House committee approves increase in spill penalties

Legislation to increase penalties for fuel and oil spills is on the move in the House.

The House Resources Committee sent House Bill 322 to the Finance Committee Feb. 12 for consideration.

The bill, drafted primarily by Resources co-chair Rep. Andy Josephson, D-Anchorage, would double most penalties the Department of Environmental Conservation can levy against spillers of oil, fuels and other hazardous substances including vessel waste water.

Josephson stressed throughout the Resource Committee’s series of lengthy meetings on it that the primary impetus behind HB 322 is bringing spill penalty amounts into the 21st century. In some cases the fines haven’t been changed since they were implemented in the late 1970s.

“If we don’t update the law we’re stuck in 1977 forever and the cost of cleanup exceeds the amount the (Spill Prevention and Response Division) takes in,” Josephson said before voting to advance the bill Feb. 12.

HB 322 moved on a 5-4 party line vote with Democrat support and Republican opposition.

Reps. George Rauscher, R-Wasilla, and Dave Talerico, R-Healy, objected to increasing the fines on the fear that upping the penalties could discourage individuals or companies from reporting spills to DEC, regardless of the fact that notifying the state of such an accident is currently required by law.

That in turn could lead to unnecessary environmental damage from unreported spills not being adequately cleaned up, they argued.

Rep. Chris Birch, R-Anchorage, questioned the subjectivity of how DEC officials determine when and at what amount to levy fines against spillers.

Spill Prevention and Response Director Kristin Ryan said she doesn’t feel the issuance of penalties for spills is subjective because the department decides whether or not to impose a civil fine based on a list of criteria set in law by the Legislature, including if the spill was caused or prolonged by a decision that the economic benefit of not complying with prevention requirements led to the spill or pushed a company or individual to delay cleanup.

Ryan added that she could not think of a time when a homeowner had been fined for a spill — of fuel oil, for example — based on the economic benefit consideration under her watch. For private individuals, she said the cleanup cost usually amounts to “a penalty in itself.”

However, the current penalty schedule is outdated and doesn’t allow DEC to recover its costs as the Legislature says it should, according to Ryan, particularly in the case of large spills.

“The amount that we’re restricted to charge for a penalty is very low,” she said. “For those few instance where we have a substantial release we really would be limited in recovering and penalizing, frankly, the company for the release that harmed the environment.”

HB 322 would double the per-gallon penalties for non-crude oil spills greater than 18,000 gallons on state lands or in state waters. Those penalties have not been adjusted since 1977. The penalty for a large spill into an anadromous water body would go from $10 per gallon to $20 per gallon. That same penalty, if adjusted for inflation would be $39.70 per gallon today, according to Josephson’s office

Legislators supporting the bill repeatedly noted the fines from the 1970s would be roughly quadruple the current amount if adjusted for inflation, while the bill just doubles them.

Amendments by Rep. Justin Parish, D-Juneau, to increase those penalties to match inflation were rejected.

The penalties for large crude spills — enacted in 1989, the same year as the Exxon Valdez grounding — would be doubled as well, which would bring them in line with inflation, according to Josephson’s office. The current penalties for large crude spills are $8 per gallon for spills less than 420,000 gallons and $12.50 per gallon for larger releases.

DEC collects roughly $150,000 in penalties during an average year with no exceedingly large spills, according to Ryan. The department expects HB 322 would add about $75,000 per year to that figure.

Birch characterized the bill as “a solution in search of a problem” given DEC reports a longstanding downward trend in the number of spills reported to the department each year.

The number of spills has fallen from an average of about 2,500 per year in the late 1990s and early 2000s to generally less than 2,000 per year since 2010, according to DEC. There were 2,046 spills in 2017 totaling 271,000 gallons; more than 188,000 gallons of which was non-crude oil such as refined fuels. About 1,600 gallons of crude oil were spilled last year.

Those figures do not include natural gas released from Hilcorp Energy’s Cook Inlet pipeline leak discovered early last year. DEC did not calculate a gallon amount for the gas leak, according to Ryan.

The department also did not issue a penalty against Hilcorp for the leak that lasted more than two months because the company reported it as soon as it was discovered and did what it could to mitigate environmental damage she said. Large sheets of “pan ice” prevented divers from safely reaching the punctured subsea pipeline until the ice cleared in early spring.

Alaska Oil and Gas Association CEO Kara Moriarty testified against the bill, noting that crude oil spills accounted for less than 2 percent of the overall volume of spilled substances in the state in the last three years. Oil and gas companies spend between $1.8 million and $8 million per year on spill prevention and response equipment and training and thus DEC is not often required to spend large amounts of its money to respond to industry spills.

“The same cannot be said for non-oil industry facilities,” Moriarty said.

The bill would also classify water produced from oil wells as crude in the event of a spill as long as the water contains a small amount of oil, which Moriarty also testified against. She said “produced water clearly does not cause the same level of damage as pure crude” and the amount of actual oil in the water can be calculated.

Ryan contended that the water produced from North Slope wells — the percentage of water increases as the oil field ages — is saltwater that has been found to be as toxic as crude when spilled, is difficult to clean up and therefore should be considered in the total spill volume for determining a penalty.

The Resources Committee did remove a provision of HB 322 that would have required trucking companies hauling crude to have a DEC-approved spill prevention and response contingency, or C-plan, before transporting oil. The state requires oil and gas producers, Alyeska Pipeline Service Co., which oversees the Trans-Alaska Pipeline System and oil tanker activities out of Valdez, and other tanker vessel operators to have a C-plan.

There currently is no similar state requirement for trucking companies hauling crude, however.

Alaska Trucking Association Executive Director Aves Thompson said federal Department of Transportation regulators mandate C-plans for crude haulers and state approval would be unnecessarily duplicative.

The committee ultimately cut out the state approval of C-plans, but HB 322 would now require the companies to submit the federal C-plans to DEC so the state has them on file for reference in the event of a spill.

Home spills

On the flipside of the spill penalty debate around HB 322, Gov. Bill Walker’s administration introduced a bill to remove DEC’s requirement to recover all of its costs from homeowners in the event of a heating oil spill.

House Bill 305 would specifically remove the requirement for DEC to bill homeowners seeking technical assistance for a spill of home heating fuel presuming the homeowner does what they can to clean up the spill as quickly and completely as possible.

Ryan said currently the department is mandated by law to recover its costs in the event a DEC technician visits a home heating oil spill site to provide technical assistance, for example, but does not actually take part in the cleanup.

The homeowner is still responsible for the cleanup costs, she added, and homeowner’s insurance does not usually cover spill cleanup.

“The cost recover, in our opinion, is somewhat duplicative in this scenario,” Ryan testified Feb. 9.

HB 305 remains in the House Resources Committee. Its mirror, Senate Bill 158, was scheduled to be heard in Senate Resources Feb. 14 at the time of this writing.

Elwood Brehmer can be reached at [email protected].

02/14/2018 - 12:09pm