Legislature(2001 - 2002)

04/25/2001 01:48 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 244                                                                                                            
     "An Act relating to a grant  of state land to the Denali                                                                   
     Borough  for  a  railroad  and utility  corridor  and  a                                                                   
     railroad   development  project;  repealing   provisions                                                                   
     relating  to a  grant of  a right-of-way  of land  for a                                                                   
     railroad and  utility corridor to the  Alaska Industrial                                                                   
     Development and  Export Authority; and providing  for an                                                                   
     effective date."                                                                                                           
Co-Chair Williams provided members  with a proposed committee                                                                   
substitute,  work draft  22-LS0850\) Cook,  4/23/01 (copy  on                                                                   
REPRESENTATIVE JEANETTE  JAMES, SPONSOR testified  in support                                                                   
of the legislation.  She observed that the  legislation would                                                                   
implement  a  northern  [rail] access  into  Denali  National                                                                   
Park. It  would go approximately  40 miles from Healy  to the                                                                   
edge of  the park. The access  would be through  state lands.                                                                   
The proposal  has been around  for approximately  nine years.                                                                   
Legislation  was passed  in 1998 to  allow Alaska  Industrial                                                                   
Development  and Export  Authority  (AIDEA) to  bond for  the                                                                   
project.  The bonding  did not  occur.  The 1998  legislation                                                                   
would  have transferred  40,000  acres  within a  90,000-acre                                                                   
corridor  to the  Denali  Borough  to be  used  in the  lands                                                                   
selection.  The lands  remaining after  selection would  have                                                                   
been returned to the state. The  land transfer did not occur.                                                                   
She  concluded that  it  makes more  sense  to determine  the                                                                   
location of the  right-of-way prior to the  land transfer and                                                                   
to  assure  that  there  are no  existing  interests  in  the                                                                   
corridor. Under  the proposed  committee substitute  a survey                                                                   
would occur  prior to the land  transfer. After the  route is                                                                   
determined approximately 3,500  acres would be transferred to                                                                   
the Denali  Borough and  would become  part of their  borough                                                                   
entitlement from  the state.  She acknowledged objections  to                                                                   
the  legislation.  She noted  that  there are  concerns  that                                                                   
additional  access is  not needed  or that  a southern  route                                                                   
could be used.                                                                                                                  
TAPE HFC 01 - 96, Side A                                                                                                      
In  response   to  a   question  by  Representative   Davies,                                                                   
Representative  James  clarified  that  the  lands  would  be                                                                   
disposed  under  the  same  proposal   as  entitlements.  She                                                                   
pointed out that  an environmental impact statement  would be                                                                   
needed  before  a railroad  could  be  built. Land  would  be                                                                   
disposed as part  of the Denali Borough's  state entitlement.                                                                   
The  borough  has  45,000 acres  in  entitlements,  of  which                                                                   
approximately 20,000 have been received.                                                                                        
MARY   KAYE  HESSION,   DEPARTMENT   OF  NATURAL   RESOURCES.                                                                   
ANCHORAGE, testified  via teleconference. She noted  that the                                                                   
bill  requires   the  Department  of  Natural   Resources  to                                                                   
transfer  up to  3,500  acres  of state  land  to the  Denali                                                                   
Borough for a future railroad  towards Kantishna. In order to                                                                   
reach  Kantishna, the  railroad  will need  to continue  west                                                                   
across  National  Park lands.  The  Borough  and the  private                                                                   
Kantishna Holdings  Inc. would work to identify  and survey a                                                                   
railroad route across this land.                                                                                                
The  proposed  committee substitute  takes  care  of many  of                                                                   
department's concerns  regarding the original bill,  and is a                                                                   
more   efficient  approach   than  the   original  bill.   In                                                                   
particular, the department supports  inclusion of the land as                                                                   
part of the Borough's existing municipal land entitlement.                                                                      
Ms.  Hession observed  that Department  of Natural  Resources                                                                   
believes that  more effort  is needed  to determine  the best                                                                   
access route  into the  North Side  of Denali National  Park,                                                                   
and a railroad  in this corridor  may or may not be  the best                                                                   
approach.  The Department  of Natural  Resources is aware  of                                                                   
two other  planning efforts that  should be coordinated  with                                                                   
the railroad  project. The  Department of Transportation  and                                                                   
Public  Facilities  is  slated  to receive  $1.5  million  in                                                                   
federal funding for an Environmental  Assessment of the North                                                                   
Side access. This  effort is the subject of  an appropriation                                                                   
for the  state matching funds,  which is contained  in Senate                                                                   
Bill 3. The National Park Service  has also invited the state                                                                   
to participate  in a  study of North  side access  issues and                                                                   
alternatives.  The   proposed  railroad  route   would  cross                                                                   
National  Park  Service  land  and cannot  be  built  without                                                                   
National Park Service concurrence.  The Department of Natural                                                                   
Resources  believes that  it is  essential to  work with  the                                                                   
National Park service  to achieve an agreed  upon access plan                                                                   
for Denali National  Park. She emphasized that  no unilateral                                                                   
state or  borough effort  can achieve  access into  the park,                                                                   
unless  the National  Park Service  is a  participant in  the                                                                   
Ms.  Hession  noted  that  the  department's  second  concern                                                                   
regards what  rights the bill  grants to Kantishna  Holdings,                                                                   
Inc.  Once the  corridor is  identified,  the implication  is                                                                   
that  Kantishna  Holdings,  Inc., would  have  the  exclusive                                                                   
right to  build a  railroad in  the corridor. The  department                                                                   
believes that the  land should be conveyed to  the Borough so                                                                   
that other uses  or developers could make use of  the land as                                                                   
well,  not  only  for  the  purpose   of  enabling  Kantishna                                                                   
Holdings, Inc. to develop a railroad  and related facilities,                                                                   
as stated in Section 1(a).                                                                                                      
Ms. Hession  discussed the  Department of Natural  Resources'                                                                   
fiscal  note.  The  department  would need  to  provide  land                                                                   
status  information,  identify  valid  existing  rights,  and                                                                   
participate   in  the  corridor   selection  process.   Costs                                                                   
associated with  the actual land  transfer were  included for                                                                   
FY 2006.                                                                                                                        
Representative  John  Davies  questioned  if  the  conveyance                                                                   
would involve a best interest  finding. Ms. Hession explained                                                                   
that the  conveyance for land  entitlements is  basically the                                                                   
same  as the  normal  state land  disposal  process. A  draft                                                                   
decision  would receive  public review  and comment before  a                                                                   
final  decision  is made.  The  most  significant  difference                                                                   
would be in regards to the transfer  of the deed, which would                                                                   
not occur before  changes to the Tanana Basin  Area Plan were                                                                   
made. The public comment process is nearly identical.                                                                           
Representative  Croft referred to  subsection (d) on  page 2,                                                                   
line 14.  He noted that other  provisions of AS 29.65  do not                                                                   
apply.  He questioned  what public process  would apply.  Ms.                                                                   
Hession  responded  that  the  public  process  is  primarily                                                                   
contained  AS  38. Under  subsection  (d) the  Department  of                                                                   
Natural Resources would not have  to check the classification                                                                   
of the  land for  the grant  program. She  did not  know what                                                                   
other  provisions  of  Title  29 would  be  exempted  by  the                                                                   
language. There are no exemptions  on Title 38, which governs                                                                   
public notice and comment.                                                                                                      
Representative Croft noted that  the legislation provides the                                                                   
grant for the  purpose of supporting economic  development by                                                                   
Kantishna  Holdings, Inc. He  asked what  would occur  if the                                                                   
legislation were  passed and the Denali Borough  decided that                                                                   
they  wanted  to  deal  with   another  entity.  Ms.  Hession                                                                   
acknowledged  that  the  department  is  concerned  that  the                                                                   
Boroughs' hands might be tied  and its ability to deal with a                                                                   
competitor  or  use the  land  for  other purposes  would  be                                                                   
limited.  The   department's  hope   was  that  the   Borough                                                                   
government  would have  as much  freedom as  possible to  use                                                                   
their municipal land entitlement.                                                                                               
Representative James noted that  the Kantishna Holdings, Inc.                                                                   
is   a  private   rural   corporation   that  was   developed                                                                   
specifically for  the project.  They would provide  the money                                                                   
and own and operate the project.                                                                                                
DAVID   BRAUN,  HEALY,   testified   via  teleconference   in                                                                   
opposition  to HB  244.  He maintained  that  the Borough  is                                                                   
trying to pull a "fast one." He  maintained that the bill has                                                                   
very little to  do with a railroad. It is only  a vehicle for                                                                   
the Denali  Borough to bypass  state government,  and acquire                                                                   
real  estate that  has  previously  been denied  them.  "This                                                                   
railroad  will   likely  not  get  built  for   economic  and                                                                   
political reasons,  but the Borough  Assembly will  still get                                                                   
land in  the wolf townships that  they have coveted  for many                                                                   
Mr.  Braun   questioned  why   the  land  is   being  handled                                                                   
differently from other entitlements.  He pointed out that the                                                                   
first draft  of HB  244 was not  available until  the Borough                                                                   
Assembly meeting  of April  7, 2001.  He maintained  that the                                                                   
bill has moved at an accelerating  pace. He asserted that the                                                                   
spirit of  the 24-hour rule  has been violated.  He disagreed                                                                   
with statements  that  only those  who live  in the area  are                                                                   
opposed to  the plan.  "The State of  Alaska itself  has kept                                                                   
development out  of these townships  for decades.  There have                                                                   
been no public  hearings on the matter;  Representative James                                                                   
has said that she will meet with  the public in the summer to                                                                   
reassure  us -  after it  is all  done.  I would  ask you  to                                                                   
remember  your  own  response  when  the  Federal  Government                                                                   
imposes its will on the State of Alaska."                                                                                       
Mr. Braun  argued that  it is not  clear that developing  the                                                                   
wolf  townships is  in  the best  economic  interests of  the                                                                   
state. He  stated that  many residents  and tourists  have no                                                                   
interest in the  national park experience and  felt that many                                                                   
more people visit the Wolf Townships  than are turned away by                                                                   
the parks bus system.                                                                                                           
Co-Chair  Williams stated  that  he did  not  think that  the                                                                   
legislation would  pass during the first session  of the 22nd                                                                   
Representative Croft summarized  that the Borough has request                                                                   
the  land  in   the  past  and  that  requirements   on  land                                                                   
entitlements have  prevented them  from getting it.  He asked                                                                   
what were  the Borough's prior  attempts to get the  land and                                                                   
what  prevented  them  from receiving  the  land.  Mr.  Healy                                                                   
recalled statements at Borough  meetings that the borough had                                                                   
been blocked from applying for selection of the lands.                                                                          
Representative Croft  summarized that the Denali  Borough had                                                                   
asked for  the land as  an entitlement  in the past  and that                                                                   
some  section of  the law  regarding entitlements  prohibited                                                                   
them from getting it. Mr. Braun  stated that it was suggested                                                                   
that  the  land  was off  limits  to  the  Borough  selection                                                                   
process.  Representative  James  acknowledged  that  politics                                                                   
were involved.                                                                                                                  
LINDA  PAGANELLI,  HEALY,  testified  via  teleconference  in                                                                   
opposition to the legislation.  She stated that she supported                                                                   
efforts to  address solutions  to park  access, she  does not                                                                   
support the  North Access contained  in HB 244.  She stressed                                                                   
that  the North  Access proposal  speculates  that the  route                                                                   
will  continue through  the National  Park  to Kantishna  and                                                                   
that the  demand will exist  for year around  operation, that                                                                   
350-900 permanent  jobs will be created and  that the present                                                                   
40 mile rail  route, which would provide  minimum opportunity                                                                   
for mountain  or wildlife view  will provide visitors  with a                                                                   
satisfactory experience.  She maintained that  a demonstrated                                                                   
need for  the north  access should be  clearly defined  and a                                                                   
route  that  best  serves  the  state's  interest  should  be                                                                   
identified.  The Department  of  Natural Resources,  National                                                                   
Park Service  and the United  States Congress  recognize that                                                                   
the  area in  question  serves as  an  important habitat  for                                                                   
wildlife.  She  asserted  that  the lands  should  remain  in                                                                   
public ownership  and not be  transferred to the  Borough for                                                                   
purposes  of  economic  development. Changes  to  the  Tanana                                                                   
Basin  Area Plan  should  follow  procedures  as outlined  in                                                                   
statute.  She  expressed concern that the  legislation grants                                                                   
sole  rights for  project  development  to one  company.  She                                                                   
questioned  where  the  state  of  Alaska's  interest  is  in                                                                   
bestowing   this  "sweetheart   deal"  and  a   legislatively                                                                   
mandated seat  at the planning  table to Kantishna  Holdings,                                                                   
Inc. There  are safeguards in  the Alaska State  Constitution                                                                   
to  protect citizens  from individuals  that  may be  serving                                                                   
their own self-interest by providing  a legislative guarantee                                                                   
to a specified contractor. The  Denali Borough government has                                                                   
no planning  experience. Local government officials  would be                                                                   
relying  on a  private  consulting  firm and  developer  with                                                                   
their own  undisclosed agendas.  She questioned if  Kantishna                                                                   
Holdings,  Inc. would  be able  to make good  on their  claim                                                                   
that zero public funds would be  needed. She asked what would                                                                   
occur if  the company abandons  the project. She  recommended                                                                   
that the  legislation contain a  sunset date as  discussed in                                                                   
the  House  Transportation  Committee hearing  on  April  17,                                                                   
2001, which would allow the land  to revert back to the state                                                                   
if no development occurs by a specific date.                                                                                    
In   response   to   a   question    by   Vice-Chair   Bunde,                                                                   
Representative  James noted that  the Borough  has a  bed tax                                                                   
and a severance tax on the Usibelli Coal Mine.                                                                                  
NANCY  BALE,  ANCHORAGE,  testified   via  teleconference  in                                                                   
opposition  to  the legislation.  She  pointed  out that  the                                                                   
legislation  does   not  provide  a  safeguard   against  the                                                                   
building of roads  as a consequence of  railroad construction                                                                   
and subsequent  development.  The land  grant of 3,500  acres                                                                   
would  be  in  violation  of   the  Tanana  Basin  Area  Plan                                                                   
recommendation  is accompanied  by  no covenants  prohibiting                                                                   
the building  of roads associated with  economic development.                                                                   
There  is  no  guarantee  of a  best  interest  finding.  She                                                                   
maintained  that development  would  be  inevitable once  the                                                                   
corridor is open.                                                                                                               
Ms. Bale  referred to the  North Access Feasibility  Study of                                                                   
1997.  The  cost of  building  a  railroad according  to  the                                                                   
document  is staggering.  She  maintained  that  a more  cost                                                                   
effective  hotel/development scheme  along the Parks  Highway                                                                   
would involve  less potential  resource damage, more  control                                                                   
and less  expenditure of state  funds. She urged  legislators                                                                   
to evaluate  the Parks Highway  corridor first. The  State of                                                                   
Alaska  is  at  this  time  embarking  on  a  study  of  this                                                                   
corridor. "Let us  step back and have a look  at what already                                                                   
needs  fixing   and  comprehensive   planning,  with   public                                                                   
involvement,  before  we fund  a  private contractor  with  a                                                                   
giveaway of sensitive lands."                                                                                                   
In  response to  a  question by  Vice-Chair  Bunde, Ms.  Bale                                                                   
explained  that the  land in question  is a  feedlot for  the                                                                   
park caribou  and their predators.  There are no  controls on                                                                   
the legislation.                                                                                                                
JOE  FIELDS, PRESIDENT,  KANTISHNA  HOLDINGS INC.,  ANCHORAGE                                                                   
testified  in  support. He  stated  that  it is  still  their                                                                   
intent  not to  use public  money on  the construction  site.                                                                   
Government  has proposed  bringing money  to the project.  He                                                                   
stressed  that they  are trying  to  create a  public/private                                                                   
relationship   and  provide  environmental   access   to  the                                                                   
community. The  public process  would be fully  utilized. The                                                                   
proposal   would  generate  new   economic  development.   He                                                                   
stressed  that   the  intent   is  to  create   new  economic                                                                   
development  in a region  that was  bypassed by the  pipeline                                                                   
and missile defense proposals.                                                                                                  
In response  to a  question by  Vice-Chair Bunde, Mr.  Fields                                                                   
noted  that the  Denali  Borough Assembly  expressed  support                                                                   
through a resolution  passed in 1993. On April  18 [2001] the                                                                   
Assembly  expressed unanimous  support for  the proposal.  He                                                                   
added  that  the  current  road is  a  corridor  between  two                                                                   
wilderness  areas   of  the  Park.   The  park   road  serves                                                                   
approximately  4,000 of  6.4 million  acres.  The south  side                                                                   
development proposal  would not  provide any access  into the                                                                   
Representative  James  pointed out  that  there  was a  $1.32                                                                   
million  dollar federal  appropriation available  for an  EIS                                                                   
study.  The Senate  has  included  funding in  the  operating                                                                   
budget to provide the state match.                                                                                              
Representative  Foster  MOVED  to  ADOPT  proposed  committee                                                                   
substitute,  work  draft  22-LS0850\)  Cook,  4/23/01.  There                                                                   
being NO OBJECTION, it was so ordered.                                                                                          
Representative Hudson MOVED to  ADOPT Amendment 1 provided by                                                                   
Representative  James  (copy  on  file.)  Amendment  1  would                                                                   
Eliminate "By  September 1 2002"  on page 1, line  14; insert                                                                   
"except where  needed for  construction or for  environmental                                                                   
considerations   or    for   required   ancillary    facility                                                                   
development"  on page  2, line  2 and replace  " September  1                                                                   
2002" with  "upon the submission  of the survey"  There being                                                                   
NO OBJECTION, it was so ordered.                                                                                                
Representative  Croft  expressed  concern with  the  language                                                                   
"purpose of  supporting economic  development in  the borough                                                                   
by enabling Kantishna  Holdings, Inc. and its  successors and                                                                   
assigns in interest."  He felt that the language  would allow                                                                   
litigation  based on  a challenge  to the  purpose and  would                                                                   
provide difficulties if a further partnership were engaged.                                                                     
Representative   James  understood   Representative   Croft's                                                                   
concerns but did not share them.                                                                                                
Representative  Croft spoke  in support  of the deletion.  He                                                                   
stressed that it  would provide a broader authority  and make                                                                   
it less susceptible to challenge.  Representative Croft MOVED                                                                   
to Adopt Amendment  2: delete "for the purpose  of supporting                                                                   
economic  development in  the borough  by enabling  Kantishna                                                                   
Holdings, Inc.  and its successors  and assigns  in interest"                                                                   
on page 1, lines 9 - 11.                                                                                                        
Representative  John Davies questioned  why would  state land                                                                   
be  provided  for  the  purpose   of  design.  Representative                                                                   
Whitaker noted  that there  are significant costs  associated                                                                   
with the design aspect of the  project and suggested that the                                                                   
land should be available as assurance.                                                                                          
Representative Foster OBJECTED to Amendment 2.                                                                                  
Representative James  did not think that the  amendment would                                                                   
kill the bill, but stated that  she would prefer to leave the                                                                   
language in the legislation.                                                                                                    
Representative Croft WITHDREW Amendment 2.                                                                                      
TAPE HFC 01 - 96, Side B                                                                                                      
Representative  Foster MOVED  to report  CS out of  Committee                                                                   
with the accompanying fiscal note.  There being NO OBJECTION,                                                                   
it was so ordered.                                                                                                              
CSHB  244 (FIN)  was REPORTED  out  of Committee  with a  "do                                                                   
pass" recommendation  and with a previously  published fiscal                                                                   
impact (#1) note by the Department of Natural Resources.                                                                        

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