HOUSE FINANCE COMMITTEE APRIL 15, 1997 8:12 A.M. TAPE HFC 97 - 95, Side 1, #000 - end. TAPE HFC 97 - 95, Side 2, #000 - end. TAPE HFC 97 - 96, Side 1, #000 - #416. CALL TO ORDER Co-Chair Gene Therriault called the House Finance Committee meeting to order at 8:12 A.M. PRESENT Co-Chair Hanley Representative Kelly Co-Chair Therriault Representative Kohring Representative Grussendorf Representative Martin Representative Davis Representative Moses Representative Foster Representative Mulder Representative J. Davies was not present for the meeting. ALSO PRESENT Senator Lyda Green; Michael Pauley, Staff, Senator Loren Leman; Susan Schrader, Executive Director, Alaska Environmental Lobby, Juneau; Tuckerman Babcock, Staff, Senator Lyda Green; Janice Adair, (Testified via teleconference), Department of Environmental Conservation, Anchorage; Mike Crouch, (Testified via teleconference), Eagles' Ridge Ranch, Delta Junction; Mike Schultz, (Testified via teleconference), Grain-Farmer, Delta Junction; Laurie Knopp, (Testified via teleconference), Knopp Dairy, Delta Junction; Charles Thompson, (Testified via teleconference), Agriculture Credit Director, Alaska Farm Service Agency, U.S. Department of Agriculture, Palmer; Sigmund Restad, (Testified via teleconference), Northern Pioneer Ranch, Palmer; Ray DeVilbiss, Farmer, Mat-Su; Gene Williams, (Testified via teleconference), Range Farmer, Palmer; Harvey Baskin, (Testified via teleconference), Farmer, Wasilla; Gerhard Groeschez, (Testified via teleconference), Pt. MacKenize; Harry Wassink, (Testified via teleconference), Anchorage; Gary Stromberg, (Testified via teleconference), Farmer, Pt. MacKenize; Bill Ward, (Testified via teleconference), Farmer, Kenai. SUMMARY HB 146 An Act relating to competency testing requirements for secondary students; and providing for an effective date. 1 HB 146 was rescheduled for a latter hearing. SB 41 An Act relating to environmental audits and health and safety audits to determine compliance with certain laws, permits, and regulations. HCS CS SB 41 (JUD) was reported out of Committee with a "do pass" recommendation and with a fiscal note by the Department of Law and zero fiscal notes by the Department of Labor dated 3/18/97, the Department of Health and Social Services dated 3/13/97 and the Alaska Court System. SB 109 An Act relating to land used for agricultural purposes and to state land classified for agricultural purposes or subject to the restriction of use for agricultural purposes only; and annulling certain program regulations of the Department of Natural Resources that are inconsistent with the amendments made by this Act. SB 109 was HELD in Committee for further consideration. SENATE BILL 41 "An Act relating to environmental audits and health and safety audits to determine compliance with certain laws, permits, and regulations." MICHAEL PAULEY, STAFF, SENATOR LOREN LEMAN, commented that SB 41 would establish two incentives for businesses and other regulated entities to conduct voluntary self-audits of internal operations, in an effort to secure full compliance with environmental laws and regulations. The first incentive would be limited immunity. Entities that conduct voluntary self-audits would be immune from civil and administrative penalties for violations discovered, provided several conditions had been met. The instances of noncompliance must be discovered through a self-audit and reported promptly to the appropriate regulatory agency. The regulated entity must take action to correct the identified problem and prevent its future recurrence. Immunity is not available for violations causing substantial off-site damage or serious on-site injury. In addition, no immunity would be available for violations that were knowingly committed or that resulted from recklessness. Immunity can be denied to regulated entities with a history of similar violations, or a pattern of disregard for environmental laws. 2 The second incentive would be qualified privilege. Certain portions of the reports generated from voluntary self-audits will be considered privileged and therefore not admissible as evidence or subject to discovery in civil or administrative proceedings. The provision recognizes the valuative portion of an audit report which is self- incriminating. Privilege can be overcome if asserted for a fraudulent purpose or if the regulated entity has failed to take required actions to correct areas of noncompliance. SB 41 would create an incentive for companies and individuals acting in good faith to police themselves and maintain full compliance with highly complex regulations. Co-Chair Therriault asked if immunity would need to be disclosed to the regulatory agency. Mr. Pauley replied that immunity would only be available for those violations which are disclosed and discovered through a self-audit. Additionally, the bill provides a notice provision, providing a fifteen day in advance notice to the Department of Environmental Conservation (DEC) explaining the scope of the audit. Co-Chair Therriault questioned concerns which had been expressed in previous committees of referral regarding the "whistleblower" protection laws. Mr. Pauley explained that SB 41 neither adds or takes away any rights or protection currently provided to whistleblowers under applicable State law. In several places, the text of SB 41 clearly anticipates the positive role whistleblowers may play in calling attention to environmental problems. Certain provisions in the bill will strike a balance between the rights of employees to testify about what they have witnessed and the rights of employers to preserve the confidentiality of audit documents which are typically very sensitive and costly to produce. SB 41 also provides a mechanism through which any party can petition to have privileged audit documents disclosed for serious reasons. JANICE ADAIR, (TESTIFIED VIA TELECONFERENCE), DEPARTMENT OF ENVIRONMENTAL CONSERVATION (DEC), ANCHORAGE, spoke to the sections of the bill which the Department would support, pointing out that their concerns had been addressed. She continued, the "privilege of support" which the legislation would allow is narrow. It applies only to a portion of the audit addressing the analytical aspect of the auditor including recommendations. The Department has the authority to review the privilege portion of the audit and the confidentiality of the owner/operator. That information 3 can be retained in the agency file, not being subject to the Public Audit Act. Ms. Adair added that if the audit indicated a violation, it would need to be addressed by the Department. From that point forward, the proposed practices are similar to those currently used by DEC. She reiterated that the bill would not preclude DEC from seeking damages for cost recovery, only penalties for violation. SUSAN SCHRADER, EXECUTIVE DIRECTOR, ALASKA ENVIRONMENTAL LOBBY (AEL), JUNEAU, testified that AEL supports industry's efforts towards voluntarily compliance with environmental regulations, but that they strongly oppose passage of SB 41. Achieving compliance with regulations will require industry and government to work together. The broad language of SB 41 will cripple the State's ability to enforce protection of Alaska's environment and public welfare. She noted that the legislation would greatly obstruct efforts to find the balance between incentives for responsible monitoring and effective enforcement of regulations. Ms. Schrader listed the reasons that AEL oppose SB 41: * The legislation is a bill of secrecy. It would keep vital information regarding the public's health and safety hidden from review by the agencies we depend upon to enforce environmental laws. It would limit the employees' right to know. * This is a bill of amnesty to industries that conceal or condone noncompliance. Immunity from civil and administrative penalties is bad public policy and effectively rewards non-compliance. The bill would let crime go unpunished and encourages violators to profit at the expense of law-abiding competitors. * The legislation would be a full-employment bill for attorneys. The bill will create more confusion, litigation and expense regarding the enforcement of regulations. Ms. Schrader pointed out that environmental regulations have been passed out of necessity. She stressed that industry has a less than admirable record of self-regulating. The public's health and safety must continue to be protected, particularly in today's heated competitive climate where industry is more likely to cut corners for economic advantages. In response to Co-Chair Therriault query regarding the "in- 4 camera" review, Mr. Pauley explained the procedure was outlined on Page 7, Line 9, of the Judiciary version of the bill. In the "in-camera" review, the judge determines if any of the conditions described in numbers #1 through #5 would require disclosure of audit reports. Co-Chair Therriault inquired if DEC had offered a fiscal note. Ms. Adair replied that the financial impact to the Department would be reflected in the Department of Law's fiscal note. Co-Chair Hanley MOVED to report HCS CS SB 41 (JUD) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. HCS CS SB 41 (JUD) was reported out of Committee with a "do pass" recommendation and with fiscal notes by the Alaska Court System and the Department of Law, and with a zero fiscal note by the Department of Labor dated 3/18/97. SENATE BILL 109 "An Act relating to land used for agricultural purposes and to state land classified for agricultural purposes or subject to the restriction of use for agricultural purposes only; and annulling certain program regulations of the Department of Natural Resources that are inconsistent with the amendments made by this Act." SENATOR LYDA GREEN noted that SB 109 was similar to legislation passed last year as SB 162. Last year, it was vetoed by the Governor; the override vote, according to Judge Weeks of Juneau, came a day late. She listed the key provisions of the bill: 1. The State of Alaska will be taken off the title to the land. An essential aspect if farmers with agricultural land are to have an opportunity to finance their operations with private funding. 2. Numerous regulations will be repealed that provide for micro-management of private farms by the State. The Department of Natural Resources (DNR) has no objection to repealing those regulations. 3. An original agricultural parcel can now be subdivided into any number of parcels as long at they are no smaller than 40 acres. The 5 subdivisions do not include the ability to build a home on the property. However, current law provides for a home site to go along with any subdivision of an original parcel as long as the parcel is at least 640 acres. 4. For a subdivided parcel which includes a home site, must be under 640 acres, and conveyed to someone outside the owners immediate family. There will be two options: * Option #1 would provide an increased value fee of $6 thousand dollars payable to the State. * Option #2 would allow for the owner to do an appraisal and pay the difference in the increased value from agricultural land with a home site and without a home site. 5. Agricultural use would be protected by a perpetual covenant running with the land. Any citizen, municipality or the State could bring suit in civil court to enforce the covenant. The process should reduce or eliminate frivolous suits. 6. A limited liability report would be required to indemnify the State during the transfer of title. 7. Existing requirements for a survey before the State can offer agricultural land to allow the Commissioner of the Department of Natural Resources to waive the expensive process. The legislation will remove unnecessary regulations, promote family farming, allow farmers the option of private financing, promote more offerings of agricultural land, allow a limited number additional home sites on agricultural land and guarantee continued agricultural use of the land. Co-Chair Therriault asked when the $6 thousand dollar charge would be made. Senator Green explained that the fee was determined as the cost of building a second home and would be revenue for the State. She suggested to establish a flat fee would discourage the small 40 acre parcel farmer from building. She clarified that family members would be exempted from paying the $6 thousand dollars. There would be no fee coming back to the State until the parcel was sold 6 out of the family. The definition of "family" is the same as that indicated in the Legislative Ethics Bill. Senator Green pointed out that language was being reconsidered and would be changed to $4 thousand dollars. Co-Chair Therriault questioned the "limited liability" provision. Senator Green explained that in the process of changing the title from agriculture rights to the perpetual covenant, a limited liability policy would be offered, provided to Department of Natural Resources (DNR), who would then provide a new "deed of conveyance". In the period of time that the farmer conveys his land back to the State for the purposes of the transaction, the State did not want to have liability over actions occurring on the farmers land during that period. The State requested a "limited liability" clause to protect them during the time of the transaction. In response to Representative Grussendorf's question, Senator Green explained that a 40 acre plot could not be subdivided into smaller parcels for another family member. If the person owned 80 acres, there would be no fee to the State to divide it for a family member. If it was given outside the family, a fee would be charged. (Tape Change HFC 97-95, Side 2). Representative Grussendorf asked the average size of the agricultural plots. Senator Green replied that every size parcel imaginable exists. There will be no net loss of land for agriculture use. Representative Martin spoke to the "family farm" concept. He asked if the bill had provisions to keep the farmers from selling-out to the federal government. Senator Green explained that SB 109 did not address that concern. She commented that the 40 acre parcel was the minimum below which you can go, although, would allow a retention within a family which would allow for a family farm member to have a homesite on that plot. Co-Chair Therriault questioned language included on Page 7, Line 4: "Housing for the landowner and farm laborers". Senator Green advised that seasonal workers could need a bunk-house to live in; that would be tied to the appropriate use for agricultural purposes. She stressed that language of the bill would not permit building a condo. Representative G. Davis asked how the Department would monitor the area once the parcel was conveyed. He voiced concern implementing the legislation with the current budget cuts. Senator Green reiterated that anyone in the State 7 would have the authority to address when farm land was not being used as it should be. The change of title should reflect any restriction possibilities. TUCKERMAN BABCOCK, STAFF, SENATOR LYDA GREEN, added, last year, the bill only allowed the State authority to initiate civil action; in response to the Department's concern, Senator Green included authority for the municipalities to file civil action. He believed sufficient oversight exists in the legislation. MIKE CROUCH, (TESTIFIED VIA TELECONFERENCE), EAGLES' RIDGE RANCH, DELTA JUNCTION, spoke in support of the legislation. Aspects of the legislation which he specifically embraced were: * The right of the individual to farm their lands as deemed necessary to make a living without micro-management by the State agencies; and * The ability of current law to appeal any process when in violation. He urged Committee members to move the bill from Committee. Representative Martin inquired what Mr. Crouch would think about a prohibition on the small family farmer selling-out to the federal government. Mr. Crouch replied that decision should be the right of the individual to determine the future of his operations and then make that consideration. He believed that would create a conservation program and would be based on placing marginal farm land to better use. MIKE SCHULTZ, (TESTIFIED VIA TELECONFERENCE), PRODUCER- GRAIN FARMER, DELTA JUNCTION, noted his support for the legislation, agreeing that Pt. MacKenzie should be treated separately. He explained that Pt. MacKenzie has local, not statewide, problems. The proposed legislation addresses concerns experienced by the farming industry which have existed for twenty years when the original ag-title was created. He urged Committee members to support the legislation. LAURIE KNOPP, (TESTIFIED VIA TELECONFERENCE), KNOPP DAIRY, DELTA JUNCTION, testified in support of the legislation. She spoke to her concern regarding a employee housing unit on her property. Co-Chair Therriault clarified that there would be no added assessment to the employee house on her property. 8 Ms. Knopp read testimony from Scott Miller in support of SB 109. Mr. Miller elaborated the legislation would keep the State from micro-managing farms, concluding that farm land must be protected. CHARLES THOMPSON, (TESTIFIED VIA TELECONFERENCE), AGRICULTURE CREDIT DIRECTOR, ALASKA FARM SERVICE AGENCY, U.S. DEPARTMENT OF AGRICULTURE, PALMER, noted that the Alaska Farm Service Agency's interest in the bill would favor the fee-simple title passed on through the bill. The U.S. Department of Agriculture shares a loan program with bankers of Nationwide. Including the guarantee loan incentive, the loan process could be expedited and be more responsive to the needs of farmers. To date, the banks have not been willing to accept title as it currently exists. He recommended passage of the legislation. SIGMUND RESTAD, (TESTIFIED VIA TELECONFERENCE), NORTHERN PIONEER RANCH, PALMER, voiced appreciation for the Senator's consideration of previous voiced concerns with the legislation. He spoke to the 40 acre subdivision clause, a parcel size which would not lend itself to a practical operation. A profitable farm must allow itself a substantial rotation process. (Tape Change HFC 97-96, Side 1). RAY DEVILBISS, (TESTIFIED VIA TELECONFERENCE), FARMER, PALMER, suggested that the legislation would increase the price of agricultural land. He added that SB 109 would allow present owners of ag-right titles to apply for and receive the new title without value being hindered, whereas, new purchasers of that land from the State in future sales, must pay for it at that time. Such an action could make some owners more "equal" than others. Mr. Devilbiss questioned how long would it take before a concern surfaces over the loss of ag-land turning into primary residence for off-farm wage earners. He suggested there would be pressure at that time for the State to buy- back the developed lands. HARVEY BASKIN, (TESTIFIED VIA TELECONFERENCE), DAIRY FARMER, WASILLA, stated that any farmer making a living in Alaska can not afford to subdivide. The State is the major land holder and current laws are not logical. GERHARD GROESCHEZ, (TESTIFIED VIA TELECONFERENCE), FARMER, PT. MACKENIZE, spoke to the fiasco the State has created in the dairy industry at Pt. MacKenzie. He recommended that the State continue to keep the covenant with the dairy 9 facility on that land. Mr. Groeschez spoke to his support for passage of SB 109. GENE WILLIAMS, (TESTIFIED VIA TELECONFERENCE), RANGE FARMER, PALMER, informed Committee members of the difficulty of farming in Alaska where the weather conditions and the shortness of the season dramatically affect the growing season. She admitted that many people have made a "go" of it. Ms. Williams encouraged for more people to have that opportunity, requires subdividing to 40 acres parcels. She supported keeping it "ag-only land" and urged passage of the legislation. HARRY WASSINK, (TESTIFIED VIA TELECONFERENCE), ANCHORAGE, commented that SB 109 provides a good title for farmers in Alaska. He noted his support for the legislation. GARY STROMBERG, (TESTIFIED VIA TELECONFERENCE), FARMER, PT. MACKENIZE, testified in support of SB 109. BILL WARD, (TESTIFIED VIA TELECONFERENCE), FARMER, KENAI, spoke in support of the proposed legislation. The intent of the bill would diversify the economy and help the farming industry grow successfully. He urged members to move the bill from Committee. SB 109 was HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 10:00 A.M. 10