Legislature(1993 - 1994)
04/15/1994 08:15 AM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE RESOURCES STANDING COMMITTEE April 15, 1994 8:15 a.m. MEMBERS PRESENT Representative Bill Williams, Chairman Representative Bill Hudson, Vice Chairman Representative Con Bunde Representative Pat Carney Representative John Davies Representative David Finkelstein Representative Joe Green Representative Jeannette James Representative Eldon Mulder MEMBERS ABSENT None OTHER LEGISLATORS PRESENT Senator Steve Frank COMMITTEE CALENDAR SB 310: "An Act relating to the management and sale of state timber and relating to the administration of forest land." HEARD AND HELD FOR FURTHER CONSIDERATION WITNESS REGISTER SENATOR STEVE FRANK Alaska State Legislature State Capitol, Room 518 Juneau, Alaska 99801-1182 Phone: 465-3709 POSITION STATEMENT: Prime Sponsor SB 310 TOM BOUTIN, Director Division of Forestry Department of Natural Resources 400 Willoughby Ave. Juneau, Alaska 99801-1724 Phone: 465-2491 POSITION STATEMENT: Supported SB 310 and answered questions ELLEN FRITTS, Deputy Director Division of Habitat and Restoration Alaska Department of Fish and Game P.O. Box 25526 Juneau, Alaska 99802-5526 Phone: 465-4105 POSITION STATEMENT: Answered questions GERON BRUCE, Legislative Liaison Alaska Department of Fish and Game P.O. Box 25526 Juneau, Alaska 99802-5526 Phone: 465-6143 POSITION STATEMENT: Answered questions ALBERT PAGH Four Star Lumber Company 2849 Parks Highway Fairbanks, Alaska 99709 Phone: 479-6643 POSITION STATEMENT: Supported concept of SB 310 MARICKE BARNES 517 Revilla Ketchikan, Alaska 99901 Phone: 247-1275 POSITION STATEMENT: Supported SB 310 TROY REINHART, Executive Director Alaska Forest Association 111 Stedman, #200 Ketchikan, Alaska 99901 Phone: 225-6114 POSITION STATEMENT: Supported SB 310 ROBERT DENNEY Talkeetna, Alaska 99676 POSITION STATEMENT: Opposed SB 310 ROBERTA SHELDON Talkeetna, Alaska 99676 POSITION STATEMENT: Opposed SB 310 ED SHARP Lake Creek Lodge, Alaska Phone: 733-2051 POSITION STATEMENT: Opposed SB 310 PREVIOUS ACTION BILL: SB 310 SHORT TITLE: STATE/PRIVATE/MUNI TIMBER OPERATION/SALE SPONSOR(S): SENATOR(S) FRANK,Taylor,Pearce, Sharp,Miller,Kelly,Halford; REPRESENTATIVE(S) Olberg JRN-DATE JRN-PG ACTION 02/14/94 2829 (S) READ THE FIRST TIME/REFERRAL(S) 02/14/94 2829 (S) RESOURCES 03/02/94 (S) RES AT 3:30 PM BUTROVICH RM 205 03/05/94 (H) MINUTE(ECO) 03/16/94 (S) RES AT 3:30 PM BUTROVICH RM 205 03/22/94 (S) RES AT 1:30 PM BUTROVICH RM 205 03/24/94 (S) RES AT 03:30 PM FAHRENKAMP ROOM 203 03/28/94 (S) RES AT 3:30 PM BUTROVICH RM 205 03/30/94 3406 (S) RES RPT CS 4DP 1DNP NEW TITLE 03/30/94 3407 (S) ZERO FN TO SB & CS PUBLISHED (DNR) 03/30/94 (S) RLS AT 11:35 AM FAHRENKAMP ROOM 203 03/30/94 (S) MINUTE(RLS) 04/05/94 3448 (S) RULES RPT 3CAL 2NR 4/5/94 04/05/94 3449 (S) HELD TO 4/6/94 04/06/94 3476 (S) READ THE SECOND TIME 04/06/94 3477 (S) RES CS ADOPTED UNAN CONSENT 04/06/94 3477 (S) AM NO 1 MOVED BY LITTLE 04/06/94 3478 (S) AM NO 1 FAILED Y9 N11 04/06/94 3478 (S) AM NO 2 MOVED BY LITTLE 04/06/94 3479 (S) AM NO 2 FAILED Y9 N11 04/06/94 3479 (S) AM NO 3 NOT OFFERED 04/06/94 3479 (S) AM NO 4 MOVED BY LITTLE 04/06/94 3479 (S) AM NO 4 FAILED Y9 N11 04/06/94 3480 (S) AM NO 5 MOVED BY DUNCAN 04/06/94 3480 (S) AM NO 5 FAILED Y8 N12 04/06/94 3480 (S) AM NO 6 MOVED BY DUNCAN 04/06/94 3481 (S) AM NO 6 FAILED Y9 N11 04/06/94 3481 (S) AM NO 7 MOVED BY DUNCAN 04/06/94 3482 (S) AM NO 7 FAILED Y9 N11 04/06/94 3482 (S) AM NO 8 MOVED BY DUNCAN 04/06/94 3482 (S) AM NO 8 FAILED Y9 N11 04/06/94 3483 (S) AM NO 9 MOVED BY LINCOLN 04/06/94 3483 (S) AM NO 9 FAILED Y9 N11 04/06/94 3483 (S) AM NO 10 MOVED BY ZHAROFF 04/06/94 3484 (S) AM NO 10 FAILED Y9 N11 04/06/94 3484 (S) AM NO 11 MOVED BY ZHAROFF 04/06/94 3484 (S) AM NO 11 FAILED Y9 N11 04/06/94 3485 (S) AM NO 12 MOVED BY LINCOLN 04/06/94 3485 (S) AM NO 12 FAILED Y10 N10 04/06/94 3486 (S) AM NO 13 MOVED BY ZHAROFF 04/06/94 3486 (S) AM NO 13 FAILED Y9 N11 04/06/94 3486 (S) AM NO 14 MOVED BY ADAMS 04/06/94 3487 (S) AM NO 14 FAILED Y8 N12 04/06/94 3487 (S) ADVANCE TO THIRD READING FLD Y11 N9 04/06/94 3487 (S) THIRD READING 4/7 CALENDAR 04/07/94 3506 (S) READ THE THIRD TIME CSSB 310(RES) 04/07/94 3506 (S) PASSED Y11 N8 E1 04/07/94 3506 (S) Adams NOTICE OF RECONSIDERATION 04/08/94 3527 (S) RECON TAKEN UP/IN THIRD READING 04/08/94 3527 (S) PASSED ON RECONSIDERATION Y11 N7 E2 04/08/94 3531 (S) TRANSMITTED TO (H) 04/08/94 3212 (H) READ THE FIRST TIME/REFERRAL(S) 04/08/94 3212 (H) RESOURCES 04/08/94 3220 (H) CROSS SPONSOR(S): OLBERG 04/15/94 (H) RES AT 08:15 AM CAPITOL 124 ACTION NARRATIVE TAPE 94-53, SIDE A Number 000 The House Resources Committee was called to order by Chairman Bill Williams at 8:25 a.m. Members present at the call to order were Representatives Williams, Hudson, Bunde, Davies, Green, and Mulder. Members absent were Representatives Carney, Finkelstein, and James. CHAIRMAN BILL WILLIAMS announced there is a quorum present. He said the meeting is on teleconference with Anchorage, Cordova, Fairbanks, Homer, Kodiak, Ketchikan, Mat-Su, Petersburg, Seward, Sitka, Kenai/Soldotna, Tok, Valdez, Nenana, Haines, Port Protection, Talkeetna, and Lake Creek Lodge. (CHAIRMAN WILLIAMS noted for the record that REPRESENTATIVE JAMES joined the committee at 8:26 a.m.) SB 310 - STATE/PRIVATE/MUNI TIMBER OPERATION/SALE CHAIRMAN WILLIAMS noted this is the first hearing in the House for SB 310. He said today's goal is to provide the committee with a general briefing and understanding of the provisions of the bill, and then take public testimony. SENATOR STEVE FRANK, PRIME SPONSOR, stated SB 310 is designed to encourage investment and development in the timber industry by allowing long term sales. He said a past problem has been the state being unable to commit to a long term sale with provisions giving preference for in-state processing and a stable long term supply. When SB 310 was introduced, there was a lot of public outcry about some of the provisions in the bill. He explained the public's comments were taken seriously, resulting in an exhaustive public hearing process and a bill rewrite, including 33 amendments. He pointed out the Tanana Chiefs Conference (TCC) was very involved in the process and offered many good amendments, many of which were used. SENATOR FRANK reviewed amendments which were made to make the bill less objectionable. He noted there had been concerns about the public process aspects of SB 310. The public process was strengthened by adding an additional public comment period before the commissioner makes a tentative selection. In addition, after the commissioner chooses a preferred operator, the second public comment period was lengthened from 60 to 90 days. This change was requested by TCC so they could have greater participation by people from out of town. He stated another addition includes a public notice provision so the public will be aware of small timber sales, which are exempt from the five year schedule. Number 066 SENATOR FRANK stated the twenty year extension was changed to a renewal type of process, so that after three quarters of the term of the contract a renewal process will begin allowing the public to comment again and the commissioner to come out with another request for proposals (RFP), to determine if the same or other operators should be granted another term on the contract. He said the environmental protection provisions were clarified. He pointed out there have been mischaracterizations of SB 310. People have said there will not be a requirement to comply with the Forest Practices Act. He stressed that is untrue. He explained under SB 310, there is a requirement that the forest management agreement (FMA) be consistent with existing land use plans. SENATOR FRANK said a one million board foot cap on small timber sales was put into SB 310. He stated most small timber sales can work fine under the five year schedule. However, under the current law, there is no flexibility. For example, if a road was being built and there was timber in the right-of-way, that timber could not be sold because it was not on the five year schedule. This change gives the Department of Natural Resources (DNR) the flexibility to make a small sale, if that sale makes sense. He stated a provision was also added which requires a biennial operating plan, so the department is on top of the contract through the length of the contract. This provision strengthens the department's ability to monitor what the operator is doing in regard to complying with the contract. Number 098 SENATOR FRANK stated there are two different definitions of sustained yield in the current law. He said the more restrictive definition in Title 38 was used in SB 310, at the suggestion of TCC. That definition provides further protection for not cutting more than what can be sustained on a long term basis. He explained there is also a requirement for the FMA's to have deactivation and termination provisions in the contract, in case there is not compliance with the contract terms. Bonding can also be included in the contract but is not required. According to the department, the bonding market is unstable at times and it is better not to put that requirement in law but rather leave bonding up to the department. SENATOR FRANK said protection for other forest uses has been clarified. Existing forest uses have to be considered when evaluating a FMA, including public access for existing forest uses. The FMA's are required to have provisions for existing public access and consider the interest of private landowners when granting access. Removed from the bill were some of the more controversial elements which were not necessary, including the provision that the commissioner could not close more than 640 acres to mineral entry. Number 150 SENATOR FRANK stated the words "activities" and "lifestyles" were retained. There had been confusion as to what those words meant. The requirement that a timber sale be on a five year sale plan for two years in advance was retained. He felt there has been a lot of work done on SB 310, including a large amount of public testimony. He said there is still opposition to the bill but he feels he worked honestly and straightforwardly with people who have expressed concerns. He thought CSSB 310(RES) is quite workable and one which is supported broadly. With the provisions for public comment and participation, with the strength of the existing Forest Practices Act, and with the strength of the consistency requirement for local land use plans, etc., he felt the bill is balanced and one that the committee can support. (CHAIRMAN WILLIAMS noted for the record that REPRESENTATIVE FINKELSTEIN had joined the committee at 8:28 a.m.) Number 175 REPRESENTATIVE BILL HUDSON stated several years ago, there was a discussion with representatives from Finland who were encouraging the state to adopt the standards used in that country. He asked Senator Frank if he had access to that information. SENATOR FRANK responded he did not. He has looked at ways to make this type of concept work in Alaska, consistent with existing Alaska laws and processes. He mentioned there has been criticism of the FMA concept. He stated he does not have personal knowledge about whether FMA's do or do not work. He has been frustrated with the Alaska Department of Fish and Game (ADF&G) saying that just because this is the way Canada structures a FMA, does not mean that is the way a FMA will be structured in Alaska. He thought two different types of systems or processes are being discussed, which do not have to be anything like processes elsewhere. REPRESENTATIVE JOE GREEN noted page 2, line 30 indicates "At least once each calendar year, the commissioner shall solicit proposals...", yet there is a zero fiscal note. He wondered if this requirement will create more work for the department. SENATOR FRANK responded DNR does have a budget for public notices and he expects the public notice provision for solicitation will be nominal in cost and can be handled by their existing budget. REPRESENTATIVE GREEN noted page 2, line 16 indicates "Sales under 500,000 board feet and emergency sales are exempt..." and asked if the Forest Management Act precludes a series of small sales requests being excluded. SENATOR FRANK answered no. He said there is a one million board foot limit per region, so that will be avoided. He added that most timber sales will remain on the five year schedule and an emergency sale provision for small timber sales will not be utilized as a way to avoid being on the five year schedule. REPRESENTATIVE GREEN clarified there is no provision in SB 310 to allow an increase in timber sales in Southeast Alaska. SENATOR FRANK responded most of Southeast Alaska is the Tongass National Forest and there is not much state land. Number 259 REPRESENTATIVE JOHN DAVIES recalled that Senator Frank had mentioned a biennial operating plan and a termination provision. He asked Senator Frank to expand on what those will entail. SENATOR FRANK replied the operating plan is not any different than an existing timber sale from the standpoint of compliance with the Forest Practices Act, which ADF&G is very involved in. He said the biennial operating plan will give the department a formal process to control the FMA through the life of the agreement. He added without an annual operating plan, there would still be a need for compliance with terms of the contract, the Forest Practices Act, and the sustained yield principles. He explained the requirement for a biennial operating plan was included to provide additional protections for the public's concern. REPRESENTATIVE DAVIES asked if the biennial supervision is a review for compliance or does it involve an ongoing negotiation for adjustments of the contract. SENATOR FRANK replied it is not specified. He said the critical point is that in order to attract investment, there is a need to know that timber will be available and the price will be firm. Number 315 REPRESENTATIVE JEANNETTE JAMES stated she is excited about the possibility of having FMAs because there is potential for the long term use of soft and hard woods. She expressed concern that the way the bill is written, public comment is solicited after the commissioner solicits for proposals and after industry makes an offer. Her concern is that if she were an industry person, she would not want to make an offer subject to public comment. She asked if it was possible to get public comment prior to sending out the RFP, so the specifics in the RFP would indicate the scope of what is available and what the conditions might be. Therefore, when industry makes an offer, they know they will not have to deal with the public comment period and be required to make their information public information. SENATOR FRANK stated the public comment period was discussed extensively and it was felt it will be best to have the public comment period after the department has selected a tentative proposal. For example, if there are five proposals, it was felt the public should not be burdened with learning and understanding all of the proposals if one of the proposals did not meet the best interest findings of the department, etc. He felt there needs to be confidence shown that the department will pick the best proposal, one which meets the public interest findings and then let the public comment on the one chosen. However, there have been comments that if a proposal is already a tentatively selected agreement, the public will not really have a voice and the process will not really involve the public. Therefore, it was decided to allow the public to comment before the commissioner makes a tentative selection. SENATOR FRANK felt if a company is willing to submit a proposal, it has to be public and the company has to have public confidence to ultimately succeed. If a proposal does not meet common sense, it does not appear it will protect the environment, and provide benefits to the community and the state, he did not feel it will go forward. He thought there is a need to structure the proposal process in a way which allows the public to comment and allows the facts to be brought forward, enabling the community to make a reasoned judgement about whether the FMA will be good for the community. Number 417 REPRESENTATIVE JAMES clarified that Senator Frank does not believe a RFP could be specific enough to make it meaningful. SENATOR FRANK stated if a point is reached where the department structures the agreement, the private sector's creativity cannot be taken advantage of and the approach can be very narrow. He said if there is an allowance for multiple proposals to come in, there is a potential for a better proposal rather than having the department anticipate what a company's needs or desires may be. He thought it was best to allow the department to solicit proposals, let the public comment, let the commissioner make a selection, and then let the public comment again. He felt an open market type of approach is best. REPRESENTATIVE JAMES, coming from the position of the environmental community who will probably be the most vocal, commented if the public comment period is prior to the RFP as opposed to after a tentative selection is made, they might feel they are more a part of the process and not feel like their public comment is just an exercise and not very meaningful. SENATOR FRANK pointed out there are land use plans, and current law requires that any forest management plan be consistent with the land use plan. The public is involved with land use plans throughout the state and have a tremendous effect on how land use plans emerge. He said if one were to look at the entire picture, there are at least three opportunities for public involvement--one in the overall land use plan, and two opportunities contained in SB 310. Number 498 REPRESENTATIVE DAVID FINKELSTEIN stated the land use plans were completed in the past. When those plans were developed and public input occurred, no one was envisioning FMAs. SENATOR FRANK responded in the Fairbanks area, a five year timber plan is being developed and in the latter years, the plan calls for an increase in the timber sales plan, which the public is commenting on. He said Representative Finkelstein may have a point but Senator Frank knows that in the Tanana Valley Forest, that debate has occurred. He felt there are adequate opportunities for public comment. REPRESENTATIVE FINKELSTEIN noted that Section 1 says the forest land use plan only has to consider the land use planning requirements where even a regional plan has been done. He said in many parts of the state, the regional plan, which is the land use plan under AS 38.04.065(a), has been completed. He stated in those cases, the forest land use plan would not even need to consider the land use planning requirements. SENATOR FRANK said Section 1 applies only to the small sale aspect. Number 556 REPRESENTATIVE FINKELSTEIN said the state forests were established because of the high public interest in the various types of uses, especially as compared to other public lands. He felt the decision to commit the state forests to the primary purpose of commercial forest development gives people concern. He asked Senator Frank if he would consider removing Section 5. SENATOR FRANK replied Section 5 is a slight change. He said managing a state forest and creating jobs from the forest is the primary purpose. Many people liked establishing state forests because it prevented land disposals and ensured that other uses of the forest were maintained. He felt the primary reason for establishing forest uses is to manage them over the long term in a manner which will allow commercial forestry. He said the change in Section 5 to include the primary purpose, while at the same time perpetuating the personal, commercial, and other beneficial uses through multiple use management is a slight change. He felt the change is an important part of SB 310. REPRESENTATIVE FINKELSTEIN pointed out the old purpose of the state forest was the personal, commercial, and other beneficial uses of resources through multiple-use management. Number 633 REPRESENTATIVE GREEN asked if owners of adjacent property have been involved in the discussion of SB 310. SENATOR FRANK replied not to his knowledge. He said there are not too many big land owners in the state. He noted there is specific language in the bill which requires the commissioner to not authorize a FMA if it will jeopardize an existing timber operator. The desire is to protect existing operators and strengthen the ability of the state to offer sales which will be responsive to needs. REPRESENTATIVE GREEN said in the past few years, there have been large areas of the state with beetle kills. He asked if SB 310 will help utilize some of that dead timber. SENATOR FRANK replied it may. He stated he is more interested in a long term situation. He does not want temporary jobs which will create a problem when they are eliminated. He felt the beetle kill situation is not something which is focused on in SB 310. TAPE 94-53, SIDE A Number 000 REPRESENTATIVE DAVIES asked Senator Frank if he would support an addition to SB 310 which would limit the percentage of the allowable cut to be included in FMAs. He supports the idea of long term contracts but is concerned if the entire allowable cut is tied up in long term contracts, the small operators will be eliminated. SENATOR FRANK said he will consider it. He does not want to constrain the department from doing what makes common sense. He felt specific language in SB 310 protects existing operations. He expressed concern about unduly restricting the department. The timber operators' lives depend on being able to have timber available for sale and will do their best to maintain their operations. He is not concerned that the department will sell an amount of timber or create a FMA which will jeopardize small operators. REPRESENTATIVE DAVIES asked Senator Frank to point out the provisions in SB 310 which protect the ongoing operators. SENATOR FRANK responded page 4, lines 22-25. Number 045 REPRESENTATIVE HUDSON felt SB 310 covers the compensation to the state to administer the agreement in a manner subject to the commissioner's determination. He noted the ADF&G zero fiscal note states in the accompanying pages it will cost $109,000 per agreement. He thought it is important for the state and SB 310 to articulate the need for those who are going to get involved in the forests, to also be responsible for these kind of necessary provisions. Page 5, lines 15 and 16 state "provisions regarding compensation, if required by the department, for state services provided to administer the agreement;". He asked if it would be wise, as public policy, to eliminate the words "if required by the department" and therefore say a final proposed agreement must contain provisions regarding compensation. He felt it will be a stronger statement that in the final agreement, it will not leave it up to the commissioner but make it a part of the actual agreement. SENATOR FRANK responded that change is not a problem but he felt the committee should work with the department. He stated many people believe SB 310 is a giveaway. He stressed SB 310 is not a giveaway but rather a management tool for the utilization of the state's resources. He said benefits will be derived through money going to the general fund and noted that revenue will exceed costs. He hoped that the committee does not put anything into the bill which people can litigate over. He noted that eliminating the words probably will not do any damage but added the words are contained in the bill because the department wants flexibility on how the agreements are structured. REPRESENTATIVE HUDSON stated he will not suggest any action until the department is heard from. He hoped that any final agreement not only provides for the tax coffers of the state but also provides for any costs which the state must incur in order to administer the agreement. Number 106 THOMAS BOUTIN, DIRECTOR, DIVISION OF FORESTRY, DNR, stated Section 1 removes a redundancy, and will not apply to the FMAs proposed in Section 3 but instead will apply to the existing timber sale program. The redundancy is where there is an existing land use plan or a forest management plan, the requirements in AS 38.04.065(b) do not have to be accommodated in a forest land use plan. He said the Division of Forestry has to comply with two separate and distinct processes for every timber sale, each of which has public and agency comment. He stated one of the processes is the AS 38.05.113 five year plan, which says that each sale has to be in a five year plan for at least the two prior years in order for that sale to go forward. There is a public and agency process for that five year plan each year. Therefore, every single timber sale is examined twice in that five year plan process. He noted that separately, AS 38.05.112 requires a forest land use plan for every single timber sale. Section 1 will change the considerations required under those forest land use plans in the instance where there is an existing forest management or land use plan. He stressed Section 1 only modifies the forest land use plans for the existing timber sale program. Number 138 MR. BOUTIN said Section 2 allows an exemption for sales under 500,000 board feet from the five year plan process and also puts a cap of one million board feet for each region, which can be exempt from the five year plans. He stated the Division of Forestry will continue to put every timber sale in the five year plans but occasionally there is an instance, such as a land use conversion to agriculture being proposed, where timber could not be brought to market because it had not been in the five year plan for the two prior years. MR. BOUTIN stated Section 3 provides for the FMAs. He said there is nothing in Section 3 exempting FMAs from the protections of the Forest Practices Act. He noted those protections are stronger for state land than they are for any other kind of ownership. FMAs will have to comply with those protections. He said Section 5 is the prerogative of the legislature to define the uses and purposes for the state forests. Section 6 adds an entailment in the management of the state forest. MR. BOUTIN said DNR, ADF&G and the Department of Commerce addressed concerns in regard to the original version of SB 310 and the committee substitute answers all of the concerns. He stated DNR supports CSSB 310(RES). He explained that FMAs are a tool which DNR does not now have. He noted that FMAs will not allow the harvest of timber which now cannot be harvested. He said the constraint on harvest is sustained yield. FMAs will not open up any acreage or stand of timber which is not available currently. If timber the department will now be selling would instead be sold under an FMA, it would be more cost effective to do so. FMAs will allow pushing some of the costs, which the state now incurs, on to the contractor. DNR will only use FMAs when they are cost effective on an existing timber sale. Otherwise, the existing timber sale routes will be used. Number 230 MR. BOUTIN stated he has never seen such detail in a fiscal note as the fiscal note submitted for SB 310. He has also never seen cost accounting done by the state. He said the state uses cash accounting and calls it the modified accrual method. He commented whenever he sees cost accounting he is somewhat skeptical. Number 245 CHAIRMAN WILLIAMS clarified the reason there is a zero fiscal note is because the department will be receiving more money from the timber sales than costs incurred and the department is already geared up to do this type of work. MR. BOUTIN responded there is no timber which can be sold under an FMA that cannot be sold currently. For example, the timber in the Interior is in the state's five year plan presently, beginning in fiscal year 1997. He said DNR is currently updating the Tanana Valley State Forest plan and it is not possible to prejudge that process or any other process. He stated if this was fiscal year 1997 and the public processes, which will have taken place up to that time had occurred, and those timber sales were still in the five year plan, they would be offered, even absent FMAs. The difference is that a FMA will allow in-state processing in the best interest finding. Currently, DNR does not have the ability to get up next to in-state processing in its timber sale program. Number 289 REPRESENTATIVE FINKELSTEIN agreed many of these areas could have been sold previously under existing laws, but the main reason they have not been is because of a lack of appropriation to fund the timber sales. He said just because it was allowed in the past is not an argument that it does not need a fiscal note. It would cost more money in the past to put them up for sale. He stated he did not understand Mr. Boutin's logic. MR. BOUTIN responded FMAs will not allow the sale of timber that cannot already be sold presently. FMAs will be used in instances where it will be more cost effective to sell the timber through an FMA than through the existing timber sale program. He stated the only area which has been identified to have a potential for a material increase in ongoing timber sales is the Interior timber--the 60 million feet of low-value hard wood--which can be offered for sale beginning in fiscal year 1997, since it is in the five year plan. He said that timber could be offered for sale now. It would cost more money to put a sale up which is going to be 60 million feet. He did not think FMAs come into the equation. FMAs would be a more cost effective way to put the 60 million feet up for sale. Number 348 REPRESENTATIVE DAVIES stated he does not understand why FMAs are more cost effective than the existing timber sale program. MR. BOUTIN said if FMAs were overwhelmingly cost effective, the fiscal note would have reflected the savings in FMAs, Section 1, and Section 2. He stated many of the timber sale lay out responsibilities which DNR currently has, could be passed on to the contractor, particularly in the instances of the aspen stands. REPRESENTATIVE HUDSON clarified the difference involves giving DNR the opportunity to create a greater value from the same trees, as opposed to simply making a stand of trees available for cutting and shipping out. SB 310 will give DNR the ability to make the terms and conditions more than just a matter of price per log, but rather a price on an overall basis to the economy of the region and the state, by virtue of inducing someone to invest because of the long term commitment of trees. MR. BOUTIN said that is correct. He stated because of the Southcentral Timber Development v. The State of Alaska, the state does not now have a way to offer a timber sale, for example, on the Haines State Forest, requiring in-state processing. He explained the Haines State Forest goes to the highest bidder and that bidder exports the logs. FMAs will enable in-state processing. REPRESENTATIVE HUDSON clarified SB 310 is sort of the Alaska hire provision of the state's timber operations. REPRESENTATIVE DAVIES thought the requirement for in-state processing violates interstate commerce law and the only way that requirement can be avoided is through an exemption from Congress to the interstate commerce provisions. MR. BOUTIN said the Department of Law advised that the best interest finding accommodating the FMAs can include a clear finding that there will be an in-state processing facility constructed. That finding would not run afoul of Southcentral Timber Development v. The State of Alaska. He felt no one will take the risk of not building that plant when the finding said the plant would be built. Clearly, the state would have a way to back out of the agreement if the finding had included in-state processing and the contractor called it off and exported the logs. Number 442 ELLEN FRITTS, DEPUTY DIRECTOR, DIVISION OF HABITAT AND RESTORATION, ADF&G, stated she is available for questions. CHAIRMAN WILLIAMS reminded everyone that the long term timber contract in the Tongass had been cancelled. He said the ADF&G fiscal note on SB 310 indicates a need for more people. He wondered what effect that cancellation will have on ADF&G and asked whether or not the Division of Habitat is ready to cut their staff in half because of that cancellation. MS. FRITTS responded that possibility has not been discussed. She felt the important point to realize is that in the current fiscal year, the Southeast Regional office took a substantial cut and there has been a struggle to complete all of the work needing to be done. She thought there may be a lot of work remaining. CHAIRMAN WILLIAMS said much of that work will be eliminated because of the timber contract cancellation. MS. FRITTS replied ADF&G has not had the opportunity to discuss the impact of the cancellation. She reiterated ADF&G has made many staff cuts in Southeast Alaska, including the biologist position in Petersburg. Therefore, much of the work being done there for things other than forest service planning, such as fish habitat permits for stream crossings, working with communities, etc., have been cut back. She does not expect moving biologists from Southeast to another area because of the cancellation. Number 522 GERON BRUCE, LEGISLATIVE LIAISON, ADF&G, said ADF&G did work with DNR and the Department of Commerce on SB 310. Significant changes have been made to SB 310 which the department appreciates including making the FMAs consistent with state land use plans and the improvements in the public process. He stated there have been concerns expressed about the approach taken on the ADF&G fiscal note. He said the department looked at the existing FMAs in North America and the fiscal note was based on those agreements. MR. BRUCE stated earlier comments indicated the possibility that FMAs, which will take place under SB 310, will not resemble those other North America agreements. He stressed looking at what has occurred to date is the best information available on what a FMA will look like. The fiscal note was constructed to accurately reflect what the department has seen happen. He stressed if there was a different kind of an arrangement, such as smaller sales, etc., the fiscal note would be impacted. He pointed out that until a FMA is signed and is in place, the department will not know what the size and scope is and the department's work load will vary. Number 560 REPRESENTATIVE FINKELSTEIN clarified both ADF&G and DNR conclude that for any of the activities in SB 310 or even activities under existing law, there will be a need for more biologists and foresters. The ADF&G fiscal note assumes there will be some activity as a result of SB 310 and the DNR fiscal note assumes there will not be. MS. FRITTS responded that is a fair assessment. REPRESENTATIVE DAVIES stated ADF&G has a zero fiscal note but on the front page there are several asterisks and the analysis shows a $103,000 cost per agreement. He wondered why those numbers do not appear on the front of the fiscal note. He also pointed out that a similar fiscal note prepared in 1989 for HB 205 stated HB 205 would allow state forest lands, which are currently required to be managed for multiple use and classified under the state land planning process to be administratively designated for forestry as a primary use by the commissioner of DNR and transferred to a timber company for long term management. He felt that bill was very similar to SB 310, yet ADF&G submitted a $205,000 figure at that time and the amount appeared on the front of the fiscal note. MR. BRUCE responded ADF&G does not know what the actual costs will be for a FMA in Alaska. The costs estimated on the fiscal note are based on similar agreements which have occurred in other places. He agreed FMAs in Alaska may be different but the costs have to be speculative until a FMA is in place. REPRESENTATIVE DAVIES asked if there would have been the same uncertainty in 1989. MR. BRUCE replied he cannot speak to the assumptions which went into the fiscal note in 1989 but that was probably the best estimate at that time. Since then, ADF&G's assumptions and numbers have changed. He felt that reflects the uncertainty when the department is attempting to look ahead and forecast what the costs might be for a project which does not exist yet. ADF&G does feel that if there is activity under SB 310, there will be a need for an increase in staffing to accommodate and fulfill the department's statutory requirements. Again, ADF&G will not know what that amount will be until the size and scope of the agreement is known. REPRESENTATIVE HUDSON requested Ms. Fritts to submit a profile of the Division of Habitat and Restoration to committee members at some point. He also asked her to submit comments on what the impact of the Tongass cancellation will be to the division. TAPE 94-54, SIDE A Number 000 CHAIRMAN WILLIAMS stated there will not be enough time to take much of the public testimony but added SB 310 will be scheduled again on Wednesday, April 20 and public testimony will be taken at that time. Number 030 ALBERT PAGH, FOUR STAR LUMBER COMPANY, FAIRBANKS, stated he and his son have owned and operated a sawmill and logging operation for 24 years. He has worked in the timber industry for 53 years. He expressed support of the concept of FMAs with some reservations. He hoped the wording in SB 310 will require FMAs to be in predominantly hardwood stands. Currently, there are sawmills in the Fairbanks area that can process all of the spruce which can be sold from the Tanana Valley State Forest and keep it on an even flow sustained yield basis. If the FMAs were on hardwoods, they would have to be processed in-state, since the hardwoods are of too low a quality to export as raw logs. MR. PAGH said there were two truckloads of birch logs hand picked and shipped to Washington State to be processed. He followed one load to Northwest Hardwoods and talked to the manager. He went out into the plant and watched the processing of logs into lumber and then watched the grading of lumber. Out of those hand picked logs, 16 percent made furniture grade lumber. The rest of it was pallet material. He stressed had those logs been cut into lumber in Alaska, the shipping of the pallet material would have cost more than the lumber was worth. MR. PAGH pointed out there are a few small operations in Fairbanks using a very small amount of hardwoods, but they have to be very selective in choosing the trees they can use. It is impossible to tell if a standing tree is sound enough to use, so usually many trees have to be cut before finding one which can be used. He explained that most of the birch cut is used for firewood. He stressed aspen cannot even be given away. Number 051 MR. PAGH stated if there was a pulp mill or chipboard plant, the small operators could sort out what they could use and sell the rest to the pulp or chipwood plant. It would also give the sawmills in the area a place to dispose of tops and all other cull logs. He said if FMAs were for spruce, there is no doubt the high grade logs would be exported. The Seward mill is shutting down because they can make 50 percent more selling the logs for export than they can milling them. The Seward mill is a very modern state of the art sawmill. It was built a few years ago at the cost of $20 million. He pointed out that a pulp or chipboard plant would cost as much or more, so there is a need to have a long enough contract to amortize the investment. MR. PAGH said the Tanana Valley State Forest is about 1.8 million acres and if an average of 14,400 acres per year were cut, it would take 125 years to cut the 1.8 million acres. The second crop would then be ready to cut. He noted when mentioning 125 years, he is talking about spruce, as the hardwoods should be cut at 60 to 80 years or less. He stressed at the present time, less than 1,000 acres a year are being cut. Number 066 MR. PAGH stated there are many young people who have dropped out of school and it is very hard for them to find a job they can make a living at. Many of them turn to crime. He said working at logging does not take a college degree, so many of these young people could be taken off the streets and given good paying jobs. He noted that jobs in logging would be 11 months a year and jobs in the processing plants would be year-round. Much has been said about tourists not wanting to come to Alaska and see clearcuts. He pointed out that most tourists are his age or older and they come from a generation that either had to work or go hungry. Therefore, he did not think those people would begrudge Alaska the opportunity to make a living. MR. PAGH told committee members that most clearcuts grow up with grass and brush in a couple of years and the most telltale marks are the boundaries which are relatively straight. Clearcuts generate good browse for animals. Fish and game managers like to see fires left to burn to create browse but he felt that is a terrible waste of the state's natural resources. MR. PAGH stated logging requires access, so road systems are funded by an allowance from timber sales. The roads are then used by all for recreation, firewood gathering, and in some cases, fire fighting. He pointed out there are hundreds of lightening fires a year. Unaccessible fires usually are left to burn if they do not endanger someone's home. The timber is usually left to rot. He said the Rosie Creek burn was salvaged because it had access. Over 20 million board feet was salvaged. He stressed under today's regulations written by environmentalists, the salvage of such timber before it spoils is impossible, even if it does have access. He mentioned the Kenai Peninsula bug killed timber and said if fire destroys the timber, environmentalists feel it is mother nature's way but if that same timber is logged and used to build homes, they think it is terrible. Number 089 MR. PAGH said Alaska is a rich state in natural resources, if the citizens are allowed to use the resources wisely as was intended under the Statehood Act. He stated 8/10 of 1 percent of the 1.8 million acres per year is all that is required to support a viable forest industry in the Interior. He stressed there are things in SB 310 which need to be changed if there is to be any timber industry at all. There are millions of acres in the state that cannot be logged. He felt 1.8 million acres is very little to ask for. He noted the amount of land not available for timber cutting: 52 million acres of National Parks; 77 million acres of National Wildlife Refuge; 22 million acres of National Forests; 56 million acres of National Wilderness. He added the state has 116 state parks. He thought the environmentalists and the people who want to recreate have enough places to go. REPRESENTATIVE CON BUNDE clarified Mr. Pagh would like to have the FMAs limited to hardwoods, which can be processed locally. MR. PAGH responded that is correct. He stated because hardwood logs are of such low quality, they cannot be exported raw. REPRESENTATIVE BUNDE clarified the processing will include a small amount of furniture and lumber, and the rest will be chips. MR. PAGH said no. He stated it is not feasible to have a furniture factory. REPRESENTATIVE BUNDE asked what the local processing will consist of. MR. PAGH responded chips or something of that nature. REPRESENTATIVE HUDSON requested a copy of Mr. Pagh's presentation. He felt that Mr. Pagh had determined some practical, astute and common sense approaches to the problem being confronted. Number 153 MARICKE BARNES, KETCHIKAN, testified via teleconference and expressed support of SB 310. She said (indiscernible) decision by the Clinton Administration to terminate the Alaska Pulp Corporation's long term contract. She stressed long term forest management on the Tongass has provided stable, year-round family wage jobs. Now, hundreds of families' jobs and their welfare are at stake. She felt the decision clearly exhibits why the state must intensively manage those lands of which it has control. The state cannot count on the federal government to act in the best interest of Alaskans. MS. BARNES stated she just graduated from college and feels lucky to be able to come home to establish her career in Alaska. However, unless the state passes legislation such as SB 310, there will not be stable economic development in her community and people like her will not be able to return home to find work. SB 310 is good public policy, good forest management and provides jobs as well as economic growth. She urged the committee to pass SB 310 for the young people of the state who want to work at home. Number 174 TROY REINHART, ALASKA FOREST ASSOCIATION, INC. (AFA), KETCHIKAN, testified via teleconference and expressed support of SB 310. He stressed SB 310 is an important piece of legislation which will allow: public participation; organized job, industry, and economic growth; full protection of the Forest Practices Act for all resources including important stream buffers; and protection of forest health values from insect and disease epidemics. He stated SB 310 is good public policy which deserves the committee's support. MR. REINHART said AFA was pleased that ADF&G gave SB 310 a zero fiscal note and felt it was a proper, prudent, and professional decision. However, the additional three pages of dialogue associated with the fiscal note are misleading, not productive to the debate nor the proper role of the agency. He pointed out the document is full of buzz words intended to invoke misconceptions in the minds of the general public. AFA feels the words such as "...the promise of cheap, long-term timber supplies", "...very large companies...", and "...large scale and rapidity of cutting..." should not be in a fiscal note and are unacceptable. MR. REINHART stated no one in the forest industry or those supporting SB 310 are asking for a hand out or harvesting beyond sustainable levels. All that is requested and needed is a reliable, stable, certain and economically feasible supply of timber. AFA is very concerned about unsubstantiated accusations to the contrary. He stressed that the timber contract cancellation in Sitka only proves again that the state of Alaska needs to manage its land for people and communities and not rely on the federal government to do so. AFA fully supports SB 310 and respectfully requests the committee's support. Number 212 ROBERT DENNEY, TALKEETNA, testified via teleconference and expressed opposition to SB 310. ROBERTA SHELDON, TALKEETNA, testified via teleconference and stated she is a lifelong Alaskan and a 30 year resident of Talkeetna. She said Talkeetna's economy is dependent on the tourist and recreational industry. Wild and scenic viewings of the state's natural resources in their natural state are the big drawing card there. She noted her business is dependent on those values and natural resources. She urged committee members to see SB 310 for what it is--an egocentric and greedy effort by a special interest group to dominate and profit from a resource which belongs to all of the people of Alaska. She felt timber is a public resource, not one to be monopolized by a special interest group. MS. SHELDON said when SB 310 went through the Senate, there was overwhelming public opposition to it. This bill provides for FMAs which guarantee long term, locked in contracts that provide for timber harvesting as the primary use, with other vital uses being secondary. She felt those priorities are outrageous. She stated her business depends on the wilderness and recreational values present in the Susitna River valley. She pointed out Alaska is the last wild land in America and people are coming to the state by the thousands because there is nothing wild left outside and because the environment and natural resources have been altered so much outside. She urged committee members not to make the same mistakes. She noted times have changed and more jobs are developing from natural resources in their natural state. MS. SHELDON requested committee members to not allow the special interest timber industry have a special privilege with a resource that belongs to all of the people in the state. She urged committee members to oppose SB 310. Number 259 ED SHARP, LAKE CREEK LODGE, testified via teleconference and stated he is in the tourism business and has almost everything he owns invested in the business. He expressed opposition to SB 310. He said the state cannot allow forest logging companies to totally dominate the land. There is lots of small scale logging occurring in his area. He stressed large scale logging is not compatible with the uses of the Susitna River Valley that most people see as the primary use. He noted there are tourists coming from all over the world to see what is left in the state. Alaska is the last place in the country that people can come and have a little bit of the real outdoors to experience. He urged committee members to oppose SB 310. MR. SHARP stressed timber is a renewable resource which will go on forever if it is left totally unmolested. He said for the past ten years he has been in business, the public has been trying to get that point across. He stressed there has been a lot of testimony confirming what he is saying. He felt the legislature wants to create a few high paying jobs. He stated there is a need to realize that there are hundreds of smaller operations, which account for many times more revenue to the state, than what will be created with the logging jobs. On the long term, the tourism industry is going to be dead if logging is allowed as the primary use of the land. ANNOUNCEMENTS CHAIRMAN WILLIAMS announced SB 310 will be heard again on Wednesday, April 20. He said the committee will meet at 8:15 a.m. on Monday, April 18 to hear SB 293. ADJOURNMENT There being no further business to come before the House Resources Committee, Chairman Williams adjourned the meeting at 10:18 a.m.