HOUSE ECONOMIC TASK FORCE WORK SESSION ON REGULATION AND GOVERNMENT OPERATIONS November 5, 1993 9:00 a.m. REPRESENTATIVE AL VEZEY chaired the meeting and made introductory comments about the purpose of the task force and goals of this work session. He opened the hearing to public comment. AL CLOUGH, Mining Specialist, Department of Commerce and Economic Development, commented on the following regulatory initiatives: Water Quality - The Department of Environmental Conservation (DEC) is continuing to work on federally- mandated water quality standards. The cancer risk (1/100,000) standard is central to those discussions. They are also working on a provision that would allow water treatment/discharge facilities to operate at a lower standard than drinking water facilities. He said DEC's work in this area is vital regulatory change. Title 38 - The Department of Natural Resources (DNR) is conducting a review of Title 38 (land management codes) for possible statutory changes to simplify the law. Wetlands - The Environmental Protection Agency (EPA) is conducting meetings throughout the state. Wetlands regulations have dire implications for everyone. We need to make sure changes are made to allow for reasonable business activity in Alaska. Third-party Lawsuits - There is a bill in the legislature that addresses this issue. The mining industry is required to get use permits, which are then appealed and end up in court. Why have a permit system if it always ends up in court? Perhaps there should be a bonding requirement for those who oppose a permitted project. Alaska Minerals Commission - Housed in the Department of Commerce and Economic Development, the commission releases an annual report with recommendations. The final version of the 1994 report is due within a month. DCED Funding Requests - The state has instituted a geologic/geophysical mapping program. It was funded at $750.0 in its first phase this year. They want to make it an annual effort. DCED would like to see the creation of an economic development foundation. This entity could provide seed money for projects such as geophysical mapping. This would require statutory action. Oil Industry Outlook - There is tremendous pressure to relocate offshore. The oil companies have a huge current investment with no assurance as to the tax or regulatory climate. The state needs to provide a higher degree of certainty to companies that meet defined standards. RUDY VETTER, Fairbanks, said that many companies are moving out-of-state now, but they'll be back in a few years. Alaska has good mineral reserves and will be one of the better prospects in the Western world, he said. BONNIE WILLIAMS, Fairbanks, asked that the report of the Governor's Task Force on Regulatory Reform be added to the documentation of this working group. She reviewed the six major recommendations of the task force and spoke about the cost of regulations to Anchorage ($429 million) and the state (over $1 billion). She said the University of Alaska spends $7 million a year for regulatory compliance. She also talked about the state's agricultural policy. She said the statute authorizing agricultural homesteads does not favor private enterprise and dooms farmers to failure. She urged a change to state law that would give farmers full rights of ownership on agricultural parcels. MS. WILLIAMS discussed the federal wetlands issue and suggested that there should be a no-net-loss provision for landowners which would replace the land and jobs and compensate for the lost revenues to public and private entities. MS. WILLIAMS encouraged the legislature to pass tort reform measures, saying they could have a big impact on the cost of health care, child care, trucking, et cetera. ED BOSTRUM, Fairbanks, referred to changes in the state's agricultural policy recommended by the Governor's Task Force on Regulatory Reform. He suggested tax statutes be amended to exempt agricultural lands from municipal taxes if ag land is conveyed as fee simple property. MR. BOSTRUM said that red meat, elk farming, the sales of farm products and home-developed products should be regulated by the Division of Agriculture, not DEC. The Division of Agriculture has an advocacy role with respect to agriculture, so they could be expected to produce more reasonable regulations. RICHARD MULLEN, Manager, SE Alaska Petroleum, Ketchikan, discussed new federal regulations governing pollution liability and marine transportation. He pointed to proposed regulations by the federal Minerals Management Service that would require $150 million pollution liability insurance for all petroleum users near navigable waters. He said they propose changing the definition of navigable waters in such a way that every diesel-fueled home in Southeast could fall under this guideline. MR. MULLEN stressed that regulations are often interpreted in ways that go far beyond the intent when they were drafted. He said regulations should be more strictly construed so that businesses can know how to comply. He said he doesn't mind jumping through hoops; he just wants the hoops to be standing still when he jumps. MR. MULLEN said the Exxon Valdez spill led to a morass of regulations. He mentioned barge companies that were required to submit their oil spill contingency plans to a minimum of 11 regulatory entities. He said the hodge podge of regulations has driven at least one major fuel distribution company out of business in Southeast. DON MAY, Ketchikan, said that as President of Kohler Mine, he finds it more difficult to comply with regulations every year. He sees the ambiguous terms in many regulations as an opportunity for legal challenges to legitimate operations. MR. MAY stated the risk factor resulting from regulatory uncertainty and delay is overwhelming. He pointed to overlapping regulatory authorities, such as DEC and the Corps of Engineers, and ever-growing restrictions on private lands as discouragement to developers. MR. MAY said his operation generated lots of gravel last year. The state used some for road construction. But instead of saving gravel for that use in the future, the Corps requires that gravel piles be leveled. That results in the loss of millions of dollars worth of gravel. REPRESENTATIVE VEZEY asked Mr. Clough for his thoughts on a possible requirement that proposed regulations be endorsed by both houses of the legislature. Mr. Clough said that could lead to a worse situation than we have now. As an example, he said DNR is working on proposed changes to Title 38 to make it more user-friendly. He suggested waiting to see what happens to Title 38 revisions before trying other routes. He also mentioned DEC's new water quality regulations as a good effort to overcome regulatory problems. MR. MULLEN reiterated that he believes regulations are not the problem. The problem arises in the interpretation of regulations after they are in place. He advised the task force not to worry about how regulations are written, but how they are administered. He criticized DEC in this respect. He feels some employees have a personal agenda, and there should be more controls on employees charged with implementing regulations. CHARLIE BODDY, Vice President, Usibelli Mine) suggested the task force review the report of the Governor's Task Force on Regulatory Reform and the annual report of the Alaska Minerals Commission for good ideas on regulatory reform. MS. WILLIAMS said the cleanest way to make meaningful regulatory reform would be through the Administrative Procedures Act. REPRESENTATIVE VEZEY asked what she thought about requiring regulations to be approved by the legislature. MS. WILLIAMS responded that such a requirement changes the relationship between the legislature and the executive branch. She pointed out that the voters have rejected the idea three times. MR. VETTER said the only way to change the federal regulatory system is to sue them. He criticized unfunded mandates, and suggested the only way to regain a reasonable approach to regulation at the state level is through budget cuts. He said there should be a requirement that permits be processed within five days. REPRESENTATIVE VEZEY closed the work session by thanking those who participated. He said there would be further opportunity to comment tomorrow when the work session continues.