CS FOR HOUSE BILL NO. 160(FIN) "An Act relating to the emission control permit program; relating to fees for that program and to the accounting of receipts deposited in the emission control permit receipts account; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Wilken stated that this bill, introduced at the request of the Governor, "establishes standardized air permit conditions based on best management practices. The legislation differentiates between major and minor sources air pollution and focuses the Department of Environmental Conservation accordingly. Senate companion bill 116 passed out of Senate Resources with a recommendation of seven 'do passes'." TOM CHAPPLE, Director, Division of Air and Water Quality, Department of Environmental Conservation, testified that the Governor is committed to resource development as well as protecting the environment. Mr. Chapple asserted these are not exclusive goals. He told of a legal dispute "to ensure that Alaska's rights are not eroded", relating to a mining operation with the federal Environmental Protection Agency (EPA) that is currently under consideration by the United States Supreme Court. Mr. Chapple stressed this technical legislation would not change the air quality standards relative to the protection of public health, but would rather change the permitting process "to be more responsive to our economic development, while also preserving our excellent air quality." Mr. Chapple stated this legislation would change the terminology used in Alaska to match national terminology. He exampled "contaminant", a term utilized in the State, would be replaced with "pollutant", a national term. He expressed this would simplify the process of adopting federal "rules" and increases understanding by Department staff, the regulating community and consultants. He predicted this would result in efficiencies. Mr. Chapple continued that this bill distinguishes between major and minor sources of pollution for the purposes of permitting, pointing out that current State statute addresses all pollution as major sources. He listed major sources as oil and gas development, larger mines, power plants in most cities and rural hub communities, military bases and seafood processing plants. He then listed minor sources as many rural community power plants, asphalt plants, rock crushers, and fuel storage tanks. He explained that this bill would allow the Department to streamline the permitting process for minor sources and implement standardized conditions. He predicted this would also improve efficiencies. Mr. Chapple furthered that this legislation would change the structure of permit fees, to "accomplish more predictable and reliable fees." Mr. Chapple informed that this legislation represents the recommendations of a working group comprised of "the oil and gas community, mining industry, military, seafood processors and power industries" made the previous summer. Senator Olson understood the intent to streamline the permitting process. He asked how this would affect operations of existing industries. Mr. Chapple replied that this bill would result in timelier permitting. He commented on the irony that the EPA has recently adopted changes to its permitting laws that are consistent with the permits the State granted to the mining operation in the case currently before the US Supreme Court. Senator Hoffman asked if this legislation addresses the sulfur emissions from aircraft. Mr. Chapple replied that this bill is unrelated to aircraft. Senator Taylor referenced Sections 33 and 34 on page 17 of the committee substitute, surmising that these provisions would create a dedicated fund within the Department. He cited the language stipulating that all funds generated from permit fees may only be utilized to cover the "reasonable direct and indirect" costs required to support the permit program. He asked if this would also provide receipt authority to expend those funds without legislative authority. Mr. Chapple responded that receipt authority would be requested though the operating budget process. He noted this bill changes the fund management and accounting structure. He reported that the Clean Air Protection fund was appropriated $2.7 million for the current fiscal year to support the program. Senator Taylor asked how this legislation would improve efficiency in issuance of permits. Mr. Chapple answered that by streamlining the process to better match the federal permitting guidelines for larger industries, uncertainties would be removed and dialog improved. He noted that the Department has reviewed the processes employed in other states to identify efficient methods. He furthered that the Department has not been timely in permitting due to inefficiencies and inadequate staffing levels. He informed that to improve timeliness, contractors would be utilized during periods when more permits are pending. Senator Taylor requested a quantitative example of the length of time required to issue a permit under the existing statute compared to the length of time required under the proposed statute. Mr. Chapple listed the construction permit, which is required before construction begins, and the operating permit, which is issued after construction is completed and pertains to ongoing operations. He reported that construction permits are usually issued 254 days after application and that the goal is to reduce the amount of time to between 90 and 110 days. He remarked that this bill, the subsequent regulatory changes, as well as adequate staffing assignments would allow this goal to be reached. He expressed this would be "responsive to resource development and our business needs in Alaska." Senator Hoffman asked if a sectional analysis is available for this legislation. He also asked for an explanation of the proposed terminology change of "facility" to "stationary sources". JOHN KUTERBACH, Program Manager, Air Permits, Division of Air and Water Quality, Department of Environmental Conservation, explained the change in definition from "facility" to "stationary sources" is intended to make the State terminology consistent with the federal terminology as well as that of "most other jurisdictions". He pointed out that the federal definition does not specify property as a designator for the facility and also considers a stationary source using the standard industrial code in determining whether a permit is required, which differ from the State definition. He stated that this differences hamper the Department's ability to use federal case law and decisions rendered in other jurisdictions when making determinations in Alaska. Mr. Kuterbach assured that most facilities that currently require a major permit would continue to require such, although technical difference would occur in the grouping of those operations. He was unable to predict which specific facilities would have permit requirement changes. Senator Taylor opined that differences in permit types are insignificant, given the limited industrial development in the State and therefore questioned the length of time required to issue permits. Mr. Chapple assured that not every permit issuance requires 254 days, giving examples of general permits for asphalt plants and rock crushers that are handled rapidly. He stated that the longer time periods are related to more complex projects, such as a mine or oil and gas development needing a Review for Significant Deterioration of Air Quality. He stressed that industry representatives are aware of these time requirements and plan accordingly. Senator Taylor asked if the permits in question also apply to those "sources that move", such as a large ship. Mr. Chapple answered that this permitting rule generally applies to stationary sources with exceptions including portable oilrigs and portable asphalt plants. He stated that this program does not cover ships unless that ship is part of a permanent facility, such as a near shore-based seafood processing plant. He noted that the State is prohibited from imposing air quality regulations to aircraft, which are regulated by the EPA. Senator Hoffman asked whether fees would be imposed or increased as a result of this legislation. Mr. Chapple affirmed that fees would change. He informed that the current hourly rates for "a direct service on a permit review" would become a flat rate, although he expected the amount paid for a permit would be reduced due to the efficiencies gained. He continued that emission fees could increase. He told of significant discussions on this matter. Senator Hoffman asked the current fee amounts. Mr. Chapple listed the hourly fee of $78, qualifying that he was unable to predict the amount of the proposed fee. He indicated that the total fees of average projects would be reviewed to determine a reasonable amount for the flat fee. He explained a correlation between the amount of emissions measured and the amount of the emissions fee imposed. He reported that because emissions have been reduced the fees paid have also reduced, and although this is positive, the amount of revenue collected does not cover the operating costs of the program. Senator Olson asked why these changes were not implemented earlier to avoid the "dire straits" of promoting resource development. Mr. Chapple informed that the original statute was created nine years prior in 1993 and that the permitting procedures were adopted five years ago. He stated that three years ago serious problems were identified and internal reviews and benchmark analyses of other states were conducted. Senator B. Stevens asked if the designation of major or miner project was applied to both the construction permit and the operating permit. Mr. Kuterbach replied that only major projects would require both an operating and a construction permit. The minor permit program would apply to the construction and operation of minor sources or minor modifications to a major source. Senator B. Stevens clarified that major sources are governed by different regulations than minor sources. Mr. Chapple affirmed. AT EASE 9:43 AM / 9:43 AM Senator Hoffman referenced Section 23 of the committee substitute and asked what the proposed changes would accomplish. The language on page 11, lines 18 - 26 read as follows. Sec. 23 AS 46.14.200 is amended to read: Sec. 46.14.200. Review of permit action. A person who has a private, substantive, legally protected interest under state law that may be adversely affected by the permit actions, the owner or operator, or, if a public comment process is required or solicited, a person who participated in the public comment process may request an adjudicatory hearing under the department's adjudicatory hearing procedures. After the issuance of an adjudicatory hearing decision, a party to the hearing may obtain judicial review of that decision as provided in the Alaska Rules of Appellate Procedure. New Text Underlined Mr. Chapple relayed that it was "envisioned" that some of the minor permits would not have a public comment process. Therefore, he stated that this language would retain the right to appeal for those projects that involve a public comment process. Senator Hoffman clarified that under current statute, public comment is required and the proposed language allows the Department to determine whether the public would have an opportunity to comment. Mr. Chapple affirmed. Co-Chair Green offered a motion to report the bill from Committee with individual recommendations and accompanying fiscal note. MARILYN CROCKET, Deputy Director, Alaska Oil and Gas Association, testified via teleconference from an off net location to emphasize this legislation represents the recommendations of the stakeholder group that met to address the permitting issue. She stated that the Association supports the bill. Senator Taylor noted that the provision of Section 23 provides "jurisdictional grant of opportunity" for stakeholders and asked if it also provides an individual the right to request a public comment hearing. STEVE MULDER, Assistant Attorney General, Environmental Section, Civil Division, Department of Law, testified via teleconference from Anchorage, and agreed the Section provides the right to request a hearing. However, he emphasized that the requestor of the hearing must demonstrate that a decision on the issuance of the permit would impact him. He clarified that the "commenter" is not required to have ownership interest in the property but rather "could have standing if they're an adjacent property owner or they're a user of parklands in the vicinity." Senator Taylor characterized those who own neighboring property as having a legally protected interest and has "every right to be there" as a truly affected party in the matter. He compared this to others, who occasionally visit a nearby park, and he determined these parties do not have the same legal qualification. Mr. Mulder spoke to Department regulations relating to adjudicatory hearings and commissioner determinations of whether the requestor is impacted and would be adversely affected by the Department's decision. Senator Taylor requested this information be provided to his office and he indicated he might offer an amendment on the subject when the bill is before the full Senate. There was no objection and CS HB 160(FIN) MOVED from Committee with zero fiscal note #2 from the Department of Environmental Conservation. AT EASE 9:51 AM / 9:52 AM