SENATE BILL NO. 93 "An Act relating to a municipal property tax credit for an improvement that aids in improving air quality." 9:38:56 AM SENATOR JOE PASKVAN, SPONSOR, explained SB 93, the Municipal Air Quality Property Tax Credit (from Sponsor Statement, Copy on File): Some communities in Alaska have been designated as non- attainment areas for PM 2.5 by the EPA [Environmental Protection Agency]. Based on the requirements of the Clean Air Act, the state and those impacted local governments have three years to develop attainment plans designed to bring air quality into compliance with federal air standards. Senator Paskvan reported that interior Alaska has an air inversion, which creates a problem in cold weather when heating requirements are at the highest. Trapped particles results in the violation of the 2.5 air standards. He continued: SB 93 is needed as a first step to allow local municipalities the latitude in developing tax credit programs to address the important public health and community compliance issues that result from poor air quality. Senate Bill 93 is designed to provide optional tools to municipalities that can be used to create incentives for individuals to take actions that will improve local air quality and reduce fuel consumption. SB 93 expands the discretion of municipalities in a manner that allows, by ordinance, the creation of programs that will offer property tax credits for actions that the local governing body determines will improve air quality. This bill requires that eligibility, conditions and other criteria for the tax credits be established by ordinance. Examples of how this proposed legislation might be used by a municipality include: · Incentives to residents to exchange old-style wood stoves for EPA certified wood stoves. Data show that EPA certified wood stoves significantly reduce fine particulate emissions over non-EPA stoves. It is in the interest of any community with air quality nonattainment issues to have citizens who choose to heat with wood do so in the most environmentally friendly way. · Incentives to residences or commercial businesses to improve the energy efficiency of their property. Reduced fuel consumption would lead to reduced emissions from area heating or electricity generation. Incentives could be based on calculated BTU savings, MW reductions, etc. · Incentives to convert from carbon based energy consumption to alternative energy generation. This could involve tax credits for construction and use of a solar array or wind turbine to power/heat residential or commercial facilities. The proposed legislation would create a full range of options for a local municipality to address air quality issues, rather than just restriction and enforcement based options. Senator Paskvan referenced the attached zero fiscal note. 9:43:17 AM Co-Chair Stedman asked if the borough would incur EPA penalties without air quality clean-up. Senator Paskvan replied that the federal government can impose sanctions if nonattainment continues. One immediate effect was that Fort Wainwright failed consideration for a brigade of 5,000 striker members because of nonattainment of 2.5 standards. He thought that kind of sanction would continue until compliance was reached. Senator Thomas asked if transportation funding would be affected as well by nonattainment. Senator Paskvan replied that the region not only lost the troops, but could lose military bases altogether. Moving the legislation forward would demonstrate intent to come into compliance. 9:46:07 AM Senator Elton added that as energy costs have gone up, home owners are being forced out of less expensive energy sources such as wood stoves because of compliance issues. Senator Huggins asked if Fairbanks, Anchorage, and Juneau were under the EPA standards. Senator Paskvan did not know which communities were in nonattainment. The statute's language is broad enough to allow a local government to provide tax credits for the increased energy efficiency of existing structures as well as for conversion from a carbon- based source to an alternative energy source. The legislation is not only for communities in nonattainment; it provides good social policy. Senator Huggins asked if someone who owned multiple rental properties could take advantage of the program. Senator Paskvan answered that the legislation covers residences and commercial businesses. The local community has the discretion to decide who they want to benefit, the amount of the tax credit, and the period of time covered. 9:49:41 AM Senator Huggins asked if military communities were exempted out of the calculation. Senator Paskvan replied that Fort Wainwright was specifically not exempted. Senator Olson asked the cost to the municipalities of the tax credit. Senator Paskvan reported that those calculations had not been done on the local level. The legislation is the first step to promote implementation of the standard. The intent is to leave local municipalities free to decide how they want to approach the issue. Co-Chair Stedman opened public testimony. JAMES CONNER, AIR QUALITY SPECIALIST, FAIRBANKS NORTH STAR BOROUGH (testified via teleconference), spoke in support of the legislation. He read from a statement: Within the greater Fairbanks area, the fine particulate pollution fails to meet the EPA's National Ambient Air Quality Standard 20 to 30 times each winter. This health-based standard was changed in September 2006 based on the EPA's Science Advisory Board recommendations, lowering the allowable concentration of fine particulates from 65 to 35 micrograms per cubic meter (ug/m3) for a 24-hour average. There is also an annual standard that was left at 15 ug/m3. These recommendations were based on many extensive health studies over a five-year period. These studies indicated that even short term exposure to fine particulates can result in new cases of respiratory and heart disease. This is truly a public health issue, in addition to being an economic issue. The fine particulate pollution is exacerbated in the winter because the surrounding hills, the stagnant air flow, and temperature inversions trap the particulates produced locally. These are coming mostly from transportation and space heating. During the summer, space heating demands are reduced and the pollution produced is cleared out with wind and rain before it can accumulate to dangerous levels, except when we experience wildland fires. We have experienced concentrations above 1000 ug/m3 in the summer due to wildland fires, but we are permitted to exclude these natural emissions from our 24-hour and annual averages, because they are not man-made, unless we start the fires as a resource management strategy. In Fairbanks, we depend on the clean summer air to average with the polluted air in the winter to stay below the annual limit of 15 ug/m3. This is one reason it is important to reduce the number and severity of the winter emissions. If we violate the winter average, we need to extend those winter controls into the summer. 9:54:48 AM The timeline associated with the EPA action proceeds 90 days from the publication of the nonattainment designation in the federal register. That starts the clock, and then we have three years to submit to the EPA an air quality control plan demonstrating how we will attain the standard within five years. Once that federal register designation is published, all new construction projects in the designated nonattainment area are then required to demonstrate conformity with an approved air quality control plan, the plan we have three years to submit, and requires EPA approval. Since this plan takes time to create, there will likely be a period when conformity cannot be met, and economic development of the area can be affected. However, there is a one-year grace period that starts with that federal register designation date where new projects do not have to demonstrate conformity. If the state fails to submit a plan or show progress in cleaning up the air, the EPA can begin to withhold federal funds, first in the designated area and eventually to the entire state. An area or a county is allowed one exceedance of this health standard per year. The second exceedance is considered a violation that can bring a nonattainment designation to the area. The number and severity of the exceedances after that simply further jeopardizes public health and the economic environment for development, and the difficulty to eventually meet the standard. SB 93 gives the Fairbanks North Star Borough a means to provide a voluntary incentive program to borough residences and businesses to improve the efficiency of their homes and businesses in a manner that will improve air quality and efficiency. As the high cost of energy has driven residents to lower costing fuels such as wood and coal, this bill help further reduce this cost and higher emissions. 9:57:13 AM NADINE WINTERS, ASSEMBLY MEMBER, FAIRBANKS NORTH STAR BOROUGH (testified via teleconference), spoke in support of SB 93. Fairbanks has an air quality issue and is looking for a way to protect the health of residents and as well as long-term economic viability. The bill provides a tool to meet both needs. Co-Chair Stedman closed public testimony. Co-Chair Stedman asked if there would be a federal penalty against the state if the legislature did not act on the bill. Senator Paskvan answered that the penalty would be on communities that are in nonattainment. There could be various consequences, including withdrawal of federal funds for highways. He thought the best alternative was to establish policy to get local municipalities to move towards attainment. SB 93 was HEARD and HELD in Committee for further consideration. 10:00:16 AM