HOUSE FINANCE COMMITTEE February 22, 2000 1:45 P.M. TAPE HFC 00 - 37, Side 1. TAPE HFC 00 - 37, Side 2. TAPE HFC 00 - 38, Side 1. CALL TO ORDER Co-Chair Therriault called the House Finance Committee meeting to order at 1:45 P.M. PRESENT Co-Chair Therriault Representative Williams Co-Chair Mulder Representative Grussendorf Representative Bunde Representative Moses Representative G. Davis Representative Phillips Representative J. Davies Representative Austerman and Representative Foster were not present for the meeting. ALSO PRESENT Mike Tibbles, Staff, Representative Gene Therriault; Janice Adair, Director, Division of Environmental Health, Department of Environmental Conservation; Jon Tillinghast, Attorney, Sealaska Corporation, Juneau; Ken Freeman, Executive Director, Resource Development Council (RDC), Anchorage; Steven Daugherty, Assistant Attorney General, Department of Law; Carol Carroll, Director, Division of Administrative Services, Department of Natural Resources; Pamela LaBolle, President, Alaska State Chamber of Commerce; Tadd Owen, Project Coordinator, Resource Development Council (RDC), Anchorage; Richard LeFebvre, Deputy Director, Division of Mining, Land and Water, Department of Natural Resources. TESTIFIED VIA TELECONFERENCE Robert Stiles, Senior Vice President, Executive Committee, Resource Development Council (RDC), Anchorage; Charlotte MacCay, Senior Administrator, Environmental and Regulatory Affairs, Council of Producers, Anchorage; Charlie Boddy, Vice President, Governmental Relations, USIBELLI Coal Mine, Fairbanks; Richard LeFebvre, Deputy Director, Division of Mining, Land and Water, Department of Natural Resources. SUMMARY HB 361 An Act relating to charges for state services; requiring that fees levied by resource agencies for designated regulatory services be based on the actual and reasonable direct cost of providing the services, except in the case of certain negotiated or fixed fees; relating to negotiated or fixed fees of resource agencies; relating to invoices for designated regulatory services; establishing a petition process regarding fees charged by resource agencies for regulatory services; and providing for an effective date. HB 361 was HEARD and HELD in Committee. HOUSE BILL NO. 361 An Act relating to charges for state services; requiring that fees levied by resource agencies for designated regulatory services be based on the actual and reasonable direct cost of providing the services, except in the case of certain negotiated or fixed fees; relating to negotiated or fixed fees of resource agencies; relating to invoices for designated regulatory services; establishing a petition process regarding fees charged by resource agencies for regulatory services; and providing for an effective date. Co-Chair Therriault explained that for many years, the Legislature has debated the issue of appropriate fees for permits provided by the State's resource agencies, particularly the Department of Environmental Conservation. While policy direction has been given through the appropriation process, budgetary authorization for the collection and expenditure of program receipts has failed to address two primary questions. Co-Chair Therriault asked what was the appropriate level of fees to be assessed for various services. Additionally, he questioned how could the Department be held accountable for delivering the services being charged for in an efficient manner. Co-Chair Therriault noted that several years ago, the House Finance Committee (HFC) attempted to provide statutory direction for State agency permitting fees through an amendment to HB 144. Initially, the language was found to be too broad in the application. The bill did pass both the House and Senate. However, the bill failed to return to the House for a concurrent vote on the final day of session. That process generated two important outcomes: ? Identified the need for industry-wide consensus and discussions among the public and private sector entities; and ? Determined that regulatory efficiency and permit streamlining could be accomplished in relatively small increments. Co-Chair Therriault noted that HB 361 includes the following provisions: ? Requires fees levied by a resource agency for a "designated regulatory service" to be based on the actual and reasonable direct cost of providing the service. ? Requires each resource agency to establish a schedule of fixed fees for "standard designated regulatory services". Those services include simple repetitive permitting activities. ? Requires a resource agency to make an effort to negotiate a reimbursable service agreement for charges being levied on a time and expense basis. ? Requires a resource agency providing a "designated regulatory service" to employ a uniform accounting and invoicing system. Detailed monthly invoices are required for fees charged on a time and expense basis. A permittee may appeal the merit of any invoice to the Office of Management and Budget (OMB). ? Provides that a person requiring a "designated regulatory service" many petition a resource agency to amend or supplement an existing schedule of fixed fees or establish a fixed fee for a new category of service. ? Provides that a person requiring more than one regulatory service may petition an agency or agencies involved for a single project fee. MIKE TIBBLES, STAFF, REPRESENTATIVE GENE THERRIAULT, provided a brief overview of the legislation. He reiterated comments made by Co-Chair Therriault. He commented that the scope of HB 144, previous legislation had been too broad, which was a part of the problem, as regulatory services were attempted to be defined as services that could be charged for. Mr. Tibbles pointed out that HB 361 would provide a more focused group of regulatory services. The intent has been to establish a model which will work on those services. Mr. Tibbles pointed out three provisions contained within HB 361 addressing the fee structure: ? The bill would require each department to establish fixed fees; ? The bill would allow a permittee to negotiate fees on complicated situations with each department; and ? Should negotiations fall short, the fees for service would be based on the actual time and expense. Mr. Tibbles continued that the bill does require that agencies establish a uniform accounting system. The bill provides an avenue for appeal if the permittee believes that the invoice is not based on the actual direct costs. Additionally, the bill will provide an avenue for industry to petition the departments for modifications or additions to the list of fixed fees. Representative Phillips referenced "fixed fees" and asked if a citizen would be able to appeal that concern. Mr. Tibbles explained that there was a provision contained in the legislation which allows for fixed fees to be adopted in regulation. Representative Phillips inquired if the citizen would know that ahead of time. Co-Chair Therriault replied that it would go through a normal regulatory process and would allow for public comment. In regards to the "fixed fee" process, Representative Phillips asked if there was a time frame for how long an agency could take to issue a permit. Mr. Tibbles responded that for a service, the applicant would not experience a set deadline. He added that there are guidelines for the fixed fees and that the amount can not exceed $250 dollars unless it represents the average actual direct costs incurred. Representative J. Davies commented that would be an area of accountability, and recommended that it be discussed during the missions and measures overview. Co-Chair Therriault agreed that area could be negotiable. Representative Phillips interjected that only the fixed fee portion should be limited so that the Department be required to respond within a specified time. Vice Chair Bunde commented that "timeliness" could be encouraged by a decreased fee. Representative J. Davies voiced caution creating an unreasonable time frame. He thought it would be better for the Legislature to monitor it. ROBERT STILES, SENIOR VICE PRESIDENT, EXECUTIVE COMMITTEE, RESOURCE DEVELOPMENT CORPORATION (RDC), ANCHORAGE, (TESTIFIED VIA TELECONFERNCED), testified in support of the proposed legislation. The legislation would result in creating accountable and predictable results in terms of costs for regulatory services. He stressed that the bill has accomplished that. For those services that are simple and straightforward, the departments should establish a fixed fee. Mr. Stiles noted that there are some circumstances with more complex conditions regarding the permit scope. In that situation, it can be difficult to determine fees. Mr. Stiles reported that usually the department should use a time and expense base. He suggested that if the fixed fee were $250 dollars or less, the agency would not have to make a showing of the relationship between the fee and the cost of processing the fee. Mr. Stiles encouraged Committee members to move the bill. He suggested that the bill would be a good "start" in the right direction and that there are recommendations that fit to work the "kinks" out of the current system. KEN FREEMAN, EXECUTIVE DIRECTOR, RESOURCE DEVELOPMENT COUNCIL (RDC), ANCHORAGE, expressed strong support of the bill and urged that it move from Committee. Mr. Freeman noted that RDC is a statewide, member-funded, non-profit trade association. The organization's mission is to grow Alaska's economy through the responsible development of the State's natural resources. RDC's membership includes individuals and leading companies from all of Alaska's industries such as mining, oil & gas, fisheries, timber and tourism. RDC also represents all thirteen Regional Native corporations, organized labor, industry support companies and several local communities. Mr. Freeman advised that in January 1999, RDC was tasked with building an industry-wide consensus on legislation designed to deal with State agency permit fees. Sealaska Corporation had taken an earlier lead on the issue with a draft bill known as the "Permittee Bill of Rights." The concepts articulated in the "Permittee Bill of Rights" served as the starting point for the RDC work group's subsequent discussions. Mr. Freeman noted that while industry recognizes its responsibility to pay for the services it receives, the issue of allocating program costs between the public and the regulated community remains unresolved. He commented that RDC applauds the Legislature for its past involvement in the issue. Mr. Freeman advised that from January through July 1999, the group worked to develop consensus points regarding State agency permit fees and to draft legislation based on the consensus. Throughout the development stage, the fees group worked closely with Commissioner Brown and Barbara Frank of the Department of Environmental Conservation. Mr. Freeman pointed out that HB 361 would accomplish several important objectives. ? It requires the resource agencies to establish a schedule of fixed fees for relatively simple and repetitive regulatory activities. Those fees must be based on the actual and reasonable direct cost of providing the service and cannot include additional charges such as program overhead. That change is important for two reasons, as it would provide the regulated community with more predictability in determining the costs to permit an activity. Additionally, it would ensure the person requiring a designated regulatory service would only pay for the costs associated directly with providing that service. ? Recognizing that not all services provided by the resource agencies lend themselves to fixed fees, the bill directs the resource agencies to enter into negotiations with any person requiring a service to determine the costs of the complex or controversial permitting activities. In the event that negotiations are unsuccessful, the bill would require the agency to bill on a strict time and expenses basis for the work. ? The bill would provide the regulated community with flexibility through a petition process. Petitions may be used to request that the agency supplement its schedule of fixed fees, they may be used to create a fixed fee for an activity specific to a distinct economic sector, and they may be used to request a single project fee for an activity requiring multiple permits. ? The bill would require that any resource agency providing a designated regulatory service establish a uniform accounting system capable of producing an auditable invoice. Services billed on a time and expenses basis will require monthly invoices. Some negotiated fees would also incorporate the use of invoices. ? The bill is written to encompass all of the resource agencies, Department of Natural Resources, Department of Fish and Game, and Department of Environmental Conservation. Currently, the only programs included in the bill, fall under Department of Environmental Conservation. At this time, Department of Fish and Game does not have fee-charging authority and the Department of Natural Resources has already accomplished much of the work required by HB 361. Also, the bill does not grant any new fee-charging power, rather it restructures the manner in which fees can be constructed and billed. In conclusion, Mr. Freeman stressed the positive working relationship the group has had with both the Legislature and Department of Environmental Conservation. He added that the legislation is an appropriate step toward fulfilling Alaska's promise on "being open and ready for business". Co-Chair Therriault requested further clarification of the "petition process". Mr. Freeman explained that element exists for future activities involving fixed fees. The petition process allows industry to ask the agency to put together a specific "fixed fee". TADD OWEN, PROJECT COORDINATOR, RESOURCE DEVELOPMENT COUNCIL (RDC), ANCHORAGE, added that possibilities exist once the bill has passed that could be beneficial for the regulating committee to supplement the list of fixed fees. He pointed out that an example of such activity would be that on the North Slope. Co-Chair Therriault asked if the petition process could "kick off" the regulatory process, at which time, the Department could add another fee to the list. Mr. Owen explained that it was the intent to allow the regulatory committee to approach the Department with a request for supplemental fixed fees. The Department would have the authority to make that change. Representative Phillips asked if it was the intent of the committee that when applying for a specific permit, that the qualifiers granted a fixed fee would be able to purchase the permit at that time. Mr. Freeman replied that the process should be fast. There is no language in the bill that specifically addresses the timeline issue. Representative G. Davis questioned if this program was currently working well for Department of Natural Resources. Mr. Freeman replied that for the most part, the fixed fee concept has been working for that Department. He added that it is anticipated that the fixed fee process will provide a good template for Department of Environmental Conservation. CHARLOTTE MACCAY, SENIOR ADMINISTRATOR, COUNCIL OF PRODUCERS, ANCHORAGE, (TESTIFIED VIA ELECONFERENCE), testified that the Council of Alaska Producers (the Council) is an association representing companies involved in exploration, development and active operation of hard rock mines in Alaska. The Council shares the concerns slated in the recent "Minerals Commission Report" regarding companies inability to acquire environmental permits in a consistent, expeditious fashion. She agreed that industry does have a responsibility to fund a substantial portion of the environmental permitting program. The Council supports HB 361 as a vehicle to enable the Department of Environmental Conservation to collect permitting fees in a structured, accountable and equitable manner. Ms. MacCay pointed out that RDC has been actively involved in the drafting of the proposed legislation. She indicated that the bill has provided a means for fair and accountable invoicing to the applicant. The bill would incorporate and encourage fixed fees representing predictable funding for the applicants as welt as decreased administrative and accounting costs to the agencies. Ms. MacCay advised that the bill would also provide for negotiated fee agreements when projects involve complex permit components or extra review and evaluation. Ms. MacCay stated that HB 361 would provide a strong framework for assessing fees in support of environmental permitting. Ms. MacCay noted that permit fees alone cannot adequately fund the State's permitting programs, nor can they provide program continuity throughout the "boom and bust" fluctuations associated with resource development. HB 361 cannot be adopted in isolation. She stressed that the bill does need to pass, and that industry needs to continue its financial support of the environmental permitting programs. Ms. MacCay recommended that the Legislature, the Administration, and the public must acknowledge that when industry experiences a decline, the funding could dry up. She emphasized that the agency cannot attract or maintain qualified and experienced personnel in jobs that offer no stability. The Council proposes the following actions for the maintenance of environmental permitting programs in Alaska. ? Industry must pay its fair portion of permitting costs as regulated under HB 361. ? The Legislature must provide consistent year to year funding to support a core group of experienced permitting managers. ? The Administration must aggressively search for and find means to accommodate the use of third party contractors who will work under the core managers to provide permit development support on an as needed basis. Ms. MacCay concluded that the Council believes that we all can work together to provide a responsible and reliable environmental permitting plan for the State of Alaska, ensuring protection of the environment and a sound economic future. Representative Grussendorf asked if Ms. MacCay was speaking in support of the Department of Environmental Conservation continuing to provide for the permitting. Ms. MacCay replied that fees need to be paid and supported, however, that alone is not adequate and that the Legislature needs to continue to provide funding for the core work of permitting. CHARLIE BODDY, VICE PRESIDENT, GOVERNMENTAL RELATIONS, USIBELLI COAL MINE, FAIRBANKS, (TESTIFIED VIA TELECONFERENCED), spoke in support for HB 361. He stated that in the State resource industry, there is an expectation that there is a "level playing field" and that those rules apply to all endeavors. Mr. Boddy suggested that HB 361 would create a catalyst for a fairer fee approach. In conclusion, Mr. Boddy responded to Representative Phillips comment regarding the fixed fee permit. He explained that he understood the fixed fee permit process would allow for the industry represented to complete the necessary work and would then be able to leave with a permit in hand. He hoped that this goal could be reached. Representative J. Davies advised that Subsection C indicates the possibility that permits could be larger than that. He suggested that type permit could be more complicated and could take a longer turn-around. Mr. Boddy agreed, but noted that most permits are easy to issue. JON TILLINGHAST, ATTORNEY, SEALASKA CORPORATION, JUNEAU, testified in support of HB 361. He commented that Sealaska Corporation appreciates the opportunity to add its support to the legislation. On behalf of the 18,000 Alaska Native shareholders, Sealaska engages in an array of economic activity that is in nearly constant need of a variety of environmental permits. Sealaska is asked to pay fees for all the permits, making them a front-line stakeholder in the debate. Mr. Tillinghast pointed out that Sealaska has worked hard with RDC in the private sector and with the Department of Environmental Conservation to develop a policy towards regulatory fees that both: ? Provides a system of checks and balances; and ? Equitably shares the burden of regulation between the public and private sectors. Co-Chair Therriault asked about the language on Page 5, Lines 27-28. Mr. Tillinghast responded that verbiage represents final agency action. He believed that if a person felt strongly enough, they would be able to take DEC to court over it. The Department of Environmental Conservation is under mandatory, statutory duty to make that a standard regulatory service. Representative J. Davies asked in the intent of creating the bill was the fiscal impact of developing the regulatory process. Mr. Tillinghast replied that had been addressed "in passing". He believed that these were not complicated regulations. He did not know if the Department had included any funding for that in the fiscal note. (TAPE CHANGE HFC 00 - 37, Side 2) Representative G. Davis asked for an example of a simple permit. Mr. Tillinghast commented that permitting for solid waste facilities called mono-fills that contain only a single kind of waste is frequent and simple. That permitting could be provided with a standard condition fixed fee. Representative G. Davis inquired the length of time such a permit would be issued for. Mr. Tillinghast did not know. Mr. Tillinghast commented that there are two extremes in the debate, neither of which Sealaska supports. On the one hand, some maintain that the private sector brought environmental regulations upon itself, and should resultantly pay its entire cost. The other argues that environmental regulation is not done for the private sector, but rather to the private sector, and exists for public policy reasons for which the benefited public ought to pay the full cost. Mr. Tillinghast commented that the reality lies somewhere in between. He believed that the middle ground would be HB 361. The legislation assures that the applicant would shoulder the direct cost of individual permit processing, while overhead and general administrative costs would be charged to the public at large. The legislation would split the tab. It would require the overall administration of environmental regulations to compete with other programs for public funding. But at the same time, it will guarantee that the cost of government will not incrementally increase because of requirements. Mr. Tillinghast added that the bill would introduce a concept that is nearly universal in the private sector, time and expense invoicing. When a company is billed for a service, even a regulatory service, it has a right to know what it is being charged for. Disclosure, moreover, encourages efficiency in those who render the invoice, because it will be possible to assess whether the amount charged was reasonable. Mr. Tillinghast stated that the legislation provides Department of Environmental Conservation with flexibility in the billing practices. The Department of Environmental Conservation can negotiate a fee. As a practical matter, that option is likely to be used only in complex or unusual permitting situations. Conversely, Mr. Tillinghast doubted that it would be used to lower fees beyond those otherwise chargeable under the bill, because the Department would say "no". Mr. Tillinghast stressed that the bill does not require the Department of Environmental Conservation to engage in prolonged negotiations, and it does not require the agency to reach an agreement with the applicant. Additionally, the department is authorized to establish fixed fees for more routine permits, avoiding the time and expense of invoicing and cost tracking. Mr. Tillinghast pointed out that HB 361 is important because our "tightening fiscal environment" has created increased pressure to "misappropriate" the regulatory fee concept. It then becomes "taxation" in disguise. He stated that was "bad policy and bad law". Mr. Tillinghast noted that HB 361 was purposefully drafted so that it could serve as a template for other agencies, if and when they are authorized to charge significant regulatory fees. It is therefore meant as a statement of policy and not a commentary on any particular State agency. Representative J. Davies asked for Mr. Tillinghast to reiterate how the fees must relate only to the service and then how the overhead would be raised through the general fund. Mr. Tillinghast noted that there are interesting federal case laws striking down agency fees that have attempted to capture overhead and administrative costs. Co-Chair Therriault referenced the Department of Law fiscal note and that Department's need to appeal to the Office of Management and Budget (OMB). Mr. Tillinghast disagreed that the either DEC or OMB would have the authority to write regulations to keep appeals under control. He stated that the only time the OMB review process would cost the public money is if the applicant wins and the State loses. Unless the Department of Law presumes that the Department of Environmental Conservation is going to lose a lot of appeals, it should not cost much money. Co-Chair Therriault asked if the Department currently has statutory authority to establish regulations to appeal the process and if the language contained in Subsection c was all that was required for that directive. Mr. Tillinghast noted that most agencies are given whatever authority necessary to write regulations to carry out all functions. STEVEN DAUGHERTY, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW, focused his comments on the potential legal problems identified by the Department of Law in the legislation. He spoke to the anticipated costs to the Department of Law. He indicated that HB 361 would require a lot of regulations. There is the possibility that it would increase current regulations by 500 pages, as it would change costs and fees as well as the number of people petitioning for new regulations. Additionally, the Department sees potential for litigation. Mr. Daugherty noted whenever a bill is submitted, there exists a tremendous need for program review. He warned that the legislation would not be cost effective, as there will be many litigants not represented by Council. Co-Chair Therriault asked if being responsible for picking up the costs could deter that. Mr. Daughtery acknowledged that was a possibility, however, he noted that rarely do people anticipate the possibility of loosing. Co-Chair Therriault asked about the litigation expense incurred during the public process comment period. Mr. Daugherty replied that most litigation would not result from the regulations but rather through the billing requirements and the appeal decisions. Mr. Daugherty identified the Department of Law's specific areas of concern. ? The definition of the "actual and reasonable direct costs" would be difficult to determine. ? The negotiation of contractual reimbursable service agreements and the provision that would make them enforceable contracts. In the past, they were "gentlemen's agreements". He noted that the contract should be either a standard contract or otherwise the Department would be responsible to review them individually. Representative J. Davies asked Mr. Daugherty to identify the site under which the Department anticipates problems. Mr. Daugherty pointed out that the language "actual and reasonable direct costs" occurs throughout the legislation and is defined on Page 6, Item #1. He acknowledged that language has specific problems which he would address later in his testimony. ? Provisions requiring Department of Environmental Conservation to adopt industry and geographically specific regulations establishing fixed fees. He noted that would create high costs. ? Billing procedure requires sufficient detail to determine if the time and the cost is a reasonable direct cost. That information is very important in the first year and it would lead to litigation during that time. ? Any provision requiring appeals to the Office of Management and Budget (OMB). The legislation fails to incorporate procedures for OMB to adopt regulations to establish appeal procedures. Mr. Daugherty pointed out that under current law, the normal process for appealing a contract dispute would be to go through Administrative Services. There already exist statutes for going through that agency. ? The provision regarding regulatory services is too broad. He stated that the way the language is currently written in the bill, it could include any regulatory service provided by an agency. He surmised that agencies would not be given sufficient discretion. There could be potential for unintended consequences in requiring the agency to adopt regulations. ? Voiced concern with the definition of the "actual and reasonable costs". Specific concerns are with the exclusion of interagency charges, Page 6, Line 13. That language does not allow covering for costs not directly related to Department of Environmental Conservation. If an agency needed advice, they would be under pressure to go to a third party contractor to provide it. The Department expects an increase in requests for outside Council. ? Highlighted Page 6, Section (G). Mr. Daugherty noted that the Department foresaw a lot of litigation resulting from that language. It will be very expensive litigation, as they will have to hire private firms to determine what the background of the employees is as well as the duties and education. Additionally, there might not be any analogous services in the private sector. Mr. Daugherty noted these are potential problems for increased personnel action in grievance situations resulting from the above-mentioned provision. He pointed out that the costs are not listed in the fiscal notes, as they are speculative. Representative Grussendorf asked if the Department's fiscal note reflected the concerns listed in Mr. Daugherty's testimony. Mr. Daugherty recommended that the concerns should be addressed throughout the bill. He acknowledged that the fiscal note was conservative and that if the bill was not cleaned up, the costs would be higher. Representative Phillips asked if the Department of Law had been part of the working group. Mr. Daugherty replied that they had not been. Mr. Duagherty, referenced the definition of "standard designated services", Page 8, Lines 9-11 and commented that the examples were too broad and should not all be included. Additionally, the Department views the petition process as unnecessary. People already have that opportunity. Co- Chair Therriault asked if the language "shall" adopt was the differentiating factor. Mr. Daugherty agreed that was the only difference, as the bill "would" require the agency to adopt the provision. Under the Administrative Procedures Act (APA), it would have to be determined whether to put it out to public notice. It would need to be scheduled within thirty days, although, the actual hearing could be three months down the line. Representative Grussendorf pointed out that there has not been a fiscal note included for OMB for the work they would be responsible for handling. Mr. Daugherty commented that he did not know the contract provisions, but had reviewed the regulations, and that the Department of Law believes that the existing statutes and regulations would be available for that type of dispute. Representative Grussendorf asked if OMB had submitted a fiscal note. Co-Chair Therriault responded that a separate fiscal note from OMB had not been submitted. CAROL CARROLL, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF NATURAL RESOURCES, spoke to the Department of Natural Resource fee process. Most of the fees for the Department are based on use of some type of State asset. Most of these fees require not only an application fee but also a renting type fee. There are some regulatory fees such as the joint pipeline office. Co-Chair Therriault commented that the legislation is somewhat restricted to DEC fees. Ms. Carroll voiced concern that the Department of Natural Resources is not "swept into" the legislation. Ms. Carroll spoke to the fixed fee process. She stated that most of the fixed fees received by the Department of Natural Resources are under $250 dollars and are based on some kind of use for State land. She emphasized that the Department wants to be sure that when the State land is rented, that it is recognized that it is not a regulatory fee associated with it. Co-Chair Therriault asked what would happen if someone thought the fee was too high. Ms. Carroll stated that people could currently petition to have the regulations changed. Co-Chair Therriault asked if the fees had ever been challenged. Ms. Carroll did not know. She noted that Mr. LeFebvre was on line to answer questions of that sort. Ms. Carroll concluded that in the mining section, public notice makes for a more successful permitting process. She stated that to exclude public notice would not be a good idea. Co-Chair Therriault reiterated his questions if Department's fixed fees had ever been challenged or appealed. RICHARD LEFEBVRE, DEPUTY DIRECTOR, DIVISION OF MINING, LAND AND WATER, DEPARTMENT OF NATURAL RESOURCES, replied that sometimes there are complaints but rarely challenges on the fees. Representative J. Davies asked if the Department of Natural Resources fixed fees included agency charges. Ms. Carroll stated that they do when the permit is large. (TAPE CHANGE 00 - 38, Side 1). Mr. LeFebvre added that when negotiating the agreement for reimbursable costs, interagency costs would be included in the reimbursement agreement. JANICE ADAIR, DIRECTOR, DIVISION OF ENVIRONMENTAL HEALTH, DEPARTMENT OF ENVIRONMENTAL CONSERVATION, noted that she had been involved in establishing of fees for the Department for many years. Ms. Adair recalled the policy debate of how much users should pay versus how much the public should pay for providing the services covered by the fee bill at the time. She stressed that it is not fun for the Department to create a fee structure. Ms. Adair pointed out that setting fees was an encouragement established by the Legislature. The general fund authority was replaced with the use of program receipts. The Department agrees that it is important to have the policy debate. The theory was that fees should allow industry to respond to growth in State services. Ms. Adair acknowledged that RDC has been willing to work with the Department. She voiced concerns that HB 361 takes certain groups and provides certain benefits for certain programs. She suggested that another way to deal with the concern would be to provide a bill that establishes the principles that the Department would follow in establishing fees, and then a Board to assist in establishing those fees. Another idea could be based on a straight percentage. She commented that the current bill has many problems and that some of them could be fixed. The bill does change how the fees are currently calculated. The Department of Environmental Conservation has mostly flat fees. The two programs that do not have flat fees are solid waste and the water quality permits. Ms. Adair noted that there has not been concern raised before in how the Department establishes their flat fees. At this time, the Department determines the needs and checks those people expected to be involved with a plan review. Then the Department establishes an average salary by adding up all the salaries, multiplying that by the number of hours worked in a year, which then provides an average hourly rate. That number is multiplied by the number of hours it is estimated to do the work. That then is the fee proposed and generally adopted. She stated that system works well for establishing flat fees. Ms. Adair advised that hourly fees are used in solid waste as the Department could not find a good way to do flat fees. She agreed that this was controversial. Ms. Adair advised that the way in which the bill is written, rather than basing fees on estimated costs, the fees would be based on actual and reasonable direct costs. That is different from what is currently done. That language is tied to the individual person and the individual project. She noted that she did not know how to create a flat fee given that information. She asked if what was intended was an estimated flat fee based upon the people expected to be involved. Ms. Adair stressed that information would be a critical distinction for the Department. Ms. Adair advised that the bill would establish in statute, three types of regulatory services. ? Designated regulatory services; ? Standard designated regulatory services; and ? Regulatory services. Ms. Adair pointed out that the last service could pull DNR into a fee structure. The regulatory service is defined as "services provided by a resource agency". A resource agency is defined as the Department of Natural Resources, Department of Environmental Conservation and the Department of Fish and Game. Ms. Adair continued, the flat fees have been characterized as being for simple, routine projects. It is not clear from the way that the bill is drafted that only those more complex projects default to negotiated agreement. She agreed that was "fixable" language. All the regulations that have fees have a "kill" process established in the regulations. The first appeal goes to the director of the division; the second level goes to the commissioner for final agency action. She noted that she has personally written off several thousand dollars in billings to permittees in the file for the solid waste applicants. She reiterated that the current system works well. The appeal procedure sets up a group of engineers from another program or division to advise on technical matters. Ms. Adair spoke to the petitions to adopt regulations. There is a traditional policy in the Administrative Procedures Act that allows any person to petition any agency to adopt or amend an appeal. The Department is required to address it within 30 days. She stated that she had received a petition to change regulations. She reiterated that the legislation adds another procedure to the work of the Division. There are concerns regarding this matter, which seems to discount the public process. Ms. Adair emphasized that would be of concern to the Department. Ms. Adair stated that the definition of "actual and reasonable" costs would establish a "flat fee". The Department does not include interagency costs in their flat fees. Ms. Adair voiced concern with ending the public notice provision being charged back to the permittee. She advised that Section (G) is of great concern to the Department. She pointed out that DEC is a training ground for many new employees. The Department of Environmental Conservation hires many young people and then trains them. She stressed that this is a management concern rather than a fee issue and that it would be inappropriate to be in statute. Representative G. Davis agreed with that. He thought that the job descriptions of Levels I, II, III, & IV could help address that concern. He noted that an experienced technician should be the one who signs off on the projects. Ms. Adair agreed that would be equaled out as the salaries were averaged. They seek to find the average. The Division of Personnel establishes the issue of whether or not a person is capable of doing the job for each job class and is not always related to their prior work experience. Representative Williams asked if DEC had been part of the working group on the project. Ms. Adair replied that DEC had been and that some of the concerns had been addressed. Ms. Adair concluded her testimony regarding "cluttering" of DEC regulations. She thought that there could be a better way to get to the "end" intention rather than through the regulatory process. Representative Grussendorf observed that DEC has not been a favorite in the budget process over the past few years. He noted that the Legislative body has dictated that the Department comes up with program receipts. The proposed legislation would cause them to loose $4 million dollars in program receipts. He warned that the legislation would be difficult for the Department to implement. PAMELA LABOLLE, PRESIDENT, ALASKA STATE CHAMBER OF COMMERCE, JUNEAU, spoke in support of the legislation. She stated that it would present a more user friendly regulatory environment with predictability, standardization and stability. She noted that customers expect a fair and justifiable fee for business. The proposed legislation provides for a measurable cost. Ms. LaBolle concluded that the fees must not become a form of taxation. Mr. Tillinghast countered earlier testimony regarding OMB's needing regulatory authority. He stated that would require adding a sentence to the bill. In terms of substituting the Administrative Services procedures for OMB, he commented that would be a formal and time-consuming process. In order to save money, the State would not want to route the appeal to Administrative Services and then have a formal hearing with lawyers. He noted that there are no provisions in the Administrative Services regulations for charging the petitioner for the full cost of the proceeding. Mr. Tillinghast commented that a number of complaints voiced at by DEC at this meeting were new ones. One of the previous complaints was the "unqualified employee exclusion to direct costs" which is now Subsection "G". He stated that this will be a policy decision which needs to be addressed by the Finance Committee. He added that there is a petition procedure under the APA for writing regulations. It is meaningless if there is no remedy. The agency can turn it down for any reason. The way to avoid any litigation would be to make the standard meaningless. Mr. Tillinghast spoke to the "interagency charge exclusion". He commented that if the agency charge meets the standards as the bill imposes on the DEC standards, there would be no problems to include them. Mr. Tillinghast noted the comment made by Ms. Adair that "the petition process does not allow the public to be heard". He disagreed with that, stating that the bill creates a standard. There is no unlawful delegation in the Legislature creating a standard which the agency has to meet. He pointed out that the public would be commenting on whether that class of permits is or is not a standard designated regulatory service. He presumed that the agency would listen to those comments carefully. He added with respect to "charging public notice back to applicant", the bill allows for public notice to be charged to the applicant. The only such charges that are excluded are the ones that are not required by law. It should be the Legislature's job to determine which permits are important enough to require the expense and time of public notice. If the agency decides to go beyond what the agency has been appropriated, they should then cover those costs. Co-Chair Therriault noted his intent to work on the bill with the RDC group and the Department of Environmental Conservation to address these concerns. He noted that HB 361 would be HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 3:50 P.M. H.F.C. 20 2/22/00