Legislature(2015 - 2016)HOUSE FINANCE 519

04/12/2016 08:30 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time --
+ HB 300 FISH/SHELLFISH HATCHERY/ENHANCE. PROJECTS TELECONFERENCED
Moved CSHB 300(FSH) Out of Committee
+ SB 32 TIMBER SALES TELECONFERENCED
Moved HCS CSSB 32(RES) Out of Committee
+ SB 145 RECOVERY OF PUB. ASSIST. OVERPAYMENTS TELECONFERENCED
Moved CSSB 145(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
CS FOR SENATE BILL NO. 32(RES)                                                                                                
                                                                                                                                
     "An Act relating  to the sale of timber  on state land;                                                                    
     and providing for an effective date."                                                                                      
                                                                                                                                
9:57:17 AM                                                                                                                    
                                                                                                                                
CHRIS MAISCH, DIRECTOR, DIVISION  OF FORESTRY, DEPARTMENT OF                                                                    
NATURAL RESOURCES,  provided a  quick overview of  the bill.                                                                    
The  bill  would  change the  authority  process  of  timber                                                                    
sales:                                                                                                                          
                                                                                                                                
     The  bill would  amend  AS 38.05.110  and 38.05.118  to                                                                    
     expand  the  authority  of the  Commission  of  Natural                                                                    
     Resources to negotiate the sale  of timber at appraised                                                                    
     value.                                                                                                                     
                                                                                                                                
     The Department  of Natural  Resources may  offer timber                                                                    
     sales  either   through  competitive  bid   or  through                                                                    
     negotiation.   Currently   under  AS   38.05.118,   the                                                                    
     Commissioner  of Natural  Resources  may negotiate  the                                                                    
     sale  of timber  to a  local manufacturer  at appraised                                                                    
     value.  However, negotiated  sales larger  than 500,000                                                                    
     board  feet  may  only  be offered  in  areas  of  high                                                                    
     unemployment,  excess  manufacturing capacity,  and  an                                                                    
     underutilized allowable  cut of timber.  These criteria                                                                    
     prohibit larger  negotiated timber sales in  many areas                                                                    
     of the  state that  are actively managed  for forestry,                                                                    
     and  where there  is high  demand for  wood for  timber                                                                    
     products and  biomass energy.  The proposed  bill would                                                                    
     provide   that,  in   addition   to   sales  to   local                                                                    
     manufacturers  of  wood  products, sales  may  also  be                                                                    
     negotiated  with  users  of  wood  fiber.  This  change                                                                    
     clarifies that negotiated sales  may be used to support                                                                    
     wood   energy  production   as   well  as   traditional                                                                    
     products.  In addition,  the bill  would eliminate  the                                                                    
     current  limitations that  negotiated  timber sales  be                                                                    
     based on a  finding that in the area of  the sale there                                                                    
     is  a  high  level of  unemployment,  an  underutilized                                                                    
     manufacturing capacity, and  an underutilized supply of                                                                    
     timber   that  will   lose  value   if  not   cut.  The                                                                    
     requirement   that   al   three   conditions   be   met                                                                    
     substantially  limits   the  Commissioner   of  Natural                                                                    
     Resources'   authority  and   flexibility  to   approve                                                                    
     negotiated sales that would be  in the best interest of                                                                    
     the State.                                                                                                                 
                                                                                                                                
     Competitively bid  timber sales are the  preferred sale                                                                    
     method  under  most   conditions.  However,  negotiated                                                                    
     sales provide the  ability to tailor some  sales to the                                                                    
     needs   of  local   processors  in   areas  that   lack                                                                    
     competitive  interest  or  where there  is  competition                                                                    
     from  round  log export  markets  in  a region  with  a                                                                    
     constrained timber supply.  The latter situation exists                                                                    
     in Southern Southeast Alaska where  the State of Alaska                                                                    
     is  small landowner  compared to  the Tongass  National                                                                    
     Forest, and  the State of  Alaska's full  allowable cut                                                                    
     is  a  critical  source  of   logs  for  the  remaining                                                                    
     sawmills.                                                                                                                  
                                                                                                                                
10:04:26 AM                                                                                                                   
                                                                                                                                
Representative Wilson  relayed that the pellet  plant was in                                                                    
North Pole.                                                                                                                     
                                                                                                                                
Representative  Kawasaki  remarked  that there  was  concern                                                                    
about the ability  of the commissioner to engage  in the 25-                                                                    
year  process. He  requested an  explanation  of the  5-year                                                                    
appraisal process.                                                                                                              
                                                                                                                                
Mr. Maisch replied  that sales occurred at a  base rate. The                                                                    
rate was  determined by an  appraisal that covered  the cost                                                                    
of  the  division  to  offer  and  administer  a  sale.  The                                                                    
division negotiated  from the base  rate point.  He stressed                                                                    
that  the 25  years was  the maximum,  and the  commissioner                                                                    
determined  the best  interest for  the  state. He  remarked                                                                    
that  financing was  the most  important  reason for  longer                                                                    
term sales. He explained that  there were no restrictions in                                                                    
the 120  sales to any  particular length of time.  He stated                                                                    
that, as  a matter of  practice, those sales  were typically                                                                    
three  to  five   years.  He  remarked  that   there  was  a                                                                    
reappraisal clause in both the contact and legislation.                                                                         
                                                                                                                                
Representative   Kawasaki   wondered  whether,   under   the                                                                    
reappraisal, there would be  another submitted best interest                                                                    
finding.                                                                                                                        
                                                                                                                                
Mr.  Maisch replied  in  the negative,  and  stated that  it                                                                    
would be a part of the contract.                                                                                                
                                                                                                                                
Co-Chair  Neuman  noted   that  the  legislation  considered                                                                    
negotiated  sales with  areas  with  high unemployment,  and                                                                    
wondered how those areas were identified.                                                                                       
                                                                                                                                
Mr. Maisch replied that it  was 125 percent of the statewide                                                                    
average. He shared that the  statewide average was published                                                                    
by the  DLWD was currently  6.5 percent. He stated  that the                                                                    
level must  be above  7.6 percent  to employ  the authority.                                                                    
The current unemployment rate in Ketchikan was Ketchikan.                                                                       
                                                                                                                                
Co-Chair  Neuman  asked  whether the  Fairbanks  and  Mat-Su                                                                    
boroughs qualified for the sales.                                                                                               
                                                                                                                                
Mr. Maisch  answered that currently  the areas did  not, but                                                                    
the  bill   would  allow  for  the   authority  consistently                                                                    
statewide.                                                                                                                      
                                                                                                                                
Co-Chair  Neuman  remarked that  the  timber  sales must  be                                                                    
added value sales, where they process the log.                                                                                  
                                                                                                                                
Mr. Maisch  answered in the  affirmative. He shared  that it                                                                    
had long been the  department's policy to encourage managing                                                                    
in Alaska.                                                                                                                      
                                                                                                                                
10:09:28 AM                                                                                                                   
                                                                                                                                
Co-Chair  Neuman wondered  if  the funds  would be  directed                                                                    
into forestry management in Southeast Alaska.                                                                                   
                                                                                                                                
Mr. Maisch  replied in the  affirmative, and  explained that                                                                    
currently  all the  forestry positions  in Southeast  Alaska                                                                    
were funded under the timber sale receipt authority.                                                                            
                                                                                                                                
Vice-Chair  Saddler  queried  what  would  occur  without  a                                                                    
timber source for the Viking Mill.                                                                                              
                                                                                                                                
Mr.  Maisch replied  that the  mill was  currently operating                                                                    
one forest service  sale to big foreign sales,  so there was                                                                    
roughly one  year of timber  under contract. He  stated that                                                                    
it was likely that there would  not be enough timber to keep                                                                    
the mill open, without the ability to negotiate sales.                                                                          
                                                                                                                                
OWEN  GRAHAM,  ALASKA  FOREST  ASSOCIATION,  KETCHIKAN  (via                                                                    
teleconference), spoke  in support of the  bill. He remarked                                                                    
that it was very difficult to have two operators operating.                                                                     
                                                                                                                                
10:12:52 AM                                                                                                                   
                                                                                                                                
CARL PORTMAN,  RESOURCE DEVELOPMENT COUNCIL,  ANCHORAGE (via                                                                    
teleconference),  testified  in  support of  the  bill.  The                                                                    
basic  premise of  the  bill was  to  allow long-term  sales                                                                    
where appropriate.                                                                                                              
                                                                                                                                
Vice-Chair Saddler CLOSED public testimony.                                                                                     
                                                                                                                                
Representative Kawasaki had originally  thought the bill may                                                                    
have  been related  to  special interest,  but  he had  come                                                                    
around and believed it was good policy.                                                                                         
                                                                                                                                
10:16:28 AM                                                                                                                   
                                                                                                                                
Representative Wilson supported the  bill. She remarked that                                                                    
the bill provided another way to best utilize the timber.                                                                       
                                                                                                                                
Co-Chair  Neuman  remarked  that   the  department  had  the                                                                    
opportunity  to offer  the high  value processing  timber or                                                                    
logging  companies to  enter into  contracts for  up to  $10                                                                    
million board of feet a  year consistent with principles for                                                                    
a  term of  up to  ten years.  He did  not believe  that the                                                                    
department had every utilized that allowance.                                                                                   
                                                                                                                                
Representative  Guttenberg  remarked  that  it  occasionally                                                                    
paid off to "not be first."                                                                                                     
                                                                                                                                
Co-Chair Thompson  addressed the  zero fiscal note  from the                                                                    
Department of Natural Resources (DNR).                                                                                          
                                                                                                                                
Co-Chair  Neuman MOVED  to REPORT  HCS CSSB  32(RES) out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal  note. There being NO  OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
HCS CSSB  32(RES) was REPORTED  out of committee with  a "do                                                                    
pass" recommendation and with  one previously published zero                                                                    
fiscal impact note: FN2 (DNR).                                                                                                  
                                                                                                                                
10:21:21 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
10:22:46 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                

Document Name Date/Time Subjects
HB 254 NEW FN DCCED CBPL 4-1-16.pdf HFIN 4/4/2016 1:30:00 PM
HFIN 4/12/2016 8:30:00 AM
HB 254
HB300 Letters of Support.pdf HFIN 4/12/2016 8:30:00 AM
HB 300
CSHB300(FSH)- Sectional Analysis.pdf HFIN 4/12/2016 8:30:00 AM
HB 300
CSHB300(FSH) Explanation of Changes 4-4-16.pdf HFIN 4/12/2016 8:30:00 AM
HB 300
HB300 Sponsor Statement - Governor's Transmittal letter.pdf HFIN 4/12/2016 8:30:00 AM
HB 300
CS SB 32 Briefing Paper.pdf HFIN 4/12/2016 8:30:00 AM
SB 32
CS SB 32 Letter of Support AFA.pdf HFIN 4/12/2016 8:30:00 AM
SB 32
CS SB 32 Letter of Support BOF.pdf HFIN 4/12/2016 8:30:00 AM
SB 32
CS SB 32 Letter of Support Denali Log.pdf HFIN 4/12/2016 8:30:00 AM
SB 32
SB145 Summary of Changes 041116.pdf HFIN 4/12/2016 8:30:00 AM
SB 145
CS SB 32 Letter of Support Logging and Milling Tok.pdf HFIN 4/12/2016 8:30:00 AM
SB 32
CS SB 32 Letter of Support Matanuska-Susitna Borough Support Resolution.pdf HFIN 4/12/2016 8:30:00 AM
SB 32
CS SB 32 Letter of Support RDC.pdf HFIN 4/12/2016 8:30:00 AM
SB 32
CS SB 32 Letter of Support SEC.pdf HFIN 4/12/2016 8:30:00 AM
SB 32
CS SB 32 Letter of Support TVSFCAC.pdf HFIN 4/12/2016 8:30:00 AM
SB 32
SB145 Sectional Analysis 041116.pdf HFIN 4/12/2016 8:30:00 AM
SB 145
SB145 Governor Transmittal Letter.pdf HFIN 4/12/2016 8:30:00 AM
SB 145
CS SB 32 Sponsor Statement.pdf HFIN 4/12/2016 8:30:00 AM
SB 32
CS SB 32 Sectional Analysis.pdf HFIN 4/12/2016 8:30:00 AM
SB 32
CS SB 32 Letter of Support Viking.pdf HFIN 4/12/2016 8:30:00 AM
SB 32
CS SB 32 Letter of Support Superior Pellets.pdf HFIN 4/12/2016 8:30:00 AM
SB 32
CS SB 32 Letter of Support Summary.pdf HFIN 4/12/2016 8:30:00 AM
SB 32
SB32_ 2016 Testimony _Knight.pdf HFIN 4/12/2016 8:30:00 AM
SB 32