HOUSE RESOURCES STANDING COMMITTEE February 13, 1997 1:05 p.m. MEMBERS PRESENT Representative Bill Hudson, Co-Chairman Representative Scott Ogan, Co-Chairman Representative Beverly Masek, Vice Chair Representative Fred Dyson Representative Joe Green Representative William K. ("Bill") Williams Representative Irene Nicholia Representative Reggie Joule MEMBERS ABSENT Representative Ramona Barnes COMMITTEE CALENDAR * HOUSE BILL NO. 28 "An Act repealing the Alaska Coastal Management Program and the Alaska Coastal Policy Council, and making conforming amendments because of those repeals." - HEARD AND HELD (* First public hearing) PREVIOUS ACTION BILL: HB 28 SHORT TITLE: REPEAL COASTAL ZONE MGMT PROGRAM SPONSOR(S): REPRESENTATIVE(S) THERRIAULT, Kelly JRN-DATE JRN-PG ACTION 01/13/97 34 (H) PREFILE RELEASED 1/3/97 01/13/97 35 (H) READ THE FIRST TIME - REFERRAL(S) 01/13/97 35 (H) RESOURCES, FINANCE 02/13/97 (H) RES AT 1:00 PM CAPITOL 124 WITNESS REGISTER REPRESENTATIVE GENE THERRIAULT Alaska State Legislature Capitol Building, Room 511 Juneau, Alaska 99801 Telephone: (907) 465-4797 POSITION STATEMENT: Provided sponsor statement for HB 28. DIANE MAYER, Director Division of Governmental Coordination Office of Management and Budget Office of the Governor P.O. Box 110030 Juneau, Alaska 99811-0030 Telephone: (907) 465-3563 POSITION STATEMENT: Provided Administration's position in opposition to HB 28 and answered questions. MARTY RUTHERFORD, Deputy Commissioner Department of Natural Resources 3601 C Street, Suite 1210 Anchorage, Alaska 99503-5921 Telephone: (907) 269-8431 POSITION STATEMENT: Testified on HB 28. HARRY NOAH 1120 East Huffman, Number 601 Anchorage, Alaska 99515 Telephone: (907) 265-3100 POSITION STATEMENT: Testified on HB 28. SCOTT NOVAK P.O. Box 1703 Cordova, Alaska 99574 Telephone: (907) 424-3800 POSITION STATEMENT: Testified on HB 28.  ACTION NARRATIVE TAPE 97-11, SIDE A Number 0001 CO-CHAIRMAN SCOTT OGAN called the House Resources Standing Committee meeting to order at 1:05 p.m. Members present at the call to order were Representatives Ogan, Hudson, Masek, Dyson, Williams, Nicholia and Joule. Representative Green joined the meeting at 1:06 p.m. Co-Chairman Ogan noted that Representative Barnes was ill that day. HB 28 - REPEAL COASTAL ZONE MGMT PROGRAM Number 0075 CO-CHAIRMAN OGAN advised that the purpose of the meeting was to hear House Bill No. 28, "An Act repealing the Alaska Coastal Management Program and the Alaska Coastal Policy Council, and making conforming amendments because of those repeals." Noting the large number of people present, Co-Chairman Ogan said he had no intention of moving the bill that day. He advised there would be ample time for public testimony later. However, that day's testimony was restricted to the sponsor and department representatives, with the meeting intended as an educational tool. Number 0148 REPRESENTATIVE GENE THERRIAULT, sponsor of HB 28, agreed the magnitude of what he proposed deserved thoughtful consideration. He was trying to educate himself as to what was being done, why, and at what cost, to try to make a reasonable decision on how to proceed. He believed the committee should be looking at how to frame discussion concerning the bill. REPRESENTATIVE THERRIAULT explained his reasons for introducing HB 28. He had taken over the Department of National Resources (DNR) budget subcommittee four years earlier. Throughout deliberations and trying to make cuts necessary to meet the cap he had been given as budget subcommittee chair, Representative Therriault became frustrated by feedback from the DNR indicating they were almost to the point of being paralyzed. "They would not be able to process the permits, do the leases, things of that nature that we have, by statute, demanded that the department do," he said, noting that the department was receiving roughly $44-45 million a year in general funds. "And what that left me wondering is: Well, what are we getting for our $45 million, then? Or what are we doing that is consuming the $45 million that we're appropriating on a yearly basis?" REPRESENTATIVE THERRIAULT said he began asking the heads of the divisions and the commissioner for suggestions to increase the DNR's efficiency and make the overall mandated process operate more smoothly. "And that lead to the introduction of one of the pieces of legislation which I actually hope to get through the process this year, which is a Title 38 cleanup," he stated. He had worked with the DNR to identify hoops they had to jump through that might have once made sense but no longer did, especially under tight fiscal constraints, he said. REPRESENTATIVE THERRIAULT said that bill had been reintroduced this year. He suggested it had failed the previous session because it was "fairly confusing and we just ran out of time towards the end of the session." He said that legislation was now broken into two pieces. He had asked Representative Pete Kelly to be the lead person on one. Representative Therriault explained, "What we did is we pulled the mining sections out, introduced them separately. The House actually took action on that bill, and that bill has now been passed over to the Senate. And the other bill will be coming along through the process sometime soon." Number 0456 REPRESENTATIVE THERRIAULT explained, "Based on congressional action in 1990, the reauthorization of the federal program, a memo was written to the State of Alaska that detailed that if we wanted to continue to participate in the Coastal Zone Management program, there were certain things ... about our program that the federal government was going to mandate that we fix. They were putting stipulations on our program that if we wanted to continue it, there were certain things that they wanted us to do. And when I got a copy of that memo and read through it, what immediately sprang to my mind was: `We're barely able to afford the program that we currently have; how can we possibly add things to it? Where's the money going to come for that?' And so that ... really started to focus my attention on the Coastal Zone Management program, where it came from and what it was intended to do." Number 0533 REPRESENTATIVE THERRIAULT indicated after HB 28 was introduced, he had been asked who put him up to it or which resource industry had requested it. "And none of them did, and nobody put me up to it," he stated. "I actually now am in the position where I am approaching different industries and asking for their input on the bill." He emphasized that his deliberations and interaction with the budget had led him to the point of challenging the program. REPRESENTATIVE THERRIAULT cautioned, "One of the things that I think we need to be mindful of is the process that we have set up over the years. The Coastal Zone Management program came into being in the mid-'70s and was actually adopted and put onto the state statutes in the late '70s. So that was basically 20 years ago. Since that time, though, we've had a number of state actions and federal actions that I think diminish the need for the continuation of the program. And in dealing with my staff back in November and December, we went back and forth on whether we should propose a streamlining, whether we should propose changes on the periphery of the program. And I finally came down to the conclusion that ... my starting point would be to challenge the mere existence of the program." REPRESENTATIVE THERRIAULT said if nothing else, the program probably should have been put into statute with a mandatory sunset review. That way, the legislature would be forced to look at the program and its expense periodically, to determine whether other state and federal laws had grown up to supplant or surpass it. Representative Therriault noted the federal requirements were the Clean Air Act, the Clean Water Act and the Corps of Engineers 404 determinations on wetland impacts that are part of the Clean Water Act. Although those were perhaps in the discussion stages in the late 1970s, they were now on the books. Now, much of Alaska's permitting process had to live within the confines of those federal and state acts. Number 0674 REPRESENTATIVE THERRIAULT referred to a hand-drawn flow chart entitled, "Hypothetical Permit Review Process." Discussing the bottom of the chart, he said hypothetically a person might need three permits and therefore have to go to the Environmental Protection Agency (EPA), the Department of Environmental Conservation (DEC) and the Department of Natural Resources (DNR). "And just the different process that that would go through as far as best-interest finding for the issuance of a permit, possible hearings, the draft permit, the public's right to ... participate in that process, that is the state agency process," Representative Therriault stated. REPRESENTATIVE THERRIAULT referred to the top of the flow chart and indicated it was not meant to exactly duplicate the length of each process. He said, "But up on top what we've got is ... the Coastal Zone Management program. And what my suspicions are is that a lot of this is an unnecessary duplication ... that costs us money and may stretch the process out much longer than we intended it to." Number 0802 REPRESENTATIVE THERRIAULT referred to the ninth principle listed in a document entitled, "The Operating Principles of the ACMP as Reaffirmed Through the Assessment." He stated, "It says the ACMP provides for expanded authority of all state agencies in coastal districts, and with the expanded authority comes expanded responsibility. One of the main problems that I have with ... that premise is that we are the policy-setting body for the state agencies. We should be making a determination when to expand an agency's authority, ... not through some other voluntary program." REPRESENTATIVE THERRIAULT referred again to the flow chart and said in his example, although the permittee applied to the DNR, the EPA and the DEC for permits, through this program they also pulled in the Department of Fish and Game (ADF&G). He said the legislature had determined to give to the ADF&G certain powers in the permitting process. However, through the ACMP, ADF&G's powers were greatly enhanced. "And I think that's a determination that we, as the legislature, should make, and not just allow Fish and Game to exercise through ... involvement through this voluntary federal program," Representative Therriault said. REPRESENTATIVE THERRIAULT suggested it was like a box. The ACMP did two things. First, they had a review process or permitting process, as outlined on the top of the flow chart. Second, they had a coordinating function. He said, "And I'm not so sure that the coordinating function doesn't warrant retention. And I guess my question is: Through what means should we retain that coordinating function? And my suspicion is that part of the need for the coordination function stems from the ... upper part of this flow chart, that if we didn't have the upper part of the flow chart, maybe the necessity of the second part being the coordinating function wouldn't be necessary." Number 1002 REPRESENTATIVE THERRIAULT noted he was from the Interior, where no coastal zone management requirement existed. He suggested he was the perfect person to question, on a purely analytical basis, how the money was being spent and whether the process was worth it. His reason for questioning it was purely the budgetary constraints, he said. REPRESENTATIVE THERRIAULT referred to the Fort Knox mine, which had required many permits. That process was now being held up as an example of perfect permitting coordination. It had been accomplished without involvement from the Division of Governmental Coordination (DGC) or the coastal zone management structure. He said, "So I think what we need to ask is, again: How much are we expending? Have other laws grown up around this process to negate its necessity? ... Can we now move to, perhaps, a lead agency process where the same sort of coordination ... can be gathered for the permitting process?" Number 1065 REPRESENTATIVE THERRIAULT referred to a quarterly report from the Department of Law that discussed litigation involving that department and the DNR. In paging through it, he was struck by the number of cases involving determinations made by the Coastal Policy Council through the ACMP process. One case was the Native village of Koyuk versus the National Oceanographic and Atmospheric Administration (NOAA). A man had applied for a permit to have a trapping cabin in a coastal area. A determination granting the permit was appealed by the Coastal Policy Council; the case was now in court. Representative Therriault believed the Coastal Zone Management program was being used by people wanting to restrict access to the hunting and fishing opportunities out there. "And I don't think that's what the program was designed to do at all," he said. "The program was designed primarily to allow the coastal areas to do some planning on what was to take place ... in their area of the state." REPRESENTATIVE THERRIAULT believed the program had evolved into a kind of microscope, with every proposed project undergoing intense scrutiny above and beyond what state agencies had to do to permit the project; the agencies or district councils would then give a thumbs-up or a thumbs-down. "I really think that that's ... more power than the original program proposed for them to take on," he stated. Number 1188 REPRESENTATIVE THERRIAULT referred again to the flow chart and discussed the manner in which decisions were elevated to increasingly higher administrative levels. He cited an instance where three commissioners sat through a hearing one afternoon to determine whether a property owner along the Mendenhall River could place fill in his back yard. Representative Therriault believed this was an example where the process had perhaps spun out of control. Number 1253 REPRESENTATIVE THERRIAULT cited another problem. Many district councils, when putting together their plans, adopted all the regulations of a particular department. He explained, "So putting together a plan for the northwest Arctic coastal area, they may have adopted all of DEC's regulations. Then when somebody proposes a project, DEC starts on their permitting process. And of course, along their permitting process, DEC is following all of their agency regulations. In ... trying to make a consistency determination, the local district is also interpreting their plan, which is based on DEC's regulations, but they then may end up giving a thumbs-down to the project; DEC, going through their permitting process, may end up giving a thumbs-up to the process. Both of these, these dual tracks, were supposedly based on the same set of regulations, yet the outcomes of the two tracks were ... one was a `yes' and one was a `no.'" REPRESENTATIVE THERRIAULT indicated division directors and the commissioner might then have to determine whose interpretation of the state regulations was correct. He believed this situation was fraught with potential problems. Number 1328 REPRESENTATIVE THERRIAULT acknowledged that his staff had received individual fiscal notes from the departments. However, there had been a determination that the Administration wanted to present one combined package. Representative Therriault read from the fiscal note from the Office of the Governor, Office of Management and Budget, Division of Governmental Coordination, dated 2/11/97. The analysis read, in part: "... There would be no savings to the general fund for other state agencies, however, because they use the general fund match to support ongoing departmental functions." REPRESENTATIVE THERRIAULT provided his interpretation: "What I think the Administration is trying to get to is that there really would be no general fund savings if we did away with this program. You know, I'm willing to discuss that and have a healthy debate on that, but I think what they perhaps are setting aside is that we do have state agencies and divisions that are saying that the budgets are getting tight so that they can't do those things that they're mandated by statutes. So if ... nothing else, perhaps what we would do is allow the different divisions and agencies to reallocate the money that is currently being spent on this program so that they could move forward (indisc.) with permits. They could do, perhaps, in-house coordination through a lead agency kind of mechanism where, perhaps, DNR is the one that pulls together the different permitting processes and the different tracks to make sure that everything moves together, moves along on the same line." REPRESENTATIVE THERRIAULT concluded, "So I'm not, by introducing the bill, promising big general fund savings. I think we are putting in roughly $1.3 million to the general fund to match. The agencies are spending additional money within their budget, which is counted as a general fund match for the federal funds. So there is an expenditure or utilization of general fund dollars. And if we can't save every one of those general fund dollars, perhaps we could better utilize the general fund dollars." Number 1444 CO-CHAIRMAN BILL HUDSON referred to the fiscal notes. He asked Representative Therriault if they were to consider only the single fiscal note from the Office of Management and Budget. REPRESENTATIVE THERRIAULT responded, "It was my understanding that, in coming in with the fiscal note from, basically, the Office of Management and Budget and DGC, Division of Governmental Coordination, they wanted to try and pull all those things together." CO-CHAIRMAN HUDSON suggested if the other fiscal notes were added up, they should equal the DGC's figure. REPRESENTATIVE THERRIAULT replied, "I think that's the way it's supposed to work. I'm not sure." Number 1496 REPRESENTATIVE JOE GREEN suggested the fiscal notes were revenue- neutral with or without the ACMP. If the state spent the money, it got the federal receipts. If it did not spend it, it got no receipts. "So either way, the fiscal result is zero," he concluded. REPRESENTATIVE THERRIAULT replied, "I think the idea that's being advanced there is that this function needs to take place in some sort. Certainly the general fund dollars match the federal dollars that ... help to offset the cost of the agencies participating in this process. And I guess that's when I said if you look at it, the whole program is sort of a box that has two halves. You have one half that sets up the process. The second half helps to coordinate getting through that process. So I'm not so sure that without the process you would need to expend all the monies that are being expended to coordinate getting through the process." Number 1550 REPRESENTATIVE GREEN responded, "But if you say that the process needs to continue, but not necessarily in this form, somewhere we've got to pay for that. And I don't see that in the fiscal notes." REPRESENTATIVE THERRIAULT explained, "I believe there will be a need for some kind of permit coordination. But right now, we're not only doing the permit coordination, what's going on in the agencies, we're also trying to coordinate the agencies with the ACMP consistency reviews, consistency determinations, the whole separate policy or public-input process that goes on ... up in that level that is, in my mind, or my suspicion is, duplicative of what's going on in the agency process, because certainly within the agencies you have state's-best-interest finding, public's -- public input, all along the state agency permitting process." Number 1602 REPRESENTATIVE GREEN commented, "When this office of Governmental Coordination was in its infancy, I was in a different realm. And that agency actually helped streamline the process, actually, in some cases, acting as a proponent for the activity, and a bird dog or a watch dog or snapping at the heels of other agencies to get their responses in, because in the period of the '80s, there was a kind of a reluctance. The best way to slow a project down was just to not to respond, and the agencies took ever-increasing amounts of time to respond. And so finally, when ... this agency came through as a result of this, there was an internal working that kept bugging, as it were, the agencies to have much more timely response to applications that were sent in. Now, if that function is gone, are we going to take a giant step backwards ... in permitting process to get development going? And it seems to me that this legislature is, and has been, one that fosters that kind of development." Number 1665 REPRESENTATIVE THERRIAULT said that was the reason why he mentioned the Fort Knox mine, a project in Interior Alaska that did not impact or cross over into the coastal zone management. Its permitting process had advanced along. Representative Therriault stated, "There's obviously something that has grown up ... that in fact helped that project along. ... I admit that perhaps we need to consider the half of the overall box that is that bird dog, but I'm not so sure that it needs to be retained in its current structure. And I'm wondering how much of the demand or the need for that bird dog might be ... caused by the second half of the box, ... this secondary public review and process, basically." Number 1717 CO-CHAIRMAN HUDSON said he understood other states, including California, had a single coastal zone coordinating concept, where there was representation of technology and other aspects of each agency in the central committee. He asked whether Representative Therriault had looked at that. REPRESENTATIVE THERRIAULT indicated he had not had time to do so. He had figured much of that information would be brought to the table through the ongoing discussion on this legislation. Number 1752 CO-CHAIRMAN OGAN asked Representative Therriault to prepare a flow chart showing more explicitly what was redundant, i.e., what other agencies were already doing. REPRESENTATIVE THERRIAULT apologized for the hasty preparation of the present flow chart. He stated, "I will work, and will pledge also to work with the Division of Governmental Coordination, to make sure that the information that's presented is factual. ... And we'll try and do it in such a form that ... by looking at the horizontal representation, you can sort of get an idea of the length of the time line too, by putting in how many days do they have to do something, but in that process, then, when they get to a certain point that, can they freeze the process while they're soliciting more input." Number 1831 CO-CHAIRMAN OGAN invited Representative Therriault to join committee members at the table. He then asked Diane Mayer to come forward to testify. Number 1860 DIANE MAYER, Director, Division of Governmental Coordination (DGC), Office of Management and Budget, Office of the Governor, read from a prepared statement: "Administration of Alaska's coastal program is the primary responsibility of the division. I am here to voice the Knowles Administration's opposition to HB 28 - An Act repealing the Coastal Management Program. Though opposed to repealing the program, I do consider the proposal to do so an opportunity to highlight some of the benefits of the program and to answer some questions about it. "The Alaska coastal program benefits all Alaskans who live, work [and] recreate in the state's coastal areas. Its most important feature is its provision for coastal communities to set local standards that might guide development in their areas. Other benefits of the program include three million dollars annually in federal funding to support coastal program development and implementation; the Alaska coastal program gives the state and local communities a strong role in shaping proposed federal activities; coastal program regulations provide one-stop permitting services to developers, including a coordinated state review of their proposed projects. "If the coastal program is repealed, the state would lose the federal funding, would lose the state and local influence over federal actions, [and] would lose the coordinated review of project permits. Though project reviews may be addressed through new legislation, the state forfeits the federal funding and loses the experienced staff needed to manage the recreated system. "Alaska's coastal program takes advantage of the federal Coastal Zone Management Act. Congress believes state[s] and local communities are best positioned to responsibly direct development in their coastal areas. In fact, just last year, Congress passed the bill reauthorizing the federal Coastal Zone Management program by a unanimous vote in both the House and the Senate. Every coastal state now has a state coastal program and is benefiting from the state's rights and ... federal funding granted by the federal Coastal Zone Management Act. Given the extensive ownership and regulatory authority the federal government has in Alaska, eliminating the coastal program would further the federal agenda in these coastal areas. Number 1990 "The Alaska legislature has also reviewed the coastal program several times since its inception. Most recently, in 1994, the Legislative Budget and Audit Committee requested its legislative division to conduct a full review of the administration and the costs of the Alaska coastal program. The auditor's report finds that the Alaska coastal program offers unique benefits not provided by other federal programs; that DGC appears to be the most appropriate agency for administering the state's coastal program; and that DGC has been successful in the role of facilitator and consensus builder. I recently distributed copies of this report for each of the members of the committee to be sure that you had not only testimony from those involved with the day-to-day operations, but could also benefit by the rigorous, six-month review conducted by your own audit division. "From recent conversations I've had about Alaska's coastal program, it is clear that people have important questions, and I hope to provide immediate answers to many of them today. "Some say that the project review system stops development and is plagued by continuous appeals at higher levels. A quick look at our project statistics demonstrates the effectiveness of the coastal project review. I have charts. [An assistant held up large charts.] As illustrated by the first chart, over the last five years, 99.4 percent of all projects needing multiple permits were found consistent with the coastal program. This record is based on our review of approximately 400 projects each year and demonstrates that DGC is working across federal, state and local lines to solve development problems, not make them. Of these projects, the record shows, on chart 2, that 98.3 percent are permitted by regional staff with no subsequent review needed by higher agency officials. Project solutions and permit decisions are being made where they should be, at the ground level. "Even though these numbers are impressive, it is true that project appeals have sometimes resulted in the same issue being reconsidered ... several times by agency decision-makers. This repetition, though rare, as the chart shows, has been frustrating to everyone when it occurs. There is already a Cabinet-level effort to streamline the appeal process so that there is only one formal appeal per project. Furthermore, other Cabinet-level- initiated efforts are underway to streamline resource development activities such as drafting general permits for routine projects, expanding the use of joint public notices, consolidating permit application forms to reduce unnecessary paperwork, and simplifying the project permitting procedures. DGC staff is leading most of these streamlining efforts. Number 2163 "Another assertion is that federal resource laws diminish the need for the coastal program. While other state and federal laws provide for specific environmental protection, Alaska's coastal program uniquely addresses ... local interests in development activities. In addition, it provides federal funding to support coastal programs, it strengthens the voice of state and local communities in federal activities, and it provides efficient coordinated project permitting services. "There is the perception that the coastal program is duplicative of other state authorities. Alaska intentionally developed its coastal program by using existing state authorities and local approvals, rather than opting for creating a separate coastal permit. Instead of there being a new agency that adjudicates a permit, like the California coastal permit issued by their Coastal Commission, under Alaska's system the resource agencies and the affected local districts work together to ensure that the existing state and federal permits satisfy established coastal standards. Rather than duplicating existing processes, the coastal program offers one-stop shopping that brings all the participants to the table to resolve disagreements. With resource agency permits and coastal program reviews occurring on the same schedule, the process benefits all parties by saving time and money. "Another concern I have heard is that the coastal program allows state agencies to require stipulations on permitted activities beyond the agency's statutory authority. An agency can only propose stipulations based on the state coastal standards and local programs. Except for their own permits, they cannot independently require these stipulations. State statute does provide permitting agencies full authority, indeed the responsibility, to administer their permit approvals consistent with state and local coastal standards. Existing local, state and federal approvals are the legal tools for implementing project agreements. Number 2274 "A common concern [is] that the coastal program standards are vague and open to different interpretations by state agencies and coastal districts. This concern is shared by resource agencies, by the Coastal Policy Council and coastal districts. The Coastal Policy Council has directed DGC to work with the program participants to address not only the improvement of policy statements, but simplification of the procedures to implement the needed program revisions. Fixing this problem is our top priority. "Another question about the coastal program is, `Does it allow the unorganized borough to create quasi-governmental entities that participate in coastal program and development decisions?' Yes, this is true. These districts are called Coastal Resource Service Areas. Every community wants a say in development that affects the area it relies on for their economic opportunity and their quality of life. Alaskans living in the unorganized borough are no different. These communities deserve a voice in activities that affect their areas. The coastal program gives them an opportunity to fully participate. It is local participation that often builds understanding and support for projects and reduces legal challenges at the end of the reviews. "Taking a longer view, coastal resource service areas have proven to be a stepping stone to borough formation. Of the seven CRSAs originally formed under coastal management, three have organized into boroughs and others are now seriously considering taking the next step. "For developers, elimination of the ... coastal management program will mean they will be on their own to navigate the maze of federal and state permitting requirements. One-stop shopping will disappear. There will not be a standard process resolving disagreements between agencies and no way to make sure that local communities are fully informed about projects in their area. If a new system is developed, the state will have lost its federal funding and the experienced staff needed to get the new system up and running. Number 2378 "Wholesale repeal of Alaska's coastal program forfeits our position of power over federal decisions that affect our coast; it turns back federal dollars that largely benefit local communities in their attempt to responsibly direct coastal development in their areas; and it unravels Alaska's project review system that provides one-stop services and development solutions for individuals and companies proposing coastal projects. The Knowles Administration is opposed to HB 28 - the repeal of this important program. "Mr. Chairman, since it is a networked program with significant initiatives underway, we thought it would be beneficial for the committee to have access to Marty Rutherford, Deputy Commissioner of DNR, and Craig Tillery, the Assistant AG. Ms. Rutherford is a Coastal Policy Council member [and] has an extensive background in community issues from her many years with Community and Regional Affairs. And Mr. Tillery is our legal guide in the current streamlining effort. I've been told that they're on-line with the Anchorage LIO. ... We are all available to help answer any questions you might have." CO-CHAIRMAN OGAN thanked Ms. Mayer and asked if there were questions from the committee. Number 2428 CO-CHAIRMAN HUDSON commended Ms. Mayer. He referred to her indication that over 98 percent of issues and appeals were settled at the regional level. He asked, "What type of delegated responsibility have you given to the regional level?" He further asked, "Even though they may ... settle it all at the regional level, do they still have to come to you or to the council for final approval?" MS. MAYER replied no. [Beginning of explanation cut off by tape change.] TAPE 97-11, SIDE B Number 0006 MS. MAYER continued, "And unless there's disagreement between the parties, which includes the local community and the developer, ... their solutions are captured in the finding. The regional-level staff sign the decision and the project is out the door." CO-CHAIRMAN HUDSON asked, "Diane, where in the statutes do we derive the authority for the unorganized borough to -- is that in the coastal zone policy act itself?" MS. MAYER replied, "Right. ... That would be at [AS] 46.40 something." She affirmed that was in the Alaska Coastal Management Act. CO-CHAIRMAN HUDSON responded, "And so, then, given the fact that the unorganized borough is truly the province of the legislature, as opposed to the Administration, I'm assuming that the act delegates that authority to the Administration ... for the review and the participation in that element?" MS. MAYER said that was true. The act was actually very thorough on what it takes to form a CRSA, with probably two pages of law just on the subject of coastal resource service areas, she stated. Number 0073 CO-CHAIRMAN HUDSON said concern had been expressed to him about how a coastal policy act could extend 200 miles up a river, for instance. He asked Ms. Mayer, "Do you believe that it has gone well beyond what it was originally intended?" MS. MAYER said the coastal zone boundary was debated during the formation of the program, in the late '70s and early '80s, under the Reagan Administration, with much concern and debate at the Washington, D.C., level about the criteria and methodology used to establish that boundary. It was handled through a National Environmental Policy Act (NEPA) document, with a rigorous evaluation of that criteria. "It is a biophysical boundary," Ms. Mayer explained. "And I think if there's ... any policy questions, that the technical basis for that boundary, as a biophysical boundary, is very sound. The policy question, I guess, ... was: Would we want to evaluate it against some new technical basis?" Number 0128 CO-CHAIRMAN HUDSON asked if there were maps showing where it applied. MS. MAYER referred to a map of Alaska held up by an assistant and said, "This is the biophysical boundary that was developed and debated and finally approved. Coastal districts, when they do their planning, do have the ability to modify the boundary if they choose different criteria. So it's not necessarily frozen, but that option is passed on to the local ...." Number 0172 CO-CHAIRMAN OGAN noted that Harry Noah, former Commissioner of the Department of Natural Resources, and Scott Novak, former public Co- Chair of the Coastal Policy Council, would testify. He emphasized there was no intention of moving HB 28 that day and that he foresaw several meetings on it. He acknowledged that Marty Rutherford and Craig Tillery were also available for questions. Number 0220 REPRESENTATIVE THERRIAULT referred to a letter containing stipulations from the EPA. He expressed concern that when there were federal funds to operate a program, there was no promise those funds would continue. This had been a voluntary program that came with federal funds to operate it. Now, there were stipulations requiring additional things. If those were not met, they chanced losing those federal dollars. Representative Therriault asked, "Then what would we do? How would we operate the program? Would it take additional general fund dollars to step in?" He asked Ms. Mayer, "And just from your understanding of what all is contained ... in the letter with the stipulations, are we going to be able to meet all the demands?" Number 0272 MS. MAYER replied, "Representative Therriault, I applaud your eye on ... this one. The code for it is 6217. It's a section of federal law. So they call it the `6217 provisions.' When the coastal program was developed, ... Congress made it a voluntary program, and they enticed states to participate by giving funding if you did create a coastal program, as Alaska did, and then this federal consistency, where federal agencies would have to come and work with you before they could take actions in the coastal zone, both direct actions they might do, like lease sales, or permitting actions, like EPA discharge permits." MS. MAYER said it had been reauthorized several times in increments. "And when they got to the 1990 reauthorizations, I wasn't around," she said. "So I found out about it later, and I had a reaction similar to yours, which is why I enjoy the question. They put in a section that mandated, for the first time in the program, that ... coastal programs address nonpoint source pollution problems. `Nonpoint' means doesn't come out of a spigot; you can't turn it off. ... So it's general runoff from urban areas and roads, storm water runoff, hillside, from construction, harbors. There's a whole array of sources of nonpoint runoff, and it is a very serious problem. "For some reason, Congress picked the coastal program as the place to insert the requirement that states had to do a better job containing nonpoint. And prior to that, in the Clean Water Act, all the water quality requirements are all under Section 319 of the Clean Water Act, which DEC manages for the state. So you have a program essentially being run by DEC for nonpoint issues, and here's this requirement that says -- essentially the law says you have to do it jointly ... with your DEC counterpart. And so it was the first time that they really mandated. There were 55 management measures. They said you had to meet them. There was some initial funding to work on the problem. You had so much time to write back and say how you were going to meet them. And if you met them, then that was great. And if you couldn't meet these 55 management measures, you would negotiate with the EPA, and then, after some period of time where they really decided you weren't serious about rising to this challenge, they would start deducting federal funds from your program. A complete and total anomaly to, you know, 20 years of coastal management. "... We did get the money. We hired an excellent employee who took the tack on these 55 measures to go out into the agencies, as DGC does, and identify where there were existing state resources addressing nonpoint. There's resources within DOT roads, there's resources within DOT harbors, there's resources, obviously, within DEC, dam safety in DNR, there's all kinds of places. Our Forest Practices Act covers a lot of the nonpoint issues there. And we essentially packaged up ... and really networked the existing resources we had addressing this problem and gave it back to EPA. And in the first round of dialogue, of the 55 management measures, they came back and there were ten they wanted us to do more than we had done. And the letter you're referring to discusses how we did on those ten. So I thought we were doing pretty good, since nothing new was created at this point and we were still satisfying it." Number 0453 MS. MAYER continued, "The other thing that happened with the money is we did take the approach to really try to educate about nonpoint, rather than jump into a regulatory mode. And we had small grant programs going for communities. We gave some money to state agencies and did create a series of informational brochures, tools, a variety of things. I actually wish I had the stack here. ... For the Y-K area, we gave them $10,000. They did a landfill siting and operations manual, because landfills were a source of nonpoint pollution in that area. In Wrangell, ... we had a grant for them to install some storm water controls in a sensitive area, a parking lot next to a salmon stream. That was a concern locally about the effect. In Haines, we gave them some funds to replace culverts and stabilize banks and fish streams. "And ... there's a whole series of things. We did a brochure for harbors, which was a kind of a centerpiece of the whole thing, ... to pass out at the harbors that really instructed boaters of small things you could do when you're boating to keep there from being nonpoint pollution around harbors. So ... the first vein was network our existing resources, give it back to EPA. The second approach was do some educational things to address the problem beyond what was existing. And the third thing we're doing is this whole issue; it's such an anomaly in the program that nationally, coastal states are basically fairly irate. And there is an organization called the Coastal States Organization, which has been working on what to do to correct this problem, the problem of the threat of losing this funding if you don't take on operations to meet these management measures that could potentially ... be very costly to the state. I mean, it truly would become the first unfunded mandate in the program. "And I did volunteer to be on a nominating committee that was put out -- put out the election ballot for officers and whatever, and we did do amendments to the bylaws. And one of the amendments was to create a subcommittee specifically addressing the ... water quality issues, and of course the first target is working with Congress to straighten out this problem. So we are right now -- the letter identified ten points. We have gotten internal agreement on a response to EPA on all ten. We are not interested in -- or able -- we don't have the funding to take on new operations, but we feel like we have upgraded our responses in those areas. And in the next meeting, I'm hoping to just get resolution that yes, Alaska's response has satisfied the program." Number 0584 REPRESENTATIVE GREEN asked, "If you are sitting as a kind of a gathering agency for determining whether certain requirements are met before an activity takes place ..., what happens when a federal requirement says `go left' and a state requirement says `go right'? Where does your division intervene? And that has happened, as I understand it." MS. MAYER replied, "If the federal requirement is one that directly relates to an agency conducting a development activity, like a lease sale by `MMS,' where they're taking a direct action, they're not -- there's no applicant, there's no party, they're taking the direction. Their requirement is that they have to be as consistent as they can with our coastal program. But if there is a conflict with their mandate, they have to proceed. So essentially the program sets up the dialogue, the state ... and the local players bring the terms, and you really are trying to shape development. You don't trump them. If the activity is one where an applicant is trying to get a federal permit, we do need to get through the whole process. Basically, if the state, through our process, just thinks `this does not cut it,' if it's a `no,' that `no' will stand." Number 0671 REPRESENTATIVE GREEN responded, "I was thinking kind of the other way around. If you were a smaller activity, you didn't have a battery of experts or a massive legal talent to go to, and they were to come to you, and I'm thinking now more of a state permit where your division might say, `Well, that seems to do it,' but you have a ... federal restriction or requirement that's not in line with the state restriction or requirement. If they were to come to you, would you, because of the conflict, then, stop them? Would you say, `Well, we'll go with A or B,' or -- what I'm wondering is what sort of reliance can an applicant have ... with an approval through your division?" MS. MAYER asked who would have the conflict with the federal requirement. REPRESENTATIVE GREEN explained, "Well, the applicant is coming and wanting to do something in the coastal zone area. And ... he comes to the various state agencies, and there may be federal overlying requirements that may not be in sync with the requirements that are being professed by certain state agencies. And they may come to you and ask, `Which way should we go here?'" Number 0729 MS. MAYER asked whether Representative Green was talking about an instance where a federal agency, through its permitting authority, was about to say `no,' whereas the state was going to say `yes.' REPRESENTATIVE GREEN said, "It's more in line, and not necessarily with a ... federal agency saying `no,' but just having a federal requirement. There's a printed requirement that you either do or don't do something." MS. MAYER asked, "Built into our program?" She said she could not think of a case demonstrating that situation. "And it may be that I'm just misunderstanding the regulatory vision you have, or I'm not aware of federal requirements ... that don't let us implement our programs," she said. Number 0768 REPRESENTATIVE GREEN said in the past, there had been U.S. Army Corps of Engineers requirements at odds with federal and state requirements. Issues had been brought up that impacted the program. He inquired whether Ms. Mayer's division would take a step to try to resolve those kinds of issues. He asked, "Would you ever be so proponent that you would say, `Go ahead'? Or would you say, `No, not until we can get resolve'? In some cases, you don't get resolve." Number 0796 MS. MAYER replied, "Examples do help, and if we had a very specific, it would help a lot. But generally, just regarding Corps permitting and Alaska's coastal program, I would just cite a couple examples of how coastal management has interfaced very nicely in directing development in wetland areas. Both the City and Borough of Juneau, as well as the Municipality of Anchorage through their coastal program, did do wetlands planning, which brought together the federal players, the state players, the local players, to really assess the values of the various wetlands in these areas. And they agreed upon which areas were wetlands that required permits, but that were of a low enough value that in one decision, the Corps would let go of its regulatory authority and just pass it on to the local government, for the low-value wetlands. "Another example in coastal management really facilitating wetland issues in this state: Just recently, the Corps of Engineers reauthorized, I think it was, 34 permits they issue nationwide. They say nationwide if your wetland is smaller than this, you don't have to get a permit. Or ... this nationwide permit is permit enough for you. But because they're nationwide, they really need scrutiny at the regional level, and Alaska's coastal program is so well networked with the agencies and with local communities that Alaska, the Corps in Alaska, was the first region to get all the local conditions decided on for those nationwide permits, for their approval to move forward. So there are ways -- well, this might not be exactly the issue you're talking about. (Indisc. -- papers on microphone) the importance of that local/state/federal relationship (indisc.)." Number 0908 REPRESENTATIVE GREEN said, "This was where I was heading for in this question, was that we seem to have a dual ability. We can use your agency as a coordinating agency or, in some cases, there has been ... a lead agency. I'm thinking of, say, the mining permitting through the Division of Mines. And if that is effective for the mining community, might there be lead agencies established that are already existing agencies, and ... not make it necessary to have a coordinating agency such as yours? Could they do this on their own and thereby reduce the cost of government?" Number 0930 MS. MAYER said it was a big question and that Fort Knox was an excellent example of a lead agency concept at work. She stated, "In that case, DNR brought the agencies together and did the review of that mine project in the Interior and took it to closure and did an excellent job. I applaud the department in that work. Representative Therriault had mentioned in his testimony that it seemed to work there, so we don't need somebody else doing it. There is a very different, important distinction between the work DNR did at Fort Knox and the work DGC does, and that is, DGC has no program receipts. We don't have program receipt authority." MS. MAYER said in the case of Fort Knox and other mining projects, the company actually selected a lead, negotiated for services and also provided funding to that agency to then fund the participating players. She emphasized the importance of looking at a project as a whole and then deciding what permits were required. "That's where the coordination is definitely necessary," she said. "If you do that and you're paying the participants to coordinate, the discretion the agencies have to make that work, and there is discretion, the motivation they have to exercise their discretion to make that work is definitely enhanced by ... the financial arrangements. ... And I think the fact that basically the company is buying the service. If we didn't have DGC, what it means is those projects that are more marginal financially, of which there are numerous, I mean, we do 400 a year. Those are not 400 Fort Knoxes. But they are 400 Alaskan projects where developers are trying to get permits from more than one [agency] ..., and I think ... what we're talking about there is setting up a system, if you really base it on `you buy your coordination,' I don't know, on these smaller projects, if it would make them marginal and what kind of effect that would have on the smaller economic development activities." Number 1080 MS. MAYER continued, "The question to me on lead, I think that coordination is basically an art. I mean, it's experience, it's working with people, ... and the training and the right type of person, and then the knowledge, and knowing the language, being able to speak the language is all a part of the success. And there's nothing inherent in DNR or inherent in DGC ... that makes it better at doing that. I think the real question is an operational one, which is: Is it most cost-efficient to have there be sort of squadrons of these people within the departments, and then try to route players to the right parties? And then you have the staff people within the agencies trying to figure out who's the lead on the 400 projects. If that truly was more cost-efficient than just standardizing it, have there truly be facilitation- skills-central that can be utilized, then, you know, I support it. I support, you know, efficient government, and ... I tried to make a career out of it, I guess. But I think that's the policy question." Number 1173 REPRESENTATIVE REGGIE JOULE noted the process involved people from local areas brought together with state and federal officials as well as with companies seeking to develop resources in those areas. He asked how much money the result of this partnership had brought to the state by getting everyone to the table at the same time so things could be accomplished. He commented, "Those numbers must be pretty big, I would think." Representative Joule elaborated, citing examples such as Prudhoe Bay and the Red Dog Mine. He asked whether Ms. Mayer had a feel for the amount of litigation that had been avoided by having all the players at the table. MS. MAYER replied, "The main feel I have for that is that they're great questions." She suggested the Department of Commerce and Economic Development might have relevant statistics. She indicated project reviews and good records existed on the files the DGC did have. However, focus had not been on "keeping track of things beyond just getting the job done." Number 1323 REPRESENTATIVE JOULE said having all the players at the table not only saved the state money in terms of litigation, but probably allowed some of the development that had occurred as well. He asked Ms. Mayer, "Would the repeal of this program have any impact on the potential development of ANWR, the gas line, or NPR?" MS. MAYER said, "I've thought a lot about the effect of this program, and ... I didn't run to that project, in thinking about it. I think ... as ANWR becomes open and development occurs in ANWR, as federal lands, the effects that that development would have and ... how it would look is something ... that the North Slope Borough would have a greater role in shaping as a result of this program." Number 1433 MARTY RUTHERFORD, Deputy Commissioner, Department of Natural Resources, and Alternate Member, Alaska Coastal Policy Council, testified via teleconference in Anchorage in response to Representative Joule. She stated, "I think part of the answer is the comfort level of the ... North Slope Borough and the communities in the borough might not be as high if the program were not in place, because this program does allow the communities and the (indisc.) governments to come in and tell federal and state agencies how they would like activities to occur. So if you remove that opportunity from them, their comfort level might fall. So I think the potential is that there could be a negative impact to the ... potential development of ANWR [and] N-PRA." CO-CHAIRMAN OGAN called upon Harry Noah and requested that he specify why he had been asked to testify. Number 1541 HARRY NOAH, former Commissioner of the Department of Natural Resources, came forward to testify, saying he was speaking as a citizen. He commended the chairman and the sponsor for taking on this issue. He said, "I think one of the things that's happened over the last 25 years is we've just added environmental regulation on top of environmental regulation. And once they're set in place, it's very difficult to unwrap a system. And also, you have so many constituents and vested interests, it really is hard to kind of pull a program apart and take a look at it, particularly one that's this complicated, and it is really a fairly complicated thing." MR. NOAH explained he would draw three things and ask members to answer in their own minds a question he would pose. He drew a box with two halves. One half was the CZM program. One half was the coordination function. He said, "The CZM program needs the coordination function. The coordination function does not need the CZM program." He emphasized they were separate entities in this permitting process. MR. NOAH continued to draw and said, "The second of these boxes is that if you draw this permit process and you look at the whole state, then you have this level of permitting. You have solid waste permits, you have federal and a myriad of permits across the state. You must understand for -- within this coastal zone, this program, this voluntary federal program ... that we've got money for, has added a layer to that. It's simply added a layer of permitting, and although it's not called a permit anymore, it is essentially a permit that has to be obtained. And finally, if ... your district was both in the coastal zone and outside the coastal zone, and let's say this is that area, and the coastal zone was 50 miles wide, okay? ... And someone came to you and they were inside that 50 miles, and they said, `Why do I have to do this extra level of permitting but someone 51 miles away doesn't?'" MR. NOAH said he would comment first on the coastal zone management and then on the coordination function. He explained, "When this was set up, and I think in a lot of people's minds the Coastal Zone Management program is an environmental protection program, and I think when it was initially put together or conceived after the Santa Barbara oil spill, there was a gap in the ability to regulate coastal areas. And I think when you look at the United States as a whole, there's a major difference between Chesapeake Bay and the coast of California, and the development pressures that one has in those areas versus Alaska. It's ... a degree of development pressure." Number 1761 MR. NOAH said since that time, environmental regulations had evolved dramatically, to the point where the burden of the permitting task on both the applicant and the system was quite extraordinary. Mr. Noah said the legislature was not appropriating enough money to meet all the statutes currently on the books. He suggested the end result of not being able to manage the permit process well would be the slowing of future development. MR. NOAH stated, "In every case, the environmental protection for those coastal areas comes from existing statute other than the Coastal Zone Management program. It's either water quality, it's air quality, it's wetlands protection. And in each of those, if they're not already controlled by the state, then the state has a very clear certification program, that -- that they have a clear voice in how those permits are issued. So again, to be clear, within this coastal zone, you've simply added another layer. And it is a planning layer that's associated with that." MR. NOAH said, "The next point that's made is ... that government, city, local government, has a much greater say. I think collectively they do. But what we also have created [is] a system where there are whole groups of people that are not accountable anymore. They're not accountable like you are. If you make a really dumb decision, you'll find yourself unelected. That does not necessarily occur in this system that we have in front of us right now. It's a very amorphous system. And because of that, that we have created a system that's growing on us, that does not have the same elected accountability that you would normally have in land use decisions, and the same land use law under Title 29. So again, as you're looking at this bill, I would hope that you would consider that piece." Number 1898 MR. NOAH said third, money was the central question here. Although he had not looked at the fiscal notes, through his experience he knew tremendous effort was required within the agencies. The cost was hidden, not clearly definable in man-hours per fiscal year. The energy spent on this particular issue cumulatively was very large, he noted. MR. NOAH pointed out, "Every time somebody has to make application in this system, there's a cost to them." He continued, "Finally, the federal money is certainly a key and not to be thrown away lightly here. But in the mining industry, if you've got $20 ore, and it costs you $25 to get out of the ground, you don't spend a lot of time mining it. And I wonder if that's the system that we've created here that's kind of evolving on us at this point." Number 2008 MR. NOAH believed the coordination function was very important in the state. He cautioned not to lose that. "But I think that ... in looking at this bill, you have to look at sort of both sides of this coin in terms of permitting," he said. "The system is starting to bog down. The legislatures from the past and administrations, including the one I was in, keep adding statutes. At the same time, you're taking away money. There's a problem here." Mr. Noah indicated this bogging down was obvious within industry and its ability to move permits through the system. He believed the reason Fort Knox was successful in permitting was the ability for the agencies to deal with major projects in the state. Number 2088 MR. NOAH drew another box indicating a few major projects and numerous small-to-medium-size projects. He said the bureaucracy was prepared to deal with the latter. He suggested the big projects disrupted the system. They were both interesting and expensive. Mr. Noah said, "And for the most part, the state doesn't really have ... the technical capabilities to deal with these major mines, to deal with the major oil projects. And if you're just talking about straight environmental protection, the state doesn't have that technical capability right now, or it's so ... used up, because of the requirements that are currently on them, that that's where the system's starting to bog down." MR. NOAH suggested the DGC truly played an important coordination role in small projects. The "little guy" could not afford to deal with the myriad of regulations or to hire lawyers, for example. He said, "And they do a heck of a good job in making that system work. But when it comes to the major projects and how those things are dealt with, that's the economic engine that's going to drive the state. The system isn't working very well. And when you talk about lead agencies and how you organize that, I think you're really referring to the large projects, because these little ones, you'll -- if you break the system apart too much, you'll ... explode the little guys. But if you don't deal with the system, you won't deal with the big guys that are going to basically drive the economy of the state." Number 2268 REPRESENTATIVE GREEN concurred that the morass of hurdles seemed to stagnate many projects and perhaps scare off applicants. He asked whether part of the dilemma was not self-induced, coming from federal regulations and court decisions that became, in effect, law. He asked Mr. Noah whether, especially in his experience as former commissioner of DNR, a stand needed to be taken against things "imposed against our will." CO-CHAIRMAN OGAN asked Mr. Noah to state what his former position was and indicate his frame of reference for expertise. Number 2369 MR. NOAH replied he had been commissioner of DNR under Governor Hickel for 18 months. He had also worked on permitting for many of the major mining projects in Alaska, including Greens Creek, Red Dog, Fort Knox and the A-J Mine. "I did the permitting for the Trans-Alaska Gas System, those kinds of things," he added. [Beginning of Mr. Noah's response to Representative Green's questions cut off by tape change.] TAPE 97-12, SIDE A Number 0006 MR. NOAH suggested separating out the coordination role. He said as a citizen he asked, "Why are we taking on another set of regulations and a bureaucracy? What's the purpose of that, that's a voluntary process?" Number 0081 REPRESENTATIVE THERRIAULT advised that Mr. Noah was testifying at his request. He had worked with the former commissioner through chairing the DNR budget subcommittee. It had been portrayed to him that Mr. Noah had been brought on because he knew regulations and was a consensus-builder. Representative Therriault's staff had heard about a presentation by Mr. Noah addressing "exactly what were we doing and why were we doing it and how it impacted the system." He had encouraged Mr. Noah to testify, bringing his expertise with not only how the system works but also how expensive it is in the department. REPRESENTATIVE THERRIAULT referred to one of Mr. Noah's drawings. He indicated part of a box that he said represented state agency permits required by statute. Referring to the $44-to-45-million appropriation to the DNR, Representative Therriault asked: "What is eating up all the money so that they can't do anything? At the end of .. the day, nothing comes out of the box." Number 0284 CO-CHAIRMAN HUDSON referred to a chart drawn earlier by Mr. Noah and noted that Mr. Noah had worked with big companies. Co-Chairman Hudson indicated he had a question for both Mr. Noah and Ms. Mayer. Acknowledging earlier testimony that the DGC worked well to coordinate smaller projects, Co-Chairman Hudson cited examples. He then asked what percentage of the total work involved big companies or projects such as the Kensington or Greens Creek mines. Number 0372 MS. MAYER responded, "I would say percentage-wise, it's pretty small." She offered to do some quick math and cited examples including Northstar and Kensington. CO-CHAIRMAN HUDSON said, "Those are your big ones, now." MS. MAYER replied, "Right." CO-CHAIRMAN HUDSON said, "So the large ones, then, are the smaller portion of your total coordinated effort." MS. MAYER concurred and stated, "But ... the way we look at it, and the way we're organized, is we have two regional offices, three people each, and they deal volumes. So we've got people set up to just deal the small projects. The large ones are time-consuming. So then we have three other people who just specialize in the large projects. So they're all equally busy, but obviously the large projects are taking up more time." Number 0443 CO-CHAIRMAN HUDSON referred to the costs involved in operating within the coastal zone or developing a major project such as the Kensington mine. "The cost that we don't see, because it's not in our budget, is the cost to the private sector," he said. Co- Chairman Hudson asked Mr. Noah to provide a "broad-based relevancy- cost profile" at some point in time. Suggesting Mr. Noah use the Kensington mine or another familiar project as an example, he asked for some idea of how much it cost industry to work its way through the regulations. Number 0516 MR. NOAH replied, "I'll just put direct cost to the company, that they would show on their books internally. ... But depending on the scale of the project, you're looking at a cost of ... $3 million to $10 million. The cost of just permitting the gas line, for example, even though everyone says it's permitted, to go to the next step and get all the permits you need to construct it, that's probably a $150-million-dollar effort. ... And I think that's the thing that's different. The level of scrutiny is tremendous. The level of water quality work, the interpretation of that, is tremendous. And that's where the system kind of breaks up." MR. NOAH suggested, "You need to break off the little guys and try to deal with them on general funds. Maximize your general funds in the area that most needs it. The big guys, I got to tell you, and I'll get rocks from the other side on this, they should pay for that, because it's an extraordinary expense to everyone. But the system right now isn't set up properly for that money to come in. Each agency is collecting money from these companies differently. It's not a good system right now. And I think if you could concentrate in this, to set up a system, or maintain your system that exists for the small applicants, ... what DGC does is very good. ... Don't blow it up. You'd hurt the state." MR. NOAH said, "But you need to look at the larger role of these major projects. And the applicants should fund that level of scrutiny because when a company is spending $10 million, there's probably $2.5 million in review costs for the state to take on that same project. ... I think within industry, and I may be wrong but the people that I know, the concept of putting forth those dollars is not out of the question at all. ... It's a way to maximize your general fund dollars." Number 0670 CO-CHAIRMAN HUDSON commented that Echo Bay, by its own accounts, put more than $100 million over ten years into trying to open and permit the old A-J Mine. He wondered how much money the people put into that. "So it's not just an investment by the company in reaching a failed point, but it's also an investment on our part," he said. "And that's way I think this issue is very important, that we fully understand it and find out what, if anything, can we do, not only to save industry money in reaching either a point of go or no-go, but also those of us right here in this town and in this state." Number 0740 CO-CHAIRMAN OGAN said to Ms. Mayer, "Now, you said that ... a very small percentage was large projects in number, but I gathered that about half the resources are spent on large projects and about half on handling the smaller ones. Is that correct?" He asked Ms. Mayer to respond, roughly, in man-hours. MS. MAYER said about one-third, or maybe a little less, was spent on large projects. Number 0786 REPRESENTATIVE THERRIAULT referred to the first box drawn by Mr. Noah and the indication that coastal zone management required the second half, the coordination. "But the coordination doesn't necessarily require CZM," Representative Therriault pointed out. "And so when he makes his comment that the coordination, that function, that portion of what DGC does, is important, then I'm not so sure, and I just wanted to maybe get a response from Mr. Noah of whether he feels that perhaps could be adequately provided through a lead-agency mechanism, or does there need to be ... some entity over the agencies ... that would look out for that coordination?" Number 0832 MR. NOAH cautioned, "I think you have to be very careful to blow up the system right now. You've taxed it so much - you, it's the collective `you' - you've taxed the system so much by this more- statute-less-money issue that you're going to have to go into this carefully and think out ... how you're going to permit in this state for the next 15 years. You've got an old system now. We had a lot of money when it started. It's evolved past that. And the problems have evolved past that. You need to look at this real hard in how you're going to accomplish it." MR. NOAH continued, "I think the lead agency has some merit, but I don't think you want DNR, for example, or DEC, policing itself necessarily. DGC has a role that's neutral. It's very useful. But really, on those small projects, I think, is the main area we're doing that. ... This is very complicated, and it's really important getting into it. But please handle this carefully. ... It's going to happen anyway, because the nature of -- this change is coming. Be careful in how you set that up, I think, because it will have a long-term impact." Number 0947 SCOTT NOVAK, former public co-chair of the Coastal Policy Council, testified via teleconference from Cordova. He emphasized that under HB 28, no one was abandoning the concepts of coastal zone management of finding a balance and promoting the wise use of coastal resources. "But it's simply putting them back into other existing authorities, which I believe would be more efficient than the current coastal zone program," he stated. MR. NOVAK agreed coastal zone management and the DGC were unique and separate functions. "By eliminating the coastal zone program, you are not ... getting rid of the coordination of programs," he said. "DGC can still certainly remain in business." He referred to concerns about the program's cost and suggested there never was and never may be a full accounting of its cost-effectiveness. "Mr. Noah brought up the cost to the applicant," he said. "Another point is, what is the true cost to the local communities who are participating in this program?" [Some comments indisc. due to poor sound quality.] MR. NOVAK suggested the cost of appeals must also be considered. "For example, the City of Cordova recently was involved as a petitioner this past year over a state decision which challenged the ACMP program," he said. "The City of Cordova spent $50,000 in legal fees trying to carry forward this petition. They ultimately dropped out. The City of Kodiak and the City of Whittier were also petitioners and probably spent similar funds. What the City of Cordova might have received in these small grants to operate its program, and considering the cost of the city just trying to participate in one petition process, certainly didn't (indisc.) for the City of Cordova." Number 1152 MR. NOVAK said the other cost factor was enforcement of policies and the decision-making process that occurred with the program. He stated, "One of the complaints to come out of the assessment that has been done here for the past two years is that essentially there was very little or no enforcement of these permits and these stipulations that are put on there, because no one has the funds to actually go out there and see if the permits and stipulations are actually being complied with." MR. NOVAK stated, "Another potential cost factor, and it was brought up earlier, are the potential for these unfunded federal mandates, the nonpoint-sort-of-pollution program that's mentioned (indisc.) something that the feds would like to see the state adopt. I believe there is a time table there. Over the next several years, the feds are expecting in this state to slowly start implementing some of the things the feds would like to see done through a nonpoint program. What is the cost of implementing these unfunded federal mandates?" MR. NOVAK provided an example of nonpoint pollution in coastal communities. Most boat harbors operated grid systems for letting boats go dry in order to work on the hulls. Instead, vessels could be hauled out of the water and put into containment areas where the hulls could be scraped, and where contaminants could be handled as toxic waste. Mr. Novak asked, "What are the potential costs to Alaska and Alaska communities if, by being involved in a coastal program and accepting some funding from the feds, that we are then obligated to comply with some of these unfunded federal mandates? All that needs to be considered in determining the cost- effectiveness of the program." MR. NOVAK referred to Ms. Mayer's discussion of the benefits of Alaska staying in a coastal program. He countered, "Those benefits are not unique. ... All of those things can be done through those other existing authorities. We don't necessarily need the ACMP for local governments to be able to participate in state decisions or for local governments to be able to develop standards within their municipal boundaries to guide development. Those things can be done through the Title 29 and Title 46 authorities." MR. NOVAK continued, "As far as shaping federal activities, I think it's important to note that the relationship between the state and the feds is primarily where the state is given a seat at the table. Coastal zone management does not give state government any veto power over a federal activity." He stated, "And as far as some of the things this assessment has brought out, that the coastal program has gone through for the past two years, I think it was a very valid point and it shows why I believe it's not working. The participants of the coastal program (indisc.) one of the strongest points of having it is this networking approach to addressing everybody's concerns and getting the permits issued. But networking is a way of consensus-building, of sitting everybody down at the table and trying to address everyone's concerns." MR. NOVAK said different participants wanted "due deference" or recognition as experts in certain areas. He stated, "For example, a local community wants to be recognized as the expert or given due deference in interpreting the meaning of the enforceable policies that (indisc.) the district plan. The state agencies want due deference. So they want to be recognized as the experts in interpreting the meaning of state regulations. (Indisc.)." MR. NOVAK continued, "Now, to me there's a conflict there, that if you're going in with the intent to build a consensus through this networking program, which is kind of having a mutual interpretation of what these various policies and regulations mean, but on the right hand you're talking about giving the various participants a due deference or recognition as experts to be the sole interpreter of their policy, that those two aren't consistent. I mean, are you networking? Or are you granting different participants some kind of exclusive authority? I think through the ACMP you're trying to do both. And this causes a great sense of confusion." Number 1467 MR. NOVAK recalled that sometime during the past year, Ms. Mayer had commented that "there was some (indisc.) in the Lower 48. I believe, to the best of my knowledge, they were from the state of Colorado. And they were reviewing Alaska's methodology for (indisc.) projects. They offered the comment that Alaska gives as much review to very small projects as they would give only to the very large projects. And I think this, again, expresses why there's so much confusion or frustration in the program is that we're putting very small, very simple projects under the microscope. And a good example was mentioned earlier, was this appeals process for this DNR cabin permit in the Bering Straits Region. Four or five years in appeals and litigation, and to the best of my knowledge, it's still not solved, all because of a question as to whether it was consistent with someone's coastal plan. That is not being efficient, when everybody is spending that much time and effort reviewing and reviewing and reviewing whether someone should have a cabin in the woods." MR. NOVAK said, "Commissioner Shively, who's the current commissioner of DNR, if you could get him off privately, would probably tell you he's not a great fan of the coastal zone program. At least he's expressed that through the program in the past year or two. And his concern is, how many times do we have to remake a decision? Hopefully, if we have good people in state government, which I believe we do, you should be able to make your decisions once, and that should stand. Occasionally, there's going to be a need to go back and take a review. But whether the emphasis of the coastal zone program is this petition process, granting this tremendous level of due process to public members and others, will we keep going back and relooking and relooking and relooking and making these decisions over and over and over again?" Number 1586 MR. NOVAK said, "I read (indisc.) recently - it actually was in context with a review of the state education system - where a principal of an Anchorage school said a possible definition of insanity is doing the same thing over and over again, but expecting different results. And I think this is part of what's going on in the coastal zone program is we keep doing the same thing over and over again, expecting each time we redo it to get some kind of a different result." Number 1680 MR. NOVAK stated, "Coastal programs have been in this assessment now for almost two years. But this is the second assessment that it's been through. The Hickel Administration had started its own assessment in '94. From my perspective, I've been involved assessing the coastal program for over three years. On one hand, we've identified a lot of areas where the program can be improved to be more efficient. On the other hand, when it gets down to the final wire of actually making a decision (indisc.) couple of fixes, it would make the program ... more efficient. No one is willing to make that move. And again, I think this is where the program's become obsessed in this attempt to try to please everyone. I mean it's just not working. Because we have ... other existing authorities in Title 29 or Title 46 and the state constitution, we can do all the things that coastal zone management is trying to do by giving these responsibilities exclusively back to either the state agencies or the local governments, (indisc.) each unit, each entity do their job and (indisc.) stop trying to intermingle and bring all these people together. If they're left alone to do their own job and everyone learns to respect each others' (indisc.) move much more efficiently." REPRESENTATIVE THERRIAULT asked, "What is your overall length of time of involvement in the process?" MR. NOVAK replied, "Just a little over four years." CO-CHAIRMAN OGAN noted that the sound quality was poor and asked Mr. Novak to restate his position. Number 1729 MR. NOVAK replied, "I was a member of the Coastal Policy Council, and on the council, I was elected from that council to be the public co-chair." REPRESENTATIVE THERRIAULT explained that after the introduction of HB 28, Mr. Novak had contacted Representative Therriault's office to express interest in it. Because of Mr. Novak's past involvement on the Coastal Policy Council going through the assessment, Representative Therriault believed his testimony would be useful. Number 1769 REPRESENTATIVE GREEN commented that in 1993, when Mr. Noah was commissioner, the Alaska Superior Court had stayed an oil and gas lease sale. The applicants included Greenpeace, Trustees for Alaska and the Center for the Environment. Representative Green said, reading in part, "The court wrote that the two methods by which the commissioner may find consistency are either finding that all specific environmental protections have been met ... or that if there is to be a conflicting issue, that the finding and the provisions of 6 AAC 80.130(d), which requires a finding of no feasible, prudent alternative to meet the public need for the proposed use and a finding that all feasible and prudent steps to maximize conformance with the standards will be taken." REPRESENTATIVE GREEN stated, "Now that's, to me, the word `all' in there, [it] seems to me that should be changed to `litigant attorney retirement fund.' Because any time you do that in statute, and it's in our state statute as well, as the court order, it seems to me that there is just almost no way you can get through that hurdle without somebody bringing an issue." He asked Mr. Noah and Ms. Mayer whether there was a way to keep the coordinator and do away with the coastal zone management program. Number 1868 CO-CHAIRMAN OGAN asked whether Representative Green was referring to material in the committee packet. REPRESENTATIVE GREEN said he was referring to a court case from three years ago. Number 1895 MR. NOAH believed it was an important point. He said one problem with the Coastal Zone Management program relating to litigation on lease sales, et cetera, was that the standards were amorphous and unclear. Although clear in a planning sense, for a city planner, for example, they were not clear relating to "big industrial-type of things." Mr. Noah stated, "They invite litigation. And so you have two options to deal with that. You make it much more specific, which will be a very difficult thing to do. You've dealt with water quality, for example, and ... is 36 parts per billion okay of arsenic or is 50 parts per billion of arsenic okay? ... Do you want to sit here and deal with that? I don't think so." MR. NOAH said, "If you don't have to do that, you don't open yourself to the litigation. ... By having this program - and I'm just making friends everywhere here, I'm sure - by having this program, ... you've opened up another opportunity for litigation, another avenue to get at ... these different projects, you see. You have the opportunity under an NPDS, or ... waste water discharge (indisc.). You have an opportunity under the air quality. You have an opportunity under NEPA, an EIS. But this program has added another layer, another opportunity to bring litigation and deal with that point." Number 1960 MS. MAYER asked Representative Green to cite the case he was discussing. REPRESENTATIVE GREEN said, "Okay, it's Superior Court case number 3KN-93-1174 CI." MS. MAYER asked what the legal reference was in the body of the document. REPRESENTATIVE GREEN indicated he was just reading an excerpt and did not have that information. MS. MAYER asked Mr. Noah if it was Lease Sale 78. MR. NOAH said it was. REPRESENTATIVE GREEN concurred. Number 1995 MS. MAYER said, "A couple things on that ruling, and one is that ... the legislature has changed the standard of review since that activity even occurred. So there have been substantive changes in the law from '94, I believe the changes were made, that would affect the outcome of that court case. But the court case was ruled before -- or was ruled on a project that occurred before the law was changed. So part of the outcome is moot." REPRESENTATIVE GREEN asked if she was referring to Senate Bill 308. MS. MAYER replied, "Right. And ... the other point I was going to make on that, having read the judge's ruling that recently did come out, and being kind of alarmed by the broadness by which the judge did rule, and immediately talking to some DNR attorneys about taking action to rebut or review or whatever the step is for court, have a reconsideration of it, I also found out that the record for that lease sale ... contained very little information about coastal management, which made it difficult for them to make a case at all. And just simple changes in their procedures and documentation have accounted for improvements which in ... the current lease sales wouldn't have resulted in a ruling as strenuous as that one." MS. MAYER continued, "But there are, from that case, a couple of ideas we've been talking about if this does move and there are reg changes. Of course ... I don't support repeal of the program. I would never tell anyone that the program is perfect. Through the assessment that Mr. Novak talked about, through some of the decisions where you can see where the courts are headed in their thinking, there are more surgical things that can be done to straighten out some of the thinking that the judges seem to be relying on or -- or going down a course that is fairly extreme. ... And some of the language you quoted, I think, reflects that extremeness." Number 2094 REPRESENTATIVE GREEN asked, "So you feel that we're pretty well down the road with [SB] 308, that we could now live with ... scrutiny such as this?" MS. MAYER responded, "I think there have been improvements since Lease Sale 78 ... that would have avoided this situation." Number 2105 REPRESENTATIVE BILL WILLIAMS asked Ms. Mayer to express her thoughts on Mr. Noah's discussion of major projects versus smaller projects. He understood Mr. Noah to say major projects should be out on their own, with larger companies themselves working on it. He stated, "And I thought I heard you say earlier in your discussion ... that they generally take care of themselves anyway. And -- and making sure that we keep hold of the smaller projects. Right now, the City of Ketchikan, the Gateway Borough, is supportive of this organization right now. But we handle smaller projects." Representative Williams asked Ms. Mayer, "Would you agree with Mr. Noah on this? And what kind of suggested (indisc. - - papers shuffling) would you see in this area?" Number 2162 MS. MAYER responded, "The notion of one-size-fits-all in terms of review is -- I don't think is accurate." She said it was incorrect to think one system could handle world-class developments as well as routine projects. She indicated the current program had built- in flexibility where small, routine projects went through minimal, if any, review. "And on the upper end, there is some discretion to bend the system to accommodate what goes on in the really large project," Ms. Mayer stated. "I don't think, even with the accommodation we have currently in place, that there is the most efficient mechanisms for the very large projects. And part of the streamlining initiative that the Administration is taking on is looking at: How do we look at large projects and what are the distinctions that we should be pointing to? So I think Mr. Noah is correct in recognizing they're a different breed of cat." MS. MAYER said she and Mr. Noah had discussed what to do about it many times. She stated, "So I think it's just: How do you craft the solution? And to just assume, well, you chop those off and then they're entirely different, ... well, maybe that will be true and maybe more analysis of the problem will show that. ... I'm not there yet, that they're so different. They still have a lot of permits. They have various stages of development to be considered. The phasing, 308, took care of some of that. I think there's a little more that needs to be done. It was very well-designed for oil and gas. It has some gaps when you try to apply it to some other large project development, because their needs weren't quite in the maker's eye when that was designed. So there's some ways to tweak it. And I think there can be some very healthy discussions about how most efficiently to handle it. I agree that they would be different. I don't necessarily think that that just implies somebody else does it. But again, if it makes sense that somebody else does it, I think that would be ...." Number 2272 REPRESENTATIVE WILLIAMS said, "Someone else that does it would be DNR, DEC, or whoever else, and either of those agencies would -- are basically doing it today in the major projects. And maybe the coastal zone management ... isn't really needed by the cooperation portion of it. ... Maybe we could form a bill around this area, to have the state agencies, DNR, DEC and whoever else we have to deal with in these to -- on major projects, and use the cooperation portion of this act." Representative Williams said, "As I see us needing this organization right now, at least for the time being, but, and I think Mr. Noah alluded to that also, at least to be careful. If I'm wrong, I'd sure like to hear (indisc.)." Number 2324 MR. NOAH replied, "I don't think you're wrong at all. I think that the question is really what Representative Therriault stated: How do you use your limited funds to the greatest extent that you can? ... And if you set up a system where you break off the major projects, where they can be dealt with differently and funded differently, then that would allow you to focus your money on DGC and that type of thing, you see. But be clear, you don't need the coastal zone management program to do that. You've just added another layer there that -- they're separate things, you see. They're really even separate legislation; they just happen to be together in this office. Right?" Number 2361 MS. MAYER said, "Wrong." She added, "I think it would be useful just to take a minute to think about why we have the system we have right now. And that is, in '82 everything was being permitted separately. Everything was a separate track, a separate permit. ... [W]hat was requested, and where the pressure was, instead of having these developers running around chasing permits, agency after agency, they wanted somebody handling it on a project basis, so you could pull the agencies together and they would be on a similar schedule and be processing them, so they were looking at the same project and the permits actually matched, to make that project work. And when that issue came up, at that time the coastal program was very cognizant of the problem and understood it and took leadership in solving it with the state agencies." MS. MAYER continued, "And what we designed, then, was a system where the state agencies would come together. There was a platform where permits were looked at commonly. Problems were solved. But one of the premises was they would continue to deal with their separate processing, that what they already did was not basically game for the system. And so the coastal program, in crafting the solution to bring parties together on a project basis, it turned out the authority got housed in the coastal program." MS. MAYER continued, "Harry [Noah] is right. What we need is a coordination system. And coastal management needs it. So when the problem arose, coastal management solved it. Whatever we do with large projects, coastal management will still need to interface with that. And the question becomes, you can have a coastal program and you can have a coordination system, and they have to have a seamless interface for program implementation. The real question is: How do you most efficiently coordinate projects? That is the challenge. The Administration's working on it. Mr. Noah gives talks about it and is very expert in the question because of his experience. The legislature is looking at it. It's a very good question. And I think it has to be answered not necessarily on the merits of coastal management but on the issue of: How do you most efficiently accomplish that task?" [Short section on DGC missing because of tape change.] TAPE 97-12, SIDE B Number 0006 MS. MAYER concluded, "This whole discussion is a natural progression." Number 0023 REPRESENTATIVE THERRIAULT said, "Mr. Noah, you've talked about breaking the large projects out. But in your mind, there would still be a problem, though, if they were trying to satisfy the very fuzzy requirements of the CZM program. Is that correct?" Number 0032 MR. NOAH replied, "Again, these are two separate questions, as far as I'm concerned. The Coastal Zone Management program is, again, is another layer. You all have to decide whether that layer is required. ... And Diane [Mayer] is correct that the 308 bill changed the law somewhat in terms of phasing and dealt with that specific issue on Lease Sale 78, but it hasn't taken away the whole opportunity for litigation. It hasn't changed that. And so I think that's the policy question that you have to answer here, is if someone comes to you - the question I asked at the beginning - and your district is half in and half out of the coastal zone, and someone in the coastal zone, two miles away from this other individual, has to go through one program, and two miles away, somebody doesn't. Why is that? ... How do you, as a representative, explain that to the folks?" Number 0100 MR. NOVAK spoke again via teleconference from Cordova. He said, "On the matter of the use of state concern, which I believe is the same thing as breaking out large projects, probably along with petitions, one of the most contentious things that (indisc.) come up with the assessment, attempting to define what is a use of state concern or when is there a project, that because of meeting some set of criteria, that the state government moves in and says, `We're going to do this; we're going to review it and permit it,' and the local communities are going to have a lesser role in that because it's a matter of state concern. "There's been a complete inability of the Coastal Policy Council and the other participants to address that. ... But addressing that is simply making some decisions. You simply have to draw that line in the sand and say when a project gets to some level of criteria, the state government is ... taking it back completely. (Indisc.) step on somebody's toes, but that has to be done. And until somebody defines the use of state concern, we're going to continue to have all this fighting back and forth about how a project should be permitted. "And I don't believe, from my four years of involvement in it, that the Coastal Policy Council, or this larger coastal zone family of all the people who participate in it, are willing to just make some of those (indisc.) decisions (indisc.), deciding things like the use of state concern, one of the reasons why I think, all things considered, and in the interest (indisc.) of everybody, it's time for the state government (indisc.) the program just isn't working well enough to keep it around the way it is." Number 0190 MR. NOVAK referred to a question about enforcement of programs. He said he would read from the Cordova coastal plan. He believed it was a good example of how almost any coastal plan would read and of why it was so confusing. He explained, "This is in a coastal policy dealing with development effects of sea bird colonies and marine mammal haul-outs. And the (indisc.) policy says that development activities with high levels of acoustical or visual disturbance shall be designed and operated to minimize significant adverse impacts on sea bird colonies and sea lion and harbor seal haul-outs or rookeries. That's a pretty vague statement. What is a high level of acoustical or visual disturbance? And what is a significant adverse impact? "You're setting yourself up for one person who is in a position of making a permitting decision to look at this statement and apply a fairly subjective interpretation as to what is or is not a high level of acoustical or visual disturbance and making a call as to whether anything special has to be done. Then there's someone else coming and saying, `I disagree with how this person interpreted the plan and therefore I'm going to file a petition or eventually I'm going to take you to court because I think ... the level of acoustical and visual disturbance is different or is significant. "These kind of vague statements get you nowhere. And the fact is impacts on sea birds or marine mammals is something that's governed by the U.S. (indisc. -- coughing) Wildlife. Why is a local community being given an opportunity to write, potentially, regulations on what is good or bad for marine mammals? It's already done. Why do it again? And why do it in such a way that it's so vague that all you do is open everything up to a lawsuit?" Number 0291 CO-CHAIRMAN OGAN advised that he planned additional hearings on HB 28. He noted that the meeting Thursday, February 20, would address other bills. ADJOURNMENT CO-CHAIRMAN OGAN adjourned the House Resources Standing Committee meeting at 3:25 p.m.