Legislature(1993 - 1994)
04/22/1994 08:15 AM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
TAPE 94-62, SIDE B Number 000 SB 310 - STATE/PRIVATE/MUNI TIMBER OPERATION/SALE REPRESENTATIVE JAMES made a MOTION to AMEND CSSB 310(RES) as follows: Page 1, line 4: Delete "AS 38.05.112(c)" Insert "AS 38.05.112" Page 1, following line 4: Insert new material to read: "Sec. 38.05.112. FOREST LAND USE PLANS. (a) The department may not [SELL OR] harvest timber, except for isolated sales of less than 50,000 board feet [PERSONAL USE TIMBER HARVEST], until a site-specific forest land use plan has been adopted. A forest land use plan is required whether or not a regional or area land use plan under AS 38.04.065(a) or a forest management plan under AS 41.17.230 has been adopted. (b) The commissioner shall base a forest land use plan on the best available data, including information provided by other agencies [DESCRIBING THE IMMEDIATE AND LONG-TERM EFFECTS OF INDIVIDUAL AND COLLECTIVE FOREST ACTIVITIES ON THE TIMBER BASE AND ON OTHER RESOURCES AND USES]." Page 2, following line 14: Insert a new subsection to read: "(d) A management plan prepared by the commissioner under AS 41.17.230 or AS 38.04.065 must consider and permit the uses described in (c) of this section. If the commissioner finds that a permitted use is incompatible with one or more other uses in a portion of a state forest, the commissioner shall, consistent with AS 41.17.200, affirmatively state in the management plan that finding of incompatibility for the specific area where the incompatibility is anticipated to exist and the time period when the incompatibility is anticipated to exist together with the reasons for each finding. If the commissioner finds that the use described in (c)(1) of this section is incompatible, or otherwise restricts that use, the commissioner must also document the finding with sound scientific data that clearly proves the incompatibility and the benefits of the restriction." REPRESENTATIVE JAMES stated the amendment was requested by the Interior Alaska Forest Association in Fairbanks and contains the needed changes to provide options for the "little guy" to be able to continue in the timber industry. The first part of the amendment allows for sales of less than 50,000 board feet. She said that size of timber sales is not being done currently because the Division of Forestry feels those size sales are more trouble than what they are worth. The amendment will allow salvage sales and sale of timber which has been stacked, without going through the planning process. REPRESENTATIVE JAMES explained the other portion of the amendment provides that if the commissioner finds the permitted use is incompatible with one or more uses in a portion of a state forest, that there will be scientific evidence proving the incompatibility and the benefits of the restriction. Number 062 REPRESENTATIVE GREEN asked if a person has a hunting lodge with a vast panoramas, which is part of the reason the lodge is in a certain location, and a clearcut is allowed by a forest management agreement (FMA) affecting the lodge's view, will the proposed amendment have any impact. REPRESENTATIVE JAMES replied if trees have a direct relation to the person's livelihood, cutting the trees down is scientifically deteriorating to the business. She felt that person would be protected. She stated the intent of the language is to ensure that decisions are not made subjectively or politically. REPRESENTATIVE GREEN expressed concern about what is determined to be scientific and what is determined to be aesthetic. REPRESENTATIVE JAMES reiterated the amendment says if a permitted use is incompatible with one or more of the uses in the state forest. She gave several examples. Number 117 REPRESENTATIVE DAVIES made a MOTION to AMEND the AMENDMENT to CSSB 310(RES) on page 2, line 5, after the word "scientific" insert the words "or economic". REPRESENTATIVE MULDER OBJECTED for the purpose of discussion. REPRESENTATIVE DAVIES, referring to Representative Green's example of a hunting lodge, stated if the trees are cut down it is a scientific fact the trees are gone, but it would not be a scientific issue as to whether it impacted the value of the lodge. Rather, it would be an economic issue. REPRESENTATIVE JAMES stated she does not object to the amendment to the amendment. REPRESENTATIVE MULDER WITHDREW his OBJECTION. CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, the MOTION PASSED. REPRESENTATIVE FINKELSTEIN clarified the amendment says if the commissioner finds commercial logging to be incompatible with any other use in the forest, or if any other use even restricts commercial logging, the finding must be made with scientific data clearly proving the incompatibility. He felt that is a burden of proof which is nearly insurmountable. He stressed the state forests were set up not only for the timber value but also because of public use. He said currently, the commissioner is able to sell timber sales and only has to deal with local objections. REPRESENTATIVE JAMES stated Representative Finkelstein is assuming that FMAs are going to involve huge pieces of land, which is not necessarily true. She said a forest management plan could be a small parcel of timber land. The benefits and advantages of a forest management plan is it is a management plan as opposed to a timber sale, whereby reforestation and all of the other identified conditions needed to be maintained in that forest are the responsibility of the person who has the forest management plan. She felt there is a need to ensure that subjective information does not stop every sale. She pointed out it would be possible in a FMA to have a fishing or hunting lodge within the agreement, thereby protecting that lodge. Number 307 REPRESENTATIVE FINKELSTEIN stated the previous discussion assumes the amendment is a provision which affects FMAs and he felt it is not. He said the amendment is inserting a provision in the complete overall process and he felt the amendment is not restricted to FMAs. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES GREEN, MULDER, BUNDE, JAMES, CARNEY, HUDSON, and WILLIAMS. Voting against the amendment were REPRESENTATIVES DAVIES and FINKELSTEIN. The MOTION PASSED 7-2. CHAIRMAN WILLIAMS noted for the record that proposed amendments X21 and X23 have been withdrawn. REPRESENTATIVE JAMES made a MOTION to AMEND CSSB 310(RES) as follows: Page 2, line 31, following "land.": Insert "The commissioner shall identify the forest land included in the solicitation of proposals. The land identified may include land covered by a cooperative resource management or development agreement under AS 38.05.027, subject to the approval of the owner of any land than state land." Page 6, line 10, following "commissioner.": Insert "If the forest management agreement covers non- state land under an agreement authorized under AS 38.05.027, the owner of the land must approve the agreement." REPRESENTATIVE GREEN OBJECTED for discussion purposes. REPRESENTATIVE JAMES stated this amendment allows a FMA to include land owned by several other owners. The amendment also provides that everyone will know what land is being discussed through the commissioner identifying the forest land in the solicitation of proposals. She said the sponsor of SB 310 feels the amendment is fine. REPRESENTATIVE HUDSON said the key language in the amendment is "the owner of the land must approve the agreement." REPRESENTATIVE GREEN WITHDREW his OBJECTION. CHAIRMAN WILLIAMS stated no objections being heard, the MOTION PASSED. REPRESENTATIVE DAVIES made a MOTION to AMEND CSSB 310(RES) as follows: Page 8, following line 23: Insert a new bill section to read: "*Sec. 7. AS 41.17.230(a) is amended to read: (a) The commissioner shall prepare a management plan consistent with AS 38.04.005 and this chapter for each state forest and for each unit of a state forest to assist in meeting the requirements of this chapter. An operational level forest inventory shall be completed before a management plan for the state forest or the unit of a state forest is adopted. The management plan shall be adopted, implemented, and maintained within three years of the establishment of a state forest by the legislature. The management plan shall set a total amount of the harvestable timber of the forest or unit, not to exceed 75 percent, that may be the subject of forest management agreements under AS 38.05.122." REPRESENTATIVE MULDER OBJECTED. REPRESENTATIVE DAVIES stated the important part of the amendment is the underlined portion at the bottom. He said the amendment addresses one of the basic concerns people have in regard to large FMAs, which is there is incomplete information about the inventory. If there is an overestimation on what is available and the state commits to an offering based on that overestimate and is locked in for 20 years, there is no way to make an adjustment. He noted the other concern is by allowing a large fraction of the potential harvestable timber to go into an FMA, smaller operators are being eliminated. He stressed there are enough small operators in the Tanana Valley currently to take care of all the spruce there and there is no need for another plant in the Tanana Forest. REPRESENTATIVE DAVIES stated he does not want to prescribe for the entire state what the percentage of the allowable cut for FMAs should be. Rather, he wants the allowable cut to be set on a region by region basis in the management plan, which is consistent with the way SB 310 sets up the relationship between the FMA and the management plan--every FMA has to be consistent with the existing management plan. Number 330 REPRESENTATIVE JAMES felt the protections are already in the bill but she asked the sponsor to speak on the amendment. RICK SOLIE, AIDE, SENATOR STEVE FRANK, stated there is no need to further restrict a FMA by requiring a certain percentage of harvest because there is already a sustained yield requirement in law and the Division of Forestry has to maintain the requirement. He said there is no need to rewrite all of the Alaska statutes in SB 310 as there is the Forest Practices Act (FPA). The Division of Forestry is not going to allow a FMA until there is a sufficient inventory to determine that the sustained yield can be maintained. He felt the amendment is inappropriate and will hurt the spirit of giving the Department of Natural Resources (DNR) flexibility to do good FMAs, allowing for responsible sustained yield harvest. REPRESENTATIVE JAMES added that one of the requirements for a FMA is that existing operations be considered. She is not comfortable with including certain amounts in the bill. REPRESENTATIVE DAVIES stated it could be consistent with the sustained yield philosophy to allocate the entire forest under a FMA, because a FMA has to operate under sustained yield. The sustained yield requirement in the FPA does not restrict the percentage of the forest to be allocated to a FMA. He felt it is a philosophical question as to whether one wants to allow the entire forest to be harvested by one large operator or to preserve some portion of the forest for small operators. He agreed that SB 310 does protect existing small operators but does not protect future small operators. REPRESENTATIVE DAVIES pointed out that testimony suggests spruce are not even being discussed, but rather the development of a new forest operation in the Tanana Valley relating to low quality hardwoods. He stressed the issue is the allocation between large FMAs and small operators. He felt the management plan should address that issue. Number 404 REPRESENTATIVE JAMES thought there could be a FMA which includes some small operators. She said since existing small operators are already protected in the bill, she would like to leave that up to the decision of the FMA proposal and the public can respond during the public comment period. She did not feel there is a need for a further restriction. REPRESENTATIVE DAVIES stated SB 310 only protects existing small operators and does not preserve a niche for small operators to bid on the forest in the future. MR. SOLIE pointed out that the protection for existing operators is located on page 4, line 22, subsection (1). He said the bill does address consistency with management plans both on page 2, line 26 and page 4, line 26, subsection (2). He felt the amendment restricts more than necessary. REPRESENTATIVE FINKELSTEIN reiterated the lines referred to do not speak to any future base for the small operators and their ability to run their small mills. REPRESENTATIVE DAVIES agreed SB 310 does provide for protection of existing operators and does require that a FMA operate under existing land use plans but his concerns are still not addressed. First, there is a possibility of an error in the inventory. Second, the bill does not protect the niche for small operators. Finally, the land use plans are not required to consider the percentage of forest to be allocated to FMAs. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES DAVIES, CARNEY, and FINKELSTEIN. Voting against the amendment were REPRESENTATIVES MULDER, JAMES, GREEN, BUNDE, HUDSON, and WILLIAMS. The MOTION was DEFEATED 6-3. Number 525 REPRESENTATIVE DAVIES made a MOTION to AMEND CSSB 310(RES) as follows: Page 2, line 29, following "yield.": Insert "The commissioner may only enter into one forest management agreement that covers land within each state forest in a three-year period. The commissioner may only enter into one forest management agreement in a three-year period in each region of the state for which a regional land use plan has been adopted or is to be adopted for land outside of state forests. In this subsection, "state forest" has the meaning given in AS 41.17.950." REPRESENTATIVE MULDER OBJECTED for purposes of discussion. REPRESENTATIVE DAVIES stated this amendment addresses the concern regarding the forest being tied up in a series of large agreements and being renewed for a long period of time, with no possibility of responding to changing circumstances in the forest. He said this amendment limits the number of FMAs entered into in any three year period. He pointed out that because the prior amendment was not passed, there is still a possibility of having the entire forest tied up in FMAs but with this amendment, every three years, there would be an opportunity to revisit at least one agreement. REPRESENTATIVE JAMES stated this amendment also assumes the FMAs are going to be large. She pointed out that the bill provides for an annual solicitation. She did not feel comfortable binding the department. She felt it should not be assumed that because a solicitation is put out, there will be response. She added there may also be unsolicited FMAs. She commented just because the state is ready to sell timber, does not mean there will be a buyer and to put restrictions on the commissioner, may close the door to some opportunities. Based on that, she objected to the amendment. REPRESENTATIVE MULDER felt there will be two adverse affects in adopting the proposed amendment. He stated a bind will be put on the small companies as the amendment will not just involve big companies being bound to one contract, but also the small companies. He said there may be a niche requiring several small companies for different needs. He also felt the amendment puts further restraint on the economic feasibility. He stressed the purpose of SB 310 is to promote economic diversity and opportunity and the amendment hinders that opportunity. MR. SOLIE stated the amendment will limit the time of the certainty of a FMA to three years. He stressed it is fundamental to have some certainty in order for a company to be able to get financing to construct the value-added facilities, which will create long-term stable jobs. The sponsor opposes the amendment. REPRESENTATIVE DAVIES said he is not proposing limiting the length of a FMA. The amendment only says a FMA can be entered into every three years. The purpose is to stagger the FMAs in time and serves as a management tool for the department. He stated no one is going to go through the process to establish a FMA for a small sale. The purpose of a FMA is to capitalize a new plant and a new plant is not going to be built based on a small sale. Rather, the sale will involve a large portion of the forest, guaranteeing a large resource in the future in order to get financing for a value-added plant. He said there is a need to preserve some operations for small operators and preserve the ability for DNR to manage the forest in the best way possible. He stressed whether or not SB 310 is passed, there will continue to be small lease sales and small plants. He reiterated that FMAs are not directed at small operations. REPRESENTATIVE GREEN asked if the amendment precludes the Native associations. TAPE 94-63, SIDE A Number 000 REPRESENTATIVE DAVIES replied the amendment does not apply to private land, but to state land only. REPRESENTATIVE GREEN noted the amendment says "land outside of state forests." REPRESENTATIVE DAVIES said the regional land use plan may cover portions of state land that are not classified as state forests. Timber sales can be offered on land which is not classified as state forests. REPRESENTATIVE HUDSON stated the earlier amendment by Representative James which was adopted does include private land within the forest (indiscernible). He said whatever is done with the proposed amendment will couple with the private operator. REPRESENTATIVE DAVIES noted the previous amendment addressed FMAs and cooperative land sales. The portions under the state forests would satisfy the requirement that it was a sale on state land within a regional land use area. He pointed out that what is being discussed is a regional land use plan not under the FMA. Number 030 CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES FINKELSTEIN, DAVIES, and CARNEY. Voting against the amendment were REPRESENTATIVES JAMES, BUNDE, MULDER, HUDSON, and WILLIAMS. The MOTION was DEFEATED 5-3. Number 039 REPRESENTATIVE JAMES made a MOTION to AMEND CSSB 310(RES) as follows: Page 4, following line 11: Insert a new paragraph to read: "(7) extent to which the proposed agreement provides for processing in the state of the timber harvested, to the extent permitted by law;" Renumber the following paragraphs accordingly. Page 5, following line 19: Insert a new subparagraph to read: "(F) provisions requiring the processing of the timber in the state if that is the highest and best use of the timber as determined by the commissioner and if permitted by law;" Reletter the following subparagraphs accordingly. Page 8, following line 23: Insert a new bill section to read: "*Sec. 7. SEVERABILITY. Under AS 01.10.030, if AS 38.05.122(d)(7) or (g)(2)(F), or the application of those provisions to any person or circumstance, is held invalid, the remainder of this Act and its application to other persons or circumstances shall not be affected." REPRESENTATIVE MULDER OBJECTED for discussion purposes. REPRESENTATIVE JAMES said the amendment adds a paragraph which will provide instructions to the FMA that in-state processing is desired if possible. She stated the next part of the amendment provides for the highest and best use of the timber. She noted the third part of the amendment ensures, that in case either of the first parts of the amendment are unconstitutional, the rest of the bill will stand. REPRESENTATIVE CARNEY agreed with the intent of the amendment but would like to see an effective date. REPRESENTATIVE MULDER agreed. He said there have been numerous discussions about promoting the work force in the state and value-added products in Alaska and while there are restrictions on what can be done, this amendment makes a strong statement about the desire for this type of economic development to occur in Alaska. REPRESENTATIVE JAMES stated the effective date will be a given because the bill will probably be challenged. REPRESENTATIVE DAVIES said the way to make this amendment happen is to petition the state's Congressional delegation to exempt the state of Alaska from the interstate commerce restriction. Number 084 REPRESENTATIVE JAMES felt that is a separate issue. She felt if SB 310 has not done anything else, it has made Alaskans rally behind that thought and idea. In the meantime, she is not willing to hold up the process until that happens. She said passing this amendment will give the DNR commissioner the ability to choose a proposal which includes in-state processing. CHAIRMAN WILLIAMS agreed. REPRESENTATIVE CARNEY made a MOTION to AMEND the AMENDMENT to CSSB 310(RES) on page 6, line 7, insert a new paragraph which says, "The commissioner may not enter into a final agreement until the state receives from the federal government an exemption from federal law so that the state may require that timber harvested under the agreement be processed within the state." REPRESENTATIVES MULDER AND JAMES OBJECTED. REPRESENTATIVE DAVIES said he attempted to get an opinion from the Attorney General about this issue without success, but it is his understanding that the state cannot put a requirement in the bill for in-state processing unless the exemption is received from the federal government. He noted the state of Oregon has received an exemption. Number 123 CHRIS GATES, DIRECTOR, DIVISION OF ECONOMIC DEVELOPMENT, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT (DCED), stated there is not much faith that the federal law can be changed. However, he encouraged committee members to allow this tool (the amendment) to exist while there is an attempt to change the federal law. He said the ability to choose, out of several competing proposals, the one which has in- state processing and a provision to hire Alaskans, allows the department to do things contractually which they could never do if it were mandated by law. He pointed out that Alaska hire and in-state processing cannot be mandated but it can be done contractually. REPRESENTATIVE JAMES stated FMAs may not include white spruce going to Japan but in fact might involve hardwoods. She said to hold up the entire FMA process until a federal exemption can be received will be taking a step backward. REPRESENTATIVE DAVIES reminded everyone SB 310 applies statewide, not just in the Tanana Valley. He stated if a process is set up and bids are evaluated with a selection made based on the in-state processing requirement, that process would be unconstitutional and could be challenged. He said a change in federal law is not required, as the federal law allows for these exemptions currently, the state just needs to ask for the exemption and get it. REPRESENTATIVE CARNEY asked if there is any way to stipulate that the contract contain the requirement for in-state processing. MR. GATES replied the state cannot mandate primary manufacture but it can be accomplished contractually. REPRESENTATIVE DAVIES agreed as long as the price remains the same, but as soon as someone offers one cent less for the materials and the contract is not granted because of in- state processing, the state will lose in court. REPRESENTATIVE JAMES speaking against the amendment to the amendment, said subsection (F) in the amendment says ..."the processing of the timber if that is the highest and best use of the timber" and she felt decisions can be made on what benefits the state the best. She stated the price itself may not necessarily be the determining factor. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the motion were REPRESENTATIVES FINKELSTEIN, DAVIES, and CARNEY. Voting against the motion were REPRESENTATIVES MULDER, HUDSON, JAMES, and WILLIAMS. The MOTION was DEFEATED 4-3. Number 209 REPRESENTATIVE DAVIES made a MOTION to AMEND the AMENDMENT to CSSB 310(RES) deleting the severability clause. He stated the clause is redundant with existing statutes. REPRESENTATIVES HUDSON and WILLIAMS OBJECTED. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the motion were REPRESENTATIVES DAVIES, CARNEY, and FINKELSTEIN. Voting against the motion were REPRESENTATIVES MULDER, JAMES, GREEN, HUDSON and WILLIAMS. The MOTION was DEFEATED 5-3. CHAIRMAN WILLIAMS asked for a roll call vote on the motion to amend. Voting in favor of the motion were REPRESENTATIVES DAVIES, HUDSON, JAMES, MULDER, FINKELSTEIN, GREEN, CARNEY, and WILLIAMS. The MOTION PASSED 8-0. Number 235 REPRESENTATIVE JAMES made a MOTION to AMEND CSSB 310(RES) as follows: Page 2, line 30: Delete "shall" Insert "may" CHAIRMAN WILLIAMS asked if there were any objections to the motion. Hearing none, the MOTION PASSED. REPRESENTATIVE JAMES made a MOTION to AMEND CSSB 310(RES) as follows: Page 8, line 6, following "industry;": Delete "and" Insert "[AND]" Page 8, line 7, following "habitat": Insert new material to read: "; and (8) to the fullest extent practicable, harvested forest land shall be reforested, naturally or artificially, so as to result in a sustained yield of merchantable timber from that land; if artificial planting is required, silviculturally acceptable seedlings must first be available for planting at an economically fair price" Page 8, following line 7: Insert a new bill section to read: "*Sec. 5. AS 41.17.060 is amended by adding a new subsection to read: (d) With respect to private forest land only, to the fullest extent practicable, harvested forest land shall be reforested, naturally or artificially. If artificial planting is required,silviculturally acceptable seedlings must first be available for planting at an economically fair price." Renumber the following bill sections accordingly. Page 8, following line 23: Insert a new bill section to read: "*Sec. 8 AS 41.17.060(b)(4) is repealed." REPRESENTATIVE HUDSON OBJECTED for discussion purposes. MR. SOLIE stated this amendment will amend the reforestation statute in the FPA and clarify what was intended when the statute was drafted. He said existing law pertains to state and municipal forest lands and this new Section 5 pertains to private lands. The section clarifies that private land harvest is not on a sustained yield basis as required by law. He noted that private landowners wanted this clarification in statute. REPRESENTATIVE MULDER asked what is the definition of silviculturally. CHAIRMAN WILLIAMS stated it means tree planting. Number 282 REPRESENTATIVE GREEN wondered if "economically fair price" is an understood term or is it subject to conflict. MR. SOLIE replied he did not think so. He said the amendment is existing law except for the deletion of the words "sustained yield". REPRESENTATIVE DAVIES asked where the words "sustained yield" appear in the amendment. CHAIRMAN WILLIAMS said the wording is in the FPA and was put in inadvertently. He indicated that attached to the amendment is a copy of current law. MR. SOLIE said the underlined portion of the amendment is a repeat of existing law and the words "so as to result in a sustained yield" was deleted from the section below. He noted at the end of the sentence in existing law, the words "in the state" was deleted in the new law that only applies to private forest land. He stated there was concern it might require the purchase of trees. He explained existing law stands for state and municipal and this change is only to private lands. Number 334 REPRESENTATIVE FINKELSTEIN stated he does not fully understand the impact of repealing (b)(4). He clarified the end result is eliminating the application of sustained yield to private timber lands. MR. SOLIE said that is incorrect. He explained currently there is no state requirement for sustained yield harvest on private forest lands. The amendment makes existing law consistent with that and the reforestation part of the FPA. REPRESENTATIVE FINKELSTEIN felt he must be missing something because the wording is exactly the same as existing law. REPRESENTATIVE JAMES said on page 8, line 7, after the word "habitat", the new material is to be inserted. (8) is added which is precisely the language in existing (4). She explained (4) is being moved to (8). REPRESENTATIVE FINKELSTEIN stated the impact of moving the language is to say it does not apply to private lands which is what it applies to now. He felt this amendment is a major change. He said if there is an existing sustained yield requirement on private lands and that is going to be removed, he is concerned there has been no testimony regarding the change. MR. SOLIE said existing law relates to sustained yield harvest for state and municipal. He stressed reforestation is different than harvesting. Reforestation is something done after the trees are cut down. He stated sustained yield does not relate to reforestation. In this change, the language will remain the same for state and municipal land. For private land, the language is kept as it should apply, which does not require any sustained yield harvest. He pointed out this amendment clarifies existing law. Number 430 REPRESENTATIVE FINKELSTEIN felt he is getting different answers. He stated now it sounds like the reforestation requirement for private lands is being removed. REPRESENTATIVE JAMES pointed out that the new Section 5 contains the word "reforested". REPRESENTATIVE FINKELSTEIN said the point of the amendment is to eliminate any inference of sustained yield on private lands. REPRESENTATIVE JAMES responded that is correct. REPRESENTATIVE FINKELSTEIN stated he will have to oppose the amendment because there has been no discussion or public testimony regarding this change. He said perhaps sustained yield on private lands was the intent of the FPA and has been an issue in the past. REPRESENTATIVE DAVIES agreed with Representative Finkelstein's comments and added that the Division of Forestry has not commented on this amendment. He also noted that existing law says "to the fullest extent practicable", so if someone has private land and wants to use it for agriculture purposes, reforestation is not practicable. He said the law is only saying that if someone has private land and is managing it as a forest, to the extent practicable, the sustained yield principle should be followed. He did not understand why a change is needed. Number 473 REPRESENTATIVE JAMES did not feel the state should be telling private landowners what they should do with their land. She will support the amendment because the Tanana Chiefs Conference wants this amendment and should be supported. REPRESENTATIVE DAVIES pointed out the FPA was enacted after a huge amount of public involvement and consensus debate. He felt this amendment is not a trivial aspect of the debate. He also felt that making this change without having an adequate amount of debate is bad public policy. CHAIRMAN WILLIAMS stated during the negotiations on the FPA, it was determined that nothing would be done with the FPA unless everyone agreed. He said he is willing to hold this amendment and amendment X38 until the Alaska Forest Association and DNR can testify. REPRESENTATIVE DAVIES stated the amendment is amending the FPA and is not required by SB 310. He said if the amendment is such a good idea, it should be introduced as a bill by itself. REPRESENTATIVE JAMES WITHDREW her MOTION. Number 605 REPRESENTATIVE DAVIES made a MOTION to AMEND CSSB 310(RES) as follows: Page 7, line 4, after "(1)": Insert "The commissioner shall conduct biennial performance reviews of the agreement throughout the term of the agreement." Page 7, line 9, after "operator.": Insert "The operator shall pay the reasonable cost of all reviews conducted under this subsection." REPRESENTATIVE JAMES OBJECTED. REPRESENTATIVE DAVIES said this amendment will require the commissioner to perform biennial performance reviews and determine whether or not the contract is being followed. He stated one of the criticisms of the FPA is it is difficult to catch up to violations. One of the major justifications for the FPA is the state does not have the resources to plan, design, lay out, and monitor a lease sale. Much of the costs will be shifted from the state to the person who has the FMA with the state. He pointed out that if the agreement is not audited regularly, there will be no way to know whether or not the terms of the agreement are being followed. REPRESENTATIVE JAMES agreed there is a need to review but felt "conduct biennial performance reviews" does not necessarily have any definition. She hoped there will be monitoring but that does not necessarily mean every two years. She expected there will be some method by which the FMAs will be monitored. She stressed ongoing monitoring is needed. REPRESENTATIVE DAVIES felt uncomfortable discussing amendments when no representatives from the department are present. CHAIRMAN WILLIAMS asked for a roll call vote on the motion. Voting in favor of the amendment were REPRESENTATIVES FINKELSTEIN, DAVIES, and CARNEY. Voting against the amendment were REPRESENTATIVES HUDSON, JAMES, MULDER, and WILLIAMS. The MOTION was DEFEATED 4-3. Number 713 REPRESENTATIVE DAVIES made a MOTION to AMEND CSSB 310(RES) as follows: Page 5, line 6, after "agreement": Insert "and the final agreement" Page 5, line 12, after "timber": Insert ", which may not be less than fair market value and shall be adjusted annually by the commissioner using a nationally recognized index that is suitable for measuring inflation or deflation in the cost of comparable stumpage" Page 5, line 19, after "agreement;": Insert "the cost of construction and maintenance of necessary access roads and other necessary infrastructure shall be paid by the operator;" Page 6, line 5: Delete "may" Insert "must" REPRESENTATIVES WILLIAMS and JAMES OBJECTED. TAPE 94-63, SIDE B Number 000 REPRESENTATIVE DAVIES stated there is nothing in SB 310 requiring any resemblance between the final agreement and the proposed final agreement. He pointed out former Attorney General Charlie Cole's principal concern is too much power is being given to the DNR commissioner. He said the first part of the amendment provides that the final agreement contain the elements which have been said should be in the proposed final agreement. REPRESENTATIVE DAVIES explained the second part of the amendment is an attempt to address a concern regarding long- term FMAs--throughout the years of the agreement, inflation goes up, and at the end of the time period, timber is being sold at a low rate. He stated this amendment says the initial sale should be at fair market value and there should be some type of index, so inflation can be taken into consideration. He said the third part of the amendment provides that the cost and maintenance of roads and other infrastructure be paid by the operator. He felt any agreement should be self sustaining. Representative Davies stated the final part of the amendment provides for a requirement of bonding. MR. GATES said most FMAs do anticipate a consumer price index (CPI) (indiscernible). The issue is whether or not that should be mandatory. He stated there is a small argument for having the flexibility to not require a CPI escalator as a tool of negotiating. He cannot envision entering into a FMA without a CPI escalator. However, the question becomes why compel a CPI escalator as a tool for every FMA. He was not sure it is valid for every agreement. MR. GATES said in regard to the last part of the amendment, there can be small and customized FMAs. He felt it might be wise not to mandate bonding in those situations and to limit the flexibility. He stated for large agreements, it is anticipated there will be bonding. REPRESENTATIVE CARNEY asked Mr. Gates to speak to the costs of roads. MR. GATES replied normally, the cost of road construction will always be included in the operator's costs. However, if a new part of the state is being accessed and it is important to provide access, the market cannot tolerate the costs of access to a big region. He said the state may want to put the road in as an economic development effort. The individual roads would then be paid for by the operator. He pointed out the amendment provides that even the major roads would have to be paid for by the FMA operator. Number 093 REPRESENTATIVE JAMES said although she agrees with all that is contained in the amendment, she is not willing to support it. She stated in regard to the cost of construction and maintenance of necessary access roads, part of the provision is that the proposed final agreement must include provisions regarding the responsibilities for construction and maintenance of the access road. She has always had a problem with the term fair market value. She felt it means the biggest price anyone is willing to pay and she was not sure there is any place to get a nationally recognized index suitable for measuring inflation or deflation in the cost of comparable stumpage. She pointed out the determining factor of whether or not something is financially feasible depends on the end product. In many cases where there is bidding on federal forest timber, there will be a minimum bid and she supports including a minimum bid in the bill. REPRESENTATIVE JAMES stressed a FMA is being discussed and that presumably there is some best interest in the state which is going to be devised out of the agreement. She expected the operator will pay full price for the timber. REPRESENTATIVE DAVIES made a MOTION to DIVIDE the QUESTION and offer the first part of the amendment (Page 5, line 6, after "agreement":) and the second part would be the rest of the amendment (Page 5, line 12, after "timber":). CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, the MOTION TO DIVIDE PASSED. Number 156 MR. SOLIE expressed support for the first amendment. CHAIRMAN WILLIAMS asked if there were any objections to the first part of the amendment. Hearing none, the MOTION PASSED. REPRESENTATIVE MULDER OBJECTED to the second part of the amendment. REPRESENTATIVE GREEN made a MOTION to AMEND the AMENDMENT, on the first line, changing the word "shall" to "may". REPRESENTATIVE HUDSON said he is not convinced there should be a requirement in the law to annually adjust the stumpage prices in the contract because if the desire is to lure corporations into investing in a factory, there may be a need to have flexibility. MR. GATES expressed concern about the fair market value part of the amendment because there may be a desire to encourage people to put in plants and give lower rates for 2-3 years while they are building their plant or getting financing. He felt a major tool is being taken away through this amendment by compelling the fair market value on trees always. He said it is a tremendous amount of flexibility to encourage investment if a period of time of forgiveness can be given or 50 percent of fair market value rate of stumpage as an inducement. REPRESENTATIVE HUDSON mentioned it is not an unknown tool which has been used in the state. He pointed out the state would never have had the oil industry on the Kenai Peninsula if there had been no flexibility to encourage those kinds of investments into that area. CHAIRMAN WILLIAMS asked if there were any objections to the motion. Hearing none, the MOTION PASSED. CHAIRMAN WILLIAMS asked for a roll call vote on the amendment (2nd part). Voting in favor of the motion were REPRESENTATIVES CARNEY, DAVIES, and FINKELSTEIN. Voting against the motion were REPRESENTATIVES MULDER, HUDSON, JAMES, GREEN, and WILLIAMS. The MOTION FAILED 5-3. REPRESENTATIVE GREEN made a MOTION to AMEND CSSB 310(RES) as follows: Page 5, line 19, after "agreement;": Insert "the cost of construction and maintenance of necessary access roads and other necessary infrastructure shall be paid by the operator;" CHAIRMAN WILLIAMS OBJECTED. MR. GATES stated roads must be considered in the FMA plan but this amendment will require the operator to pay costs for all roads, which may not give the flexibility desired. CHAIRMAN WILLIAMS ruled the MOTION OUT OF ORDER. He said the amendment has already been discussed and voted on. REPRESENTATIVE DAVIES made a MOTION to AMEND CSSB 310(RES) as follows: Page 5, line 19, after "agreement;": Insert "the cost of construction and maintenance of necessary temporary access roads and other necessary infrastructure shall be paid by the operator;" REPRESENTATIVE WILLIAMS OBJECTED. REPRESENTATIVE DAVIES said this amendment will eliminate the concerns expressed by Mr. Gates. This amendment will allow the state to construct the permanent roads and the FMA will only be required to incur the costs of the temporary roads. MR. GATES stated the amendment is still limiting the commissioner's flexibility to do the best job possible to craft a good FMA. REPRESENTATIVE JAMES stated amendments such as this are detrimental to the process because it identifies what the operator is going to pay for. She hoped the operator will pay for all the roads. She stressed if the word "temporary" is used, it could be assumed the operator only has to pay for the temporary roads, when in fact there may be sufficient value in the timber to pay for all of the roads. Number 354 CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES CARNEY, DAVIES, and FINKELSTEIN. Voting against the amendment were REPRESENTATIVES JAMES, HUDSON, MULDER, and WILLIAMS. The MOTION FAILED 4-3. REPRESENTATIVE DAVIES made a MOTION to AMEND CSSB 310(RES) as follows: Page 7, after line 12: Insert a new subsection to read: "(n) Notwithstanding any other provision of this section, the operator under an agreement that includes timber harvesting on land within the Tanana Valley drainage may not harvest timber on that land under the agreement if the harvest would result, during a calendar year, in timber harvest operations (1) on more than 6,000 acres of land, public and private, in the Tanana Valley drainage; or (2) that harvested more than 1,000 acres of white spruce in the Tanana Valley drainage." Reletter the following subsection accordingly. CHAIRMAN WILLIAMS OBJECTED. REPRESENTATIVE DAVIES said this amendment will apply specifically to the Tanana Valley drainage and not statewide. The amendment will limit the total amount of acreage of land contained in a single FMA. REPRESENTATIVE JAMES clarified the limit is being put on not necessarily a single FMA but any FMA in the Tanana Valley drainage. Number 383 REPRESENTATIVE DAVIES noted the amendment says "the operator under an agreement" and "a calendar year." REPRESENTATIVE JAMES recalled in Mr. Pagh's testimony, he had indicated in regard to spruce, there is the capability of harvesting 5,000 acres a year and currently 1,000 acres a year is being harvested. She said this amendment does not make any provision for hardwoods. She felt uncomfortable including any kind of limits in the bill. However, she would like to send a message that there is a desire not to have all of the timber gone in a year but she is not comfortable with the numbers contained in the amendment. REPRESENTATIVE DAVIES noted the amendment says a single agreement and pointed out there are two distinctions: a total of 6,000 acres and a subtotal of acres in white spruce. REPRESENTATIVE HUDSON asked how much general timber land is available in the Tanana Valley drainage. REPRESENTATIVE DAVIES replied approximately 1.5 million acres. REPRESENTATIVE HUDSON asked how may acres of white spruce are available. REPRESENTATIVE DAVIES replied there are approximately 5,000 acres of white spruce available per year and this amendment would limit a single agreement to one-fifth of that total. Number 443 MR. GATES stated DCED tried to advance the concepts of sustained yield, multiple use, good scientific evidence and a balancing of values as controlling the amount of acreage in a given area and the types of things which could be done. He felt to set truly arbitrary limits goes away from those types of principles and takes away the flexibility. REPRESENTATIVE DAVIES stressed the numbers are not arbitrary but were based on an estimate of the total amount of acreage available and what was considered to be a reasonable maximum for the total acreage to be allowed in a FMA. He stated he has received 275 public opinion messages on SB 310 and they are running 4-1 opposed to SB 310. One of the fundamental reasons why people are opposed to the bill is size. Most people want the scale of a FMA to be limited. He noted most people are not opposed to a long-term contract. Most people are opposed to having a big operation requiring huge amounts of acreage every year to be clearcut. He stressed this amendment attempts to look at a reasonable amount of the forest, which could be set aside for long-term agreements, yet is big enough to enable some small plants to be capitalized but not so big that it will allow the capitalization of big plants. Number 503 REPRESENTATIVE JAMES said she shares the concerns which Representative Davies mentioned. She also expressed concern that when restrictions are put in statute, the hands of a solicited bid from someone are being tied. She stated when a proposal goes out to the public, there is an opportunity for the public to determine that an amount is more than what they are willing to support. She felt the public will be listened to. She noted there are 30 million acres in the Tanana Valley basin and she is not comfortable with the numbers in the amendment, even though she does understand the concerns. MR. GATES stated all concerns mentioned are valid. However, this amendment is eliminating the possibility that an operator could propose something that is acceptable to the public and contains more acres. He felt the operator should be given the chance to convince the public, through the public hearing process, that a cut is appropriate at a higher level. CHAIRMAN WILLIAMS recalled someone had asked how long it would take to cut 6,000 acres. He said the cut could be done in a season. Number 557 MR. SOLIE stated since DNR is not represented, he will offer some statistics they provided. There are approximately 30 million acres of land in the Tanana basin, with about 3.4 million acres classified as forest land or is in the Tanana Valley State Forest, and the sustained yield estimate harvests are between 16,000-20,000 acres a year. He pointed out this amendment is proposing 6,000 acres which is 25-33 percent of the sustained yield harvest as a cap. He said there are approximately 95,000 acres (indiscernible). REPRESENTATIVE FINKELSTEIN said this amendment does not place a cap. This amendment only specifies the amount of acres which can be put in each agreement. REPRESENTATIVE JAMES expressed concern that if this amendment is not intended to put a cap on the cut but rather a cap on each single FMA, this amendment is limiting a FMA on what kinds of operations it could have. She felt the amendment might eliminate a large FMA. She pointed out that the whole purpose of SB 310 is to encourage FMAs for future development and in-state processing. She stressed it would be defeating if an amendment is passed which discourages FMAs. Number 612 REPRESENTATIVE DAVIES stated that is exactly what the amendment does. It would eliminate large FMAs in the Tanana Valley. He pointed out that overwhelming testimony has indicated there is a desire to not limit the use of the forest as long as it is used in an appropriate scale. People fear clearcuts in their backyards. CHAIRMAN WILLIAMS stated view sheds are important. However, one of the things happening in the Tongass is the timber industry is continually being told in a critical manner that they are being subsidized. He said a lot of money is involved in determining view sheds. TAPE 94-64, SIDE A Number 000 CHAIRMAN WILLIAMS stated the people asking for the view sheds are also speaking against the timber industry because of the industry being subsidized. MR. GATES said there has been a lot of limited thinking in regard to what a FMA is. He stated there is a concept of a FMA which may or may not be true. FMAs may come with a package of incentives from a company to a community saying there is an understanding of the impact and the possible negative things and offer a package of good things such as restoration to streams, building bridges, and community centers. This amendment keeps the operator from attempting to convince the public that a larger scale FMA might be in the community's best interest. REPRESENTATIVE DAVIES said the only experience people have had in this state similar to a FMA is the Haines Forest experience. People were upset, a lot of money was lost, an inventory still is not in hand, etc. The track record leaves room for skepticism. He felt small FMAs should be tried first and then later consider larger FMAs. He stressed there are a lot of people concerned statewide. He reiterated people in Fairbanks do not oppose the timber industry but are concerned about a large scale timber industry. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES FINKELSTEIN, DAVIES, and CARNEY. Voting against the amendment were REPRESENTATIVES JAMES, HUDSON, MULDER, and WILLIAMS. The MOTION FAILED 4-3. Number 058 REPRESENTATIVE HUDSON felt the last proposed amendment was an attempt to address the concern expressed by the public. He thought perhaps another approach is language such as, "To the extent practicable, the commissioner shall seek agreements that include timber harvesting in the Tanana Valley drainage that do not exceed..." He stated some reasonable limitations would be placed at the end. He thought that approach would be constructive and not tie the hands of the commissioner in regard to FMAs but rather would guide the commissioner. REPRESENTATIVE JAMES made a MOTION to AMEND CSSB 310(RES) as follows: Page 4, following line 13: Insert "(8) timber inventory;" Renumber the following text accordingly. REPRESENTATIVE JAMES said the amendment provides for an addition of "timber inventory" to the list of what the commissioner considers when reviewing and evaluating a proposed agreements. CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, the MOTION PASSED. ANNOUNCEMENTS CHAIRMAN WILLIAMS announced the committee will meet on Monday, April 25 at 8:15 a.m. to hear SB 306 and SB 374. ADJOURNMENT There being no further business to come before the House Resources Committee, Chairman Williams adjourned the meeting at 7:35 p.m.