SENATE RESOURCES COMMITTEE February 22, 1994 12:00 P.M. MEMBERS PRESENT Senator Mike Miller, Chairman Senator Loren Leman, Vice Chairman Senator Steve Frank Senator Drue Pearce Senator Dave Donley Senator Fred Zharoff MEMBERS ABSENT Senator Al Adams OTHER LEGISLATORS PRESENT Senator Suzanne Little Senator Jay Kerttula Representative Joe Green 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." SENATE BILL NO. 308 "An Act modifying administrative procedures and decisions by state agencies that relate to uses and dispositions of state land, property, and resources, and to the interests within them, and that relate to land, property, and resources, and to the interests within them, that are subject to the coastal management program; and providing for an effective date." HB 232 (BOW HUNTING STAMP & BOW HUNTING SAFETY) WAS SCHEDULED, BUT NOT HEARD THIS DATE. PREVIOUS ACTION SB 215 - See Resources minutes dated 11/19/93, 1/19/94, 2/7/94, and 2/16/94. See Labor & Commerce minutes for 2/22/94. SB 308 - See Resources minutes dated 2/14/94. HB 232 - No previous action to record. WITNESS REGISTER Representative Mike Navarre Capitol Building Juneau, Ak. 99801-1182 POSITION STATEMENT: Opposed SB 215. Marla Berg, Legislative Aide c/o Senator Al Adams Capitol Building Juneau, Ak. 99801-1182 POSITION STATEMENT: Commented on an amendment to SB 215. Robert Poe, Director Division of Information and Administrative Services 410 Willoughby Ave., Suite 105 Juneau, Ak. 99801-1795 POSITION STATEMENT: Opposed SB 215. Mike Conway, Director Division of Spill Prevention and Response Department of Environmental Conservation 410 Willoughby Ave., Suite 105 Juneau, Ak. 99801-1795 POSITION STATEMENT: Opposed SB 215. Jim Eason, Director Division of Oil and Gas Department of Natural Resources P.O. Box 107034 Anchorage, Ak. 99510-7005 POSITION STATEMENT: Supported SB 308. Charlie Johnson P.O. Box 948 Nome, Ak. 99762 POSITION STATEMENT: Opposed SB 308. Steve Porter P.O. Box 100360 Anchorage, Ak. 99510 POSITION STATEMENT: Supported SB 308. Walt Furnace Alaska Support Industry Alliance 4220 B St. Anchorage, Ak. 99503 POSITION STATEMENT: Supported SB 308. Loren Flagg, Executive Director Kenai Peninsula Fishermen's Association 34824 K Beach Rd. Soldotna, Ak. 99669 POSITION STATEMENT: Opposed SB 308. Theo Matthews, Administrative Assistant United Cook Inlet Drift Association P.O. Box 69 Kasilof, Ak. 99610 POSITION STATEMENT: Opposed SB 308. Irv Carlisle P.O. Box 2349 Soldotna, Ak. 99669 POSITION STATEMENT: Opposed SB 308. Tom Lohman North Slope Borough P.O. Box 69 Barrow, Ak. 99723 POSITION STATEMENT: Opposed SB 308. Kristin Stahl-Johnson Kodiak Conservation Network P.O. Box 2661 Kodiak, Ak. 99615 POSITION STATEMENT: Opposed SB 308. Linda Freed Kodiak Island Borough 710 Mill Bay Kodiak, Ak. 99615 POSITION STATEMENT: Commented on SB 308. Mike Chihuly P.O. box 39294 Ninilchik, Ak 99639 POSITION STATEMENT: Opposed SB 308. Stan Stephens P.O. Box 1297 Valdez, Ak. 99686 POSITION STATEMENT: Commented on SB 308. Nancy Lethcoe Alaska Wilderness and Recreational Citizens Association P.O. Box 1313 Valdez, Ak. 99686 POSITION STATEMENT: Commented on SB 308. John Oscar Soldotna, Ak. 99669 POSITION STATEMENT: Opposed SB 308. Richard Tyler Homer, Ak. 99603 POSITION STATEMENT: Opposed SB 308. Mike O'Maera P.O. Box 1125 Homer, Ak. 99603 POSITION STATEMENT: Opposed SB 308. Riki Ott United Fishermen of Alaska P.O. Box 1430 cordova, Ak. 99574 POSITION STATEMENT: Opposed SB 308. James Mykland P.O. Box 1241 Cordova, Ak. 99574 POSITION STATEMENT: Opposed SB 308. John Bocci P.O. Box 939 Cordova, Ak. 99574 POSITION STATEMENT: Opposed SB 308. Jon Isaacs 308 G Street Anchorage, Ak. 99501 POSITION STATEMENT: Wanted more time to consider SB 308. Fran Bennis Alaska Conservation Counsel P.O. Box 101145 Anchorage, Ak. 99510 POSITION STATEMENT: Opposed SB 308. Joe McGill Bristol Bay L. A. P.O. box 322 Dillingham, Ak. 99576 POSITION STATEMENT: Opposed SB 308. Alice Ruby P.O. Box 121 Dillingham, Ak. 99576 POSITION STATEMENT: Wanted more time to evaluate SB 308. Chuck Degnan Unalakleet, Ak. POSITION STATEMENT: Opposed SB 308. Eric Smith 731 East 8th Anchorage, Ak 99501 POSITION STATEMENT: Opposed SB 308. Nancy Wainwright, Attorney Anchorage, Ak. POSITION STATEMENT: Commented on SB 308. Sue Flensburg P.O. Box 349 Dillingham, Ak. 99576 POSITION STATEMENT: Commented on SB 308. Barbara Fullmer 1031 W. 4th, Suite 200 Anchorage, Ak. 99501-1994 POSITION STATEMENT: Commented on SB 308. ACTION NARRATIVE TAPE 94-11, SIDE A Number 001 CHAIRMAN MILLER called the Senate Resources Committee meeting to order at 12:00 p.m. and announced SB 215 (OIL/HAZARDOUS SUBS. RELEASE RESPONSE FUND) to be up for consideration. He explained there was a proposed CS, dated 2/15/Resources/U version. They briefly discussed the changes from the "O" version. Number 97 SENATOR LEMAN moved to adopt the U version. There were no objections and it was so ordered. REPRESENTATIVE MIKE NAVARRE spoke in opposition to SB 215 and gave the history of the 470 Fund. He said he was co-sponsor of the original bill. He said because of lack of detailed records many times it was hard to determine who was responsible for oil spills. It will be impossible to find the responsible party for a number of contaminated sites and the burden of cleaning will fall on the state. The estimate was significant. He was looking for a way to provide for eventual cleanup and protection from ground water. At the time, there was a lot of concern about who was going to be ultimately liable for an independent contractor who had accepted hazardous waste for disposal. He explained the 470 Fund was passed before Exxon Valdez spill and it wasn't funded adequately before then. His primary concern was what if there was another big spill. Had the nickel been split at the time, it would have been adequate, but the legislature substantially changed what can be appropriated out of that fund with respect to prevention, monitoring, contingency plans, etc. Some of the things that might save money haven't been enacted. For instance, if there was one contingency plan, instead of having numerous ones. The legislature recognized there would be an on/off provision. He thought the accounting was flawed. He also noted they did not know all the expenses involved in an adequate prevention program. He concluded that there is a legitimate concern that this has been made an additional nickel per barrel tax to the industry. On the other hand, the fund is appropriated by the legislature. The focus of the debate should not be how to limit spending specifically, but what is needed to provide the programs that we want to monitor and have proper oversite for oil and hazardous substance. He thought, given the philosophy of the current administration regarding ANWR, it would be good for Alaska to have proper oversite. He also noted that at the time they established the catastrophic fund, the $50 million was a goal; although they realized it wouldn't be adequate for a catastrophic spill. Number 298 SENATOR ZHAROFF proposed the following amendments for Senator Adams who was not able to attend. He noted they were based on the "O" version of the bill. SENATOR ZHAROFF moved amendment #1. SENATOR MILLER objected for purposes of discussion. This removes "the big stick" meaning if the legislature doesn't appropriate funds the surcharge would be suspended, SENATOR ZHAROFF explained. SENATOR DONLEY asked if the subcommittee got a legal opinion on the constitutionality of such a "dedication of funds" provision? SENATOR MILLER responded that Mr. Chenoweth, who drafted the legislation, did not raise that as an issue. He would get an opinion on it, however. SENATOR ZHAROFF moved the amendment and asked for unanimous consent. SENATOR MILLER maintained his objection. SENATOR ZHAROFF just moved the amendment then. Senators Zharoff and Donely voted yes; Senators Leman and Miller voted no and the amendment failed to pass. Number 376 SENATOR ZHAROFF moved amendment #2 which would allow the fund to be tapped to provide a safe drinking water source should the existing source be polluted. He said this issue has come up and sometimes it is cheaper and faster to drill a new well than to clean up the existing source. MARLA BERG, Aide to Senator Adams, said since the 470 Fund can't be used for capital projects, and if a community didn't have enough money to drill a new water source themselves, they would go through village safe water to get funding and clean up the existing water source which would cost a lot of money. It would be a lot cheaper to just drill a new well if they could have access to the 470 Fund. SENATOR MILLER said he supported the amendment, but it was just a little too broad. Senators Donley and Zharoff voted yes; Senators Leman and Miller voted no and the amendment failed. Number 420 SENATOR ZHAROFF moved amendment #3 which puts hazardous substances back into the catastrophic fund. Senators Donley, Zharoff, and Leman voted yes; Senator Miller voted no and the amendment passed. Number 431 SENATOR ZHAROFF moved amendment #4 which deletes the accrued interest from being part of the contingency and abatement account. Senator Miller said he would get an opinion on the dedicated funds issue. Senator Zharoff voted yes; Senators Donley, Leman, and Miller voted no and the amendment failed. Number 480 SENATOR ZHAROFF moved amendment #5. SENATOR MILLER objected. Senators Donley and Zharoff voted yes; Senators Leman and Miller voted no and the amendment failed. Number 493 SENATOR DONLEY said he also had some amendments at Senator Adams' request. He moved amendment #9 which deletes section 9 from the bill. SENATOR MILLER objected for discussion purposes. ROBERT POE, Department of Environmental Conservation, said they supported the original language stating that a responsible party would have to actually contain or clean up and not just take containment "action." Deleting section 9 would accomplish that. SENATOR LEMAN commented he thought the language in section 9 meant that action would have to be taken to mitigate a spill which would be substantial. SENATOR DONLEY said the Department of Environmental Conservation supports the status quo, but he asked to hear why someone wanted to change it. SENATOR MILLER removed his objection and the amendment passed. Number 590 SENATOR DONLEY said the next amendment requested by Senator Adams was to delete sections 26 and 28 which was requested by the DEC. MR. POE said these two items define when a release is imminent. This part of the law is acted upon a couple of times a week. TAPE 93-11, SIDE B Number 590 MR. POE said the further refinements of the definition of imminent release could call into question a lot of suits after the fact. SENATOR MILLER said he thought the new language gave them more flexibility. SENATOR LEMAN agreed. MR. POE reiterated that for DNR, generally worded guidance has been best. SENATOR FRANK asked for specific examples of this situation. MIKE CONWAY, Director, Division of Spill Prevention and Response, said they deal with many times with the potential for a spill, for example a fishing vessel on the rocks whose tank has not been punctured, but given the weather you take action to pump off the tanks. And then the weather changes and it never happens. The new language would allow more "Monday morning quarterbacking" which would imply bad judgement was used. SENATOR LEMAN said he would consider the example he cited as an imminent release. SENATOR DONLEY asked if they had engaged in any litigation over the existing statute? MR. CONWAY answered that he hadn't while he worked for the state, but as Federal On-Scene Coordinator with the Coast Guard whenever they took action to mobilize gear and then go back to the responsible party, yes, they had that problem. REPRESENTATIVE GREEN asked if that was before or after the Exxon Valdez? MR. CONWAY said it was before. REPRESENTATIVE GREEN said he didn't think that after the Exxon Valdez it would be a problem to err on the side of prevention. SENATOR ZHAROFF asked for another example. MR. CONWAY couldn't think of one at the moment. SENATOR PEARCE said she thought the new language gave them increased flexibility by expanding the definition to reasonably expect there could be a problem instead of saying it's going to happen. MR. CONWAY said with the discussion on the intent of this issue as a matter of record, the language would be acceptable. SENATOR DONLEY withdrew amendment #7. Number 418 SENATOR LEMAN moved amendment #8 and asked for unanimous consent. SENATOR MILLER objected for purposes of discussion. SENATOR LEMAN explained this is the inflation proofing provision for the catastrophic oil release response account in which the $50 million will be placed. Senators Donley, Zharoff, Frank, Pearce, and Leman voted yes; Senator Miller voted no and the amendment passed from Committee. Number 395 SENATOR ZHAROFF moved to adopt amendment #9. SENATOR MILLER objected for purposes of discussion. SENATOR ZHAROFF explained a report from the Commissioner is to be submitted in the first 120 hours, then the Governor does not need to do anything to let the efforts continue. However, by administrative order he could suspend use of the fund. Now the Governor has to respond with an executive order allowing the work to continue. Senators Donley and Zharoff voted yes; Senators Frank, Pearce, Leman, and Miller voted no and the amendment failed. SENATOR ZHAROFF moved amendment #10 which lets some of the funds be used for the part of the construction of the ferries that have spill equipment. Senators Donley and Zharoff voted yes; Senators Frank, Pearce, Leman, and Miller voted no and the amendment failed. SENATOR ZHAROFF moved amendment #11 which puts hazardous materials back in and restores the mechanism by which municipal grants can be made from the fund. He said he is not certain what they did to rural communities and the funding they need to be able to respond to a spill. SENATOR MILLER said this issue did need clarification. However, the drafter couldn't be here today. SENATOR ZHAROFF asked to have this amendment forwarded. SENATOR MILLER agreed. Number 272 SENATOR DONLEY pointed out that SB 215 is essentially a very large spending bill, because it removes a source of revenue from the state. He is very concerned about how it is going to be rolled into an overall spending plan that hasn't been developed, yet. According to testimony, the tax is approximately 1% of the profit for the industry and all kinds of Alaskans are going to have to take very significant reductions in state assistance to them. He stated that there are conflicting opinions about the uses of the fund and a lot of people have testified that it is being used exactly they way they intended it to be used. Number 200 SENATOR LEMAN moved to discharge CSSB 215 U version, as amended, with individual recommendations and accompanying fiscal notes. Senators Donley and Zharoff voted no; Senators Frank, Pearce, Leman, and Miller voted yes and CSSB 215 passed from Committee. SENATOR MILLER announced SB 308 (ADMIN ACTION RE LAND/RESOURCES/PROPERTY) to be up for consideration. JIM EASON, Director, Division of Oil and Gas, said several concerns had been expressed about whether the state has the legal authority to condition, once they issue an oil and gas lease, future activities including and up to a prohibition on surface entry. An opinion from the Department of Law says they do have that authority, because it is pivotal to their proposal for phased consideration in consistency determinations and best interest findings of lease sales. He said this CS would accommodate the concerns raised by public testimony. This CS also makes clear the scope of the phases. The term non- speculative was replaced with "reasonably foreseeable, significant, direct affects" which is the federal standard. "The law" was replaced with the applicable statutes and regulations so it is clear they will be in conformance with those laws and regulations which apply to the best interest finding and the coastal zone consistency determination. MR. EASON said that section 2 had been redrafted to clarify the intent not to require the public or an agency meet all three of the standards. Number 69 SENATOR LEMAN moved to adopt the CS to SB 308 Resources, J version with the handwritten changes that are noted. There were no objections and it was so ordered. TAPE 94-12, SIDE A Number 001 CHARLIE JOHNSON, Nome, said this legislation was a reaction to the court's decision on lease sale 78. He said it's not needed; it's bad legislation. STEVEN PORTER, Anchorage, supported full analysis of all issues associated with a best interest finding process for each sale which current statutes and regulations do. The DNR scope of review should be defined during the administrative review process and not by the court. This bill is directed at providing certainty for DNR. They appreciate DNR's efforts to accommodate the public's concerns. WALT FURNACE, the Alaska Support Industry Alliance, said he was concerned with the court injunction on lease sale 78. They support this legislation which attempts to clarify the authority of the Commissioner in contracting for lease of land under the State of Alaska Oil and Gas Lease Sale Program. LOREN FLAGG, Executive Director, Kenai Peninsula Fishermen's Association, testified that SB 308 is bad legislation. It looks like the administration is trying to coverup for DNR's incompetence in handling lease sale 78. He said most sales have occurred without court delays. When DNR fails to address overriding public concerns in sensitive areas, they are successfully challenged. THEO MATTHEWS, United Cook Inlet Drifters Association, opposed SB 308. He said it basically turns public interest findings into industry interest findings. It represents a radical change in public policy that affects all land disposals. He thought it should have a judiciary reference. SB 308 is fiscally irresponsible, he said. SENATOR LEMAN noted that the Chairman for the Judiciary Committee, as well as two members were present and participating in the meeting. Number 205 IRV CARLISLE, Soldotna, opposed SB 308 for most of the reasons already stated. It gives the power to limit the concerns to be addressed on an issue that affects so many Alaskans. TOM LOHMAN, North Slope Borough, agreed with all the comments made before him in opposition to SB 308. KIRSTIN STAHL-JOHNSON, Kodiak, said they are adamantly opposed to SB 308. She said it tries to limit legitimate public concerns. The burden of proof should lie with the industry. SENATOR MILLER said they would recess for a session on the floor and would reconvene at 5:00 p.m. Number 255 SENATOR MILLER called the meeting back to order at 5:00 p.m. LINDA FREED, Acting Mayor of Kodiak, said there is improvement over the original bill, especially deleting non-speculative. However, she said they have not had adequate time to review the amendments to the bill. They would like additional time to address their concerns with the discrete phasing language. They support a process that brings together government and industry special interest groups to identify appropriate language to use in the best interest of the state and all its residents. Number 289 MIKE CHIHULY, Ninilchik, said he is a recreationist. He hunts, fishes, digs clams, and he has a charter service. He adamantly opposed SB 308. He said our present laws were designed to allow meaningful public participation in protecting resources from detriment by oil and gas activities. SB 308 will give DNR a license for oil development anywhere, at any time, at any cost. STAN STEPHENS, Valdez RCAC, said they respect the process that allows for public input. He said they are concerned that SB 308 limits the public review process and hoped they would have more time to review it. SENATOR DONLEY noted that most of the people testifying say they want more time to review the bill and asked what the intention of the Committee was. SENATOR MILLER answered that it had been a week since the bill was introduced and it was his intent to deal with the legislation this week. Number 377 NANCY LETHCOE, President, Alaska Wilderness, Recreational, and Tourism Association, encouraged them to slow down and look closely at the legislation to see what it does to the whole state and not just certain aspects of it. She said they needed more time to analyze the bill. She urged them to separate legislative problems from management problems. JOHN OSCAR testified that SB 308 was haphazard irresponsibility. It gives full authority to the Commissioner of DNR to destroy land from hundreds of miles away. This bill provides no opportunity for rural people to say something about development if it's going to be severely affecting their economy. This bill provides no meaningful permitting process. RICHARD TYLER, Homer, said the court stopping lease sale 78 was the law working as it should. He thought they were trying to fix something that wasn't broken. MIKE O'MAERA, Homer, said SB 308 was a waste of time and would create even more law suits. He said it might be more productive to modify administrative procedures. He did not think it would help establish a predictable and consistent program for the oil industry. Administrative procedures should be revised, so that divisions like the Divisions of Oil and Gas and Forestry, no longer evaluate their own project proposals. Best interest findings should go to a balanced disinterested evaluation authority. RIKI OTT, United Fishermen of Alaska, testified in opposition to SB 308. It allows DNR to ignore resource use conflicts, transportation issues, and environmental issues during the initial administrative review - prior to disposal of lands. It is not so much a matter of which issues are addressed as when they are addressed. A multi-phased process will force the state during later stages into a position of either proceeding with an unsound project or expensive buy backs of the sale or lease, including interest and any expenditures made by the lessee. This bill favors development, MS. OTT said. Although "non- speculative" has been removed, the intent has not changed. "Direct" is still in it and there are many rules against using it because it limits itself to paper transactions. DNR should anticipate risks, such as oil spills, and work out resolutions before any leases are issued. MS. OTT continued saying that this bill limits local control over local development and increases federal control over federal lands. It concentrates the power to determine land disposals in the hands of mid-level bureaucrats. She said this bill would increase law suits because of public frustration and lack of clarity. The Coastal Zone Management is not the problem. The public needs to discuss and resolve issues up front to make sure its projects are allowed to proceed, that they are done responsibly, and with minimal impact on other resource users and the environment. JAMES MYKLAND, Cordova, said he realized development was necessary to insure the financial survival of our state, but he wants environmentally safe development. This legislation will allow DNR to ignore resource use conflicts and environmental issues during the initial administrative review prior to disposal of these lands. He strongly supported delaying SB 308 until all citizens from around the state have a chance to respond to it if they want to. JOHN BOCCI, Cordova, opposed SB 308 for all the reasons already mentioned today. TAPE 94-12, SIDE B He doubted that the oil industry could handle a catastrophe. JON ISAACS said he is a planning consultant and has worked with communities and the oil, mining, and timber industries. He said there has been the need to change the Coastal Zone Management program over the past year regarding oil spills, contingency plans, and coastal zone planning. He has helped to develop solutions everyone could live with. He appreciated the problems DNR has with the court decision on lease sale 78 with best interest findings and coastal consistency. There has not been adequate time to evaluate the implications of the bill or the amendments. SB 308 as it stands is not a solution for a number of reasons. Procedural problems with best interest findings resulting from shortage of staff could have been avoided with assistance from Division of Governmental Coordination and other agencies. It gives broad discretion to Division Directors with implications that are not wholly related to oil and gas decisions. It reduces the local government coastal district role in decision making. In conclusion, he urged the Committee to not take hasty action on SB 308 and allow proper consideration of the proposed amendments and other appropriate alternatives to this problem. FRAN BENNIS opposed SB 308. She said the Coastal Zone Management Program is important to those on the coast and they strongly oppose legislation that undermines the substance of the Act by reducing public involvement by limiting the effects of the scope of evaluating in the review process. They support the ecosystem management concept. Potential effects on lands adjacent to lease sales must be considered in the review process. JOE MCGILL, Dillingham, opposed any change in administrative procedures. People in Dillingham depend on the fishing industry, he stated. ALICE RUBY, Chairman, Bristol Bay --- Association, said they want to continue working with the state in developing policies and support legislation. They realize there needs to be certainty in the leasing process and other decisions in Title 38. They have not had time to review the bill and there are very intense opinions on both sides. As a result they do not oppose or support the bill. SENATOR ZHAROFF asked why the court said the state can't continue with lease sale 78. SENATOR MILLER explained that the court said that the state in using their best findings used reasoning they shouldn't have. MR. EASON explained that the Superior Court issued an injunction against lease sale 78, because the judge determined that the plaintiffs would likely prevail on a claim when the case is finally adjudicated by the court on an issue of whether or not the Division of Oil and Gas would be in compliance with the Coastal Zone Management Program consistency determination by presuming you can condition future permitting activities to assure that they are consistent. SENATOR ZHAROFF asked how the state knows what to do. MR. EASON explained that this bill does not propose to do away with the public process. It's being mischaracterized to say that it would. It defines the ability of the director, under a delegation from the Commissioner, to define the scope and, most importantly, to define the ability to make a decision to proceed with a lease sale on a phased basis. SB 308 would allow the process of issuing a lease (the paper transaction) to take place with less than total certainty of what may happen in the future, but with a guarantee that the lease is conditioned so that whatever activity is proposed in the future, there will be ACMP review, review by the public, and review by the agencies. He said it is wrong that this is a dramatic departure in policy. To illustrate this he read the Code of Federal Regulations: 930.37(c): "In cases where the Federal agency has sufficient information to determine the consistency of a proposed development project from planning to completion, only one consistency determination will be required. However, in cases where major federal decisions related to a proposed development project will be made in phases, based upon developing information with each subsequent phase subject to federal agency discussion to implement alternative decisions based upon such information, for example planning, citing, and design decisions, a consistency determination will be required for each major decision. In cases of phased decision making, federal agencies shall insure that the development project continues to be consistent to the maximum extent practicable with the state's management program." He summarized that they are simply asking the state legislature to put into law what is already in federal statutes and regulations. He said if you can make a good enough decision to condition all the things you want to happen in the future, you only do one consistency determination. He thought that truly would be cutting the public out of the process. SENATOR ZHAROFF commented that he didn't think it was good to model the state's policy after federal policy, because they have kind of a dictatorial type of approach. Because there were a lot of complications with the Bristol Bay oil lease sale, he said it was important to be cautious and move slowly. MR. EASON said there is no retroactive provision in the legislation. He pointed out that this is not intended to affect the process where people review permits for development. There is no intent to restrict or exclude from consideration the public or their participation in that consideration. He explained the problem DNR finds itself in with the court decision is a history that extends from 1959, in the case of Cook Inlet where there have been 26 oil and gas lease sales in the sale 78 area. The court bought an allegation of a conflict and yet there is no record of it. There is a record of claims that there will be conflicts, but that is balanced against 26 lease sales where there has been compatible development, fishing, and recreational use. He said there is a lot of discussion about the discomfort of delegating the responsibility of making a decision of this importance to the Commissioner. It is inevitable that someone will make that decision for Alaska where it's the Commissioner or the courts. Based on the process, he didn't think they really wanted the courts making resource disposal decisions. It's a very time consuming and contradictory process. Number 363 CHUCK DEGNAN, Unalakleet, opposed SB 308, because it narrowly defines project impact areas or phases of projects. This bill would effectively neutralize public citizens' and coastal districts' input into the state decision making process. It also puts the decision making on the director level rather than the commissioner level. SENATOR LITTLE pointed out that SB 308 could very narrowly limit the scope of a consistency determination. It could therefore, limit input from the public. MR. EASON explained that the responsibility would be upon the department to address in writing any comment or concern raised by the public, as it is today. But it is correct that relevant comments and concerns to the disposal would be the focus of the scope. It is quite likely, and based upon past experience, that they will receive comments that are neither related or relevant, or in some cases, can't be understood, to apply to the issue they are considering. Those cases would be identified and discussed and if they aren't truly relevant, it will be explained why in writing. The legislature would have the continuing ability as an oversite body to make sure that process is not abused. At the same time, the courts would have some guidance from the legislature about the process it intends to have in place and the level of inquiry it expected of a decision maker to proceed with a lease sale. SENATOR DONLEY said a lot of people have said they need more time to deal with this issue and he asked if they were from extremist groups. MR. EASON answered no, he thought it an issue that needed to be addressed quickly. He explained that this legislation has been characterized as an immediate reaction to a one time, special problem. It is, in fact, a reaction to a series of litigation results that began in 1987 that have clearly established a pattern of the court in picking up the jurisdiction and authority to make leasing policy. That is a seven year process and we are facing a situation where literally every sale that is scheduled for which there is a finding and a consistency determination under the current law will be, if it's challenged, enjoined, in his opinion. MR. EASON said there has been a great deal of testimony, a lot of it has been misdirected and inaccurate. He is trying to clarify the inaccuracies. ERIC SMITH, Anchorage, said this legislation is DNR trying to get the legislature to tell DNR they don't have to consider the impacts of mining or oil and gas development at the lease sale stage or at the exploration stage. He said the government never turns anyone down if they find something. He said the federal government looks at all stages, not just the lease stage. NANCY WAINWRIGHT, Anchorage attorney, said the working groups with Coastal Zone Management have been a very positive development. She said Mr. Eason has not indicated a willingness to meet with many of these groups who have been working together for perhaps 15 years. She said that impacts have to be looked at broadly. She thought this bill should be allowed to go through the process that has worked well in the past. SUE FLENSBURG, Dillingham, made two observations. She said there definitely needs to be certainty for all concerned with respect to the decision making process. She thought the amendments are a step in the right direction, but they need additional work. She appreciated Senator Donley's remarks about slowing the bill down, because the public has a genuine interest in it and needs the time to comprehend what the amendments mean. Number 75 MR. EASON responded to a number of points by saying that this is not just a recent phenomenon, but it is real and it creates a conflict between facts and speculation which is why they had a standard of "non-speculative" - originally. They are finding that the mere allegation of a conflict is accepted by the courts, although there are 26 lease sales that suggest the contrary. He said the bill has an immediate effective date and is not retroactive. It is not set up to bypass the public process. It is set up to get guidance from the legislature for both them and the judiciary on what they expect so everyone knows the rules and can proceed with the orderly development of Alaska's resources. DNR is not asking to avoid the hard questions. One of the most important comments was made by Mr. Isaacs who said that he hadn't participated in any or almost no projects which weren't susceptible to being worked out. Here we are dealing with a process the courts have now adopted where we don't get the opportunity to try to work on projects - where things are really proposed, under real time situations, under real locations, with real analysis of the things that may be conflicts. The courts are stopping them short at the paper transaction. Nothing happens at a lease sale but the transfer of a right which is further conditioned to assure that there is a consistency determination review and agency and public review of anything that is proposed. He said under AS 38.05.180(c) they already consider cumulative impacts. That is required and it still would be required. This does not represent a radical change in policy. It's the policy followed by federal agencies. It is the policy they think is important for the Alaska Court to recognize. He said the only time the state has had to buy back a lease is when the legislature made a decision that it did not want leasing in Kachemak Bay. It was very appropriate. The legislature has also chosen to withhold from leasing all the submerged and tidelands in Bristol Bay. In no other instance has there been the need to buy back a state lease. It is important to note there has been numerous occasions when state lessees did not get to do exactly what they wanted to do on their lease. It's not a question of whether they can or cannot condition that use. Using the example of Lisburne and Niakuk, he said the state conditioned those two developments extensively. TAPE 94-13, SIDE A Number 001 SENATOR LITTLE asked if any developers had not been allowed to do anything on their lease. MR. EASON answered not that he was aware of. SENATOR ZHAROFF asked what affect passage of this legislation would have on lease sale 78. MR. EASON said it was due to go to trial in September and that process has to go through the court system unless the Supreme Court overturns the injunction which the state has appealed. If this legislation passed, the court would be aware of it, but he didn't know if it would have an impact on their decision making. SENATOR LEMAN said he thought the effective date would probably be 90 days after the Governor would sign the bill and asked how he thought it would affect the current process for an August lease sale. MR. EASON said they had issued the preliminary finding and consistency determination last week or the week before. It is out for public comment now. Based on public comment they will revise both of those decisions as necessary. Those findings will go out on May 14. Technically anyone has a right to object from that point until the sale in late August or early September. Number 131 SENATOR ZHAROFF said the way he understood this bill the public process was going to change to the extent that now the concerns of the public and Coastal Zone Management people start from the bottom and work up. The passage of this bill reverses the process so all of the public interests are considered. Only the interests identified by the Department come back down for public review. MR. EASON said that was not correct. The intent is not to narrow the scope of what people can say. It's to make clear they will take all comments from the public regardless of where or whom they are. The decision making in support of the written finding will address those comments and will also have the burden of showing which of those comments are relevant to the sale proposed and to the phase of the disposal. It's with the understanding that those subsequent events that might happen will go through the same public review. MR. EASON said he has struggled to try and make the process more understandable to people. He apologized for any failure in that, but gave an example with drivers licensing. Using the reasoning behind the court's injunction, if he were issuing a drivers license he is being asked to determine where everyone he's giving a license is going to drive for the rest of their life; what kind of car they are going to drive in; whether or not they might hit someone; and whether or not they might drive under the influence of alcohol. If he were the drivers license director, he couldn't do that. Yet he is being asked to do that for something that is more important to the state's long term health. He can't do that, but he assures them, if they allow him to issue the lease, he will make sure the lease has the conditions in it that will make them come back to the public and the agencies with a specific proposal. With this legislation he is telling them there is a serious problem. If the problem is unaddressed, there will be no more leasing. That is not necessarily good under the fiscal circumstances the state finds itself in. He explained they do not give a lease unless the people are qualified and there are already laws saying what the qualifications have to be. They can't do a thing until they post a bond. That's not the end of it. They still must get contingency plan approvals from DEC; they must get Title 16 approvals by ADF&G; they must undergo consistency determination; if they are lucky enough to find something and it's offshore or in wetlands, they must do a federal Environmental Impact Study, etc. The system of permitting and processing is huge and extensive and consumes years. SENATOR ZHAROFF noted that sometimes the sales have taken place within a core section of fishing grounds - as in Shelikof Straits. At the time the industry was able to work with them to modify plans and came up with something agreeable. Passing this bill throws all that aside. MR. EASON said this bill doesn't do that. The process he described at Shelikof Straits is exactly the process they had at sale 78. Several provisions in the lease put them on notice that a whole range of alternatives existed for restricting activities including timing restrictions, restricting their access to certain surface locations, or requiring the use of directional drilling. SENATOR ZHAROFF said he can't see where the process has been broken. He felt they were going too far too fast. He said he was concerned with sale 79 which is in Cape Yakataga in his district. MR. EASON said if that sale is allowed to happen, it does not provide the lessee an opportunity to go anywhere at any time he wants. Any proposal to do anything will go through public review as well as state agency reviews. If this bill passes, there will be one difference. The courts would understand that whoever makes the decisions cannot foresee into the future after a lease sale and can not tell in advance if there will be 1 well or 30 wells or 3,000 wells. Number 330 SENATOR ZHAROFF asked if this bill takes away any tool an individual or user group might have in the future? MR. EASON explained that it's ultimately the policy decision the legislature has to make whether they want a decision making process that is based upon someone's vague discomfort or a feeling that something might be wrong. If that's the standard, they can adopt that and DNR can do their best working with it. He advised that is not a very good standard for making decisions. SENATOR ZHAROFF said he didn't think the courts would allow frivolous concerns for an injunction. MR. EASON responded the bill is not limiting public comment. As a matter of law they could not prevail in a litigation without some certainty within the process that defines the standards that both have to live by. And some person has to ultimately make the decision. SENATOR LITTLE said the decision should be made within the Coastal Zone Management Process. MR. EASON said that is a matter for the legislature. Currently that decision is relegated to the Commissioner. SENATOR DONLEY said he would feel better and might be convinced if there was more time to understand the issues and asked for the bill to be held for one more week. Number 371 SENATOR DONLEY moved to table SB 308 for one week or to the Chairman's discretion after one week to comply with what people are asking for. SENATOR MILLER objected to the motion. Senators Zharoff and Donley voted yes; Senators Leman, Pearce, and Miller voted no and the motion failed. SENATOR PEARCE asked if he could do a side by side schematic for the process they go through and the timing as it stands now and as it would be under SB 308. MR. EASON said there is a simple answer. There will be no change in the process. There was some discussion of the schedule with BARBARA FULLMER, Department of Law in Anchorage. SENATOR PEARCE said she understood people saying they wouldn't have an opportunity to have input and she heard him saying the public would have input, but he is trying to bring the scope back from an entire universe of trying to guess what might happen somewhere maybe to something they can say with some amount of reliability may or may not take place. She asked how long a lease sale was valid. MR. EASON said most of the leases are for 10 years. That's the primary term. If production is discovered, there are lives that are much longer than 10 years. Some go back into the early sixties and may be producing still in 30 years. SENATOR PEARCE noted that drilling techniques and production techniques are changing so quickly, she didn't know how anyone could know with any certainty what the possible ramifications of leasing might be in a few years time. MR. EASON said he appreciated her comments on this issue - that systems are designed to accommodate people's concerns. It comes at a cost to industry, but it is something that can and is done. Number 494 SENATOR DONLEY moved amendment #1. SENATOR LITTLE explained it would confirm what DNR has been stating about not being compelled to go ahead with a project if they later determined the project was not in the best interests of the state. It also says that liabilities and benefits will be considered at that particular phase without greater weight necessarily being given to the long term benefits. SENATOR PEARCE noted that they have already proved they have the right to not go ahead, although she didn't understand the second part. Senators Donley and Zharoff voted yes; Senators Frank, Pearce, Leman, and Miller voted no and the amendment failed to pass. Number 567 SENATOR DONLEY moved amendment #2. SENATOR LITTLE explained this amendment would enable the state to revoke a permit without having to buy back the lease. SENATOR MILLER asked what the guidelines would be for cancelling a lease. SENATOR LITTLE said that would be up to the Department. MR. EASON explained there is a process for buying back leases. He also didn't think amendment #2 would hold up under court review. Senators Donley and Zharoff voted yes; Senators Frank, Leman, Pearce, and Miller voted no and the amendment failed to pass. SENATOR DONELY moved amendment #3. SENATOR LITTLE explained it deletes language exempting permits or other authorization revokable by the Commissioner from a written best interest finding requirement. TAPE 94-13, SIDE B Number 595 MR. EASON asked if this would require a written finding before a permit or authorization. SENATOR LITTLE answered yes. MR. EASON said they have a staff that does nothing but written findings and requiring it for every authorization they do could simply not be done. It would also significantly increase the budget. SENATOR LITTLE explained the intent was to confirm the public's participation in the process. Senators Donley, Zharoff, Frank, Pearce, Leman, and Miller voted no and the amendment failed to pass. SENATOR ZHAROFF asked if the first two amendments could accompany the bill to the next committee. SENATOR MILLER agreed to do that. SENATOR LEMAN asked what would be the impact of the first part of the first amendment that was offered. MR. EASON said he thought it was unnecessary. They decided to work on the language and send it along with the bill. SENATOR ZHAROFF moved that a new section 5 be added reading this bill would sunset in 5 years. SENATOR MILLER objected for purposes of discussion. MR. EASON said it was a legislative prerogative. Senators Donley, Zharoff, and Leman voted yes; Senators Frank, Pearce, and Miller voted no and the amendment failed to pass. Number 468 SENATOR FRANK moved to pass CSSB 308 (Resources) from Committee with individual recommendations and asked for unanimous consent. SENATOR DONLEY objected. Senators Pearce, Leman, Frank, and Miller voted yes; Senator Donley and Zharoff voted no and CSSB 308 (Resources) passed from Committee. SENATOR MILLER adjourned the meeting at 5:35 p.m.