HOUSE RESOURCES STANDING COMMITTEE March 1, 1995 8:10 a.m. MEMBERS PRESENT Representative Joe Green, Co-Chairman Representative Bill Williams, Co-Chairman Representative Scott Ogan, Vice Chairman Representative Alan Austerman Representative John Davies Representative Pete Kott Representative Irene Nicholia Representative Eileen MacLean MEMBERS ABSENT Representative Ramona Barnes COMMITTEE CALENDAR HB 128: "An Act establishing an exemption to the requirement of obtaining a waste disposal permit for certain activities that yield water and waste material discharges ancillary to those activities." PASSED CSSSHB 128(RES) OUT OF COMMITTEE HB 107: "An Act relating to restrictions attached to certain commercial fisheries limited entry permits." PASSED CSHB 107(FSH) OUT OF COMMITTEE WITNESS REGISTER JACK PHELPS, Aide Representative Bill Williams State Capitol, Room 128 Juneau, AK 99801 Phone: 465-3424 POSITION STATEMENT: Prime Sponsor HB 128 DEENA HENKINS, Section Chief Drinking Water & Wastewater Section Alaska Department of Environmental Conservation 410 Willoughby Juneau, AK 99801 Phone: 465-5300 POSITION STATEMENT: Answered questions on HB 128 DAVE JOHNSTON, Chairman Alaska Oil & Gas Conservation Commission 3001 Porcupine Drive Anchorage, AK 99501 Phone: 279-1433 POSITION STATEMENT: Supported HB 128 GERON BRUCE, Legislative Liaison Alaska Department of Fish and Game P.O. Box 25526 Juneau, AK 99811-5526 Phone: 465-4100 POSITION STATEMENT: Commented on fiscal note NEIL MACKINNON, Representative Alaska Minerals Commission 1114 Glacier Avenue Juneau, AK 99801 Phone: 586-1254 POSITION STATEMENT: Supported HB 128 PATRICIA BERG, Representative ARCO Alaska P.O. Box 100360 Anchorage, AK 99510 Phone: 265-6878 POSITION STATEMENT: Supported HB 128 MOLLY SHERMAN, Representative Alaska Environmental Lobby P.O. Box 22151 Juneau, AK 99802 Phone: 463-3366 POSITION STATEMENT: Opposed HB 128 TROY REINHART, Employee Relations & Public Affairs Manager Ketchikan Pulp Company P.O. Box 6600 Ketchikan, AK 99901 Phone: 225-2151 POSITION STATEMENT: Supported HB 128 REPRESENTATIVE BEN GRUSSENDORF State Capitol, Room 415 Juneau, AK 99801 Phone: 465-3824 POSITION STATEMENT: Prime Sponsor HB 107 FRANK HOMAN, Commissioner Commercial Fisheries Entry Commission 8800 Glacier Highway Juneau, AK 99801 Phone: 789-6160 POSITION STATEMENT: Supported HB 107 BILL FLOR, President Southeast Dungeness Crab Association P.O. Box 262 Petersburg, AK 99833 Phone: 772-3829 POSITION STATEMENT: Supported HB 107 BETH FLOR P.O. Box 262 Petersburg, AK 99833 Phone: 772-3829 POSITION STATEMENT: Supported HB 107 SCOTT CROSS P.O. Box 1575 Petersburg, AK 99833 POSITION STATEMENT: Supported HB 107 ANDY WRIGHT P.O. Box 1432 Petersburg, AK 99833 Phone: 772-9233 POSITION STATEMENT: Supported HB 107 MARK JENSEN P.O. Box 457 Petersburg, AK 99833 Phone: 772-3316 POSITION STATEMENT: Voiced concerns with HB 107 language LADD NORHEIM P.O. Box 935 Petersburg, AK 99833 Phone: 772-3671 POSITION STATEMENT: Supported HB 107 DAVE BEEBE P.O. Box 148 Petersburg, AK 99833 Phone: 772-3357 POSITION STATEMENT: Supported HB 107 SHERRI WOHLHUETTER P.O. Box 1312 Petersburg, AK 99833 Phone: 772-9248 POSITION STATEMENT: Supported HB 107 ROCKY LITTLETON P.O. Box 1373 Petersburg, AK 99833 Phone: 772-4521 POSITION STATEMENT: Supported HB 107 MICHAEL SHELDON P.O. Box 1288 Petersburg, AK 99833 Phone: 772-3746 POSITION STATEMENT: Supported HB 107 DENNIS ONEAL P.O. Box 1083 Petersburg, AK 99833 Phone: 772-3982 POSITION STATEMENT: Supported HB 107 GWYNNE SHORT P.O. Box 1224 Petersburg, AK 99833 Phone: 772-3585 POSITION STATEMENT: Supported HB 107 PREVIOUS ACTION BILL: HB 128 SHORT TITLE: WASTE DISPOSAL PERMIT EXEMPTION SPONSOR(S): REPRESENTATIVE(S) WILLIAMS,Kott,Toohey,Green,Kelly JRN-DATE JRN-PG ACTION 01/27/95 156 (H) READ THE FIRST TIME - REFERRAL(S) 01/27/95 156 (H) RESOURCES 01/27/95 163 (H) COSPONSOR(S): KOTT, TOOHEY 02/08/95 271 (H) SPONSOR SUBSTITUTE INTRODUCED-REFERRALS 02/08/95 271 (H) RES 02/20/95 425 (H) COSPONSOR(S): GREEN 02/20/95 (H) RES AT 08:00 AM CAPITOL 124 02/20/95 (H) MINUTE(RES) 02/22/95 456 (H) COSPONSOR(S): KELLY 03/01/95 (H) RES AT 08:00 AM CAPITOL 124 BILL: HB 107 SHORT TITLE: RESTRICTED LIMITED ENTRY PERMITS SPONSOR(S): REPRESENTATIVE(S) GRUSSENDORF JRN-DATE JRN-PG ACTION 01/20/95 102 (H) READ THE FIRST TIME - REFERRAL(S) 01/20/95 102 (H) FSH, RES 02/08/95 (H) FSH AT 05:00 PM CAPITOL 124 02/08/95 (H) MINUTE(FSH) 02/10/95 299 (H) FSH RPT CS(FSH) 1DP 4NR 02/10/95 300 (H) DP: ELTON 02/10/95 300 (H) NR: G.DAVIS, OGAN, MOSES, AUSTERMAN 02/10/95 300 (H) ZERO FISCAL NOTE (ADFG) 2/10/95 03/01/95 (H) RES AT 08:00 AM CAPITOL 124 ACTION NARRATIVE TAPE 95-26, SIDE A Number 000 The House Resources Committee was called to order by Co-Chairman Williams at 8:10 a.m. Members present at the call to order were Representatives Green, Williams, Austerman, Davies, Kott, and Nicholia. Members absent were Representatives Ogan, Barnes, and MacLean. CO-CHAIRMAN BILL WILLIAMS announced there was a quorum present. HRES - 03/01/95 HB 128 - WASTE DISPOSAL PERMIT EXEMPTION CO-CHAIRMAN WILLIAMS told committee members they have a proposed committee substitute, version R, dated February 23, 1995, in their packets. REPRESENTATIVE PETE KOTT made a MOTION to ADOPT CSSSHB 128(RES). CO-CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, the MOTION PASSED. Number 030 JACK PHELPS, AIDE, REPRESENTATIVE BILL WILLIAMS, PRIME SPONSOR, stated CSSSHB 128(RES) represents the changes discussed at the last hearing on HB 128. He requested committee members to look at page 2, lines 13-16. He said the previous draft of HB 128 had a definition of hazardous waste drawn from Title 46. The problem identified at that time was that the Alaska Oil and Gas Conservation Commission (AOGCC) utilized the federal definition for hazardous waste found in 40 C.F.R., Part 261, in regulating activities in the oil patch. He noted the definition of hazardous waste in the Department of Environment Conservation's (DEC) statutes is a short paragraph. The definition under the Environmental Protection Agency (EPA) is 80 plus pages. Therefore, it was deemed appropriate by all concerned to use the federal definition of hazardous waste in CSSSHB 128(RES). He pointed out there is a precedent in statute for using the federal definition in Alaska statutes for hazardous waste. MR. PHELPS stated the other change in the committee substitute is on page 3, line 17. He noted this part of the bill was added at the request of DEC to allow them to continue to regulate excavation dewatering activities. He said this section was added prior to the previous draft but groundwater had not been included. This committee substitute includes the term groundwater. MR. PHELPS identified another change which was suggested and that change is reflected in the amendment R.1 in committee member's folders. He said when it was decided to transfer the annular disposal authority from DEC to AOGCC, the bill was drafted to deal with oil or gas wells on the oil patch. It was recently pointed out that in the production facilities there are water producing wells and water reinjection wells as part of the Enhanced Oil Recovery Program. He stated it did not seem appropriate to leave those out of the loop. Therefore, it was suggested that amendment R.1 add those as well so it would be certain that AOGCC would have the authority to regulate all of the annular pumping on the slope. He explained amendment R.l adds those water wells which are associated with oil well activity in the oil patch. Number 140 REPRESENTATIVE JOE GREEN made a MOTION to ADOPT AMENDMENT R.1. Page 2, lines 11-12: Delete "the disposal, in the annular space of an oil or gas well, of drilling mud, cuttings, and nonhazardous drilling operation wastes;" and insert "the disposal of drilling mud, cuttings, and nonhazardous drilling operation wastes in the annular space of an oil or gas well or in the annular space of a water well associated with oil or gas exploration and production;" Page 2, line 19: Delete "an oil or gas" and insert "a." CO-CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, the MOTION PASSED. MR. PHELPS stated there has been interest raised in how the excavation dewatering portion might affect certain activities. He said it might be appropriate to question DEC on how those might affect certain activities, particularly reserve pits on the North Slope. Number 173 DEENA HENKINS, SECTION CHIEF, DRINKING WATER & WASTEWATER SECTION, DEC, stated she would be happy to answer questions. CO-CHAIRMAN WILLIAMS asked if CSSSHB 128(RES) were to pass into law as it currently reads, would the draft general permit regarding drilling wastes, currently out for public comment, no longer be necessary. MS. HENKINS replied yes, that would be her interpretation. CO-CHAIRMAN WILLIAMS questioned if this bill were to pass in its current form, does she know of any human health risks, or specific, quantifiable environmental pollution problems that would go unregulated. MS. HENKINS stated she is not aware of complaints or problems with the type of activities the bill describes. She felt the department would have other recourses to deal with these kind of wastes if a problem was discovered. For example, if wastes were causing a health hazard, that would presumably meet the definition of pollution which is prohibited in statute. CO-CHAIRMAN WILLIAMS noted the department might not be able to take an official position for or against HB 128, but asked Ms. Henkins to tell the committee, given the current state of knowledge about the activities covered under this exemption, if the bill would pose any significant difficulties in carrying out the department's legal responsibility to protect the environment. MS. HENKINS replied no. Number 221 CO-CHAIRMAN WILLIAMS referred to Section 3 of CSSSHB 128(RES) and noted at the department's request, the language regarding excavation dewatering was included. He said in the oil patch, there are reserve pits which were formerly used to contain drilling wastes and are permitted under federal National Pollutant Discharge Elimination System (NPDES) provisions, which DEC certifies. He stated those drilling wastes are now ground and reinjected into the formation and the industry's practice is to empty and clean the pits and re-vegetate them. He noted they do leave a hollow in the ground and sometimes accumulate runoff. He asked how DEC would treat post grind and inject abandoned reserve pits in light of the excavation dewatering provisions of CSSSHB 128(RES). He wondered if DEC would require new permits if these pits had to be dewatered. MS. HENKINS said she is not familiar with dewatering reserve pits but felt if there were any contaminants in the water in the reserve pit and the water was being discharged to land or surface waters, the department would want to permit that activity. She stated that what the department is most commonly dealing with is muddy water from an excavation. CO-CHAIRMAN WILLIAMS noted for the record that Representatives MACLEAN and OGAN had joined the committee. Number 262 REPRESENTATIVE IRENE NICHOLIA asked if CSSSHB 128(RES) would have a negative impact on fish spawning streams. MS. HENKINS replied it will not. She said point source discharges to any surface water would still require a permit. If a non-point source discharge was causing a violation of DEC's water quality standards, the department could take action. She noted the Alaska Department of Fish and Game (ADF&G) could also require a Title 16 permit if an activity was affecting anadromous waters in their jurisdiction. Number 284 DAVE JOHNSTON, CHAIRMAN, AOGCC, expressed support of CSSSHB 128(RES). He stated AOGCC has authority, in its statutes AS 31.05.030, to regulate the disposal of oil field wastes. He said CSSSHB 128(RES) would remove the dual jurisdiction and permitting authority over this activity currently existing between the DEC and the AOGCC. The activity is similar to the Underground Injection Control (UIC) Program which is mandated under the federal Safe Drinking Water Act that AOGCC administers. He noted the state, through AOGCC, acquired primacy for the UIC Program in 1986. The UIC Program differs from the Annular Disposal Program in that the UIC Program was set up to control the injection of production wastes on a large scale, and the Annualar Disposal Program was originally conceived as an exemption to the UIC Program to allow the disposal of wastes associated with the drilling of one well only. MR. JOHNSTON stated those who set up the UIC Program originally did not feel it would make sense to require a dedicated injection well to be drilled solely to take wastes from one exploratory well. Therefore, it was decided that the Annular Disposal Program was not something subject to UIC jurisdiction. He noted because of AOGCC's statutory authority, that does remove the commission from the regulation of the disposal of oil field wastes in the annular space of the well. MR. JOHNSTON said the Interstate Oil and Gas Compact Commission in 1992, made the recommendation that the Annular Disposal Program be turned over to AOGCC. That recommendation was made because in the wisdom of the people reviewing the program, who were from various other states, saw that the AOGCC had the expertise and knowledge to properly manage this program. The annular disposal of mud and cuttings, etc., is an activity which takes place many thousands of feet below ground. He stressed AOGCC understands that environment, whereas DEC does not have nearly the expertise when it comes to understanding things like confining zones, receiving zones, well construction, etc. He stated CSSSHB 128(RES) will not significantly add to AOGCC's existing burden it has under the UIC Program. The AOGCC encourages the legislature of pass CSSSHB 128(RES). Number 351 REPRESENTATIVE EILEEN MACLEAN asked what is done with mud drillings when wastes are disposed. MR. JOHNSTON replied currently the mud and cuttings can be disposed of in two ways which reflects a change within the past two years. He said these mud and cuttings previously went to reserve pits where they sat for quite a long time. He stated AOGCC is in the process of closing out those reserve pits. He stressed the preferred alternative is below ground injection. The injection zones on the North Slope are 3,000 to 5,000 feet below the surface. The confinement of those injection materials are ensured by enuring that proper confining zones exist above where the oil field wastes are placed so they cannot migrate to the surface again. He noted when looking at confining zones, AOGCC looks for thick layers of shale or some impermeable barrier to flow. REPRESENTATIVE MACLEAN asked what CSSSHB 128(RES) would do. MR. JOHNSTON stated this bill would remove dual jurisdiction currently existing between the AOGCC and DEC. Both agencies currently have a piece of this annular disposal issue. AOGCC has looked at it as an issue associated with drilling safety, protecting the integrity of the well, etc. DEC has looked at it more from the standpoint of what the waste material is. He noted there is no argument between the two agencies over the process. The process of annular disposal has proven to be a very good process to dispose of the wastes permanently in a manner that protects the environment. He stressed he could not think of any better alternative than the underground injection of this waste. Number 393 REPRESENTATIVE SCOTT OGAN asked what is the annular space of an oil or gas well. MR. JOHNSTON replied the annular space is the space between the earth and the casing put into that boring or it is the space between two strings of casing. For example, when a well is drilled there will be a surface casing string in the area of 13 and five- eighths inches in diameter. A smaller production string of about nine and five eighths inches in diameter runs down inside that surface string. The space between the two is the annular space. Fluid is put down that space until it reaches a receiving zone that is below the bottom of the surface string. He explained the surface string goes down between 2,000 and 4,000 feet and is cemented in place. The annular space between the surface string and the rock formation is cemented to the surface. Wastes are put down the annular space between the production casing and the surface casing. The wastes travel down the annular space and go out into the receiving formation at the base of the bottom of the surface casing. REPRESENTATIVE OGAN clarified the disposal zone is a porous rock formation. MR. JOHNSTON stated porous sandstone is involved and gravity and pressure is used. He said mud and cuttings involve a lot of weight which tend to push the wastes out into the formation but pressure is also added. Number 430 CO-CHAIRMAN WILLIAMS said in light of the discussion with Ms. Henkins regarding reserve pits in the oil patch, he asked Mr. Johnston to make comments on reserve pits that might help the committee understand the permits and safeguards that govern this activity. MR. JOHNSTON stated the AOGCC has always looked at reserve pits more as the prerogative of the DEC since it is an activity associated with the surface. AOGCC's focus is more on the subsurface environment. He said AOGCC's regulations briefly talk to reserve pits. He noted there are people who believe the AOGCC should take a larger role in reserve pits but there is a point reached where it does not make sense to have this dual jurisdiction all the time. He stressed AOGCC has backed off the reserve pit issue and has allowed DEC more of a say in that issue. Again, it is something the commission could step into and direct additional attention. Number 457 REPRESENTATIVE ALAN AUSTERMAN asked Mr. Johnston to explain the reserve pits. He wondered if the pits are capped off. MR. JOHNSTON responded there are a number of generations of reserve pits which have existed over a number of years. More recently, as people became more knowledgeable about wastes, the construction has reflected that wisdom with permeability barriers, etc. He noted that some of the reserve pits, particularly those on the Kenai Peninsula, are difficult to find. Generally, reserve pits were covered over and forgotten. Today, those old reserve pits are being reopened and the mud and cuttings are being disposed of through an injection type program. He noted that wells on the North Slope are being drilled without reserve pits and stressed this is where the Annular Disposal Program has become much more important. Number 497 REPRESENTATIVE JOHN DAVIES noted on page 2, line 30 and page 3, line 11, there is the phrase "established industry procedures". He wondered if Mr. Johnston, as a regulator, is comfortable with such a phrase. He asked if there are established industry procedures. MR. JOHNSTON stated AOGCC refers quite often to good engineering practices, good oil field practices, etc. He said established industry procedures may be different to different companies. He felt good engineering practices, or recognized engineering practices might be better. He felt if engineers are talked to, there would be a consensus on what these things are. He noted it is similar to the phrase, "a good citizen." He pointed out the phrase is an intangible and is subject to debate. Number 530 GERON BRUCE, LEGISLATIVE LIAISON, ADF&G, told committee members they have a fiscal note which was prepared by the department for the first version of the bill. He said the department was not aware, until recently, of the work being done to modify the bill. He stated he did receive a copy of CSSSHB 128(RES) the day before and had faxed it to the department staff in Fairbanks. Based on their review, the department believes the fiscal note should be revised to reflect a zero fiscal note. REPRESENTATIVE DAVIES asked Mr. Bruce to highlight the changes between the original bill and the committee substitute which resulted in less activity on the part of the department. MR. BRUCE stated the changes clarify that the intent of the bill is to address the question of the duplication of efforts between the AOGCC and DEC on the specific matter of the disposal of wastes associated with oil drillings. He noted that DEC's other responsibilities on water quality will not be affected and will continue to do the things that the department depends on them to do. He explained the original fiscal note was based on the assumption that DEC would not do some of the things they are currently doing in regard to ensuring that water quality standards are adequate for the protection of fish and wildlife. REPRESENTATIVE DAVIES clarified that ADF&G is comfortable that DEC is going to continue to do those things related to habitat protection, which allows the department to have a zero fiscal note. MR. BRUCE stated that is correct. DEC will continue to do things that ensure water quality which are important for fish and wildlife habitat. He noted CSSSHB 128(RES) does not affect ADF&G's responsibilities regarding the protection of fish and wildlife habitat. Number 572 NEIL MACKINNON, REPRESENTATIVE, ALASKA MINERALS COMMISSION (AMC), stated AMC supports CSSSHB 128(RES). He said this law was applied for the first time last year, specifically in the case of the Echo Bay Mine drilling project. He told committee members about delays in several projects. He pointed out there is no other place where it is required to permit the discharge from a mining drill hole in the exploration stage. REPRESENTATIVE MACLEAN wondered what is currently done with wastes. MR. MACKINNON said the drilling waste is mostly water, which is used to cool the bits, and rock cuttings. The water flows out into a return tank which is recirculated and put back down the hole. He stated last year a sand centrifuge was used to pull the sand out which is put on the ground. Number 606 PATRICIA BERG, REPRESENTATIVE, ARCO ALASKA, stated ARCO Alaska supports HB 128, supports using the federal definition of hazardous waste, and supports the amendment just adopted. Previously, ARCO Alaska had concerns about Section 3 (B) to unintentionally include reserve pits which had been excavated with the drilling wastes ground and injected back down into the hole. She said what remains is an empty reserve pit. She stated based on Ms. Henkins' testimony, ARCO Alaska has no further concerns. She explained the intent of that section is for construction sites not for cleaned and abandoned reserve pits. MOLLY SHERMAN, REPRESENTATIVE, ALASKA ENVIRONMENTAL LOBBY (AEL), stated AEL is always in support of things which streamline government efficiency and costs less. She said she has been involved in exploration drilling with reconnaissance crews as a field cook and many of the places she has been they firmly believe in conscientious business and environmental practices. She noted they fulfill their contracts with vigor and as economically viable as possible. They are conscientious people who love to work outside, relish the risk and extreme conditions, and love Alaska. MS. SHERMAN said AEL's intent is not to shut down drilling operations or to objectively oppose the bill. She stressed AEL's concerns regard safeguards and abuses where practices are not established. AEL feels there is a critical flaw in the last half of CSSSHB 128(RES) as there is not a cohesive set of standards. She stressed that issue needs to be addressed. She noted often the drilling sites are in remote areas and in many places there are pits involved. She expressed concern about clean up and reclamation. If not mandated, she felt there should be established reclamation standards set up. She stressed it is not difficult to rake an area and reseed it. Number 660 TROY REINHART, EMPLOYEE RELATIONS & PUBLIC AFFAIRS MANAGER, KETCHIKAN PULP COMPANY (KPC), stated KPC supports CSSSHB 128(RES). KPC does considerable drilling to develop rock pits and to build roads under best management practices. He noted that currently there are not any regulatory incentives in place which also protect the environment. He stressed if a permitting process is started, it would impact KPC's operations. He pointed out currently there is not a chance for an exemption for minimal activities that involve drilling to place charges or drilling to build logging roads and develop rock pits. He stressed KPC takes all the safeguards in place to ensure that water used in drilling operations do not get discharged in streams. TAPE 95-26, SIDE B Number 000 REPRESENTATIVE DAVIES made a MOTION to AMEND CSSSHB 128(RES) on page 2, lines 29 and 30, and page 3, line 11, eliminating the words "established industry procedures" and substituting the words "recognized engineering practice." CO-CHAIRMAN WILLIAMS OBJECTED for the purpose of discussion. REPRESENTATIVE DAVIES felt the amendment provides a middle ground. He said the other option is to require state guidelines. He expressed concern the notion of established industry procedures is perhaps vague. He stated the phrase "recognized engineering practice" would be more focused and a less elusive concept for something which is intangible. CO-CHAIRMAN GREEN wondered if the amendment would require an established definition of what "recognized engineering practices" are. He expressed concern about leaving something vague where there is not a track record. He said recognized engineering practices could come from various sources that could compete with one another. Number 073 REPRESENTATIVE AUSTERMAN asked if established industry procedures or recognized engineering practices are written. REPRESENTATIVE DAVIES stated he is not an expert. He stressed the whole concept being dealt with is intangible and there are no written procedures and that concerns him. He said there probably is no singular volume that can be used to find established industry procedures or recognized engineering practices. On the other hand, he felt the engineering practice is a professional area which is somewhat removed from a particular industry. He noted in most engineering fields, there are many publications which do not exist in the same way for industry procedures. He pointed out his amendment is still an intangible concept but would take it one step less removed from intangible. CO-CHAIRMAN WILLIAMS suggested the committee pass out the bill as it is and then he and Representative Davies can discuss his concerns. He noted if they agree one way or the other, perhaps Representative Davies can offer an amendment on the floor. REPRESENTATIVE DAVIES WITHDREW his MOTION. REPRESENTATIVE AUSTERMAN made a MOTION to MOVE CSSSHB 128(RES), with accompanying zero fiscal notes, out of committee with individual recommendations. CO-CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, the MOTION PASSED. Number 150 HRES - 03/01/95 HB 107 - RESTRICTED LIMITED ENTRY PERMITS REPRESENTATIVE BEN GRUSSENDORF, PRIME SPONSOR, stated HB 107 came from a moratorium situation. He said about three years ago there were concerns about the pressures on the dungeness crab stock and the sustainability of the stock while deriving income off of it. The Commercial Fisheries Entry Commission (CFEC) was given the tool for a moratorium. During that moratorium, the CFEC and people in the fisheries have been looking at the crab questions and have come to the conclusion that it is in the best interest of the stock to enter into some form of limited entry in the dungeness crab fishery, in Southeast, to protect the stock. REPRESENTATIVE GRUSSENDORF stated HB 107 addresses the issue and gives the CFEC the ability to determine a plan to limit the pots, etc., but stressed HB 107 does not address any specific plan. HB 107 simply authorizes the CFEC to do it. He stressed HB 107 does not affect the ability of the Board of Fish to make their decisions. He explained what HB 107 will do is bring people into the dungeness crab fisheries at their historical level of participation. FRANK HOMAN, COMMISSIONER, CFEC, stated CFEC supports HB 107. He said HB 107 is a continuation of an earlier effort to look for a solution in the crab fishery. He noted in the crab fishery, there is a great diversity of effort levels and establishing a limited entry program similar to the current salmon industry would allow that effort level to increase significantly, which is not a good conservation measure but rather is counter-productive to the resource. He explained HB 107 would allow a variation to the typical limited entry system in that the CFEC could keep the effort level at its current capacity by restricting the permits to some historical level of effort. MR. HOMAN told committee members that currently there are approximately 45,000 pots in Southeast. If the current system was continued, there would be about 300 permits issued in the fishery and each permit could fish 300 pots each, raising the effort level to 90,000 pots over time. For that reason, the CFEC has been reluctant to give the traditional limited entry to the crab fishery and has been searching for the last three years to determine another effort restriction. He felt HB 107 is something which can be worked with to keep the fishery at its current level with its participants, while preserving the resource. Number 276 CO-CHAIRMAN WILLIAMS stated there are probably fishermen concerned about not being able to get 200 or 300 pots at a time. For example, if his son wanted to start fishing but is only fishing 75 or 100 pots, he asked how he would get up to 300 pots to make the fishing viable for him. MR. HOMAN responded a proportional pot limit on a permit means the fishery would be similar to what it is today. For example, if someone was fishing 100 pots, they could continue to fish 100 pots; those who are fishing 300 pots could continue to fish 300 pots. He said if the 100 pot permit was sold, a 300 pot permit could be purchased, which allows people with 100 pot permits to move up and also allows new entrants to come in at a lower level. Number 306 REPRESENTATIVE DAVIES clarified if a 100 pot permit was sold, a 300 pot permit could be purchased. MR. HOMAN said all the permits, at whatever pot level allowed, would be transferrable permits, so they could be bought and sold. He stressed that would depend, however, on whether or not a permit was available. REPRESENTATIVE DAVIES clarified that in Mr. Homan's example there would have to be two permits available. MR. HOMAN replied that was correct. REPRESENTATIVE AUSTERMAN asked how many permits can a person hold. MR. HOMAN stated a person can hold one permit in each fishery under the current system. REPRESENTATIVE AUSTERMAN clarified a person could not fish 600 pots with two permits. MR. HOMAN responded that would not be allowed. REPRESENTATIVE OGAN made a MOTION to ADOPT CSHB 107(FSH). CO-CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, the MOTION PASSED. Number 332 CO-CHAIRMAN WILLIAMS wondered how the amount of gear each fisherman is using can be verified. MR. HOMAN stated that is an issue which the CFEC has to give more analysis to. He said the CFEC will need to review catch histories, harvest levels and the number of pots claimed on registration forms to determine a ratio or formula. He noted the CFEC would work with biologists on the issue. He pointed out the CFEC has all of the harvest fish tickets from the past, so they know what each individual harvest level has been. CO-CHAIRMAN GREEN said if the point is reached where there is over fishing with the number of pots allowed and there had to be a cutback, he wondered how that cutback would happen. MR. HOMAN stated the crab fishery in Southeast is now under a moratorium. He said the CFEC does not have the ability to change the pot level as that is a Board of Fisheries decision. CO-CHAIRMAN GREEN asked if that is a total for all of the fishery. MR. HOMAN replied that was correct--it is not an individual or group total. He said one of the difficulties which has arisen is the Board of Fisheries only meets about every three years on these issues. He stated HB 107 says the CFEC can use the maximum allowed by the Board of Fisheries and can issue permits based on a proportion of that maximum. Number 385 REPRESENTATIVE AUSTERMAN clarified if there is a drop in the number of sustainable crab that can be taken, at some point in time there is a limitation put on by ADF&G in regard to the time frames of fishing so the amount of the crab catch can be controlled. MR. HOMAN explained the department can adjust seasons, limits, sexes and sizes. Number 405 BILL FLOR, PRESIDENT, SOUTHEAST DUNGENESS CRAB ASSOCIATION (SEDCA), urged committee members to support HB 107. He said HB 107 is part of continuing process, since 1984, to achieve a protection of the crab resource in Southeast. He stressed that resource does need some protection. He stated the problem with the traditional limited entry is the fleet is so diverse--not everyone fishes the full 300 pot limit and many people fish on the weekends with very few pots. He pointed out if a traditional limited entry was created, the potential for growth in the number of pots would increase dramatically. MR. FLOR said in 1991, SEDCA came to the legislature and presented the problem and a moratorium on the crab fishery was passed so the fishery could be studied. He noted the CFEC held hearings in the fall and went to all of the Southeast communities. The Southeast fleet was fairly united in creating a tiered system, even though many other ideas were discussed. He stressed the tiered system seemed fair, the diversity of the fleet would be grandfathered in as it exists now, and it is a fairly simple plan. Number 437 REPRESENTATIVE AUSTERMAN asked if the moratorium was just on the Southeast crab fishery. MR. FLOR replied it was. REPRESENTATIVE AUSTERMAN clarified HB 107 reflects statewide. MR. FLOR said it does. BETH FLOR, PETERSBURG, testified via teleconference and stated she is in favor of HB 107. She felt HB 107 will enable CFEC to design specific limited entry programs that will solve many problems for resource conservation, as well as provide equitable levels of participation. SCOTT CROSS, PETERSBURG, testified via teleconference, expressing support for HB 107. He said it is quite clear the traditional limited entry will not work for the dungeness crab fishery. He stated if the moratorium is allowed to expire, there will be a big impact. He noted other fisheries are breaking new ground and moving towards a less derby-style fishery and there is an opportunity to do the same in the dungeness crab fishery. He said this will help the value of the crab, as well as the safety of the fishermen. ANDY WRIGHT, PETERSBURG, testified via teleconference and expressed support for HB 107. MARK JENSEN, PETERSBURG, testified via teleconference and said he would support a bill that would get a limited entry type program going. He stated he does not agree with the wording in HB 107, especially not being able to change a permit. He felt if he has a permit for 100 pots and another person is going to sell their 100 pot permit, he should be able to buy another permit. He said when the moratorium bill was passed, it provided for research of the crab stocks and to his knowledge, that has never been done except for dock surveys. Number 489 REPRESENTATIVE MACLEAN asked Mr. Jensen to explain his first opposition to HB 107. MR. JENSEN said if a person originally receives 100 pots, he cannot add to that number of pots unless he sells his permit and buys another permit. He stated he did not understand why, if a person originally got a permit for 100 pots, he could not buy another 100 pot permit. REPRESENTATIVE OGAN stated the committee substitute for HB 107 took care of that issue. He noted the original bill said, "The fishing capacity allowed under an entry permit may not be changed after the permit is issued." He explained in the committee substitute that language was deleted. MR. JENSEN said that would alleviate the problem. He expressed concern also on the fact that many people show 300 pots on their registration when, in fact, they are not fishing that many pots. He felt using the registration criteria would not be realistic information for the program. He noted also if someone has a bad year, that could affect the criteria used for the program. Number 520 MR. HOMAN stated what Mr. Jensen is talking about is a provision which was looked at during the public hearing process and it was called a stackable provision where a person could consolidate permits. He said there is difficulty with that provision in the current system in that permits are limited to one permit per fishery. He noted to accommodate a stackable system, there would be a need to consolidate permits which is a difficult thing to incorporate into the CFEC's current system because it does not occur anywhere else. He felt it would be a very complicated provision to incorporate at this time but is something which could be looked at in the future. He stressed CFEC does not want to do anything to jeopardize any of the other existing limited entry fisheries by having a provision that could consolidate permits. MR. HOMAN noted the CFEC is currently faced with a court case called the Johns case which says a fishery can become too exclusive by a reduction in the number of permits. He said if it gets to a point where the court would declare the fishery too exclusive, new permits would have to be issued in that fishery. He stated that is why the stackable provision was not pursued. Number 544 LADD NORHEIM, PETERSBURG, testified via teleconference and expressed support for HB 107. He expressed concern about the viability of the crab fishery and felt HB 107 will help keep the fishery at a viable level. He stated he likes HB 107 because it gives a kid out of high school the opportunity to buy a small pot permit on which he could build. DAVE BEEBE, PETERSBURG, testified via teleconference and expressed support for HB 107. He stated his main concern is the direction of the fisheries in the Pacific Northwest and those fishermen moving into Southeast Alaska. SHERRI WOHLHUETTER, PETERSBURG, testified via teleconference and said she is strongly in favor of HB 107. She stated HB 107 will give the CFEC a responsible management tool for the crab resource which is crucial for the longevity of this resource. She stressed if the resource is not managed responsibly, it will not be available for anyone. ROCKY LITTLETON, PETERSBURG, testified via teleconference and expressed support for HB 107. MICHAEL SHELDON, PETERSBURG, testified via teleconference and expressed support for HB 107 because he is concerned that the California, Oregon and Washington fleet plan to come up and fish the fishery. He stated if the fishery is allowed to be accessed by a wide open fishery, the production will be hampered. He said he would like to see his son get a chance to get into the fishery. DENNIS ONEAL, PETERSBURG, testified via teleconference and expressed support for HB 107. GWYNNE SHORT, PETERSBURG, testified via teleconference and stated her husband, Joe Short, has been in the fisheries for 15 years. They both support HB 107. TAPE 95-27, SIDE A Number 000 MR. BRUCE stated the department supports HB 107. He recalled that earlier testimony in the fisheries committee indicated the bill was not needed from a biological standpoint. He clarified the department's biologists believe HB 107 does have biological benefits for protecting the crab stocks from over-exploitation. REPRESENTATIVE AUSTERMAN asked someone to explain the committee substitute. MR. HOMAN said the committee substitute removes one sentence from the original bill. He stated in the original bill on page 2, lines 22 and 23, there was reference that the permit could not be changed after it has been issued. He noted the Attorney General's Office was somewhat concerned that reference may indicate some restriction on the Board of Fisheries. He stressed the Board of Fisheries still has the final authority on the maximum numbers of pots. Number 045 REPRESENTATIVE DAVIES made a MOTION to MOVE CSHB 107(FSH) with accompanying zero fiscal note out of committee with individual recommendations. CO-CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, the MOTION PASSED. CO-CHAIRMAN WILLIAMS announced that the committee was going to hear HB 170 again but due to time, it will be taken up again on Monday, March 6. ADJOURNMENT There being no further business to come before the House Resources Committee, Co-Chairman Williams adjourned the meeting at 9:35 a.m.