Legislators work to increase spill fund

House, Senate hearing separate bills which would provide adequate funding to DEC’s Division of Spill Prevention and Response

Kristen Nelson

Petroleum News

House Bill 158 and Senate Bill 86, both moving through the Alaska Legislature, address the same issue - funding for the Alaska Department of Environmental Conservation’s Division of Spill Prevention and Response is running a deficit as crude oil production declines, reducing income to the Oil and Hazardous Substance Release Prevention and Response Fund. The fund was created to provide a reliable source of funding for SPAR’s activities and has been financed with a 5 cent per barrel surcharge on oil produced, with 4 cents going to the prevention account.

Sen. Peter Micciche, R-Soldotna, sponsor of SB 86, said in a statement that a variety of industries and individuals spill oil and hazardous substances and a majority of spills to which the state responds are refined oil spills. Micciche said SB 86 “distributes prevention and response costs across all users of refined fuel.” The surcharge in SB 86 is 0.8 cent per gallon on refined fuels distributed in the state.

HB 158, sponsored by Rep. Cathy Munoz, R-Juneau, “establishes an environmental fee of one cent a gallon on refined fuel sold, transferred, or used in the state,” she said in a sponsor statement. Munoz said fuel distributors are already filing and paying taxes on motor fuels each month and this surcharge would be collected from the same distributors.

Munoz said there is a $1.9 million projected shortfall in SPAR funding in fiscal year 2016, assuming receipt of a $5 million federal settlement related to a site in Aniak and budget reductions including deletion of four positions and consolidation of programs.

After FY2016, Munoz said, the estimated budget shortfall without additional funding is $7 million annually.

Munoz said in a March 25 House Finance Committee presentation that she has been aware of the problem through her work on DEC’s operating budget, but said legislation introduced three years ago to increase the crude oil per barrel surcharge to 7 cents met a lot of resistance. The argument, she said, was that the oil industry has funded a majority of SPAR’s activities since 1989, but spills tied to crude oil only represent a small percentage.

Micciche said in a March 24 Senate Labor and Commerce Committee hearing that the oil industry not only takes care of its own spills, but literally takes care of everyone else’s spills in addition. SPAR goes after responsible parties, he said, but the state is on the hook where folks don’t have the ability to pay or are long gone.

DEC Commissioner Larry Hartig thanked the sponsors of both bills in the Senate hearing for coming forward. This has been a need for some time, Hartig said, and without additional funding the division would have to cut back on assistance it provides to Alaska’s rural villages.

SPAR Director Kristin Ryan told the Senate committee that there would be no change in cost to the division to implement the surcharge.

On the cost recovery issue, she said SPAR has done everything it can to improve recovery from responsible parties including automating billing and sending out bills every month. She said the division does recover all of its costs related to oil incidents and insurance is required for industries SPAR regulates. The issue, she said, is small spills where the division doesn’t regulate.

Ken Alper, director of the Department of Revenue’s Tax Division, said in a fiscal note that there would be an implementation cost of $50,000 in FY15 to cover costs of updating the system and form the division uses, as well as to draft regulations for the new surcharge.