Legislature(2011 - 2012)BUTROVICH 205
04/02/2012 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB215 | |
| 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 219 | TELECONFERENCED | |
| += | SB 215 | TELECONFERENCED | |
SB 219-DISPOSALS OF STATE RESOURCES
4:29:15 PM
CO-CHAIR WAGONER announced consideration of SB 219.
4:29:37 PM
WYN MENEFEE, Chief of Operations, Division of Mining, Lands and
Water, Department of Natural Resources (DNR), Juneau, AK, said
he was available to answer questions on SB 219.
CO-CHAIR WAGONER moved Amendment 1.
27-GS2717\A.1
Bailey
AMENDMENT 1
OFFERED IN THE SENATE BY SENATOR WAGONER
TO: SB 219
Page 1, line 1:
Delete "lease, sale and other disposal"
Insert "leases, sales, and other disposals"
Page 1, following line 4:
Insert a new bill section to read:
"* Section 1. AS 38.05.050 is amended to read:
Sec. 38.05.050. Disposal of land for private
ownership. The commissioner shall determine the land
to be disposed of for private use. The commissioner
shall determine the time and place of disposal. A
public [AN] auction sale, sale by sealed bid, a
lottery sale, or a disposal of land for homesites may
be held in a community that is near the land to be
sold or disposed of."
Page 1, line 5:
Delete "Section 1"
Insert "Sec. 2"
Renumber the following bill sections accordingly.
Page 1, line 10:
Delete "no"
Insert "not [NO]"
Page 3, line 22:
Delete "only be renewed"
Insert "be renewed only"
Page 3, line 23:
Delete "no"
Insert "not"
Page 4, line 5, following "38.05.102,":
Insert "38.05.565,"
Page 5, following line 2:
Insert new bill sections to read:
"* Sec. 10. AS 38.05.075(e) is amended to read:
(e) The commissioner may require
prequalification of bidders for a lease to be issued
under AS 38.05.070. If the commissioner determines to
require prequalification, the procedures established
by this section and the notice including
prequalification [PRE-QUALIFICATION] requirements
required to be given under AS 38.05.945 shall be
completed within 75 days of the receipt of the first
lease application unless the commissioner grants
additional time for the completion of the procedures.
Within the 75-day period or the additional time
granted by the commissioner, the commissioner shall
complete
(1) classification under AS 38.05.300;
(2) the procedures required by
AS 38.05.035(e);
(3) any other action required by law for
the disposal of the lease to a bidder except survey,
appraisal, and the auction or sealed bid.
* Sec. 11. AS 38.05.075(g) is amended to read:
(g) Notice of an auction or sealed bid required
under this section shall be made by certified mail to
all prequalified bidders."
Renumber the following bill sections accordingly.
Page 5, following line 19:
Insert a new bill section to read:
"* Sec. 14. AS 38.05.115 is amended to read:
Sec. 38.05.115. Limitations and conditions of
sale. (a) The commissioner shall determine the timber
[AND OTHER MATERIALS] to be sold [,] and the
limitations, conditions, and terms of sale. The
limitations, conditions, and terms shall include the
utilization, development, and maintenance of the
sustained yield principle, subject to preference among
other beneficial uses. The commissioner may negotiate
sales of timber [OR MATERIALS] without advertisement
and on the limitations, conditions, and terms that are
considered to be in the best interests of the state.
Within a one-year period, the commissioner may not
negotiate a sale without advertisement to the same
purchaser of
[(1)] more than 500 M.B.M. or equivalent
other measure of timber [;
(2) EXCEPT AS PROVIDED IN (3) OF THIS
SUBSECTION, MORE THAN 25,000 CUBIC YARDS OF MATERIALS;
OR
(3) MORE THAN 100,000 CUBIC YARDS OF
MATERIALS TO A COMMON CARRIER HOLDING A LEASE UNDER
AS 38.35].
(b) Negotiated sales not exceeding 50 M.B.M. or
the equivalent other measure of timber [OR 2,500 CUBIC
YARDS OF MATERIALS] are exempt from the provisions of
AS 34.15.150.
(c) The limitations of this section are not
applicable to timber that [WHICH] becomes state
property under the provisions of AS 45.50.210 -
45.50.235."
Renumber the following bill sections accordingly.
Page 6, line 21:
Delete "14A"
Insert "13A"
Page 6, line 22:
Delete "in fee"
Page 7, line 13:
Delete "either"
Page 8, line 15:
Delete "per person within a one calendar year"
Insert "a person within a one-calendar-year"
Page 8, following line 17:
Insert a new subsection to read:
"(f) Notwithstanding (a) - (e) of this section,
for the purpose of creating incentives for the
development of peat as a source of heat or power, the
director may negotiate the sale of peat to
individuals, organized or unorganized communities,
tribal governments, or private profit or nonprofit
organizations. Under this subsection, the director may
provide
(1) for personal use by an individual, not
more than 200 cubic yards of peat a year at no cost;
(2) for commercial use, not more than
30,000 cubic yards of peat during a single 10-year
period at no cost; or
(3) for commercial use requiring more than
30,000 cubic yards of peat, the amount required by the
user during a 10-year period beginning when the user
uses more than 30,000 yards of peat at the price of
(A) 20 percent of the representative
regional sales price determined by the director under
AS 38.05.550(d)(1); or
(B) 20 percent of the fair market value
determined by an appraisal completed under
AS 38.05.550(d)(2), if the applicant provides the
appraisal at the applicant's expense and the appraisal
is approved by the commissioner."
Page 9, line 31:
Delete "section"
Insert "paragraph"
Page 10, line 1:
Delete "such a"
Insert "the"
Page 10, line 4:
Delete "section"
Insert "paragraph"
Page 11, line 3:
Delete "insure"
Insert "ensure [INSURE]"
Page 11, line 7:
Delete "which"
Insert "that [WHICH]"
Page 12, line 12:
Delete "[(i)]"
Page 13, line 16:
Delete "[(A)]"
Page 13, line 28:
Delete "sec. 18"
Insert "sec. 22"
Delete "further"
Page 15, line 23:
Delete "and quarry stone"
Insert "stone, pumice, and common clay"
Page 15, following line 23:
Insert a new bill section to read:
"* Sec. 25. AS 41.23.470(b) is amended to read:
(b) The commissioner may conduct only a
negotiated timber [OR MATERIAL] sale under
AS 38.05.115 to provide for personal use, including
house logs and firewood, or for a use incidental to
the construction of access, or for habitat
enhancement."
Renumber the following bill sections accordingly.
Page 16, line 5:
Delete "Article"
Insert "art."
Page 16, line 7:
Delete "catchline"
Insert "catch line"
Page 16, line 9:
Delete "Section 19"
Insert "Section 23"
Page 16, line 10:
Delete "sec. 23"
Insert "sec. 28"
CO-CHAIR PASKVAN objected for discussion purposes.
4:31:15 PM
CAMERON LEONARD, Assistant Attorney General, Civil Division,
Environmental Section, Department of Law, Anchorage, AK, said he
was available to answer questions on SB 219.
CO-CHAIR WAGONER invited Mr. Menefee to explain the amendment.
MR. MENEFEE explained that the majority of the following
amendments were crafting amendments. The Division of Legislative
Legal found a couple of things that needed to be brought into
conformance and there were a few other more substantial points.
He explained that the bill put all the "Auction and sealed bid"
provisions together for consistency, but a few places were
missed in sections 1, 10, 11 for AS 38.05.050, .075 and .075(g),
so those were modified to say "auction or sealed bid".
4:32:56 PM
Section 14 on page put the "timber sale" back in because it was
accidentally omitted when they removed "material sale" out of
the "timber sale" statutes.
4:33:51 PM
On page 1 another change dealt with pluralizing lease sale
disposal in the title to "leases, sales, and other disposals".
The second item adds "sealed bid" into section 1 in AS.3895.050.
Line 14 was a numbering issue and line 20 was a Legislative
Legal correction from "not" to "no". The next two changes on
page 2 were also from Legislative Legal.
4:34:57 PM
Line 9, page 2, of the amendment would go into page 4, line 5,
of the bill and provides exceptions when land might be sold for
less than the sealed bid amount. A part of AS 38.05.565 deals
with a less than fair market value sale and using the
representative regional sales price instead of the competitive
sales price had to be inserted in the list.
4:36:37 PM
On page 2, "or sealed bid" was added to lines 12 and 27 in
section 10 of .075(e) because it had been omitted. Legislative
Legal also found the "prequalification" spelled without the
hyphen and that was corrected to "pre-qualification".
4:37:22 PM
Language on page 3, line 4, put "and other materials" back into
the timber sale statutes in Section 14. Language on page 3, line
27, starts renumbering per Legislative Legal.
Language on page 3-4 of the amendment refers to page 6, line 22,
of the bill and talks about "all materials owned in fee by the
state" and "in fee" was removed, because the state does not
always own the entire fee simple estate. The idea here was as
long as the state owns the surface estate, it can dispose of the
materials; this clarifies that it doesn't have to be "in fee."
The language on page 7, line 13, was a crafting issue; the same
with the next amendment.
4:37:59 PM
SENATOR FRENCH stated that he felt his "inner Max Gruenberg
coming out" on page 4, lines 6-8, of the amendment addressing
page 8, line 15, of the bill, and wanted to say "per year," but
he would let it go.
4:39:27 PM
MR. MENEFEE moved on to page 4, lines 10-29, of the amendment
that dealt with peat. An amendment in the House incentivized
extracting peat for power and heat production; it also dealt
with private individuals getting 30,000 cubic yards of peat for
the first 10 years for free and 20 percent of the representative
sales or an appraisal price for the second decade - the idea was
to try to incentivize some sort of market to use peat in rural
villages by taking the startup cost part out of the equation.
On the bottom of page 4, top of page 5, "section" was changed to
"paragraph" and was a drafting error. The next statements were
all drafting issues that Legislative Legal said should be
another word.
He asked Ms. Jackson to fill in what Legislative Legal's
response was to the next section.
4:41:51 PM
MARY JACKSON, staff to Senator Wagoner, Alaska State
Legislature, explained that a technical renumbering revision "i"
was made per Legislative Legal on page 12, lines 25-29 where a
new section was inserted on "publication of a legal notice".
4:43:49 PM
MR. MENEFEE said the renumberings on page 5, line 26, were
because other things were renumbered further up. Changing
"quarry stone" to "stone, pumice, and common clay" was done
because they recognized that someone could construe the language
"materials" didn't really mean "pumice and common clay", but
they really want those included and thought it would be clearer
this way.
MR. MENEFEE said line 4, page 6, was another Legislative Legal
issue that referred to "material sales" in the recreation rivers
special designation area and those statutes were changed. The
new "material sales" statutes cover all this, so it's not needed
here. The rest of the amendment was all legislative crafting
issues.
4:46:09 PM
SENATOR WIELECHOWSKI asked him to explain the policy of not
charging anything for commercial use of not more than 30,000
cubic yards of peat during a single 10-year period on page 4,
lines 19 and 20, of the amendment.
MR. MENEFEE replied that this amendment came forward on the
House side and this language matches that. The discussion was at
least one company in rural Alaska (trying to create pellets out
of peat to burn in a stove, he thought) said the cost of
extracting the peat would be too exorbitant to ever start a
business and he proposed no cost for the first 10 year period
switching to 20 percent of either the original representative
sales price or an appraisal for the next 30,000 cubic yards of
peat in the next 10-year period. He reminded them that only one
appraisal had been done on peat, because there was no other peat
extraction to compare it to. So they have to look overseas. The
university did an appraisal and it may have resulted in too high
of a cost to start a business.
CO-CHAIR PASKVAN said then it's not the intent to give free peat
to use for lawns, but just for heating.
MR. MENEFEE clarified that line 13 [page 4] says "development of
peat as a source of heat or power" and it's not just for
personal use, but it could be for something like a school, too.
SENATOR WIELECHOWSKI went to lines 24 and 25 and asked if
getting the first 30,000 cubic yards for free was up to the
discretion of the director. What was the authority to say yours
is free but yours is $1 cubic yard?
MR. MENEFEE replied that these kinds of discretions are based
upon the need of the business that wants to get started. For
instance, somebody needs only 20,000 cubic yards or wants it for
a 12-year period or they only need it for 8 years.
SENATOR WIELECHOWSKI went to lines 24-29 and asked if over
30,000 yards you could get a million yards at 20 percent of the
fair market value.
4:50:58 PM
MR. MENEFEE answered that people do cut peat to use in their
stove, but not commercially. In this situation the volumes seem
large, but idea is if you are going to incentivize and get a
business started where they can regionally market this and start
shipping it around, it needs pretty large volumes. He was
correct that there wasn't an upper limit, but as soon as you
jump over the 30,000 cubic yards of peat in a 10-year period,
you get into this 20 percent category on line 22. Once you get
past that, you're into full price. By that time the idea was
that the market would be established by then and it could be
compared against market values at that point.
SENATOR WIELECHOWSKI asked if any regulations or laws were in
place for cutting peat now on state land - liking mining.
MR. MENEFEE replied not specifically for peat, but even if it's
free, they would still need to get an authorized amount from the
Corps of Engineers for so much peat from such and such a
location and reclaiming instructions. The way .550 is set up
they would have to designate a site as such and go through a
public process asking people if they know peat will be dug out
of the area.
4:53:26 PM
CO-CHAIR PASKVAN said when you extract gravel, peat often gets
extracted with it and he was trying to figure out what he meant
by saying there was no market for peat.
MR. MENEFEE responded when he talks about market he is speaking
specifically to the production of heat and power. He explained
that when a materials site is created it has a certain amount of
overburden that is usually used for reclamation. At times people
have sold that to create other types of organic material for
gardens and such and that doesn't fit this definition of being
used for heat and power. They do have prices for the overburden
if someone starts selling it; it would be a standard material
sale process.
He explained that if you find gravel, you probably don't have
peat, because it is typically created by an anaerobic wet
environment.
CO-CHAIR WAGONER said this amendment was made in the other body
that was looking for ways to create businesses in rural Alaska.
SENATOR WIELECHOWSKI said he didn't know enough about peat, but
it sounded like it could be good for rural communities. However,
30,000 cubic yards for free seemed like a lot.
CO-CHAIR WAGONER explained that his experience with peat was
that thousands or tons of it are eroding into Cook Inlet and
disappear. There is a lot of it and it's not used for much.
SENATOR FRENCH said he shared some of Senator Wielechowski's
concerns.
MR. MENEFEE shared what Representative Dick said: if it never
happens the state hasn't lost anything, but if you don't
incentivize it, a market will never get started and he wanted to
be overly generous in creating a new industry.
SENATOR WIELECHOWSKI said he wouldn't object, but he would find
out more about it.
CO-CHAIR WAGONER found no objection and announced that Amendment
1 was adopted.
SENATOR FRENCH moved Amendment 2.
27-GS2717\A.2
Bailey
AMENDMENT 2
OFFERED IN THE SENATE BY SENATOR FRENCH
TO: SB 219
Page 3, line 23, following "lease.":
Insert "The director shall provide public notice
of the lease renewal decision."
CO-CHAIR WAGONER objected for discussion purposes.
SENATOR FRENCH said he didn't think DNR would oppose the
amendment, because it adjusts page 3, line 23, by adding "The
director shall provide public notice of the lease renewal
decision." DNR said it was their intent to provide public
notice, so this just makes it explicit.
CO-CHAIR WAGONER removed his objection and finding no further
objection said Amendment 2 was adopted.
SENATOR FRENCH said he was withdrawing Amendment 27-GS2717\A.3
because it had a drafting error. He noted that it could be
addressed in the next committee.
SENATOR FRENCH moved Amendment 3.
27-GS2717\A.4
Bailey
AMENDMENT 3
OFFERED IN THE SENATE BY SENATOR FRENCH
TO: SB 219
Page 1, line 3:
Delete "relating to rights to use state water;"
Page 15, line 24, through page 16, line 1:
Delete all material.
Renumber the following bill sections accordingly.
Page 16, line 10:
Delete "sec. 23"
Insert "sec. 22"
CO-CHAIR WAGONER objected for discussion purposes.
SENATOR FRENCH explained that this makes some significant
adjustments to the bill; however it conforms with amendments
offered in the other body.
5:01:29 PM
CO-CHAIR PASKVAN confirmed that it removed section 21 of version
A on page 15 of the bill as it was removed in House Finance.
MR. MENEFEE said that was correct.
CO-CHAIR WAGONER removed his objection and finding no further
objection said that Amendment 3 was adopted.
5:02:10 PM
SENATOR WIELECHOWSKI moved Amendment 4.
27-GS2717\A.6
Bailey
AMENDMENT 4
OFFERED IN THE SENATE BY SENATOR WIELECHOWSKI
TO: SB 219
Page 6, lines 12 - 13:
Delete ". The department may exempt, by
regulation, small operations from the production
royalty otherwise required by this section"
CO-CHAIR WAGONER objected for discussion purposes.
SENATOR WIELECHOWSKI explained that this amendment deletes two
lines from page 6, lines 12-13. The current provision reads the
department that is contemplated being added may exempt by
regulation small operations from the production royalty
otherwise required by this section. A legislative Legal opinion,
dated April 2, 2012, says in essence that this would violate the
terms of the Statehood Act.
5:03:14 PM
At ease 5:03 to 5:04 p.m.
5:04:03 PM
SENATOR WIELECHOWSKI added that a Legislative Legal Memo, dated
April 2, stated that the Alaska Supreme Court decided that the
leasing requirements in section (6)(i) of the Alaska Statehood
Act considered in the context of the Schools Land Act, the
Mineral Leasing Act and other Statehood Minerals Act and Mineral
Leasing systems in other states mandates a system under which
the State of Alaska must receive rent or royalties for its
mining leases. The decision determined that the state could not
forego or fail to charge and collect rents and royalties. The
court stated that the State Hard Rock Mineral Leasing Laws that
did not require rents or royalties did not meeting the leasing
requirements of section (6)(i). It goes on to say the proposed
amendment to AS 38.05.212(a) apparently provides for a
circumstance where small operations would be exempt from
royalties. Therefore, it is likely to be found to violate the
terms of the Statehood Act and therefore, Amendment 4 simply
removes that provision to stay in compliance with the Statehood
Act.
MR. MENEFEE said they reviewed this with the Department of Law
(DOL), and the exemption was for people who in the end don't pay
royalty anyway because it is based upon net income not on gross
income. That's why they felt it wasn't a violation of the
Statehood Act and it got rid of the paperwork shuffle where
someone is not going to pay royalty. It's not a loss of revenues
to the state; it's the same amount.
MR. LEONARD said that was a good explanation of the intent to
cover operations that weren't paying royalties already because
of their small size, but he couldn't say if that ran afoul of
section (6)(i) or not.
CO-CHAIR PASKVAN asked if there was a limitation on the number
of years someone can report that they are not making any money.
MR. MENEFEE replied that no law could prevent someone from
failing to produce enough income to pay royalty for years on
end. What has happened is that hobby miners can go out and mine,
but they are not getting enough to pay royalty, because they can
deduct their costs for producing that gold. However there are
certain situations, like submerged mining leases, where you have
to produce in paying quantities or the terms will be changed.
5:08:36 PM
CO-CHAIR PASKVAN asked how many people were reporting they
weren't making any money.
MR. MENEFEE replied about 100 or so people.
CO-CHAIR WAGONER related that he had a mining claim on state
forest land, False Creek 1, and his wife remarked that he had
never worked so hard for so little and he they were trying to
address people like that.
SENATOR WIELECHOWSKI said he didn't dispute that, but a Supreme
Court case, the Statehood Act and a Legislative Legal opinion
appear to be right on point, and he didn't know how they could
do this without running afoul of multiple pieces of law.
MR. MENEFEE said this doesn't create additional work and they
were suggesting something that would limit the amount of work.
5:10:52 PM
CO-CHAIR PASKVAN asked if there was a limit for gross expenses
one can declare.
MR. MENEFEE replied that rent and expenses can be counted, but
they have to be justified. He didn't know if large mines had any
sort of cap.
MR. LEONARD said that the statute doesn't provide a cap, but
there is a relatively comprehensive regulatory scheme that
delves into calculating royalties, which he didn't have with
him.
CO-CHAIR PASKVAN said the question was if someone can extract a
thousand ounces and say they didn't make a penny for five years
in a row and the state doesn't get anything.
SENATOR WIELECHOWSKI said his staff just pointed out another
section of (6)(i) of the Statehood Act, which says, "any lands
or minerals hereafter disposed of contrary to the provisions of
this section shall be forfeited to the United States." He said
this amendment clearly violates those provisions and the
consequences appear to be quite severe.
5:14:38 PM
MR. MENEFEE said he understood what he was saying and he
wouldn't dispute the legal opinion.
SENATOR FRENCH said he had spent many hours this session reading
the statehood debates in US Congress, and this was one of the
larger questions that took place in both 1954 and 1957 - about
how the state would gain control of land that was then in the
hands of the US government.
5:16:08 PM
CO-CHAIR WAGONER removed his objection and finding no further
objections announced that Amendment 4 was adopted.
CO-CHAIR PASKVAN asked if the department could estimate the
number of ounces that are extracted that the state receives
nothing on.
MR. MENEFEE answered that they could go the state's royalty
records and find an example where a company starts up the first
year and doesn't produce that much and doesn't pay royalty.
Staff found at about 6 ounces of gold or about $10,000 worth of
income was the threshold where people weren't paying royalty.
CO-CHAIR PASKVAN said he wanted the gross amount that was being
written off per year.
5:18:16 PM
SENATOR FRENCH moved to report SB 219, as amended, from
committee with individual recommendations and attached fiscal
note(s) to next committee of referral. There were no objections
and therefore CSSB 219(RES) moved from the Senate Resources
Standing Committee.
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