Legislature(1995 - 1996)

02/21/1996 08:07 AM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
               HOUSE RESOURCES STANDING COMMITTEE                              
                       February 21, 1996                                       
                           8:07 a.m.                                           
                                                                               
                                                                               
 MEMBERS PRESENT                                                               
                                                                               
 Representative William K. "Bill" Williams, Co-Chairman                        
 Representative Joe Green, Co-Chairman                                         
 Representative Scott Ogan, Vice Chairman                                      
 Representative Alan Austerman                                                 
 Representative Ramona Barnes                                                  
 Representative John Davies                                                    
 Representative Pete Kott                                                      
 Representative Don Long                                                       
 Representative Irene Nicholia, via teleconference from Minto                  
                                                                               
 OTHER MEMBERS PRESENT                                                         
                                                                               
 Representative Gail Phillips                                                  
                                                                               
 MEMBERS ABSENT                                                                
                                                                               
 All members were present                                                      
                                                                               
 COMMITTEE CALENDAR                                                            
                                                                               
 HOUSE BILL NO. 344                                                            
 "An Act authorizing the commissioner of the Department of Natural             
 Resources to negotiate and enter into timber sale contracts that              
 provide for local manufacture of high value-added wood products;              
 and establishing an Alaska Forest Products Research and Marketing             
 Program within the Department of Commerce and Economic                        
 Development."                                                                 
                                                                               
      - HEARD AND HELD                                                         
                                                                               
 PRESENTATION:  NAVIGABLE WATER AND SUBMERGED LANDS                            
 Department of Fish and Game                                                   
 Department of Law                                                             
 Department of Natural Resources                                               
                                                                               
 PREVIOUS ACTION                                                               
                                                                               
 BILL:  HB 344                                                               
 SHORT TITLE:  VALUE-ADDED TIMBER SALES; MARKETING                             
 SPONSOR(S):  RULES BY REQUEST OF THE GOVERNOR                                 
                                                                               
 JRN-DATE     JRN-PG    ACTION                                                 
 05/10/95      2085    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 05/10/95      2085    (H)   RESOURCES, FINANCE                                
 05/10/95      2085    (H)   FISCAL NOTE (DNR)                                 
 05/10/95      2085    (H)   3 ZERO FNS (DCED, CRA, UA)                        
 05/10/95      2085    (H)   GOVERNOR'S TRANSMITTAL LETTER                     
 09/19/95              (H)   RES AT  9:00 AM                                   
 02/21/96              (H)   RES AT  8:00 AM CAPITOL 124                       
                                                                               
 WITNESS REGISTER                                                              
                                                                               
 THOMAS H. BOUTIN, State Forester                                              
 Division of Forestry                                                          
 Department of Natural Resources                                               
 400 Willoughby Avenue, 3rd Floor                                              
 Juneau, AK  99801-1724                                                        
 Telephone:  (907) 465-2780                                                    
 POSITION STATEMENT:  Testified in support of CS HB 344.                       
                                                                               
 KARL OHLS, Resources Specialist                                               
 Division of Trade and Development                                             
 Department of Commerce and Economic Development                               
 P. O. Box 110804                                                              
 Juneau, AK  99811-0804                                                        
 Telephone:  (907) 465-5467                                                    
 POSITION STATEMENT: Testified in support of CS HB 344.                        
                                                                               
 JACK PHELPS, Executive Director                                               
 Alaska Forest Association, Inc.                                               
 111 Stedman, Suite 200                                                        
 Ketchikan, AK  99901-6599                                                     
 Telephone:  (907) 225-6114                                                    
 POSITION STATEMENT:  Testified in support of CS HB 344.                       
                                                                               
 RICK SMERIGLIO                                                                
 HCR 64, Box 565                                                               
 Seward, AK  99664                                                             
 Telephone:  (907) 288-3614                                                    
 POSITION STATEMENT:  Expressed concern with CS HB 344.                        
                                                                               
 RONALD RICKETTS                                                               
 Fairbanks Industrial Development Corporation                                  
 515 7th Avenue                                                                
 Fairbanks, AK  99701                                                          
 Telephone:  (907) 452-2185                                                    
 POSITION STATEMENT:  Testified on CS HB 344.                                  
                                                                               
 JULES V. TILESTON, Director                                                   
 Division of Mining and Water Management                                       
 Department of Natural Resources                                               
 3601 C Street, Suite 800                                                      
 Anchorage, AK  99503-5935                                                     
 Telephone:  (907) 269-8624                                                    
 POSITION STATEMENT:  Navigable Waters/Submerged Lands Presentation            
                                                                               
 BRUCE BOTELHO, Attorney General                                               
 Department of Law                                                             
 P.O. Box 110300                                                               
 Juneau, AK  99811-0300                                                        
 Telephone:  (907) 465-3600                                                    
 POSITION STATEMENT:  Navigable Waters/Submerged Lands Presentation            
                                                                               
 FRANK RUE, Commissioner                                                       
 Department of Fish and Game                                                   
 P. O. Box 25526                                                               
 Juneau, AK  99811-5526                                                        
 Telephone:  (907) 465-6141                                                    
 POSITION STATEMENT:  Navigable Waters/Submerged Lands Presentation            
                                                                               
 JOANNE GRACE, Assistant Attorney General                                      
 Department of Law                                                             
 1031 West 4th Avenue                                                          
 Anchorage, AK  99501                                                          
 Telephone:  (907) 269-5100                                                    
 POSITION STATEMENT:  Navigable Waters/Submerged Lands Presentation            
                                                                               
 MARTY RUTHERFORD, Deputy Commissioner                                         
 Department of Natural Resources                                               
 3601 C Street, Suite 1210                                                     
 Anchorage, AK  99503                                                          
 Telephone:  (907) 269-8431                                                    
 POSITION STATEMENT:  Navigable Waters/Submerged Lands Presentation            
                                                                               
 JIM CULBERTSON, Resources Manager                                             
 Division of Land                                                              
 Department of Natural Resources                                               
 3601 C Street                                                                 
 Anchorage, AK 99503                                                           
 Telephone:  (907) 269-8525                                                    
 POSITION STATEMENT:  Navigable Waters/Submerged Lands Presentation            
                                                                               
 ACTION NARRATIVE                                                              
                                                                               
 TAPE 96-19, SIDE A                                                            
 Number 000                                                                    
                                                                               
 CO-CHAIRMAN WILLIAM K. "BILL" WILLIAMS called the House Resources             
 Committee meeting to order at 8:07 a.m.  Members present at the               
 call to order were Representatives Williams, Green, Ogan, Austerman           
 and Long.  Representative Nicholia attended via the teleconference            
 network from Minto.  Representatives Barnes, Davies and Kott                  
 arrived late.                                                                 
                                                                               
 HB 344 VALUE-ADDED TIMBER SALES; MARKETING                                  
                                                                               
 Number 017                                                                    
 C0-CHAIRMAN WILLIAMS announced that the committee would hear HB 344           
 but it was not his intent to move the bill from committee.  He said           
 Co-Chairman Green would chair the agency presentation on navigable            
 waters and submerged lands.                                                   
                                                                               
 CO-CHAIRMAN WILLIAMS noted the arrival of Representative Davies.              
                                                                               
 Number 117                                                                    
                                                                               
 CO-CHAIRMAN GREEN moved to adopt committee substitute for HB 344 as           
 the working document.  Hearing no objection, it was so ordered.               
                                                                               
 Number 170                                                                    
                                                                               
 REPRESENTATIVE JOHN DAVIES asked the origination of the committee             
 substitute and an explanation of the changes.                                 
                                                                               
 CO-CHAIRMAN WILLIAMS stated that the changes came primarily from              
 the Board of Forestry and would be addressed by Tom Boutin, the               
 State Forester.                                                               
                                                                               
 Number 252                                                                    
                                                                               
 THOMAS BOUTIN, State Forester, Division of Forestry, Department of            
 Natural Resources said that he was expecting Karl Ohls, Department            
 of Commerce and Economic Development, to join him at the conference           
 table.  He made available his prepared testimony on the committee             
 substitute and distributed a draft fiscal note.  He introduced Ms.            
 Kathleen Morse, Forestry Economist, Department of Commerce and                
 Economic Development.                                                         
                                                                               
 MR. BOUTIN read his testimony into the record:                                
                                                                               
 "Thank you for allowing the Board of Forestry to add to the public            
 process on HB 344.  Last Fall, the Board of Forestry held a hearing           
 on the bill and then worked what they heard into recommendations.             
 The committee substitute adopted virtually all of those                       
 recommendations.                                                              
                                                                               
 MR. BOUTIN proceeded, "We're very pleased with the processes of               
 which we have been a small part on both HB 212 and HB 344.  The               
 work of the House Resources Committee and HB 212 sponsor                      
 Representative Jeanette James allowed virtually all stakeholders              
 and interests to reach an understanding.  With HB 344, the Board of           
 Forestry was able to bring its role as a consensus building body of           
 interest groups to the process,  The Board of Forestry looks for              
 sound science and good process.                                               
                                                                               
 MR. BOUTIN informed, "The Governor introduced this legislation in             
 response to concerns of many groups, including members of the                 
 timber industry that we better utilize the timber that is cut in              
 Alaska.   HB 344 is our response to what we think we heard from               
 many constituents who want better utilization of state timber.                
                                                                               
 MR. BOUTIN said, "What you see in HB 344 is what we heard from                
 people like Steve Seley, of Ketchikan.  The Governor's office told            
 me that Steve would be here to talk with you today but we just                
 received the sad news that Steve's Dad just passed away.  I                   
 understand that some other small Southeast operators would be                 
 patched into this teleconference except for the busy scheduled you            
 have before you today.                                                        
                                                                               
 MR. BOUTIN introduced the committee substitute:                               
                                                                               
 "Section 1.  The purpose of HB 344 is to bring some certainty of              
 wood supply to processors who bring high value in the manufacture             
 of state timber.  The administration has talked with many small               
 operators and they agree on at least one point they can find a                
 market for any high-value product they can produce but they cannot            
 buy the capital equipment those products require unless there is a            
 reliable supply of timber.  While HB 344 is not a mandate to                  
 eliminate log exports or change the forest products industry, it is           
 still true that round log export prices prohibit small operators in           
 Southeast from putting capital equipment in place.                            
                                                                               
 MR. BOUTIN continued, "HB 344 is a tool and an incentive for high             
 value-added processing.  While Governor Knowles would like small              
 independent commercial wood users to have an advantage, this bill             
 is directed toward maximizing the number of jobs per acre harvested           
 and does not favor any sector of the forest products industry.                
                                                                               
 MR. BOUTIN proceeded, "Section 2. provides that negotiated timber             
 sales of up to 10 million board feet and 10 years in duration can             
 be negotiated for use in the local manufacture of high value-added            
 wood products.  HB 344 originally provided for sales of no more               
 than 5 million board feet per year.  We did not intend that would             
 be enough to supply all the wood needs of some types of value-added           
 processing.  However, a firm that has a certainty of supply for a             
 substantial part of its needs can then compete on the open market             
 for timber sold by private and public timber owners.  Very few wood           
 users receive all of their supply from one source.                            
                                                                               
 Number 576                                                                    
                                                                               
 MR. BOUTIN stated, "While the CS now allows sales of up to 10                 
 million board feet per year, we would feel more comfortable with 5            
 to 7 million board feet as a maximum.  Most timber sale contracts             
 will be far less.  A higher amount would alarm the public without             
 gaining any utility whatsoever.  The Board of Forestry did not                
 recommend any change to the contract volume.                                  
                                                                               
 MR. BOUTIN proceeded, "The Board heard concerns about the increase            
 in timber offered that might result from this bill.  Section 2                
 adopted the Board's recommendation to provide for limiting the                
 number of contracts per region by regulation.  There has been some            
 discussion about different possible interpretations of line 16,               
 page 2.  The way I understand it, the commissioner could set a                
 maximum number of contracts per region and that maximum must be two           
 or more.  That is acceptable to us if that is the correct                     
 interpretation.                                                               
                                                                               
 MR. BOUTIN continued, "Another area that the Board of Forestry                
 investigated is the portion of state timber that is of sufficient             
 quality to produce high value-added products.  The CS adopts the              
 Board of Forestry recommendation to allow consideration of other              
 value-added wood products.                                                    
                                                                               
 MR. BOUTIN said, "Section 2, paragraph (e), required the                      
 commissioner to consider not only the economic benefits for the               
 manufacture of high and other value-added wood products, but also             
 the likelihood of the venture being successful, job creation and              
 stability, fish and wildlife habitat and multiple use, and the                
 stumpage return to the state.                                                 
                                                                               
 MR. BOUTIN informed, "The CS adds public process in providing for             
 an updated Forest Land Use Plan after a 5-year performance review.            
 The requirements of AS 38.05.112 (Forest Land Use Plans) and AS               
 38.05.113 (5 year schedules of timber sales) apply to HB 344                  
 because the Governor wants good public process.  The public has               
 told us that at least during the past 2 years, forest land use                
 plans and 5 year schedules have provided good public process.                 
                                                                               
 MR. BOUTIN continued, "The Board of Forestry looked at the list of            
 high value-added products and recommended adding to the list.  The            
 CS has the amended list to now include veneer, plywood, finger-               
 jointed lumber and house-logs, exactly as the Board of Forestry               
 recommended.                                                                  
                                                                               
 MR. BOUTIN said, "The Board also wanted to encourage the processing           
 of other value-added products where the resource just cannot make             
 high value-added products.  The CS includes the list of other                 
 value-added wood products in Section 2, paragraph (k)(2).  Other              
 value-added wood products means pulp, chips, waferboard, green                
 lumber, fiberboard, cants, slabs or planks intended for                       
 remanufacture.  Similar products can be specified by regulation.              
                                                                               
 MR. BOUTIN added, "Section 3.   As noted earlier, the Board of                
 Forestry heard about the public concern that this bill could lead             
 to large increases in the amount of timber offered.  The CS limits            
 the number of these timber sales to no more than 2 per region in              
 1996, 1997 and 1998.                                                          
                                                                               
 "HB 344 as originally drafted provided for an Alaska Forest                   
 Products Research and Marketing Program.  We had not heard of any             
 concerns over that proposal but the CS eliminates it.  Karl Ohls              
 will talk about that in a moment.                                             
 MR. BOUTIN testified, "HB 344 does not add timber sales.  Timber              
 sales on state land are unlikely to approach the ceiling of                   
 sustained yield with multiple use because of budget realties.                 
                                                                               
 MR. BOUTIN concluded, "HB 344 is simply a method of sale option.              
 It does not change public process for timber sales.  It does not              
 transfer any forest management responsibilities to the timber                 
 purchaser.  It does not close the door on round log exports."                 
                                                                               
 Number 803                                                                    
                                                                               
 KARL OHLS, Resources Specialist, Division of Trade and Economic               
 Development, Department of Commerce and Economic Development                  
 testified stating, "the committee substitute deletes the original             
 Section 3, which created the Alaska Forest Products Research and              
 Marketing Program within the Department of Commerce.  I understand            
 the committee made this change because of concerns about creating             
 a new program and adding to the fiscal cost of state government.              
                                                                               
 MR. OHLS said, "The Commerce Department recognizes and respects the           
 committee's legitimate concerns about adding more functions to                
 state government.  The department had these same concerns in mind             
 when it decided to address HB 344 by setting new priorities within            
 its existing budget.  We currently have a budgeted position for a             
 forest specialist in the Division of Trade and Development.  We are           
 incorporating the job duties described in the original HB 344 into            
 the job description for the forest specialist.  No additional                 
 expense would be involved.                                                    
                                                                               
 MR. OHLS declared that the department's fiscal note is zero.                  
                                                                               
 Number 843                                                                    
                                                                               
 MR. OHLS introduced Ms. Kathleen Morse, who will fill Commerce's              
 existing position.  "Ms. Morse currently works as a regional                  
 economist for the U.S. Forest Service.  We are working on the final           
 details of an Intergovernmental Personnel Act agreement with the              
 Forest Service that would allow Ms. Morse to work for the state,              
 starting in mid-March, with the official title of forestry                    
 economist.                                                                    
                                                                               
 MR. OHLS said, "Ms. Morse will have two main assignments.  The                
 first is working on a strategy for maintaining a viable timber                
 supply for the forest products industry.  The second is developing            
 a strategy for the expansion of value-added wood products.                    
                                                                               
 Number 916                                                                    
                                                                               
 MR. OHLS concluded, "In conclusion, the Commerce Department's view            
 is that Section 3, as originally drafted, should reassure Alaska's            
 forest products industry that the administration is committed to              
 the development of value-added wood products in Alaska.  The                  
 administration is willing to reinforce this commitment with                   
 language in statute.                                                          
                                                                               
 MR. OHLS added, "If the committee, however, leaves the CS as is,              
 the department still plans to commit a significant amount of Ms.              
 Morse's time to the duties described in the original HB 344.  We              
 believe these duties are critical for the success of our efforts to           
 promote the value-added wood products industry.                               
                                                                               
 Number 998                                                                    
                                                                               
 CO-CHAIRMAN WILLIAMS noted the arrival of Representative Pete Kott            
 and Representative Irene Nicholia announced her presence in Minto.            
                                                                               
 CO-CHAIRMAN WILLIAMS apprised the committee that Marty Rutherford,            
 Department of Natural Resources; Joanne Grace, Department of Law;             
 and Jane Angvik, Division of Lands were on the Anchorage network.             
                                                                               
 Number 1030                                                                   
                                                                               
 REPRESENTATIVE DAVIES referred to the CS on page 2, line 16, where            
 the commissioner sets the maximum number of contracts per region.             
 He asked if the Board of Forestry had discussed this issue.                   
                                                                               
 MR. BOUTIN said the Board of Forestry asked for just what is in the           
 bill, that there be no more than two contracts per region for the             
 three years following enactment of the bill and then a maximum per            
 region be set by regulation.  He added that the board did not                 
 tender language specific to that but asked that, "Motion Number               
 Seven" of what we submitted to the House Resources Committee, that            
 limit for three years be a limit of two.  However, they did not ask           
 that there be at least two per region, they asked that there be no            
 more than two per region for the three years following enactment              
 and after that the commissioner set it by regulation.                         
                                                                               
 REPRESENTATIVE DAVIES wanted further clarification and asked if the           
 board's position was that there should be a maximum of two, or did            
 they contemplate that the commissioner might set a limit higher               
 than two sometime in the future.                                              
                                                                               
 MR. BOUTIN replied that the board wanted no more than two per                 
 region for the three years following enactment and then, after                
 that, it should be set by regulation.  He said they were silent on            
 the number and did not put, as section 2 has, that there be no less           
 than two.                                                                     
                                                                               
 Number 1164                                                                   
                                                                               
 C0-CHAIRMAN WILLIAMS addressed Joanne Grace, Department of Law, and           
 referred to the February 19, 1996 memorandum to his office from the           
 Division of Legal and Research Services regarding a risk that the             
 provisions of this bill requiring local manufacture may violate the           
 interstate commerce clause of the United States Constitution.                 
                                                                               
 JOANNE GRACE, Assistant Attorney General, Department of Law,                  
 informed the chairman that her attendance related to the Navigable            
 Waters and Submerged Lands presentation and said that she was not             
 prepared to discuss HB 344.                                                   
                                                                               
 Number 1205                                                                   
                                                                               
 MR. BOUTIN responded that he had heard discussion by other                    
 attorneys on Gerald Luckhaupt's memorandum and said the attorneys             
 seemed divided on that issue.  He stated that he had talked to a              
 number of attorneys in the Department of Law and it would seem that           
 the consensus is that, on-balance, HB 344 is constitutional and               
 there certainly is a consensus that it is enforceable.                        
                                                                               
 MR. BOUTIN continued the discussion stating that the strategy used            
 by the assistant attorney general for forestry was that since every           
 timber sale requires a best interest finding, and the DNR uses the            
 Forest Land Use Plan to substantiate that and DNR always talks                
 about the economics in the Plan, any value-added proposition that             
 is an increased number of jobs as a result of this sale, would                
 become part of this best interest finding.                                    
                                                                               
 Number 1328                                                                   
                                                                               
 MR. BOUTIN went on to say that it is true that HB 344 would be much           
 enhanced by action in Congress.  He informed the committee that               
 language had been provided to the Alaska Congressional delegation             
 that the DNR wishes Congress would adopt and that would then settle           
 the question.  He said all the attorneys he had talked with say               
 that HB 344 is certainly constitutional, but in the absence of                
 that, still the attorneys we have talked with believe that, on-               
 balance, it is constitutional.  Secondly, all the attorneys believe           
 that the contract can be crafted as such that it is enforceable               
 without getting crosswise with southcentral timber development.               
                                                                               
 Number 1372                                                                   
                                                                               
 CO-CHAIRMAN WILLIAMS asked that the Department of Law provide the             
 committee with a written response to the constitutional question.             
                                                                               
 NUMBER 1382                                                                   
                                                                               
 REPRESENTATIVE DON LONG stated a concern that there is a 10 million           
 board feet limit in one area and then a designation of two                    
 contracts per region.  He asked the department to explain whether             
 they are going for the 10 million board feet or limiting operations           
 to two contracts per region.                                                  
                                                                               
 MR. BOUTIN responded that the committee substitute allows timber              
 sale contracts of up to 10 million board feet.  He said he had a              
 hard time imagining that there would be any contract as much as 10            
 million board feet.  He said, except for the hardwood resource in             
 the Interior that is not being used, he does not know of a place              
 where the state has an ability to put together a 10 million board             
 foot, per year contract.   He said that one million board feet is             
 a much more likely number than even five million board feet.  It              
 does allow up to two of these a year, per region. So, in theory six           
 per year of these contracts.  He said the 10 million board feet is            
 the absolute ceiling on the contract size and it is higher than it            
 needs to be and certainly most of the contracts would be far                  
 smaller.                                                                      
                                                                               
 Number 1464                                                                   
                                                                               
 REPRESENTATIVE LONG asked Mr. Boutin how many regions there were.             
                                                                               
 MR. BOUTIN answered that there are three regions as set up in the             
 Forest Practices Act: coastal, southcentral and interior.                     
                                                                               
 Number 1480                                                                   
                                                                               
 REPRESENTATIVE DAVIES said with respect to the interstate commerce            
 and the congressional exemption, has the Administration formally              
 transmitted this request to the congressional delegation.                     
                                                                               
 MR. BOUTIN replied that the Governor's Office had done that and               
 responded to Representative Davies that he would provide the                  
 committee with a copy of that communication.                                  
                                                                               
 Number 1537                                                                   
                                                                               
 REPRESENTATIVE ALAN AUSTERMAN asked for clarification on the fiscal           
 notes.                                                                        
                                                                               
 MR. BOUTIN explained that the Department of Commerce and Economic             
 Development fiscal note is zero.  The draft of the Department of              
 Natural Resources fiscal note is $26.5 for the first year, for                
 principally putting together regulations, and $3.5 for each year              
 thereafter.                                                                   
                                                                               
 Number 1570                                                                   
                                                                               
 CO-CHAIRMAN WILLIAMS stated his intention was not to move CSHB 344            
 today and said he would take teleconference testimony at this time.           
                                                                               
 Number 1580                                                                   
                                                                               
 REPRESENTATIVE DAVIES said the fiscal note conflicts the expense              
 and asked if the department expects any additional state revenue as           
 a result of the letting of the contracts.                                     
                                                                               
 MR. BOUTIN replied that begs the question of would there be an                
 increase in the amount of timber sold.  The state's timber sale               
 program brings more money to the general fund that it costs.  In              
 the calendar year ending 12/31/95, the state brought in $1.9                  
 million in timber sale receipts and that is a multiple of the cost            
 of putting that timber up for sale.  He said, if there was an                 
 increase in some part of the state, in the amount of timber, and              
 that timber would bring more money to the general fund than what it           
 cost, then that would balance out the amount in that fiscal note.             
                                                                               
 Number 1665                                                                   
                                                                               
 JACK PHELPS, Executive Director, Alaska Forest Association, Inc.,             
 testified that the association represents timber industry                     
 throughout Alaska and supports legislation that enhances economic             
 opportunities by making the forest resources of Alaska available              
 for sustained harvest.                                                        
                                                                               
 MR. PHELPS stated that the Alaska Forest Association wants to                 
 express its appreciation to Governor Knowles for introducing HB
 344.  "We especially applaud the concept of fostering the growth of           
 the forest products industry in the Interior of Alaska.  We would             
 also like to commend your efforts, Chairman Williams, in working              
 with industry to produce a substitute bill which is much more                 
 likely to succeed in its stated goals."                                       
                                                                               
 MR. PHELPS said the AFA supports the proposed committee substitute            
 for HB 344.  "We believe that the changes embodied in CS reflect              
 the real world needs that must be addressed if this bill is to help           
 foster an expanded forest industry in the Interior of Alaska."                
                                                                               
 MR. PHELPS recalled that at the House Resources Committee meeting             
 held in Anchorage, September 1995, "the industry told you that it             
 needed some assurance of a relatively long-term steady and reliable           
 supply of timber before it could make the investment necessary to             
 enlarge the industry in the Tanana Basin.  HB 344, as originally              
 introduced, provided a sufficiently long term for the proposed                
 contract to satisfy the reliability factor, but it limited the                
 contract to a maximum volume of only five million board feet.  That           
 simply is not large enough of a supply to support even a moderate             
 good sized mill.  Your proposed substitute increases that number to           
 10 million board feet.  While we might like an even larger number,            
 we believe that this amendment vastly improves the potential for              
 this bill to do its job.  We ask that you resist any attempts to              
 reduce this maximum sale size.  I point out that it is a maximum as           
 the bill is currently written, the commissioner is free to craft a            
 smaller sale if the situation suggests it."  He said, the House               
 Resources Committee has heard Tom Boutin suggest that in most                 
 instances that would be the case, and he did mention the Interior             
 hardwoods which are clearly an exception if somebody comes along:             
 there is a proposal on the table that would deal with that.                   
                                                                               
 MR. PHELPS said the other major issue concerns the industry, at the           
 time of the Fairbanks hearing, and the severe limitations the                 
 original bill placed on products qualified for these negotiated               
 sales.  "In other words, the definition of high value-added was               
 entirely too restrictive.  The proposed committee substitute adopts           
 the definition language that was recommended by the Board of                  
 Forestry and we believe that this change addresses our previous               
 concerns.  It also proposes an adjustable percentage of the harvest           
 that must go into these high value-added products and allows the              
 commissioner to consider the production of other value-added                  
 products in negotiating the contract.  These are excellent and                
 important improvements to the bill."                                          
                                                                               
 MR. PHELPS said, "In summary, Mr. Chairman, the AFA believes that             
 you have proposed a very workable solution to the problem of                  
 encouraging the responsible harvest of timber from Alaska's boreal            
 forest while also helping build an increased employment base here             
 in Alaska.  We commend you for crafting a vastly improved version             
 of HB 344.  We urge you to continue on your present course.  Please           
 be assured that we are available to work with you as the measure              
 makes its way through the legislative process."                               
                                                                               
 Number 1824                                                                   
                                                                               
 RICK SMERIGLIO, of Moose Pass, testified from Seward.  "I would               
 like to state my opposition to the provision in the bill that                 
 requires renegotiation of the stumpage price once every three years           
 or, at least, once every three years.  I do not believe that the              
 taxpayers will get the highest price for the resource that they own           
 when we only renegotiate the price once every three years.  I would           
 like to say that Governor Hickel was right in calling this the                
 `owner state.'  We, the taxpayers, do own that resource and I think           
 all interests are best protected when we get the highest dollar               
 value.                                                                        
                                                                               
 MR. SMERIGLIO reiterated that his main opposition to CSHB 344 is              
 the provision that requires renegotiation only once every three               
 years.  He said, "I believe that the taxpayers ought to get the               
 highest value for the resource that they own and that means selling           
 the timber when the price is high and getting the highest value               
 that way."                                                                    
                                                                               
 Number 1911                                                                   
                                                                               
 RONALD RICKETTS, Executive Director, Fairbanks Industrial                     
 Development Corporation, recalled that he had testified before the            
 House Resources Committee at the hearing in Fairbanks.  He said, "I           
 am pleased with the results of your work to this date.  The                   
 committee substitute is a good piece of work.  I also commend the             
 Board of Forestry for their input to this process."                           
                                                                               
 MR. RICKETTS referred to page 4, beginning on line 21 of CSHB 344,            
 the definition of `high value-added wood products' and `other                 
 similar finished wood products.'  He said he equated plywood with             
 engineered wood products and felt it should fall into the category            
 of other similar finished wood products.  He advised that oriented            
 strand board and plywood are used for exactly the same purposes.              
                                                                               
 Number 1982                                                                   
                                                                               
 MR. RICKETTS referred to line 26, page 4, and questioned the                  
 language "high defect birch" and stated his opinion is that aspen             
 is more likely to be high defect.  He related that his company sent           
 both birch and aspen to an Oregon mill for test runs through their            
 veneer plant; the birch was very acceptable but the aspen had too             
 much defect to be usable for the quality they were looking for.               
                                                                               
                                                                               
 Number 2061                                                                   
                                                                               
 MR. RICKETTS said he would like to present a copy of a letter sent            
 to the Board of Forestry last October having to do with a five-year           
 area plan: the operation schedule in the Fairbanks area.  He said             
 the letter is from the Oregon company looking at the feasibility of           
 building a veneer mill in the Fairbanks area.  The company asked              
 for 15 million board feet of hardwood timber sale within the Five             
 Year Schedule.  He said he brought up this issue because it relates           
 to the volume of timber we are talking about.                                 
                                                                               
 Number 2105                                                                   
                                                                               
 REPRESENTATIVE SCOTT OGAN interpreted the language on page 4, line            
 26 "deciduous aspen, poplar, and high defect birch, includes                  
 engineered wood products and paneled wood products" meant that for            
 that high defect product, it can be made into engineered wood                 
 products.  He said the language simply allows for the less than               
 high quality material to be used in engineered and paneled wood               
 products.                                                                     
                                                                               
 Number 2143                                                                   
                                                                               
 MR. RICKETTS suggested that the language read high defect aspen,              
 poplar and birch.  He felt that definition would be clearer.                  
                                                                               
 CO-CHAIRMAN WILLIAMS said the committee would make sure that the              
 language was clear to everyone.  He proceeded to close the                    
 testimony on CSHB 344 and turned the gavel over to Co-Chairman Joe            
 Green.                                                                        
                                                                               
 BRIEF AT EASE                                                                 
                                                                               
 Number 2262                                                                   
                                                                               
 CO-CHAIRMAN GREEN invited Attorney General Bruce Botelho,                     
 Commissioner Frank Rue and Director Jules Tileston to come forward.           
                                                                               
 PRESENTATION:  NAVIGABLE WATER AND SUBMERGED LANDS                          
                                                                               
 Number 2312                                                                   
                                                                               
 CO-CHAIRMAN GREEN introduced the subject of the hearing saying that           
 the navigable waters issue dates back to statehood.  It seems that            
 there is a degree of contention between just who owns the waterways           
 and the lands beneath them.  He said of critical importance is who            
 will actually end up with ownership.                                          
                                                                               
 CO-CHAIRMAN GREEN asked, "Do we have title to submerged lands in              
 the state of Alaska?  If we do not, why not?  If we do not, are we            
 in jeopardy of losing those rights through any kind of statute of             
 limitations?"                                                                 
                                                                               
 Number 2333                                                                   
                                                                               
 BRUCE BOTELHO, Attorney General, Department of Law informed the               
 committee that two of the departments water law experts were on               
 line in Anchorage.                                                            
                                                                               
 MR. BOTELHO said the state of Alaska has title to all navigable               
 waters within the state as a result of one law and one doctrine:              
 The doctrine is called the Equal Footing Doctrine which provides              
 that upon admission of a state to the union it is entitled to all             
 waters that have been the equivalent of waters given in any other             
 state.  We have the benefit of previous admissions of, over the               
 last two hundred years, those waters that have been historically              
 recognized as waters belonging to a state.  Under the Equal Footing           
 Doctrine, Alaska would be entitled to those navigable waterways and           
 inland waterways.                                                             
                                                                               
 MR. BOTELHO said under the Submerged Lands Act, the state has a               
 separate leg to stand on with regard to navigable waters.  He said            
 submerged lands extend to the territorial waters three miles from             
 the territorial lands of the state.  He said there was controversy            
 over exactly what the extent of that boundary is.  In United States          
 v. Alaska, particularly in the Beaufort Sea.                                 
                                                                               
 MR. BOTELHO said that we have been in litigation as a state with              
 the federal government in a couple of areas where the actual extent           
 of the state's acquisition has been a question.  Probably the most            
 well known is the "PLO 82" lawsuit, involving a public land owner,            
 issued by the federal government in 1943, in which some 48,000,000            
 acres were withdrawn.  The federal government has taken the                   
 position that lands withdrawn prior to statehood, including those             
 waters, would basically preclude the state from accessing title to            
 submerged lands within that withdrawal.  He said this is our test             
 case in that regard.                                                          
                                                                               
 MR. BOTELHO said it is quite clear from the U.S. Supreme Court                
 decision on the, so called, Utah Lake case where the federal                  
 government made a similar claim.  The state challenged and the                
 Supreme Court held that that withdrawal would not defeat the                  
 state's right to title unless there could be a two-fold finding:              
 One, that Congress clearly intended to include the submerged lands            
 in the withdrawal.  Second, that Congress affirmatively intended to           
 defeat the future state's title to the submerged lands.  That is              
 the point that we arguing in the "PLO 82"....(change tape)                  
                                                                               
 TAPE 96-19, SIDE B                                                            
 Number 000                                                                    
                                                                               
 MR. BOTELHO said, "...a major case to firm up the state's belief              
 that it is entitled to all submerged lands that are navigable                 
 waters within the state.  There has been a Gulkana case as well,              
 ultimately decided in 1989 by the ninth circuit, that also found              
 the river to be navigable water of the state.  Again, supporting              
 the state's basic position with regard to navigable waters."                  
                                                                               
 Number 035                                                                    
                                                                               
 REPRESENTATIVE DAVIES asked if there are any instances of the state           
 losing a claim.                                                               
                                                                               
                                                                               
 MR. BOTELHO said he was unaware of any.  The one area that was a              
 matter of great concern surrounded pre-1983 transfers of land to              
 Native corporations and whether the transfer included transfer to             
 the title of lands underlying water bodies that were pertinent to,            
 or adjacent to, these transfers.  In 1983, there was an agreement             
 between the state and the federal government that those transfers             
 would specifically exclude transfers of submerged lands on                    
 navigable waters.                                                             
                                                                               
 Number 098                                                                    
                                                                               
 MR. BOTELHO followed up on Representative Davies concern about the            
 statute of limitations.  He said it was important to know `vis-a-             
 vis' the federal government, there is no statute of limitations               
 running against the state on quiet title of submerged lands with              
 one exception.  That is, to the extent that the federal government            
 has undertaken some development activity on a water body or                   
 submerged lands, the state is limited to a 12-year period within              
 which to assert its claim to title.  Absent that one exception,               
 that is some specific developmental activity, the state is not                
 barred by the statute of limitations.  There is a different story             
 though if there is a transfer to a conveyee.  At that point, the              
 state statute of limitations probably would run the possibility of            
 losing title.                                                                 
                                                                               
 Number 141                                                                    
 CO-CHAIRMAN GREEN acknowledged the arrival of Speaker of the House,           
 Gail Phillips.                                                                
                                                                               
 CO-CHAIRMAN GREEN wanted to know, if the state has sovereignty over           
 submerged lands, why each individual case is contested and, often,            
 results in litigation.                                                        
                                                                               
 Number 169                                                                    
                                                                               
 MR. BOTELHO said it reflects a variety of fact specific situations            
 where the federal government, or some other party, might contest              
 whether a particular water body is navigable where there might be             
 an attempt by the federal government to assert that it has certain            
 controls on, or the ability to restrict activities on, a water                
 body.  That is usually where the conflicts arise.  We also want to            
 remove any ambiguity on many of the water bodies of the state as to           
 whether or not they are navigable.  There are several reasons why             
 one might for a policy choice decide to litigate.  After litigation           
 is resolved, definitively, with the federal government, what the              
 status of the water bodies are, we have an excess of 2,000 rivers             
 and streams that would be considered navigable in Alaska.                     
                                                                               
 Number 223                                                                    
                                                                               
 CO-CHAIRMAN GREEN asked if that meant the state has ownership to              
 some and not others.                                                          
                                                                               
 MR. BOTELHO replied that the state has consolidated three cases in            
 Northeastern Alaska that are being litigated.  He said there has              
 not been a firm assertion by the federal government that they are             
 not navigable waters, generally, but we are fighting over the                 
 extent of it: the Kandik River, the Black River & the Nation River.           
                                                                               
 Number 251                                                                    
                                                                               
 FRANK RUE, Commissioner, Department of Fish and Game (ADF&G) said             
 the department is in a support role to the Department of Law and              
 the Department of Natural Resources and share the concern that we             
 want to be aggressive in asserting navigability for a number of               
 reasons.  Recently with dual management in subsistence, it may be             
 important for the state's management of fish and wildlife that we             
 assert navigability.  Also, primarily, for public use, public                 
 access to fish and wildlife, the navigability issue can become                
 significant. So, we have supported the Department of Law and the              
 Department of Natural Resources in various litigations and/or                 
 assertions and that has been our role.  We give information and               
 point out areas where we think the federal agencies are                       
 overreaching and trying to restrict public uses on what believe are           
 navigable waters.                                                             
                                                                               
 Number 304                                                                    
                                                                               
 JULES V. TILESTON, Director, Division of Mining & Water Management,           
 Department of Natural Resources (DNR) said the DNR's technical                
 people have worked on navigability determinations and assertions              
 with the Attorney General's Office, the Department of Fish and Game           
 and other state agencies.                                                     
                                                                               
 MR. TILESTON pointed out that last year the overall coordination              
 role was eliminated from the budget.  He said the division and the            
 commissioner developed an alternate strategy which he would explain           
 to the committee.                                                             
                                                                               
 MR. TILESTON said current budget deliberations provide leadership             
 and technical support for navigability litigation involving the               
 state, specifically, on the Kandik, Black and Nation rivers.  He              
 said the DNR has been working closely with the Attorney General.              
 The original litigation was filed in the early 1990s, it has gone             
 through the ninth circuit twice and was finally remanded with a               
 decision that it is right.  He said the state should have a                   
 decision from the federal government within the next several weeks            
 on the determinations.                                                        
                                                                               
 MR. TILESTON said the DNR is already programming work for this                
 summer to verify the factual information that the state needs.  The           
 DNR has contacted the Department of the Interior with a proposal,             
 subject to legal advice, because of other pending litigation.  If             
 the DNR can get the Interior and the state to agree on hydrologic             
 facts, or other facts, that determine navigability, then we can               
 stipulate in court what the facts are and argue about what the                
 interpretations would be.  He said this is a cost savings.                    
                                                                               
 MR. TILESTON stated that the DNR is exploring with the Department             
 of Interior whether to pick up on a project that was postponed last           
 year when the funding was deleted.  That was a cooperative effort             
 with the Interior agencies to specifically look at arranging water            
 bodies in the state into one of three categories.  The first being            
 water bodies that are clearly too small or ones that are clearly              
 navigable, the Yukon River, for example, and there is no dispute.             
 Then we can get the quiet title from the federal court.                       
                                                                               
 Number 419                                                                    
                                                                               
 MR. TILESTON said the second category of rivers would be those                
 groups where there was not enough factual information to make that            
 type of a determination.  Then we would work out a cooperative                
 program and seek funding to get the pieces of missing information             
 that we need and proceed with that.                                           
                                                                               
 MR. TILESTON said the third category of rivers are those where we             
 absolutely could not agree, for whatever reason, and there was no             
 administrative solution.  Then we prepare and go to court on those            
 particular things.  But the whole objective was to get away from a            
 water body-by-water body litigation which is very time consuming              
 and expensive.  He said this issue is not on the table but the DNR            
 is exploring with the Department of Interior to see whether there             
 is any interest in picking it back up.                                        
                                                                               
 Number 449                                                                    
                                                                               
 MR. TILESTON said the DNR is prepared to take whatever programming            
 effort it needs to ensure that technical support to the Attorney              
 General's Office, on those three rivers, is there.  If the federal            
 government is doing something or there is a problem with land                 
 owners where navigability ownership questions arise, we are                   
 prepared to take those on.  He said the ADF&G and concerned                   
 citizens called the DNR about the Russian River.  After speaking              
 with Commissioner Rue, we did the field work, we analyzed the data            
 and we submitted a navigability assertion that (indisc. paper                 
 tearing) all things being equal, the Russian River was in state               
 ownership.  That in a nutshell is what we will be doing next year.            
                                                                               
 Number 493                                                                    
                                                                               
 CO-CHAIRMAN GREEN asked Mr. Tileston to explain what he meant by              
 the term "right" in referring to the three rivers.                            
                                                                               
 MR. BOTELHO explained that when the state filed suit in late 1993,            
 the federal government did everything they could to get the case              
 dismissed.  The United States District Court ruled in the state's             
 favor.  The federal government then went to the ninth circuit.  The           
 ninth circuit upheld the district court, and, as a consequence, we            
 have been jockeying back and forth.  The court has now directed               
 that the federal government has until March 6th to file its formal            
 answer to the complaint.  We filed our complaint timely and it will           
 be a very short time before an answer will be required from the               
 government, but because of procedural motions we are two and a half           
 years waiting for that answer.  The court has directed that the               
 federal government file its answer by March 6th.                              
                                                                               
 Number 602                                                                    
                                                                               
 REPRESENTATIVE GAIL PHILLIPS, Speaker of the House, Alaska State              
 Legislature stated that the first of her questions will be directed           
 to the Department of Natural Resources and said that she would also           
 appreciate a response from the Department of Law and the Department           
 of Fish and Game.                                                             
                                                                               
 REPRESENTATIVE PHILLIPS asked Mr. Tileston if he thought asserting            
 title to navigable water bodies is a public trust responsibility.             
                                                                               
 MR. TILESTON indicated that his answer was yes.                               
                                                                               
 Number 625                                                                    
                                                                               
 MR. BOTELHO said the answer is an unqualified yes.  The public                
 trust term also has a very specific meaning which many members of             
 the public are not aware of and that is the whole concept of title            
 being held by the state being in trust for the public trust.  That            
 in turn means to make sure that the rivers are available to be                
 navigated that the public can use it unhindered for commerce and              
 for fishing: to be unburdened by any private rights.  So, when we             
 talk about the public trust term, there is the public trust concept           
 in general which we clearly support.  There is also a very specific           
 meaning here that the state takes a major obligation, does take               
 navigable title in trust to make sure that this free access is                
 unhindered by unreasonable interference by private interests.                 
                                                                               
 Number 686                                                                    
                                                                               
 REPRESENTATIVE PHILLIPS addressed all three participants asking if            
 this process meets state government's trust responsibilities under            
 the state constitution.  Is the process working?                              
                                                                               
 Number 705                                                                    
                                                                               
 MR. TILESTON responded that he has been working in this field both            
 nationally, since the 1960s, and in Alaska, since 1972.  The                  
 process is working from his perspective.  This program is working             
 and we are able to respond to those situations which are very                 
 significant.  He said the Russian River is a good example.                    
                                                                               
 Number 750                                                                    
                                                                               
 MR. BOTELHO said the role of the Department of Law is a supportive            
 role in the sense that we are trying to execute policies developed            
 by the DNR.  To the extent that our role is, primarily, front line            
 litigation, we have had great support from the Department of                  
 Natural Resources.  Their support has made it possible for us to              
 engage in litigation to begin with, and to be able to carry it out.           
 He said, from a more limited perspective, yes, I think the state is           
 on the right track.  The question is the extent to which we are               
 able to enjoin the battle in other parts of the state, resources              
 are obviously limited.                                                        
                                                                               
 Number 789                                                                    
                                                                               
 REPRESENTATIVE PHILLIPS asked if the state is constitutionally on             
 track.                                                                        
                                                                               
 MR. BOTELHO replied that the state is constitutionally on track in            
 the sense of asserting our constitutional mandate and upholding               
 what we think federal law is with regard to our entitlement to                
 lands underlying navigable waters.                                            
                                                                               
 Number 811                                                                    
                                                                               
 COMMISSIONER RUE stated that he was concerned when the DNR's budget           
 was reduced and their ability to deal with navigability was                   
 jeopardized.  The Department of Fish and Game is continuing to work           
 with the DNR and will help them to assert navigability in critical            
 situations to make sure that we have public access.                           
                                                                               
 REPRESENTATIVE PHILLIPS asked Commissioner Rue if the state is                
 constitutionally on track from his perspective.                               
                                                                               
 COMMISSIONER RUE answered yes and deferred to the Department of               
 Law.                                                                          
                                                                               
 REPRESENTATIVE PHILLIPS questioned Mr. Tileston. "At one point, the           
 state of Alaska gave notice of its intent to file quiet title on              
 nearly 200 streams in Alaska.  What is being done on these cases?"            
                                                                               
 Number 853                                                                    
                                                                               
 MR. TILESTON replied that the 200 streams were filed approximately            
 three-five years ago when interagency groups met and selected the             
 Kandik, the Nation and the Black Rivers as the ones to first take             
 to court.  The final answer on those three rivers would direct us             
 to which next ones we would pick.  The Kandik, Nation and Black               
 rivers are Interior, they are not lake fed and they are non-glacial           
 meaning that the court decision will have potential application to            
 those types of rivers and they are all smaller other than the Black           
 and the Gulkana.  Depending on what the court tells us, we would              
 then select, subject to funding, another set of criteria and then             
 pursue those.                                                                 
                                                                               
 Number 913                                                                    
                                                                               
 REPRESENTATIVE PHILLIPS addressed the Attorney General regarding              
 his comments on the 12 year time limit, "Is it your assertion that            
 of these 200 rivers or streams that unless any kind of federal                
 development has occurred on them, then there is not a time limit              
 for the state to assert its ownership?"                                       
                                                                               
 MR. BOTELHO replied that is correct to the extent that these have             
 not otherwise been conveyed to third parties.  That is the first              
 caveat.  In which case, the statute of limitations would be a state           
 statute of limitations.  The only restriction is that there is some           
 federal development activity putting the state on notice of an                
 adverse view. The state is not subject to a statute of limitations.           
                                                                               
                                                                               
 REPRESENTATIVE PHILLIPS interjected asking, "Of those 200 has the             
 federal government put the state on notice on any of them?"                   
                                                                               
 MR. BOTELHO suspected that there very few, if any, and deferred to            
 Mr. Tileston.                                                                 
                                                                               
 MR. TILESTON said he would supply a written response.                         
 Number 972                                                                    
                                                                               
 REPRESENTATIVE PHILLIPS proceeded, "If the legislature determined             
 by statute to ensure title within a time frame and, unless there              
 was a federal intervention of some sort, that would be the process            
 to take.  The legislature by statute could determine a time frame             
 for the state gaining title to those."                                        
                                                                               
 MR. BOTELHO advised that where the legislature could act would be             
 to extend the state statute of limitations on conveyances to third            
 or private parties.  It could not affect the 12 year federal                  
 statute of limitations in terms of federal conduct on waters.                 
                                                                               
 Number 1007                                                                   
                                                                               
 REPRESENTATIVE PHILLIPS inquired, "..if there was no federal                  
 intervention?"                                                                
                                                                               
 MR. BOTELHO responded that if there has been no federal transfer              
 and there has been no federal activity, there is no statute of                
 limitations.                                                                  
                                                                               
 CO-CHAIRMAN GREEN asked if a conveyance would be a federal                    
 intervention.                                                                 
                                                                               
 MR. BOTELHO said a conveyance to another party, in effect, takes it           
 out of the federal quiet title act and makes the time subject to              
 state statute of limitations.                                                 
                                                                               
 CO-CHAIRMAN GREEN expressed concern that something might slip                 
 through the cracks.                                                           
                                                                               
 Number 1049                                                                   
                                                                               
 REPRESENTATIVE PHILLIPS asked, "Have there been any conveyances?"             
                                                                               
 MR. BOTELHO said the answer is that there have been numerous                  
 conveyances, mostly in the context of the Alaska Native Claims                
 Settlement Act.  "As I remarked at the outset, of particular                  
 concern are transfers prior to 1983.  My recollection is that the             
 Department of Natural Resources, on behalf of the state, worked               
 closely with the federal government in trying to prevent any                  
 further conveyances that left ambiguous transfers of waters                   
 underlying navigable rivers.  The law is that if it is not a                  
 navigable water, in the first place, the property line extends to             
 the mid-point of the river or a water body.  With respect to                  
 transfers that were taking place before 1983, there have been                 
 numerous transfers, and a great deal of confusion and concern about           
 whether the state is going to be in a posture adverse to various              
 Native corporations over the water bodies.                                    
                                                                               
 Number 1130                                                                   
 CO-CHAIRMAN GREEN asked about the Utah Lake case.                             
                                                                               
 MR. BOTELHO explained that the United States v. Utah deals with the         
 question of withdrawals of federal lands prior to statehood and               
 whether those withdrawals effectively vitiated the Equal Footing              
 Doctrine or the Submerged Lands Act, in terms of the state's                  
 acquisition.                                                                  
                                                                               
 Number 1173                                                                   
                                                                               
 C0-CHAIRMAN GREEN stated that his concern is that the Utah Lake               
 case established sovereignty with the states on navigable waters              
 and, subsequent to that, there was conveyance by the federal                  
 government.  He asked if the federal government is conveying rights           
 on navigable waters, for example, to a Native Corporation, it no              
 longer has.                                                                   
                                                                               
 MR. BOTELHO replied that is precisely the concern that was raised             
 and led to the agreement in 1983.                                             
                                                                               
 REPRESENTATIVE LONG asked if the transfer included a designation by           
 the federal government for parks, preserves, and wildlife?                    
                                                                               
 MR. BOTELHO explained that would not be a transfer, it is change of           
 land status from the federal government and quiet title would not             
 be affected in terms of the statute of limitations.                           
                                                                               
 Number 1281                                                                   
                                                                               
 MR. TILESTON said he had worked for the federal government in 1983,           
 and stated that he would prepare a written response.                          
                                                                               
 MR. BOTELHO asked Joanne Grace to clarify if there are situations             
 where the federal government has transferred lands to third parties           
 where the title to the underlying or submerged lands is in                    
 question.  "My recollection is that was an issue prior to 1983 and            
 that, at least, since 1983, the state and the federal government              
 have reached agreement that transfers would not explicitly exclude            
 submerged lands adjacent to federal transfers."                               
                                                                               
 MS. GRACE replied that was correct and was codified in 1987-1988,             
 in federal law, with the exception of waterways smaller than 198              
 feet.  Those still have to be determined navigable or nonnavigable            
 to determine whether they should be charged to Native corporations            
 or not.  She said that determination is made only for charging land           
 status and does not prevent a state from bringing a quiet title               
 action more than 10 years after.                                              
                                                                               
 Number 1393                                                                   
                                                                               
 CO-CHAIRMAN GREEN asked if the state is in the process of bringing            
 quiet title to some of those conveyed lands.                                  
                                                                               
 MS. GRACE responded that she was not aware of any.  She deferred to           
 the Department of Natural Resources.                                          
                                                                               
 CO-CHAIRMAN GREEN said if the state lost its appeal process after             
 the 10 years, do we lose the chance to regain title to those lands?           
                                                                               
 Number 1455                                                                   
                                                                               
 MS. GRACE said that the United States does not purport to convey              
 submerged lands that are larger than a particular size lake or                
 river.  If they do purport to convey something larger than that,              
 then the state has a certain amount to appeal that administrative             
 determination.                                                                
                                                                               
 Number 1494                                                                   
                                                                               
 JIM CULBERTSON, Resources Manager, Division of Land, Department of            
 Natural Resources, testified that the statute of limitations was              
 repealed in 1987 and, prior to that time, a lot of lands had been             
 conveyed to corporations by Interim Conveyance.  For the purposes             
 of chargeability of acreage to the entitlement of the Native                  
 corporations, if a lake was over 50 acres in size, or a stream was            
 over 198 feet in width, it was meandered on the survey plat and the           
 acreage was not charged to the corporation.  That same law also               
 repeals the statute of limitations in ANILCA and provided that the            
 state would not be prohibited from recovering title to any of those           
 lands that were conveyed by an Interim Conveyance document.  That             
 document is issued prior to survey, it is title to the land.  The             
 Native corporations that were conveyed land by Interim Conveyance,            
 hold title to the land.  What the survey rules do is compensate the           
 entitlement in acreage but leave the issue of ownership up to                 
 future settlement or litigation.                                              
                                                                               
 MR. CULBERTSON clarified that the statute of limitations was                  
 repealed at the same time the survey rules were implemented.                  
                                                                               
 Number 1598                                                                   
                                                                               
 CO-CHAIRMAN GREEN asked if, 10 or 15 years from now, a litigation             
 for ownership of that which was conveyed and agreed to in 1983,               
 could still be done, and we are not barred from that?                         
                                                                               
 REPRESENTATIVE PHILLIPS addressed the DNR, "In the February 1996              
 memo from Mr. Tileston, he indicated that navigability                        
 determinations are routinely made as part of a land transfer from             
 the federal government.  I assume that this means to the state or             
 a third party such as a regional or village corporation.  If this             
 is being done routinely, does the DNR monitor all of these                    
 transfers and the navigability determinations?"                               
                                                                               
 Number 1644                                                                   
 MR. TILESTON said the BLM issues, as in the Gulkana decision, on              
 all transfers so that they are applying the current court standards           
 that have been used.  To the extent that the DNR checks state                 
 acreages, we own it regardless if it becomes a chargeability thing            
 which Joanne Grace was talking about earlier.  It is an acreage               
 issue that we need to keep track on but it is not an ownership                
 question.  As far as the Native corporations are concerned, there             
 is a route, but not a case-by-case check.  We do a screening check,           
 but we do not go through each and every application and that is one           
 of the concerns that the Department of Fish and Game has raised.              
                                                                               
 Number 1728                                                                   
                                                                               
 REPRESENTATIVE PHILLIPS said if it came to your attention that                
 there was a problem, "What would be your next step?"                          
                                                                               
 MR. TILESTON answered the first thing would be to look at the                 
 records and see whether we have a conflict.  Because of Native                
 conveyances to date, the Native corporations have received title to           
 approximately 30,000,000 acres.  A large part of the conveyances              
 that are being made involve lands and water bodies for which                  
 previous determinations have been made.  He said the first thing              
 the department would do is to go back and see what the previous               
 federal decisions were in that area.  If it was inconsistent, then            
 we would call our lawyer.                                                     
                                                                               
 Number 1785                                                                   
                                                                               
 C0-CHAIRMAN GREEN noted the arrival of Representative Ramona                  
 Barnes.                                                                       
                                                                               
 REPRESENTATIVE PHILLIPS addressed Mr. Botelho, "Commissioner                  
 Shively testified at the Senate Finance Committee overview of the             
 DNR that the state need not worry about navigability and title                
 because there is no statute of limitations for the state filing its           
 claims.  Is that true?"                                                       
                                                                               
 Number 1825                                                                   
                                                                               
 MR. BOTELHO responded that the answer is yes, it is true.                     
                                                                               
 REPRESENTATIVE PHILLIPS said, "As a result of the Ninth Circuit,              
 court of appeals decision in the Katie John case, federal agencies            
 could attempt to exert management authority over some navigable and           
 nonnavigable waters.  How are the state's interests being protected           
 and is the Department of Law getting the technical support it needs           
 in this case?                                                                 
                                                                               
 MR. BOTELHO said the state had filed, as of January 6, 1996, a                
 petition (indisc) with the United States Supreme Court in the Katie           
 John case precisely because of concerns raised by the Speaker. "We            
 solicited support from all Western states to join as amicus support           
 of our petition.  We have garnered the support of 11 states, and              
 several states joined because of the efforts of the Speaker's                 
 Office in making contact with counterparts in those states.  We               
 have also made efforts with the U. S. Department of Justice and the           
 Department of the Interior to try and get them to support our                 
 petition for certiorari?  The winning parties may not see a great             
 a deal of advantage in doing so but we have a directly conflicting            
 Supreme Court case on point.  And sooner or later, we are going to            
 see a major conflict that is between state and federal officials              
 that are going to affect the citizens of the state in trying to               
 decide which law to follow.  In that respect, it is in everyone's             
 interest to see the Supreme Court resolve the issue once and for              
 all."                                                                         
                                                                               
 Number 2092                                                                   
                                                                               
 CO-CHAIRMAN GREEN asked the status of the eleven states that had              
 joined with Alaska because of the issue.                                      
                                                                               
 MR. BOTELHO replied that none of them have language similar to                
 ANILCA, which is Alaska specific, but the underlying principles of            
 what constitutes public land is one of great concern to Western               
 states and the overall, overreaching, in our view, of the federal             
 government in this area.  There is a very strong motivation on                
 their part to join in this effort.  There are numerous parties                
 within the state and around the country who are aligning themselves           
 to oppose the petition in amicus, in opposition to the certiorari             
 being taken.                                                                  
                                                                               
 REPRESENTATIVE PHILLIPS added that her office requested support               
 from 14 Western states.  Eleven states offered their support and              
 the other three were not opposed to it but could not afford to                
 enter into the legal battle at this point in time.  After it gets             
 to the court, they will revisit it.                                           
                                                                               
 Number 2154                                                                   
                                                                               
 MR. BOTELHO said that the Department of Law retained Paul Anzini to           
 draft a brief for amicus support, but it was largely due to the               
 efforts of Ron Sommerville who enlisted individual states to sign             
 on.  In addition Cheri Jacobus, formerly of the AG's office, now              
 with the Idaho Attorney General's office, drafted a separate amicus           
 brief which elicited support from half of the 11 states.                      
                                                                               
 MR. BOTELHO assured Chairman Green that if the state of Alaska was            
 forced to pay all of the costs, it would be well worth it.  Just              
 getting the psychological sign-on by the states, sends a powerful             
 message to the Department of the Interior and, hopefully, to the              
 court itself.                                                                 
                                                                               
 Number 2245                                                                   
                                                                               
 REPRESENTATIVE PHILLIPS addressed Commissioner Rue, "There has been           
 considerable confusion and concern over navigability determinations           
 on the Russian River on the Kenai Peninsula.  Because of the                  
 importance of this stream for public recreation, primarily fishing,           
 can you explain how the state is protecting the public interest               
 access interest to this river?"                                               
                                                                               
 COMMISSIONER RUE responded that the Department of Fish and Game has           
 worked closely with the DNR to assert our rights to navigability on           
 the Russian River.                                                            
                                                                               
 MR. TILESTON assured the committee that the Russian River is in               
 public ownership.                                                             
                                                                               
 Number 2365                                                                   
                                                                               
 REPRESENTATIVE PHILLIPS referred to Mr. Tileston's memorandum of              
 February 7, 1996 and stated that the DNR is asserting navigability            
 only on the lower Russian River.                                              
                                                                               
 MR. TILESTON explained that the lower Russian River was the only              
 section up for potential land transfer.                                       
                                                                               
 Number 2416                                                                   
                                                                               
 MR. TILESTON explained to Chairman Green that the Gulkana decision            
 established a limit of 1,000 pounds for a raft, essentially for               
 adults.....(change tape)                                                      
                                                                               
 TAPE 96-20, SIDE A                                                            
 Number 031                                                                    
                                                                               
 REPRESENTATIVE PHILLIPS addressed Marty Rutherford and Commissioner           
 Rue, "Would there ever be an occasion in a navigability debate                
 whereby the resource of the waterway, the habitat, and the                    
 environmental resource of the waterway would hinder the                       
 navigability assertion?"  "If you determine that this river was               
 primarily going to be used for fishing, but not necessarily                   
 navigable and we are asserting that the navigability status should            
 be transferred to the state, would we have a battle between the DNR           
 and the Department of Fish and Game to block the navigability                 
 assertion?"                                                                   
                                                                               
 Number 108                                                                    
                                                                               
 COMMISSIONER RUE stated that the Department of Fish and Game                  
 pressed the DNR hard to assert navigability because of the presence           
 of the resource, like fish, so that the people who have access to             
 it, can use it.                                                               
                                                                               
 MARTY RUTHERFORD, Deputy Commissioner, Department of Natural                  
 Resources, agreed with Commissioner Rue stating that the DNR's                
 experience has been that the ADF&G has encouraged the Department of           
 Natural Resources to assure that a river is navigable when there              
 was sport fishing opportunities.  She said the DNR would continue             
 to look at the criteria for navigability of 1,000 pounds for a                
 raft.                                                                         
                                                                               
 Number 259                                                                    
                                                                               
 MR. BOTELHO explained that the big issue with Utah Lake, and the              
 reason that it is important is the question of withdrawals pre-               
 statehood, and whether or not that withdrawal took the waters                 
 within that withdrawal outside of the Equal Footing Doctrine or the           
 Submerged Lands Act.  The importance of the Utah Lake case was the            
 rejection of the federal government assumption that a simple                  
 withdrawal, absent an explicit finding by Congress that the                   
 withdrawal included the waters, and an explicit finding by Congress           
 of an attempt to defeat a future state's right to those waters.               
 The state would assume, at statehood, title to those submerged                
 lands.  He stated that the Utah Lake case is the state of Alaska's            
 "ace" in the PLO 82 litigation and the 48,000,000 acres included in           
 that 1943 withdrawal.                                                         
                                                                               
 MR. BOTELHO said that all the water bodies within that 48,000,000             
 acres that are navigable would become the state's.                            
                                                                               
 Number 410                                                                    
                                                                               
 MR. BOTELHO answered Chairman Green's question saying that it is              
 the land underneath it that is really the issue.  He referred to              
 "PLO 82" and said the 48,000,000 acres of land and waters and the             
 argument that the federal government has made that everything that            
 was in those outer boundaries is federal.  We are taking the                  
 position that the federal government is wrong.  The navigable                 
 waters in there belong to the state of Alaska, and the lands                  
 underlying those waters title rests with the state of Alaska not              
 the federal government.  That is the point that we expect to                  
 prevail on.                                                                   
                                                                               
 Number 497                                                                    
                                                                               
 MR. TILESTON discussed with the committee instances of short                  
 stretches of a river which are not navigable and discussion ensued            
 on natural physical conditions and the river being susceptible to             
 navigation and seasonal variations.                                           
                                                                               
 Number 718                                                                    
                                                                               
 REPRESENTATIVE DAVIES asked if there are situations other than                
 Interim Conveyances where the state statute of limitations is                 
 running.                                                                      
                                                                               
 MS. GRACE responded that a conveyance to anyone other than a Native           
 corporation.  She felt that the normal statute of limitations would           
 apply to other conveyances to private parties, but did not know of            
 any.                                                                          
                                                                               
 Number 799                                                                    
                                                                               
 REPRESENTATIVE DAVIES asked Mr. Tileston to research that issue for           
 the committee.                                                                
                                                                               
 CO-CHAIRMAN GREEN said that prior Native allotments would only go             
 to the waters edge, they do not go to the mid-point of the stream.            
                                                                               
 MR. TILESTON replied that it would not include the stream if it is            
 navigable.  He referred to the Third Judicial District Court Palmer           
 decision dealing with the Chickaloon River; it specifically dealt             
 with a Native allotment.  In that case, the state court said it did           
 have jurisdiction; the public had the right on the Chickaloon River           
 because of the documented rafting that had been going.  The BLM               
 made that determination in 1988, and the allotment went to court in           
 1990.  The court said the public had the right to use the river               
 because of the state's ownership of the water itself, irrespective            
 of who owned the land, and the allotment did include the river                
 bottom when it was navigable.                                                 
                                                                               
 Number 931                                                                    
                                                                               
 MR. CULBERTSON said there seems to be a lot of confusion about the            
 statute of limitations with third parties.  He said he is not aware           
 of any state law that provides a statute of limitations for                   
 navigability.  There is an issue dealing with whether or not Native           
 allotments, in particular, which are federal trust lands and have             
 been conveyed to third parties, have a statute of limitations or              
 some other bar to recovering title.  That may be where some of the            
 confusion is coming from because the case in Chickaloon did deal              
 with the Native allotment and basically what the court did was                
 skirted the issue of whether the state had title by falling back on           
 a state statute that that access was provided by the water column             
 itself regardless of the ownership of submerged lands.                        
                                                                               
 Number 1007                                                                   
                                                                               
 MR. CULBERTSON responded to Chairman Green that because allotments            
 are in a special trust status there is a question about the 12 year           
 statute of limitations and how that would apply to them.  It was              
 the federal 12 year statute of limitations that was revoked in 1983           
 when the survey rules were put into effect.                                   
                                                                               
 Number 1048                                                                   
                                                                               
 MR. BOTELHO said that given the obvious importance of the statute             
 of limitations and, the lack of clarity internally, he recommended            
 that the Resources Committee allow him the opportunity to prepare             
 a chart, that graphs out where the statute of limitations does and            
 does not apply, and highlight where there is ambiguity.                       
                                                                               
 Number 1086                                                                   
                                                                               
 REPRESENTATIVE RAMONA BARNES asked if RS 2477 lands are access                
 corridors and said is there not a statute of limitation on that.              
                                                                               
 MR. BOTELHO replied that RS 2477 is an issue the Administration has           
 spent a great deal of time on.  It is our view that we do not have            
 a statute running with the land changes reflected in ANILCA.                  
                                                                               
 Number 1140                                                                   
                                                                               
 REPRESENTATIVE BARNES said her understanding was that there was a             
 specific period of time for the state to assert corridor claims on            
 RS 2477 lands.  She asked what the Department of Law is doing on              
 that issue.                                                                   
                                                                               
 MR. BOTELHO said with regard to RS 2477, the state filed notice,              
 with the DNR taking the lead, and engaged in a major study of                 
 various RS 2477 routes in the state.  There were some 1900 hundred            
 potential routes identified.  The list was narrowed to about 500,             
 to those where there was little ambiguity about the historical                
 basis, or not otherwise duplicated.  He said the Department of Law            
 and the DNR identified routes that we gave notice on, as required             
 by federal law, to the federal government.  This Administration,              
 like the Hickel Administration, filed its opposition to the                   
 Department of the Interior's proposed role making that takes the              
 position that RS 2477 determinations are a federal law issue and              
 not a state law issue.  He said the state is also working to try              
 and revitalize a process with Interior to try and resolve some of             
 these routes without having to resort to case-by-case litigation.             
                                                                               
 Number 1406                                                                   
                                                                               
 REPRESENTATIVE OGAN reported that during the interim, in a joint              
 House/Senate State Affairs meeting, Mr. Botelho stated that RS 2477           
 was not a priority because the department's priority was protecting           
 the children.  "Now you are asserting that it is becoming more of             
 a priority, and you have identified 11 out of the 500, out of 1500            
 possibilities, that you are going to assert state's rights."                  
                                                                               
 MR. BOTELHO responded that Representative Ogan was correct that he            
 had specifically identified that one of the areas the Department of           
 Law would be forced to cut was the staff position doing RS 2477               
 litigation.                                                                   
                                                                               
 MR. BOTELHO affirmed that there are 11 routes and the department is           
 reevaluating whether there are others. He said that it is important           
 that these are very fact specific and they are not any different,             
 in kind, than the issue of navigable waters where you have to                 
 litigate on a fact specific basis, the historical use.                        
                                                                               
 Number 1591                                                                   
                                                                               
 REPRESENTATIVE OGAN confronted Mr. Botelho saying, "Given your past           
 record with dropping lawsuits, with prejudice, which were done                
 forever, what assurances do we have that you will not do the same             
 on navigable waterways and RS 2477?"                                          
                                                                               
 MR. BOTELHO replied that his track record is not very long, people            
 point obviously to the Babbitt lawsuit.  He said, "I serve the                
 Governor of the state.  He is the elected chief executive, and to             
 the extent that policies and litigation are set by the Governor, in           
 terms of executing his views of what is in the state's interest,              
 that is what I will fall on.  I think that you are giving an                  
 indication here, and it has been consistent about what the state's            
 views are on RS 2477, they have not changed appreciably from                  
 Administration to Administration on this issue nor have they on               
 navigable waters."                                                            
                                                                               
 Number 1669                                                                   
                                                                               
 REPRESENTATIVE BARNES disputed Mr. Botelho's comment about the CEO            
 establishing policy.  She said, "That is true, but you as the chief           
 law enforcement agent of the state of Alaska have an absolute                 
 responsibility to the people of this state.  If your only assertion           
 is to serve whomever happens to be the chief executive, I think we            
 should again visit the question of an elected Attorney General."              
                                                                               
 REPRESENTATIVE BARNES refuted Mr. Botelho's testimony about either            
 protecting the children or asserting states rights in RS 2477.  She           
 reminded him that she had served on finance for many years and she            
 did not believe that was a choice the Attorney General had to make.           
                                                                               
 Number 1741                                                                   
                                                                               
 MR. BOTELHO said the choices are limited to very few sections that            
 are unrestricted general funds.                                               
                                                                               
 Number 1811                                                                   
                                                                               
 CO-CHAIRMAN GREEN addressed Commissioner Rue and asked if the                 
 department exercised jurisdiction on anadromous streams.                      
                                                                               
 COMMISSIONER RUE affirmed that was correct.                                   
                                                                               
 CO-CHAIRMAN GREEN expressed concern about agency budget reductions            
 and suggested that a re-prioritization may be necessary in some               
 departments where the legislature is forced to cut expenditures.              
 He said we want to know that we are not subject to any kind of                
 statute of limitations which would bar our right to exercise                  
 jurisdiction ownership.  He emphasized that the Department of Law             
 not allow that to slip through the cracks and suggested that this             
 become a high priority issue in the budget.                                   
                                                                               
 Number 1952                                                                   
                                                                               
 MR. BOTELHO said none would dispute the fact that we could use more           
 resources to do a job much more aggressively.  The Administration             
 is very committed with competent individuals who are interested in            
 pursuing these matters.                                                       
                                                                               
 REPRESENTATIVE OGAN asked if there is a time line on RS 2477.  "Do            
 we have a deadline that if we do not file, we are done forever with           
 these assertions?"                                                            
                                                                               
 MR. BOTELHO answered that it is the Administration's view that                
 there is not a statute of limitations running.  There is an                   
 argument that has not been asserted, but might be asserted, that we           
 are faced with some time line.  Within the last several weeks, the            
 Department of Law communicated with the Department of the Interior            
 to find out if they might join in atolling agreements so that, if             
 there is any ambiguity, we have got it shut off.  Interior inferred           
 that the Department of Justice will not authorize them to enter               
 into such an agreement, and that will play a role in our decision             
 on how we are going to move forward on this.                                  
                                                                               
 CO-CHAIRMAN GREEN thanked all participants for their attendance. He           
 announced that the House Resources Committee would meet in Kenai on           
 Friday, February 23, 1996.                                                    
                                                                               
 ADJOURNMENT                                                                   
                                                                               
 There being no further business to come before the House Resources            
 Committee, Chairman Green adjourned the meeting at 10:17 a.m.                 
                                                                               

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