Legislature(2013 - 2014)BARNES 124

03/18/2014 01:00 PM House TRANSPORTATION


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 343 STATE BUILDINGS: CONSTRUCTION & MAINT. TELECONFERENCED
Heard & Held
+= HB 371 STATE LAND AND MATERIALS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                HB 371-STATE LAND AND MATERIALS                                                                             
                                                                                                                              
CHAIR P. WILSON announced that  the final order of business would                                                               
be HOUSE  BILL NO. 371, "An  Act providing for the  Department of                                                               
Transportation and  Public Facilities to hold  the surface estate                                                               
of certain state land; relating  to the transfer of certain state                                                               
land and  materials from the  Department of Natural  Resources to                                                               
the Department  of Transportation  and Public Facilities  for the                                                               
construction or  maintenance of the  state highway  system, state                                                               
airports, and state public buildings  and facilities; relating to                                                               
the  lease  or  sale  of certain  marine  or  harbor  facilities;                                                               
relating  to  the   lease  or  disposal  by   the  Department  of                                                               
Transportation and  Public Facilities of  rights-of-way, property                                                               
interests, or improvements that  are no longer required; relating                                                               
to the  grant of certain  easements over submerged state  land to                                                               
the  federal  government; relating  to  the  transfer of  certain                                                               
maintenance  stations   on  the  James  Dalton   Highway  to  the                                                               
Department of  Transportation and Public Facilities;  relating to                                                               
the conveyance of land for  right-of-way purposes from the Alaska                                                               
Railroad  Corporation to  the  Department  of Transportation  and                                                               
Public Facilities; and providing for an effective date."                                                                        
                                                                                                                                
2:27:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ISAACSON moved  to adopt  the proposed  committee                                                               
substitute  (CS)  for  HB   371,  labeled  28-LS1545\C,  Bullock,                                                               
3/17/14 as the working document.                                                                                                
                                                                                                                                
There being  no objection, Version  C was adopted as  the working                                                               
document.                                                                                                                       
                                                                                                                                
2:28:08 PM                                                                                                                    
                                                                                                                                
JOHN BENNETT, Right-of-way Chief,  Northern Region, Department of                                                               
Transportation  &  Public  Facilities  (DOT&PF),  referred  to  a                                                               
letter of  March 13, 2014 in  response to questions posed  by the                                                               
committee on  March 11, 2014.   He stated the  proposed committee                                                               
substitute  (CS)  for  HB  371,  Version  C,  will  help  clarify                                                               
language in Section  16 regarding reciprocal easements.   He also                                                               
understood questions  arose on whether this  bill would eliminate                                                               
or reduce public  involvement or public notice  so the department                                                               
generated  a chart  to show  all  the points  of involvement  and                                                               
notice [entitled "Typical DOT&PF Project Development Process"].                                                                 
                                                                                                                                
MR.  BENNETT  also  understood Representative  Johnson  has  been                                                               
considering a proposed amendment.                                                                                               
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS asked  to  discuss some  questions                                                               
raised.                                                                                                                         
                                                                                                                                
CHAIR P.  WILSON referred to  the aforementioned  response letter                                                               
from the DOT&PF that answers a  number of the questions raised at                                                               
the March 11, 2014 hearing.                                                                                                     
                                                                                                                                
2:31:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS  referred  to the  private  sector                                                               
would interface with the bill.   The [March 18, 2014] letter from                                                               
DOT&PF poses  questions on how  SB 211  or HB 371  impact funding                                                               
for DNR and DOT&PF.   He read [from a letter by  a DNR person not                                                               
identified], as follows:                                                                                                        
                                                                                                                                
     Would  DOT lose  funding  from the  lost material  sale                                                                    
     revenue as  a result of  this bill?   Would DOT  gain a                                                                    
     new  funding  source  from selling  material  from  the                                                                    
     material  sites?   Section 13  of the  bill states  DNR                                                                    
     would no  longer charge DOT  for material.   Does "DOT"                                                                    
     include  DOT contractors?    Would  DOT start  charging                                                                    
     their  contractors or  others for  material from  state                                                                    
     material sites?  If so, where would those funds go?                                                                        
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS acknowledged  the large  number of                                                               
questions.                                                                                                                      
                                                                                                                                
MR. BENNETT responded  he is correct, with respect  to the issues                                                               
of  payment  for  materials,  since DOT&PF  would  no  longer  be                                                               
charged so  DNR would  no longer  have that  revenue stream.   He                                                               
related his  understanding that the  bulk of the revenue  for the                                                               
sales of  material goes into  the state's  general fund.   To the                                                               
extent that some of it might  be used in management or processing                                                               
of material  sales contracts, he  pointed out that the  DNR would                                                               
not have the burden of  applying for or processing material sales                                                               
contracts  so the  lost revenue  wouldn't be  quite as  big of  a                                                               
problem [since neither department  would have to administratively                                                               
manage  these  contracts].   With  respect  to DOT&PF  generating                                                               
revenue by  sale of materials,  he responded that this  bill does                                                               
not provide  authority nor  has the  department had  authority to                                                               
sell materials  to third  parties.  Thus,  there wouldn't  be any                                                               
revenue  stream coming  in  to  DOT&PF by  virtue  of this  bill.                                                               
Further,  the DOT&PF  wouldn't charge  contractors for  materials                                                               
because  the  department  is expecting  the  bidding  process  to                                                               
result  in better  prices since  the department  will use  state-                                                               
owned materials and not need to procure them.                                                                                   
                                                                                                                                
2:33:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS acknowledged  he has  had a  vague                                                               
impression that private businesses  sell materials.  For example,                                                               
in  Sitka  there are  private  quarries  that  sell gravel.    He                                                               
expressed  concern that  the state  would be  competing with  the                                                               
private sector if the state provides  the material for free but a                                                               
private quarry in the same proximity sells the same materials.                                                                  
                                                                                                                                
MR.  BENNETT   acknowledged  the   concern.    Even   though  the                                                               
department  has hundreds  of  BLM and  DNR  sites available,  the                                                               
department  likes to  consider its  contracts  as advertised  ,au                                                               
contain   contract-furnished  materials.      For  example,   the                                                               
department might  make a material site  available - a BLM  or DNR                                                               
site -  but the  contractor is  not obligated to  use them.   The                                                               
contractor may decide to purchase  materials elsewhere or develop                                                               
a material site.  It all depends  on the market forces as to what                                                               
is  best for  the  contractor to  reduce  his/her overall  costs.                                                               
Clearly a lot of commercial  material sites and competition exist                                                               
in the  urban and suburban areas  so the market forces  will work                                                               
very well  for the state.   In rural  areas it is  more difficult                                                               
since  not   many  property  owners   have  materials   to  sell.                                                               
Additionally,   the   department    must   perform   geotechnical                                                               
investigations  to  determine  whether  the  material  meets  its                                                               
specifications and sufficient quantities  exist.  He acknowledged                                                               
there  might  be  a  private  property  owner  who  is  aware  of                                                               
available gravel,  but that  gravel may not  be suitable  for the                                                               
project.   Further, there  isn't any  assurance that  the private                                                               
property owner will  offer the same conditions,  terms, or prices                                                               
to all the contractors.   It could skew the project significantly                                                               
in the  instance that  only one commercial  provider exists.   He                                                               
summarized  that the  department recognizes  commercial providers                                                               
exist but  the market will  determine whether those will  be used                                                               
by the contractor.                                                                                                              
                                                                                                                                
2:37:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON related  a scenario in which  DOT&PF has a                                                               
material site  for a project.   Since  the materials are  free to                                                               
the department, the  DOT&PF can underbid or  complete the project                                                               
for less  by hiring  state employees.   He  would like  to ensure                                                               
that the  state does  not perform  projects that  have previously                                                               
been done by  the private sector under a  competitive process for                                                               
the materials.                                                                                                                  
                                                                                                                                
MR.  BENNETT  deferred  to the  deputy  commissioner  to  answer;                                                               
however, he offered his belief that  prior to taking on a project                                                               
that would have gone out to  bid, the department would need to do                                                               
a  best interests  findings to  determine it  was in  the state's                                                               
been  interest  that  the  maintenance forces  did  not  pay  for                                                               
materials or  even larger maintenance work  that could constitute                                                               
a project.   In  the same  sense contractors  aren't going  to be                                                               
charged  either  since  the materials  are  state-owned  and  are                                                               
designated  for state  projects.   Thus,  the department  doesn't                                                               
envision any issue will arise.                                                                                                  
                                                                                                                                
2:38:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON asked  whether  it  is constitutional  to                                                               
give away the state's resources.                                                                                                
                                                                                                                                
MR. BENNETT answered that the state  would not be giving away its                                                               
resources since the materials would  be used for public projects.                                                               
Further, DOT&PF represents the public in this instance.                                                                         
                                                                                                                                
2:39:03 PM                                                                                                                    
                                                                                                                                
CHAIR P.  WILSON related  her understanding  that everyone  is on                                                               
the  same "playing  field" since  the DOT&PF  doesn't charge  the                                                               
contractors either.                                                                                                             
                                                                                                                                
MR. BENNETT agreed.                                                                                                             
                                                                                                                                
REPRESENTATIVE JOHNSON maintained the  state would be giving away                                                               
resources  to a  private contractor  even  though it  is for  the                                                               
public good.                                                                                                                    
                                                                                                                                
MS. RICE explained that the  department does not intend to change                                                               
contracting  procedures.   Under  the bill,  the proposed  change                                                               
would merely  reduce paperwork  between DNR  and DOT&PF.   First,                                                               
the DOT&PF  physically manages  most of  these pits.   Currently,                                                               
the DOT&PF  contacts DNR, creates  a materials sales  contract at                                                               
$.50  per yard  - the  standard price  - and  makes the  contract                                                               
available in specifications to contractors.   All contractors can                                                               
use  this   source  for   materials;  however,   the  contracting                                                               
specifications also  allow the  contractor to  go to  any supply.                                                               
In fact,  contractors will  sometimes make their  own pits.   Any                                                               
materials  that come  from  the  state's pit  will  end up  being                                                               
embankment so essentially the DOT&PF  is moving from one resource                                                               
to another.   The  public will  always continue to  use it.   The                                                               
$.50 per yard  not being paid is  pretty inconsequential compared                                                               
to the  $2-4 per yard  that the  department would pay.   Further,                                                               
most  of that  money is  haul and  placement.   The DOT&PF  needs                                                               
certain quality materials, makes them  available, but most of the                                                               
time the materials are not used.                                                                                                
                                                                                                                                
2:41:05 PM                                                                                                                    
                                                                                                                                
CHAIR P. WILSON surmised most of those are not in urban areas.                                                                  
                                                                                                                                
MS. RICE said that most of  the material used by the Municipality                                                               
of Anchorage  (MOA) is hauled  from the  Matanuska-Susitna valley                                                               
by train since did not believe DOT&PF has a pit in the area.                                                                    
                                                                                                                                
2:41:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON maintained that  the state would be giving                                                               
away  state  assets   since  they  would  not   be  charging  the                                                               
contractor.   He related his  understanding the  department would                                                               
waiver  the  $.50  per  yard   fee  and  asked  whether  this  is                                                               
constitutional.                                                                                                                 
                                                                                                                                
MR. BENNETT answered  that the DOT&PF has purchased  land for its                                                               
project.  The  state requests that the contractor  use the state-                                                               
owned material on the state's project.                                                                                          
                                                                                                                                
REPRESENTATIVE  JOHNSON  envisioned  a paving  project  in  which                                                               
private contractor  can bid on  it $.50  per yard, but  under the                                                               
new scenario the fees are waived.                                                                                               
                                                                                                                                
2:43:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ISAACSON  understood that  since DNR  was involved                                                               
and the  DOT&PF has paid DNR  for materials, which he  equated as                                                               
an  administrative fee.   He  further understood  that under  the                                                               
bill, since  DNR is  no longer  the owner,  the DOT&PF  is moving                                                               
material from  one state site to  a road bed.   The state doesn't                                                               
provide a  public benefit  by paying  DNR an  administrative fee.                                                               
This bill  attempts to  consolidate the  process by  limiting the                                                               
management  the project  and  materials for  the  project to  one                                                               
department [the DOT&PF].                                                                                                        
                                                                                                                                
2:44:49 PM                                                                                                                    
                                                                                                                                
SEAN LYNCH,  Assistant Attorney General,  Transportation Section,                                                               
Department   of   Law   (DOL),  responded   that   Representative                                                               
Isaacson's characterization  is fully  accurate.  When  the state                                                               
furnishes culverts,  materials, or  anything else for  a project,                                                               
all bidders accommodate  for this in their bid,  which results in                                                               
reduced project costs and general  fund savings.  In instances in                                                               
which contractors have to purchase  materials from the state, the                                                               
state would also pay additional  administrative costs for the two                                                               
agencies [DNR &  DOT&PF].  He clarified that  the contractors are                                                               
not taking materials  for their own personal use  for third party                                                               
uses,  but are  moving  state  materials from  one  place to  the                                                               
state's project site.                                                                                                           
                                                                                                                                
CHAIR P. WILSON characterized this  as "getting rid of the middle                                                               
guy" since it will be cheaper.                                                                                                  
                                                                                                                                
MR. BENNETT agreed.   He described the current  process as moving                                                               
money from DOT&PF  to DNR and the contractor does  not benefit in                                                               
any way.                                                                                                                        
                                                                                                                                
REPRESENTATIVE JOHNSON thought it might be circular logic.                                                                      
                                                                                                                                
2:47:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FEIGE acknowledged it  was shifting money from one                                                               
pocket to the other.  He  asked how this is applied in federally-                                                               
funded projects.                                                                                                                
                                                                                                                                
MR.  BENNETT   answered  that  most  of   DOT&PF's  projects  are                                                               
federally-funded projects.   In  those instances,  the department                                                               
uses federal  dollars to pay the  $.50 fee per cubic  yard fee to                                                               
DNR.   He suggested that  for the most part  the funds end  up in                                                               
the general fund.                                                                                                               
                                                                                                                                
REPRESENTATIVE FEIGE said  the process would allow  the DOT&PF to                                                               
obtain more from the federal funding for any given project.                                                                     
                                                                                                                                
MR. BENNETT answered that is correct.                                                                                           
                                                                                                                                
2:47:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GATTIS related a  scenario in a contractor invests                                                               
in a pit  that provides the materials used on  jobs; however, the                                                               
state is  giving the contractor's  competitors free  gravel which                                                               
gives them an advantage.                                                                                                        
                                                                                                                                
CHAIR  P.  WILSON using  that  scenario,  suggested that  if  the                                                               
contractor could  get it for  free that the competitors  may also                                                               
wish to use the free material.                                                                                                  
                                                                                                                                
REPRESENTATIVE GATTIS agreed but  pointed out that the contractor                                                               
would still be paying for the pit.                                                                                              
                                                                                                                                
CHAIR P. WILSON  suggested the contractor could  save his/her own                                                               
pit gravel for another purpose.                                                                                                 
                                                                                                                                
2:49:43 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FEIGE said  the  competitiveness  of the  private                                                               
gravel pit owner  is somewhat reduced by eliminating  the cost of                                                               
the  gravel.   He  suggested  that  the  cost  of the  gravel  is                                                               
primarily the transportation cost to deliver the material.                                                                      
                                                                                                                                
MR. BENNETT agreed that is a  relevant point.  One contractor may                                                               
bid and  plan to  use the  state's existing  material site.   The                                                               
successful bidder may  have purchased a site to  develop since it                                                               
could result in a 20-mile less  haul distance.  He maintained the                                                               
developed  site  could be  more  competitive  and it  will  still                                                               
"shake out" in the market.                                                                                                      
                                                                                                                                
2:51:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   KREISS-TOMKINS    understood   the   discussion.                                                               
However,  he suggested  that this  bill changes  the market  to a                                                               
certain extent.   While transportation and haul  costs will still                                                               
determine whose gravel pit is  most competitive in a project, the                                                               
current  market  forces are  changed  under  the  bill.   He  was                                                               
interested in  hearing from the  private sector in the  rural and                                                               
non-rural areas with respect to the  bill.  He offered his belief                                                               
that it merits  further investigation as to the  specifics of how                                                               
this will affect contractors.                                                                                                   
                                                                                                                                
CHAIR P.  WILSON suggested that contractors  would be complaining                                                               
if the bill [created disadvantages for them].                                                                                   
                                                                                                                                
2:52:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ISAACSON referred to  the DOT&PF's response to the                                                               
committee [dated March  13, 2014].  He referred to  page 2, which                                                               
read:                                                                                                                           
                                                                                                                                
        Could DOT&PF lease land from the Alaska Railroad                                                                      
     Corporation (ARRC), rather than the ARRC selling land                                                                    
     to DOT&PF?                                                                                                               
                                                                                                                              
REPRESENTATIVE  ISAACSON said  the  response was,  in part,  "The                                                               
short answer  is that  while leasing land  from ARRC  may benefit                                                               
the  railroad's bottom  line, it  may not  represent a  good long                                                               
range policy for the management,  operation and funding of DOT&PF                                                               
facilities."                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ISAACSON  offered  that   the  letter  gives  two                                                               
examples,  first,  in  which  the ARRC  was  compensated  in  the                                                               
Illinois [Street project  in Fairbanks].  In  the second example,                                                               
the Healy  River airport,  the ARRC doesn't  want to  continue to                                                               
pay for a lease  since it is a state benefit.   He concluded that                                                               
the ARRC  suffers negligible operational  impacts when  a portion                                                               
of  ARRC's  property  is transferred  as  required  for  DOT&PF's                                                               
projects,.  He  understood the ARRC's land similar  to the Alaska                                                               
Mental  Health Trust  Lands in  that its  purpose is  to generate                                                               
revenue.   Thus,  the  more  land that  is  taken  away from  the                                                               
railroad the larger  the impact it will have in  terms of loss of                                                               
rent and profit.  Currently,  the ARRC has been suffering because                                                               
of fewer  active leases and  the ARRC has declining  revenues due                                                               
to   declining  production   at   refineries   and  coal   mines.                                                               
Therefore, any impact to the railroad can hurt, he said.                                                                        
                                                                                                                                
2:54:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ISAACSON  wondered if  there might be  a different                                                               
way to  address this.   He asked  whether instead of  taking land                                                               
the DOT&PF could exchange state land to compensate the railroad.                                                                
                                                                                                                                
MR. BENNETT  answered that DOT&PF  doesn't have a land  base that                                                               
it could trade since it is  constrained by its obligations to the                                                               
federal   funding  agencies,   such   as   the  Federal   Highway                                                               
Administration  (FHWA).   Further,  the DOT&PF  pays fair  market                                                               
value to  the railroad for  any land  DOT&PF takes.   The concept                                                               
behind  this just  compensation is  that  the ARRC  can take  the                                                               
proceeds  and  replace the  right-of-way  land  taken from  them.                                                               
Therefore,  it doesn't  necessarily reduce  the land  base unless                                                               
the railroad doesn't replace the  lands acquired for the project.                                                               
Additionally, a railroad  is considered a utility so  in terms of                                                               
highway  rights-of-way  or  airports,  the  ARRC  can  through  a                                                               
limited fee  of a  utility permit  can gain access  to them.   He                                                               
characterized this  as being a  very lopsided relationship.   The                                                               
DOT&PF pays  full fair  market value  for any  lands it  needs to                                                               
acquire from  the ARRC,  but the railroad  can use  DOT&PF's land                                                               
for a very limited fee.                                                                                                         
                                                                                                                                
MR. BENNETT, in  terms of the Illinois  Street project, explained                                                               
that  the public  used Illinois  Street  for 100  years and  will                                                               
likely use  it for  another hundred years.   He  anticipated that                                                               
for a 50-year  lease the DOT&PF would pay for  the property "over                                                               
and over  again."  More importantly,  when the term comes  due it                                                               
will likely  be out  of synch  with a  DOT&PF project  that would                                                               
generate revenue  to renew the lease.   For example, it  would be                                                               
possible   to  pay   for  a   lease  from   a  Federal   Aviation                                                               
Administration (FAA) funded  project if one was  available.  Even                                                               
though  the DOT&PF  has  been seeking  one  that without  project                                                               
funding the DOT&PF  doesn't have anything available  to renew the                                                               
lease.                                                                                                                          
                                                                                                                                
2:57:18 PM                                                                                                                    
                                                                                                                                
CHAIR P.  WILSON commented that  the ARRC reviewed this  bill and                                                               
agreed with it.                                                                                                                 
                                                                                                                                
REPRESENTATIVE ISAACSON  answered that this doesn't  mean it will                                                               
necessarily  be good  for the  railroad.   He  asked for  further                                                               
clarification on the Healy project.                                                                                             
                                                                                                                                
MR. BENNETT  answered that it is  not a good public  policy for a                                                               
transportation department  with long-term  public needs  to lease                                                               
land with a recurring renewal fee.                                                                                              
                                                                                                                                
CHAIR  P.  WILSON  remarked  that  the  ARRC's  agreement  should                                                               
relieve members of these specific concerns.                                                                                     
                                                                                                                                
REPRESENTATIVE  ISAACSON responded  that  it doesn't.   He  asked                                                               
whether  the   ARRC  would  receive  any   compensation  for  the                                                               
$320,000.                                                                                                                       
                                                                                                                                
MR. BENNETT answered that this  bill doesn't address leasing.  It                                                               
would only  eliminate the step  necessary to  receive legislative                                                               
approval  for  the  ARRC  to   convey  fee  simple  title.    The                                                               
department  believes this  will advance  projects by  one to  two                                                               
years.   He maintained that  this bill does not  address leasing.                                                               
It will not eliminate any lease  revenues due to the railroad for                                                               
the airport.   The DOT&PF  must secure  these funds prior  to the                                                               
end of the lease in 2017 if the public intends to use the land.                                                                 
                                                                                                                                
CHAIR P. WILSON  pointed out a letter of support  from the Alaska                                                               
General Contractors is in members' packets.                                                                                     
                                                                                                                                
3:00:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON,  with respect  to gravel, noted  that DNR                                                               
will  make  available  gravel  sales  to  private  companies  for                                                               
private projects.  He asked  whether the ARRC will sell materials                                                               
to a  private project.  He  interjected by related a  scenario in                                                               
which the DOT&PF  has materials and asked  whether the department                                                               
will make gravel available to the public  or if it is it just for                                                               
state use.                                                                                                                      
                                                                                                                                
MR. BENNETT related  his understanding the question  is if DOT&PF                                                               
has acquired land from the ARRC  or DNR, whether the DOT&PF would                                                               
sell gravel.   To his knowledge,  all the land acquired  from the                                                               
ARRC has  been dedicated  to the actual  operational need  of the                                                               
highway or  the airport.   The DOT&PF  doesn't have  authority to                                                               
sell gravel, he said.                                                                                                           
                                                                                                                                
3:02:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON pointed  to non-railroad  materials.   He                                                               
understood a  provision exists  for DOT&PF to  take a  gravel pit                                                               
from  DNR and  use it  for  a state  project.   He asked  whether                                                               
DOT&PF  would  sell non-railroad  gravel  to  a private  company,                                                               
which DNR can currently do.                                                                                                     
                                                                                                                                
MR. BENNETT answered yes.                                                                                                       
                                                                                                                                
3:02:47 PM                                                                                                                    
                                                                                                                                
MR. LYNCH advised  that the DOT&PF exemption in Section  13 of HB
371, relieves  the DOT&PF from  the material  sales requirements.                                                               
He  read,  "Notwithstanding  the  provisions in  AS  38.05.560  -                                                               
38.05.565 ...."   This provision  provides DNR authority  to sell                                                               
materials from  state-owned material  sites.  This  bill relieves                                                               
the  DOT&PF of  the  requirement from  entering  into a  material                                                               
sales contract, but DNR retains  its authority under AS 38.05.550                                                               
- 38.05.565 to  sell material from these sites  to third parties.                                                               
He reiterated that DOT&PF does  not have any authority for third-                                                               
party sales and doesn't take the physical site itself.                                                                          
                                                                                                                                
3:04:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON recalled testimony  that if the state were                                                               
to provide  a discount  to a  refiner on  royalty oil,  the state                                                               
would need to provide the same discount to everyone.                                                                            
                                                                                                                                
MR. LYNCH said he can't speak  to the comparison since he doesn't                                                               
know  the  facts;  however,  this  would  allow  for  state-owned                                                               
resources to  be removed from  a state pit  and put into  a state                                                               
project.  He  concluded that the material is never  disposed to a                                                               
third  party.   All  bidders  would have  equal  assess asset  to                                                               
incorporate  state owned  material into  the state  project.   It                                                               
would be the  same way as if DOT&PF had  an overstock of culverts                                                               
and  lists  it  in  the  contract to  be  incorporated  into  the                                                               
project.                                                                                                                        
                                                                                                                                
REPRESENTATIVE JOHNSON  maintained that in terms  of oil, whether                                                               
it was  jet fuel for trains  or something else that  if the state                                                               
offered  a  discount  it  must  give the  same  discount  to  all                                                               
parties.                                                                                                                        
                                                                                                                                
3:05:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ISAACSON recalled the  commissioner said "may" but                                                               
not "must."                                                                                                                     
                                                                                                                                
REPRESENTATIVE JOHNSON  asked whether the state  was subjected to                                                               
the same "may" for gravel as it  is for oil so would the state be                                                               
putting  itself  in the  position  that  it  needed to  give  the                                                               
material away.                                                                                                                  
                                                                                                                                
MR. LYNCH  explained that  the bids  incorporate the  same common                                                               
ground for  "all bidders" so he  did not envision this  would set                                                               
up a disparity.                                                                                                                 
                                                                                                                                
3:06:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FEIGE  thought that the  analogy would be  to take                                                               
royalty  oil and  refine it  into  fuel used  by state  vehicles.                                                               
Further, the  state could  probably justify a  lower cost  of the                                                               
royalty oil if it  resulted in a lower cost of  fuel to the state                                                               
just as  DOT&PF provides  an equal opportunity  for gravel  to be                                                               
used on  a state  project.  In  the end, the  result would  be to                                                               
reduce  the cost  of materials.    In the  case of  oil it  could                                                               
reduce cost of fuel to the  state and result in lower consumptive                                                               
costs to the state and hence the public.                                                                                        
                                                                                                                                
REPRESENTATIVE JOHNSON  maintained that  a discount to  one means                                                               
the state might need to give it to everyone.                                                                                    
                                                                                                                                
REPRESENTATIVE  FEIGE thought  that  rationale  would only  apply                                                               
since the state can only consume so much fuel.                                                                                  
                                                                                                                                
3:07:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON  referred  to the  language  in  Alaska's                                                               
Constitution  that indicates  the state's  resources are  for the                                                               
common good of all people.                                                                                                      
                                                                                                                                
REPRESENTATIVE  ISAACSON  agreed   that  Article  VIII,  Alaska's                                                               
Constitution requires the maximum use  and benefit to the people;                                                               
however, it  also sets  up a "similarly  situated" aspect.   Thus                                                               
the  benefits would  accrue to  similarly situated  circumstances                                                               
first and  then to the rest.   He suggested several  other issues                                                               
could trigger a definitive answer.                                                                                              
                                                                                                                                
REPRESENTATIVE JOHNSON remarked he still has questions.                                                                         
                                                                                                                                
3:10:02 PM                                                                                                                    
                                                                                                                                
DICK MYLIUS said  he is testifying as a  private citizen although                                                               
he previously  worked with DNR for  29 years and dealt  with many                                                               
of  these issues.    He stated  that his  letter  is in  members'                                                               
packets  [dated March  12, 2014].   He  offered to  summarize his                                                               
concerns that have  not yet been addressed.   His primary concern                                                               
stems  from language  in the  bill that  essentially says  if the                                                               
DOT&PF asks DNR for a parcel  of land, under proposed Sections 3,                                                               
5,  8,  the  state  "shall"  transfer  these  lands  to  airport,                                                               
highways,  and  facilities,  respectively.     Thus,  DNR  cannot                                                               
decline, condition  the transfer,  or protect existing  or future                                                               
rights.  His biggest concern  relates to material sites or gravel                                                               
pits.   Of his six general  comments, the proposed CS,  Version C                                                               
addresses  his  concern  with  Section 16.    He  explained  that                                                               
proposed  Section 13  would allow  the DOT&PF  to extract  gravel                                                               
from any  existing pit on  state land.   The DOT&PF would  not be                                                               
allowed  to establish  any conditions  on the  gravel extraction.                                                               
He suggested that  this provision needs to  be distinguished from                                                               
the other provisions of the bill  that allow DOT to receive title                                                               
to the surface estate.                                                                                                          
                                                                                                                                
CHAIR P. WILSON asked for further clarification.                                                                                
                                                                                                                                
3:12:14 PM                                                                                                                    
                                                                                                                                
MR. MYLIUS reiterated that Section 13  of HB 371 allows DOT&PF to                                                               
extract  gravel  from any  existing  gravel  pit on  state  land,                                                               
including gravel  pits may have  been developed by  another party                                                               
for a  totally different purpose.   For example,  numerous gravel                                                               
pits exist  on the North Slope.   These pits have  been developed                                                               
by the oil and gas  industry or their contractors to specifically                                                               
support North Slope  development.  Of course,  any development on                                                               
the North Slope  would require gravel roads or  pads although the                                                               
DNR  has  issued  numerous gravel  sales  contracts  to  parties.                                                               
Under HB  371, DOT&PF  could go  take any  amount of  gravel from                                                               
those pits  without any consideration or  restrictions imposed by                                                               
DNR  to protect  those  developing  their own  gravel  pits.   He                                                               
reiterated that DOT&PF  could remove gravel from  these pits that                                                               
essentially would make  it impossible to fulfill  contracts.  The                                                               
provision  in Section  13 doesn't  say anything  about protecting                                                               
valid  existing rights  although  such protections  are in  other                                                               
provisions of  the bill  applying to the  transfers.   Section 13                                                               
would apply  to any  existing pits  on state  land.   He strongly                                                               
recommended removing Section 13 from the bill.                                                                                  
                                                                                                                                
3:13:48 PM                                                                                                                    
                                                                                                                                
MR. MYLIUS  said the bill  still does not address  the overriding                                                               
or competing land  claims.  He referred to an  earlier example of                                                               
Happy  Valley  and Franklin  Bluffs,  in  which the  North  Slope                                                               
Borough  has  municipal  entitlement   selections.    The  DOT&PF                                                               
responses indicate  the state should  keep those and  the borough                                                               
essentially  loses out.    The bill  doesn't  address that  there                                                               
still is  a valid  selection.  If  the intent of  HB 371  is that                                                               
those  parcels should  be  transferred to  DOT&PF  then the  bill                                                               
should  actually indicate  that  the NSB's  selections should  be                                                               
rejected.  Otherwise  the DNR will need to  reject the selections                                                               
and likely  need to  litigate the matter.   Additionally,  if the                                                               
DOT&PF doesn't  need all the land  the bill leaves it  totally up                                                               
to the DOT&PF  to determine how much land  and specifically which                                                               
land it gets  to keep.  This would essentially  mean that the NSB                                                               
would be left with "the leftovers."                                                                                             
                                                                                                                                
3:14:52 PM                                                                                                                    
                                                                                                                                
MR. MYLIUS said  the bill does not provide any  method for public                                                               
concerns with access or conflicts  with existing landowners.  The                                                               
DOT&PF has  indicated its existing process  handles that process;                                                               
however,  the  DOT&PF's  existing  process  pertains  to  highway                                                               
projects in terms  of road location, but does not  often get into                                                               
the specific location of gravel  pits for state highway projects.                                                               
Those  decisions  are  typically  subsequent  decisions  and  the                                                               
decisions about buffers  and similar issues are  made through DNR                                                               
at the  time it  executes a  gravel sale  to DOT&PF.   Therefore,                                                               
there isn't any  provision that allows for those  types of issues                                                               
to be dealt with, he said.                                                                                                      
                                                                                                                                
3:15:31 PM                                                                                                                    
                                                                                                                                
CHAIR P. WILSON, asked him to put his concerns in writing.                                                                      
                                                                                                                                
CHAIR P.  WILSON, after first  determining no one else  wished to                                                               
testify, closed public testimony on HB 371.                                                                                     
                                                                                                                                
[HB 371 was held over.]                                                                                                         

Document Name Date/Time Subjects
HB371 AGC Support Letter.pdf HTRA 3/18/2014 1:00:00 PM
HB 371
HB 371 Testimony of Dick Mylius .pdf HTRA 3/18/2014 1:00:00 PM
HB 371
HB 371 comments Smith.pdf HTRA 3/18/2014 1:00:00 PM
HB 371
HB0343A.pdf HTRA 3/13/2014 1:00:00 PM
HTRA 3/18/2014 1:00:00 PM
HB 343
HB 343-Sponsor Statement.pdf HTRA 3/13/2014 1:00:00 PM
HTRA 3/18/2014 1:00:00 PM
HB 343
HB 343-Sectional Anaylsis.pdf HTRA 3/13/2014 1:00:00 PM
HTRA 3/18/2014 1:00:00 PM
HB 343
HB343 DOTPF Presentation 3-13.msg HTRA 3/18/2014 1:00:00 PM
HB 343
HB343-DOA-FAC-03-07-14.pdf HTRA 3/13/2014 1:00:00 PM
HTRA 3/18/2014 1:00:00 PM
HB 343
HB343-DOR-AHFC-03-07-14.pdf HTRA 3/13/2014 1:00:00 PM
HTRA 3/18/2014 1:00:00 PM
HB 343
HB343-DOT-SPF-3-13-14.pdf HTRA 3/13/2014 1:00:00 PM
HTRA 3/18/2014 1:00:00 PM
HB 343
Sustainable Energy Act Annual Report to Legislature 2013 (2013 12 26).pdf HTRA 3/13/2014 1:00:00 PM
HTRA 3/18/2014 1:00:00 PM
HB 343
HB 343 ASHRAE 90_1 Article.pdf HTRA 3/13/2014 1:00:00 PM
HTRA 3/18/2014 1:00:00 PM
HB 343
HB 343 Standardized Designs DOTPF 3-13-14.pdf HTRA 3/13/2014 1:00:00 PM
HTRA 3/18/2014 1:00:00 PM
HB 343
HB-343 AHFC 3 13 14 FINAL.pdf HTRA 3/13/2014 1:00:00 PM
HTRA 3/18/2014 1:00:00 PM
HB 343
HB 343 CCHRC Presentation.pdf HTRA 3/13/2014 1:00:00 PM
HTRA 3/18/2014 1:00:00 PM
HB 343
4407 MOU (wo exhibits).pdf HTRA 3/18/2014 1:00:00 PM
HB 371
SB 211
Egan SB211 Response.pdf HTRA 3/18/2014 1:00:00 PM
HB 371
SB 211
Happy Valley Docs.pdf HTRA 3/18/2014 1:00:00 PM
HB 371
SB 211
HB 371 - letter Milles 3-12-14.pdf HTRA 3/18/2014 1:00:00 PM
HB 371
Project Flow Chart.pdf HTRA 3/18/2014 1:00:00 PM
HB 371
SB 211
HB 371 Sectional Analysis.pdf HTRA 3/18/2014 1:00:00 PM
HB 371
Wilson HB371 Response.pdf HTRA 3/18/2014 1:00:00 PM
HB 371
CSHB 371 Ver C Work Draft.pdf HTRA 3/18/2014 1:00:00 PM
HB 371