Legislature(2011 - 2012)BUTROVICH 205
03/28/2012 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB145 | |
| SB219 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 145 | TELECONFERENCED | |
| += | SB 215 | TELECONFERENCED | |
| *+ | SB 219 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 219-DISPOSALS OF STATE RESOURCES
4:25:53 PM
CO-CHAIR WAGONER announced SB 219 [Rules by request of the
Governor] to be up for consideration.
4:26:09 PM
ED FOGELS, Deputy Commissioner, Department of Natural Resources
(DNR), asked that the DNR chief of operations join him.
4:26:23 PM
WYN MENEFEE, Chief of Operations, Division of Mining, Land and
Water, Department of Natural Resources (DNR), introduced
himself.
MR. FOGELS said he would give some broader background to where
this bill came from and then would turn it over to Mr. Menefee
to go into the details. He said the governor asked all state
agencies to take a look at their permitting processes to see if
they could be made more efficient. They worked with five
principle focuses.
CO-CHAIR PASKVAN moved to bring SB 219, version A, before the
committee for purposes of discussion.
CO-CHAIR WAGONER objected for discussion purposes.
4:28:23 PM
MR. FOGELS said this bill is about streamlining the individual
permits that each agency issues; enhancing coordination amongst
all the state agencies and the state and federal agencies;
gathering public input, which they have doing over the last six
to eight months; looking for ways to better for collaboration
with federal permitting agencies that are key to getting any
projected permitted these days; and getting the jump on new
activities that they don't have good permitting expertise on
like shale oil, underground coal gasification, geothermal, wind
et cetera.
He said SB 219 makes individual agencies' permitting processes
work together better. The Division of Mining, Land and Water at
this time last year had a fairly significant backlog of about
2500 permits and authorizations and the legislature gave them
additional resources to work on those. With those resources came
the promise that money and people alone may not be solution; it
would come with the fundamental way of doing business and that
is what the division has been working on for the last year. A
new director, Brent Goodrum, has an eye toward organizational
efficiency and the backlog has been knocked down by about 21
percent already this year.
MR. FOGELS said one of the major things they have been doing
within the division is looking at the statutes that guide the
permitting and it has come up with significant ways to make them
work better for Alaskans. SB 219 doesn't make earth shattering
changes, but rather small changes that cumulatively will have a
big impact on how they do business. It will make some
authorizations go quicker and free up resources within the
division so more staff can be devoted to the permitting work at
hand. As a result the permitting system will run a lot smoother
and faster.
4:32:10 PM
MR. MENEFEE said when they talk about land leases it's for
things like lodges, commercial facilities and fish processing
plants not oil and gas. A provision in statute has a threshold
of when they can go "negotiated" versus "competitive" and
negotiated leases is a shorter process; you can negotiate
directly with the individual without competition. Since 1984 the
threshold for a direct negotiation is a $5,000 lease and for a
period less than 10 years. They are asking for an increase up to
$10,000 and he said that would affect just a couple of leases a
year.
More substantially, Mr. Menefee said they would like to get more
competitive category leases under negotiated leases, because
right now they have to spend an extra 30 days and publish an
auction brochure for the competitive category and that is
charged to the applicant. It's just extra time and money that
shouldn't be expended if no one is competing for it. They would
like to find out if anybody is interested through their public
notice process on disposals of interest decisions and if nobody
is, they would like to go straight to the negotiated category.
These issues were in sections 5 and 6 of the bill.
SENATOR WIELECHOWSKI asked him to describe the process for a
lease renewal (section 6).
MR. MENEFEE replied that leases can be a maximum of 55 years
long, although often they are 25 to 30 years and a lease renewal
must go through the full best interest process again. The
revision in the bill would give the department the discretion to
renew it. That means the process would be shortened and it would
be an administrative decision rather than the full preliminary
and final finding. It would still get public notice and have an
appeal option. The department would still see if there is
competitive interest, but once that has been ascertained and if
the lessee is in good standing the lease could be renegotiated.
It just shaves time off.
CO-CHAIR PASKVAN asked what percentage of the state's leases is
for 55 years.
MR. MENEFEE answered not many; some of the leases done in the
60s and 70s are 55-year leases and they are just starting to
come up. It doesn't mandate that you have to renew for the full
term, you just can't exceed the initial term. They have found
there are enough changes going on in land that they feel much
more comfortable with a 25 to 30 year lease depending on what is
being built.
SENATOR STEVENS asked how many leases would be affected.
MR. MENEFEE replied the division processes about 10 leases a
year and gets applications for about 14 to 20 a year (that's
where the backlog comes from). He couldn't predict the amount of
leases that would actually hit the renewal, because it depends
on whether people are still doing what they started out doing
and how many want to continue. But about five leases a year
could move from the competitive to direct negotiated category.
CO-CHAIR PASKVAN asked what type of operation is going in a 55-
year lease.
4:42:00 PM
MR. MENEFEE said he didn't have an exact example, but lodges
were done with longer lease terms in earlier times.
SENATOR FRENCH asked if Alyeska Ski Resort leases its land from
the state.
MR. MENEFEE replied Alyeska is a recreational development lease
through the state; there is only one recreational facility under
that statute and it is Alyeska. Examples of some other ones are
a Princess Lodge, fish processing plants, large docks like
Juneau's Jacobson Dock as well as submerged lands and uplands
where larger development is being put in.
CO-CHAIR PASKVAN asked the total number of leases and the ranges
of operations one might see.
MR. MENEFEE replied that a large scale lease would be a gas
processing plant that was completely separate; for instance the
proposed Dead Horse LNG processing plant to Fairbanks Natural
Gas or for a smaller project a guide service putting in
something more than a just a camp like a structure with
foundation for a mess hall that will last longer than five
years.
4:45:33 PM
CO-CHAIR WAGONER asked for list of lease samples, large to
small.
4:45:53 PM
MR. MENEFEE said he would certainly get those for him and moved
to sections 10, 11, 14 15 that separate timber sales from
material sales. Statutes were intertwined and a little bit
confusing; so they left the timber sale statutes (sections 10
and 11) the same, but pulled out all the material sale parts and
put them into sections 14 and 15.
Changes were made to the process of material sales that save
time and money. Typically, when someone applies for a new site
it will take 130 - 160 days. If somebody wants to come into the
same area, they are still going to have to go through the same
process; so they are proposing creating a material site disposal
area of about 15 acres. The point is that the material will be
exhausted and subsequent sales would not be publicly noticed or
have new decisions. You would just write the contracts for them.
They do 30-50 material sales a year and this would save a lot of
time and some costs.
The same materials section also deals with a couple of other
changes that have cost savings for the applicant dealing with
appraisals. He explained that these areas sell for appraised
fair market value and an appraisal actually has to be done to
get that. Those run about $5,000 per appraisal. They want to use
the representative regional sales price which they have
developed by comparing the property to private markets to find
out what the cost of in situ material is and if someone wants to
challenge that and do their own appraisal, they are welcome to
do that, too.
MR. MENEFEE said they also added language about the low
appraised fair market value sales for material that is in the
state's interest to get out of a river, for instance, where
excess material is causing flooding that the state would have to
spend money on preparing roads, bridges and emergency response,
like in Seward where the river bed is higher than the
surrounding land.
4:50:09 PM
He said point 4 of the briefing paper was about temporary water
use authorizations in section 21 of the bill. The department
currently believes it has the authority under current statute to
issue a temporary water use authorization for a period up to
five years. If a business continues to need that same water
source, they can issue another one for another five years after
that. This makes it clearer in statute that they really can,
because there have been some water right challenges. Temporary
water use authorizations are used by industry all over Alaska
and are revocable, he said, but a water right stays with the
land forever.
4:51:27 PM
CO-CHAIR PASKVAN said point 1 of the briefing paper says that
change doesn't apply to oil and gas leases and asked if point 4
temporary water use authorizations are used on the North Slope
as compared to water rights.
MR. MENEFEE clarified that oil and gas leases have a separate
authorization, but people use the temporary water use
authorizations for getting water from lakes, streams and
sometimes chipped ice to make ice roads going out on the North
Slope. Some actually get water rights if they have a well that
is going to be producing for a long time.
CO-CHAIR PASKVAN asked if the state has a developing problem
with water interests on the North Slope either through a water
use authorization or a water right.
MR. MENEFEE replied that this bill isn't about water shortages,
just about the process of doing a second authorization. And yes,
some areas on the North Slope have less water available
especially in the foothills. If you build an ice road there, you
will have to haul water from a further distance which is more
expensive.
CO-CHAIR PASKVAN said the temporary water use authorizations are
for five years and he didn't want to create a system that
excludes independents or the "new kids on the block."
4:54:28 PM
MR. MENEFEE replied that the department takes other uses into
account when it reviews the temporary water use authorizations.
Also, they are revocable and modifiable.
SENATOR FRENCH commented that they do hundreds of these.
MR. MENEFEE replied that was correct.
SENATOR FRENCH asked if there is any limit to the number of
times that a temporary water use authorization can be renewed.
MR. MENEFEE replied no; each time you reach the five-year cycle
he would have to re-review other uses before issuing it again.
He would take into account if the company was a "good actor" and
abiding by the terms of its permit.
SENATOR FRENCH asked if each authorization is noticed.
MR. MENEFEE replied that it's agency noticed but not publicly
noticed; he added that statute does not require public notice.
SENATOR FRENCH asked if there is no public comment or right of
appeal.
MR. MENEFEE replied yes there is the right of appeal. They were
recently challenged on it and the court upheld going without
public notice on these. Some people have asked how they would
know they have a right of appeal if it's not noticed and that's
a catch-22 situation.
SENATOR FRENCH said it's hard to imagine the circumstances under
which they would be aware of the decision.
MR. MENEFEE replied that temporary water use authorizations
rarely come by themselves. If it's on state land it has some
other authorization from the state going. For instance, Golden
Valley is going to do a wind energy project at Eva Creek; they
are going to need a water authorization to keep the dust down on
the road as they build it. That is all noticed.
4:57:50 PM
SENATOR FRENCH said he was thinking of the shale oil development
explosion on the North Slope and many companies could be
competing for what is fairly scarce ground water available year-
round. He asked how many times an authorization gets renewed
before it becomes a permanent water right.
MR. MENEFEE replied, "There is no more permanent water right."
If someone is going to invest in shale oil in an area where they
know there is limited water, it's probably in their best
interest to get a water right immediately versus a temporary
water use authorization, because that would exclude all others
that come subsequently.
SENATOR FRENCH said he guessed that would be a far more exacting
procedure.
MR. MENEFEE agreed.
SENATOR WIELECHOWSKI asked the standard of review on appeal if
someone has a temporary water use permit and the commissioner
decides he wants to grant a new one and someone says, "Hey, what
about me?"
MR. MENEFEE replied statutes and regulations guide the appeal
process.
SENATOR WIELECHOWSKI asked the standard of review by the court
or the reviewing entity.
MR. MENEFEE answered the reviewing entity is actually the
commissioner of the reviews under appeal. Once he makes a
decision to uphold the decision the staff made or not, at that
point an individual has 30 days to appeal to Superior Court.
SENATOR WIELECHOWSKI said he was concerned that someone gets the
temporary water use authorization, there's no public process for
renewing it and the commissioner just decides to renew it; then
there is an appeal. If it is about abuse of discretion it's
virtually impossible to overturn. So you essentially turn the
temporary water use authorization into a de facto permanent
water right.
5:00:50 PM
CO-CHAIR PASKVAN said he was reminded of an AOGCC hearing within
the last year that investigated Pioneer's difficulty in getting
water from ConocoPhillips. Was that because there was a limited
access to water or a water rights issue? He wanted to know if
the state is facing a water shortage on the North Slope and if
so, they need to know what permitting processes or interests the
system provides.
MR. MENEFEE replied there is no general water shortage on the
North Slope and he would get the details of the Alaska Oil and
Gas Conservation Commission (AOGCC) hearing.
CO-CHAIR WAGONER said once they start fracing with water, the
practice is recycling the same water; so there isn't that big of
a demand except initially.
5:02:27 PM
MR. MENEFEE discussed the sealed bid procedure in sections 1-4
and 7-9. He said the Department of Law helped discover a lot of
inconsistency about public auctions and sealed bids and they
tried to make them consistent so it's clear they can use cry
option or sealed bid if they choose.
Point 6 in sections 18 and 19 are the public notice requirements
for when they do public disposals of interest (38.05.945 public
noticing). It spells out the choices and who they have to
notify: things like statewide distribution newspapers and local
newspapers and posting in a conspicuous place locally. The one
part they are de-emphasizing is the posting of legal notices in
the newspapers that refer back to the public notice website by
phasing it out over five years. The issue is that the applicant
has to pay for all of this and a typical ad costs $300 to $900.
Point 7 deals with mining royalty in section 12. They found that
miners who are only making $10,000 in gross income in a year
don't pay royalty, because they can deduct their rental rate and
the cost of extracting the material; and because mining royalty
is paid off of net income, they don't end up paying any. They
found the threshold is right around $10,000 or about 6 oz. of
gold, not a lot of production. So they are saying save the paper
work and audit and just exempt them. The idea is to do the
exemption for the areas where the state is not getting revenue
anyway.
SENATOR FRENCH asked if this superseded Senator Wagoner's bill
on small gravel pit operators.
MR. MENEFEE replied this measure is specifically aimed toward
mining royalty on locatable minerals like gems, gold, diamonds,
platinum and silver.
SENATOR FRENCH asked the definition of small operations.
MR. MENEFEE replied it's essentially a value of $10,000 or less,
but the reason they didn't put that figure in is because the
prices of materials change so much that it wouldn't make sense.
The value would have to be addressed by regulation.
SENATOR FRENCH said that's on the gross.
MR. MENEFEE agreed.
5:06:42 PM
The next issue this bill addresses is it allows mining royalty
to be filed on a fiscal year basis rather than the calendar
year. Minors already have to file their federal income tax in a
fiscal year and having to switch over to the calendar year for
filing royalty is an accounting challenge.
5:07:44 PM
MR. MENEFEE said point 9, section 13 in the bill, talks about
submerged mining leases and Nome that has a gold rush going on
is the only one with them. Current law says when it comes to the
end of a lease (10-20 years), if somebody is still producing
minerals in paying quantities, they get one-year extensions. But
knowing you have only one year of authorization is not good
business sense. So, if they are still producing in paying
quantities and making royalty revenue payments to the state, and
they have sufficient land to continue their operations, the
department can make a judgmental call how far out to issue
another lease and that can't exceed the terms of the initial
lease.
MR. MENEFEE said these changes were small, but incrementally and
cumulatively they would make a difference in time and money for
both the state and the applicant; they would also help in
reducing the backlog.
CO-CHAIR WAGONER said, "Whatever we can to do to decrease that
backlog and keep it from building again, we're interested in."
Finding no further questions, he thanked them for presenting the
bill to the committee.
[SB 219 was held in committee.]