SENATE RESOURCES COMMITTEE February 7, 1994 4:41 P.M. MEMBERS PRESENT Senator Mike Miller, Chairman Senator Loren Leman, Vice Chairman Senator Steve Frank Senator Drue Pearce Senator Fred Zharoff MEMBERS ABSENT Senator Al Adams Senator Dave Donley COMMITTEE CALENDAR CS FOR HOUSE JOINT RESOLUTION NO. 49(RES) Requesting the United States Department of the Interior to adopt regulations that give a narrow interpretation to certain definitions under the Oil Pollution Act of 1990 relating to evidence of financial responsibility that must be shown by offshore facilities. SENATE BILL NO. 215 "An Act relating to and redesignating the oil and hazardous substance release response fund and to its use in the event of a disaster emergency; repealing the authority in law by which marine highway vessels may be designed and constructed to aid in oil and hazardous substance spill cleanup in state marine water using money in the oil and hazardous substance release response fund; amending requirements relating to the revision of state and regional master prevention and contingency plans; altering requirements applicable to liens for recovery of state expenditures related to oil or hazardous substances; amending the authority to contract to provide personnel to respond to a release or threatened release of oil or a hazardous substance and to contract to conduct spill related research; reassigning responsibility for the oil and hazardous substance response corps and for the emergency response depots to the Department of Environmental Conservation, and for the operation of the state emergency response commission and its attendant responsibilities for the local emergency planning commissions to the Department of Military and Veterans' Affairs; and modifying definitions of terms relating to the preceding provisions; terminating the nickel-per-barrel oil conservation surcharge; levying and collecting two new oil surcharges; and providing for the suspension and reimposition of one of the new surcharges; and providing for an effective date." PREVIOUS ACTION SB 215 - See Resources minutes dated 11/19/93, 1/19/94, and 2/7/94. HJR 49 - See Resources minutes dated 2/7/94. WITNESS REGISTER Jeff Logan, Legislative Assistant c/o Representative Joe Green Capitol Building Juneau, Ak. 99801-1182 POSITION STATEMENT: Commented on HJR 49. Mead Treadwell, Deputy Commissioner Department of Environmental Conservation 410 Willoughby, Suite 105 Juneau, Alaska 99801-1795 POSITION STATEMENT: Supported HJR 49. Krista Rogerson P.O. Box 1386 Valdez, Ak. 99686 POSITION STATEMENT: Opposed SB 215. Becky Gay, Executive Director Resource Development Council 121 Fireweed, Suite 250 Anchorage, Ak. 99503 POSITION STATEMENT: Supported SB 215. Sheri Schlotfeldt, President Ak. State Chamber of Commerce 217 2nd Ave., Suite 201 Anchorage, Ak. 99502 POSITION STATEMENT: Supported SB 215. Norma Calvert Marathon Oil 3201 C St. Anchorage, Ak. 99519 POSITION STATEMENT: Supported SB 215. Patty Ginsberg Prince William Sound RCAC 750 W 2nd Ave., #100 Anchorage, Ak. 99501 POSITION STATEMENT: Opposed SB 215. Tom Lakosh P.O. Box 100648 Anchorage, Ak. 99510 POSITION STATEMENT: Opposed SB 215. Ken Freeman 7604 Snow View Dr. Anchorage, Ak. 99507 POSITION STATEMENT: Supported SB 215. Judy Brady, Executive Director Alaskan Oil and Gas Association (AOGA) 721 W. Fireweed Anchorage, Ak. 99502 POSITION STATEMENT: Supported SB 215. Walt Parker, Chairman Hazardous Substance Spill Technology Review Council 3724 Campbell Loop Rd. Anchorage, Ak. 99504 POSITION STATEMENT: Opposed SB 215. Mike Macy Wave Riders 308 G St. Anchorage, Ak. 99501 POSITION STATEMENT: Opposed SB 215. Sue Libenson 824 O Place Anchorage, Ak. 99501 POSITION STATEMENT: Opposed SB 215. Paul Headlee Tanana Chief's Conference 122 First Ave. Fairbanks, Ak. 99701 POSITION STATEMENT: Opposed SB 215. Mike O'Maera P.O. Box 1125 Homer, Ak. 99603 POSITION STATEMENT: Opposed SB 215. Mary McBurney, Executive Director Cordova District Fishermen United P.O. Box 939 Cordova, Ak. 99574 POSITION STATEMENT: Opposed SB 215. Walt Furnace, General Manager Alaska Support Industry Alliance 4220 B St. Anchorage, Ak. 99503 POSITION STATEMENT: Supported SB 215. Tim Robertson P.O. Box 175 Seldovia, Ak. 99663 POSITION STATEMENT: Opposed SB 215. ACTION NARRATIVE TAPE 94-6, SIDE A Number 001 CHAIRMAN MILLER called the Resources Committee meeting to order at 4:41 p.m. and announced HJR 49 (FED REGS UNDER OIL POLLUTION ACT OF OF 1990) to be up for consideration. JEFF LOGAN, Legislative Assistant, House Oil and Gas Committee, said the sponsor had a schedule conflict and asked him to testify on behalf of the bill. He said the terms "navigable waters, offshore facility, and responsible party" were defined in a very broad manner in the regulations for OPA '90. CSHJR 49 requests the MMS to reinterpret and narrow these definitions. MR. LOGAN said it's important to deal with this resolution quickly, because the MMS has scheduled a hearing on the regulations in Anchorage for February 16 and they would like it to be a part of the public record. He explained that this resolution asks the MMS for specific action. SJR 40 asks Congress for specific action. He thought the resolutions compliment each other. MEAD TREADWELL, Deputy Commissioner, Department of Environmental Conservation, said the administration supports this resolution and feels it's complimentary to SJR 40 which passed the Senate today. Number 95 SENATOR PEARCE moved to pass HJR 49 from Committee with individual recommendations. There were no objections and it was so ordered. SENATOR MILLER announced SB 215 (OIL/HAZARDOUS SUBS. RELEASE RESPONSE FUND) to be up for consideration and to receive public testimony. KRISTA ROGERSON, Valdez, opposed SB 215 and supported testimony submitted by the RCAC. BECKY GAY, Executive Director, Resource Development Council, supported a strong emergency fund as stated in the original legislation. It's imperative that the 470 Fund be allowed to accumulate to $50 million level, the original intent, she said. They think the .02/.03 split gives clear direction and a spending cap for addressing noncatastrophic spills. It would allow the Fund to reach the $50 million level slower than the original allocation, but much sooner than the current deficit accumulation practice which will never get there. There is no incentive for state agencies to ever let the Fund get to the $50 million level, because there are so many areas to spend the money. She suggested using general fund monies and oil spill settlement money. She supported SB 215 as written. Number 220 SHERI SCHLOTFELDT, President, Ak. State Chamber of Commerce, testified that they are concerned that the money that has been appropriated to the Fund has been used for purposes other than intended in the original legislation. It is not fair public policy to make the oil industry pay for other industry spills. MS. SCHLOTFELDT recommended capping the Fund and using the money for the original purpose. She supported SB 215. Number 241 NORMA CALVERT, Marathon Oil, supported the position developed by the Alaska Oil and Gas Association (AOGA). They believe SB 215 will reestablish focus on the original intent of the 470 Fund. Number 281 PATTY GINSBERG, Prince William Sound RCAC, strongly opposed SB 215. She said there is money set aside right now at the state and federal level to respond to an emergency spill. We have much to lose, because the public's exposure to oil and gas spill impacts would increase dramatically. SB 215 alarmingly discounts the seriousness of spills defined as less than catastrophic. It is insufficient to support the state's spill prevention and response program. MS. GINSBERG said the catastrophic oil spill reserve is redundant. The federal Oil Pollution Act established a $1 billion fund. She said there are no reserves set aside for the more common huge spills of less than 100,000 barrels or for prevention. Passing SB 215 would cripple DEC's ability to prevent and respond to spills. TOM LAKOSH, Anchorage, resident, opposed SB 215 and said that it would be an imposition on the Department of Law and on Department of Environmental Conservation. An ounce of prevention is worth a pound of cure. This is a demonstrative attempt by the industry to prevent the public from protecting themselves. Number 406 SENATOR PEARCE said she thought the RCAC did a study on tractor tugs and that it was inconclusive. MR. LAKOSH responded that the second part of the study hadn't been concluded, but they are assessing the need for at least two tractor tugs and a salvage tug to respond to open water oil spills. All the vessels might be required for the Alyeska marine terminal lease renewal as well as under the OPA '90 open seas response. SENATOR PEARCE asked if the study is not complete, how can anyone know what equipment is necessary? MR. LAKOSH answered many studies have shown tractor tugs are required for this type of traffic. Salvage tugs are necessary in the open seas. Number 422 KEN FREEMAN, Anchorage resident, supported SB 215. He said it was imperative that the 470 Fund be allowed to accumulate $50 million to assure that funding is available if another spill ever occurs. JUDY BRADY, Executive Director, Alaskan Oil and Gas Association (AOGA), said the 470 Fund currently does not fulfill the purpose for which it was originally created. It is clear that the Fund was never intended to fund one third of the DEC's operating budget. She said there is a lot of confusion about what the balance in the 470 Fund really is and it is necessary to clarify some of the confusion. AOGA strongly supported SB 215. It would provide $50 million for the emergency fund originally envisioned in 1989 undiluted by other environment related expenditures. They think the balance of money in the oil reserve account should be transferred to the new account. They support the permanent .02 per barrel tax that would go into a separate account insuring a permanent source of funding for state prevention and preparedness programs while oil is being produced in Alaska. This would provide some sort of certainty for the industry and for Alaskans. Number 550 WALT PARKER, Chairman, Hazardous Substance Spill Technology Review Council, opposed SB 215. It would not provide the flexibility that is needed over the next few years in working out what remains to be done on a prevention and response program which will serve Alaska for the next several decades. Number 576 MIKE MACY, Co-author of the Alaska Master Plan for Oil and Hazardous Substance Spills, testified on behalf of the Alaska Wave Riders. TAPE 94-6, SIDE B Number 580 MR. MACY pointed out that the state of Alaska is facing huge revenue short falls and the oil companies still make tens of millions of dollars. SB 215 would give them yet another tax break. He asked why was the legislature so determined to gut the DEC. Legislature has already given control of catastrophic spill response to the Department of Military and Veterans Affairs, an agency with little spill response experience and no interest in the responsibility for protecting Alaska's environment. He pointed out that spill volume is only one factor in determining the seriousness of a spill. The legislature created the 470 Fund in the belief that paying for spill response preparedness is part of the cost of doing oil business in Alaska. SUE LIBENSON, Anchorage resident, said it is hard to grasp why the legislature is considering reducing a tax that has been working and which is not hampering the oil industry when the state is facing an enormous budget crisis. She pointed out that the legislature failed to adopt most of the recommendations of the Oil Spill Commission due to pressure from the oil industry. The 470 Fund is one of the few actions the legislature decided to take. She said prevention is the only real key. Money is much better spent on prevention and contingency planning, rather than worrying about how much money you have on hand for a response. Number 512 PAUL HEADLEE, Tanana Chief's Conference, opposed SB 215 as well as putting 2/5 of the 470 Fund money into a release, prevention, and response account. He said the vast majority of spills are 1,000 gallons or less. 470 Funds help rural villages meet their contingency plan responsibilities. SB 215 appears to be a tax relief to oil companies while shifting the cost to Alaska communities and the general fund. Protecting the environment would be taking a step backwards from the original intent of the 470 Fund. Number 498 GAIL PARSONS, Homer resident, opposed SB 215. DEC's ability to clean up spills needs to continue to be supported by the 470 Fund. Prevention is the name of the game. Number 484 MIKE O'MEARA, Homer resident, opposed SB 215. He supported the testimony presented by Sue Libenson and Patty Ginsberg. Number 450 MARY MCBURNEY, Executive Director, Cordova District Fishermen United, supported the position of the Prince William Sound RCAC and opposed SB 215. SB 215 does a great job of addressing catastrophic spills. OPA '90 and SB 215 basically insures that catastrophic spills will be covered. The .02 that is left over to address the problems that need to be taken care of. About 94% of all spills are much less than 100,000 barrels. She asked that the amount be raised to .05 to insure there is enough money to support the state's ongoing programs for prevention and response. Number 424 WALT FURNACE, General Manager, Alaska Support Industry Alliance, supported SB 215. He said the commitment in 1989 when the 470 Fund was established was to set aside a fund equal to $50 million as an emergency response key that could be drawn upon in case the state of Alaska experienced a situation similar to the Exxon Valdez. Alaska Statute 26 includes language that says the industry would agree to pay a tax equal to .05 per barrel and that that tax would be collected until the fund reached $50 million at which time it would be suspended. Number 344 TIM ROBERTSON, Seldovia Alaska, opposed SB 215. He owns a lodge and his business depends on having clean coastal waters. He is in favored continued use of the .05 barrel tax to pay for, most importantly, prevention; second, to monitor production and transportation of oil products; and third, to establish a reserve to respond to the needs of spills and contaminated spots. SENATOR MILLER thanked everyone for their participation and adjourned the meeting at 4:55 p.m.