SENATE RESOURCES COMMITTEE February 16, 1994 3:35 P.M. MEMBERS PRESENT Senator Mike Miller, Chairman Senator Dave Donley Senator Fred Zharoff MEMBERS ABSENT Senator Loren Leman, Vice Chairman Senator Drue Pearce Senator Al Adams Senator Steve Frank COMMITTEE CALENDAR 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. WITNESS REGISTER Jack Chenoweth Legislative Affairs Agency Goldstein Bldg., #406 Juneau, Ak. 99801-2105 POSITION STATEMENT: Commented on SB 215. Mary Jacobs P.O. Box 3080 Kodiak, Ak 99615 POSITION STATEMENT: Opposed SB 215. Bob Brody P.O. Box 296 Kodiak, Ak. 99615 POSITION STATEMENT: Opposed SB 215. Mary Forbes Kodiak Audubon Society 418 Mill Bay Road Kodiak, Ak. 99615 POSITION STATEMENT: Opposed SB 215. Chip Thoma Juneau, Ak. 99801 POSITION STATEMENT: Opposed SB 215. Stan Stephens, President Prince William Sound Regional Citizens' Advisory Council Valdez, Ak. POSITION STATEMENT: Opposed SB 215. James Studley P.O. Box 1049 Haines, Ak. 99827 POSITION STATEMENT: Opposed SB 215. Wayne Coleman P.O. Box 1913 Kodiak, Ak. 99615 POSITION STATEMENT: Opposed SB 215. Gerald Brookman 715 Muir Ave. Kenai, Ak. 99611 POSITION STATEMENT: Opposed SB 215. Paul Seaton 58360 Bruce Dr. Homer, Ak. 99603 POSITION STATEMENT: Opposed SB 215. Gail Parsons P.O. Box 2397 Homer, Ak. 99603 POSITION STATEMENT: Opposed SB 215. Mary McBurney Cordova Fishermen United P.O. Box 939 Cordova, Ak. 99574 POSITION STATEMENT: Opposed to SB 215. James Mykland P.O. Box 1241 Cordova, Ak. 99574 POSITION STATEMENT: Opposed to SB 215. Nancy Bird P.O. Box 1185 Cordova, Ak. 99574 POSITION STATEMENT: Opposed to SB 215. Danny Carpenter P.O. Box 1430 Cordova, Ak. 99574 POSITION STATEMENT: Opposed SB 215. Krista Rogerson P.O. Box 1386 Valdez, Ak. 99686 POSITION STATEMENT: Opposed SB 215. Donna Lane P.O. Box 1353 Valdez, Ak. 99686 POSITION STATEMENT: Opposed SB 215. Randy McGovern 1611 Carr Fairbanks, Ak. 99709 POSITION STATEMENT: Opposed SB 215. Mike Walleri 122 first Ave., Suite 600 Fairbanks, Ak. 99708 POSITION STATEMENT: Opposed SB 215 Kevin Harun, Executive Director Alaska Center for the Environment 519 W 8th, #201 Anchorage, Ak. 99501 POSITION STATEMENT: Opposed SB 215. Patti Saunders 1233 W. 11th Ave. Anchorage, Ak. 99501 POSITION STATEMENT: Opposed SB 215. Marna Schwartz 1332 W 12th Anchorage, Ak 99501 POSITION STATEMENT: Opposed SB 215. Tom Lakosh P.O. Box 100648 Anchorage, Ak. 99510 POSITION STATEMENT: Opposed SB 215. Ivan Widom P.O. Box 154 Seldovia, Ak. 99663 POSITION STATEMENT: Opposed SB 215. Ervin Paul Martin, Director Division of Emergency Service Department of Military and Veterans Affairs P.O. Box 5750 Ft. Richardson, Ak. 99505-0800 POSITION STATEMENT: Opposed SB 215. Russell Heath, Executive Director Alaska Environmental Lobby P.O. Box 22151 Juneau, Ak. 99801 POSITION STATEMENT: Opposed SB 215 Dave Parish Exxon POSITION STATEMENT: Opposed SB 215. John Sandor, Commissioner Department of Environmental Conservation 410 Willoughby, Suite 301 Juneau, Ak. 99801-1795 POSITION STATEMENT: Opposed SB 215. Richard Fineberg P.O. Box 416 Ester, Ak. 99725 POSITION STATEMENT: Opposed SB 215. Carl Pulliam Seldovia, Ak. POSITION STATEMENT: Opposed SB 215. ACTION NARRATIVE TAPE 94-9, SIDE A Number 001 CHAIRMAN MILLER called the Resources Committee meeting to order at 3:35 p.m. and announced SB 215 (OIL/HAZARDOUS SUBS. RELEASE RESPONSE FUND) to be up for consideration. JACK CHENOWETH explained the changes in the CS. He took out use of the money for marine highway ferry construction. On page 15 he explained how the money in the $50 million account would be accessed by the Commissioner. SENATOR MILLER asked about appropriations to the fund and the "blackmail clause." MR. CHENOWETH explained that the blackmail clause, section 6, requires the legislature in each fiscal year to appropriate at least an amount equal to the amount determined under (b) of this section from the general fund to the $50 million account (the rollover provision). Number 147 SENATOR MILLER asked how section 34 related to section 6. MR. CHENOWETH said he carried the language in section 34 forward from the original 1989 bill, because he wanted to make sure nothing would cut off the opportunity for the money to come in and be put toward support of the fund. He also noted that there were some drafting errors. SENATOR ZHAROFF said he needed clarification on sections 1 and 31. He wanted to know which account money would come out of for a spill. He discussed with Mr. Chenoweth different conditions for use of the money when there is a spill. Number 368 MARY JACOBS, Kodiak, said they had made good progress toward preparedness with use of the 470 funds. She thought legislative efforts would be better spent improving manning requirements and better equipment. She said with the budget shortfall we don't need to be giving the oil industry a tax break and increasing taxes for the fishing industry. BOB BRODY, Kodiak, opposed SB 215. He said the purpose of the bill is to give an undeserved windfall to the oil industry. He was Chairman of the Oiled Mayors during the Exxon Valdez cleanup and they worked very hard to adopt the legislation that this bill unceremoniously tries to dismantle. As a result of Exxon's negligence, all of their communities suffered tremendous financial and social disruption. Establishing the 470 fund and the legislation enabling DEC to properly plan, prepare, and deal with subsequent pollution problems was one of the few positive things resulting from the process. Enactment of it took over two years, with the close cooperation of the legislature, the Governor's office, DEC, the Mayors of the spill affected communities and the oil industry. In light of declining revenues it does not make sense to give the oil industry a break and then turn to the people of Alaska to fund the existing programs of planning and prevention, he concluded. Number 462 MARY FORBES, Kodiak Audubon Society, strongly opposed SB 215. It's confusing and difficult to understand. She said it would be very difficult to continue response programs, if it passed. Number 476 CHIP THOMA, Juneau, said he believed all the uses made thus far of the 470 fund were proper. The audit, due in March, will substantiate this claim. He opposed this bill which is the first substantive attempt by Exxon and BP Oil to gut the proper functions of DEC. He urged the Committee to withdraw the bill. STAN STEPHENS, President, Prince William Sound Regional Citizens' Advisory Council, said they had the bill for only a short time and there were numerous drafting errors and inconsistencies between sections. He said the proposal contains sections that were never discussed in subcommittee. MR. STEPHENS stated that the balance in the fund is $37 million, not $0 as formerly thought. The clause that permanently suspends the surcharge if the legislature doesn't appropriate the entire balance of the spill reserve to the new catastrophic account is the very reserve the legislation is supposed to protect. In this bill it is jeopardized by the eleventh hour budget crap shoots of the legislature facing a massive budget shortfall. This bill is only a large tax break for the oil producers. Another false premise this bill is based on is that this response fund is a DEC slush fund that has been misused. The only access to the fund DEC has is for spill response. They have used approximately $1.5 million for this purpose in the last 4 years. All other access and use of the funds is from appropriations made by the legislature for programs authorized in statute. The proposal is riddled with technical definition changes that diminish Alaska Departments' of Law and Environmental Conservation authority in unpredictable ways. Some programs are close to being implemented, but if SB 215 passes they would be impossible. Number 534 JAMES STUDLEY, Vice Chairman for LAPC Association, said the bill refers to emergencies and what's lacking is that the people that are going to be there and work are not addressed. There is money there if there is a problem. The 470 fund originally intended to have the problems handled. The money does not get down to the people who do the work as it does with some federal funding. If the intent of the fund is to help the people of Alaska to prevent a disaster, to plan and cope with a disaster, they need more money at the working level. WAYNE COLEMAN, Kodiak, opposed SB 215. He asked why they aren't getting materials staged in strategic locations around the state to allow the citizens to cope effectively with releases of oil and other hazardous substances. He asked why in these times of serious budget shortfalls does the state want to reduce taxes on some segments of the economy, the oil industry, while proposing increases on other segments, like commercial fishing. TAPE 94-9, SIDE B MR. COLEMAN asked why the state wanted to reduce taxes on the oil industry while proposing to cut programs for socially and economically disadvantaged citizens. He said that some parts of the bill are confusing and vague, for instance section 11. GERALD BROOKMAN, Kenai, opposed SB 215. He agreed with what he had heard so far. He is particularly concerned with the smaller spills that aren't catastrophic. To be prepared we need lots of drills and equipment. He thought it more appropriate to increase the funds. He said there are federal funds available for the catastrophic spills. PAUL SEATON, Homer, opposed SB 215. He said prevention, planning, and preparedness is what we should be working on. Anything that would restrict the fund for those mechanisms shouldn't even be considered. Number 532 GAIL PARSONS, Homer teacher, was very concerned with any changes being made to the 470 fund. She would like to see the response and volunteer corps in place which are called for under the fund. She is concerned with the division of funds into different accounts. She wasn't getting a tax break; she didn't see why the oil industry should be given a tax break. MARY MCBURNEY, Cordova District Fishermen United, opposed SB 215. There is no reason to restructure the 470 fund. If there is a problem with the way the funds have been spent, the legislature should look at its own appropriation process. Section 32 was of particular concern to her, because it provides a mechanism by which the 5 cent surcharge can be suspended altogether. JAMES MYKLAND, Cordova, said the 470 fund has been working and is doing the job it is supposed to do. If something is working and not broken, why fix it? NANCY BIRD, Cordova, said she just looked at the original purpose of the 470 fund and there is no need for a change. If anything, they need more money available for DEC prevention and response efforts. She supported increasing the surcharge to 10 cents a barrel. DANNY CARPENTER, Cordova commercial fisherman, said this bill would complicate an already complex issue. Before oil started to flow through the pipeline, preventive and mitigation measures were compromised away due to the expense. The Exxon Valdez demonstrated that a cleanup is not the viable solution. KRISTA ROGERSON, Valdez, opposed SB 215, because limiting funding from the 470 fund would put us back to where we were before the Exxon Valdez oil spill. She asked the committee to drop the bill, so Alaskans could continue to protect the state's resources through preparedness and prevention. Number 354 DONNA LANE, Valdez charter boat owner, opposed SB 215, because it decreases the state's ability to monitor the oil industry in response to spills. It is fair that the ones who profit from the production and transportation of oil be responsible for any damage. The surcharge is fair. SB 215 restricts the availability of 470 funds or spills less than 4.2 million gallons. The majority of spills in Alaska are of this size or less. Alaska's future is the tourism industry and destroying our resources is a threat to it. DONNA LANE testified for Nancy Lethcoe, President, Alaska Wilderness Recreation and Tourism Association who was unable to attend this teleconference. She said both the 2 cents and 2 1/2 cents surcharge are insufficient to pay for spill prevention, response, and cleanup. She opposed SB 215 and supported Senator Adams' proposal to raise the surcharge to 10 cents. It makes no sense to give the oil industry a tax break and cut out funding for volunteer response corps. RANDY MCGOVERN, Fairbanks, said he spent three years on the State Hazardous Substance Spill Technology Review Council. He said at a time when the legislature is talking of reinstituting the income tax, there is no sense in losing millions of dollars in revenue by passing this bill. $1 of prevention is worth $100 in any response or cleanup, he concluded. MIKE WALLERI, General Council for Tanana Chiefs Conference, opposed SB 215. A lot of people view this bill as tax relief for the oil companies. They are concerned with the shifting of the burden of paying for the spill prevention program to Alaska residents. He noted there is room for improvement within the 470 fund. Legislation could clarify in section 11 that the money could be used to pay for municipal village contingency plans. The 2.5 cents per barrel is really insufficient to fund prevention programs currently, let alone to expand in needed areas. He suggested defeating the bill or totally rewriting it to address the problems in rural Alaska. Number 204 KEVIN HARUN, Executive Director, Alaska Center for the Environment, said we can't do much to cleanup a spill, but we can do a lot to prevent by minimizing risk and containment. The bill, if enacted, would not provide enough money to fund the state's core spill prevention and response program. He said the 470 fund is redundant, because OPA '90 has a $1 billion spill reserve. Another lesson they learned from the spill is that they weren't prepared to act. Putting the abatement funds into the catastrophic account probably would result in DEC layoffs. He was concerned that the definition of "relief" was redefined to include injury to life or loss or damage to property. They are concerned that property would exclude damage to environmental values such as habitat. Hazardous waste prevention is important. If we lose this money, what is the alternative, he asked. Number 165 PATTI SAUNDERS, supported most of the previous testimony. She noted that the drafter of the CS spent 1/2 hour trying to explain a bill and did not succeed. She wondered if there was any hope of it being implemented in an appropriate fashion. To stop funding a program that gave them prevention improvements in the first place is going backwards. There is no excuse for being complacent. She asked why this bill was important other than to give the oil companies a tax break. Number 76 MARNA SCHWARTZ, Anchorage, opposed SB 215. She said the extent of contaminated sites in Alaska is large. Taking care of the Alaska's environment is a remarkable commitment. She urged the legislators to maintain and strengthen the commitment. TOM LAKOSH, Anchorage, supported previous testimony. By passing the 470 fund bill, the legislature made a finding that hazardous substances are threatening the citizens and resources of Alaska. SB 215 exposes citizens to more hazardous substances and passing it would be a violation of the oath of office the legislators took to protect the people of Alaska and their resources. TAPE 94-10, SIDE A Number 001 IVAN WIDOM, Anchorage, Prince William Sound Regional Citizens Advisory Council, opposed SB 215. He said the 470 fund was not set up to be a temporary tax. It was set up so that money would always be available for spill prevention and response. The surcharge was never intended to fund emergency response only; it was intended to cover permanent programs within DEC to prevent and respond to spills. In reality the legislature is the only entity that can control spending out of the 470 fund. DEC does not have an open ended access to the fund. There is no positive result to splitting the nickel, except to reduce taxes for the oil industry. Number 62 ERVIN PAUL MARTIN, Director, Division of Emergency Services, requested language that would allow the Division access to pay costs incurred by that Division to maintain a state coordination capability in support of DEC for responses to disaster spills and releases. They have previously enjoyed authorization to that effect. It would seriously impair their ability to support spill response capabilities. RUSSELL HEATH, Executive Director, Alaska Environmental Lobby, said the draft CS is a far cry from what the citizens at the table and most of the public testimony had requested in the subcommittee. They opposed splitting the nickel creating an artificial distinction between a catastrophic account and a mitigation account which limits DEC's flexibility in planning for and responding to oil spills. With the legislature facing a $1 billion deficit, it is a wonder to him why the 5 cents per barrel surcharge is being reduced. Number 171 DAVE PARISH, Exxon, said the industry has supported some funding from the 470 fund for the state prevention and response programs and continue to do so. However, they could not support splitting the existing account into two 2 1/2 cent accounts. He referred to a chart he passed to the Committee explaining the financial break down of the Governor's budget which totalled $13.5 million for all the DEC agencies. The 2 1/2 cent split into the contingency and mitigation account would generate $19 million; and they can't support that, because that is almost $6 million surplus funding beyond what the Governor has requested of the legislature this year. He added that they adamantly oppose a 3/2 split reversed. Number 238 JOHN SANDOR, Commissioner, DEC, said he was very pleased with the testimony from the last hour and a half which accurately reflects the concerns of the Department. With the proposed 2 1/2 cent split, they would run out of abatement monies within 11 months. He said he was puzzled that so much misinformation had been spread. He emphasized that at the direction of the Governor, they took control of the account, did an internal audit, they raised the fund balance from $6 to $12 to $24 to $37 million. It is ironic that while it is professed there is a negative balance, indeed the proposal in the CS is to transfer all of the reserves making it possible for the catastrophic fund to be capped off in the first year. He said it is in the best interest of Alaska and the oil companies to reexamine this legislation. Number 297 RICHARD FINEBERG, Fairbanks, opposed restructuring the 470 fund without clear recognition of the importance of prevention in the state's oil spill program and the incredible magnitude of North Slope profits. Number 341 SENATOR ZHAROFF said he still had a number of concerns starting with section 1 and the tie in to section 31, as well as the ferry exemption. In section 11 he was concerned with the purpose section and the hazardous substance section. In section 16 he had questions about the financing of the catastrophic oil release. What disturbed him the most is section 32, the "blackmail clause." Also another question he had was regarding the activities of DEC and their ability to be able to perform the mandated functions with the 2 1/2 cents without passing some of the costs on to, in particular, rural areas. SENATOR ZHAROFF was also concerned with the deviation from hazardous substances, a number of which are utilized by the oil industry. He was concerned with the 5 days or 120 hours and how that fit in with having the Commissioner responding in a timely manner and then having an executive order in place in time to continue the response. He thought someone from the Department of Law should advise them on that issue. SENATOR MILLER inserted that the 5 days was a suggestion from DEC. CARL PULLIAM, SOS Response Team at Seldovia (a local oil spill response group formed from legislation as a result of the Exxon Valdez oil spill), opposed SB 215. He said it would cut the funds for local spill response depots and volunteer response corps. It negates any previous legislative attempt. It deals a severe blow to a community's ability to be responsible for its own area. He concluded saying if you can't make a positive change, don't change anything at all. Number 449 SENATOR MILLER said he was mystified that some people had said if the fund were left in place the $50 million would go off, but they turn around and say they need money for the fund which is what the 2 1/2 cents would do. If the nickel completely went off, there would be no money coming in. The other confusing thing is that if they take DEC numbers and give them enough money and they can't do the job, it's not the legislature's concern. SENATOR MILLER adjourned the meeting at 5:40 p.m.