Legislature(2017 - 2018)BUTROVICH 205
02/09/2018 03:30 PM RESOURCES
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|Overview: Arctic Strategic Transportation & Resources Project (astar)|
* first hearing in first committee of referral
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SB 166-MINING: CLAIMS;RIGHTS;RENTAL RATES;LABOR 3:56:04 PM CHAIR GIESSEL announced consideration of SB 166 relating to mining statements of labor. This bill is from the administration and it is being managed by the Department of Natural Resources (DNR). This committee held an informational hearing on the subject of the mining claim process on January 22, 2018. ED KING, Special Assistant to the Commissioner, Department of Natural Resources (DNR), Juneau, Alaska, introduced himself and said the deputy commissioner would start with opening remarks. HEIDI HANSEN, Deputy Commissioner, Department of Natural Resources (DNR), Juneau, Alaska, said SB 166 is an attempt to help the mining community solve an increasingly prevalent problem of the unintentional abandonment of mining claims. This bill provides one option to begin the dialogue, but the department is happy to work with the committee and the public to find a best outcome for all the parties involved. She noted that a mining claim is structurally different than a lease agreement. A mining claim is a self-initiated right, which is perpetuated by the miner's actions. Failure to meet the legal requirements to maintain a claim results in the automatic termination of the claim by operation of law not by departmental action. The department has little discretionary authority under the current statute to "forgive" errors on affidavits or failure to pay rent. The rights, themselves, and the preservation of those rights fall to the claimant. She explained that over the last few years, the department has received numerous complaints that the current statutory requirements are too rigid and punitive, and they agree in many regards. The department is looking for a solution that will decrease rather than increase DNR's administrative burden in the face of budget cuts and staff reductions. 3:58:29 PM MS. HANSEN said the labor requirement for a mining claim is minimal, but the reality is that the holder of the mining claim is very likely to want to work their claim to generate value from their exclusive right to the locatable minerals. A legal requirement to do that work is not necessary. Meanwhile the requirement to pay rents already provides an additional economic incentive to do that same work. As the options to address this issue were evaluated, it became clear that a simple fix was not available. A waiver system was considered but administering it would require additional staff. A grace period was contemplated along with a required notification but that, too, would put an increased burden on staff, and as did other alternatives. The department came up with the idea of repealing the annual labor requirement as a win/win way to improve miners' tenure security without increasing departmental workload and SB 166 begins the dialogue. MR. KING said they had received a lot of feedback since the bill was introduced and are preparing a frequently asked questions (FAQ) to supplement the materials early next week. 4:00:40 PM Section 1 is a conforming change since the annual labor requirement is being removed throughout the statute. Sections 2 and 3 surround the idea of a "bonafide miner" that they are recommending as a new term in state statutes. Basically, someone that is taking the exclusive rights to the state's resources should have a responsibility to develop those resources. In many ways the annual labor requirement was ensuring that work was happening, and the department wanted to be very clear that their intention is that a holder of a mining claim still has that obligation to develop those resources. They think that all the miners who are out there doing their annual labor today by their actions have already demonstrated that they are bonafide miners. This language is not an intent to take away anyone's claims. Even without this language, the department believes it is implied. The bonafide miner in section 2 is added to the qualifications to hold a mining claim in good faith. 4:02:25 PM SENATOR WIELECHOWSKI asked the definition of "bonafide miner." MR. KING replied that the definition is added in section 3 subsection (d) as follows: An entity or person who seeks to acquire, acquires, or holds exploration or mining rights under AS 38.05.185 - AS 38.05.275 in good faith for the purpose of mineral exploration and development and not for the prevention of mineral exploration and development. SENATOR WIELECHOWSKI asked if he sees a lot of instances of people acquiring land not for the purpose of mineral exploration or development. MR. KING replied they don't go through that exercise now but that doesn't mean people aren't doing it. What they are trying to make clear through this legislation is that they don't want to open up a new way for someone to get this new opportunity to withhold minerals from development. SENATOR WIELECHOWSKI asked him to cite some examples of lands where people are holding exploration or mining rights for the prevention of mineral exploration or development. MS. HANSEN replied more to the point, they are trying to encourage the development of mineral exploration and production. SENATOR WIELECHOWSKI said he took that as a no. MR. KING said that was correct. In removing the annual labor requirement, they don't want to create an opportunity for someone to get those exclusive rights and deny them indefinitely to someone who wants to develop them. 4:05:01 PM CHAIR GIESSEL remarked that the annual labor report is kind of like a plan of development for an oil lease by documenting that work was done. But if that requirement is to be removed, they want to make sure something is in place that says some work still has to be done even though the department is not asking for the written document. MR. KING replied that is their expectation. 4:06:02 PM MR. KING said section 3 (c) of AS 38.05.090 adds a new subsection intended to address how the department will administer this bonafide miner requirement. He elaborated that in applying for a lease, the applicant would have to submit an affidavit that says they are intending to work that claim. A mining claim doesn't have that requirement, because a miner has self-initiated rights: it is assumed that they are bonafide unless the department asks for verification, which can be in the form of a recorded sworn statement. SENATOR WIELECHOWSKI asked if it is correct that under current law, someone has to provide an affidavit that they are doing the work on the property. MR. KING answered yes. SENATOR WIELECHOWSKI remarked that they are changing that now so that someone doesn't have to do the work, and he asked if they think that is going to encourage more mining. MR. KING replied the issue is that these unintended abandonments create a lot of uncertainty about whether a claim is still under claim. If that can be clarified, they believe it would encourage more investment. The economic incentives themselves will drive that investment. SENATOR WIELECHOWSKI asked how much the annual labor costs. MR. KING said the labor requirement amounts to $100 per year. SENATOR WIELECHOWSKI asked if he had thought about extending the time someone has to actually perform labor on their property from one to two years. He added that he just didn't see how this encourages people to do more. MR. KING said he saw his point, but the purpose of this bill isn't to encourage more development. It's to secure a miner's tenure and to take away that uncertainty that they might be working a claim that has been invalidated and that someone else can take away from them (by going out and staking that claim). He pointed out that $100 per year labor is required, but more labor above that rolls forward into the next year(s) - a miner don't have to be out there every year. And if a miner can't get out to his claim and actually perform the labor, he can just send a check for $100. The current environment isn't doing anything to necessarily encourage that investment. It's the miners' actions and their motivation for economic gain that is generating this resource development. That isn't being taken away, but the department is trying to help secure that tenure to make them very comfortable to continue investing. 4:10:03 PM SENATOR BISHOP asked if the $100 is for a one-quarter quarter section claim and commented that adding quarter sections gets expensive really quick. CHAIR GIESSEL said she was trying to interpret the problem this legislation is trying to solve and thought it was the question of top-filing. Someone else seeing an unintentional error in an annual filing, top-files on a miner and he loses that claim. DNR is trying to fix that problem by removing the requirement for that paperwork. Is that close to what they are doing? MR. KING clarified when that erroneous affidavit is recorded, the abandonment already occurred. It's not the action of someone else staking over that claim that invalidates the previous claim, and it's not a notification from the department that abandons that claim either. The claimant's actions making that error is what abandoned that claim. CHAIR GIESSEL said she was trying to drill down to the motivation and asked if there is no grace period or notification of the mistake, and are they trying to fix that, too. MR. KING said that was correct. Under current statute the department doesn't have any leeway to forgive an error. It's not a decision that the department makes and therefore, it's not a decision they can rescind. If the requirement for annual labor and the recording of the annual labor affidavits is removed, the problem goes away. If they don't want to go that far, they could consider a grace period. However, in doing that, one of the goals they had in providing this legislation was not to increase the state budget and they are worried that a grace period would create more work for the department. 4:13:43 PM SENATOR VON IMHOF asked if a 60-day grace period could alleviate some of Senator Wielechowski's concerns. She asked how many errors were made in the past and how much staff time a grace period would take. MR. KING responded because the abandonment actually occurs when the error occurs, the error may have happened 10 years ago. In that case, a 60-day grace period would have also expired. So, unless the grace period is attached to a notification that the abandonment has occurred, there would be no opportunity to cure it, but then the department has to provide the staff to do that. SENATOR VON IMHOF said she thought paperwork is required annually and therefore, it should be caught before 10 years. MR. KING indicated no. SENATOR WIELECHOWSKI asked how someone could have abandoned their claim 10 years ago and still be paying the annual fee for the same claim. He asked how many mining claims there are each year and how many are abandoned. MR. KING answered there are about 35,000 mining claims today and about 5-10 percent per year are known to be abandoned, but he would get better figures for him. SENATOR WIELECHOWSKI asked if people are checking the records and taking over a claim. 4:16:38 PM MR. KING answered yes, people are finding mistakes on affidavits, over-staking those claims, and accusing the senior claimant of being in default or having abandoned their claim and claiming ownership of it. He corrected that his earlier estimate was for "known" abandonments. It's possible other errors haven't been detected. It creates a property rights issue that needs to be settled in civil court ultimately, because when these issues have been brought to the department's attention, it doesn't have any tools to do anything about it. MS. HANSEN added that a number of people have expressed concern to DNR that when they believe that their claims are abandoned, they have to go back and re-stake them, and depending on the number of claims, that could cost a lot, as well. So, this is not only curing the problem that Mr. King just mentioned, but it also cures this re-staking issue. MR. KING said he was sure some of the committee members had heard about this from their constituents. CHAIR GIESSEL said, yes, many. SENATOR VON IMHOF said she was eager to get his FAQs and asked him to put them in layman's terms and start with what concerns they are trying to address, what they are proposing to do and what the consequences are. MS. HANSEN said she would be happy to do that. 4:19:19 PM SENATOR BISHOP said he would provide a little historical perspective on why this discussion is taking place: his office has files from people who have been on a staked claim for 10 years and through an error on recording the affidavit of annual labor they were sent an abandonment notice. In the meantime, someone top-filed over them. So, after 10 years' worth of effort and one mistake, it's gone. The top-filer now has the ground. That is just one example but there are more. Hopefully, a solution can be found, because he thinks this is wrong. 4:21:24 PM MR. KING said if there is a problem with the definition of "bonafide miner" in sections 2 and 3 the rest of the bill can survive without those provisions. Section 4 is a conforming change and removes the reference to "annual labor" elsewhere in statute. Section 5 is the increase in the annual rental payment. The fiscal analysis for SB 166 indicates that repealing the annual labor requirement would result in an annual loss of $584,000 to the state. Currently there are 21,000 quarter claims (each claim has four 40-acre claims within them), which calculates into a total of 85,000 40-acre claims. There are 57,975 acres under lease; if each of those leases were converted to 40-acre claims that would result in 1,449 equivalent claims. Then they have 13,294 actual 40-acre claims; for a total of just under 100,000 40-acre equivalent claims. 4:26:52 PM The rental amount goes from $20 to $50 on page 3, line 29, of the bill. It looks like it's more than double. But he pointed out that $20 was put in place in 1989 and adjusted for inflation every 10 years. So, today, miners pay $35 (for that same zero to five-year old 40-acre claim). The last time this number was adjusted for inflation was 2009, so next year it will be adjusted again. Applying that inflation adjustment today brings one to the numbers on the fifth line of that box on the third page of the fiscal analysis. If this bill were not to pass, the miners would be paying $40, $85, and $200. The correct way to look at the rental increase in this bill is to compare it to that baseline. 4:28:07 PM SENATOR BISHOP asked if the 10-year consumer price index (CPI) increment in the statute is still at the discretion of the commissioner. MR. KING replied yes; the fee schedule is updated every 10 years by regulation: so, to the extent that the commissioner has the authority to implement a regulation. SENATOR BISHOP said that could be in the FAQ sheet at the chair's prerogative. CHAIR GIESSEL indicated that would be fine. SENATOR WIELECHOWSKI asked if this bill affects claims on federal property. MR. KING replied that they talked to the Bureau of Land Management (BLM) to make sure what this measure doesn't affect federal claims. There are state requirements that do govern federal claims, but a federal claim must also follow federal law, and that is what state law says. The department thought it made sense because they were removing the annual labor requirement from state law that it got removed everywhere. If that creates a problem, there is no requirement that the Title 27 references to annual labor should be repealed. 4:29:47 PM SENATOR WIELECHOWSKI asked what the federal requirements are to establish and keep a mining claim. MR. KING replied that the federal law is still the General Mining Act of 1872, and it requires just an annual work assessment that is also $100 for 40 acres. SENATOR WIELECHOWSKI asked if the state system is identical to the federal system currently. MR. KING replied prior to 1989 it was; Alaska adopted the federal law and the federal system at statehood. However, in 1989, the Supreme Court ruled against the state and started requiring that the state also impose annual rental and royalty payments, which don't exist for federal claims. The debate was always if Alaska wants a location system like the federal government or a leasing system that requires rents and royalties, and right now, we have both. So, they are suggesting removing that annual labor requirement that is really kind of unnecessary. 4:31:08 PM MR. KING said they have received many questions about section 5 and he hoped his answer is adequate. He would be happy to discuss the fiscal note with the committee at any time. He said section 6 is the inflation adjustment, and because the rental payments are being adjusted, it makes sense to inflation- adjust the statutory requirements into today's dollars. So, section 6 rebases the inflation index to the 2018 timeframe instead of the 1989 timeframe in the original rental requirements. Section 7 maintains definitions that would otherwise be lost through repeal and those are found in the annual labor chapter, AS 38.05.242. Because most of those definitions are related to things associated with annual labor the only surviving definition that needs to be maintained is the meridian, township, range section claim (MTRSC). So, that section is pulled out of section .242 and moved into section .211. Section 8 is a conforming change that removes the repealed statutes from the abandonment provision in AS 38.05.065. Section 9 is a new subsection (c) that is added to the abandonment section. It is intended to help existing errors on affidavits that are in existing files. Because the department doesn't have the discretion to grant them immunity, they were trying to figure out the best way to allow those cures to occur and decided to waive the penalty associated with curing those abandoned claims. He explained that section .265 already allows one to cure an abandoned claim that is the result of an error in an essential fact, but it requires paying a penalty. SENATOR BISHOP asked the timeline on that. MR. KING replied that no time is defined in statute to cure an abandonment. It is indefinite. He added that the only caveat is that the cure provision doesn't apply whenever there is a competing interest. If two people assert their rights to a claim the cure can't happen and it must be litigated before going forward. 4:36:03 PM Section 10 repeals the annual labor requirement. Section 11 is transition language that was inserted to clarify what happens when annual labor is removed in the middle of an annual labor year. It creates transition language to go along with an effective date of September 1. SENATOR WIELECHOWSKI asked if section 10 repeals a number of statues that are conforming changes. MR. KING answered yes. It is the annual labor requirement and all the statutes surrounding the enforcement of it. He said section 12 clarifies the timing in which the commissioner can calculate the changes of rentals in each year. It clarifies that the next inflation adjustment will happen in the year 2028. Section 13 authorizes the department to adopt regulations and implement changes that are made by this act. Section 14 authorizes the department to amend existing leases to conform with statutory changes in this bill. The reason that is important is because a lease, unlike a claim, is an actual contract and has contract terms, and the legislature can't just strike a term of a contract. This language allows the department to take those terms out of the lease to conform with the statutory changes this bill would be making. Section 15 provides for an immediate effective date for section 13, and section 16 provides for the effective date of September 2 for first day of the next annual labor year. That concluded the provisions in SB 166. CHAIR GIESSEL thanked him and finding no further questions, held SB 166 in committee.