(a) Subject to (b) of this section, the commissioner may use money from the oil and hazardous substance release prevention and response fund to make grants to a municipality, village, or school district that is affected by the release or by the response to the release and that demonstrates that the release or response to the release involves extraordinary expenditures that are beyond the reasonable capability of the municipality, village, or school district to meet from the current revenue sources of the municipality, village, or school district if a release of oil exceeds 2,500 barrels of oil, or if a release of a hazardous substance exceeds an amount of a hazardous substance that, when released into the environment, presents a threat to the economy and public welfare of the municipalities, villages, and school districts affected by it at least equivalent in effect to the effect of a release of oil in an amount defined by this subsection.

(b) For each release or threatened release of oil or a hazardous substance

(1) for which the commissioner of environmental conservation may, under AS 46.08.045, expend money from the oil and hazardous substance release response account in the fund, and subject to agreement with the commissioner of environmental conservation as to the amount of money in the fund that may be used by the department to make grants, the commissioner may expend not more than $10,000,000 of the unrestricted balance of the oil and hazardous substance release response account in the fund for grants for purposes described in AS 29.60.520; if the commissioner and the commissioner of environmental conservation do not agree on the amount of money in the response account in the fund that may be used by the department to make grants under AS 29.60.500 - 29.60.599 for release or threatened release of oil or a hazardous substance, the governor shall make the determination;

(2) for which money may not be expended from the response account under (1) of this subsection, and subject to appropriation of money in the fund that may be used by the department to make grants, the commissioner may expend not more than the amount appropriated from the oil and hazardous substance release prevention account in the fund for grants for purposes described in AS 29.60.520.

(c) Notwithstanding the limitation of AS 37.07.080(e) against the transfer of money between appropriations, when the commissioner and the commissioner of environmental conservation have agreed to the amount of money in the oil and hazardous substance release response account that may be used by the department to make grants, or when that determination has been made by the governor, the commissioner of environmental conservation shall promptly transfer that amount to the department for use under AS 29.60.500 - 29.60.599.

(d) For money that has been transferred under (c) of this section, if within any one-year period thereafter the commissioner does not use the money to make a grant under AS 29.60.500 - 29.60.599, the commissioner shall return the unexpended amount transferred under (c) of this section to the oil and hazardous substance release response account of the fund.