CS FOR SENATE BILL NO. 24(JUD) "An Act relating to regulations; relating to administrative adjudications; amending Rule 65, Alaska Rules of Civil Procedure; and providing for an effective date." This was the third hearing for this bill. Co-Chair John Torgerson noted the new CS Version "W" before the committee did not incorporate the removal of Section 8 from CS Version "V", as amended by the committee in it's previous hearing. Senator Dave Donley, as sponsor of that amendment, understood the difficulty in removing the section and had no objection to it remaining in the bill. He moved for adoption of CS SB 24 Version "W" as a Workdraft. Without objection, it was adopted. It was noted that earlier Amendments 2, 3 and 4 were redrafted and renumbered Amendments 5, 6 and 7 to conform to CS Version "W". Senator Sean Parnell moved for adoption of Amendment #5. Co-Chair John Torgerson explained the amendment a technical recommendation from the Department of Law. It would delete "the division of habitat and restoration of" and insert "for habitat and restoration programs". The division was not created by statute but by regulation. Therefore there was no official division and this amendment would conform the bill to law. The amendment would also delete, "designated state entity" and insert, "designated state agency". Senator Randy Phillips asked for clarification that the habitat and restoration division in the Department of Fish and Game was not created by statute. Co-Chair John Torgerson said it was created by Executive Order and then regulations were adopted to operate the programs. Amendment #5 was adopted without objection. Senator Al Adams moved for adoption of Amendment #6. Senator Dave Donley objected. Senator Al Adams explained that this would limit the use of supplemental notices for Department of Environmental Conservation regulations relating to domestic wastewater disposal, food service programs and the solid waste management program. He said these regulations were most likely to affect citizens who were unfamiliar with the regulation process and would not benefit from the additional notices. This would be cheaper to operate and make regulation adoption easier. DEBORAH BEHR, Assistant Attorney General, Legislation and Regulations Section, Civil Division, Department of Law, came to the table at the request of Senator Al Adams. The amendment would create a pilot project out of the programs of the Department of Environmental Conservation. These programs were selected because it was felt they affected citizens who did not regularly deal with regulations and therefore would have smaller fiscal notes. Senator Dave Donley commented that the bill as it was included the programs mentioned plus others from Department of Environmental Conservation. He said that the bill was narrowed to only include the Department of Environmental Conservation, Department of Natural Resources, and the Department of Fish and Game, habitat and restoration programs. Therefore, it was already focused to the most problematic programs. Senator Gary Wilken asked if this amendment would narrow the bill down further. Senator Dave Donley answered it would. Co-Chair John Torgerson added that it would exclude all the other programs listed in the current CS. Amendment #6 failed to be adopted by a vote of 1-8. Senator Al Adams cast the yea vote. Senator Al Adams moved for adoption of Amendment #7. Senator Dave Donley objected. Senator Al Adams spoke to the motion. Tape: SFC - 99 #63, Side A 8:07 PM Senator Al Adams continued to speak saying the amendment would reduce the number of public notices needing to be sent. It would also make an efficient use of the Internet and allow for a shorter turn around time for comments on proposed regulations. It would make the process more predictable for business and eliminate reoccurring cycles of revisions and comment periods. Deborah Behr commented that this amendment addressed the most problematic sections of the bill. She explained the process for adopting regulations required under the current bill regarding timber sales. There was no end to the number of times required for a proposed regulation to be sent out for public comment. She spoke of concerns about missed construction seasons and missed timber sales. This amendment would reduce costs by limiting to provisions to pilot programs. Senator Randy Phillips asked when was the last time the state had a timber sale. Deborah Behr did not know and said she would have to ask Department of Natural Resources. However, this provision would also apply to air quality issues. Senator Dave Donley asked what was different between this amendment from what the departments currently did. Deborah Behr detailed the steps of the current process. So long as the proposed regulation fit the scope of the public notice, the commissioner had the discretion to adopt the change without further public comments. This amendment would remove that discretion, but only for one round of public comments. Senator Dave Donley responded that while this was a step toward the original intent of the bill, it did not go far enough. It should not be limited to one round. If a person agreed with the first regulation proposal and chose not to comment, he or she would then not be notified of the next proposed change, which may be significantly different. Senator Pete Kelly asked Deborah Behr to comment on Senator Dave Donley's statement. She said Senator Dave Donley raised a point. How do people who didn't comment the first round have an opportunity to be noticed of subsequent changes? She suggested that those interested would follow the process on the Internet. Amendment #7 failed to be adopted by a vote of 1-8. Senator Al Adams cast the yea vote. Senator Al Adams moved for adoption of Amendment #8. Co- Chair John Torgerson objected. Senator Al Adams explained the amendment would remove Section 4, requirement for a cost benefit analysis for new regulations, which would be costly. Deborah Behr further explained the problems the Administration had with Section 4 of the bill because of its vagueness. It did not define the costs to benefit the public requirement. She spoke of the difficulty to decipher when there were competing interests to the public about a proposed regulation such as with timber sales, saying it would be difficult to figure what was appropriate. Determining the cultural impact to the community into the cost of development. There would be many court challenges based on this point. She also referred to small business waivers and the need to determine if there was a public cost benefit under the requirement of the bill. She continued saying this amendment was an expansion of Senator Pete Kelly's suggestions for serious consideration of costs. The Department of Law felt this solution would be workable and would have no fiscal impact to the state. Co-Chair John Torgerson noted he added the cost benefit analysis to the section of the CS after a sidebar with Senator Dave Donley. Senator Dave Donley commented that the added language was only to a portion of the section. This amendment would remove the entire section. He spoke to the rest of the section. First, the Senate Judiciary Committee had adopted many provisions to soften the effects of the cost benefit. He detailed those provisions noting the added flexibility and safeguards. Co-Chair John Torgerson commented that the greatest flexibility his CS added to the bill was to page 2 lines 24-28, which dictated that a cost benefit was not necessary if the cost to implement the regulation was identified in the fiscal note. He said the intention was to stop the Administration from adopting regulations that went beyond the scope of the enabling or authorizing legislation. If it would, the agency would have to return to the Legislature with a request to change the statute to conform to their proposal. The intent was to lessen the impact on the fiscal notes of this bill. Senator Dave Donley pointed out a further ultimate safeguard. Although the Legislature hoped that the Administration would follow the intent of the limited application of the legislation, if something did go wrong, there would be this savings clause dictating that the regulation may not be adopted because the agency failed to comply with the section. This would prevent lawsuits, according to Senator Dave Donley. Co-Chair John Torgerson added that there was also conforming section on page 5 lines 11-16. It clearly stated that if a copy of the fiscal note identified in the front section were available from the designated state agency then the cost benefit analysis would not be required. He felt that showed the clear intent of the Legislature. Amendment #8 failed to be adopted by a vote of 1-8. Senator Al Adams cast the yea vote. Senator Dave Donley spoke to Amendment #9. He noted the Senate Judiciary Committee version of the bill, which had applied to most of state government rather than the 3 departments currently, there was a general provision that addressed problematic question of agency heads not accepting the findings of hearing officers. Under their existing powers of the Administrative Procedures Act, the commissioners would remand the decisions back to the hearing officers because they didn't agree with the findings. There was no standard in existing law dictating when a commissioner could remand a decision back for more facts. He felt there needed to be some sort of standard inserted. This amendment contained the language drafted in the Senate Judiciary Committee hearings. He said there had been discussion about another vehicle to do this. One was the proposed constitutional amendment recently introduced by the Senate Judiciary Committee providing that a separate department conduct regulation hearings. He felt that the odds of the constitutional amendment being adopted were slim and suggested this amendment would help the situation. He also felt a change to the Administrative Procedures Act would also be helpful. He wished for these provisions to apply to all departments, not just the three left in the bill. He wanted a general across the board provision. He welcomed any suggestions to accomplish the goal of preventing the commissioners from remanding hearing officer decisions without valid grounds. Senator Dave Donley moved for adoption of Amendment #9. Senator Al Adams objected. Deborah Behr was invited to comment on the amendment. She pointed out that hearing officers were not confirmed cabinet officers and never came before the Legislature for confirmation. Therefore, this amendment would allow an unconfirmed cabinet officer, generally a private attorney, to trump the decision of a confirmed cabinet officer. Most regulations were adopted by boards or commissions made up of lay people appointed by the Governor and confirmed by the Legislature. There could be a hearing officer who was not a licensed doctor issuing a decision that went against medical practice, because the attorney had no knowledge. If the agency could not find a substantial factual question would be in court over what that the substantial question was. Even with that, the Lieutenant Governor would have to grant approval. She felt this would change the balance of power. Senator Dave Donley asked if Deborah Behr had any suggestions for additional language to the Administrative Procedures Act. Deborah Behr offered to work with sponsor to find one. Senator Dave Donley offered to withdraw his motion. Co-Chair John Torgerson said they could go back to the original language from an earlier workdraft. Senator Dave Donley said multiple hearings were held in the Senate Judiciary Committee and this was an ongoing discussion. He welcomed assistance in setting standards but thought there ought to be standards. Deborah Behr restated her offer of assistance in detail. Co-Chair John Torgerson told Deborah Behr this language was included in another version. Senator Dave Donley was willing to give them one more chance to come up with something smoother. He said he could address the matter on the Senate floor. Senator Dave Donley withdrew his motion to adopt Amendment Co-Chair John Torgerson turned the discussion to the fiscal notes. He noted that some of the department's fiscal notes went up. He commented the committee could take several approaches to reduce the amounts. The departments could testify to the reason the funding was needed. Deborah Behr mentioned that the fiscal notes were drafted against the "V" version. The fiscal notes to the "W" version would go down. Co-Chair John Torgerson noted that the CS Version "V" was substantially less restrictive than the versions before. BOB LOEFFLER, Director, Division of Mining, Department of Natural Resources testified via teleconference from Anchorage. He addressed the division's concerns with the cost benefit analysis requirement and its potential affects to the mining industry. He felt the cost benefit analysis might have the unintended consequence providing a significant legal handle that could unavoidably delay a number of important mining projects. Senator Dave Donley interrupted asking if the director was familiar with page 3 lines 12-14 of the bill. Bob Loeffler believed it said a regulation may not be voided but it didn't address temporary restraining orders or other court actions to remand for further analysis that would delay a project. Senator Dave Donley noted there was another section on page 2 lines 10-12 that could address the concerns regarding restraining orders. He offered the committee could incorporate that provision. Bob Loeffler replied that would alleviate his concerns. Bob continued his testimony saying that because a number of mining projects required a specific regulation to Department of Environmental Conservation's water quality standards, a cost benefit analysis would have to be done before a mine could be approved. He gave examples of the Kensington Mine that required site-specific criteria and a stream reclassification for the Red Dog Mine. He speculated that a company that designed their project to maintain clean water would have to jump another hurdle before getting approval. That would be to prove their total benefits were greater than the total costs. He didn't know if that was the intention of the legislation, but it was how he interpreted it. He asked how good did an economic analysis have to be in order to pass that hurdle. His answer was that it would have to be better than that of any well-funded opposition. For a large industrial mine, that could be substantial. Co-Chair John Torgerson asked if the division intended to adopt new regulations every time a mine opened. Bob Loeffler did not, but noted that no but certain mines needed regulations for water quality reasons. Senator Dave Donley said the Senate Judiciary Committee had been given a memo issued by Governor Knowles directing state agencies to do a cost benefit analysis before adopting regulations. He asked how the division implemented that order. Bob Loeffler responded that the regulations were typically done by Department of Environmental Conservation. He had not done a cost benefit analysis of the scope called for in the proposed bill. Senator Dave Donley queried, "So you didn't comply with the Governor's directive to all the members of the bureaucracy?" Bob Loeffler said that before his division wrote new regulations, it analyzed the cost and benefits, but in a general manner rather than in the detail called for if a major industrial facility effect a significant portion of the population. Senator Dave Donley moved for adoption of Amendment #10. This would copy the language from page 2 lines 9-12, "A person may not obtain a temporary restraining order.based on a failure to comply with this subsection" and insert on page 3 after line 14. Without objection it was adopted. The discussion returned to the fiscal notes. Senator Dave Donley suggested the committee direct departments do new fiscal notes based on Version "W" and justify any increases Senator Al Adams commented that with the addition of Section 4 the cost benefit analysis added costs to the departments. Co-Chair John Torgerson retorted that the cost benefit analysis was only required if the regulations went outside the scope of the enabling statute's fiscal note. Therein lay the policy call. Senator Dave Donley stated that it was surprising to him that the Administration was opposed to the cost benefit analysis. He detailed the arguments in favor of the analysis. Senator Al Adams asked if the sponsor wanted to start the regulation process with the cost benefit analysis after a new law was passed or from ground zero. Senator Dave Donley clarified to limit the applicability to regulations adopted for new statutes. He said that would be another possibility but it didn't seem that radical. He noted that the federal government already did it and it would be reasonable to require state government as well. Senator Randy Phillips requested the departments be given a time limit for submitting the new fiscal notes. Co-Chair John Torgerson said his office would request them in a timely manner. Co-Chair John Torgerson ordered the bill held in committee.