Legislature(2015 - 2016)BUTROVICH 205

02/25/2015 03:30 PM RESOURCES

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Audio Topic
03:30:27 PM Start
03:31:05 PM SB32
03:59:51 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overview of Extraction Industry in Alaska: TELECONFERENCED
Anchorage Economic Development Corporation
-- Testimony <Invitation Only> --
<Above Item Removed from Agenda>
Moved CSSB 32(RES) Out of Committee
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                      SB  32-TIMBER SALES                                                                                   
3:31:05 PM                                                                                                                    
CHAIR  GIESSEL announced  SB 32  to be  up for  consideration and                                                               
that public comment was still open.                                                                                             
3:31:11 PM                                                                                                                    
SENATOR MICCICHE joined the committee.                                                                                          
3:31:40 PM                                                                                                                    
SENATOR COSTELLO moved  CSSB 32 ( ), version  29-GS1022\W, as the                                                               
working draft.                                                                                                                  
CHAIR GIESSEL objected for discussion purposes.                                                                                 
3:32:05 PM                                                                                                                    
CHRIS MAISCH, State Forester and  Director, Division of Forestry,                                                               
Department of  Natural Resources  (DNR), Juneau, Alaska,  said at                                                               
the last  hearing the  question came  forward about  the proposed                                                               
change in the  committee substitute (CS) on line 6.  It drops the                                                               
language: "consistent  with the  best interest  of the  state" at                                                               
the very  end of the  sentence in that  section. He was  asked if                                                               
that intended to  mean a best interest finding or  simply a lower                                                               
case best  interest, and in  consultation with the  Department of                                                               
Law and  the Governor's legislative director,  they all concurred                                                               
that it would be appropriate to clear up the possible confusion.                                                                
3:33:09 PM                                                                                                                    
SENATOR WIELECHOWSKI joined the committee.                                                                                      
MR.  MAISCH said  "best interest"  also occurred  on line  9, but                                                               
there it requires a finding.  That statement was moved forward to                                                               
ensure that  a finding would be  required for a timber  sale that                                                               
was  under this  authority.  He  added that  none  of the  public                                                               
process is changed with the CS.                                                                                                 
CHAIR GIESSEL,  finding no questions,  removed her  objection and                                                               
work draft W was adopted.                                                                                                       
3:35:33 PM                                                                                                                    
SENATOR STOLTZE  said he talked  to the Mat-Su Borough  mayor and                                                               
manager  since  the last  meeting  who  indicated they  had  been                                                               
offering timber sales  but didn't get much  response. The feeling                                                               
is  that there  is a  glut in  the Mat-Su  Valley market  and the                                                               
state offering other sales would  further restrict their economic                                                               
He said  that the Alaska  Outdoor Council has also  had concerns,                                                               
because  the Division  of Forestry  had failed  to interact  with                                                               
them over past  timber regulations. He wanted to  make sure there                                                               
had been the outreach that had  been avoided in the past. He also                                                               
wanted  to know  more  about Mr.  Maisch's  discussions with  the                                                               
mayor and the manager.                                                                                                          
3:37:28 PM                                                                                                                    
MR.  MAISCH responded  that he  had  shared an  email with  Mayor                                                               
DeVilbiss and Manager  Moosey; the mayor said he  will inform the                                                               
assembly of this  proposed legislation and he  hadn't any further                                                               
discussion with Mr.  Moosey, but expected to hear  back from him.                                                               
As for potentially glutting the  timber market, they don't intend                                                               
to use  this authority  in the  Mat-Su Valley  unless there  is a                                                               
need. Their preferred  method of selling timber  there will still                                                               
be through competitive auctions under their 120 authority.                                                                      
He said  an auction was offered  in the Mat-Su Valley  this fall;                                                               
four timber sales were available  and there were no bidders. That                                                               
could  mean they  are satiated,  so  he doesn't  intend to  offer                                                               
other sales except under the 120 authority.                                                                                     
SENATOR STEDMAN said it's a  large state that has big differences                                                               
in  some  of  the  forests.   Southeast  doesn't  have  municipal                                                               
forests;  it has  the Tongass  and some  small state  forests and                                                               
forests on  some Native lands.  The response from this  region is                                                               
that timber sales  have been very well received and  he liked the                                                               
language change.  He thought that  some of the public  process in                                                               
this industry had actually been  detrimental and had been used to                                                               
shut the industry  down versus get a fair  and balanced multi-use                                                               
forest moving. The pendulum has moved  too far to the point where                                                               
there are objections to virtually every timber sale.                                                                            
3:40:41 PM                                                                                                                    
SENATOR WIELECHOWSKI  asked Mr.  Maisch to address  some concerns                                                               
in the Young's  Timber letter in their folder; one  was that this                                                               
could potentially lead to "cronyism."                                                                                           
MR. MAISCH responded  that a number of safeguards  are built into                                                               
the  process; first  is the  one  that he  just mentioned,  using                                                               
competitive  bid  under  their  120  authority,  their  preferred                                                               
method of selling timber and what  they do in 90 percent of their                                                               
timber sales.  He also related  that in Tok where  Young's Timber                                                               
is located, Alaska Power and  Telephone (APT) was interested in a                                                               
large  long-term sale  to support  the development  of a  utility                                                               
that  would  use wood  as  the  primary  fuel source  to  produce                                                               
electricity.  They  started out  with  the  118 process  in  that                                                               
instance, and  after the preliminary best  interest finding (BIF)                                                               
was put  out they  had commenters  including from  Young's Timber                                                               
that  indicated they  potentially had  competitive interests.  At                                                               
that point,  the division  backed up  and closed  the preliminary                                                               
BIF  out with  no action  and started  a 120  process with  a new                                                               
preliminary BIF that would basically  offer that timber sale as a                                                               
competitive sale. Then  both Young's Timber and  APT could decide                                                               
whether they wanted to compete for  that wood. So, by example the                                                               
issue  the letter  referenced was  addressed. The  department has                                                               
the best  interest of the state  at heart and there  are specific                                                               
things they have to do in a BIF that address that question.                                                                     
He  said Subsection  (1-(b)  in  11AAC71.055 provided  additional                                                               
things  they  can  consider.  This  is part  of  their  123  sale                                                               
authority and  it talks about  financial backing,  capability and                                                               
experience in  the proposed activity  and being able to  meet the                                                               
bonding and  insurance requirements of  the timber sale.  Part of                                                               
that BIF process  is the department's due diligence  as an agency                                                               
and  as professionals  to ensure  that  this is  approached in  a                                                               
business-like manner.                                                                                                           
SENATOR WIELECHOWSKI said one of  the other issues Young's Timber                                                               
raised  was  if an  environmental  group  can be  prevented  from                                                               
purchasing the timber.                                                                                                          
MR. MAISCH answered  that a negotiated sale would  be through the                                                               
RFP  process  where  the  objectives   are  enumerated  like  the                                                               
creation  of  local  jobs  and  what  kind  of  high  value-added                                                               
products are  going to be  manufactured, and it is  unlikely that                                                               
an  environmental   group  could  respond  positively   to  those                                                               
criteria. He said  the main area of the state  that they use this                                                               
authority in is Southern Southeast Alaska.                                                                                      
3:46:56 PM                                                                                                                    
SENATOR STOLTZE said he appreciated  the continuing follow-up and                                                               
that his overall concern is to support the Southeast economy.                                                                   
3:48:28 PM                                                                                                                    
JOE YOUNG, owner,  Young's Timber, Inc., Tok,  Alaska, opposed SB                                                               
32 as written,  especially Section 3 that  states "AS 38.05.11(c)                                                               
is repealed."  He said  the intent  of that  section was  to help                                                               
Alaskans   with  high   levels  of   unemployment,  underutilized                                                               
manufacturing   capacity,  underutilized   allowable  cut/damaged                                                               
trees (Tok has  thousands of acres of fire  killed and wind-blown                                                               
trees) or  land being converted  to non-forest use for  long term                                                               
negotiated timber sales.                                                                                                        
He said SB 32 needs to  be at least delayed until public hearings                                                               
and explanations  of the sectional  analysis are held in  Tok and                                                               
other  rural  areas,  so  it   can  rewritten  to  reflect  their                                                               
MR.  YOUNG  explained  that  the  Tok  area  has  four  different                                                               
operators   that  have   10  timber   sales  executed   under  AS                                                               
38.05.11(h)(c). The effect of these  sales has spurred investment                                                               
of over  $3 million by the  private sector and $4  million by the                                                               
state  for wood  fiber  heating  systems to  reduce  the cost  of                                                               
energy in  the Tok area.  Young's Timber, alone, has  invested $5                                                               
million  in value-added  equipment because  of the  118(c) timber                                                               
sales it was able to acquire.                                                                                                   
He  said  the   118(c)  timber  sales  in  rural   areas  can  be                                                               
administered   with  smaller   staff.   They  can   be  used   to                                                               
economically reduce hazardous fuels  in rural communities feeding                                                               
the  energy   heating  systems.  It  can   spur  timber  industry                                                               
development, help reduce energy costs and create new jobs.                                                                      
3:50:56 PM                                                                                                                    
His other concern was the  immediate effective date in Section 5.                                                               
"What's the rush?" he asked. It sure looked suspicious.                                                                         
3:51:39 PM                                                                                                                    
ERIN   MCLARNON,  Executive   Director,  Working   Forest  Group,                                                               
Anchorage,  Alaska, supported  SB  32.  She is  also  a Board  of                                                               
Forestry member. She said SB  32 would allow the DNR commissioner                                                               
to better  respond to  the economic  and geographic  realities of                                                               
the  forest product  industry.  "Who would  have  guessed that  a                                                               
primary  demand for  our  state's timber  would  be for  bio-mass                                                               
energy purposes?" she asked.                                                                                                    
She explained that SB 32 would  allow the DNR to offer negotiated                                                               
timber sales for  up to 25 years, which is  crucial for medium to                                                               
large bio-mass energy  products to get off the  ground. This bill                                                               
would  also give  DNR  the flexibility  to  determine which  sale                                                               
method  is in  the best  interest of  the state  for each  timber                                                               
CHAIR  GIESSEL,  finding  no  further  questions,  closed  public                                                               
SENATOR  WIELECHOWSKI said  an RFP  made  him feel  a little  bit                                                               
better and asked if it was a requirement for a manufacturer.                                                                    
MR.  MAISCH replied  that  is the  language that  is  in the  123                                                               
authority. It is  not in the 118 authority, but  the same process                                                               
is used: they can choose to do an  RFP, but they don't have to do                                                               
one. As a practice  in their RFP they make an  initial cut at who                                                               
might be  appropriate to  negotiate with. It's  part of  the best                                                               
interest finding process.                                                                                                       
SENATOR WIELECHOWSKI said he sees a  lot of merit and with a good                                                               
commissioner this is  a great bill, but his concern  was that the                                                               
maybe the  commissioner's uncle  is a  local manufacturer  and he                                                               
gives him  a sweetheart deal but  they would have got  a lot more                                                               
money by putting it out to  bid. With an RFP anyone could respond                                                               
and the commissioner would have to negotiate the best deal.                                                                     
MR. MAISCH answered that was  right. Through the BIF process, the                                                               
commissioner  would  most  likely  be the  final  signatory.  He,                                                               
himself,  has  been delegated  authority  for  a timber  sale  of                                                               
$50,000 or less.  For example,  the current 123 sale in Fairbanks                                                               
has  a   $400,000  value   and  that  will   be  signed   by  the                                                               
commissioner. The BIF is in the  light of day; the public comment                                                               
is  on  it. The  process  is  well  designed to  prevent  Senator                                                               
Wielechowski's concern from occurring.                                                                                          
SENATOR STOLTZE  said he  worked with Mr.  Stancliff on  the bio-                                                               
mass project  and he wanted  to hear  from him whether  this will                                                               
diminish or enhance the viability of those types of projects.                                                                   
3:56:48 PM                                                                                                                    
SENATOR  WIELECHOWSKI asked  if  removing language  in section  1                                                               
that requires  consistency with  the best  interest of  the state                                                               
implies that it has to be in the best interest of the state.                                                                    
MR.  MAISCH explained  that  a  question on  lines  6  and 9  was                                                               
specifically asked  at the last hearing.  The question pertaining                                                               
to line  6 was  would the  lower case  best interest  be confused                                                               
with an  actual finding  that would be  a best  interest finding.                                                               
He  concurred that  that language  was  potentially confusing  to                                                               
especially the  lay public and the  purpose of the CS  is to drop                                                               
the generic best interest reference and avoid the confusion.                                                                    
3:58:00 PM                                                                                                                    
DAVE  STANCLIFF,  representing  himself,  Tok,  Alaska,  said  he                                                               
hadn't the time to go through  the bill to speak intelligently on                                                               
all  sections, but  he would  give him  a deeper  assessment next                                                               
week when he was in Juneau.                                                                                                     
3:59:11 PM                                                                                                                    
SENATOR  COSTELLO  moved  to report  CSSB  32(RES),  version  29-                                                               
LS1022\W,  from  committee  with individual  recommendations  and                                                               
attached fiscal note(s).  There were no objections and  it was so                                                               

Document Name Date/Time Subjects
SRES Agenda Feb 25 2015.pdf SRES 2/25/2015 3:30:00 PM
SB 32-W.pdf SRES 2/25/2015 3:30:00 PM
SB 32
SB32-W-Explanation of Changes.pdf SRES 2/25/2015 3:30:00 PM
SB 32
SRES-SB 32-02-13-2015.pdf SRES 2/25/2015 3:30:00 PM
SB 32
SRES-SB 32-Sectional Analysis-02-13-2015.pdf SRES 2/25/2015 3:30:00 PM
SB 32
SRES-Response from Division of Forestry .pdf SRES 2/25/2015 3:30:00 PM
SB 32 Memorandum.pdf SRES 2/25/2015 3:30:00 PM
SB 32
SRES-SB 32 Governor Transmittal Letter-02-13-2015.pdf SRES 2/25/2015 3:30:00 PM
SB 32
SRES-SB 32-Fiscal Note-DNR-DOF-02-13-2015.pdf SRES 2/25/2015 3:30:00 PM
SB 32
SRES-SB 32-Letter of Support-(TVSFCAC)-2-13-2015.pdf SRES 2/25/2015 3:30:00 PM
SB 32
SRES-SB 32- Letter of Support-RDC-02-06-2015.pdf SRES 2/25/2015 3:30:00 PM
SB 32