SENATE RESOURCES COMMITTEE March 22, 1995 3:50 p.m. MEMBERS PRESENT Senator Loren Leman, Chairman Senator Drue Pearce, Vice Chairman Senator Steve Frank Senator Rick Halford Senator Robin Taylor Senator Georgianna Lincoln Senator Lyman Hoffman COMMITTEE MEMBERS ABSENT None COMMITTEE CALENDAR CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 128(RES) am "An Act relating to the disposal of wastes; giving the Alaska Oil and Gas Conservation Commission authority to regulate disposal in the annular space of an oil or gas well, or in the annular space of a water well associated with exploration and production of oil or gas, of drilling mud, cuttings, and nonhazardous drilling operation wastes, and exempting that disposal from the requirement of a waste disposal permit issued by the Department of Environmental Conservation; and establishing an exemption from the requirement of obtaining a waste disposal permit from the Department of Environmental Conservation for certain activities that yield solid and liquid waste material discharges and cooling water discharges." CS FOR HOUSE BILL NO. 169(RES) "An Act defining the scope of the responsibility of the Department of Natural Resources for regulating the mineral resources of the state." PREVIOUS ACTION No previous Senate action. WITNESS REGISTER Jack Phelps Legislative Aide Alaska State Capitol Juneau, Alaska 99801-1182 POSITION STATEMENT: Testified for sponsor of HB 128 Dave Johnston Alaska Oil and Gas Conservation Commission 320 Mariner Dr. Anchorage, AK 99515 POSITION STATEMENT: Supports HB 128 Chris Phillips Alaska Oil and Gas Association 121 W. Fireweed Lane, Suite 207 Anchorage, AK 99503 POSITION STATEMENT: Testified on HB 128 Neil Mackinnon Alaska Minerals Commission 1114 Glacier Ave. Juneau, Alaska 99801 POSITION STATEMENT: Supports HB 128 and CSHB 169(RES) Steve Borell Alaska Miners' Association 501 W. Northern Lights Blvd. Anchorage, AK 99503 POSITION STATEMENT: Supports HB 128 David Rogers Council of Alaska Producers P.O. Box 33930 Juneau, AK 99803 POSITION STATEMENT: Supports HB 128 Leonard Verrelli Division of Environmental Quality Department of Environmental Conservation 410 Willoughby Ave., Suite 105 Juneau, Alaska 99801 POSITION STATEMENT: Testified on CSHB 169(RES) Jules Tileston, Director Division of Mining and Water Management Department of Natural Resources 3601 C St., Ste. 800 Anchorage, AK 99503-5935 POSITION STATEMENT: Testified on CSHB 169(RES) Glen Gray Division of Governmental Coordination Office of the Governor Box 110030 Juneau, AK 99811-0030 POSITION STATEMENT: Testified on CSHB 169(RES) ACTION NARRATIVE TAPE 95-24, SIDE A Number 001 CHAIRMAN LEMAN called the Senate Resources Committee meeting to order at 3:50 p.m. The first order of business was CSSSHB 128 (RES)am. SRES - 3/22/95 HB 128 WASTE DISPOSAL PERMIT EXEMPTION  JACK PHELPS, staff to Representative Williams, prime sponsor of HB 128, gave the following testimony. HB 128 was introduced as a result of a recommendation from the Alaska Minerals Commission. Recently the Department of Environmental Conservation (DEC) began a general permitting process for incidental discharges associated with mineral drilling and well drilling. For years, those discharges were treated as minimal and inconsequential under AS 46.03.100. That statute is extremely broad and states any discharge to any waters, surface or land, to the state, requires a permit. The mineral and well drilling industries feel the process presents unnecessary compliance problems. HB 128 exempts the industry from the permit process if the operation does not produce a point source discharge into a surface water of the state and is incidental to the general industry activity. The first two sections of the bill deal with the transference of current dual jurisdiction, eliminates DEC oversight, and places oversight authority with the Alaska Oil and Gas Conservation Commission (AOGCC). Representative Williams worked with DEC on Section 3 to satisfy DEC's concerns regarding specificity. The Department of Fish and Game (DF&G) was concerned about affects on habitat therefore direct surface water discharges were excluded from the exemption. He noted the Alaska Oil and Gas Association (AOGA) has suggested an amendment to Section 3, to page 2, line 27 and page 3, line 16. SENATOR LEMAN announced there is a proposed amendment from DEC as well, and that he planned to take testimony and hold action on the amendments until Monday. MR. PHELPS explained the DEC amendment rearranges Section 3, but does not appear to make any changes. SENATOR TAYLOR asked about the word "annular." MR. PHELPS replied it refers to the space between the casings in an oil well. Number 120 SENATOR LEMAN noted some of the mud produced from drilling is radioactive. He asked if that material is included under hazardous wastes (EPA 40 C.F.R., Part 261) or if it could be reinjected into the annular space. MR. PHELPS could not specifically answer, but stated that is the precise reason for the transfer of authority to AOGCC since they are familiar with those activities and are able to make those determinations. SENATOR LEMAN commented he was referring to the natural material that is produced. DAVE JOHNSTON, Chairman of the AOGCC, testified in support of HB 128, especially in regard to the transfer provision. The AOGCC believes HB 128 will improve oversight by consolidating authority for annular disposals and streamline permitting requirements. Currently two agencies have oversight authority, the AOGCC and the DEC. THE AOGCC has the expertise to evaluate proper casing, proper submitting programs, proper injecting procedures, etc. This is an outgrowth of the Underground Injection Control Program (UIC) implemented by the AOGCC since 1986, and mandated by the federal Safe Drinking Water Act. The annular disposal program is very similar. The transfer of this authority was recommended by the Interstate Oil and Gas Compact Commission when they conducted a peer review of Alaska's exploration and production waste management program. Number 177 Regarding Senator Leman's question about radioactive materials, MR. JOHNSTON replied naturally occurring radioactive material (NORM) is a class 2 fluid, and is injected under a UIC program. The EPA has reviewed UIC procedures for disposal of class 2 fluids. Number 222 CHRIS PHILLIPS, Operations Engineering Manager for BP Exploration in Alaska, testified as a representative of AOGA. AOGA supports the intent of Sections 1 and 2 of HB 128, transferring oversight authority to AOGCC as the transfer of jurisdiction will promote regulatory efficiency. Regarding the exemptions contained in Section 3, subsection (f)(1)(B), he suggested the following clarifying amendment. Delete: (f) Except as to discharges arising out of exploration and development drilling for oil and gas resources, Add to page 3, line 16: "otherwise required" after the word "permit." He explained the first amendment would remove any danger that the language could be construed as creating a new permitting requirement; the second amendment would prevent expansion of the scope of permitting requirements. Number 274 SENATOR TAYLOR questioned the need for the legislation at this time if it merely preserves the status quo in statute. MR. PHELPS responded that last spring and summer the DEC began a public comment period on a new general permit, as the result of a concern raised by a member of the general public. That process raised a great deal of reaction among industry members because they saw no reason to create a new permitting process for activities that had gone on for years without causing any problems. HB 128 restores the status quo. Number 300 SENATOR FRANK asked if the public member's concern was aimed at challenging DEC for not enforcing the law. MR. PHELPS answered affirmatively, and clarified that the current statute is so broad that any discharge without a permit under AS 46.03.100 could probably be considered a violation. Section 3 places in statute, provisions that were assumed to have been there. SENATOR TAYLOR felt it is ludicrous that so much time has to be wasted to pass a bill that has been unnecessary for the past 20 years. He expressed concern about DEC's budget. Number 320 NEIL MACKINNON, representing the Alaska Minerals Commission (AMC), stated HB 128 is one of the top recommendations of the AMC. He stated when he attempted to begin drilling on his property at Jualin, he was notified that he needed a drilling permit. In researching AS 31.05.030, he found any discharge into the air, land or water of the state, other than domestic wastewater, must be permitted. He noted that could be interpreted to mean businesses discharging wastewater into municipal treatment plants would require permits. After contacting DEC, he was told DEC received a complaint from a member of the public about Echo Bay's drilling operations, which prompted the enforcement of the statute. MR. MACKINNON felt the situation raises a serious equal protection issue and enforcement of this statute is a deterrent to mineral exploration. He added no other state or country requires such permits. Number 398 STEVE BORELL, Executive Director of the Alaska Miners' Association (AMA), testified in support of HB 128. He agreed with Mr. Mackinnon's comments. The AMA is primarily concerned with Section 3, regarding water well drilling and incidental construction. He believed DEC selectively applied the statute to the proposed permit regulations. He commented the bill will correct a technicality in statute, to allow the status quo to continue. Without the passage of HB 128, burdensome requirements will be added to the permitting process which will not provide any benefits. He believes Governor Knowles supports the measure. SENATOR TAYLOR asked how long Mr. Borell has lived in Alaska. MR. BORELL replied he has been in Alaska since 1986, but also lived in Alaska in 1970-71. SENATOR TAYLOR commented on the change of attitude toward mining and wildlife from 40 years ago. DAVID ROGERS, representing the Producer's Council, testified in support of HB 128. He reserved judgement on the proposed amendment until he had time to review it. SENATOR LEMAN announced HB 128 and the proposed amendments would be held until Monday. Number 493 SRES - 3/22/95 HB 169 DEPT. NAT RES. IS LEAD AGENCY FOR MINING  The committee took up HB 169. ROD MOURANT, legislative assistant to Representative Kott, testified for the sponsor. HB 169 defines the Department of Natural Resources (DNR) as the lead agency for permit processing and development of the mining industry. DNR will act as a coordinating and contact agency for mining companies to obtain information on the status and requirements of their activities. This measure was recommendation number five in the Alaska Minerals Commission 1995 report. The applicant would meet with DNR and define the project; DNR would appoint a team leader who defines the scope of the project and determine participating agencies, who then appoint agency coordinators. The applicant would then meet with personnel to develop a work plan and time frame. This method will be less expensive for the applicant, but should the applicant not meet the work plan requirements, the project would revert to the normal project process, and would no longer be handled on an expedited basis. MR. MOURANT explained the committee substitute addresses department concerns that the legislation implied that DNR would take over statutory requirements of other departments. That was not the intent of the sponsor, therefore the language, "and, in its capacity as lead agency, shall coordinate all regulatory matters concerning mineral resource exploration, development mining and associated activities," on lines 6-8, page 1, was added. LEN VERELLI, Director of the Air and Water Quality Management Sections at the DEC, stated the language added to the committee substitute is satisfactory to DEC. NEIL MACKINNON stated CSHB 169 (RES) is one of the AMC's recommendations. He commented as a small mine operator, he would prefer to go to one agency for information, and to have one person accountable for that information. Number 523 JULES TILESTON, Director of Mining and Water Management, DNR, gave the following testimony. The administration has not yet taken a position on CSHB 169(RES), but he believes the amendments will resolve the administration's concerns. The Alaska Minerals Policy Commission reviewed the Fort Knox project in Fairbanks and determined the effectiveness of the project was due to the fact that DNR assigned a senior staff member, familiar with the permitting process and agencies, to coordinate the process. DNR has expertise in mining, water management, and reclamation, statewide; the Division of Governmental Coordination (DGS) provides technical expertise on mining related issues; the Division of Lands deals with tidelands; and the Plants Materials Center contains the state's reclamation experts. The word "coordinate" will not mean that DNR will take on the permitting or regulatory authorities of other entities; nor can it arbitrarily or capriciously direct another entity to do something against its laws or regulations. The term does imply that evaluations, decisions, and processes be uniformly applied to mining operations throughout Alaska. He noted AS 27.19.010(d) is another way of solving the problem; it prevents DNR's ability to usurp or modify other agencies' authorities and responsibilities. Number 570 SENATOR TAYLOR asked how the bill could be redrafted to usurp the authority of the other departments. MR. TILESTON remarked he has worked on the permit process of major projects in the state for 25 years and believes it is critical to provide strong leadership and a consistent approach to the permitting process. TAPE 95-24, SIDE B SENATOR TAYLOR commented he believes when the competing entities are forced to sit with, and justify, their capricious activities to their colleagues, they have to acknowledge the rules and regulations of the other entities involved. Number 570 SENATOR LINCOLN asked what the DGC's function is. GLEN GRAY, project analyst with the DGC, stated DGC plays a similar coordinating role with coastal zone projects as DNR would under CSHB 169 (RES) with mining projects. If two or more state permits, or one federal permit, are required for coastal zone projects, DGC coordinates those reviews. Number 557 SENATOR PEARCE asked what "hammer" DGC has when an agency is being obstructive. MR. GRAY replied final deference is given to the specific agency that has responsibility for that resource. If an agreement is not reached, the DGC makes its best guess and writes a consistency determination which can be appealed by the agencies. SENATOR PEARCE commented the Shepard's Point road project that was mandated by Judge Holland in an agreement between the federal government, the state, and the Alyeska plaintiffs, is not progressing. She stated permits are not forthcoming; part of the problem is the U.S. Corps of Engineers, but the DF&G is unwilling to issue permits because they feel the project is unnecessary. She questioned the need for DGC if they cannot fulfill the requirements of a court ordered project. MR. GRAY responded he was not familiar with that project. Number 518 SENATOR LINCOLN asked if the coordinating functions of DGC and DNR will overlap if CSHB 169(RES) passes. MR. GRAY answered the bill would require that DGC, when it coordinates such a review, would involve DNR. DNR would act as the lead agency; DGC would coordinate the review. SENATOR LINCOLN asked for clarification of the agency roles. MR. GRAY explained DGC would still provide the permitting coordination; and would work closely with the lead agency regarding DNR's concerns. Number 518 SENATOR LINCOLN questioned Mr. Gray's opinion of CSHB 169(RES). MR. GRAY felt the word "coordinate" created confusion. To his understanding, this bill would not affect the authority of any other agency, therefore it would not create a problem for DGC because DGC would still coordinate reviews within the coastal zone. The bill would ensure that DGC work with DNR in the permitting process. SENATOR LINCOLN requested the committee provide a letter of intent to clarify that CSHB 169(RES) was not designed to permit DNR to function for other departments. SENATOR TAYLOR stated the legislation implies DNR will be the lead agency, therefore they need to lead other agencies. SENATOR LINCOLN did not feel CSHB 169(RES) clarifies the situation described by Senator Taylor. She stated the testimony differed. SENATOR HOFFMAN asked for Mr. Mourant's understanding of the delineation of functions under CSHB 169(RES). MR. MOURANT explained the word "coordinate" means just that; there is no change of authority intended by the measure. The regulatory and statutory authorities of DEC, DF&G, DGS, and DNR will remain in those agencies as specified in regulation and statute. The only purpose of CSHB 169(RES) is to provide a single contact point for mining applicants to get advice, coordinate, and find out the status of their projects. It is a method of expediting a bureaucratic process. Number 488 SENATOR HOFFMAN questioned DF&G's comments on the fiscal note. MR. MOURANT replied the fiscal note was not provided to the sponsor, therefore he was unable to comment. Number 458 SENATOR TAYLOR remarked in both British Columbia and Alberta, the government decides whether the project will occur, and directs its agencies to provide solutions to any problems. In Alaska, the agencies are asked to bring all problems to the table to shut the project down. He felt Alaska to be approaching the problem in a backward manner. He added if CSHB 169(RES) creates a "one stop shopping" system for mining applicants, that system will not be expeditious if every agency creates blocks to the process. He noted it has taken longer to obtain the initial permits on the AJ mine than it took to win World War II. Number 443 MR. MOURANT indicated there are many matters regulated by DF&G that are of no interest to the mining community. DF&G would coordinate its regulatory authority with DNR on only those matters affected by the application. SENATOR LINCOLN asked if there would be committee objection to DEC's recommended language that further states that Section 1 does not alter or diminish the authority of another state agency under its laws and regulations. SENATOR LEMAN did not believe the language to be necessary. MR. MOURANT explained HB 169 was initially amended because of that concern, and that language was developed in coordination with the affected agencies, who now seem to feel further clarification is necessary. SENATOR LEMAN announced CSHB 169(RES) would be held until Monday. He also announced the next Senate Resources Committee meeting would be held on Friday; SB 69 and SJR 20 are scheduled. The subcommittee on SB 130 will meet on Thursday at 1:00 p.m. in the Beltz Room. He adjourned the meeting at 4:50 p.m.