak of hepatitis A is centered in the Kotzebue region. In the period between 1986 and 1989, an outbreak of hepatitis exceeded 1,600 reported cases. The department is fearful that the outbreak near Kotzebue represents a new round. This has been called to the attention of the congressional delegation as well as the new administrator of EPA. A meeting in Washington, D.C. has been requested to deal with the issue. A further request has been made for comparable funding at the $25 million level for village safe water. Federal officials have been asked to compare Alaska's needs to those along the Texas/Mexican border where funding totals $120 million. Pointing to the matching grants, Senator Rieger asked if municipalities had their required 50% and were prepared to proceed with proposed projects. Commissioner Sandor responded affirmatively, he added that the department received grant requests totaling $82.6 million. In each of those instances, the municipality is prepared to match. For village safe water projects, proposals total $49.2 million. Department priority places greatest emphasis on public health and environmental health needs. Senator Rieger next inquired regarding design standardization for village safe water projects. Commissioner Sandor noted that projects often have to be redesigned to meet specific community needs inherent in arctic and sub-arctic climates. He stressed that 135 communities do not have running water in homes. The department attempts to educate the community, identify what the community wants, and ensure local operation and maintenance capability. Further discussion followed between Senator Rieger and Keith Kelton regarding application of standardized designs as well as engineering changes. Senator Kerttula noted past engineering inadequacies, noting particularly the sewer system at Wasilla. Mr. Kelton acknowledged past engineering disagreements between cities and various consultants. The Commissioner next spoke to solid waste planning grants. He attested to receipt of proposals for these competitive grants and noted that the department expects to grant up to ten such projects. Funding for data processing hardware and software would fund replacements. Unlike other agencies with centralized systems, the department has a network of personal computers. This provides greater flexibility and ensures that the entire system does not shut down. Approximately 65% of the department's 511 personal computers are four to five years old. Requested funding would replace hardware that has become obsolete and upgrade software. Senator Kelly noted numerous requests from departments for new computer equipment. Co-chair Pearce advised that she and Co-chair Frank would be tracking requests and meeting with the Office of Management and Budget to "try to get a handle on this." Speaking to the $63.4 request for cooperative environmental research and development with the University of Alaska, Commissioner Sandor explained that the effort is directed toward solution of the recent problem of paralytic shellfish poisoning in crab. The state must develop a system for identifying and dealing with PSP toxins. The above request would provide for analysis and testing to develop a model for regional, local, and field testing. The Commissioner further spoke to recent labeling agreements with the national food and drug administration. A second component of the request seeks $97.5 for lab instrument methodology for heavy/trace metals. This effort will also be conducted in conjunction with the University. The $300.0 for impaired waterbody assessment and recovery plans relates to the national clean water act. The federal act requires monitoring of water systems which can be impaired by industry, urban residential development activity, accidental events, etc. A number of waterbodies statewide fall into this category. A third party sued EPA, charging that Alaska had not conducted an analysis of contaminated waterbodies. Funding will commence this effort. While the state was not a party to the suit, the department agreed, in the course of settlement of the suit, to begin the process of assessment and recovery. In response to a question from Senator Kerttula, Commissioner Sandor pointed to contamination in Southeast Alaska resulting from pulp mill operations at Sitka and Ketchikan. Waters at Ward Cove and Silver Bay are regarded as impaired because the mills discharge affluent into them. The department has been tracking this discharge and has noted no particular problems. These waters require analysis in greater detail. There are approximately 90 impaired waterbodies statewide. Co-chair Pearce asked if the project would be applied to Lake Hood as well. Commissioner Sandor acknowledged that it would be covered by the process, although it may not be acted upon this year. The $34.1 request for northern panhandle household hazardous waste removal is a coordinated effort by the department and the Southeast Alaska Conference. Funding would apply to facilities and devices for collection. Each community will collect the hazardous materials and then "feed them into this system." The Commissioner next spoke to the $260.0 request for the community hazardous waste storage and transfer facility. He explained that the department conducted two projects last year: one in Anchorage and the other in Southeast. For the present year the department seeks to establish fixed transfer systems for household hazardous waste in Prince William Sound and with the Southwest Alaska Municipal Conference. One or two transfer stations will be set up in specified areas within Prince William Sound for accumulation of non-regulated waste. Two or three facilities will be established in Southwest. Discussion followed between Senator Frank and Commissioner Sandor regarding the working of transfer stations. The Commissioner explained that stations will provide temporary storage for hazardous waste prior to shipment from the state and subsequent disposal. End, SFC-93, #23, Side 2 Begin, SFC-93, #25, Side 1 Further discussion followed between Senator Frank and Commissioner Sandor regarding ownership of transfer facilities and the type of household waste involved. In response to a question from Senator Frank asking how transfer facility projects differ from normal department operating activities, Commissioner Sandor explained that the department is venturing into a new area for the first time. Household waste is exempt material and, in the past, was simply dumped into landfills. The department is attempting to avert future problems by collecting and properly disposing of this material. Senator Frank asked if grants would be provided to communities for transfer stations. Commissioner Sandor answered affirmatively and advised that state moneys would only cover a part of the cost. Communities are providing the greater amount toward collection of the materials. Discussion followed between Senator Sharp and Commissioner Sandor concerning permitting of commercial enterprises to handle waste motor oil. The Commissioner spoke to certified collection points at boat harbors, etc. The private sector (service stations) has been encouraged to serve this collection function as well. The $120.0 for laboratory operations instrument acquisition and installation relates to new equipment needed to meet EPA and OSHA requirements dealing with regulated substances. The safe drinking water act requires that if Alaska is to retain primacy, the state have the ability to detect and measure toxic substances. The detail budget lists specific items and instruments to be purchased. Discussion followed between Senator Sharp and the Commissioner regarding whether private labs could be certified by the state to perform water quality testing instead of expansion of DEC capabilities. The Commissioner acknowledged that testing could be accomplished in the private sector and that the department would encourage communities to utilize private labs. He noted, however, that some of the equipment sought within the $120.0 capital request would be needed to certify private facilities. Speaking to the $125.0 for satellite data telemetry development, Commissioner Sandor explained that soon after becoming commissioner he learned that of the United States and its territories, Alaska was 53rd out of 54 in terms of meeting water monitoring and testing requirements. A major emphasis was thus placed on testing. The proposed satellite telemetry will be the first step toward automated water monitoring at remote sites. It offers great promise for collection of data needed to maintain primacy and ensure that water systems are safe. As an example of remote monitoring benefits, Mr. Kelton noted a recent situation at Noatak. He explained that the water system there had a history of operational problems since it froze five years ago. Sensing equipment costing $35.0 to $40.0 was installed. Through a dedicated telephone line, the department is capable of monitoring the system from Anchorage. During the past winter, someone siphoned fuel from the boiler facility. Those monitoring the system from Anchorage were able to contact the operator in Noatak and replace fuel in the tank. The effort saved a $500.0 project. The satellite system has great potential and flexibility. It could eliminate the need for a dedicated telephone line. The department intent is to provide sensing equipment on future water and sewer projects. Commissioner Sandor next spoke to the $7.5 million request relating to response fund support for the Alaska Marine Highway System ferry. He noted that outfitting of the ferry with response/command facilities, a mobile emergency response depot, berthing, and cargo capabilities would be conducted in conjunction with the Dept. of Transportation and Public Facilities. Co-chair Pearce said that the committee would be conducting a hearing specifically for 470 funds for the front section of the budget. She noted a call to the Senate floor session and suggested that comments relating to 470 moneys be rescheduled to a future hearing. ADJOURNMENT The meeting was adjourned at approximately 11:10 a.m.