Legislature(2017 - 2018)BARNES 124

01/18/2017 01:00 PM RESOURCES

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Audio Topic
01:00:30 PM Start
01:17:45 PM Overview: Department of Natural Resources
02:59:35 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overview: Dept. of Natural Resources TELECONFERENCED
-- Testimony <Invitation Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                        January 18, 2017                                                                                        
                           1:00 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Andy Josephson, Co-Chair                                                                                         
Representative Geran Tarr, Co-Chair                                                                                             
Representative Dean Westlake, Vice Chair                                                                                        
Representative Harriet Drummond                                                                                                 
Representative Justin Parish                                                                                                    
Representative Chris Birch                                                                                                      
Representative DeLena Johnson                                                                                                   
Representative George Rauscher                                                                                                  
Representative David Talerico                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Chris Tuck (alternate)                                                                                           
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
OVERVIEW:  DEPARTMENT OF NATURAL RESOURCES                                                                                      
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
ANDREW MACK, Commissioner                                                                                                       
Department of Natural Resources                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided a PowerPoint presentation                                                                       
entitled, "Department of Natural Resources Overview for House                                                                   
Resources Committee, January 18, 2017."                                                                                         
                                                                                                                                
ED FOGELS, Deputy Commissioner                                                                                                  
Office of the Commissioner                                                                                                      
Department of Natural Resources                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION   STATEMENT:     Provided   background  information   on                                                             
directors Mr. Keyes, Mr. Maisch,  and Mr. Ellis of the Department                                                               
of  Natural   Resources,  and   answered  questions   during  the                                                               
PowerPoint   presentation   entitled,  "Department   of   Natural                                                               
Resources  Overview for  House  Resources  Committee January  18,                                                               
2017."                                                                                                                          
                                                                                                                                
ARTHUR KEYES, Director                                                                                                          
Division of Agriculture                                                                                                         
Department of Natural Resources                                                                                                 
Palmer, Alaska                                                                                                                  
POSITION  STATEMENT:   Provided  information on  the Division  of                                                             
Agriculture   during   a    PowerPoint   presentation   entitled,                                                               
"Department  of Natural  Resources Overview  for House  Resources                                                               
Committee January 18, 2017."                                                                                                    
                                                                                                                                
JOHN "CHRIS" MAISCH, State Forester and Director                                                                                
Division of Forestry                                                                                                            
Department of Natural Resources                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Provided  information on  the Division  of                                                             
Forestry during  a PowerPoint presentation  entitled, "Department                                                               
of  Natural  Resources  Overview for  House  Resources  Committee                                                               
January 18, 2017."                                                                                                              
                                                                                                                                
BEN ELLIS, Director                                                                                                             
Central Office                                                                                                                  
Division of Parks & Outdoor Recreation                                                                                          
Department of Natural Resources                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Provided  information on  the Division  of                                                             
Parks  &  Outdoor  Recreation during  a  PowerPoint  presentation                                                             
entitled  "Department of  Natural  Resources  Overview for  House                                                               
Resources Committee January 18, 2017."                                                                                          
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:00:30 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GERAN   TARR  called   the  House   Resources  Standing                                                             
Committee meeting  to order at  1:00 p.m.   Representatives Tarr,                                                               
Birch, Parish,  Talerico, Rauscher, Drummond,  Johnson, Westlake,                                                               
and Josephson were present at the call to order.                                                                                
                                                                                                                                
[Committee   members   described    various   natural   resources                                                               
activities and  issues related to  each of their districts.   Co-                                                               
Chairs Tarr  and Josephson  provided members  with organizational                                                               
information on the structure of the committee.]                                                                                 
                                                                                                                                
^OVERVIEW:  DEPARTMENT OF NATURAL RESOURCES                                                                                     
           OVERVIEW:  DEPARTMENT OF NATURAL RESOURCES                                                                       
                                                                                                                              
1:17:45 PM                                                                                                                    
                                                                                                                                
CO-CHAIR TARR announced that the  only order of business would be                                                               
a PowerPoint  presentation provided by the  Department of Natural                                                               
Resources (DNR).                                                                                                                
                                                                                                                                
1:22:27 PM                                                                                                                    
                                                                                                                                
ANDREW  MACK,  Commissioner,  Department  of  Natural  Resources,                                                               
provided detailed  background information  on key  staff members.                                                               
He  then   directed  attention   to  a   PowerPoint  presentation                                                               
entitled,  "Department of  Natural Resources  Overview for  House                                                               
Resources  Committee  January  18,  2017,"  and  noted  that  the                                                               
presentation would include  four parts:  Part I would  be a broad                                                               
overview on  Alaska's resource  base such  as the  resources that                                                               
are available and  the state's obligation thereto;  Part II would                                                               
be an  introduction of the  divisions within DNR  and information                                                               
on their recent  activities; Part III would provide  an update on                                                               
the  Alaska   LNG  Project   (AKLNG);  Part   IV  would   be  the                                                               
department's   2017   priorities   and  activities   (slide   2).                                                               
Commissioner  Mack   pointed  out   that  not  included   in  the                                                               
presentation  is DNR's  responsibility  to  maintain the  state's                                                               
position relative to the federal  government and federal agencies                                                               
on  issues  such as  land  management,  public land  orders,  the                                                               
National Petroleum  Reserve-Alaska (NPRA), and the  proposed road                                                               
through the  Izembek National Wildlife  Refuge.    He recommended                                                               
that  another  full  presentation  is warranted  to  discuss  the                                                               
topics of land issues and large resource development projects.                                                                  
                                                                                                                                
1:30:24 PM                                                                                                                    
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
1:31:19 PM                                                                                                                    
                                                                                                                                
COMMISSSIONER  MACK informed  the  committee  that a  fundamental                                                               
principal  of Alaska  is its  responsibility to  manage its  land                                                               
base; in  fact, the  state encompasses  586,412 square  miles, is                                                               
larger  than  all but  eighteen  sovereign  nations, and  has  an                                                               
extensive coastline,  three million  lakes, and  approximately 40                                                               
percent of  the nation's  freshwater.   At statehood,  Alaska was                                                               
granted  approximately  105  million  acres of  land  along  with                                                               
tidelands,  shore  lands,  and  submerged  lands,  which  add  an                                                               
additional 60 million acres.   He compared the total land managed                                                               
-  in excess  of 160  million acres  - to  an area  approximately                                                               
three  times   the  size  of   Oregon,  which   creates  exciting                                                               
opportunities,  along  with  obligations,  responsibilities,  and                                                               
questions that are fifteen times  greater than those of any other                                                               
state (slide 3).   Turning to the vast resource  potential of oil                                                               
and gas,  Commissioner Mack said on  the North Slope there  is an                                                               
estimated 40  billion barrels of undiscovered  conventional oil -                                                               
16 billion barrels  of that is onshore in state  and federal land                                                               
-  an estimated  24 billion  barrels offshore,  and an  estimated                                                               
over  200  trillion  cubic   feet  of  undiscovered  conventional                                                               
natural gas.   He  pointed out  the premise  for the  natural gas                                                               
estimate  is  based  on  estimates  for  Prudhoe  Bay  and  Point                                                               
Thomson.                                                                                                                        
                                                                                                                                
1:36:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH asked  whether the state is  due any further                                                               
entitlements of land.                                                                                                           
                                                                                                                                
COMMISSIONER  MACK responded  that the  state selected  about 100                                                               
million  [acres],  with  about  5  million  more  [acres]  to  be                                                               
selected, and  has patented  title to  about 60  million [acres].                                                               
He  explained that  although there  are federal  barriers to  the                                                               
state's plans in many areas, the  state holds title to 60 million                                                               
acres, 40  million acres  have been  tentatively approved,  and 5                                                               
million acres are left for selection.                                                                                           
                                                                                                                                
REPRESENTATIVE BIRCH  asked whether  the state  formally objected                                                               
to  the  "offshore designation  ...  [that]  took  a lot  of  our                                                               
offshore potential away."                                                                                                       
                                                                                                                                
COMMISSIONER MACK said  yes, the state asserted  its interest and                                                               
legally nominated both  the Beaufort Sea and the  Chukchi Sea for                                                               
development  under  the Outer  Continental  Shelf  Lands Act  [of                                                               
1952].   He  characterized  the recent  decisions affecting  that                                                               
area as  "very disappointing."   He  concluded his  discussion on                                                               
resource  development on  the North  Slope, observing  that there                                                               
are also  companies that are interested  in unconventional plays.                                                               
In  Cook Inlet,  significant  undiscovered  resources include  19                                                               
trillion cubic feet  of natural gas, 600 million  barrels of oil,                                                               
and  46 million  barrels of  natural gas  liquids.   Furthermore,                                                               
there   are  companies   such  as   Doyon,  Limited   and  Ahtna,                                                               
Incorporated  who are  looking for  oil and  gas in  Middle Earth                                                               
[areas of  the state  not on  the North Slope  or in  Cook Inlet]                                                               
(slide 4).   Commissioner Mack  continued, noting that  the state                                                               
ranks  in  the  top  ten  in the  world  for  important  minerals                                                               
including coal,  copper, lead,  and gold.   He said  DNR believes                                                               
that mining in  Alaska has untapped potential  and the department                                                               
works to ensure  mining operations have a clear  path, and opined                                                               
that  the state  has a  good relationship  with mining  regarding                                                               
safety.   Alaska was ranked  second for mineral potential  in the                                                               
2015  Fraser Institute  Survey of  Mining Companies  and has  the                                                               
potential to lead the nation in mineral production (slide 5).                                                                   
                                                                                                                                
1:41:36 PM                                                                                                                    
                                                                                                                                
COMMISSIONER MACK  presented an organizational chart  showing the                                                               
DNR commissioner,  deputy commissioners, and  division directors,                                                               
and  which   indicated  that  Deputy  Commissioner   Mark  Wiggin                                                               
presides over  the Division of Geological  & Geophysical Surveys,                                                               
the  Division of  Oil &  Gas, and  the Mental  Health Trust  Land                                                               
Office.    Deputy  Commissioner   Ed  Fogels  presides  over  the                                                               
Division of  Agriculture, the Division  of Mining, Land  & Water,                                                               
the Office  of Project Management  & Permitting, the  Division of                                                               
Forestry, the  Division of  Parks &  Outdoor Recreation,  and the                                                               
Division of Support Services (slide 6).                                                                                         
                                                                                                                                
CO-CHAIR JOSEPHSON related that  the Office of Project Management                                                               
& Permitting  is now fully  funded by developers,  explorers, and                                                               
producers.  For a later  discussion, he expressed his interest in                                                               
learning how this saves general fund (GF) dollars.                                                                              
                                                                                                                                
1:44:13 PM                                                                                                                    
                                                                                                                                
ED FOGELS, Deputy Commissioner,  Office of the Commissioner, DNR,                                                               
provided  background  information   on  Arthur  Keyes,  director,                                                               
Division of Agriculture.                                                                                                        
                                                                                                                                
1:45:01 PM                                                                                                                    
                                                                                                                                
ARTHUR KEYES,  Director, Division  of Agriculture  ("DoAG"), DNR,                                                               
informed  the committee  that the  division provides  land sales,                                                               
loans,  and inspections,  manages the  Alaska Grown  program, and                                                               
oversees  other programs  related to  the agricultural  industry.                                                               
One  of the  sections  of  the division  is  the Plant  Materials                                                               
Center (PMC),  which is the  sole source  of native seed  for the                                                               
state  (slide 7).   In  2016, PMC  treated 657  surface acres  of                                                               
Elodea-infested  waterways  in  Anchorage and  in  the  Matanuska                                                               
Susitna valley (Mat-Su).  He  clarified that Elodea is an aquatic                                                               
invasive  plant  that  causes problems  for  float  planes,  fish                                                               
species, and  natural habitat.   In addition, PMC  produced 1,837                                                               
pounds  of   certified  seed  potatoes   sold  to   producers  in                                                               
Southcentral,  Interior,  Kodiak   and  Southeast  Alaska,  which                                                               
equals  approximately  $3  million  in  retail  sales  of  mature                                                               
potatoes.   Finally, PMC processed  over 177,000 pounds  of grass                                                               
seed to  revegetate and reclaim 3,900  acres of land.   Mr. Keyes                                                               
said over  the past three  years, the division  educated fourteen                                                               
communities  and one  hundred  and  seventy=five producers  about                                                               
farm food  safety practices, and  opined farm food safety  is one                                                               
of the largest challenges facing Alaska's farmers.                                                                              
                                                                                                                                
MR.  KEYES  continued, noting  that  the  division conducted  350                                                               
field  inspections of  the timber  industry, seed  potatoes, seed                                                               
grass, federal country-of-origin  (COO) audits, farmer's markets,                                                               
retail  [sales],  and   farms.    Also  in   2016,  the  division                                                               
facilitated the transition of Mt.  McKinley Meat & Sausage to the                                                               
private sector.   Mr.  Keyes explained that  Mt. McKinley  Meat &                                                               
Sausage is  located in  Palmer, is an  asset of  the Agricultural                                                               
Revolving Loan  Fund (ARLF), and  is the only U.S.  Department of                                                               
Agriculture (USDA)  approved slaughter facility  in Southcentral.                                                               
The facility  is used by farmers  statewide and is a  vital piece                                                               
of infrastructure to  the agricultural industry.   Mr. Keyes said                                                               
that  millions of  dollars in  agricultural  loans are  dependent                                                               
upon  the aforementioned  facility  [for  repayment] because  the                                                               
plant provides  the USDA stamp  so that farmers' products  can be                                                               
sold as a final cut of  meat.  He stressed the plant's importance                                                               
to the  agriculture community  and for  food security  in Alaska;                                                               
however,  ARLF  took possession  of  the  plant  in 1986  and  it                                                               
traditionally  operates at  a  loss.   He  pointed  out that  the                                                               
facility is a "holdover" from  Alaska Correctional Industries and                                                               
serves  as a  prisoner  training business.    The plant's  annual                                                               
losses of  $100,000 to $150,000  are paid from  interest payments                                                               
farmers make to  ARLF, thus no losses are  paid from unrestricted                                                               
general  funds (UGF).    In 2002  and 2006,  the  state issued  a                                                               
request for  proposal (RFP)  for purchase  of the  plant, without                                                               
success.  As director, Mr. Keyes  released a new RFP in July 2016                                                               
and there  were no valid applicants,  but the RFP was  amended in                                                               
response  to the  agricultural community,  a qualified  applicant                                                               
emerged, and the  applicant's proposal was accepted  by the Board                                                               
of Agriculture  & Conservation on  December 9, 2016.   Currently,                                                               
the RFP is available for  public comment, and Mr. Keyes expressed                                                               
his confidence in the pending sales agreement.                                                                                  
                                                                                                                                
1:54:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAUSCHER  asked about  the public response  to the                                                               
RFP.                                                                                                                            
                                                                                                                                
MR. KEYES answered  that the Board of  Agriculture & Conservation                                                               
considered the  plant a real  estate asset but the  public viewed                                                               
the RFP issued in July 2016  as "one-sided."  After review, a few                                                               
new ideas were incorporated.                                                                                                    
                                                                                                                                
REPRESENTATIVE RAUSCHER noted  his district includes agricultural                                                               
land.                                                                                                                           
                                                                                                                                
REPRESENTATIVE PARISH asked whether  there are any protections in                                                               
place for  the pricing of  products, considering the fact  that a                                                               
private owner may need to raise  prices to meat producers to make                                                               
the business profitable.                                                                                                        
                                                                                                                                
MR.  KEYES  agreed  that  prices could  be  raised;  however,  he                                                               
related that  there has  been "massive"  growth in  the livestock                                                               
industry and another way to make  a profit is to increase volume.                                                               
Speaking  from his  experience as  a business  owner, he  posited                                                               
that  the facility  under private  ownership  would increase  its                                                               
volume.   He said, "I  would expect  it would be  competitive and                                                               
remain competitive for the producers."                                                                                          
                                                                                                                                
REPRESENTATIVE  DRUMMOND recalled  touring the  plant and  seeing                                                               
its products and prisoners processing  meat.  During the tour she                                                               
learned that  if the  plant under discussion  were to  shut down,                                                               
protein production in Southcentral would  be destroyed due to the                                                               
distances  from other  plants  that can  certify  USDA, and  also                                                               
conflicts with hunting seasons at the other two plants.                                                                         
                                                                                                                                
MR. KEYES said  the other two aforementioned  plants include wild                                                               
game processing in their business plans.   In fact, the other two                                                               
plants stop processing livestock for  two months during wild game                                                               
season because  livestock and  wild game  cannot be  processed at                                                               
the same  time.   Were it  not for Mt.  McKinley Meat  & Sausage,                                                               
this period  of closure  would be  devastating for  the producers                                                               
[of livestock]  due to the  distance needed to travel  to another                                                               
plant while  one is  shut down.   He  restated that  recently the                                                               
volume  of  livestock  processed  through  Mt.  McKinley  Meat  &                                                               
Sausage has set  a record, and a shutdown would  force all of the                                                               
livestock  to  be  processed  in  Fairbanks  or  Delta  Junction,                                                               
adding, "I  don't view  it as feasible,  [Mt.] McKinley  Meats [&                                                               
Sausage] is vital."                                                                                                             
                                                                                                                                
REPRESENTATIVE  DRUMMOND  asked  what  percentage  of  meat  sold                                                               
commercially in  Alaska is processed  at the Mt.  McKinley plant.                                                               
She estimated  the amount  would be  comparable to  locally grown                                                               
food, which is about 5 percent.                                                                                                 
                                                                                                                                
MR. KEYES said he would provide that information.                                                                               
                                                                                                                                
REPRESENTATIVE RAUSCHER asked whether  the reliance of 4-H [youth                                                               
organizations] on  Mt. McKinley  Meat &  Sausage was  taken under                                                               
consideration.                                                                                                                  
                                                                                                                                
MR. KEYES  expressed his belief  that the potential new  owner is                                                               
supportive of 4-H.                                                                                                              
                                                                                                                                
MR. FOGELS added  that two years ago a legislative  audit of ARLF                                                               
said the state cannot hold and manage assets.                                                                                   
                                                                                                                                
CO-CHAIR TARR  offered to provide members  further information on                                                               
the related legislative audit.   Returning attention to the terms                                                               
of the RFP, she asked whether  farmers would retain access to the                                                               
facility throughout the transition to new ownership.                                                                            
                                                                                                                                
2:04:12 PM                                                                                                                    
                                                                                                                                
MR. KEYES  stated that one of  the biggest problems with  the RFP                                                               
issued in July  2016, was that it dictated certain  policies to a                                                               
potential new owner.  Interested  parties informed the state that                                                               
it  could  not  "[tie]  someone's  hand" for  the  new  owner  to                                                               
succeed,  therefore the  restrictions were  reduced.   He pointed                                                               
out that a  new owner will have  to invest a lot of  money in the                                                               
facility,  and   to  be  profitable,  must   provide  service  to                                                               
everyone.  Mr.  Keyes redirected attention to  DoAG activities in                                                               
2016, noting that ARLF - which  was established in 1953 - managed                                                               
sixty-six   loans  for   agriculture  equipment,   property,  and                                                               
activities, with  a principal loan  balance of $7.69  million and                                                               
six new loans in 2016.   In addition, the division leveraged $1.3                                                               
million  in   federal  grant  funding  for   state  and  industry                                                               
projects,  including  the  Elodea   program.    Another  division                                                               
program inspected  more than  116 million  board feet  of timber,                                                               
thus enabling  exports of Southeast  timber to Asian  markets and                                                               
generating $93 million in timber industry revenue (slide 8).                                                                    
                                                                                                                                
CO-CHAIR JOSEPHSON  inquired as  to the  amount of  state revenue                                                               
that is derived from $93  million in timber industry revenue, and                                                               
questioned why DoAG,  and not the Division  of Forestry, provides                                                               
timber inspections.                                                                                                             
                                                                                                                                
MR. KEYES  explained that DoAG historically  provides inspections                                                               
because  its staff  includes the  State Plant  Regulatory Officer                                                               
(SPRO).   Inspections  and certifications  made by  the SPRO  are                                                               
recognized  at  the federal  level.    He  advised that  in  some                                                               
states, forestry and agriculture are "one and the same."                                                                        
                                                                                                                                
MR. FOGELS added that most state  timber in Southeast is sold for                                                               
local mills; however, the  aforementioned program certifies round                                                               
logs harvested from private land and going to markets in Asia.                                                                  
                                                                                                                                
REPRESENTATIVE  JOHNSON asked  for further  information regarding                                                               
timber inspection.                                                                                                              
                                                                                                                                
MR. KEYES said the division sends  an inspector to Asia where the                                                               
logs are  fumigated, and the inspector  certifies the fumigation.                                                               
The logs are then accepted into port to be further processed.                                                                   
                                                                                                                                
MR.  FOGELS  further  explained that  Asian  countries  will  not                                                               
accept  logs from  the U.S.  unless they  have been  fumigated to                                                               
prevent  the  entry of  invasive  "bugs  or  critters."   As  per                                                               
international  trade  protocols,  a bio-sanitary  inspector  must                                                               
certify the fumigation;  most logs are fumigated in  the U.S. but                                                               
Alaska has an exception from  USDA that allows the fumigation and                                                               
certification to occur in Asia.                                                                                                 
                                                                                                                                
CO-CHAIR TARR asked for further  information on the certification                                                               
of seed potatoes.                                                                                                               
                                                                                                                                
MR. KEYES  observed that  Alaska has  a pristine  environment for                                                               
agriculture  due to  its long  distance  from other  agricultural                                                               
areas;  inspecting  and  certifying seed  potatoes  ensures  that                                                               
Alaska potatoes will not have the  diseases seen in the Lower 48.                                                               
Providing  protection is  not expensive  but results  in over  $3                                                               
million in economic activity and a measure of food security.                                                                    
                                                                                                                                
REPRESENTATIVE  TALERICO   asked  whether   Elodea  [eradication]                                                               
projects are planned for the Fairbanks area.                                                                                    
                                                                                                                                
MR.  KEYES  affirmed that  the  division  is  in the  process  of                                                               
permitting a  project in  the Fairbanks  North Star  Borough that                                                               
will be  finalized in February  [2017], and treatment  will begin                                                               
the following summer.  He offered to provide further details.                                                                   
                                                                                                                                
REPRESENTATIVE  TALERICO asked  for  confirmation  when the  meat                                                               
facility transition is completed.                                                                                               
                                                                                                                                
MR.  FOGELS  provided  background   information  on  Mr.  Maisch,                                                               
director of the Division of Forestry.                                                                                           
                                                                                                                                
2:15:22 PM                                                                                                                    
                                                                                                                                
JOHN "CHRIS"  MAISCH, Director, Division of  Forestry (DOF), DNR,                                                               
informed  the  committee  DOF's  mission  is  to  serve  Alaskans                                                               
through   sustainable  forest   management   and  wildland   fire                                                               
protection.   The DOF fiscal  year 2017 (FY 17)  operating budget                                                               
was  approximately  $47  million, of  which  approximately  $24.2                                                               
million were  UGF.   The division supports  239 positions  and is                                                               
one of the  larger divisions within DNR.  Mr.  Maisch said DOF is                                                               
the  lead  state  agency  for wildland  fire  management  of  150                                                               
million  acres  with the  primary  goal  of protecting  life  and                                                               
property.  Further,  DOF manages 47 million acres  of forest land                                                               
considered commercial.  Alaska also  has three state forests that                                                               
are managed by DOF.  During  the last fire season, there were 354                                                               
fires in  state protection areas  that burned 104,482  acres, one                                                               
of the  least amounts of area  burned in recent years  (slide 9).                                                               
Calendar  year 2016  was the  second worst  year and  5.1 million                                                               
acres were  burned during  766 fires.   The contrast  between the                                                               
past  two fire  seasons demonstrates  the range  of fire  seasons                                                               
possible  in Alaska  from  the  number of  acres  burned, to  the                                                               
corresponding  budget  expenses;  for  example,  in  FY  17  fire                                                               
suppression activities cost  $26.2 million UGF and in  FY 15 fire                                                               
suppression activities cost $103.4 million [UGF].                                                                               
                                                                                                                                
MR. MAISCH,  turning to  timber and  forest management,  said DOF                                                               
sold 8.2  million board feet  of logs in  34 timber sales  - from                                                               
the Railbelt  to Southeast  - to 27  Alaska-based companies.   He                                                               
pointed out that  timber sales were about one-half  of normal due                                                               
mostly to  a 42  percent budget  reduction in  forest management,                                                               
and to environmental challenges  to the Southeast timber program.                                                               
Mr. Maisch projected  that more sales will occur  because DOF has                                                               
cleared legal  challenges related to the  Tongass National Forest                                                               
transition  plan  (slide  9).   He  then  directed  attention  to                                                               
activities in  [FY 16] beginning  with the Tetlin River  Fire and                                                               
the  McHugh Fire  near  Anchorage.   He said  93  percent of  the                                                               
firefighting workforce were Alaskans,  which generated about $5.5                                                               
million  in payroll,  but last  season only  about 50  percent of                                                               
firefighters  were   Alaskans.    In  addition,   Lower  48  fire                                                               
assignments of Emergency Firefighter  crew generated $5.6 million                                                               
in wages  to Alaskans fighting fires  in the southern U.S.    The                                                               
division  received  four  competitive   grants  for  hazard  fuel                                                               
reduction for facilities in Caswell,  McGrath, and Delta Junction                                                               
amounting  to $800,000.   He  noted that  federal grants  are the                                                               
only source  of funds for  this type  of mitigation, such  as the                                                               
fuel break  which saved  a portion of  Soldotna during  the Funny                                                               
River Fire (slide 10).   In response to Representative Parish, he                                                               
returned attention  to staff reductions,  and said from FY  15 to                                                               
FY 17 there was a 39 percent  reduction in staff and a 42 percent                                                               
reduction  in the  budget of  the forest  management side  of the                                                               
division.                                                                                                                       
                                                                                                                                
2:23:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PARISH asked about the  effect of the reduction in                                                               
timber sales on lost state revenue and economic activity.                                                                       
                                                                                                                                
MR. MAISCH advised that DOF  annually generates about $980,000 in                                                               
revenue  from timber  sales, mostly  from the  southern Southeast                                                               
timber  program targeted  for domestic  processing; logs  sold on                                                               
the export market  are more valuable, but  the state historically                                                               
sells  timber locally  to protect  jobs.   He restated  that last                                                               
year  was  the lowest  volume  for  Southeast, and  he  estimated                                                               
revenue will be about one-half of average.                                                                                      
                                                                                                                                
REPRESENTATIVE JOHNSON  recalled there  was a forestry  office in                                                               
Palmer during  an extremely  bad fire  year and  an appropriation                                                               
was needed to continue firefighting  activities.  She inquired as                                                               
to the source of the extra funds.                                                                                               
                                                                                                                                
MR.  MAISCH  cautioned that  budget  questions  are not  easy  to                                                               
answer  because the  fire season  is split  by two  fiscal years.                                                               
The   division   spends  funds   from   an   activity  code   for                                                               
firefighting,  and   from  a  preparedness  code   to  be  ready.                                                               
Further, the  activity code  is divided  for fire  suppression on                                                               
federal land, which is reimbursed.  He  said at the end of a fire                                                               
season it "takes  actually two years to balance  those books with                                                               
our federal partners and other states  ...."  However, all of the                                                               
funds for  state protected  lands are  GF money,  and all  of the                                                               
funds  for federal  lands  are  federal money.    The state  also                                                               
protects private and municipal lands.                                                                                           
                                                                                                                                
MR.  MAISCH  returned  to  the   presentation,  noting  that  DOF                                                               
continues  work   on  the   Tongass  National   Forest  (Tongass)                                                               
transition  from old  growth to  young growth  together with  the                                                               
U.S. Forest  Service (USFS), U.S. Department  of Agriculture; the                                                               
state  is  a major  partner  in  forest management  and  recently                                                               
signed the  Good Neighbor Authority  (GNA) agreement  that allows                                                               
states management  authority for  timber sales on  federal lands,                                                               
after   the    federal   government   completes    the   National                                                               
Environmental Policy Act (NEPA) statement.   At this time, DOF is                                                               
in the  process of negotiating  a supplemental  project agreement                                                               
for  a large  timber  sale.   Also,  DOF  is  participating in  a                                                               
federally funded USDA Forest Inventory  & Analysis Program in the                                                               
Interior  that  will  measure   forest  productivity  and  create                                                               
sustained  yield  calculations  to support  biomass  projects  in                                                               
rural communities.   He  estimated the  program will  bring about                                                               
$1.1  million to  $2 million  into the  division annually  (slide                                                               
10).                                                                                                                            
                                                                                                                                
CO-CHAIR JOSEPHSON  referred to slide  10, which showed  that DOF                                                               
was involved  in issues of  water quality  and fish habitat.   He                                                               
asked whether the indicated  inspections are reimbursable service                                                               
agreements  between  DNR  and  the  Department  of  Environmental                                                               
Conservation  (DEC) and  the  Alaska Department  of  Fish &  Game                                                               
(ADFG).                                                                                                                         
                                                                                                                                
MR.  MAISCH  explained  that  the  inspections  occur  under  the                                                               
auspices  of  the  Alaska  Forest  Resources  and  Practices  Act                                                               
(FRPA); DNR  is the lead  agency and works  with ADFG and  DEC to                                                               
follow the regulations  of the Act which are  designed to protect                                                               
fish habitat and water quality.   The statutes and regulations of                                                               
the  Act  require  private landowners  to  observe  certain  best                                                               
management  practices.   Fifty-four inspections  were on  private                                                               
land,  mostly on  Alaska Native  corporation land  in Kodiak  and                                                               
Southeast, and  eighty-two inspections  were on  state land.   In                                                               
further  response  to  Co-Chair  Josephson,  he  said  DOF  gives                                                               
deference to its sister agencies  in areas of fisheries and water                                                               
quality, but  each of  the three  departments "support  their own                                                               
efforts in  that so  no money exchanges  hands between  the three                                                               
agencies."                                                                                                                      
                                                                                                                                
COMMISSIONER MACK  added that there  are concerns about  the most                                                               
recent  plan  by  USFS  to  manage the  Tongass,  and  the  state                                                               
formally objected  and lodged complaints through  comments during                                                               
the  development  of the  plan.    However,  the state  can  take                                                               
advantage  of the  work being  done by  the Tongass  young growth                                                               
forest  inventory   and  through  the  Good   Neighbor  Authority                                                               
agreement.   He  stated his  hope that  additional federal  funds                                                               
identified for fire suppression in  the Tongass can be redirected                                                               
into a planning  process, and complete the  inventory quickly, to                                                               
facilitate more federal timber sales in Southeast.                                                                              
                                                                                                                                
REPRESENTATIVE BIRCH inquired  as to the status  of the "roadless                                                               
rule."                                                                                                                          
                                                                                                                                
2:34:42 PM                                                                                                                    
                                                                                                                                
MR.  MAISCH said  there is  one  piece of  litigation pending  in                                                               
district court  between the state  and USFS  on this topic.   The                                                               
state's challenge  to the [2001 Roadless  Area Conservation Rule]                                                               
was argued  over one year ago  and a decision is  expected at any                                                               
time.                                                                                                                           
                                                                                                                                
REPRESENTATIVE PARISH inquired  as to how much of  the 60 million                                                               
acres  of state  land and  the 40  million acres  of tentatively-                                                               
approved land  is likely to  increase fire danger in  the future,                                                               
and how many are "forestry lands."                                                                                              
                                                                                                                                
MR.  MAISCH  cautioned  that  most of  Alaska  can  burn  whether                                                               
forested or  not; he noted that  all of the 105  million acres of                                                               
entitlement  land  are provided  fire  protection  by either  the                                                               
Alaska  Fire  Service,  Bureau of  Land  Management  (BLM),  U.S.                                                               
Department  of  the  Interior,   or  the  Division  of  Forestry,                                                               
depending on  the service area  affected.  He offered  to provide                                                               
further details of the fire management plan to the committee.                                                                   
                                                                                                                                
MR.  FOGELS added  that there  are few  state land  selections in                                                               
Southeast.   In  further  response to  Representative Parish,  he                                                               
clarified that the  state has received 100 million  acres of land                                                               
from  the  federal  government,  and of  the  100  million  acres                                                               
received, 60 million  [acres] have been patented,  and 40 million                                                               
[acres] have been tentatively approved,  thus the state has legal                                                               
management authority over 100 million  acres of state land and is                                                               
due 5 million more acres.                                                                                                       
                                                                                                                                
REPRESENTATIVE  TALERICO  asked  whether  the  director  has  any                                                               
concerns about  BLM's Eastern  Interior Resource  Management Plan                                                               
(RMP), or the  Central Yukon RMP, related to  designated areas of                                                               
"critical environmental concern."                                                                                               
                                                                                                                                
MR. MAISCH said he does  not anticipate any difficulties managing                                                               
the  state forest  due to  either of  the aforementioned  federal                                                               
plans.                                                                                                                          
                                                                                                                                
COMMISSIONER MACK  informed the  committee that both  the Eastern                                                               
Interior RMP  - approved by BLM  in 2016 - and  the Central Yukon                                                               
RMP,  affect land  in the  [Trans-Alaska Pipeline  System (TAPS)]                                                               
corridor and the entire North Slope.   This is a very significant                                                               
concern to  the state; in fact,  DNR has objected to  the Eastern                                                               
Interior RMP,  and BLM  has acknowledged  receipt of  the state's                                                               
objection.   Impacts to the  Fortymile Mining District  and other                                                               
issues are  substantive, although  a litigation decision  has not                                                               
been made.   In  addition, the  Central Yukon  RMP is  of immense                                                               
concern  to the  state because  it is  a BLM  plan over  Alaska's                                                               
North  Slope.   He added  that the  Central Yukon  RMP covers  53                                                               
million acres, 13 [million] of  which are federally owned, and 40                                                               
million [acres] are state-owned.                                                                                                
                                                                                                                                
2:44:36 PM                                                                                                                    
                                                                                                                                
BEN ELLIS, Director, Central Office,  Division of Parks & Outdoor                                                               
Recreation, DNR,  informed the committee  Alaska is  blessed with                                                               
the largest state parks system in  the nation.  The largest state                                                               
park,  Wood-Tikchik,  is  1.6  acres,   and  the  third  largest,                                                               
Chugach, is  0.5 million acres.   The division manages  the parks                                                               
with  177  fulltime  positions,  administers  federal  recreation                                                               
grants, and oversees  state programs such as  boating safety, the                                                               
Alaska Office of History and  Archaeology, and the State Historic                                                               
Preservation Office (slide 17).   Mr. Ellis invited the committee                                                               
to attend the opening of the  K'esugi Ken campground in the South                                                               
Denali  Visitor's   Center  Complex,  which  is   the  first  new                                                               
campground in  20 years.  Turning  to budget issues, he  said the                                                               
division continues  its initiative to reduce  reliance on general                                                               
funds for state park operation.   In FY 13, program receipts from                                                               
fees covered  33 percent of  the division's operational  cost; by                                                               
2016,  fees covered  37 percent,  and last  year fees  covered 49                                                               
percent of  the division's operational  cost.  He  projected that                                                               
in FY  18, fees will cover  over 50 percent of  operational cost.                                                               
The division's goal is to  bring operational costs close to self-                                                               
sufficiency.   One  of  the division's  stellar  programs is  the                                                               
boating  safety program,  and through  the Kids  Don't Float  and                                                               
life jacket loan  board programs, 28 lives were  saved in Alaska.                                                               
In addition, the division reviewed  over 1,600 projects for their                                                               
impact  to  historical  properties.    These  reviews  assist  in                                                               
exploration and development  and are federally funded,  as is the                                                               
boating safety  program.  The  division also awarded  $360,000 in                                                               
historical grants and over $1,400,000  in recreational grants for                                                               
trails funded  by the Recreational Trails  Program (RTP), Federal                                                               
Highway  Administration.   The recreational  grants are  used for                                                               
grooming trails  and for  safety and education  (slide 18).   Mr.                                                               
Ellis expressed his pride in the division.                                                                                      
                                                                                                                                
2:50:00 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOSEPHSON  inquired as  to the  funding source  for snow                                                               
machine trail grooming and snowpack work.                                                                                       
                                                                                                                                
MR. ELLIS explained that a  program for snow machine grooming and                                                               
safety  comes from  snow machine  registration fees  collected by                                                               
the  Division of  Motor Vehicles,  Department of  Administration,                                                               
and  a "pass-through  in  the  budget."   The  budget amount  was                                                               
eliminated last  year; however,  the program  is funded  one year                                                               
and enacted the following year,  thus the division is using "2016                                                               
money."   He  understood  the  amount has  been  returned in  the                                                               
governor's proposed budget.                                                                                                     
                                                                                                                                
CO-CHAIR  TARR recalled  the  division  received increased  state                                                               
receipt   authority   from   the   legislature   to   allow   for                                                               
merchandising.                                                                                                                  
                                                                                                                                
MR.  ELLIS  advised  that  many   state  parks  sell  park-themed                                                               
merchandise for  revenue; at  least six  states earn  millions of                                                               
dollars  through wholesale  retail, online,  and campsite  sales.                                                               
After  receiving permission  from the  legislature, the  division                                                               
developed merchandise  and a  web site  for sales.   So  far, the                                                               
division has  generated about  $20,000 in  revenue from  sales in                                                               
the late  fall and early winter,  and he expressed hope  sales of                                                               
merchandise will decrease the division's need for UGF.                                                                          
                                                                                                                                
REPRESENTATIVE PARISH  asked how  the committee can  help promote                                                               
growth in sales.                                                                                                                
                                                                                                                                
MR.  ELLIS said  funding would  help  the division  put out  more                                                               
products for  sale, and pointed  out states that  invest $500,000                                                               
in products  sell that merchandise for  $1,000,000.  Furthermore,                                                               
other  programs,  such   as  more  public  use   cabins  and  new                                                               
campgrounds, will also increase  revenue and advance the division                                                               
toward self-sufficiency.   In further response  to Representative                                                               
Parish, he  said Alaska will  primarily rely on the  Internet for                                                               
selling merchandise, which  is an area of sales  that is "slowest                                                               
to grow."                                                                                                                       
                                                                                                                                
2:59:35 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Resources Standing Committee meeting was adjourned at 2:59 p.m.                                                                 

Document Name Date/Time Subjects
2017 DNR Overview for House Resources.pdf HRES 1/18/2017 1:00:00 PM
Department Overview: Alaska Department of Natural Resources