Legislature(2011 - 2012)HOUSE FINANCE 519

04/02/2012 09:30 AM FINANCE

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09:36:00 AM Start
09:36:07 AM HB361
09:57:39 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time Change --
Moved CSHB 361(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 361                                                                                                            
     "An  Act relating  to the  Alaska  Land Act,  including                                                                    
     certain lease,  sale, and other disposal  of state land                                                                    
     and  materials; relating  to production  royalties from                                                                    
     miners;  relating to  rights to  use  state water;  and                                                                    
     providing for an effective date."                                                                                          
9:36:07 AM                                                                                                                    
Representative Edgmon MOVED to ADOPT Amendment 4:                                                                               
     Page 17, Line 26 through Page 18, Line 3:                                                                                  
          Delete all material.                                                                                                  
          Renumber following bill sections accordingly.                                                                         
Co-Chair Stoltze OBJECTED for purpose of discussion.                                                                            
Representative Edgmon  explained the purpose of  Amendment 4                                                                    
was  to delete  Section  26, on  page 17  of  the bill.  The                                                                    
amendment   accomplishes    the   removal    of   unintended                                                                    
consequences   of    transforming   temporary    water   use                                                                    
authorization    into   a    permanent   water    right   or                                                                    
authorization.  He  offered  the amendment  while  being  in                                                                    
support of the bill.                                                                                                            
Co-Chair  Stoltze WITHDREW  his  OBJECTION.  There being  NO                                                                    
further OBJECTION, Amendment 4 was adopted.                                                                                     
9:39:30 AM                                                                                                                    
AT EASE                                                                                                                         
9:40:08 AM                                                                                                                    
Representative Gara MOVED to ADOPT Amendment 5:                                                                                 
          Page 7, line 24:                                                                                                      
          insert after the word "operations": "that                                                                             
          generate less than $10,000 in annual gross                                                                            
Co-Chair Stoltze OBJECTED for purpose of discussion.                                                                            
Representative  Gara referred  to  page 7  of  the bill.  He                                                                    
pointed out  there was no  definition of  "small operations"                                                                    
that  would  be exempted  from  the  production royalty.  He                                                                    
explained  the   need  for  some  limitation   before  being                                                                    
exempted from  the royalty tax.  The amendment  offered that                                                                    
small  mining  operations  producing less  than  $10,000  in                                                                    
annual  gross income  be exempted.  He wanted  to make  sure                                                                    
that larger  companies were  not able  to avoid  the royalty                                                                    
payment. He  did not know if  that was the intention  of the                                                                    
WYN MENEFEE,  OPERATIONS MANAGER,  DIVISION OF  MINING, LAND                                                                    
AND WATER,  DEPARTMENT OF NATURAL RESOURCES  stated that the                                                                    
$10,000 gross  income is  in the  ballpark. He  believed the                                                                    
limit  was more  appropriate  in regulation  because of  the                                                                    
variable prices  of minerals. There might  be fluctuation in                                                                    
the  prices  of  gold  versus silver  versus  platinum.  The                                                                    
administration perspective  believed it would be  better for                                                                    
the department to address the dollar number in regulation.                                                                      
Vice-chair Fairclough referred  to an earlier Representative                                                                    
Seaton  gravel  bill  [HB  89]  and  believed  there  was  a                                                                    
different    threshold   that    expanded   the    reporting                                                                    
requirements because  of the  auditing burden.  She remarked                                                                    
that it was around the $40,000 mark.                                                                                            
Representative Neuman agreed that  the Department of Revenue                                                                    
testified  they had  removed all  taxes because  it was  too                                                                    
Mr.  Menefee  interjected  that the  present  bill  and  the                                                                    
gravel bill [HB  89] do not link together.  The royalties in                                                                    
HB 361  are on  locatable minerals. The  other bill  [HB 89]                                                                    
referred to a mining license tax.                                                                                               
Representative Gara commented that  gravel extraction is for                                                                    
public purpose therefore,  it is important to  keep the cost                                                                    
down. Mining is not extraction  for a public purpose, but it                                                                    
is  for  the  private  operator's profit.  He  is  happy  to                                                                    
accomplish  the  change  in   regulation,  but  without  any                                                                    
language  in the  bill there  is no  control over  where the                                                                    
limit is set. He remarked that  he would be happy to work on                                                                    
better language before  the bill hits the  floor. At present                                                                    
there was nothing in the  bill stating someone would not pay                                                                    
taxes even if  they made a lot more money.  He thought it to                                                                    
be an  unconstitutional delegation of powers.  There must be                                                                    
standards for the agency.                                                                                                       
Mr. Menefee  indicated the department  could try to  work on                                                                    
better language.  He added  that he would  rather not  see a                                                                    
dollar amount, but the state  would not be obtaining royalty                                                                    
payments anyway  as it  is a net  royalty amount.  He agreed                                                                    
there  could be  some  different language  crafted, but  the                                                                    
challenge  would be  in finding  the correct  language since                                                                    
net  royalties can  also be  exempted on  larger operations.                                                                    
The  intention  is  to  deal   with  groups  extracting  and                                                                    
developing   a  small   amount   of   mineral  product.   He                                                                    
acknowledged that  he would  try to  work on  redrafting the                                                                    
Representative Gara WITHDREW Amendment 5.                                                                                       
9:46:55 AM                                                                                                                    
Representative Gara MOVED to ADOPT Amendment 6:                                                                                 
          page 18, line 3:                                                                                                      
          insert after "project": "if the current standards                                                                     
          for issuing a temporary water use authorization                                                                       
          under this section are met."                                                                                          
Co-Chair Stoltze OBJECTED for purpose of discussion.                                                                            
Representative Gara  explained the amendment had  to do with                                                                    
granting  water   use  authorization  permits  that   use  a                                                                    
significant amount of water.                                                                                                    
Co-Chair Stoltze  interrupted that  a similar  amendment had                                                                    
just been passed.                                                                                                               
Representative Gara WITHDREW Amendment 6.                                                                                       
9:48:07 AM                                                                                                                    
Vice-chair  Fairclough summarized  the  three fiscal  notes.                                                                    
The first  from the  Department of Natural  Resources listed                                                                    
that  from  FY  13 to  FY  18  a  zero  fiscal note  and  an                                                                    
indeterminate in  the change to revenues.  The second fiscal                                                                    
note,   the   Department   of  Transportation   and   Public                                                                    
Facilities, stated that  from FY 13 to FY 18,  a zero fiscal                                                                    
note  and  zero  changes  to revenue.  And  the  third,  the                                                                    
Department of Fish and Game, was  a zero fiscal note from FY                                                                    
13 to FY 18.                                                                                                                    
Representative  Doogan revealed  that he  did not  think the                                                                    
legislature should  be handing legislative authority  to the                                                                    
agencies  to  make  public  policy  decisions.  The  Finance                                                                    
committee makes policy  by deciding how much  money is given                                                                    
back or  taken away from  companies and people.  He believed                                                                    
there has  been a  habit of  handing out  exemptions through                                                                    
legislation or  methods such  as revealed in  the bill.   He                                                                    
voiced his  concerns, but  indicated he  would not  keep the                                                                    
bill from moving out of committee.                                                                                              
Representative  Neuman  asked  the department  about  fiscal                                                                    
note  3002.  In  the  language   section,  on  page  2,  the                                                                    
Department  of  Revenue  (REV)  mentions  that  the  primary                                                                    
benefit  would come  from the  savings  costs through  staff                                                                    
time  saved  in  less  auditing and  royalty  paperwork.  He                                                                    
stressed  that considerable  legislation passed  through the                                                                    
committee  referencing cost  savings,  but efficiencies  are                                                                    
never seen. The  fiscal note said the savings  would go into                                                                    
more pressing mining issues. He  wondered if that just moves                                                                    
manpower around and exactly where  would the savings be seen                                                                    
and how  would it  be measured.  Mr. Menefee  responded that                                                                    
the  savings and  staff efficiencies  would come  in several                                                                    
different  ways  through the  bill.  He  noted that  if  the                                                                    
current  backlog   could  be   finished  and   new  incoming                                                                    
applications  were   kept  current,  the   department  could                                                                    
reallocate  staff time.  The savings  in one  area does  not                                                                    
automatically mean it can be cut  out of budget as the staff                                                                    
will  be needed  to catch  up  with the  backlog. The  other                                                                    
savings would come to the  applicant who will need less time                                                                    
waiting  for  their application  to  be  processed. A  third                                                                    
savings is in the cost  for the applicant. The applicant may                                                                    
not have  to go to public  notice for an auction  or another                                                                    
9:53:45 AM                                                                                                                    
Representative Neuman  asked whether there was  an exact way                                                                    
to measure the  number of people being helped  and the staff                                                                    
reduction  time. Mr.  Menefee  responded that  he had  given                                                                    
some  cost  savings  examples to  the  committee  before.  A                                                                    
savings  of   130  days  off  a   material  sale  processing                                                                    
translates  into   2600  hours   of  time  savings   to  the                                                                    
applicants in a year. The  staff savings time would be less.                                                                    
The amount  of savings  will be incremental  and challenging                                                                    
so hard to predict  accurately. Representative Neuman stated                                                                    
that he  wanted to return  to the Missions and  Measures and                                                                    
the ultimate goal of measuring department efficiency.                                                                           
Co-Chair  Stoltze pointed  out the  value of  the bill  when                                                                    
more money  was being spent on  a $10,000 lease then  it was                                                                    
worth. He  agreed the department's  time was  important, but                                                                    
also the  public's time. The  bill creates a  more efficient                                                                    
Representative Doogan  agreed, but  voiced his  concern that                                                                    
there  was no  upper limit  in the  bill. He  would be  more                                                                    
comfortable  if  there was  a  ceiling.  The legislature  is                                                                    
giving the power to the  department to do whatever they want                                                                    
and that did not make him comfortable.                                                                                          
9:57:39 AM                                                                                                                    
Representative  Costello  commented   that  the  legislature                                                                    
would like departments  to come and tell  them about finding                                                                    
efficiencies  that  have  grown  out of  the  expertise  and                                                                    
decades-long  hands-on involvement  that state  workers have                                                                    
with the  issues. The process  has been  a long time  in the                                                                    
making. In the bill, the  department has indicated they will                                                                    
be   reviewing   some   of   the   statues   and   providing                                                                    
efficiencies.  She  signified  that   would  be  a  positive                                                                    
exchange   with  the   state,  executive,   and  legislative                                                                    
branches. She  hoped more  departments would  be forthcoming                                                                    
with similar legislation.                                                                                                       
Vice-chair Fairclough MOVED to report  CSHB 361 (FIN) out of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
CSHB  361(FIN) was  REPORTED  out of  committee  with a  "do                                                                    
pass" recommendation and with  new indeterminate fiscal note                                                                    
from  the Department  of  Natural  Resources and  previously                                                                    
published zero fiscal notes: FN1 (DFG), FN2 (DOT).                                                                              

Document Name Date/Time Subjects
HB361 HF followup questions 3-21-12.pdf HFIN 4/2/2012 9:30:00 AM
HB 361
HB361 Amendments 3-4 Gara Edgemon.pdf HFIN 4/2/2012 9:30:00 AM
HB 361