Legislature(2011 - 2012)BARNES 124

02/14/2011 01:00 PM RESOURCES


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 105 SOUTHEAST STATE FOREST TELECONFERENCED
Heard & Held
*+ HB 123 CLEAN WATER FUND: LINKED DEPOSITS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                       February 14, 2011                                                                                        
                           1:03 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Eric Feige, Co-Chair                                                                                             
Representative Paul Seaton, Co-Chair                                                                                            
Representative Peggy Wilson, Vice Chair                                                                                         
Representative Alan Dick                                                                                                        
Representative Neal Foster                                                                                                      
Representative Bob Herron                                                                                                       
Representative Cathy Engstrom Munoz                                                                                             
Representative Berta Gardner                                                                                                    
Representative Scott Kawasaki                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 123                                                                                                              
"An Act relating to the Alaska clean water fund."                                                                               
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
HOUSE BILL NO. 105                                                                                                              
"An Act relating to the Southeast State Forest; and providing                                                                   
for an effective date."                                                                                                         
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 123                                                                                                                  
SHORT TITLE: CLEAN WATER FUND: LINKED DEPOSITS                                                                                  
SPONSOR(s): REPRESENTATIVE(s) SEATON                                                                                            
                                                                                                                                
01/26/11       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/26/11       (H)       RES, FIN                                                                                               
02/14/11       (H)       RES AT 1:00 PM BARNES 124                                                                              
                                                                                                                                
BILL: HB 105                                                                                                                  
SHORT TITLE: SOUTHEAST STATE FOREST                                                                                             
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
01/18/11       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/18/11       (H)       RES, FIN                                                                                               
02/14/11       (H)       RES AT 1:00 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
KATIE KOESTER, Staff                                                                                                            
Representative Paul Seaton                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Introduced HB 123 on behalf of the sponsor,                                                              
Representative Seaton.                                                                                                          
                                                                                                                                
LYNN KENT, Director                                                                                                             
Division of Water                                                                                                               
Department of Environmental Conservation (DEC)                                                                                  
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  During the hearing on HB 123, answered                                                                   
questions.                                                                                                                      
                                                                                                                                
DEVONY LEHNER                                                                                                                   
Homer, Alaska                                                                                                                   
POSITION STATEMENT:  Supported HB 123.                                                                                        
                                                                                                                                
JOHN "CHRIS" MAISCH, State Forester, Director                                                                                   
Division of Forestry                                                                                                            
Department of Natural Resources (DNR)                                                                                           
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Supported HB 105.                                                                                        
                                                                                                                                
RON WOLFE, Natural Resources Manager                                                                                            
Sealaska Corporation                                                                                                            
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Supported HB 105.                                                                                        
                                                                                                                                
SHELLY WRIGHT, Executive Director                                                                                               
Southeast Conference                                                                                                            
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Supported HB 105.                                                                                        
                                                                                                                                
JOHN SANDOR                                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Supported HB 105.                                                                                        
                                                                                                                                
WAYNE NICOLLS                                                                                                                   
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Supported HB 105.                                                                                        
                                                                                                                                
CARL PORTMAN, Deputy Director                                                                                                   
Resource Development Council (RDC)                                                                                              
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Supported HB 105.                                                                                        
                                                                                                                                
KIRK DAHLSTROM, Co-Owner and General Manager                                                                                    
Viking Lumber Company Inc.                                                                                                      
Craig, Alaska                                                                                                                   
POSITION STATEMENT:  Supported HB 105.                                                                                        
                                                                                                                                
ERIC LEE                                                                                                                        
Petersburg, Alaska                                                                                                              
POSITION STATEMENT:  Opposed HB 105.                                                                                          
                                                                                                                                
JOSEPH SEBASTIAN                                                                                                                
Petersburg, Alaska                                                                                                              
POSITION STATEMENT:   During  the hearing on  HB 105,  urged that                                                             
the bill be  balanced by deleting some parcels  from state forest                                                               
designation and instead designating them as state parks.                                                                        
                                                                                                                                
JEREMY MAXAND                                                                                                                   
Wrangell, Alaska                                                                                                                
POSITION STATEMENT:   During  the hearing on  HB 105,  urged that                                                             
ways be  found to  process the timber  within Alaska  rather than                                                               
allowing it to be exported.                                                                                                     
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:03:43 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  PAUL   SEATON  called  the  House   Resources  Standing                                                             
Committee meeting to order at  1:03 p.m.  Representatives Seaton,                                                               
Feige,  P. Wilson,  Herron, Dick,  Kawasaki, Gardner,  and Foster                                                               
were present at the call  to order.  Representative Munoz arrived                                                               
as the meeting was in progress.                                                                                                 
                                                                                                                                
            HB 123-CLEAN WATER FUND: LINKED DEPOSITS                                                                        
                                                                                                                                
1:04:12 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON  announced that  the first  order of  business is                                                               
HOUSE BILL  NO. 123, "An Act  relating to the Alaska  clean water                                                               
fund."                                                                                                                          
                                                                                                                                
1:04:57 PM                                                                                                                    
                                                                                                                                
KATIE KOESTER,  Staff, Representative  Paul Seaton,  Alaska State                                                               
Legislature,  introduced  HB  123  on  behalf  of  Representative                                                               
Seaton, sponsor.   She said the  bill would expand access  to the                                                               
Alaska Clean Water  Fund, which is a revolving  fund comprised of                                                               
mostly federal  dollars for  the purpose  of improving  the water                                                               
systems in the  state.  Currently, only  municipalities and state                                                               
agencies  have access  to these  clean water  dollars and  HB 123                                                               
would broaden  the access to that  fund.  The Alaska  Clean Water                                                               
Fund  is   used  mostly  by   municipalities  for   point  source                                                               
pollution,  such as  septic systems.   Nonpoint  source pollution                                                               
dollars are also  in the fund and these are  the type of programs                                                               
that are  being talked about  under HB 123.   An example  of what                                                               
would not fall under HB 123  is a private company borrowing Clean                                                               
Water  Fund money  for  a  giant private  septic  system.   Those                                                               
systems  are point  source pollution  and are  only available  to                                                               
municipalities and state agencies.                                                                                              
                                                                                                                                
1:06:18 PM                                                                                                                    
                                                                                                                                
MS.  KOESTER explained  that  HB 123  would  establish a  "linked                                                               
deposit  program" to  access the  Clean  Water Fund  dollars.   A                                                               
linked deposit  would allow the  state agency to put  Clean Water                                                               
Fund dollars into a bank and  then the bank would loan that money                                                               
to the  borrower.   The relationship between  the state  and bank                                                               
would be a certificate of deposit:   the state would basically be                                                               
investing those Clean  Water Fund dollars in a bank  and then the                                                               
bank's   responsibility  would   be  to   vet  an   applicant  or                                                               
prospective  borrower, which  is who  is being  referred to  when                                                               
talking about expanding access to  Clean Water Fund dollars.  The                                                               
bank would  also have the  responsibility to collect  payment and                                                               
follow up on any loan defaults.                                                                                                 
                                                                                                                                
MS. KOESTER  related how  the program would  work.   A non-profit                                                               
organization  would   bring  a  project  to   the  Department  of                                                               
Environmental Conservation  (DEC) for  approval.   The department                                                               
would make  sure it is an  eligible project that falls  under the                                                               
mission  of  the  Clean  Water Fund.    Eligible  projects  would                                                               
include anything  that would contribute  to a  healthy watershed,                                                               
such  as   green  space  development,  on-site   septic  systems,                                                               
agricultural   best  practices,   storm  water   management,  and                                                               
brownfield  remediation,  to name  a  few.   The  definition  for                                                               
eligible  nonpoint source  pollution  projects  is broad  because                                                               
when talking about  runoff, rainwater, and streams it  is hard to                                                               
point a finger at it.                                                                                                           
                                                                                                                                
1:08:36 PM                                                                                                                    
                                                                                                                                
MS. KOESTER pointed  out that this program is used  in many other                                                               
states.    The  committee  packets include  examples  about  some                                                               
agricultural, brownfield  remediation, and on-site  septic system                                                               
programs instituted in  Ohio as a way to broaden  access to Clean                                                               
Water Fund dollars.  She drew  attention to a booklet on members'                                                               
desks  from  the  Homer  Soil  and  Water  Conservation  District                                                               
[entitled Landscape  Suitability Map]  that is  a manual  on best                                                             
practices  for development.   The  district received  a grant  to                                                               
develop a landscape suitability map  of the entire Homer area and                                                               
identify projects  that could  be used  for green  development of                                                               
subdivisions and land use in the Homer area.                                                                                    
                                                                                                                                
MS.  KOESTER  provided an  example  of  how this  linked  deposit                                                               
program could be used under HB  123 for the bettering of Alaska's                                                               
water systems.   The Homer  Soil and Water  Conservation District                                                               
would  take  these  best  management   practices  to  DEC.    The                                                               
department  would  determine  and   approve  the  eligibility  of                                                               
projects  for  Clean  Water  Fund  dollars,  such  as  stormwater                                                               
management,  leaving  green space  in  a  subdivision, and  other                                                               
practices outlined  in the  booklet.  Once  approved by  DEC, the                                                               
developer would  go through  a development  accreditation process                                                               
with the  Homer Soil and  Water Conservation District.   Then the                                                               
developer  would go  to a  bank for  a project  loan using  these                                                               
Clean Water  Fund dollars that  the state  has put into  the bank                                                               
and for  which the bank  is paying  a below-market value  rate to                                                               
the state.   The  bank would  charge the  developer an  amount to                                                               
administer this loan.                                                                                                           
                                                                                                                                
1:11:39 PM                                                                                                                    
                                                                                                                                
MS. KOESTER  noted that  broadening access  to these  Clean Water                                                               
Fund  dollars has  been  successful in  other  states because  it                                                               
provides  a market  driven incentive  for healthy  water systems,                                                               
rather than  using enforcement.   She  directed attention  to the                                                               
Alaska Clean  Water Fund Intended  Use Plan for Fiscal  Year 2009                                                               
in the  committee packet.  She  read from page 2,  long term goal                                                               
5, which  states:   "Increase the pace  at which  available funds                                                               
are loaned  by marketing to  existing and potential  new eligible                                                               
entities by  expanding the  overall funds  usage.   Potential new                                                               
entities  may include  lending  to  non-profit organizations  for                                                               
water  quality type  of  projects, and  to  homeowners through  a                                                               
link-deposit program for on-site septic system improvements."                                                                   
                                                                                                                                
1:12:55 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE understood the state  would deposit money with the                                                               
bank, the  bank would  pay a  lower-than-market interest  rate to                                                               
the state  for use of  that money, and  then the bank  would loan                                                               
that money  to people, entities,  or non-profits.  He  asked what                                                               
interest rate the bank would charge.                                                                                            
                                                                                                                                
MS. KOESTER replied  the bank would charge an  interest rate that                                                               
it feels acceptable for its risk  in assuming that borrower.  She                                                               
confirmed that  Co-Chair Feige's understanding of  the program is                                                               
correct.                                                                                                                        
                                                                                                                                
CO-CHAIR FEIGE inquired what risk  the bank would be taking since                                                               
it is the state's money.                                                                                                        
                                                                                                                                
MS. KOESTER  responded there  is still a  risk that  the borrower                                                               
might default.   The real reason why  the risk is on  the bank is                                                               
so that  the bank will do  the proper vetting of  that applicant.                                                               
The applicant would have to have  collateral or a credit score or                                                               
go through any other type of  process necessary to access a loan.                                                               
The difference  is that someone might  not be able to  get a loan                                                               
for some  of these  projects because the  capital does  not exist                                                               
without being able to access the Clean Water Fund dollars.                                                                      
                                                                                                                                
1:14:25 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  asked how much  of the current funding  stream is                                                               
being  utilized   by  the  municipalities  and   other  qualified                                                               
entities that are presently allowed to borrow from the fund.                                                                    
                                                                                                                                
MS.  KOESTER deferred  to DEC  for the  exact numbers.   However,                                                               
based   on  her   conversations  with   the  U.S.   Environmental                                                               
Protection Agency (EPA) about the  goals that were established to                                                               
increase the access and increase the  lending of the funds, it is                                                               
the sponsor's  belief that there is  room in that fund  to expand                                                               
access.                                                                                                                         
                                                                                                                                
1:15:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P.  WILSON  understood  the  state  provides  the                                                               
money, but  she inquired  whether the  money comes  directly from                                                               
the state or  from the federal government.   She further inquired                                                               
whether the state gets this money back when the bank is repaid.                                                                 
                                                                                                                                
MS. KOESTER answered that the  Clean Water Fund is mostly federal                                                               
dollars,  so  it is  a  federal-state  revolving loan  fund  that                                                               
exists in  all the  states for  cleaning up  water systems.   The                                                               
state  would get  the  money back  from the  banks  along with  a                                                               
lower-than-market interest.   It would be just like  the state is                                                               
investing  funds in  a bank  instead of  right now  where all  of                                                               
those loans  are issued to  municipalities or state  agencies and                                                               
for  which a  lower-than-market value  interest rate  is applied.                                                               
The state gets those dollars back  at a nominal interest rate and                                                               
that is  why it is  a revolving fund -  it keeps growing  and the                                                               
state is able to expand programs.                                                                                               
                                                                                                                                
1:16:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI asked  how much money is in  the fund and                                                               
how much is encumbered.                                                                                                         
                                                                                                                                
MS. KOESTER  understood that the  fund is at around  $45 million.                                                               
She deferred to DEC to answer the question in more detail.                                                                      
                                                                                                                                
REPRESENTATIVE KAWASAKI  observed in  paragraph 2 of  the sponsor                                                               
statement that community  organizations, developers, non-profits,                                                               
and individuals would  have access to borrowing these  funds.  He                                                               
inquired  whether a  Native  village  corporation, a  cooperative                                                               
that   is  regulated   by  "RCA",   or   a  community   supported                                                               
agricultural farm would be included as eligible borrowers.                                                                      
                                                                                                                                
MS. KOESTER  understood that  any type  of organization  would be                                                               
eligible and would  not have to be a non-profit.   The money just                                                               
has to  be spent on  projects that  are eligible for  Clean Water                                                               
Fund dollars.                                                                                                                   
                                                                                                                                
REPRESENTATIVE KAWASAKI  requested a  broader definition  of what                                                               
the Clean Water Fund currently spends money on.                                                                                 
                                                                                                                                
1:18:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MUNOZ asked  whether  Ms.  Koester's referral  to                                                               
"state funds"  means the funds that  are in the Clean  Water Fund                                                               
now.                                                                                                                            
                                                                                                                                
MS.  KOESTER replied  correct, she  is talking  about the  Alaska                                                               
Clean Water  Revolving Loan  Fund.  She  allowed it  is confusing                                                               
because that fund  is federal dollars, but the  state has control                                                               
over those dollars.                                                                                                             
                                                                                                                                
1:19:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MUNOZ requested  further  explanation about  what                                                               
would be linked under the bill.                                                                                                 
                                                                                                                                
MS.  KOESTER  explained that  the  Clean  Water Fund  is  already                                                               
available  to municipalities,  so  right  now municipalities  can                                                               
already apply to DEC  for a loan under that fund.   Under HB 123,                                                               
access  to  this  fund  would  be  expanded  by  saying  that  an                                                               
individual, through a  bank, can have access to  Clean Water Fund                                                               
dollars with  an eligible  project.   The state's  treasury would                                                               
put an  amount of money  in a bank  as a certificate  of deposit,                                                               
say  $100.   The bank  would  pay interest  to the  state, say  2                                                               
percent, over  the life of  the loan.   The bank would  then loan                                                               
that $100  to say,  John, a  developer in Homer,  who is  doing a                                                               
green development that  will have a green space.   The bank would                                                               
charge John an interest rate of  7 percent, of which 5 percent is                                                               
to cover the bank's  risk of loaning to John and  2 percent is to                                                               
cover its administration fee to the state.                                                                                      
                                                                                                                                
1:21:26 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SEATON interjected  that  the relation  of this  linked                                                               
deposit system is the developer  can get cheaper capital, and can                                                               
have access  to capital, when  the interest rate  might otherwise                                                               
prevent the  development from  going forward.   At  extremely low                                                               
interest rates  this might not  be beneficial, but  when interest                                                               
rates  go  high  developers  have   a  hard  time  getting  money                                                               
economically enough to do a  development; thus the linked deposit                                                               
would allow  for water  systems to be  improved, whether  that is                                                               
catchment  ponds  or  other water  system  improvements.    Water                                                               
systems does  not just mean  water to  the house, it  means water                                                               
systems flowing down through a planned development.                                                                             
                                                                                                                                
REPRESENTATIVE  MUNOZ inquired  whether the  fund grows  as loans                                                               
are paid off with  interest, or is the fund meant  to stay at the                                                               
level of $45 million.                                                                                                           
                                                                                                                                
MS. KOESTER responded that the  Alaska Clean Water Fund does grow                                                               
and  the  interest  received  is  re-loaned  to  other  qualified                                                               
projects.   That  is  how it  currently works  and  how it  would                                                               
continue to work.                                                                                                               
                                                                                                                                
1:23:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER  understood that  HB 123 would  expand the                                                               
entities that  can borrow the  money that is  essentially federal                                                               
money that  the state has control  of.  But rather  than have DEC                                                               
or   the   state  take   the   loan   applications  and   provide                                                               
administration, it would  be done through a bank and  the bank is                                                               
willing  to provide  a lower  interest  rate because  it has  the                                                               
security of the state's certificate of deposit.                                                                                 
                                                                                                                                
MS. KOESTER confirmed that this is correct.                                                                                     
                                                                                                                                
REPRESENTATIVE  GARDNER noted  that  the language  that would  be                                                               
added  by  HB  123  is  "to  persons,  municipalities,  or  other                                                               
qualified entities...."  She asked  what that specifically really                                                               
means.   For example,  Kensington Mine  has built  settling pools                                                               
next to  its roads so that  the runoff does not  go directly into                                                               
streams,  which is  clearly a  water  quality issue.   She  asked                                                               
whether Kensington  Mine would be  a qualified entity for  a loan                                                               
for something like these settling ponds.                                                                                        
                                                                                                                                
MS.  KOESTER   allowed  that  the  sponsor   has  struggled  with                                                               
"qualified entities"  because if it  is defined too  tightly then                                                               
no one  is really eligible.   She said her understanding  is that                                                               
Kensington  Mine  would  be  eligible   by  working  through  the                                                               
approval process that the project is eligible for.                                                                              
                                                                                                                                
REPRESENTATIVE GARDNER commented that  if large industrial groups                                                               
such as those  on the North Slope are eligible,  there would need                                                               
to be  a limitation on  the scale so that  one or two  big groups                                                               
did not  take all  the funds  and leave  "John in  Homer" without                                                               
access to the money.                                                                                                            
                                                                                                                                
MS. KOESTER  agreed, saying limitations  on the money  would have                                                               
to be developed because there is  a need for municipalities.  She                                                               
deferred to DEC to speak to the current limitations.                                                                            
                                                                                                                                
1:26:15 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE observed that the  first section of HB 123 defines                                                               
the  projects, which  is  the existing  law:   public  wastewater                                                               
collection, treatment, or discharge  systems; nonpoint sources of                                                               
pollution; and estuary conservation  and management programs.  He                                                               
inquired why  private persons would  need to be added  because it                                                               
seems to him that persons do  not have the responsibility for any                                                               
of those particular projects.                                                                                                   
                                                                                                                                
MS. KOESTER answered  that individual persons would  not be added                                                               
for  point  source  pollution  projects,   such  as  solid  waste                                                               
management systems.   There are two sections of the  fund - point                                                               
source  and  nonpoint  source.   Individual  borrowers  would  be                                                               
eligible for  nonpoint source pollution  because it is  much more                                                               
difficult to  point a finger  at something like  pesticide runoff                                                               
or a  development that  has issues  with pavement  and stormwater                                                               
management  that are  harder to  mitigate.   So,  the bill  would                                                               
really  provide a  market incentive  for individuals  to consider                                                               
those aspects when developing.                                                                                                  
                                                                                                                                
CO-CHAIR  FEIGE asked  whether the  Alaska Clean  Water Revolving                                                               
Loan Fund is just different terminology  for the same thing or is                                                               
something different.                                                                                                            
                                                                                                                                
MS. KOESTER replied  it is the Alaska Clean  Water Revolving Loan                                                               
Fund and  HB 123 would  just expand  the eligible borrowers  to a                                                               
portion  of that  fund, which  is the  nonpoint source  pollution                                                               
portion of that fund.                                                                                                           
                                                                                                                                
1:28:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FOSTER  inquired whether any pushback  is expected                                                               
from state agencies  or municipalities that fear  the $45 million                                                               
might not  grow and  so more  people would  be fighting  for this                                                               
piece of the pie that is not growing.                                                                                           
                                                                                                                                
MS.  KOESTER responded  she  believes  municipalities have  first                                                               
priority.   It is the  sponsor's understanding that  Alaska could                                                               
be   taking  advantage   of  more   clean  water   opportunities.                                                               
Municipalities are not using the fund  at this point in time to a                                                               
level that would indicate there is an over-demand on the fund.                                                                  
                                                                                                                                
REPRESENTATIVE FOSTER asked how much of the fund is encumbered.                                                                 
                                                                                                                                
MS. KOESTER deferred to DEC.                                                                                                    
                                                                                                                                
REPRESENTATIVE  P. WILSON  inquired how  many applications  there                                                               
are per year and said she would like to hear from DEC.                                                                          
                                                                                                                                
CO-CHAIR SEATON confirmed that DEC would be speaking later.                                                                     
                                                                                                                                
1:30:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HERRON understood  banks  would  like it  because                                                               
they can  make money, but more  importantly if a bank  can invest                                                               
in a project that enhances the  bank's investment in a project or                                                               
collateral or  neighbor projects  it is in  its best  interest to                                                               
borrow this  money from the  state to lend  out so that  the bank                                                               
can protect those  projects that may be  surrounding a respective                                                               
project.  He inquired whether  this specific legislation has been                                                               
tried in a previous Alaska legislature.                                                                                         
                                                                                                                                
MS.  KOESTER answered  that House  Bill 200  was introduced  last                                                               
year but was not heard.                                                                                                         
                                                                                                                                
1:31:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MUNOZ related that at  a recent hearing before the                                                               
House  Community and  Regional  Affairs  Standing Committee,  the                                                               
City of  Unalaska testified  that it  is considering  upgrades to                                                               
its  water  discharge system  to  go  from  a primary  system  to                                                               
secondary.   She  asked whether  Unalaska would  be eligible  for                                                               
these  funds and,  if so,  whether the  fund large  is enough  to                                                               
support those new  requirements that the EPA  is bringing forward                                                               
for many of Alaska's coastal communities.                                                                                       
                                                                                                                                
MS.  KOESTER  replied  that  the  City  of  Unalaska  is  already                                                               
eligible for those funds.   From her limited understanding of the                                                               
potential  implications of  that decision,  she said  it is  much                                                               
larger  than what  many of  the state's  funds combined  would be                                                               
able to handle.                                                                                                                 
                                                                                                                                
1:32:27 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  surmised the  upcoming requirements  described by                                                               
Representative  Munoz  are  beyond  the current  ability  of  the                                                               
[Alaska Clean Water Fund] to fund.                                                                                              
                                                                                                                                
MS. KOESTER  understood there is  some potential coming  from the                                                               
EPA for changes to its  requirements that would have far-reaching                                                               
ramifications for many  communities.  However, she  said she does                                                               
not know  very much about this  because it is very  new and there                                                               
are a lot  of assumptions as to which communities  may or may not                                                               
be targeted, including some in the sponsor's district.                                                                          
                                                                                                                                
CO-CHAIR FEIGE, regarding page 2, line  14, of HB 123 that states                                                               
the department  "shall" establish a linked  deposit loan program,                                                               
asked whether it would  be better to say "may" so  as to give DEC                                                               
the option of doing this depending upon demand.                                                                                 
                                                                                                                                
MS.  KOESTER responded  that that  would  be a  policy call;  the                                                               
differences between  "shall" and  "may" are  very large.   Either                                                               
way, statutory  authority is needed  to hold Clean  Water dollars                                                               
somewhere besides the treasury.                                                                                                 
                                                                                                                                
1:34:59 PM                                                                                                                    
                                                                                                                                
LYNN   KENT,  Director,   Division   of   Water,  Department   of                                                               
Environmental Conservation (DEC),  explained that DEC administers                                                               
two separate funds:   the Drinking Water Revolving  Loan Fund and                                                               
the Clean  Water Revolving Loan  Fund that  is the subject  of HB                                                               
123.  The Drinking Water Revolving  Loan Fund is tapped out right                                                               
now and no dollars are  available beyond the annual appropriation                                                               
to the  fund in  the federal  grant.   The Clean  Water Revolving                                                               
Loan Fund is about $390 million,  of which a balance of about $42                                                               
million  is currently  available.   While  that may  seem like  a                                                               
large amount of money, there  are some communities poised to seek                                                               
some very  large loans  from that  fund, as  was just  heard, and                                                               
that  has  the  potential  to  tap  out  the  fund  in  a  hurry.                                                               
Currently the loan  fund is being used  primarily for communities                                                               
for   their  wastewater   collection,  treatment,   and  disposal                                                               
systems.    The  department  does  fund  some  nonpoint  projects                                                               
through  solid  waste  projects and  stormwater  projects,  again                                                               
through loans to communities.                                                                                                   
                                                                                                                                
MS.  KENT, regarding  the question  of  whether large  industrial                                                               
businesses could get  loans under HB 123, said the  answer is yes                                                               
and no.   She  said she  believes they  would be  prohibited from                                                               
getting a loan for an activity  that is regulated under the point                                                               
source requirements of the Clean  Water Act.  The Kensington Mine                                                               
stormwater  example   that  was  cited  earlier   is  actually  a                                                               
permitted discharge at the mine, so  the mine would likely not be                                                               
eligible for a  nonpoint source loan through  this linked deposit                                                               
program.   She said she believes  that under the way  the bill is                                                               
currently  set   up,  private  industry  could   seek  loans  for                                                               
activities that are nonpoint source pollution oriented.                                                                         
                                                                                                                                
1:37:36 PM                                                                                                                    
                                                                                                                                
MS. KENT, regarding  the question about the source  of the funds,                                                               
explained that the  fund consists of the  annual appropriation by                                                               
the EPA, the  interest the state receives on the  portions of the                                                               
fund  that are  loaned out,  and the  repayments of  the previous                                                               
loans that  have been  issued.   While the  fund is  growing from                                                               
that perspective,  DEC is  concerned that  federal appropriations                                                               
that have  been helping  to capitalize the  fund are  proposed to                                                               
take some pretty severe hits this year.                                                                                         
                                                                                                                                
REPRESENTATIVE GARDNER  requested a definition of  the difference                                                               
between point source and nonpoint source.                                                                                       
                                                                                                                                
MS.  KENT answered  that a  point source  is a  discharge from  a                                                               
facility that  comes from what  EPA calls a  discreet conveyance,                                                               
such  as a  pipe  from a  treatment plant  that  discharges to  a                                                               
surface water.   Nonpoint source  discharge does not come  from a                                                               
discreet conveyance;  for example, pollution from  dog droppings,                                                               
herbicides, or fertilizers that are from  the lawn of a city park                                                               
and that through rainfall run off  into a creek or surface water.                                                               
Another nonpoint example  is rain falling onto  parking lots that                                                               
then  runs off,  carrying  oils  and grease  from  cars into  the                                                               
creek.  The  EPA does not have a regulatory  program for nonpoint                                                               
source discharges.                                                                                                              
                                                                                                                                
1:39:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI  inquired how  DEC would define  a person                                                               
or other qualified entity for purposes of the regulations.                                                                      
                                                                                                                                
MS.  KENT replied  that DEC  would have  to write  regulations to                                                               
implement  HB 123,  but  as  the bill  is  currently written  the                                                               
eligible entity would not preclude  anyone who has a project that                                                               
would be  eligible under  the terms of  the revolving  loan fund.                                                               
So,  eligible entity  could  include a  private  individual or  a                                                               
private business so  long as the person or entity  had a nonpoint                                                               
source project that fell within  the allowable projects under the                                                               
fund.                                                                                                                           
                                                                                                                                
1:40:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P.  WILSON, regarding Unalaska having  to meet new                                                               
EPA requirements, noted that Unalaska  goes through a huge amount                                                               
of water because of the number  of processors located there.  She                                                               
surmised that  many municipalities  may be  faced with  having to                                                               
meet these  new EPA requirements.   She asked how much  money the                                                               
State of Alaska receives from  the federal government and whether                                                               
the  program would  be able  to  provide funds  to all  qualified                                                               
entities if the program is kept as it is now.                                                                                   
                                                                                                                                
MS. KENT responded that the  municipalities are always requesting                                                               
money  from  DEC,  not  just  for new  facilities  but  also  for                                                               
upgrading  and replacing  current facilities  and to  accommodate                                                               
growth in  the community.  Therefore,  it is not always  a new or                                                               
higher regulatory  standard that causes municipalities  to seek a                                                               
loan from the department.   Right now the department is receiving                                                               
about $12 million  annually in federal allocations  for this fund                                                               
and the  demand for the funds  is going up  and up.  A  few years                                                               
ago DEC  had a much larger  balance in this fund;  the balance is                                                               
going down and DEC expects it to tap out very soon.                                                                             
                                                                                                                                
1:42:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P. WILSON inquired whether  the fund would be able                                                               
to handle  adding more eligible  entities for these  loans, given                                                               
that  the state  may be  receiving  less money  from the  federal                                                               
government  in  coming  years and  that  municipalities  will  be                                                               
needing upgrades.                                                                                                               
                                                                                                                                
MS. KENT  answered that  it all comes  down to  prioritization on                                                               
use of  the fund.   When conducting  its annual  scoring process,                                                               
the  department primarily  looks  at the  immediate health  needs                                                               
that would result  from a given project.  So,  once the funds are                                                               
tapped out, what is likely to  happen is that those projects that                                                               
meet an  immediate health  need would  outscore projects  that do                                                               
not  provide  such  an  immediate health  benefit.    In  further                                                               
response  to Representative  P.  Wilson, she  said  she does  not                                                               
think  DEC's  eligibility criteria  for  the  loan programs  have                                                               
changed since the fund's inception.                                                                                             
                                                                                                                                
1:44:35 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON opened public testimony on HB 123.                                                                              
                                                                                                                                
1:44:53 PM                                                                                                                    
                                                                                                                                
DEVONY  LEHNER,  Private  Developer,  said  HB  123  would  allow                                                               
another  group  of potentially  eligible  recipients  to come  on                                                               
line, but that  she sees no downside to passing  the bill because                                                               
the state  would still  have the  flexibility to  determine where                                                               
the  money  is allocated.    She  noted  that  she is  a  private                                                               
developer and  that individual  private developers  have profound                                                               
long-term  effects  that  can either  increase  or  minimize  the                                                               
demands on  municipal systems.   She and  her husband  are strong                                                               
advocates of trying to minimize  demands on municipal systems and                                                               
keeping environmental effects from transferring offsite.                                                                        
                                                                                                                                
1:46:57 PM                                                                                                                    
                                                                                                                                
MS. LEHNER stated that she and  her husband are developing an 80-                                                               
acre conservation  subdivision, called Stream  Hill Park.   It is                                                               
located inside  Homer city  limits so there  are many  hoops that                                                               
must be  jumped through.  Over  half of the subdivision  has been                                                               
set aside in  permanent green space that  is primarily drainages,                                                               
not creeks  which require a  buffer anyway.  These  drainages are                                                               
for  handling  large amounts  of  water  coming from  within  the                                                               
subdivision as  well as from  outside it.   She noted  that there                                                               
are many piecemeal developments uphill  from Stream Hill Park, so                                                               
her  subdivision   represents  a   system  between   upslope  and                                                               
downslope development  that can  handle lots of  water.   She and                                                               
her husband  have tried to  create many  ways where water  can be                                                               
flowed, infiltrated,  and cleaned  so that it  will not  become a                                                               
problem downslope.  She pointed  out that impervious surfaces are                                                               
created by development which causes much  more runoff.  So, if no                                                               
mechanisms  are put  in place  for looking  at these  things long                                                               
term, the city will end up  with more and more runoff and already                                                               
the city often has more than it can effectively handle.                                                                         
                                                                                                                                
1:48:49 PM                                                                                                                    
                                                                                                                                
MS.  LEHNER noted  that there  is a  rippling effect  of benefits                                                               
when  developers,  particularly  those  that  control  relatively                                                               
large parcels,  are encouraged to  look at ways of  developing so                                                               
as  to minimize  the demands  on municipal  services.   There are                                                               
currently  no incentives  to  do  what she  and  her husband  are                                                               
trying to do in their development  and they have had to work hard                                                               
with taxing entities to explain  that these parks and open spaces                                                               
are set aside as non-developable  lands for forever and so should                                                               
not be taxed  as developable.  A developer has  lots of issues to                                                               
deal  with  when trying  to  pro-actively  develop in  ways  that                                                               
maximize  watershed  and  community  benefits,  so  any  kind  of                                                               
incentive  could be  significant  for  encouraging developers  to                                                               
look  at   approaches  that  have   long-time  benefits   to  the                                                               
municipality and the  community.  She and her husband  have put a                                                               
trail  in their  open space  system that  is used  by many  Homer                                                               
residents.   Thus,  in addition  to open  space protecting  water                                                               
quality,  it  provides outdoor  activity,  quality  of life,  and                                                               
health benefits.                                                                                                                
                                                                                                                                
MS. LEHNER added  that the benefits are  diverse, widespread, and                                                               
long term.   She urged members to consider the  value of allowing                                                               
developers to  have access to  these kinds of funds  through this                                                               
linked  deposit  program  because  developers  really  shape  the                                                               
communities in which  they are developing.  It is  better to have                                                               
the   developments   designed   in  appropriate   and   long-term                                                               
environmentally  conscious sustainable  ways  than  to be  giving                                                               
money to municipalities to deal  after the fact with the problems                                                               
created by poorly designed developments.                                                                                        
                                                                                                                                
1:51:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P. WILSON inquired whether  the U.S. Army Corps of                                                               
Engineers would  consider the 40 acres  of land set aside  in Ms.                                                               
Lehner's subdivision as wetlands.                                                                                               
                                                                                                                                
MS. LEHNER replied that very little  of the area set aside in her                                                               
subdivision  is mapped  as wetlands.    Kenai Peninsula  wetlands                                                               
were classified  and mapped in  2005 at  a scale of  1:25,000 and                                                               
those are  the maps  used by  the corps.   Virtually none  of the                                                               
areas  that she  and her  husband have  set aside  are mapped  as                                                               
wetlands even  though they  convey water downhill.   She  and her                                                               
husband are  setting aside much  larger areas than what  would be                                                               
required by the minimum regulatory standards.                                                                                   
                                                                                                                                
1:52:44 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE commented  that Ms.  Lehner's subdivision  sounds                                                               
like a  very nice  development that would  be a  good investment.                                                               
He asked  whether Ms. Lehner  could not go  to a bank  and borrow                                                               
money to do this same thing.                                                                                                    
                                                                                                                                
MS. LEHNER responded that she and  her husband have a credit line                                                               
of over $2  million with a bank.  However,  she pointed out, when                                                               
developing within  the city the  developer is required to  put in                                                               
sewer,  water, and  paved roads.    The lots  in her  subdivision                                                               
range from one-quarter  to one-half acre in size which  is a more                                                               
expensive  way to  go than  the  more traditional  way of  having                                                               
roughly  one-acre  individual parcels  with  no  green space  and                                                               
where the buyer must put in  an on-site septic and figure out how                                                               
to put  in a well  or have water  delivered.  Such  a traditional                                                               
development  would have  required much  less money  up front  for                                                               
infrastructure, but it would not  have created a significant open                                                               
space  system.   She said  her testimony  today is  talking about                                                               
folks in  the future who  would be able  to get a  lower interest                                                               
rate  than she  and her  husband were  able to  get.   That lower                                                               
interest rate  would encourage and  allow developers to  use this                                                               
beneficial type of approach.                                                                                                    
                                                                                                                                
CO-CHAIR SEATON held over HB 123.                                                                                               
                                                                                                                                
                 HB 105-SOUTHEAST STATE FOREST                                                                              
                                                                                                                                
1:56:14 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SEATON announced  that the  next order  of business  is                                                               
HOUSE  BILL NO.  105, "An  Act  relating to  the Southeast  State                                                               
Forest; and providing for an effective date."                                                                                   
                                                                                                                                
1:56:29 PM                                                                                                                    
                                                                                                                                
JOHN  "CHRIS"  MAISCH,  State  Forester,  Director,  Division  of                                                               
Forestry, Department  of Natural Resources (DNR),  spoke in favor                                                               
of HB 105.   He paraphrased from the  following written statement                                                               
[some minor formatting changes]:                                                                                                
                                                                                                                                
                                                                                                                                
     This bill is part of  the state's effort to ensure that                                                                    
     local timber processing continues to  be a piece of the                                                                    
     economy in  Southeast Alaska.   The majority  of timber                                                                    
     in SSE [southern Southeast Alaska]  is on federal land,                                                                    
     but  federal timber  sales  have declined  drastically.                                                                    
     Local  mills now  depend heavily  on  state timber  for                                                                    
     survival.  Demand for southeast  timber for wood energy                                                                    
     is also  increasing, further raising the  importance of                                                                    
     securing a timber base in this region.                                                                                     
                                                                                                                                
MR. MAISCH, as an example, noted that Sealaska Corporation                                                                      
recently installed a wood pellet boiler for heating its building                                                                
in Juneau.  He continued speaking from his written statement:                                                                   
                                                                                                                                
     Pursuant  to  [Senate  Committee Substitute  for  House                                                                    
     Bill] 162(RES), the 25,291  acre Southeast State Forest                                                                    
     was  established in  June 2010.   HB  105 would  add an                                                                    
     additional  23,181   acres  of   state  lands   to  the                                                                    
     Southeast  State  Forest  from  state  lands  currently                                                                    
     available  for   timber  harvest.    The   Division  of                                                                    
     Forestry  would then  be able  to  manage the  combined                                                                    
     acreage  (48,472  acres)  for  a  long-term  supply  of                                                                    
     timber and  retain these lands  in state  ownership for                                                                    
     multiple uses.   These forest lands will  be managed as                                                                    
     an  integrated unit  and according  to  a state  forest                                                                    
     management  plan that  will be  developed via  a public                                                                    
     process within the next two years.                                                                                         
                                                                                                                                
1:58:24 PM                                                                                                                    
                                                                                                                                
     While the  lands were  previously available  for timber                                                                    
     harvest before  the State  Forest was  established, the                                                                    
     State  Forest  designation   ensures  these  productive                                                                    
     forest  lands  will  remain   in  state  ownership  and                                                                    
     contribute  to the  long term  viability of  the timber                                                                    
     based economy in southeast.                                                                                                
                                                                                                                                
     In 2009, the previous  forest inventory was updated for                                                                    
     all  general use  lands managed  by  the Department  of                                                                    
     Natural Resources  (DNR) with forest  management intent                                                                    
     language  per  the  regions  Area  Plans.    This  data                                                                    
     provides the required  supporting information on timber                                                                    
     volume,   acreage  and   allowable  harvest   for  this                                                                    
     request.   The  allowable harvest  from these  lands is                                                                    
     approximately 8.3 million board  feet.  The DNR manages                                                                    
     over  159,000 acres  of uplands  in southern  southeast                                                                    
     Alaska.  Timber management  is allowed on approximately                                                                    
     one  third of  this  land; the  State actively  manages                                                                    
     this timber  base to supply  wood to  local processors.                                                                    
     The remaining  land is  designated primarily  for other                                                                    
     uses   including   land    sales,   recreation,   water                                                                    
     resources,  and fish  and  wildlife habitat,  including                                                                    
     over  65,073 acres  of  legislatively designated  state                                                                    
     marine parks and critical habitat areas.                                                                                   
                                                                                                                                
     Adding lands to  the State Forest will  ensure that the                                                                    
     State's  most   suitable  lands  in   Southeast  remain                                                                    
     available to  contribute to  timber supply  through the                                                                    
     State's  ongoing  timber sale  program.    Much of  the                                                                    
     State  owned  timber  land   in  southeast  Alaska  was                                                                    
     inherited  from   the  U.S.   Forest  Service   and  is                                                                    
     comprised  of young,  second-growth stands.   Actively-                                                                    
     managed  second-growth   stands  provide   more  timber                                                                    
     volume per acre on shorter  rotations and can result in                                                                    
     improved deer browse than unmanaged stands.                                                                                
                                                                                                                                
2:00:17 PM                                                                                                                    
                                                                                                                                
     We  can increase  timber  yield  and associated  timber                                                                    
     supply  from  state  land  by  thinning  these  stands.                                                                    
     Thinning  is   a  long-term  investment  and   is  only                                                                    
     justified  if the  land will  continue to  be available                                                                    
     for forest management.                                                                                                     
                                                                                                                                
     Timber  sales  from  these  lands  will  be  a  mix  of                                                                    
     domestic  and  export and  will  be  based on  economic                                                                    
     conditions and  locations.  As established  by the 1984                                                                    
     Supreme   Court   Case    of   South   Central   Timber                                                                    
     Development,  Inc  vs.  Esther  Wunnicke,  Commissioner                                                                    
     DNR, the state  may not restrict round  log exports due                                                                    
     to  the  interpretation   of  the  interstate  commerce                                                                    
     clause.   Instead, the state has  developed timber sale                                                                    
     methodologies   to   encourage  domestic   manufacture.                                                                    
     Currently, almost all sales sold are to local mills.                                                                       
                                                                                                                                
     The proposed  additions to  the Southeast  State Forest                                                                    
     include 23  parcels (see chart in  the briefing paper).                                                                    
     Approximately 21  percent of these lands  are from five                                                                    
     parcels  that  had  previously  been  reserved  pending                                                                    
     legislative  transfer  to  the  University  of  Alaska.                                                                    
     That legislation  did not pass freeing  these lands for                                                                    
     long-term forest  management in the State  Forest.  The                                                                    
     legislation  includes general  use lands  on Prince  of                                                                    
     Wales,  Tuxekan,   Gravina,  Kosciusko,  Revillagigedo,                                                                    
     Wrangell,  Suemez,  Mitkof,  Kuiu,  Dall,  and  Zarembo                                                                    
     Islands.   Six of  these parcels  are adjacent  or near                                                                    
     existing State Forest parcels.                                                                                             
                                                                                                                                
2:01:53 PM                                                                                                                    
                                                                                                                                
     The Division  of Forestry worked with  the [Division of                                                                    
     Mining, Land  and Water] to identify  and exclude lands                                                                    
     that  are  priorities  for   the  state  land  disposal                                                                    
     program.   A consultation  was also initiated  with the                                                                    
     University   of  Alaska   Statewide   Office  of   Land                                                                    
     Management  and University  senior  officials.   A  key                                                                    
     difference  between a  state forest  designation and  a                                                                    
     transfer of  lands as proposed by  previous legislation                                                                    
     is the  continued long-term  public ownership  of these                                                                    
     lands  as  opposed  to other  development  uses.    The                                                                    
     Division also  consulted with the Alaska  Department of                                                                    
     Fish and  Game to  ensure there was  internal alignment                                                                    
     on the list of proposed  parcels, and there is. Several                                                                    
     other parcels  were considered as part  of our internal                                                                    
     due diligence process, but  because of [known] concerns                                                                    
     and  or   potential  for  high  controversy   were  not                                                                    
     included.                                                                                                                  
                                                                                                                                
     Fish habitat  and water quality  are key  components of                                                                    
     the  Forest Resources  and Practices  Act (FRPA)  which                                                                    
     have  a  series  of  regulations  that  will  apply  to                                                                    
     management of these parcels.   Stream buffers have a no                                                                    
     cut 100 foot minimum width  on both anadromous and high                                                                    
     value resident fish streams.   The next 100 to 300 foot                                                                    
     zone may  allow timber  harvest, but the  activity must                                                                    
     be  consistent for  both the  maintenance of  important                                                                    
     fish  and wildlife  habitat.   Area Plans  also provide                                                                    
     for coastal buffers of 300  to 500 feet with additional                                                                    
     recommendations  for  specific  parcels.    During  the                                                                    
     development  of  the  forest  management  plan,  a  key                                                                    
     consideration  for the  Neets  Bay parcel  will be  the                                                                    
     maintenance of water quality and  quantity for the fish                                                                    
     hatchery  operation at  the head  of the  bay.   Dialog                                                                    
     with  the   Southern  Southeast   Regional  Aquaculture                                                                    
     Association   (SSRAA)   is  ongoing   concerning   this                                                                    
     legislation.                                                                                                               
                                                                                                                                
2:03:52 PM                                                                                                                    
                                                                                                                                
     The Southeast State Forest would  be managed as part of                                                                    
     the  State   Forest  System  under   AS  41.17.200-230.                                                                    
     Subsection (a) of Sec. 41.17.200 reads in part:                                                                            
                                                                                                                                
     "The  primary purpose  in  the  establishment of  state                                                                    
     forests  is timber  management  that  provides for  the                                                                    
     production,  utilization, and  replenishment of  timber                                                                    
     resources  while  allowing  other  beneficial  uses  of                                                                    
     public land and resources".                                                                                                
                                                                                                                                
     In  addition to  timber management,  State Forests  are                                                                    
     open for multiple uses,  including wildlife habitat and                                                                    
     harvest,   mining,   transportation,   recreation   and                                                                    
     tourism.     State  Forest   lands  would   be  managed                                                                    
     consistent  with   the  management  intent   under  the                                                                    
     current Prince  of Wales  Island and  Central Southeast                                                                    
     area  plans.    Changes   to  management  intent  would                                                                    
     require public and  interagency review through adoption                                                                    
     of a State Forest Management Plan under AS 41.17.230.                                                                      
                                                                                                                                
     One of  the other demands  on state  land in SSE  is to                                                                    
     fulfill land  entitlements for new municipalities.   To                                                                    
     avoid conflicts with  the Wrangell Borough entitlement,                                                                    
     the Southeast State Forest bill  specifies that the new                                                                    
     Wrangell Borough  may select  State Forest  land within                                                                    
     the borough  boundary.   The Wrangell  borough boundary                                                                    
     encompasses three parcels in  the existing state forest                                                                    
     (Crittenden Creek  and Bradfield Canal East  and West),                                                                    
     and  four parcels  in the  proposed additions  (Eastern                                                                    
     Passage,  Pat Creek,  Pat Creek  uplands and  Earl West                                                                    
     Cove).                                                                                                                     
                                                                                                                                
     If  additional municipalities  are incorporated  before                                                                    
     June 30, 2019, lands  that were vacant, unappropriated,                                                                    
     unreserved  land  before  establishment  of  the  State                                                                    
     Forest  would be  included in  the  calculation of  the                                                                    
     municipal   entitlement  acreage,   but   may  not   be                                                                    
     selected.                                                                                                                  
                                                                                                                                
2:05:33 PM                                                                                                                    
                                                                                                                                
     DNR  has briefed  many  statewide  groups and  entities                                                                    
     across Southeast Alaska  about this proposal, including                                                                    
     the   Board   of   Forestry,   SE   Conference,   local                                                                    
     governments,  and the  diverse groups  participating in                                                                    
     the  Tongass  Futures  Roundtable.   These  discussions                                                                    
     will continue and  to date we have  received letters in                                                                    
     support from the following organizations:   the City of                                                                    
     Coffman  Cove, the  Resource  Development Council,  the                                                                    
     Alaska Forest  Association, The  Alaska Chapter  of the                                                                    
     Society  of  American Foresters  Southeast  Conference,                                                                    
     [and] ...  a letter of support from George Woodbury.                                                                       
                                                                                                                                
2:06:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MUNOZ  inquired whether  the University  of Alaska                                                               
intends  to  move  forward   with  selecting  the  aforementioned                                                               
parcels of lands and legislation.                                                                                               
                                                                                                                                
MR. MAISCH replied no.   Based on discussions, the university has                                                               
no intention of moving forward with additional legislation.                                                                     
                                                                                                                                
REPRESENTATIVE KAWASAKI asked how much  of the current acreage is                                                               
being utilized now.                                                                                                             
                                                                                                                                
MR.  MAISCH  responded  that currently  about  50,000  acres  are                                                               
identified  in the  area plan  as  general use  land with  forest                                                               
management intent.  The combination  of the bill that passed last                                                               
year and HB 105  would put just about all of  the lands that were                                                               
classified  general   use  forestry  intent  into   state  forest                                                               
designation.  In  further response, he confirmed  that the 23,000                                                               
additional acres are currently managed  for forestry and are part                                                               
of the allowable cut in  southern Southeast Alaska.  Thus, adding                                                               
these lands to the state  forest would not increase the allowable                                                               
cut, but it would allow  the division to start making investments                                                               
in pre-commercial thinning.  Right  now the division is unwilling                                                               
to  do that  since a  municipality  could form  and select  those                                                               
acres.                                                                                                                          
                                                                                                                                
2:08:19 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE observed  that concern  has been  expressed by  a                                                               
group that the timber from Hook  Arm and Rowan Bay will likely be                                                               
exported because these two locations are  so far from a mill.  He                                                               
asked  whether Mr.  Maisch  had earlier  stated  that whole  logs                                                               
could not be exported from state land due to federal statute.                                                                   
                                                                                                                                
MR.  MAISCH  answered that  the  state  used  to have  a  primary                                                               
processing rule,  which was essentially  a round log  export ban.                                                               
However,  because of  the interstate  commerce  clause, only  the                                                               
federal government  has the  ability to do  that and  the state's                                                               
statute was struck down by  the [U.S.] Supreme Court.  Therefore,                                                               
the state does not have the  ability to regulate round log export                                                               
by law.   So, by policy and  the type of sales  that the division                                                               
does, the state encourages domestic  manufacture of timber in the                                                               
state.                                                                                                                          
                                                                                                                                
CO-CHAIR FEIGE  inquired whether the  division has talked  to the                                                               
mill  in  [southern] Southeast  Alaska  as  to whether  it  could                                                               
receive timber from those parcels.                                                                                              
                                                                                                                                
MR. MAISCH replied  that that particular mill,  Viking Lumber, is                                                               
the last mid-size mill in the  state.  The mill has benefitted by                                                               
state timber  sales and if not  for state volume it  would likely                                                               
have closed due to lack of federal volume.                                                                                      
                                                                                                                                
2:10:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MUNOZ  offered her  support for  HB 105  and asked                                                               
whether the  timber base is stable  for the mill that  is located                                                               
in Hoonah.                                                                                                                      
                                                                                                                                
MR. MAISCH  identified the  mill as Icy  Straits Lumber  Mill and                                                               
said this mill  does have some state volume under  contract.  The                                                               
one area  that the U.S.  Forest Service is  doing well in  is its                                                               
small timber sale  program and that program supplies  most of the                                                               
small mills on Prince of Wales  Island and is meeting most of the                                                               
needs of the small operators.                                                                                                   
                                                                                                                                
2:11:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER  observed that page  2 of the  letter from                                                               
the Southeast Alaska Conservation  Council talks about the likely                                                               
export of  the timber  from Hook  Arm and Rowan  Bay.   She asked                                                               
whether it  makes economic  sense for the  timber from  these two                                                               
parcels to go to Viking Lumber for processing.                                                                                  
                                                                                                                                
MR. MAISCH  answered that he did  not mean to imply  earlier that                                                               
Viking Lumber  would likely  be able to  process the  timber from                                                               
those locations.   Those  two locations  are fairly  isolated and                                                               
those logs would  likely go to the round log  export market.  The                                                               
way the industry functions right  now in Southeast Alaska is that                                                               
there  is  both  a  round   log  export  market  and  a  domestic                                                               
manufacturing  market.   It is  important  for the  cash flow  of                                                               
mills  to be  able to  export  a portion  of the  logs that  they                                                               
purchase because  of the price  that they  can get on  the export                                                               
market for sorts  that are not profitable for sawing  or for very                                                               
expensive  logs that  command  a  very high  price.   In  further                                                               
response, he concurred  that Viking Lumber would  likely not have                                                               
access to the  processing of timber from Hook Arm  and Rowan Bay,                                                               
although it  is difficult to  anticipate what the  economics will                                                               
be at the time that the sales come forward.                                                                                     
                                                                                                                                
2:13:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI asked whether  there are any requirements                                                               
that trees  from state  forests must be  processed or  have value                                                               
added before they can be exported.                                                                                              
                                                                                                                                
MR. MAISCH  replied no, that is  what the state tried  to do with                                                               
its primary  processing law that was  on the books in  the 1970s.                                                               
It went to court in 1984, so  the state does not have the ability                                                               
to  require   that  type  of  manufacture,   especially  under  a                                                               
competitive purchase  situation.  The state  has several statutes                                                               
for selling timber.   The statute used a lot  when selling timber                                                               
in Southeast Alaska is called  "118," which refers to the section                                                               
of  the  statute.   In  areas  of  high unemployment  and  under-                                                               
utilized  allowable cut,  this statute  allows for  a competitive                                                               
negotiated process and  one of the things that can  be taken into                                                               
consideration  is   either  value  added  or   high  value  added                                                               
products.   Statute "123,"  often referred to  as the  high value                                                               
added statute,  has more stringent requirements  but the division                                                               
is  currently unable  to use  that statute  in Southeast  Alaska.                                                               
Two other statutes under which  the division sells timber are the                                                               
regular  competitive bid  process and  the small  negotiated sale                                                               
process.   Right now  a purchaser can  choose to  manufacture and                                                               
most  of the  logs purchased  are  being used  for local  sawing.                                                               
Separate appraisals are  done on any logs that  will be exported,                                                               
which  the purchaser  must  identify, and  the  state receives  a                                                               
higher price for these.                                                                                                         
                                                                                                                                
2:15:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P.  WILSON pointed out  that a parcel  included in                                                               
HB  105,   Cleveland  Peninsula,  was  under   consideration  for                                                               
selection by the university and at  that time a group in Wrangell                                                               
had identified this parcel as being  an area that it used for its                                                               
children's wilderness  program.   She asked whether  the division                                                               
has talked with this group.                                                                                                     
                                                                                                                                
MR. MAISCH  responded no, he  is not aware of  that organization,                                                               
but that  the division would talk  to them if the  name and phone                                                               
number are  provided.   He said  he does not  believe any  of the                                                               
parcels  are actually  on the  Cleveland Peninsula,  but that  he                                                               
will check and get back to the committee.                                                                                       
                                                                                                                                
2:17:03 PM                                                                                                                    
                                                                                                                                
RON  WOLFE,  Natural  Resources  Manager,  Sealaska  Corporation,                                                               
testifying  in support  of  HB 105,  stated  that communities  in                                                               
Southeast  Alaska  are  experiencing  either  reduced  population                                                               
demand or continued population loss.   This is important for such                                                               
things as schools,  property values, and businesses.   The timber                                                               
industry, while struggling, is one that  is needed, as are all of                                                               
the industries in Southeast Alaska.   The Southeast Alaska timber                                                               
industry is  basically supported by  three legs:   federal timber                                                               
sales, private  timber harvest, and  state timber sales,  and all                                                               
three  of these  landowners  are necessary  for  a viable  timber                                                               
industry in  this region.  Sealaska  Corporation is predominantly                                                               
in the  round log export  business and uses the  same contractors                                                               
as does Viking  Lumber.  It is these same  contractors that would                                                               
purportedly  operate  on  state  timber sales.    The  same  fuel                                                               
distributors and air  taxi companies are also used.   Thus, he is                                                               
describing a critical mass that  is important for the survival of                                                               
the Southeast  Alaska region.   If any one  of these legs  of the                                                               
stool  falls away,  Southeast  Alaska could  be  in very  serious                                                               
trouble.  The long term commitment  of the state, as described by                                                               
Mr. Maisch, is important for  the long term management and health                                                               
of the timber industry.                                                                                                         
                                                                                                                                
2:20:14 PM                                                                                                                    
                                                                                                                                
MR.  WOLFE,  regarding the  concerns  expressed  about round  log                                                               
export, said it  is important to note that a  strong component of                                                               
timber sales on the Tongass  National Forest is round log export.                                                               
This  is  necessary to  make  the  timber  economics work.    The                                                               
premium price  attained from round  log export is  basically what                                                               
makes a timber  sale economical to operate.  He  urged members to                                                               
look at  Sealaska's website to  read the McDowell Group  study on                                                               
timber industry  employment, which  found that  on a  per million                                                               
board foot basis the round  log export industry generates just as                                                               
many jobs as the domestic  manufacturing industry.  These jobs in                                                               
the  round log  export arena  are frequently  in rural  Southeast                                                               
Alaska villages where there are  no other forms of employment and                                                               
this  source  of  cash  is  crucial  in  a  subsistence  economy.                                                               
Favoring  a solely  domestic manufacture  would mean  that people                                                               
would have to move to a village  that has a sawmill.  He said the                                                               
Alaska Forest Resources  and Practices Act works  well to protect                                                               
fish and wildlife habitat resources on state and private land.                                                                  
                                                                                                                                
2:22:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAWASAKI  said  it  seems that  the  value  added                                                               
industry would provide more jobs than would round log export.                                                                   
                                                                                                                                
MR. WOLFE  appreciated how that seems  counterintuitive, but said                                                               
a look  at how Sealaska  manufactures round logs into  a customer                                                               
specification will  show the extra  jobs that are created  in the                                                               
sort yard  when the scale rollout  is done.  More  importantly is                                                               
the ship loading  or stevedoring jobs that go with  the export of                                                               
the  round logs.   So,  the combination  of these  jobs basically                                                               
equivocates to the mills.                                                                                                       
                                                                                                                                
MR. WOLFE, in response to  Co-Chair Seaton, agreed to provide the                                                               
committee with a  copy of the aforementioned McDowell  study.  He                                                               
further offered to  provide committee members with a  tour of the                                                               
Sealaska wood pellet boiler system.                                                                                             
                                                                                                                                
2:24:50 PM                                                                                                                    
                                                                                                                                
SHELLY  WRIGHT, Executive  Director,  Southeast Conference,  said                                                               
she  is testifying  on  behalf of  the  communities of  Southeast                                                               
Alaska  that rely  on  resource development  for  survival.   She                                                               
testified as follows:                                                                                                           
                                                                                                                                
     The communities  of Southeast Alaska are  struggling to                                                                    
     survive.   Part  of the  struggle  is a  lack of  jobs.                                                                    
     There used to  be a timber industry in  our region that                                                                    
     supported  our communities.   People  had wage  earning                                                                    
     jobs and financial support for  their schools and their                                                                    
     infrastructure.   We depended on this  for security and                                                                    
     for our  future.  Now our  industry is almost gone.   I                                                                    
     have been  told the timber  industry is a thing  of the                                                                    
     past.  However, I opened  the Juneau Empire last Friday                                                                  
     and read on  the front page that the  State of Alaska's                                                                    
     retirement fund  officials are looking at  investing in                                                                    
     a timber industry in the Lower  48.  To make the Alaska                                                                    
     state retirement  fund more  secure they  are investing                                                                    
     in timber in the southeastern  states from Texas to the                                                                    
     Carolinas while we  sit on 17 million  acres of Tongass                                                                    
     National  Forest.   That tells  me we  are missing  the                                                                    
     mark here in  our region.  This state forest  will be a                                                                    
     small way  to stabilize  our investments in  the future                                                                    
     of  our  communities.    Allowing  the  state  to  have                                                                    
     designated  lands to  manage  for  timber harvest  will                                                                    
     give  our  local  mills  a  little  more  security  and                                                                    
     therefore maybe  be able  to employ  a few  more folks.                                                                    
     We  are down  to one  medium  sized mill  in Prince  of                                                                    
     Wales  Island   and  nine  or  ten   mom-and-pop  mills                                                                    
     throughout the region that rely  on the bigger mills to                                                                    
     stay in  business.   Supply is  the obstacle  for every                                                                    
     one of these mills.   We are encouraged by the progress                                                                    
     the  state department  of forestry  has  made with  its                                                                    
     industry  development  and  with the  partnership  they                                                                    
     have  with  the  federal government.    However,  these                                                                    
     efforts are  almost unfortunately too little  too late.                                                                    
     Our  region is  in emergency  mode now.   We  need this                                                                    
     forest designation in order to survive.                                                                                    
                                                                                                                                
2:27:26 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON interjected that the  committee has a copy of the                                                               
Southeast Conference  Resolution 11-11 as  well as a copy  of the                                                               
February 14,  2011, letter from  the Southeast  Conference Timber                                                               
Committee chairperson.                                                                                                          
                                                                                                                                
MS. WRIGHT continued her testimony:                                                                                             
                                                                                                                                
     The existence of a timber  industry in Southeast Alaska                                                                    
     depends  on immediate  action to  provide  a supply  of                                                                    
     economically  viable  sales.     There  has  been  some                                                                    
     concerted  effort by  the state  working with  the U.S.                                                                    
     Forest Service  to improve the quality  and quantity of                                                                    
     the  Forest   Service  timber   sales.     This  effort                                                                    
     continues,  but has  not  resulted  in the  improvement                                                                    
     needed.   There  are 17  million acres  in the  Tongass                                                                    
     National Forest.   This bill  will secure  48,472 acres                                                                    
     for  timber  harvest  management  by  the  Division  of                                                                    
     Forestry.  It is a very  small amount of land in a very                                                                    
     big picture, but it could  go a long way in maintaining                                                                    
     the stability for  our people in Southeast  Alaska.  As                                                                    
     a   representative  of   the  logging   communities  in                                                                    
     Southeast Alaska,  I urge you to  support the expansion                                                                    
     of  the Alaska  State  Forest.   This designation  will                                                                    
     enable the Department of  Natural Resources Division of                                                                    
     Forest  to sustainably  manage  the timber,  fisheries,                                                                    
     wildlife,  waters,   recreation,  and   other  multiple                                                                    
     benefits  that  will   strengthen  the  local  economy,                                                                    
     provide  jobs,  and  improve quality  of  life  of  all                                                                    
     Southeast Alaska communities.                                                                                              
                                                                                                                                
2:29:55 PM                                                                                                                    
                                                                                                                                
JOHN SANDOR spoke in favor of HB 105 from the following written                                                                 
statement [original punctuation provided]:                                                                                      
                                                                                                                                
     I first came  to Alaska on an assignment  with the U.S.                                                                    
     Forest  Service  in 1953  and  served  as the  Regional                                                                    
     Forester  of   the  Alaska  Region  from   1976  to  my                                                                    
     retirement from that agency in  1984.  I also served as                                                                    
     Commissioner of the  Alaska Department of Environmental                                                                    
     Conservation  from 1990-1994.    I  am submitting  this                                                                    
     testimony as  an individual - a  Certified Forester and                                                                    
     life-time member of the Society of American Foresters.                                                                     
                                                                                                                                
     I  support HB  105 -  which  will add  23,181 Acres  of                                                                    
     State lands  to the  25,291 acre existing  State Forest                                                                    
     which was  established last year.   This expanded State                                                                    
     Forest of  48,472 acres will  enable the  Department of                                                                    
     [Natural]   Resources    Division   of    Forestry   to                                                                    
     sustainably [manage]  the timber,  fisheries, wildlife,                                                                    
     waters,  recreation, and  other multiple  benefits that                                                                    
     will strengthen  the local  economy, provide  jobs, and                                                                    
     improve the  quality of life of  the communities living                                                                    
     in the vicinity of these existing state lands.                                                                             
                                                                                                                                
     Since  the closure  of the  two  Southeast Alaska  pulp                                                                    
     mills during the  1990's and the loss  of an integrated                                                                    
     forest product  industry in the region,  employment and                                                                    
     population levels have significantly declined.                                                                             
                                                                                                                                
MR. SANDOR called the committee's  attention to the Department of                                                               
Labor & Workforce Development's  projections for populations from                                                               
2010  to 2034.   The  population of  Southeast Alaska  is roughly                                                               
69,000 and by  the year 2034 the population will  decline by 14.5                                                               
percent.  This is astonishing  because the total state population                                                               
is  projected to  increase  by 24  percent.   He  noted that  the                                                               
Department of  Natural Resources has  had an exemplary  record of                                                               
working with  local communities in protecting  and managing local                                                               
forests.   The  new  Southeast State  Forest  will provide  local                                                               
communities with  new opportunities to improve  their economy and                                                               
quality  of life.    He  directed attention  to  a Juneau  Empire                                                             
article in  the committee  packet written  by Tlingit  leader Dr.                                                               
Walter Soboleff.                                                                                                                
                                                                                                                                
2:33:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HERRON inquired  whether  more  acreage could  be                                                               
added to the state forest.                                                                                                      
                                                                                                                                
MR.  SANDOR replied  that this  is about  one-third of  the total                                                               
state forest land in Southeast Alaska,  but it is about the ideal                                                               
amount in that  state forest.  He deferred to  the state forester                                                               
as to whether any additional land should be added.                                                                              
                                                                                                                                
2:34:53 PM                                                                                                                    
                                                                                                                                
WAYNE NICOLLS urged passage of HB 105, paraphrasing from the                                                                    
following written statement [original punctuation provided]:                                                                    
                                                                                                                                
     I  am  retired  after  37  years  with  the  US  Forest                                                                    
     Service.   I  am a  50-year  member of  the Society  of                                                                    
     American Foresters and I  continue my education efforts                                                                    
     to  qualify as  a  Certified  Forester.   I  am also  a                                                                    
     member of the Alaska Board of Forestry.                                                                                    
                                                                                                                                
     This statement  in support  of HB 105  is in  behalf of                                                                    
     myself as  an individual,  not as  a spokesman  for any                                                                    
     organization.                                                                                                              
                                                                                                                                
     The  addition of  some 23,000  acres  to the  Southeast                                                                    
     State  Forest  will total  nearly  50,000  acres.   The                                                                    
     legislature and  administration are to  be complimented                                                                    
     for  their  foresight  in  establishing  the  Southeast                                                                    
     State Forest  and I urge  that they exercise  that same                                                                    
     foresight in enlarging it.                                                                                                 
                                                                                                                                
     As I indicated last  year during deliberations that led                                                                    
     to the  establishment of the [Southeast]  State Forest,                                                                    
     designation  of lands  as  such  elevates their  status                                                                    
     above  mere  state  ownership.   It  justifies  prudent                                                                    
     investments  via  cultural   treatment  of  the  forest                                                                    
     stands   and   establishment   of   infrastructure   to                                                                    
     facilitate their management and multiple public use.                                                                       
                                                                                                                                
     While  much  current  focus is  on  logging,  resultant                                                                    
     employment,  and  current  economic  results  of  state                                                                    
     management,  the  real  benefit is  long  term  through                                                                    
     subsequent  management  and   use  over  many  decades,                                                                    
     possibly a century  or more.  These  long term benefits                                                                    
     far outweigh short term wood harvest benefits.                                                                             
                                                                                                                                
     I have only heard one  argument for deletion of certain                                                                    
     tracts on the basis  that they contain considerable old                                                                    
     growth.   Thus should remain outside  the state forest.                                                                    
     This is  some sort of  reverse logic.  The  argument is                                                                    
     without merit because  as the land is  already owned by                                                                    
     the  state  it  can  be  harvested.   It  just  is  not                                                                    
     feasible  to  invest  management  effort  subsequently.                                                                    
     Not including  it in the  state forest does  nothing to                                                                    
     protect it from logging if that is the objective.                                                                          
                                                                                                                                
     Contrary to some popular belief,  old growth is not the                                                                    
     epitome of wildlife habitat.   Carefully managed forest                                                                    
     land  through   vegetation  manipulation   can  improve                                                                    
     habitat.   It can  increase carrying capacity  for deer                                                                    
     and other  species.  It  can even improve  fish habitat                                                                    
     as has  been proven by  research in the past  decade or                                                                    
     two.   Preaching that old  growth must be  preserved to                                                                    
     benefit  wildlife   is  shallow  logic.     The  effort                                                                    
     opposing  inclusion  in  state  forest  would  best  be                                                                    
     devoted to  acquiring current scientific  knowledge and                                                                    
     advocating conservation through forest management.                                                                         
                                                                                                                                
2:38:59 PM                                                                                                                    
                                                                                                                                
CARL PORTMAN, Deputy Director, Resource Development Council                                                                     
(RDC), spoke in favor of HB 105 as follows:                                                                                     
                                                                                                                                
     RDC  supports  HB 105  given  expansion  of the  forest                                                                    
     would help  sustain the forest products  industry, save                                                                    
     jobs, and help the economy.   The state land identified                                                                    
     for  inclusion  into  the new  state  forest  has  been                                                                    
     consistently  managed  for  timber harvest.    A  state                                                                    
     forest designation  over these lands would  ensure they                                                                    
     would remain  in state ownership and  contribute to the                                                                    
     long-term viability of the  forest products industry in                                                                    
     Southeast Alaska.                                                                                                          
                                                                                                                                
     RDC  supported  the  creation of  the  Southeast  State                                                                    
     Forest because  demand for state timber  exceeds supply                                                                    
     and local  mills are dependent  on a  consistent supply                                                                    
     to stay  in business.   The majority  of the  timber in                                                                    
     Southeast  Alaska  is  on  federal  land,  but  federal                                                                    
     timber sales have declined  sharply.  Subsequently, the                                                                    
     demand for state timber from  local mills has increased                                                                    
     significantly.                                                                                                             
                                                                                                                                
     Much  of the  new state  forest contains  young second-                                                                    
     growth  stands.   There is  broad support  for shifting                                                                    
     timber harvesting  in Southeast Alaska from  old growth                                                                    
     to  second  growth.    The new  state  forest  and  the                                                                    
     proposed additional parcels to  it would help provide a                                                                    
     sustainable   timber   supply   to  local   mills   and                                                                    
     accelerate   the  harvest   of  second-growth   timber.                                                                    
     Actively  managed  second-growth  stands  will  provide                                                                    
     more timber volume per acre on shorter rotations.                                                                          
                                                                                                                                
     The   shift   to   second-growth  harvesting   can   be                                                                    
     accelerated and  timber volume increased on  state land                                                                    
     by  thinning  these stands.    However,  thinning is  a                                                                    
     long-term investment and is only  justified if the land                                                                    
     will be available for timber harvesting.                                                                                   
                                                                                                                                
     In  our  view  the   Southeast  State  Forest  and  the                                                                    
     proposed  additions to  it are  needed to  help restore                                                                    
     some balance  in Southeast Alaska,  given approximately                                                                    
     95 percent of the Tongass  National Forest is closed to                                                                    
     logging.    The  Tongass   itself  comprises  about  94                                                                    
     percent of  the land  base in Southeast.   As  a result                                                                    
     land  management  in  Southeast is  extremely  weighted                                                                    
     toward conservation  and non-development uses.   Of the                                                                    
     17  million acres  in the  Tongass, only  663,000 acres                                                                    
     are scheduled  for harvesting over  the next  100 years                                                                    
     and half  of that acreage  is second growth  timber cut                                                                    
     decades  ago.   The  annual  harvest  ceiling has  been                                                                    
     reduced  to  267  million board  feet,  down  from  520                                                                    
     million  board feet  under previous  federal plans  and                                                                    
     mandates.   Only 30  million board  feet of  timber has                                                                    
     been harvested  annually in recent years,  less than 15                                                                    
     percent  of  the allowable  cut.    Timber harvests  in                                                                    
     these federal  lands are likely  to be  constrained due                                                                    
     to litigation and other federal issues.                                                                                    
                                                                                                                                
2:41:39 PM                                                                                                                    
                                                                                                                                
     With regard  to state  lands, DNR manages  over 159,000                                                                    
     acres  of uplands  in southern  Southeast  Alaska.   Of                                                                    
     these, approximately 48,472 acres  would be included in                                                                    
     the new expanded  state forest.  The  remaining land is                                                                    
     designated for other  uses, including recreation, water                                                                    
     resources, land  sales, and fish and  wildlife habitat,                                                                    
     including  25,000  acres  of  legislatively  designated                                                                    
     state  parks, refuges,  and public  use  areas.   These                                                                    
     statistics in  our view speak  to the need,  the urgent                                                                    
     need, of a productive state  forest in Southeast.  With                                                                    
     the Forest  Service unable to provide  timber sales and                                                                    
     the  industry  need to  keep  operating  and with  most                                                                    
     federal land  in the region now  closed to development,                                                                    
     the proposed  additions to  the Southeast  State Forest                                                                    
     are needed and would  help sustain the forest products,                                                                    
     industry, save jobs, and benefit the economy.                                                                              
                                                                                                                                
2:43:40 PM                                                                                                                    
                                                                                                                                
KIRK  DAHLSTROM,  Co-Owner  and General  Manager,  Viking  Lumber                                                               
Company Inc.,  specified that  17 years ago  he and  his brothers                                                               
bought  a bankrupt  sawmill located  on Prince  of Wales  Island,                                                               
intending to  run the  mill on Forest  Service timber.   However,                                                               
the  federal government  has let  them down.   Over  the past  10                                                               
years almost one-third  of the mill's volume has  come from state                                                               
timber sales and is  what has kept the mill alive.   The mill has                                                               
over 100 employees and contributes  about $17 million annually to                                                               
the local Prince of Wales Island  economy.  Over the years he has                                                               
had  some very  tough times  with  timber supply,  but the  state                                                               
timber sale program  and [House Bill 162],  which established the                                                               
state  forest  last year,  have  given  him great  confidence  to                                                               
continue going.   He supports passage  of HB 105 because  it will                                                               
provide  more  confidence  to  keep  going in  the  face  of  the                                                               
horrible market conditions and timber supply that he has had.                                                                   
                                                                                                                                
CO-CHAIR  SEATON   inquired  whether   Viking  Lumber   would  be                                                               
interested in the two remote parcels [Hook Arm and Rowan Bay].                                                                  
                                                                                                                                
MR.  DAHLSTROM replied  that  over the  years  Viking Lumber  has                                                               
reached out  over 200 water  miles to get  timber.  Rowan  Bay is                                                               
not too  far, but  it may take  a little more  of the  wood being                                                               
exported from there  to cover the extra  costs of transportation.                                                               
About 30-40 percent  of the logs would go to  the sawmill and the                                                               
rest would need to be exported to make it economical.                                                                           
                                                                                                                                
2:46:55 PM                                                                                                                    
                                                                                                                                
ERIC LEE noted that all of  the comment heard by the committee so                                                               
far has been from big timber  interests.  The reason for this, he                                                               
maintained,  is that  the small  operators can  have an  entirely                                                               
different opinion about  HB 105.  Born in Petersburg  in 1951, he                                                               
said  he has  been a  subsistence hunter  on Mitkof  Island every                                                               
year since he was  a boy until the season was  closed in 1975 due                                                               
to the  drastic decline of  deer after the extensive  logging and                                                               
two hard  winters.   Before logging deforested  much of  the best                                                               
deer winter habitat, game was plentiful  on the island.  Deer and                                                               
wolf populations  rose and  fell in the  same natural  cycle they                                                               
had always followed  for thousands of years.  During  the time he                                                               
grew up  the deer season was  open for five months  of each year,                                                               
from  August  through December,  and  the  limit was  four  deer.                                                               
Following  the closure  in 1975  the deer  made only  a slow  and                                                               
partial recovery and  the season remained closed  entirely for 16                                                               
years.  In  1991 it was re-opened  for two weeks with  a limit of                                                               
one buck,  and except for  a small  archery season it  remains at                                                               
just two  weeks and a  limit of  one very-hard-to-find buck.   In                                                               
spite of  this very restrictive  management, the  deer population                                                               
has never recovered.  This  dramatic reduction in Mitkof Island's                                                               
deer   carrying  capacity   is  directly   attributable  to   the                                                               
deforestation of  deer winter range  and the extensive  system of                                                               
logging roads  that allow poachers  to access most of  the island                                                               
and that also provide easy travelling for wolves.                                                                               
                                                                                                                                
MR.  LEE also  recalled  his days  of coho  salmon  fishing in  a                                                               
stream in the Falls Creek  watershed on Mitkof Island before that                                                               
area was logged.  He said  the streambed and sandbars were clean,                                                               
but  during and  after  logging  of the  watershed  the sand  and                                                               
gravel bars were periodically covered by  an inch or more of fine                                                               
mud and silt  even though the logging took place  a long distance                                                               
from the creek.   Over the next  four or five years  the coho run                                                               
dropped to a fraction of its  former strength and has never fully                                                               
covered.                                                                                                                        
                                                                                                                                
MR. LEE  said he is  using these firsthand observations  from his                                                               
life to  show why  he is concerned  about the  additional logging                                                               
that would  take place on  Mitkof Island  if the four  parcels on                                                               
the island  are selected.   There are  already over 150  miles of                                                               
logging roads on this small  island, he noted.  Both ecologically                                                               
and   economically,  logging   has  not   been  conducted   in  a                                                               
sustainable way despite the claims to  the contrary.  Most of the                                                               
valuable  timber from  these state  lands  will be  cut down  and                                                               
shipped overseas  as fast as  possible, rather  than sustainably,                                                               
with no regard for added processing to bring economic benefit.                                                                  
                                                                                                                                
2:50:54 PM                                                                                                                    
                                                                                                                                
MR.  LEE urged  that no  state  lands be  designated for  logging                                                               
until the  timber can be processed  in Alaska for the  benefit of                                                               
Alaskans.   He  read from  Article 8,  Section 4,  of the  Alaska                                                               
State Constitution which states  that resources shall be utilized                                                               
and managed  sustainably, and said  that the proposal  for Mitkof                                                               
Island is not even remotely close to sustainable.                                                                               
                                                                                                                                
MR. LEE,  regarding round log  export, pointed out that  the best                                                               
trees are  shipped overseas  and these  trees are  centuries old,                                                               
irreplaceable,  and extremely  valuable.   Once  those trees  are                                                               
gone  they are  gone for  good.   The big  timber interests  make                                                               
their   quick   money,   but   sustainable   long-term   business                                                               
opportunities  for the  mom-and-pop operators  are gone  with the                                                               
exported timber and it is  the mom-and-pop operators that provide                                                               
economic opportunities for communities like Petersburg.                                                                         
                                                                                                                                
2:53:28 PM                                                                                                                    
                                                                                                                                
JOSEPH SEBASTIAN warned  that like the federal  forest program on                                                               
the Tongass National Forest, this  state forest land program will                                                               
be a  deficit-receipt program to  the State  of Alaska.   It will                                                               
require more state  investment than there will be  profits to the                                                               
state  or communities.   Much  of this  land is  already marginal                                                               
timber or old clear cuts and  marginal second growth.  There will                                                               
be  tens of  thousands of  dollars of  survey costs,  monitoring,                                                               
accounting, and  trying to  keep the users  honest that  will add                                                               
further costs.  Additionally, the  far-flung nature of these land                                                               
parcels will make them impossibly  expensive to administer by the                                                               
state forester  and his  staff.  This  program amounts  to little                                                               
more than corporate welfare for  a couple of timber operators and                                                               
the round log export amounts to round job exports.                                                                              
                                                                                                                                
2:55:50 PM                                                                                                                    
                                                                                                                                
MR.  SEBASTIAN  said  the  state   cannot  clearcut  its  way  to                                                               
prosperity  in the  Tongass and  will be  doubly impoverished  by                                                               
exporting its forest resources under  the premise of further jobs                                                               
from exporting.  Sealaska has  completely stripped the trees from                                                               
over  half of  Dall Island,  he charged,  so the  island will  be                                                               
clearcuts on top  of clearcuts.  He urged that  the state program                                                               
be more  responsible than has Sealaska.   The Hook Arm  and Rowan                                                               
Bay parcels  should be dropped.   The parcel  in Rowan Bay  has a                                                               
lot of coastline  and sensitive beach fringe.   North Kuiu Island                                                               
is one  of the  most heavily logged  places in  Southeast Alaska.                                                               
The  Sumdum, Cleveland  Peninsula, Mite  Cove, Lynn  Canal, Rowan                                                               
Bay, and Hook  Arm parcels should be deleted from  HB 105 and the                                                               
bill balanced by designating these parcels as state parks.                                                                      
                                                                                                                                
2:58:19 PM                                                                                                                    
                                                                                                                                
JEREMY MAXAND noted that he and  his parents were born and raised                                                               
in Wrangell  and his father was  a longshoreman.  He  is proud to                                                               
say that  in 1992 he  was the  first Wrangell student  to receive                                                               
the Alaska  Pulp Corporation's  academic scholarship  of $10,000,                                                               
which helped put  him through college.  He said  his comments are                                                               
not necessarily in  support or opposition to HB  105; rather, his                                                               
primary concern is  with the potential scale of  round log export                                                               
and,  in  essence, the  exporting  of  jobs from  his  community.                                                               
Wrangell  used to  have a  very large  mill that  processed 60-70                                                               
million board  feet a  year, but  this mill is  now in  the final                                                               
stages  of complete  dismantlement.   The Wrangell  community has                                                               
gone through a  tumultuous economic time to  re-create itself and                                                               
identify ways to  diversify and stabilize its  economy.  Wrangell                                                               
has two micro-operators that  process about 250,000-500,000 board                                                               
feet of timber a year into  amazing wood products and he supports                                                               
their efforts 100 percent.                                                                                                      
                                                                                                                                
MR. MAXAND said  his concern about HB 105 is  that Wrangell is in                                                               
the  unique  position  of  determining how  it  will  go  forward                                                               
economically and what  role the timber industry is  going to play                                                               
in that.   He believes most people have moved  beyond the idea of                                                               
a  large timber  industry in  Wrangell, but  they have  not moved                                                               
beyond  the idea  that Wrangell  could have  some very  important                                                               
value  added wood  manufacturing  operations in  addition to  the                                                               
ones  the community  currently has.   Even  though comments  have                                                               
been   made   that  there   are   efforts   to  encourage   local                                                               
manufacturing of that fiber, his concern  is that he does not see                                                               
how genuine or real those efforts  are.  If HB 105 moves forward,                                                               
he urges  that the state look  very hard at ways  to innovatively                                                               
support communities like Wrangell  that have worked toward having                                                               
a long-term  sustainable mill industry.   The state must  look at                                                               
ways to ensure that the  timber harvested from Wrangell Island is                                                               
kept on the  island for manufacturing and value  adding by small,                                                               
sustainable mill operations in Wrangell.   Alaska's timber should                                                               
not be shipped out of the  country while the communities are left                                                               
with clearcuts and  no remaining timber.  He  urged the committee                                                               
to do the right thing for the people in Wrangell.                                                                               
                                                                                                                                
3:02:31 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON held over HB 105.                                                                                               
                                                                                                                                
3:02:45 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Resources Standing Committee meeting was adjourned at 3:03 p.m.                                                                 

Document Name Date/Time Subjects
01-HB0123A.pdf HRES 2/14/2011 1:00:00 PM
02-Sponsor Statement HB123.pdf HRES 2/14/2011 1:00:00 PM
04-Innovative use of CWF.pdf HRES 2/14/2011 1:00:00 PM
05.Funding decentralized watewater systems.pdf HRES 2/14/2011 1:00:00 PM
06-Wet Weather.pdf HRES 2/14/2011 1:00:00 PM
07-Green Infrastructure.pdf HRES 2/14/2011 1:00:00 PM
08-Ohio brownfield.pdf HRES 2/14/2011 1:00:00 PM
09-the Ohio example.pdf HRES 2/14/2011 1:00:00 PM
10-Homer Soil and Water Landscape Suitability Map.pdf HRES 2/14/2011 1:00:00 PM
HB0105A.pdf HRES 2/14/2011 1:00:00 PM
Coffman Cove Support HB105-SB44.pdf HRES 2/14/2011 1:00:00 PM
1 14 11 Chenault SESF Transmittal.pdf HRES 2/14/2011 1:00:00 PM
Public Briefing HB105-SB44 1-24-2011.pdf HRES 2/14/2011 1:00:00 PM
RDC Support 1-5-11.pdf HRES 2/14/2011 1:00:00 PM
HB 105
AFA support SESF additions 1-12-11.pdf HRES 2/14/2011 1:00:00 PM
HB 105
Vicinity Map SSE State Forest 12-20-10.pdf HRES 2/14/2011 1:00:00 PM
Parcel Maps SESF 12.20.2010.pdf HRES 2/14/2011 1:00:00 PM
SEACC_SESF_h_02_11.pdf HRES 2/14/2011 1:00:00 PM
HB 105
SAF Letter of Support.pdf HRES 2/14/2011 1:00:00 PM
HB 105
HB0105-1-2-011811-DNR-N.pdf HRES 2/14/2011 1:00:00 PM
HB123-DEC-FC-02-11-11.pdf HRES 2/14/2011 1:00:00 PM
Testimony and Resolution - Southeast Conference.pdf HRES 2/14/2011 1:00:00 PM
HB 105
Testimony - Wayne R. Nicolls.pdf HRES 2/14/2011 1:00:00 PM
HB 105
Testimony - John A. Sandor.pdf HRES 2/14/2011 1:00:00 PM
HB 105
DOF Testimony HB105 2-14-11.pdf HRES 2/14/2011 1:00:00 PM
HB 105
SEAALASKA McDowell Group studies.pdf HRES 2/14/2011 1:00:00 PM
SFIN 4/14/2011 9:00:00 AM
HB 105