SENATE RESOURCES COMMITTEE  April 26, 1999 3:10 p.m. MEMBERS PRESENT  Senator Rick Halford, Chairman Senator Pete Kelly Senator Lyda Green Senator Sean Parnell Senator Georgianna Lincoln MEMBERS ABSENT  Senator Robin Taylor, Vice Chairman Senator Jerry Mackie COMMITTEE CALENDAR  SENATE BILL NO. 140 "An Act relating to the powers and duties of the Department of Natural Resources and to the Alaska coastal management program." -MOVED CSSB 140(RES) OUT OF COMMITTEE SENATE BILL NO. 133 "An Act creating and providing for the Alaska Energy Conservation Commission and transferring to it the powers and duties of the Alaska Public Utilities Commission and the Alaska Oil and Gas Conservation Commission; repealing the Alaska Public Utilities Commission and the Alaska Oil and Gas Conservation Commission; relating to regulation of waste collection and disposal; relating to the powers of the chair of the Alaska Energy Conservation Commission; relating to the appellate procedures of the Alaska Energy Conservation Commission; and providing for an effective date." -MOVED CSSB 133(RES) OUT OF COMMITTEE PREVIOUS SENATE COMMITTEE ACTION  SB 140 - See Resources Committee minutes dated 4/19/99. SB 133 - See Resources committee minutes dated 4/12/99. WITNESS REGISTER  Mr. Bruce Campbell Staff to Senator Randy Phillips State Capitol Bldg. Juneau, AK 99811-1182 POSITION STATEMENT: Commented on SB 140. Ms. Gabrielle LaRoche Alaska Coastal Management Program (ACMP) Division of Governmental Coordination (DGC) Office of the Governor P.O. Box 110030 Juneau, AK 99811-0030 POSITION STATEMENT: Opposed SB 140. Ms. Jane Angvik, Director Division of Lands 3601 C St. Ste 1122 Anchorage, AK 99503-5947 POSITION STATEMENT: Opposed SB 140. Mr. Patrick Galvin 701 W 8th, #1200 Anchorage, AK 99501 POSITION STATEMENT: Opposed SB 140. Mr. Jon Dunham, Deputy Director North Slope Borough Planning Department P.O. Box 69 Barrow, AK 99723 POSITION STATEMENT: Opposed SB 140. Mr. John Easton, Program Director Bristol Bay SCRA Coastal Management Program P.O. Box 849 Dillingham, AK 99576 POSITION STATEMENT: Opposed SB 140. Ms. Linda Freed, Community Development Director Kodiak Island Borough 710 Mill Bay Rd. Kodiak, AK 99615 POSITION STATEMENT: Opposed SB 140. Mr. Robert Fagerstrom, Co-chairman Alaska Coastal Policy Council P.O. Box 1064 Nome, AK 99762 POSITION STATEMENT: Opposed SB 140 Mr. John Bolling Coastal Coordinator Craig, AK 99921 POSITION STATEMENT: Opposed SB 140. Senator Drue Pearce State Capitol Bldg. Juneau, AK 99811-1182 POSITION STATEMENT: Sponsor of SB 133. Ms. Judy Brady, Executive Director Alaska Oil and Gas Association 121 W. Fireweed Anchorage, AK 99501 POSITION STATEMENT: Commented on SB 133. Ms. Mary Hughes Municipality of Anchorage 3601 C St. Anchorage, Ak 99501 POSITION STATEMENT: Commented on SB 133. Ms. Sharon Daniel Copper Basin Sanitation Glennallen, AK 99588 POSITION STATEMENT: Commented on SB 133. ACTION NARRATIVE  TAPE 99-27, SIDE A  Number 001 SB 140-COASTAL ZONE MANAGEMENT TO DNR  CHAIRMAN HALFORD called the Senate Resources Committee meeting to order at 3:10 p.m. and announced SB 140 to be up for consideration. MR. BRUCE CAMPBELL, aide to Senator Randy Phillips, said SB 140 was initiated as a mission alignment topic from the Senate Finance Committee. This CS includes additional language regarding Hatcher Pass that everyone agrees with. The principal task is to bring the Alaska Coastal Policy Council out of the Office of Management and Budget and into the Department of Natural Resources (DNR). The Division of Governmental Coordination currently has no director so this would be a consolidation efficiency without having to lay anyone off. He said the Division of Land deals with land permits on state land, but it also deals with a broad host of issues from offshore leases to onshore leases. The Division of Governmental Coordination is generally Alaska's "one stop shop" for permits on state, federal, and private lands. Bringing the two together may achieve some additional efficiencies. MR. CAMPBELL explained they are not necessarily talking about physically moving people from one building to another which would incur moving costs, but they are talking strictly about the reassignment of where they fit in the hierarchy of state government. SENATOR PARNELL moved to adopt the CS to SB 140 (version M 4/26/99). There were no objections and it was so ordered. Number 60 SENATOR LINCOLN asked if the fiscal note is the same for the CS as it was for the original bill. CHAIRMAN HALFORD replied that there shouldn't be any change, but the committee couldn't get a fiscal note without adopting the CS first. MS. GABRIELLE LAROCHE, Office of Governmental Coordination (DGC), said DGC opposes SB 140. She said the Alaska Coastal Policy Council passed Resolution 99-1 opposing SB 140. She warned against trying to fix something that isn't broken. No real savings to the State general fund can be identified by this consolidation. DGC is the most appropriate agency to administer the ACMP. DGC's functions are distinct from DNR. The Alaska Coastal Management Program is a well established program that has been located in the Office of the Governor since 1979. DGC's implementation has been evaluated several times in recent years and a 1994 legislative audit report concluded that DGC appears to be the most appropriate agency for administering the ACMP. It further states that DGC's placement in the Office of the Governor provides a more objective, centralized oversight and coordination function for all state agencies. In addition, DGC receives a triennial evaluation from the federal granting agency, the Office of Ocean and Coastal Resource Management within NOAA, and it has received several very complimentary evaluations of the administration of the program. The proposed bill does not result in any savings to the state general fund and may, in fact, result in increases associated with start up of the program in a new agency. Although the director position would be directly eliminated, other costs are associated with the transfer. First, DGC employees are all exempt; DNR employees are all classified. Administrative costs are associated with reclassifying positions and hiring or with transferring functions among employees currently at DNR. Short-term inefficiencies are also anticipated as a result of changing the lead agency. The federal dollars go to the Office of the Governor and a program amendment would have to be submitted to NOAA which would have costs associated with it. In the interim there could be delays or decreases in federal funding to the program as a result of having to do that with NOAA's Office of Ocean and Coastal Resource Management. Delays or decreases in federal funds could not only impact agency functions, but also the almost $1 million provided to coastal districts and communities around the State. That DGC is the most appropriate agency to administer the ACMP was the conclusion of the 1994 legislative audit report. Many years ago the State of Alaska chose to have a networked program relying on existing authorities instead of a coastal permit issued by one single agency. As such, DGC provides a coordination, information dissemination, and mediation function. The coordination and mediation among agencies and 35 coastal districts that participate in the program is best located under the umbrella of the Governor's Office rather than in a line agency which would not have oversight over the other agencies with permitting authority. DGC's function is distinct from DNR. While the sponsor suggests that the ACMP could be moved to DNR because both agencies have similar planning and permitting functions, not only are agency mandates different, but DGC has other responsibilities with which DNR staff are not familiar, including developing state positions on coastal resource issues and providing conflict resolution which is needed during planning and permitting. In addition, although DNR manages activities on state land, the scope of the ACMP is much broader in that it includes activities across the landscape of Alaska whether on state federal or private land. Number 236 MS. JANE ANGVIK, Director, Division of Land, DNR, said she wanted to underscore the fourth point made by Ms. LaRoche that the area plans prepared by the Division of Lands are very different from the Coastal Management Plans or the Coastal Management Program. The Division of Land area plans are designed to tell Alaskans what we should do with our land, providing an opportunity to evaluate the resources we have for sales, leases, disposals, harvesting, etc. This is substantially different from the Coastal Management Program which looks at whether a proposed project is on state, federal, or private land and decides its affect on coastal and marine resources according to specific criteria. Significant cuts have been made to the Division of Land in the proposed budget and if this bill is an attempt to provide DNR with the ability to provide planning, it does not because the federal program is funded by federal money with federal rules. The state money used for planning is simply to determine how Alaskans will take care of our lands. The boundaries of the area plans and the coastal management plans are also different. Number 282 SENATOR LINCOLN asked if the coastal zone areas are federally funded. MS. ANGVIK answered that the Coastal Management Program is largely funded by the federal government but she didn't know exactly how much. It is a federal program that the State of Alaska chooses to participate in in an effort to protect the coastal regional areas. SENATOR LINCOLN asked if she meant this program would not supplant the DNR dollars that are being cut in the proposed budget because the two can't be mixed. MS. ANGVIK replied that's true except for the last part. It will not supplant state functions, because the money is for a different program. Number 308 MR. PATRICK GALVIN, Anchorage Attorney, said he works with most coastal districts and with developers who are applicants. The local government component in a system built around a cooperative relationship between the federal, state, and local governments should be in the Office of the Governor because it acts as a buffer between the local government and the state permitting agency that operates a separate permitting system that is networked into the Coastal Management Program. The oversight of the way the Coastal Management plans are developed and the way the projects are reviewed by the ACMP is seen as a valuable part of the program because the Office of the Governor is more politically sensitive to the needs of the communities. The individual resources agencies are professional permitters or land managers, but have separate and distinct strengths that are not related to the overall review of the projects from a local perspective. The other troubling part of the bill from a district perspective is that the Department of Community and Regional Affairs' (DCRA) grants administrator position is eliminated with that duty going to DNR as well. The federal money passes through this Program to the local governments to do their part. DCRA plays an important role in determining where the money should go and what plans and projects will get funded. It is alarming to think that role would be eliminated and put in an agency that has no history of or any authority to do grant work. The developers view DGC as a buffer between themselves and the individual requirements of the resource agencies. Its location in the Governor's Office is seen as a benefit because of it has the ability to coordinate the agencies while keeping an eye on the developers of the State to get projects through. Also, from the developers' perspective, the ACMP is a program that has an impact on all projects taking place in the state on public, private, and federal lands. While DNR has a great deal of experience managing projects on state lands, it's unknown how that experience would carry over to a program that oversees many projects on private lands. MR. JON DUNHAM, Deputy Director, North Slope Borough Planning Department, opposed SB 140. They coordinate their permit reviews with DGC on a regular basis. They also coordinate comments with DNR on oil and gas lease sales. Both agencies perform their functions in a professional manner and they believe DGC does the best job of efficiently, effectively and fairly evaluating all the concerns expressed by the commenting agencies and individuals. They question the logic and soundness of giving DGC to DNR when DNR has so much to do with oil and gas permitting in the state. This could make the agencies susceptible to loss of independent judgement critical to administer the Coastal Management Program. He thought the Office of Governor was the best place for DGC. MR. JOHN EASTON, Program Director, Bristol Bay CRSA Coastal Management Program, was testifying on behalf of their elected Board. The majority of land in their coastal district is owned by the State and managed by DNR. The ACMP was developed in recognition that the coastal communities should play a central role in development decisions that affect them. DGC's participation in coastal management is invaluable providing a neutral forum for interested citizens to voice ideas about shaping the future while protecting important resources. SB 140 will alienate local residents. A neutral agency needs to coordinate the review. If DNR is responsible for funding, managing, and implementing coastal management, it would narrow the scope of the public review process. Several positions are slated to be cut within DNR and its biased permitting systems has CRSA concerned about how state management will be compromised. Developing legislation to increase the efficiency of state resource agencies is a difficult path, but a cost savings will not result. He opposed SB 140. Number 422 MS. LINDA FREED, Community Development Director, Kodiak Island Borough, said that coastal management is a small part of the activities the Community Development department is responsible for. They have a full range of planning activities including zoning, subdivision and land management regulations. They have incorporated the CMP into those programs. They oppose SB 140 and have opposed similar bills in the past. They have a good working relationship with DNR, but DNR doesn't have the staff to do tasks they would be required to do under SB 140. There is no state land use plan for Kodiak, neither are there any stated efficiencies for moving the program. The bill appears to be an effort to gut the Coastal Management Program. If there is support for it, it should stay where it is. It is an efficient and effective program for rural communities. MR. ROBERT FAGERSTROM, Co-chairman, Alaska Coastal Council, noted the Council unanimously adopted Resolution 99-01 at the Coastal Policy meeting on April 14. That resolution opposes SB 140. This bill will not create any savings. He reiterated previous testimony regarding the audit recommendations and endorsed all the other comments made by the others opposed to SB 140. MR. JOHN BOLLING, Coastal Coordinator, Craig, opposed SB 140. DGC's job is to act as a clearinghouse for state agencies involved in the Alaska Coastal Management Program which would not improve by locating it within the DNR. To keep all agencies on an equal footing, DGC should be kept apart from DNR and the other departments. This action would not result in saving any general fund dollars and would, in fact, increase costs. There would be short term inefficiencies which would be detrimental to the districts that participate in the program. Number 501 SENATOR LINCOLN asked if anyone could comment on the question posed in NOAA's April 19 letter about whether a cost savings would occur and whether the federal matching dollars would follow the transfer. CHAIRMAN HALFORD said that question should be followed up on in the Finance Committee. SENATOR GREEN moved to pass CSSB 140(RES) from committee with individual recommendations. SENATOR LINCOLN objected because she thought the Resources Committee could do a lot more work on the bill. CHAIRMAN HALFORD asked all those in favor of moving CSSB 140(RES) from committee to raise their hands. SENATORS GREEN, HALFORD, PARNELL, and KELLY indicated yes; SENATOR LINCOLN indicated no. The bill moved from committee with a vote of 4 to 1. SB 133-REGULATORY COMMISSION OF ALASKA    CHAIRMAN HALFORD announced SB 133 to be up for consideration. He said since the merger of BP and ARCO, the AOGCC would have to be better staffed and stronger and be much more willing to get involved to protect the state's interest. He explained that the CS primarily "beefs up" the AOGCC and makes significant improvements to the APUC. SENATOR PEARCE said she appreciated Senator Halford's concerns and also wanted to strengthen the AOGCC, which CSSB 133 does. SB 134 gives it the financial backing that it needs. SENATOR PEARCE explained that SB 133 makes basic structural changes to the APUC and asks LB&A to work with the two Commissions to bring back recommendations as to the best structure for a combined regulatory entity. Many other oil and gas producing states have done this and it worked well. In the meantime, we would continue to make the changes they were making to the APUC. The name would be changed to the Alaska Energy Conservation Commission (AECC) on July 1, 1999 with the expectation that AOGCC would become part of the entity at year end 2000. The Administration would look for a place to house the AOGCC and APUC together so they could begin to benefit from the efficiencies of combined record keeping and staffing. The pay range of the AECC chairperson would be higher than the other commissioners. Everyone else was left at the same rate. TAPE 99-27, SIDE B SENATOR PEARCE said staff for pipeline regulation and all pending pipeline matters, along with two tariff staff, would move to the AOGCC on the effective date of July 1, 1999. Space is available in the building in Muldoon, even though the building is inadequate. Since the AOGCC would be taking on the pipeline regulation, they would have access to the hearing officer being added to the larger group during the transition period. She thought the hearing officer, the additional tariff staff, and the three technical staff (in SB 134) would give them the staffing backup they need to take on the new regulatory pipeline regulation function. Number 560 SENATOR PARNELL noted that the petroleum engineer and geologist were getting paid more. SENATOR PEARCE responded that is their present level and, under this bill, the pay remains exactly as it is today. SENATOR PARNELL suggested that a year later they should all be at the same level. SENATOR PEARCE said she agrees and that she would recommend finding the correct level of pay for the commissioners. She understood the reason AOGCC personnel are paid more is because in the past pay levels have caused problems when trying to find professionally qualified personnel for the AOGCC positions. The chairman of the AECC is being given more responsibility and more power than in the past. CHAIRMAN HALFORD said there was still the question of regulation of refuse and questions regarding the APUC and the new commission but, as chairman of the Resources Committee, he was focusing on resources issues. SENATOR PARNELL moved to adopt the CS to SB 133. There were no objections and it was so ordered. MS. JUDY BRADY, Executive Director, Alaska Oil and Gas Association, said they would comment after seeing the changes being proposed in this bill. MS. MARY HUGHES, Attorney, Municipality of Anchorage, said they own four utilities: telephone, water and waste water, electric and refuse. They have approximately $1.5 billion of taxpayer money in those utilities which provide the municipality with much fiscal stability. The APUC has been a very good organization in their opinion and they feel it would be appropriate to have it remain as it is. One of the resources of the Municipality of Anchorage is refuse collections services and, in the past, small refuse providers spent a lot of money on economic regulation. From that standpoint it would seem appropriate to deregulate. She understands that this bill deregulates, but doesn't do anything for planning for management and regulation of the refuse collection services. Now, approximately 95 percent of Alaska's refuse collection is in the hands of one carrier, Waste Management. It is their belief that when services of 95% of Alaskans are with one carrier, there must be some type of regulation of that carrier. They propose the particular provisions, Sections 2, 3, 9, 16, and 27 be deleted with the idea that participants within the industry could work with legislators to come up with some way in which deregulation is a thoughtful process, so that in the end the consumer and the owners of the utility are well served. Number 453 MS. SHARON DANIEL, Copper Basin Sanitation, said they provide the refuse collection in the unorganized borough in the Copper River basin. Garbage collection is a matter of public health if not properly disposed of. Deregulation of garbage collection will result in areas of the state no longer getting garbage service. CHAIRMAN HALFORD thanked everyone for their testimony. SENATOR GREEN moved to pass CSSB 133(RES) from committee with individual recommendations. There were no objections and it was so ordered. CHAIRMAN HALFORD adjourned the meeting at 4:20 p.m.