Legislature(2015 - 2016)BARNES 124

03/04/2015 01:00 PM RESOURCES

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Audio Topic
01:05:12 PM Start
01:06:28 PM Overview(s): Biomass Overview
01:55:37 PM HB87
02:43:46 PM Confirmation Hearing(s): Alaska Oil and Gas Conservation Commission
02:52:02 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Biomass Overview by Tok, Alaska Chamber of TELECONFERENCED
Heard & Held
-- Public Testimony --
+ Confirmation Hearing: TELECONFERENCED
Alaska Oil & Gas Conservation Commission
<Above Item Rescheduled from 3/2/15>
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                         March 4, 2015                                                                                          
                           1:05 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Benjamin Nageak, Co-Chair                                                                                        
Representative David Talerico, Co-Chair                                                                                         
Representative Craig Johnson                                                                                                    
Representative Paul Seaton                                                                                                      
Representative Andy Josephson                                                                                                   
Representative Geran Tarr                                                                                                       
MEMBERS ABSENT                                                                                                                
Representative Mike Hawker, Vice Chair                                                                                          
Representative Bob Herron                                                                                                       
Representative Kurt Olson                                                                                                       
COMMITTEE CALENDAR                                                                                                            
OVERVIEW(S):  BIOMASS OVERVIEW                                                                                                  
     - HEARD                                                                                                                    
HOUSE BILL NO. 87                                                                                                               
"An Act relating to the sale of timber on state land; and                                                                       
providing for an effective date."                                                                                               
     - HEARD & HELD                                                                                                             
CONFIRMATION HEARING(S):                                                                                                        
Alaska Oil and Gas Conservation Commission                                                                                    
     Michael Gallagher - Anchorage                                                                                              
     -  CONFIRMATION(S) ADVANCED                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 87                                                                                                                   
SHORT TITLE: TIMBER SALES                                                                                                       
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
01/30/15       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/30/15       (H)       RES                                                                                                    
02/13/15       (H)       RES AT 1:00 PM BARNES 124                                                                              
02/13/15       (H)       Heard & Held                                                                                           
02/13/15       (H)       MINUTE(RES)                                                                                            
02/18/15       (H)       FIN REFERRAL ADDED AFTER RES                                                                           
03/04/15       (H)       RES AT 1:00 PM BARNES 124                                                                              
WITNESS REGISTER                                                                                                              
DAVID STANCLIFF, Vice President                                                                                                 
Tok Chamber of Commerce                                                                                                         
Tok, Alaska                                                                                                                     
POSITION STATEMENT:  Presented an overview on biomass energy                                                                  
together with a slideshow entitled "From Menace to Meals.                                                                       
JOE YOUNG, Owner                                                                                                                
Young's Timber, Inc.                                                                                                            
Tok, Alaska                                                                                                                     
POSITION STATEMENT:  Provided a PowerPoint overview of Young's                                                                
Timber, Inc.                                                                                                                    
Chris Maisch, Director                                                                                                          
Division of Forestry                                                                                                            
Department of Natural Resources                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Presented committee substitute changes for                                                               
HB 87, Version W.                                                                                                               
Kirk Dahlstrom, Stockholder and General Manager                                                                                 
Viking Lumber Company                                                                                                           
Klawock, Alaska                                                                                                                 
POSITION STATEMENT:  Testified in support of HB 87.                                                                           
DAVE STANCLIFF                                                                                                                  
Tok Chamber of Commerce                                                                                                         
City of Tok                                                                                                                     
Tok, Alaska                                                                                                                     
POSITION STATEMENT:  Expressed concerns regarding HB 87.                                                                      
JOE YOUNG                                                                                                                       
Young Timber, Inc.                                                                                                              
Tok, Alaska                                                                                                                     
POSITION STATEMENT:  Expressed concerns regarding HB 87.                                                                      
SHELLY WRIGHT, Executive Director                                                                                               
Southeast Conference                                                                                                            
Sitka, Alaska                                                                                                                   
POSITION STATEMENT:  Testified in support of HB 87.                                                                           
CHELSEA GOUCHER, Executive Director                                                                                             
Greater Ketchikan Chamber of Commerce                                                                                           
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 87.                                                                           
REBECCA KNIGHT                                                                                                                  
Petersburg, Alaska                                                                                                              
POSITION STATEMENT:  Testified in opposition to HB 87.                                                                        
ERIN McLARNON, Executive Director                                                                                               
Working Forest Group                                                                                                            
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 87.                                                                           
MIKE SALLEE                                                                                                                     
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Expressed concerns regarding HB 87.                                                                      
DAVID BEEBE                                                                                                                     
City of Kupreanof                                                                                                               
Kupreanof, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to HB 87.                                                                        
MICHAEL GALLAGHER, Appointee                                                                                                    
Alaska Oil and Gas Conservation Commission                                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  As appointee to the Alaska Oil and Gas                                                                   
Conservation Commission, discussed his qualifications and                                                                       
answered questions.                                                                                                             
ACTION NARRATIVE                                                                                                              
1:05:12 PM                                                                                                                    
CO-CHAIR  DAVID  TALERICO  called the  House  Resources  Standing                                                             
Committee meeting to order at  1:05 p.m.  Representatives Seaton,                                                               
Josephson, Tarr,  Johnson, Nageak,  and Talerico were  present at                                                               
the call to order.                                                                                                              
^OVERVIEW(S):  Biomass Overview                                                                                                 
                 OVERVIEW(S):  Biomass Overview                                                                             
1:06:28 PM                                                                                                                    
CO-CHAIR TALERICO announced  that the first order  of business is                                                               
an overview on biomass presented by the Tok Chamber of Commerce.                                                                
1:07:05 PM                                                                                                                    
DAVID STANCLIFF,  Vice President,  Tok Chamber of  Commerce, said                                                               
he also  worked Alaska Gateway  School District in  preparing the                                                               
presentation.  He noted he has  also worked with the Alaska Power                                                               
and Telephone,  the utility looking  at providing  less expensive                                                               
electrical energy possibly  through biomass.  He  advised it took                                                               
many years of discussion to bring  the Tanana State Forest from a                                                               
general  land classification  to a  state forest  of 1.8  million                                                               
acres along  the Tanana River.   He advised that at  the time the                                                               
testimony was being taken there  was indication that not everyone                                                               
wanted to  see land classified in  a manner that might  shut down                                                               
land disposal  which was a big  topic at the time.   He explained                                                               
that the  winning argument over that  period of time was  to look                                                               
at the economy available through  the use of forest products from                                                               
the Tanana Valley State Forest.                                                                                                 
1:09:13 PM                                                                                                                    
MR. STANCLIFF referred to the  slideshow "Menace to Meals," slide                                                               
2, and explained that the young  man in the greenhouse, through a                                                               
legislative appropriation,  learned to  plant and grow  a carrot.                                                               
He  noted   it  wouldn't   have  happened   if  Alaska   had  not                                                               
transitioned from  menace to meals.   Slide 3, is typical  of the                                                               
33 thousand  acres of old  growth forest,  non-commercial timber,                                                               
both black  and white spruce, ready  to burn.  With  reference to                                                               
slide  4,  he stated  the  legislature  spent over  $100  million                                                               
fighting fires due to Alaska's  100-year old climatic forest that                                                               
wants to  burn.   On a  typical summer day,  in the  Upper Tanana                                                               
Valley, there  are up to 1,000  lightning strikes.  He  noted the                                                               
aspen are dying as  there is not room for trees  to grow, and few                                                               
animals due  to the canopies.   He advised that a  30-foot circle                                                               
contains energy  equal to  five gallons of  fossil fuel  and once                                                               
the 30-foot  circle is  harvested, unlike  fossil fuel,  it grows                                                               
back.   He remarked there  has never  been a question  of cutting                                                               
trees in Tok, because if they  are not cut they will burn anyway.                                                               
He referred  to the slide  and read "5 major  fires/million acres                                                               
plus/3  major community  exits."   Slide 5,  shows proper  forest                                                               
management with  selective thinning and trimming,  and he related                                                               
that the animals  come back.  He explained  that carbon capturing                                                               
is better as the trees are  healthier and the fire doesn't spread                                                               
along  the ground  to ladder  fuels because  it has  been trimmed                                                               
away.   He  highlighted  that  this photo  is  close  to the  Tok                                                               
School,  which is  the emergency  gathering place  when a  forest                                                               
fire happens in Tok and the  children had an opportunity to watch                                                               
the process in making the school fire wise.                                                                                     
1:11:56 PM                                                                                                                    
MR. STANCLIFF  referred to slide  6, and  related there is  a 25-                                                               
year contract,  engineered by the  Division of Forestry,  to help                                                               
thin out the  33,000 acres of hazardous fuel.   He indicated that                                                               
unlike  a  clear cut  that  would  occur  in Southeast  or  other                                                               
places,  the cuts  in Tok  would  be checker  board cuts  leaving                                                               
islands  of  spruce trees,  corridors  for  wild life,  and  fire                                                               
breaks  for  escape for  residents.    Slide  7, shows  decks  of                                                               
harvested material and he indicated  that once trees are cut they                                                               
are "decked" and  those decks are converted into fuel.   Slide 8,                                                               
he  explained that  the harvest  takes place  when the  ground is                                                               
solid, often  in the winter, the  decks are placed out  of beetle                                                               
range, and placed  for easy access.  He explained  that the first                                                               
step  to  reduce  hazardous  fuel  to  a  controllable  fuel  for                                                               
incineration is a  chipper.  He noted that  through a legislative                                                               
appropriation the  school purchased  a chipper that  now provides                                                               
wood fuel for both the Tok  and Delta Schools, and provides it in                                                               
the form  indicated on  slide 9.   He  remarked that  the chipper                                                               
will chip 35 tons  of fuel an hour, each ton of  fuel is equal to                                                               
a cord of wood, and each cord of  wood is equal to 100 gallons of                                                               
fuel oil, and that is what is fed into the boiler.                                                                              
1:13:24 PM                                                                                                                    
MR. STANCLIFF  referred to  slide 10, and  stated that  the decks                                                               
are transported  to the fuel yard,  bunches of trees go  into the                                                               
chipper, chips are  then put in a  heated floor bin.   The bin is                                                               
heated in the winter otherwise  the stored material with moisture                                                               
in  it starts  to  freeze.   He  emphasized  that  this causes  a                                                               
problem as the system for  this boiler is entirely automated with                                                               
cork  screw  feeders  onto  a  conveyer, it  is  metered  to  run                                                               
automatically  and feed  the boiler.    Slide 11,  shows the  5.5                                                               
million British thermal  unit (BTU) boiler in the  school and, he                                                               
mentioned,  the energy  in one  wood match  equals 1  BTU.   With                                                               
reference  to  slide 12,  he  advised  that the  boiler  provides                                                               
enough heat  for the  entire school, of  which creates  steam and                                                               
under the foil cover is a  low speed steam driven turbine over 80                                                               
years old.   The turbine produces  heat and power for  the school                                                               
and saves  $250,000 by  displacing huge  amounts of  fossil fuel.                                                               
He remarked  the capacity is currently  at 45 KW rather  than the                                                               
75 KW  it is  capable of only  because there is  so much  heat it                                                               
can't be  dissipated fast enough so  the capacity has to  stay at                                                               
45 KW.   He  said they want  to do other  things such  as, rather                                                               
than heat the DOT building  with "30 million thousand" gallons of                                                               
fuel oil,  heat it  with the  biomass plant.   Tok is  looking at                                                               
taking  the state  investment that  has  worked so  well for  the                                                               
school  and expanding  it outward.    He related  that slide  13,                                                               
indicates  the  benefits and  savings  to  the  Tok School.    He                                                               
informed  the  committee that  the  electrical  load utility  has                                                               
worked with the school for balance  so that it does not interrupt                                                               
the power with the  grid in Tok.  He said it  is an isolated grid                                                               
and not on the main line.                                                                                                       
1:15:46 PM                                                                                                                    
MR.  STANCLIFF referred  to  slide  14, and  he  related that  it                                                               
represents  their  pride   and  joy,  a  100  foot   by  40  foot                                                               
greenhouse.    He said  the  railing  along  the soil  beds  were                                                               
donated  by  the  Department of  Transportation,  and  there  are                                                               
volunteers from the  community teaching the children  how to turn                                                               
fire into  food.   They are  taught how to  take heat  that would                                                               
normally burn in  an environmentally normal way  and create smoke                                                               
in the  atmosphere, and burn it  cleanly.  He explained  that the                                                               
particle  density  out of  the  stack  on  the biomass  plant  is                                                               
cleaner than fossil  fuel, is clean as natural gas  with 13 parts                                                               
per  million.   A German  made scrubber  takes all  of the  major                                                               
particles out that are put back  into the ground along with ashes                                                               
as fertilizer.   He indicated that  the building on the  right is                                                               
the  processing  plant where  the  food  from the  greenhouse  is                                                               
processed and  delivered to six  schools in the district.   Those                                                               
schools no longer  have to order their  vegetables from Anchorage                                                               
in a  truck, as the vegetables  are grown by the  children in the                                                               
Tok  School to  feed their  neighboring schools  with this  food.                                                               
Slide 15,  shows children  being taught  by an  extension service                                                               
from the  University of Alaska.   He  stated that they  are still                                                               
growing plants  green even  though it is  -20 degrees  in October                                                               
and  November.   Slide  16, indicates  that  the children  follow                                                               
every part of  the process in their learning  from the harvesting                                                               
of  the trees,  consuming the  fuel, heating  of the  greenhouse,                                                               
growing  and processing  the food,  he said.   Slide  17, is  the                                                               
first  campus in  the  state striving  to be  net  zero with  its                                                               
energy and able to produce  energy all from local energy sources.                                                               
He stated that for every acre  that burns it costs the Department                                                               
of Natural Resources  over $20,000 to fight the fire.   He opined                                                               
they  are  making  homes  safer by  clearing  around  elders  and                                                               
senior's homes, and just by  cleaning up the community and making                                                               
it fire  wise there is more  fuel than the school  could possibly                                                               
1:18:09 PM                                                                                                                    
MR. STANCLIFF  referred to slide 18,  and offered this is  what a                                                               
fire  looks  like when  it  runs  its  natural course,  but  when                                                               
applying his  presentation, the energy  can also help  grow fresh                                                               
food when  harnessed.   Slide 19, depicts  tomatoes on  the vine.                                                               
He  pointed to  slide 20,  and stated  that when  air quality  is                                                               
significantly improves,  everyone benefits.  The  slide shows the                                                               
processing room where  vegetables are cut and ready  to serve, he                                                               
conveyed.   Slide 21, reads,  "The people  of Tok and  our School                                                               
District thank the Legislature for  their support of our vision,"                                                               
which is  a model that can  be used in other  communities as more                                                               
biomass heat moves into rural Alaska,  he posited.  From a social                                                               
position, he  offered, fire wising communities,  protecting them,                                                               
saving  people's   lives,  and   creating  a  fossil   fuel  free                                                               
environment,  allows  that  the  legislature  does  not  have  to                                                               
appropriate funds.   He remarked that when pellets  and wood logs                                                               
begin to  travel up and down  the rivers instead of  fossil fuel,                                                               
Alaska has a safer and better  climate, and an industry for rural                                                               
Alaska  that makes  sense from  a socioeconomic  and mathematical                                                               
point of view.   He related that it is  an industry that sustains                                                               
itself, and  young people who  want to  be trained on  fire crews                                                               
trained to help communities become fire  wise, and go out on fire                                                               
calls.   In that regard, it  offers jobs in the  communities that                                                               
will  eventually put  food on  plates.   Slide 22,  reads, "Where                                                               
adults  and their  children  understand how  to  use our  natural                                                               
forest energy  to convert a  menace into  a meal."   He suggested                                                               
taking   this   model  on   a   different   scale  with   varying                                                               
applications, employ people  in rural Alaska, give  them hope and                                                               
a  local  job,  rather  than  responding  to  fire  and  spending                                                               
millions  of  dollars  on  suppression.    He  further  suggested                                                               
spending money on  training young people to  mitigate and prevent                                                               
fire,  and  to also  use  the  trees  in a  more  environmentally                                                               
sensible manner.                                                                                                                
1:20:55 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON asked how long  the recycle period is to                                                               
return the boreal forest to this height of timber.                                                                              
MR. STANCLIFF opined that if  the forest is allowed to regenerate                                                               
on its own  with no management performed within  that area, there                                                               
are a  lot trees coming back  that will choke each  other out and                                                               
it  is  a  different  scenario.     Therefore,  he  said,  proper                                                               
management  allows  spruce  trees  a timeframe  of  80-90  years,                                                               
regarding  aspen  trees, which  is  a  more favorable  crop  when                                                               
attempting  to fire  wise a  community because  the fire  doesn't                                                               
race through  the aspen forest as  quickly, it is a  much shorter                                                               
time.  He advised that planning  and management of the forest has                                                               
been  performed  over the  years  with  the Tanana  Valley  State                                                               
Forest group in  Fairbanks.  He said it involves  everyone in the                                                               
environmental community to ascertain  that there is a sustainable                                                               
amount of fuel available in  the Tanana Valley State Forest Plan,                                                               
and  currently   they  are   using  approximately   two  percent.                                                               
Although, he remarked, if the utility  were to go into action and                                                               
generate a mega power it would  probably use 15-20 percent of it.                                                               
He  offered  that Jeff  Hermanns,  Area  Forester, Department  of                                                               
Natural Resources (DNR) made things happen  in Tok as he works to                                                               
be certain Alaska has sustainable  forests of all ages in keeping                                                               
with the  mission of  the Division of  Forestry.   He highlighted                                                               
that there  is a longer growing  period for spruce trees,  but if                                                               
the trees are  managed well the productivity is  much greater for                                                               
wildlife and the environment.                                                                                                   
The committee took a brief at-ease.                                                                                             
1:24:59 PM                                                                                                                    
JOE YOUNG, Young's Timber, Inc.,  referred to Slide 1, and stated                                                               
it  is   an  aerial  view   of  Young's  Timber,   Inc.,  located                                                               
approximately six  miles east of  Tok.   It shows large  piles of                                                               
slabs, and  a large  golden pile  of sawdust  which has  been the                                                               
driving  force of  his  business.   The  slide  also depicts  the                                                               
communication tower  of Alaska Power &  Telephone Company (AP&T).                                                               
He noted  that slides 2,  was taken on top  of AP&T's tower.   He                                                               
pointed to slide  3, and stated that it all  started in 1997 when                                                               
Senator Georgianna Lincoln  was able to obtain  $230,000 worth of                                                               
funding.    Slide  4,  indicates the  history  and  timber  sales                                                               
timeline of  the Division of  Forestry in Tok, together  with the                                                               
importance of  Jeff Hermanns  to "us."   Slides 5-12,  depict Mr.                                                               
Young's  various  pieces of  equipment.    Slide 13,  shows  logs                                                               
salvaged from fires  in which they cut out the  best log parts to                                                               
make  "D" style  house  logs  for log  cabins.    These logs  are                                                               
standing dry  and are approximately  15 percent  moisture content                                                               
so when building  log houses they don't shrink and  twist or move                                                               
around and the rest of the log  is then fire wood.  Slides 14-17,                                                               
are pictures of  log homes.  He referred to  slide 18, and opined                                                               
that  they  tried  to  set  up  a  good  foundation  with  timber                                                               
contracts  the Tok  Division of  Forestry provided.   He  offered                                                               
that  they have  long term  wood  fiber contracts  in place,  300                                                               
acres  for  the  facility,  harvesting  equipment  in  place,  an                                                               
experienced and  versatile crew,  the value-added facility  is up                                                               
and operating,  and he stated  he assembles log  homes throughout                                                               
the state.  Slide 19, reads,  "YTI's issue that developed was ...                                                               
how to  utilize the sawdust,  slabs, pole timber, and  small ends                                                               
of saw  logs into  a value-added  product for  total utilization.                                                               
The solution is ..."  He  pointed to slide 20, and indicated that                                                               
the  solution is  a  fuel log  and pellets  company.   Slide  21,                                                               
indicates that  the energy solution  was for a biomass  burner to                                                               
burn the dirty  chips and to dry the clean  chips for the pellets                                                               
and fuel  logs.  He said  he worked with AP&T  for an Interrupted                                                               
Power  Purchase  Agreement  for  a   low  rate  compared  to  the                                                               
commercial  rate  currently  in  Tok,  and  that  the  Regulatory                                                               
Commission of Alaska  approved this because he is  creating a new                                                               
product  with  more  jobs and  potentially  lower  energy  costs.                                                               
Slide 22,  is a  schematic of  the new power  plant to  be built.                                                               
Slide 23, is a picture of 30  acres of cleared land for the power                                                               
plant.  Slides  24-34, depicts various machinery  used to produce                                                               
fuel logs, pellets, and chips.                                                                                                  
1:38:52 PM                                                                                                                    
MR. YOUNG pointed  to slide 35 and stated one  ton of energy logs                                                               
has the  BTU equivalent of two  cords of firewood at  25 percent.                                                               
He said slide 36, shows the entity  they sent an 8 pound fuel log                                                               
for testing, ash content (0.35  percent), BTU's (68,000) per log,                                                               
and the moisture content of the  log (8.01 percent.)  He referred                                                               
to  slide  37,  and  stated   the  new  green  pellet  plant  job                                                               
projections are 3  yearly jobs, and 24 seasonal jobs.   Slide 38,                                                               
relates to the Upper Tanana  River Basin Ecosystem and he advised                                                               
it  is a  unique ecosystem  in  that it  is 1500  feet above  sea                                                               
level, surrounded by mountains, drier  climate, and the soils are                                                               
mixed differently.   He  described the  Tanana River  as eastward                                                               
from and  including the Johnson  Rover watershed to  the Canadian                                                               
border, it has unique bedrock  and surficial geology, topography,                                                               
soils and  vegetation, with an opportunity  to practice ecosystem                                                               
management, and  use local  knowledge and  science together.   He                                                               
noted  his family's  vision, which  includes future  generation's                                                               
family  that is  looking  for sustainability  of  the forest  and                                                               
economy  in Tok  while being  conscious of  ecosystem management.                                                               
He  opined that  for Tok  to become  energy independent  and grow                                                               
their own food, the forest is where Tok will make its living.                                                                   
1:42:18 PM                                                                                                                    
REPRESENTATIVE TARR  referred to  both projects presented  to the                                                               
committee,  and  questioned  whether  all of  the  timber  he  is                                                               
harvesting is through negotiated sale on state land.                                                                            
MR. YOUNG  replied "Yes it is."   He explained that  they are all                                                               
negotiated AS  38.05.118(c), which is  the forestry law  that has                                                               
spurred all of this development.                                                                                                
REPRESENTATIVE  TARR  commented  that under  the  current  budget                                                               
proposal the  Division of  Forestry essentially  goes away.   She                                                               
asked what  impact it would have  on his wood source  relative to                                                               
what  he has  available  now, and  what would  be  needed in  the                                                               
MR. YOUNG  explained that he is  not asking for more  money, just                                                               
asking to maintain the Division of  Forestry office as it is now.                                                               
He opined it is important to have  a good fire crew in the summer                                                               
as Tok is  basically the most fire prone community  in the state.                                                               
At the  same time,  he pointed out,  Tok has  approximately 6,000                                                               
acres under contract between 12  operators.  He said that closing                                                               
the  office during  the winter  would be  detrimental as  that is                                                               
when all the  activity happens.  He offered  that currently there                                                               
are 12 commercial  operators and 420 personal  use permit holders                                                               
that cut  trees in  the forest.   He  expressed that  without the                                                               
Division of  Forestry being the  referee there will  be conflict.                                                               
He said his  main focus is to show a  positive revenue stream for                                                               
the state  and in order  to accomplish a positive  revenue stream                                                               
the state  needs to  maintain the  office at  the capacity  it is                                                               
right now.   He is aware  of the budget deficit  but "maybe there                                                               
are other  places that cuts  can be made."   He opined  that with                                                               
the  shortfall in  the budget,  the state  would want  to promote                                                               
areas creating new revenue.                                                                                                     
1:45:10 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  asked  each   witness  to  advise  the                                                               
committee of the amount of  investment in hardware they have made                                                               
to date.                                                                                                                        
MR.  STANCLIFF advised  that the  Alaska  Energy Authority  (AEA)                                                               
investment into  the school heating system  was approximately 3.1                                                               
million, the  electrical portion as  the low speed  steam turbine                                                               
was $325,000,  the greenhouse was approximately  $40,000, and the                                                               
canopy  to  cover  the  chips  and  a  log  loading  trailer  was                                                               
approximately $80,000.   He said  the investment pays off  at the                                                               
rate it  is producing.  Therefore,  he noted, if they  could make                                                               
it more efficient  with a little bit  of help it will  pay off in                                                               
approximately  13  years,  and  the  life  of  the  equipment  is                                                               
conservatively 25 years.   He expressed that Tok now  has a music                                                               
teacher and  school counselor due  to savings in the  fossil fuel                                                               
convert that allowed funding to happen.                                                                                         
MR. YOUNG  advised that he personally  has invested approximately                                                               
$1.5 million in  his business to date, and is  prepared to invest                                                               
an additional  $4 million, with the  operators combined investing                                                               
$5  million.   He offered  that  between the  public and  private                                                               
sector, there  has been over  $10 million worth of  investment in                                                               
the Tok area.                                                                                                                   
1:46:55 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON quiered whether  there is any process in                                                               
the state with an operation as sophisticated as his.                                                                            
MR. YOUNG replied  that there are operations such  as, Dry Creek,                                                               
Northland Wood  Products, operators in the  Valley, and Southeast                                                               
Alaska and  noted he is  not the only business  producing Alaskan                                                               
value added products.                                                                                                           
MR. STANCLIFF  answered that on  the school  side he knows  it is                                                               
the only school  of its size in the nation  or worldwide that has                                                               
both heat and power from chips.                                                                                                 
1:47:35 PM                                                                                                                    
REPRESENTATIVE  TARR referred  to Mr.  Young's current  contracts                                                               
and  asked how  many years  they will  provide a  supply for  his                                                               
MR. YOUNG  responded there  is a  10 year  supply and  most small                                                               
business administration loans are for 7 years.                                                                                  
1:48:00 PM                                                                                                                    
REPRESENTATIVE  SEATON  said   he  appreciates  the  presentation                                                               
because  this  committee   had  gone  forward  in   the  past  in                                                               
recommending the  Garn wood heating  system boilers which  are in                                                               
Tok and  Port Graham, and several  other places.  He  stated this                                                               
presentation   was   helpful   in  considering   diversifying   a                                                               
sustainable economy.   He asked whether the pellets  are the same                                                               
as produced  by Viking Lumber,  and whether the economics  of the                                                               
pellets coming out  of Tok are similar to  the economics produced                                                               
in other mills, such as Southeastern.                                                                                           
MR. YOUNG  answered that  he performed quite  a bit  of marketing                                                               
and competition  studies.   As to economics,  he related  that he                                                               
believes the  market is there to  be had and will  expand rapidly                                                               
in  the next  five  years, and  noted that  he  harvests his  own                                                               
timber and  has value added  mills with  no residue.   He pointed                                                               
out that  Tok sits at  the crossroads  so the distance  they haul                                                               
their  logs is  shorter than  in Fairbanks,  and they  are within                                                               
striking distance from Whitehorse, Yukon.                                                                                       
REPRESENTATIVE SEATON  stated that approximately three  years ago                                                               
this committee forwarded a proposal  to stimulate the use of peat                                                               
throughout the state  and offered thousands of tons  of free peat                                                               
to people who would develop the operation.                                                                                      
1:51:22 PM                                                                                                                    
CO-CHAIR TALERICO asked  the location of where  the products from                                                               
the greenhouse are going [in Alaska].                                                                                           
MR. STANCLIFF  answered that  the schools  are located  in Eagle,                                                               
Northway, Dot  Lake, Tanacross,  Mentasta, Tetlin,  and Tok.   He                                                               
described  Tok as  a  hub  for children  from  the other  schools                                                               
coming  in to  be  schooled  in the  greenhouse  and the  growing                                                               
process.  He advised the  committee that the price of electricity                                                               
in Tok is  $.51 cents a kilowatt hour, and  the Tok grocery store                                                               
pays  $39,000 a  month on  its electrical  bill.   He highlighted                                                               
that Mr.  Young worked with AP&T  to obtain a reduced  rate so he                                                               
could make the figures work on  his investment.  He conveyed that                                                               
the house rate  with Power Cost Equalization (PCE)  is $.31 cents                                                               
a kilowatt  hour, and the  average bill  on his 1100  square foot                                                               
home is  $300 per month during  this time of year.   Combine that                                                               
amount with fossil fuel and the  committee know why there will be                                                               
a  big market  for  some  of the  wood  products  available.   He                                                               
extended that the success in Tok  is due to an area forester from                                                               
the private sector  who understands math, understands  how to get                                                               
things done, and formed partnerships  with Doyon, AUTNA, TCC, and                                                               
to some  extent with the Department  of Labor and created  a fire                                                               
academy.   He explained  that the fire  academy trained  80 young                                                               
people from villages  all across Alaska so fire  crews could earn                                                               
money as Alaskans  on a fire rather than flying  people to Alaska                                                               
at $50,000  a jet load with  all of the money  leaving the state.                                                               
Mr.  Stancliff related  that  the area  forester  built miles  of                                                               
roads  for access  for  small operators  with  pickup trucks  and                                                               
chain saws and the price of  fossil fuel he guaranteed there were                                                               
a lot of small operators.   He added that the Chamber of Commerce                                                               
worked with the  school district who worked with  the Division of                                                               
Forestry,  with  Joe Young,  and  AP&T,  and  described it  as  a                                                               
combined effort.  He offered that  the portions that made it work                                                               
is that the  legislature has been willing to  advance some money,                                                               
and his group has  been willing to make it come  in on budget, on                                                               
time, and always reported back on its success.                                                                                  
1:54:08 PM                                                                                                                    
The committee took a brief at-ease.                                                                                             
                      HB  87-TIMBER SALES                                                                                   
1:55:37 PM                                                                                                                    
CO-CHAIR TALERICO  announced that the  next order of  business is                                                               
HOUSE BILL  NO. 87,  "An Act  relating to the  sale of  timber on                                                               
state land; and providing for an effective date."                                                                               
1:55:44 PM                                                                                                                    
CO-CHAIR  NAGEAK moved  to  adopt  proposed committee  substitute                                                               
(CS) for  HB 87,  labeled 29-GH1022\W,  Bullard, 2/26/15,  as the                                                               
working document.                                                                                                               
REPRESENTATIVE SEATON objected for discussion purposes.                                                                         
1:56:24 PM                                                                                                                    
CHRIS  MAISCH,  Director  of   Forestry,  Division  of  Forestry,                                                               
Department  of  Natural  Resources,  said  there  was  discussion                                                               
regarding [Version A, Sec. 1,  AS 38.05.110(c)], page 1, lines 4-                                                               
6, regarding "best interest," which read:                                                                                       
          (c) If a sale of timber may be offered under                                                                          
     multiple  provisions  of  AS  38.05.110-38.05.123,  the                                                                    
     commissioner  shall   determine  under  which   of  the                                                                    
     applicable  provisions to  offer the  timber consistent                                                                    
     with the best interest of the state.                                                                                       
MR. MAISCH referred to a  2/17/15, memo directed to Senator Cathy                                                               
Giessel from  Thomas Lenhart, Senior Assistant  Attorney General,                                                               
of which  Mr. Maisch  would paraphrase.   He advised  that [small                                                               
"b"]  "best  interest"  is  interpreted   by  law  as  a  general                                                               
statement such  as it would  be in  his best interest  to prepare                                                               
when speaking to the committee, as  opposed to a capital "B" Best                                                               
interest which is a best interest  finding by law.  Subsequent to                                                               
speaking  with  knowledgeable  people,  Version  W  was  prepared                                                               
wherein  the last  part  of the  sentence on  line  6 is  deleted                                                               
["consistent with  the best  interest of the  state."].   He then                                                               
referred to  [Version A, Sec.  2, AS 38.05.118(a), page  1] lines                                                               
[8-9], which read:                                                                                                              
        (a) Notwithstanding AS 38.05.115 and 38.05.120,                                                                     
        and upon a finding that the sale is in the best                                                                     
     interest of the state ...                                                                                              
MR. MAISCH noted  that the above reference is  where there should                                                               
be a  finding required  under the  state's best  interest finding                                                               
process.   He  noted that  it is  the capital  "B" Best  interest                                                               
which is  well defined in  statute and  law and has  an important                                                               
part of all  of the decision making the state  does regarding its                                                               
natural  resources.    He  opined that  the  CS  fixes  potential                                                               
confusion identified earlier.                                                                                                   
1:58:41 PM                                                                                                                    
REPRESENTATIVE  SEATON withdrew  his objection.   There  being no                                                               
further objection, Version W was before the committee.                                                                          
1:59:04 PM                                                                                                                    
MR. MAISCH pointed  out that the two previous  witnesses from the                                                               
City  of Tok  have  used  the AS  38.05.118  sale authority,  and                                                               
stressed that by  dropping the section he is  proposing will make                                                               
this  authority  applicable statewide.    Currently,  due to  the                                                               
three criteria, only  certain parts of the  state can participate                                                               
in a  timber sale offered  under this  authority.  He  noted that                                                               
the  authority  will  still  be available  for  the  Division  of                                                               
Forestry to use  and it will not minimize its  ability to perform                                                               
an  AS 38.05.118  timber  sale statewide  if HB  87  passes.   He                                                               
reminded  the committee  members  that the  problem in  Southeast                                                               
Alaska  is   that  the  section  currently   requires  an  excess                                                               
allowable cut, and  in Southeast Alaska after the  next two years                                                               
there will no longer be the  excess allowable cut.  He noted that                                                               
is the  way the Division  of Forestry is  able to direct  some of                                                               
the  logs off  state sales  to local  manufacturing and  mills in                                                               
Southeast  Alaska,  as  opposed   to  being  purchased  under  AS                                                               
38.05.120 authority as a log  that would go export which receives                                                               
no additional manufacturing  in the state.  He opined  that it is                                                               
one of the goals of this  particular change to allow the Division                                                               
of  Forestry to  continue to  choose the  negotiated sale  option                                                               
when  it is  in the  best interest  of the  state, which  will be                                                               
addressed in the best interest finding.                                                                                         
2:00:40 PM                                                                                                                    
REPRESENTATIVE SEATON  surmised that  with the  passage of  HB 87                                                               
the "get over the hump" of  only allowing that if there is excess                                                               
cut available,  then the  Division of Forestry  would be  able to                                                               
offer a  negotiated sale with  additional value  added throughout                                                               
the state.                                                                                                                      
MR. MAISCH  replied that Representative  Seaton is correct  as it                                                               
would make it  a statewide tool.  He reiterated  that the earlier                                                               
part  of  the  bill  clarifies  the  authority  the  commissioner                                                               
already has  to choose the  appropriate timber sale  authority to                                                               
be used when the state offers timber  in the State of Alaska.  He                                                               
noted  that  the majority  of  the  sales offered  statewide  are                                                               
performed  as  AS 38.05.120  sales  which  are competitive  sales                                                               
either through sealed  bid, or outcry.  He offered  that where it                                                               
is  in  the  state's  best  interest to  use  one  of  the  other                                                               
authorities, it will do that.                                                                                                   
2:01:45 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON noted  that he  read most  of the  U.S.                                                               
Supreme  Court  Decision   South-Central  Timber  Development  v.                                                             
Wunnicke, 104  S.Ct. 2237 (1984),  and asked how the  Division of                                                               
Forestry dealt with  the holding which said  that essentially the                                                               
Congress  had not  expressly said  that this  kind of  sale could                                                               
occur without  a competitive process  as it violated  negative or                                                               
dormant commerce.                                                                                                               
MR.  MAISCH  responded   that  there  is  some   clarity  in  the                                                               
regulations on that which does  allow the Division of Forestry to                                                               
consider  additional  things before  it  offers  this timber  for                                                               
sale, 11  AAC 71.055(b) lists  criteria the Division  of Forestry                                                               
can consider as part of the process, which read:                                                                                
          (b) In determining whether a negotiated sale under                                                                    
     this section is in the best interests of the state, the                                                                    
     commissioner will consider                                                                                                 
               (1) the local manufacturer's                                                                                     
                    (A) financial backing and capability;                                                                       
            (B)    experience   in    the   proposed                                                                            
     undertaking; and                                                                                                           
            (C)   ability   to   meet   bonding   or                                                                            
     insurance requirements; and                                                                                                
             (2) any other factors the commissioner                                                                             
     determines to be in the best interests of the state.                                                                       
MR.  MAISCH stated  that if  there  is interest  the Division  of                                                               
Forestry will put together a  Request for Proposals (RFP) to give                                                               
potential negotiators  the opportunity  to present the  best case                                                               
for  how they  would use  the  raw material.   He  said they  may                                                               
review  the   number  of  job  created,   type  of  manufacturing                                                               
accomplished with  the use of  the state wood, and  the financial                                                               
ability  of  the proposer  to  actually  complete what  they  are                                                               
proposing to do.  Essentially,  he noted the Division of Forestry                                                               
performs due  diligence as  part of  the RFP  process and  it can                                                               
make the  process fairly  simple, or  complex.   Historically, he                                                               
advised the process has been kept  fairly simple because a lot of                                                               
process is  not necessary in  most cases.   He opined that  it is                                                               
addressed in the  best interest finding which  gives the Division                                                               
of  Forestry  the  ability  to   choose  the  best  applicant  to                                                               
negotiate with for the rest of the terms of the contract.                                                                       
2:03:59 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON surmised  it was  sort of  a negotiated                                                               
sale light, or  a modified negotiated sale to keep  a (small "c")                                                               
competitive element to it.                                                                                                      
MR. MAISCH  answered that  basically the  RFP is  the competitive                                                               
piece  Representative Josephson  referenced in  the earlier  U.S.                                                               
Supreme Court case to not run  afoul of the ruling that they made                                                               
...  that would  be interpreted  as the  competitive part  of the                                                               
2:04:38 PM                                                                                                                    
CO-CHAIR TALERICO opened public testimony.                                                                                      
2:05:17 PM                                                                                                                    
KIRK DAHLSTROM,  Stockholder and  General Manager,  Viking Lumber                                                               
Company,  said  Viking  Lumber   bought  a  bankrupt  sawmill  in                                                               
Klawock, Alaska 21  years ago and it has  operated steadily since                                                               
that time.  The Forest  Service provided approximately 98 percent                                                               
of  Viking Lumber's  timber  supply  for the  first  10 years  of                                                               
operation.   Subsequently,  he noted,  the Forest  Service became                                                               
unpredictable  and the  Alaska  Department  of Natural  Resources                                                               
(DNR) has  come through  over and  over again  the past  10 years                                                               
supplying timber when Viking Lumber was  in dire need.  He opined                                                               
that Viking Lumber  has only negotiated one or two  sales as most                                                               
have  been through  the RFP  process.   On  two occasions  Viking                                                               
Lumber has had temporary restraining  orders imposed by a federal                                                               
judge on Forest  Service timber sales and the  state came through                                                               
with negotiated  sales and kept  Viking Lumber  operating through                                                               
that period.   He remarked  that Viking Lumber  has approximately                                                               
22  million  feet  of  logs   per  year,  with  annual  sales  of                                                               
approximately $17  million, and  the only  money that  leaves the                                                               
state is  the stumpage for the  Forest Service.  He  offered that                                                               
with  the contractors  that  build  the roads,  log  and cut  the                                                               
timber,   and  load   barge  and   ships,  the   company  employs                                                               
approximately 140 people year-round.   He described Viking Lumber                                                               
as the  largest supplier of  piano stock  out of Sitka  Spruce in                                                               
the  world which  means if  Viking  Lumber goes  out of  business                                                               
there  will  be no  grand  or  baby  grand  pianos.   He  further                                                               
described the  company as the  largest supplier of  dimension red                                                               
cedar  lumber  in  the  United States,  which  might  seem  funny                                                               
because only  approximately 8 million feet  a year is cut.   Most                                                               
red  cedar mills  do not  cut dimension,  as they  cut siding  or                                                               
boards.   He explained that  the company  also cuts a  high grade                                                               
hemlock product as  all of the hemlock goes  into the manufacture                                                               
of vertical  grain doors, and  window stock, as almost  no lumber                                                               
Viking  Lumber cuts  goes into  the construction  of homes  as it                                                               
goes  into finish,  decks, gazebos,  and  pianos.   He stated  he                                                               
supports HB  87, because it works  to keep the company  alive and                                                               
believes it will in the future.                                                                                                 
2:08:46 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON referred  to Mr.  Dahlstrom's statement                                                               
regarding federal  stumpage, but  this is all  state land  and he                                                               
requested clarification.                                                                                                        
MR.  DAHLSTROM answered  that  of  the $17  million  per year  in                                                               
revenue involving  a Forest Service  sale, the stumpage  they pay                                                               
on that  goes into  the general fund  of the  federal government,                                                               
and state timber goes to the state.                                                                                             
2:09:24 PM                                                                                                                    
DAVE STANCLIFF, Tok  Chamber of Commerce, City of  Tok, said many                                                               
years  ago an  issue of  state  authority came  before the  House                                                               
Resources Standing Committee.   In the 1980s,  there were massive                                                               
land trades going on and the  commissioner at the time asked that                                                               
sideboards  be put  on  the  land trades.    He  stated that  the                                                               
commissioner  believed the  state was  losing value  in the  land                                                               
trades but the  statutes were so wide open that  there was no way                                                               
to get a better  handle on it.  There is a  statute that for land                                                               
trades  exceeding   values  of  $500,000  or   more,  legislative                                                               
approval was required.  He  explained that the government is made                                                               
up  of checks  and balances,  and HB  87 transfers  a much  wider                                                               
authority to the Division of  Forestry and a commissioner who the                                                               
committee  may  trust  today,  but  this  bill  goes  beyond  all                                                               
administrations.   He offered that  there is no check  or balance                                                               
by the  legislative branch for  this trust factor that  is before                                                               
the committee.   He opined that government works  when one branch                                                               
or the other might get slightly  out of balance, there is another                                                               
branch that can bring it back  into balance.  He related that his                                                               
concern is the broad based  authority of a state resource without                                                               
checks and  balances in place.   He urged the committee  to reach                                                               
out and  get more of  the timber users  in the state  involved as                                                               
his understanding is that this  bill was introduced before any of                                                               
those  people were  involved  in the  deliberative  process.   He                                                               
highlighted that  this is  a monumental  change of  authority and                                                               
the committee should take it seriously.                                                                                         
2:11:51 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON asked, in  terms of state residents that                                                               
could  be  dissenters,  doesn't  this enhance  the  value  of  an                                                               
industry  and create  a tendency  to keep  logs in  Alaska rather                                                               
than sending them to Asia.                                                                                                      
MR.  STANCLIFF answered  that the  aforementioned advantages  are                                                               
there,  but he  argued that  there are  always things  beyond the                                                               
immediate  and  not  necessarily  on the  surface.    Perhaps  in                                                               
Southeast Alaska, he pointed out,  this would be a good solution,                                                               
but in  the Tok  area if  a warehouser were  to negotiate  a sale                                                               
under conditions  that may or may  not seem fair it  could wipe a                                                               
business  like Mr.  Young  off  the map.    He  related that  the                                                               
provision put into  statute years ago was so  exceptions could be                                                               
made for small and medium  size business and the sideboards would                                                               
still be there  for larger users.  He urged  the committee not to                                                               
rush and take some time.   Although, he said, in the end everyone                                                               
may comfortable and move ahead, but  it is a big decision and the                                                               
users affected should have more involvement.                                                                                    
2:13:32 PM                                                                                                                    
REPRESENTATIVE TARR surmised  that Mr. Stancliff does  not have a                                                               
suggestion for remedying the situation,  other than the committee                                                               
engaging affected parties more before  moving forward.  She asked                                                               
whether  he could  suggest examples  of the  checks and  balances                                                               
MR. STANCLIFF  advised that there  are many examples  of branches                                                               
of government,  especially the  legislative branch,  having those                                                               
types of ability.  He  suggested that rather than the legislature                                                               
approving  every   sale,  which   could  become   cumbersome  and                                                               
political, give  the legislature the  ability to veto or  by two-                                                               
thirds majority vote veto.   He offered that it can  be set up in                                                               
any manner  including public interest wherein  everyone is happy.                                                               
Although,  in the  cases he  cited years  ago where  there was  a                                                               
concern by the  commissioner over what was  happening ... concern                                                               
enough to  ask the  legislature for  help.   He opined  that "we"                                                               
need to be careful.                                                                                                             
2:15:19 PM                                                                                                                    
JOE YOUNG, Young's Timber, Inc.,  offered concern that he learned                                                               
of this  bill approximately two  weeks ago and he  wondered about                                                               
the  "new" transparency  of this  administration.   He  expressed                                                               
concern regarding repeal of AS  38.05.118(c) clause as without it                                                               
his  business would  not  be in  existence.   He  stated that  to                                                               
repeal the  clause after it  has been  a good tool  especially in                                                               
rural Alaska ... he cannot agree.   Another concern is that HB 87                                                               
adds  more confusion  to the  patch work  of forestry  laws.   He                                                               
offered concern  for someone working  in the  industry attempting                                                               
to figure out all  the laws.  A person can go  to the Division of                                                               
Forestry  who advises  that their  interpretation is  "this," but                                                               
the  person  reads  something  as  "that,"  is  a  concern.    He                                                               
questioned the  rush to get the  bill pass so fast,  not advising                                                               
anyone  regarding   the  repeal  of  AS   38.05.118(c),  and  the                                                               
confusion of all of the laws together is discouraging to him.                                                                   
2:17:41 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  offered  his  understanding  that  the                                                               
language  here, with  the tweak  just  made, was  taken from  the                                                               
Susitna Forest bill of which was  vetted over the last two years.                                                               
He asked Mr. Young whether he was aware of that bill.                                                                           
MR. YOUNG replied that he knew  "they" were trying to establish a                                                               
state forest in the Susitna Valley,  but that's all he thought it                                                               
was for.                                                                                                                        
REPRESENTATIVE JOSEPHSON referred to  AS 38.05.118(c) and posited                                                               
that the removal of  (c) would be good for Mr.  Young as he would                                                               
no longer have  to prove up that  Tok has a bad  economy, or that                                                               
Mr.  Young had  underutilized timber,  or underutilize  allowable                                                               
cut.   Now, he  remarked, the  commissioner through  the director                                                               
can more easily make a negotiated sale.                                                                                         
MR.  YOUNG  opined  that  AS  38.95.118(c) is  in  place  and  he                                                               
believes  the bill  gives the  commissioner or  the director  too                                                               
much power.   He questioned a  situation where he wanted  to do a                                                               
negotiated timber sale and the  commissioner decides it is not in                                                               
the best interest of the state.   He asked what recourse he would                                                               
have after that  determination.  He described  AS 38.05.118(c) as                                                               
checks and  balances because if a  person makes a request  to the                                                               
Division  of Forestry,  of which  he has  made many  requests and                                                               
sometimes  not received  a response,  that law  is there  for Mr.                                                               
Young's protection and he does not want to see it go away.                                                                      
REPRESENTATIVE JOSEPHSON referred to  Mr. Young's comment that he                                                               
has  not  always received  responses  to  his requests  from  the                                                               
Division of  Forestry, as opposed  to Mr. Stancliff  praising the                                                               
forester as being a great employee bringing pieces together.                                                                    
MR. YOUNG  clarified that upper  management, within  the Division                                                               
of Forestry, did not reply to his requests.                                                                                     
2:20:05 PM                                                                                                                    
REPRESENTATIVE JOHNSON  requested that Mr. Maisch  respond to the                                                               
prior statements.                                                                                                               
MR. MAISCH  responded that the  three clauses there right  now do                                                               
not  compel  the  Division  of  Forestry  to  actually  use  this                                                               
authority.  Currently, the commissioner  and Division of Forestry                                                               
determines what  timber sale  authority it  will use  through the                                                               
best interest  finding process.   He expressed that  the Division                                                               
of Forestry does not want to  be "the referee between two parties                                                               
and who really gets to negotiate  a timber sale," which is why it                                                               
generally  uses its  AS  38.05.120 authority.    For example,  he                                                               
offered, when the  AP&T project (building a  power facility using                                                               
wood)  was first  enumerated for  Tok, the  Division of  Forestry                                                               
started  an  AS  38.05.118  negotiated   sale  process.    As  it                                                               
published the  preliminary best interest  finding, which  is open                                                               
to  public  and agency  comment,  it  became apparent  there  was                                                               
competitive interest  by another party  that was equally  as well                                                               
qualified to  potentially negotiate a  sale with the  Division of                                                               
Forestry.   He explained that  rather than continue with  a final                                                               
best  interest finding,  the Division  backed up  and decided  it                                                               
would offer this sale as an  AS 38.05.120 competitive bid sale so                                                               
the  most appropriate  parties could  bid on  this resource.   He                                                               
described  that as  a situation  where the  Division of  Forestry                                                               
started down  one path and found  that it would not  work as well                                                               
as anticipated,  so went back and  did it differently.   He noted                                                               
that a best  interest finding has a  formal administrative appeal                                                               
process as  well as a  civil appeal  process so there  are checks                                                               
and balances in  place to protect parties that  have commented on                                                               
the preliminary  bid, including  parties that  may not  have been                                                               
chosen to  negotiate with.   Another example,  he offered,  is in                                                               
Fairbanks where the  Division is performing an  AS 38.05.123 sale                                                               
for the  pellet mill, which  is another form of  negotiated sales                                                               
under  the Division's  timber sale  authority -  that's the  high                                                               
value added negotiated sale authority.   He explained that within                                                               
the briefing  paper is  a summary  of five  different authorities                                                               
the Division  of Forestry has to  negotiate wood.  He  noted that                                                               
it  was  the same  issue  there  in that  a  local  saw mill  was                                                               
concerned about not  being able to receive the supply  of wood it                                                               
needed  if  the  Division  of   Forestry  performed  a  long-term                                                               
contract with the  pellet mill.  Again, he  offered, the Division                                                               
of  Forestry  modified,  after   the  preliminary  best  interest                                                               
finding  (BIF) process,  the  final BIF  process  and took  those                                                               
comments into consideration.   He explained that  the Division of                                                               
Forestry  then  structured  the   proposed  sale  differently  by                                                               
withholding any  high quality White  Spruce saw logs from  the AS                                                               
38.05.123 contract and offered those competitively.                                                                             
2:24:02 PM                                                                                                                    
SHELLY  WRIGHT, Executive  Director,  Southeast Conference,  said                                                               
the   Southeast   Conference    is   the   economic   development                                                               
organization for  Southeast Alaska, and  it supports HB 87.   She                                                               
noted that  Southeast Alaska does  not quite the  success stories                                                               
that Tok has,  as it is not doing well  in the timber department.                                                               
The  State  of  Alaska  Timber   Sale  Program  is  important  to                                                               
Southeast Alaska, and as previously  stated, without state timber                                                               
140 people on Prince of Wales Island  would be out of a job.  She                                                               
offered  that  Viking  Lumber  is hanging  on  only  through  the                                                               
assistance of private land owners  and the State of Alaska Timber                                                               
Sales.   The federal government has  not been able or  willing to                                                               
provide timber  to Southeast Alaska  for quite some time  and the                                                               
federal government owns or manages  most of the land in Southeast                                                               
Alaska.  She  remarked that this legislation will  give the state                                                               
Timber Program more  flexibility to determine how  timber is sold                                                               
and what it is used for.   Relaxing the requirements for offering                                                               
25-year sales  statewide provides a guarantee  for investments in                                                               
the industry and stability for the  work force.  Allowing the DNR                                                               
commissioner and  the [Division  of Forestry] the  flexibility to                                                               
determine which applicable  sale method is best is  not only good                                                               
for  the  buyer,  it  also  gives  the  state  the  advantage  of                                                               
receiving the best  return on the timber.  Under  the Forest Land                                                               
Use Plan it  is imperative the best use of  timber is used across                                                               
the state.   She explained  that biomass energy  processors, wood                                                               
product   manufacturers,  and   international   trades  are   all                                                               
important  economic drivers  for the  industry and  state.   This                                                               
legislation will increase  the option for the  industry and allow                                                               
the  state  an  even  better   partner  with  interested  private                                                               
investors.    As  is  known, growth  in  private  investment  and                                                               
resilient  communities are  the only  things that  will save  the                                                               
state in  this time  of a shrinking  budget and  uncertainty, she                                                               
stated.   She  offered that  the Southeast  Conference previously                                                               
sent a letter of support for this legislation.                                                                                  
2:27:06 PM                                                                                                                    
CHELSEA  GOUCHER, Executive  Director, Greater  Ketchikan Chamber                                                               
of  Commerce,  said the  Greater  Ketchikan  Chamber of  Commerce                                                               
supports HB  87 in that  it has  worked hard to  promote economic                                                               
diversities,  regional growth,  a  climate good  for business,  a                                                               
life  style that  attracts  year round  residents,  and a  stable                                                               
productive  work  force.   The  existence  of a  timber  industry                                                               
supports each aspect  of this mission unequivocally  and for this                                                               
reason the  Greater Ketchikan Chamber of  Commerce encourages the                                                               
passage  of HB  87.   She  stated that  now, more  than ever,  is                                                               
interest  in Biomass  energy and  a demand  for wood  fibers that                                                               
indicates the State  of Alaska should take a  proactive stance in                                                               
providing  timber and  access  to forest  products  for this  and                                                               
other  burgeoning  value  added industries.    Additionally,  she                                                               
pointed out, what  remains of the traditional  timber industry in                                                               
regions  like Southern  Southeast Alaska  is more  dependent than                                                               
ever  on  the  State  of  Alaska and  continues  to  face  nearly                                                               
insurmountable  obstacles  from  the  federal  government.    The                                                               
timber offered  in negotiated  state sales  help sustain  jobs in                                                               
industry  across the  state, particularly  both in  Ketchikan and                                                               
Prince of  Wales Island.   Currently, she stated,  no opportunity                                                               
to better  the lives  of individuals living  in Alaska  should be                                                               
overlooked.    It  is  inarguable  that  this  bill  offers  real                                                               
opportunities  for  Alaskans  everywhere.     She  requested  the                                                               
committee note  the support of  the Greater Ketchikan  Chamber of                                                               
Commerce and  of Ketchikan's  business community  for HB  87, and                                                               
the potential  it possesses  to positively  impact the  lives and                                                               
livelihoods of Alaskans.                                                                                                        
2:29:11 PM                                                                                                                    
REBECCA KNIGHT  expressed that  she just received  a copy  of the                                                               
proposed committee  substitute and has had  little opportunity to                                                               
review it  so will offer her  prepared testimony.  House  Bill 87                                                               
should be rejected  in its entirety as it would  suspend the same                                                               
yield requirement for  large timber sales on state  forests.  She                                                               
said  she  questions  whether  private  sector  landholders  like                                                               
Weyerhaeuser   and  Georgia   Pacific,  and   their  professional                                                               
foresters would  undertake an unsustainable business  practice as                                                               
proposed by  this bill.   She offered that  it is a  poster child                                                               
for  squandering  public resources  to  the  detriment of  future                                                               
generations.   This bill will  allow long-term  25-year contracts                                                               
for timber to be negotiated  without advertisement or competitive                                                               
bid  which is  a questionable  business practice.   She  remarked                                                               
that given  proposed huge state  government budget  cuts recently                                                               
approved by the  House Finance Committee it would  not be prudent                                                               
to support  such contracts  when there is  no assurance  that the                                                               
funds to administer  those contracts would be  available down the                                                               
road.   She said  it could  leave the state  at risk  of contract                                                               
cancelation and associated compensation costs.                                                                                  
MS.  KNIGHT stated  that the  bill  give primacy  of the  state's                                                               
public lands  to logging above  all other resources,  above fish,                                                               
wildlife,  subsistence  needs,  recreation, and  scenic  quality.                                                               
She  related  that  her  commercial  fishing  family  depends  on                                                               
quality  fish  habitat,  however,  this  habitat  will  not  even                                                               
receive  the  minimal protections  out  on  federal lands.    She                                                               
described 100  foot no cut  buffers as  the norm on  most federal                                                               
streams, yet  streams on  state lands will  only receive  66 foot                                                               
buffers.   She stated  that these  buffers are  routinely granted                                                               
exemptions  particularly  when  there  is  large  timber  in  the                                                               
stream-side  area.   She expressed  this is  exactly the  habitat                                                               
that provides shade and stream  stability to the state's valuable                                                               
fishery sources.   She highlighted  that she is  unconvinced that                                                               
essential  fish  habitat  is  adequately  protected  under  these                                                               
circumstances and  that she is  also miffed  at the rush  to push                                                               
this bill  through committee with little  consideration for other                                                               
uses.  She  opined that state timber in Southeast  Alaska will be                                                               
exported in  the round  providing few jobs  to the  very industry                                                               
that this bill is supposedly intended  to prop up.  She described                                                               
it  as another  subsidy with  no real  payback.   The bill  would                                                               
require a  finding that the sale  is in the best  interest of the                                                               
state,  however,  these  findings  are made  by  DNR  which,  she                                                               
described,  as the  timber extraction  arm  of state  government.                                                               
She posited that  the Alaska Forest Practices Act is  weak and in                                                               
serious need  of overhaul,  and that  these findings  are heavily                                                               
biased toward  logging.   She expressed that  the kind  of forest                                                               
resources important  to most people  are fish, wildlife,  and the                                                               
opportunity   for  subsistence   which   only  receives   cursory                                                               
considerations from  DNR.  She  asked that the  committee consult                                                               
with expert Alaska  Department of Fish & Game,  Fish and Wildlife                                                               
biologists  that are  free  of restrictions  of  DNR's one  voice                                                               
timber promotion policy.                                                                                                        
2:33:08 PM                                                                                                                    
ERIN  McLARNON, Executive  Director, Working  Forest Group,  said                                                               
she is  a Board of Forestry  member and an executive  director of                                                               
the  Working Forest  Group.   She  advised she  is testifying  in                                                               
support of  HB 87  that will  enable the  commissioner of  DNR to                                                               
better respond  to the economic  and geographic realities  of the                                                               
forest product industry.  She  stated that who would have guessed                                                               
that  a primary  demand for  state  timber would  be for  biomass                                                               
energy purposes.   The  bill will allow  DNR to  offer negotiated                                                               
timber sale  for up to  25-years, which  is crucial to  medium to                                                               
large biomass  energy projects to get  off the ground.   The bill                                                               
also  offers DNR  the flexibility  to determine  which applicable                                                               
sale  method is  in  the best  interests of  the  state for  each                                                               
timber sale.   She  described it  as a win-win  not only  for the                                                               
State of Alaska, but also its fiber users.                                                                                      
2:34:15 PM                                                                                                                    
MIKE SALLEE said  he is a commercial harvest diver  and has owned                                                               
and   operated  a   small   Volkswagen   engine  powered   mobile                                                               
dimensioned saw mill close to 35  years.  He noted that there are                                                               
a  couple  dozen  of  these  mills  in  Ketchikan,  over  300  in                                                               
Southeast, and  over 400 statewide.   He said he  primarily mills                                                               
salvage  timber that  has  been  carried to  salt  water by  wind                                                               
storms or landslides.  Secondarily,  he has milled neighbors logs                                                               
cleared  from their  shoreline home  sites,  milled 10,000  board                                                               
foot free  use timber, and  once purchased several  thousand feet                                                               
of  logs  at   the  local  U.S.  Forest   Service  yard  auction.                                                               
Occasionally people will  tow logs that he mills  in exchange for                                                               
some of the  lumber from those logs.   He stated he  does not cut                                                               
live  trees by  himself to  feed his  mill.   He offered  that he                                                               
mills  less than  100,000 board  feet annually  and has  produced                                                               
framing lumber, decking, cedar siding,  yellow cedar for bentwood                                                               
boxes, totems,  paddles, house timbers  and wooden  boat timbers.                                                               
His concern with  HB 87 is that it creates  25-year contracts and                                                               
that  sales tailored  to large  scale operations  will result  in                                                               
local merchantable wood going away.   He pointed out that he just                                                               
saw this bill yesterday for the  first time and hasn't had a good                                                               
chance to digest it, but a  lot of wood is going away, especially                                                               
the  yellow cedar  that  is declining  due  to allegedly  climate                                                               
change  that results  in the  loss  of snow  cover that  prevents                                                               
freezing of the yellow cedar shallow  roots.  He noted it appears                                                               
there is a partnership between  the timber industry and the state                                                               
forest manager  and that partnership  does not appear  to address                                                               
climate change and  the need to keep carbon stored  in forests in                                                               
Southeast Alaska.   In addition, he pointed out  that large scale                                                               
operations tend to target the  most valuable timber and little of                                                               
it remains  in a local borough  for processing.  He  offered that                                                               
he does  not know if HB  87 applies to Mental  Health Trust lands                                                               
and the  University of  Alaska timber lands  but has  been sorely                                                               
disappointed with the  amount of merchantable trees  cut down and                                                               
left in the woods on  Mental Health Trust lands helicopter sales.                                                               
He conveyed that they've also left  a lot of slash and tops which                                                               
it  is  a mess  in  a  lot of  areas  that  they've logged.    He                                                               
expressed that  much of the  Mental Health Trust land  timber was                                                               
exported.  He  offered his apprehensive of  more discretion being                                                               
given to a  politically appointed commissioner.  He  noted it has                                                               
been  interesting to  him  how the  state can  malign  the U.  S.                                                               
Forest  Service   while  saying  nothing  about   private  Native                                                               
Corporations shipping  vast value  out of  the state  with little                                                               
impetus to  help the rest of  the timber industry.   He mentioned                                                               
that the concept of a working  forest also means it has ecosystem                                                               
services that  the forest  performs other  than just  working for                                                               
people.    He  expressed  that   the  ecosystem  services  is  an                                                               
important part of the picture.                                                                                                  
2:38:03 PM                                                                                                                    
DAVID BEEBE, City of Kupreanof,  said he is representing the City                                                               
of  Kupreanof.   He  commented that  while  Governor Bill  Walker                                                               
cites his authority under the  Alaska State Constitution, Article                                                               
III, Section  18, the  Governor's bill  is fundamentally  at odds                                                               
with  the Alaska  State Constitution,  Article  VIII, Section  4,                                                               
which read:                                                                                                                     
     Fish,  forests,  wildlife,  grasslands, and  all  other                                                                    
     replenishable  resources belonging  to the  State shall                                                                    
     be   utilized,  developed,   and   maintained  on   the                                                                    
     sustained  yield  principle,   subject  to  preferences                                                                    
     among beneficial users.                                                                                                    
MR.  BEEBE  commented that  sustained  yield  of these  fish  and                                                               
wildlife  resources  requires  that ecosystem  services  function                                                               
without significant  impairment.   The State  of Alaska  has long                                                               
known that  significant impairment of Southeast  forest habitats,                                                               
structure, function,  and composition, precludes  the sustainable                                                               
yield of Sitka Black Tailed Deer  and other wildlife.  He advised                                                               
that  emergency closures  and  significant  restrictions on  deer                                                               
hunting presently exist  in a 20-mile or  more radius surrounding                                                               
the City of  Kupreanof.  He stated that the  Department of Fish &                                                               
Game  (ADF&G) published  a statistical  summary  of the  season's                                                               
deer hunter harvest in all of  Southeast communities in 1961.  In                                                               
terms of hunter's  success, Petersburg ranked the  highest of all                                                               
communities  of  Southeast  with  a hunter  success  rate  of  97                                                               
percent, which  is an average  of 3.5 deer  per hunter.   Yet, in                                                               
2012, 147 hunters on Mitkof  Island required 565 deer hunter days                                                               
to harvest  22 deer.   He noted  that the restrictions  on Mitkof                                                               
Island have just been imposed  on Lindenberg Peninsula, where the                                                               
City of  Kupreanof is located.   He stated  that the area  is the                                                               
hunting  destination  of  last  resort  with  regard  to  weather                                                               
protected access to  deer.  He highlighted that  there is glaring                                                               
evidence  that the  state's  failure to  abide  by the  sustained                                                               
yield  principle invoked  in the  Alaska  State Constitution  [is                                                               
apparent].   He recommended  that everyone  consider the  oath of                                                               
office  taken to  defend the  Alaska State  Constitution and,  he                                                               
asked  the committee  members to  uphold  the oath  they took  by                                                               
voting no on moving HB 87 out of committee.                                                                                     
2:41:04 PM                                                                                                                    
CO-CHAIR TALERICO closed public testimony.                                                                                      
2:41:07 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON  referred to a prior  statement that the                                                               
AS 38.05.118 bill could be used  as a backdoor way to ship timber                                                               
in the round.                                                                                                                   
MR. MAISCH advised that he did  hear that statement but it is not                                                               
a correct assertion.                                                                                                            
REPRESENTATIVE JOSEPHSON asked why that statement was incorrect.                                                                
MR. MAISCH responded  that the Division of  Forestry goes through                                                               
the best interest finding process  to negotiate the sale with the                                                               
purpose of  trying to  keep state timber  processed and  mills in                                                               
Alaska.   He referred  to the  previously mentioned  U.S. Supreme                                                               
Court case  where the  state tried to  restrict round  log export                                                               
and explained that this is  the authority crafted after that case                                                               
was lost  to enable Alaska  to have  an ability to  actually keep                                                               
logs on shore in Alaska to be processed.                                                                                        
2:42:26 PM                                                                                                                    
CO-CHAIR TALERICO held over HB 87.                                                                                              
2:42:55 PM                                                                                                                    
The committee took a brief at-ease.                                                                                             
^CONFIRMATION  HEARING(S):    Alaska  Oil  and  Gas  Conservation                                                               
                    CONFIRMATION HEARING(S):                                                                                
           Alaska Oil and Gas Conservation Commission                                                                       
2:43:46 PM                                                                                                                    
CO-CHAIR NAGEAK announced that the  final order of business would                                                               
be the  hearing on  the appointment of  Michael Gallagher  to the                                                               
position  on  the Alaska  Oil  and  Gas Conservation  Commission.                                                               
(Committee  packets  contain   biographical  information  on  the                                                               
CO-CHAIR NAGEAK opened public testimony.                                                                                        
2:44:58 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON questioned  whether  Mr. Gallagher  was                                                               
seeking the seat under AS 31.05.009(3), which read:                                                                             
      (3) one member who shall have training or experience                                                                      
      that gives the person a fundamental understanding of                                                                      
     the oil and gas industry in the state.                                                                                     
MICHAEL  GALLAGHER, Appointee,  Alaska Oil  and Gas  Conservation                                                               
Commission,  responded to  Representative  Josephson  that he  is                                                               
REPRESENTATIVE  JOSEPHSON asked  Mr. Gallagher's  background that                                                               
gives  him  a  fundamental  understanding  of  the  oil  and  gas                                                               
MR. GALLAGHER responded  that over the last 38 years  he has been                                                               
involved  one way  or  another in  the oil  and  gas industry  in                                                               
Alaska.    He said  he  spent  14 years  in  the  field, and  the                                                               
remainder of the  time he worked for the Laborers  Union where he                                                               
was  involved   in  oil  and   gas  development  in   the  state.                                                               
Subsequent to retirement, he worked  for Ahtna Construction which                                                               
is primarily  pipeline work  and was  the operations  manager and                                                               
then  interim president,  CEO,  with work  at  the Valdez  Marine                                                               
Terminal and "a lot on the pipeline."                                                                                           
2:46:43 PM                                                                                                                    
REPRESENTATIVE TARR noted that Mr.  Gallagher has been on the job                                                               
a  handful of  weeks  in  a technical  position.   She  requested                                                               
information regarding how  he is getting up to  speed and feeling                                                               
prepared going forward.                                                                                                         
MR. GALLAGHER answered  that during his first week on  the job he                                                               
"felt like  he was  drinking from  a fire  hose," and  since that                                                               
time  he has  figured out  exactly what  is going  on within  the                                                               
commission as the majority of  the work is processing permits for                                                               
the  producers.    He  advised  that  he  reads  plans  well  and                                                               
understands what they  are doing there, he has been  able to take                                                               
a  tour of  a drilling  rig in  Kenai, and  he feels  comfortable                                                               
today from what he has seen.   He offered that he participated in                                                               
his first public hearing on the  BLM Legacy Well that the federal                                                               
government  is  considering  dismantling   and  abandoning.    He                                                               
described  it  as fun  with  a  real  learning curve,  but  feels                                                               
2:48:41 PM                                                                                                                    
REPRESENTATIVE SEATON noted that  during the initial meeting with                                                               
Mr.  Gallagher he  asked how  he would  balance oil  and gas  and                                                               
preventing wastage  of hydro-carbons.   He offered  Mr. Gallagher                                                               
another opportunity to respond to that question.                                                                                
MR.  GALLAGHER responded  that his  understanding  of the  Alaska                                                               
Statutes is that Alaska needs to  get as much hydro-carbon out of                                                               
the reservoir  as possible.   He related  that he will  listen to                                                               
the reservoir engineer  to figure out the best way  to do that in                                                               
order that Alaska can recover as much oil and gas as possible.                                                                  
REPRESENTATIVE SEATON  restated his  question in that  within Mr.                                                               
Gallagher's  consideration of  wastage  whether  he is  comparing                                                               
those on a per  molecule per BTU per dollar basis.   He asked how                                                               
he will go  forward in preventing wastage on  balancing those two                                                               
MR.  GALLAGHER  answered that  he  would  have to  review  expert                                                               
opinions from the engineers.                                                                                                    
2:50:45 PM                                                                                                                    
CO-CHAIR TALERICO  offered his  understanding that  the committee                                                               
is  not committing  support nor  opposition to  this appointment,                                                               
but rather confirm  the committee has met its  obligation to have                                                               
the hearing for Mr. Gallagher.                                                                                                  
CO-CHAIR NAGEAK closed public testimony.                                                                                        
2:51:48 PM                                                                                                                    
CO-CHAIR NAGEAK announced he will forward the name of Michael                                                                   
Gallagher to the joint session of the House and Senate for                                                                      
confirmation.  No objections were stated.                                                                                       
2:52:02 PM                                                                                                                    
There being no further business before the committee, the House                                                                 
Resources Standing Committee meeting was adjourned at 2:52 p.m.                                                                 

Document Name Date/Time Subjects
3.4.15 HSE RES Chamber of Commerce Tok Bio Mass.pptx HRES 3/4/2015 1:00:00 PM
3.4.15 HES RES Young's Timber Bio Mass.pptx HRES 3/4/2015 1:00:00 PM
3.4.15 HSE RES HB 87 Sectional Analysis 3.pdf HRES 3/4/2015 1:00:00 PM
HB 87
3.4.15 HSE RES HB 87 Biomass Projects Map.pdf HRES 3/4/2015 1:00:00 PM
HB 87
3.4.15 HSE RES HB 87 AEA Map.pdf HRES 3/4/2015 1:00:00 PM
HB 87
3.4.15 HSE RES HB 87 LOS Viking.pdf HRES 3/4/2015 1:00:00 PM
HB 87
3.4.15 HSE RES HB 87 Governor Transmittal Letter.pdf HRES 3/4/2015 1:00:00 PM
HB 87
3.4.15 HSE RES HB 87 RDC support letter.pdf HRES 3/4/2015 1:00:00 PM
HB 87
3.4.15 HSE RES HB 87 Fiscal Note.pdf HRES 3/4/2015 1:00:00 PM
HB 87
3.4.15 HSE RES HB 87 Negotiated Timber Sales Briefing Paper.pdf HRES 3/4/2015 1:00:00 PM
HB 87
3.4.15 HRES HB 87 Primary Manufacture Case SCTD vs DNR 1984.pdf HRES 3/4/2015 1:00:00 PM
HB 87
3.4.15 HRES Knight public testimony HB 87.pdf HRES 3/4/2015 1:00:00 PM
HB 87
3.4.15 HRES CSHB 87 W Rebecca Knight 3.8.15 Opposition Letter.pdf HRES 3/4/2015 1:00:00 PM
HB 87
3.4.15 HRES CSHB 87 version W.pdf HRES 3/4/2015 1:00:00 PM
HB 87
3.4.15 HSE RES HB 87 Ver A.pdf HRES 3/4/2015 1:00:00 PM
HB 87