Legislature(1999 - 2000)
02/29/2000 09:02 AM Senate FIN
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
February 29, 2000
9:02 AM
TAPES
SFC-00 # 40, Side A and Side B
CALL TO ORDER
Co-Chair John Torgerson convened the meeting at
approximately 9:02 AM.
PRESENT Co-Chair John Torgerson, Co-Chair Sean Parnell,
Senator Al Adams, Senator Dave Donley, Senator Lyda Green,
Senator Loren Leman, Senator Randy Phillips and Senator Gary
Wilken.
Also Attending: DARWIN PETERSON, Senate Finance Committee
Aide and staff to Co-Chair Torgerson; JIM POUND, Aide to
Senator Taylor; BOB LOEFFLER, Director, Division of Mining,
Land and Water, Department of Natural Resources; JULIE
LUCKY, Staff to the Senate Resources Committee
Attending via Teleconference: From Wrangell: DAVID SNEED;
From Anchorage: STEVE BORELL, Executive Director, Alaska
Miners Association, Inc.
SUMMARY INFORMATION
SB 6-DISPOSALS OF STATE LAND
The Committee adopted a committee substitute as a working
draft, heard from the sponsor, the Department of Natural
Resources and members of the public. The bill was held.
SB 175-STATE MINING LAW
The Committee heard from the sponsor, the Department of
Natural Resources and the Alaska Miner's Association. The
bill reported from Committee with no changes.
SENATE BILL NO. 6
"An Act relating to the disposal of state land."
This was the fifth hearing of this bill in the Senate
Finance Committee.
Co-Chair Torgerson directed the member's attention to a
message from the Division of Mining, Land and Water[Copy on
file] that gave an estimate of what it would cost to
implement the program dependant upon how many acres the
legislation requires. He noted that a proposed committee
substitute before the members stipulates 75,000 acres of
land for disposal, which would cost $10 million according to
the division's estimates.
DARWIN PETERSON, Senate Finance Committee Aide and staff to
Co-Chair Torgerson explained the proposed committee
substitute, 1-LS0071\S.
Title - sets mandatory amounts of land to be offered
for disposal in the land bank at 75,000 acres annually
Section 1 - remains the same as the previous version
Section 2 - creates a Land Disposal Advisory Committee
that closely resembles the Alaska Minerals Commission.
This committee will accept public nominations for land
to be deposited into the land bank and can also include
their own recommendations.
Co-Chair Torgerson clarified that the committee that would
have been established under the original version of the bill
was not an advisory committee. Mr. Peterson noted that the
advisory committee language was inserted at the
recommendation of the Department of Natural Resources
because it was felt that a non-advisory committee would put
too much constraint upon the department.
Co-Chair Torgerson asked about legal concerns associated
with the non-advisory committee. Mr. Peterson explained that
there was a "separation of powers" issue.
Section 3 - states that the department must keep at
least 75,000 acres of land in the land disposal bank
Section 4 - requires the department to prepare a five-
year land disposal plan that would be compiled by
reviewing recommendations of the Land Disposal Advisory
Committee along with the department's recommendations
Section 5 - includes the advisory committee as an
entity that can nominate land for deposit or withdrawal
from the land disposal bank
Section 6 - relates to the new appraisal and survey
detailed in Section 9
Section 7 - directs the commissioner to keep an
inventory of land in the land disposal bank
Section 8 - identifies sections in statute that do not
apply to the bank
Section 9 - allows the commissioner to charge the
purchaser up front or by reimbursement, for the
appraisal and survey of land
Senator Adams asked how the 75,000 acres figure was reached
and suggested requiring 50,000 at the onset of the program
and then gradually increase the amount to 75,000. He thought
the lower initial amount would allow the new advisory
committee to become established before trying to deal with
great amounts of land.
Mr. Peterson responded that the chair had looked at three
scenarios presented by the department and chose the most
cost effective.
Co-Chair Torgerson added that it would cost $35 million to
dispose of 150,000 acres. He spoke of discussions he had
with the department about charging buyers for the up-front
costs of appraisals. He learned that could not be done and
therefore, there would be a one-time cost to start up the
program.
Co-Chair Torgerson stressed that it was still his intent to
turn this legislation into an appropriations bill. He
planned to wait until all other debate regarding the bill
was completed before drafting appropriation language.
Senator Phillips asked about the criteria given to the
commissioner in Section 9. "The commissioner may require a
purchaser of land, whether the purchase is by auction,
lottery, or other means, to provide, at the purchaser's
expense, an appraisal or survey of the land, or both,
completed in the manner directed by the commissioner." He
felt the language gave too much leeway to the department.
Mr. Peterson suggested changing "may" to "shall" saying that
the intent is to direct the department to save as much money
as possible without imposing too much constraint.
Senator Green asked if it would sometimes be more efficient
and cheaper for the department to do the surveys and
appraisals. She gave an example of a large area that was to
be subdivided, surmising that it would be more prudent to do
the surveys for the entire parcel all at one time. Co-Chair
Torgerson said that was probably true and that a
representative of the department would explain later in the
meeting. He added that the money spent on these surveys and
appraisals should still be recovered when possible.
Mr. Peterson directed attention to the permanent fund
dividend eligibility requirements stating that these are
more restrictive than simply being a resident of the state.
To become a resident of Alaska, an individual only has to
register to vote and state intent to stay in the state.
Mr. Peterson then spoke of conflicts the previous bill
versions had with other statutes with regard to stipulations
of who could purchase land under the proposed program. He
said that to limit land sales to only those who qualify for
a permanent fund dividend conflicted with other land sale
procedures within the department that only require Alaskan
residency.
JIM POUND, Aide to Senator Taylor spoke to the original
version of the bill and was unsure if the committee
substitute addressed the 50,000 acres that was sold but then
had ownership reverted back to the state.
Co-Chair Torgerson referred to the before-mentioned
information provided by the department and detailed that the
75,000 acres included the 50,000 acres available for re-
offer. He stressed that this bill only includes 25,000 new
acres and this was because of the high cost to offer any new
land. Co-Chair Torgerson spoke of the problem with charging
the buyer up front for the appraisal and survey costs and
therefore keeping expenditures down.
Mr. Pound related to a question from a constituent regarding
who would perform the surveys and appraisals. The
constituent had suggested a process for the division to
approve an appraiser or survey that would eliminate
arguments between the buyer and the state. The point was
also made that it would be less expensive to have the state
perform all surveys and appraisals in a remote area at one
time rather than require each buyer to individually arrange
for the services. Co-Chair Torgerson had made note of the
question and said he would ask the department to respond.
BOB LOEFFLER, Director, Division of Mining, Land and Water,
Department of Natural Resources, made the statement that
many Alaskans considered the sale of private land as one of
the basic responsibilities of the state. In recent months,
he said, there had been discussion on the need to increase
the rate of land sales. He qualified that at the same time,
the state's budget situation resulted in the need to find
methods of selling land that require less administrative
costs to the state. However, he stressed that the program
requires an appropriation because, although selling land
makes money, it also costs money.
Mr. Loeffler stated that the overall organization of the
bill was good, but qualified that there were some small
problems that stood in the way of a successful program. He
pointed out that Section 8, for example eliminated the
entire statutory framework for the department. Section 8
stipulated that the commissioner shall annually submit to
the governor an appropriation request for funding necessary
for survey of land to be offered for disposal, preliminary
feasibility studies, engineering design work, right-of-way
acquisition, construction of necessary capital improvements
and identification of land for future disposal. He detailed
that it eliminated the commissioner, the Division of Mining,
Land and Water and the department's ability to adopt
regulations, do public notice, perform auction sale
procedures, dispose by lottery, sell agricultural land,
reject bids, enter into contracts, give veteran's preference
and give agricultural preference.
Co-Chair Parnell did not understand how Section 8 eliminated
the abilities of the department. He noted that, "the
provisions of AS 38.05.005-38.05.037, 38.05.045-38.05.069,
and 38.05.600 do not apply to the land disposal bank, except
as specified in AS 38.04." He stated that this language did
not eliminate the department's ability to perform the above
functions and was not as "all sweeping" as the witness
feared.
Mr. Loeffler went on to describe his second concern, which
was stipulating a specific amount of land for disposal. He
said the reason for his concern was that, "quite frankly,
selling land costs some money" and without an adequate
appropriation, the department would not sell the stipulated
amount of land. Setting an amount in statute, he explained
would create an expectation that future legislatures might
not allow the department to fulfill.
Mr. Loeffler then spoke about a timing problem within the
legislation, explaining that once an appropriation is
received, it takes one to two years before the land is put
on the market, depending on whether a survey is required.
Therefore, he cautioned if the appropriation is given this
year, the land would not be available for sale until FY 02
and FY 03 regardless of any statutory requirement to sell
land this summer.
Mr. Loeffler next addressed his final concern saying he did
not understand the interaction between the advisory
committee and the legislature. He questioned the process
where the advisory committee would submit nominations of
land for disposal to the legislature and allowing the
legislature to amend how the department offers parcels. He
suggested this procedure "put the legislature in the
position of making decisions that are more appropriate for
the administrative branch." He spoke of the best interest
findings and whether the land would be used for commercial,
industrial or residential purposes, which he believed that
the legislature should not be directly involved in. He
stressed that the department currently offers the land for
sale and with some exceptions, lets the buyer determine how
the land would be used.
Senator Phillips asked if the bill stipulated 75,000 acres,
would the general fund cost to implement the program be $9.4
million. Co-Chair Torgerson affirmed the department's fiscal
note would reflect that amount if the Committee adopted a
75,000-acre provision.
Senator Phillips then asked if there would be any attempt by
the state to recover any of this money from the buyers. Mr.
Loeffler replied, "I believe that selling land makes money".
He qualified that there would be a delay before the costs
were recovered, but that eventually the state would get the
money back.
Co-Chair Parnell suggested that the fiscal note should
therefore reflect the revenues in future years, as well as
the initial startup expenditures.
Co-Chair Parnell addressed the witness's concern about the
legislature's ability to have a say in the classification
and categorization of parcels. While he understood those
concerns, he did not think the matter would be as
contentious as feared. He gave an example of the Alaska
Board of Fisheries that makes salmon allocations and noted
that the legislature seldom gets involved. Even when the
legislature does get involved, he assured that a majority
vote is required to override the board's decisions. He
thought it would be prudent to retain some ability for the
legislature to change the list of selected land to be
offered pointing out that he did not want the legislature to
be involved every year.
Co-Chair Torgerson referred to Mr. Loeffler's comment that
the department does not classify the land as residential,
industrial or commercial but only classified homesteading
and agricultural land. Mr. Loeffler explained that the
department offers partials under the statutory framework set
by the legislature, which were lottery, agriculture and
homestead. Those are the only choices, he said.
Co-Chair Torgerson thought if the department offered land in
an area already zoned for particular uses the buyer could
not use the land for purposes other than what it was zoned
for. Therefore, he agreed with Co-Chair Parnell that the
legislature's involvement in the classification would be a
smaller matter than the witness thought. Co-Chair Torgerson
said he also agreed that the legislature should not become
too involved, but thought the ability to participate should
not be precluded.
Senator Phillips directed the Committee's attention to
Section 9 of the committee substitute that addressed
appraisals and surveys. He asked the division's
recommendation of the language "may" versus "shall". Mr.
Loeffler answered that either word would be fine with him.
Except for the homestead program, he said the buyers all
reimburse the appraisal and survey cost through the sale
price of the land.
Senator Phillips had a philosophical problem with the state
fronting the money for the survey and appraisal costs. He
expressed, "If person is really serious about obtaining land
from the state, he would be paying for the appraisal and the
survey itself first before getting title to the property."
He thought there was too much exposure when the state paid
the costs up front.
Mr. Loeffler responded that the department had 5,000 parcels
that had been offered before and were already surveyed. He
stated that many parcels are returned to the state and that
those parcels are already surveyed. Reselling these parcels,
he said would recover the earlier survey costs. He added
that the "Stake it Yourself" program is hard to administer
and that pre-survey is the most efficient way to operate the
program. He also noted that some planning authorities
require a pre-survey in areas near roads.
Senator Phillips wanted to know how long the state has had
the 5,000 parcels and whether it has cost the state money.
Mr. Loeffler answered the land has been returned to the
state since the early 1980s and that the money was already
spent on surveys and appraisals for that property.
Senator Phillips made the statement that he believed the
users of any state program should at the very least pay
those services. He continued asking the total cost of the
land disposal program and how much land has been disposed
and how much returned to the state.
Mr. Loeffler stressed that in order for the program to
generate revenue, the default rate must be brought down from
the current 40-50 percent. He stated that repossessing land
is an expensive process. He said the reason for the high
default rate was because the buyers are required to pay a
down payment of only five-percent and a yearly payment of
only $100 over 20 years. He stressed that because the buyers
have so little of their own money invested in the land, the
land is easier to "walk away from". He noted that the
committee substitute requires buyers to pay the appraisal
and survey costs at the time of purchase, which would
increase their commitment to the property.
Co-Chair Torgerson recognized Senator Phillips's concern
about the default rate. However, he also had heard that the
state's unsold land is "garbage land" and that the good land
was already sold. He explained his attempt to offset these
problems by requiring the department to develop a five-year
schedule of what land would be sold. He hoped people
interested in buying certain land could nominate that land
to be offered for sale. He said this process was similar to
the one used for oil and gas development.
Co-Chair Torgerson commented on the program receipts noting
that the program would not generate new revenue for a few
years until the land is surveyed. He pointed out that the in
the previous year, the department brought in more money than
it expended. While he predicted the same could happen this
year, he said he made the judgement call to instead spend
funds to identify the value of land that could be offered.
He stated that he wanted to know the value of the land known
because he was unsure if anyone would be interested in
purchasing the land that had little value, even with the
five-percent down payment program.
Co-Chair Torgerson reminded the Committee of the 1986
economic crash in the state. He noted that the state
repossessed a great deal of land during that time.
Senator Phillips asked if the crash was the primary reason
for the defaulted loans. Mr. Loeffler answered that while
there were many parcels repossessed during that time, the
situation remains that those properties with an outstanding
balance above 90 percent have a 40 percent default rate.
Co-Chair Torgerson clarified that the land offered as
subdivisions required the survey work to be done up front at
the state's initial expense, but the surveys on remote
parcels could be performed at the buyers up front expense.
Mr. Loeffler noted that the projected cost estimates shown
on the handout assumes that purchaser pays the survey and
appraisal costs and that the expenses do not go through the
state budget.
Mr. Loeffler broke down the cost of land disposal to $250
per acre. He said that money covers the cost of identifying
areas suitable for sale and the title searches. He noted
that the title searches for these lands are different than
most title searches because all the records are contained
within the Department of Natural Resources. He continued
detailing the funds also include selecting state interest
areas, such as existing trails, critical habitat, etc.,
within a disposal area. Furthermore, he said the funds
cover the best interest finding process, advertising
available land, addressing inquiries, conducting the lottery
in lottery sales, then reviewing the appraisal and survey
and finally, contracting the administration of the actual
sale. Mr. Loeffler predicted that the proposed land disposal
process would be significantly cheaper.
Co-Chair Torgerson how many new employees would be needed
for the program. Mr. Loeffler was not sure.
Co-Chair Torgerson hoped the Committee would adopt the
proposed committee substitute and then get more info from
the department on the expected revenue, the number of new
employees along with a breakdown of expenditures. And how
much paid for by the buyer.
Senator Phillips moved for adoption of CS SB 6 Version "S"
as a Workdraft.
Senator Adams commented that he would not object to the
motion but noted a policy question on whether the
legislature should be micro-involved in land disposal. He
did not agree that the legislature should be involved.
Co-Chair Torgerson answered another of Senator Adams's
concerns saying that a land bank already exists and that
this legislation would only require the department maintain
a balance of 75,000 acres available for sale.
There was no objection and the Committee ADOPTED Version "S"
as a Workdraft.
Senator Phillips revisited the issue of inclusion of "shall"
or "may" in Section 9. He understood that there might be
some exceptions to the rule that the commissioner must
recover all costs, but wanted the language to be "shall"
with an allowable exception detailed.
Mr. Loeffler thought "shall" was acceptable so long as
exceptions were allowed for certain cases. He stated that
the department would only do the appraisal before offering
the land for sale if there was a good reason, such as areas
where a Stake it Yourself program would not work.
Co-Chair Torgerson understood and stressed that the reason
the language currently read "may" was because it would be
too difficult to incorporate the intent into statute. Mr.
Loeffler said he was willing to try to draft appropriate
language.
Senator Phillips commented that if the details could be
worked out, he would be comfortable with exception language.
Senator Wilken referred to page two line seven, which
addressed the advisory committee. He asked if the members
were subject to review or had term lengths. Co-Chair
Torgerson replied that the governor changes every four or
eight years and the President of the Senate and the Speaker
of the House of Representatives potentially change every two
years. Therefore, he surmised the advisory committee
appointments would be reviewed with each leadership change.
He qualified that the governing language was taken from the
Mineral Commission but that it could be amended to
incorporate a term limit.
Senator Wilken recommended the seats have five-year terms.
Senator Wilken then commented that the legislation assumes
the department will sell enough land to cover the operating
costs of the program. He asked if the purpose of the program
was to sell enough land to break even or to make money and
if revenues were generated, where would the money go. He
restated his question asking if the focus was to sell 75,000
acres annually or to maximize revenue. He suggested that it
might at some time be prudent to delay land sales to
maximize the return.
Co-Chair Torgerson responded that the intent of the
legislation was that the program receipts would maintain an
annual disposal of 75,000 acres. He noted there would be an
on-going cost to keep the land bank balance at 75,000 acres
and that additional revenues would go into the general fund
and become subject to appropriation. He stressed that the
legislation required the balance to be maintained at 75,000
acres but noted the legislation requires the department to
do several things that did not always happen.
Tape: SFC - 00 #40, Side B 9:50 AM
Mr. Loeffler told the Committee that he would provide
financial information but warned that the initial
appropriation would not be paid back for several years
instead of the two years suggested.
Co-Chair Torgerson clarified that because of the payment
schedule for the loans on the land sales, this was true.
Mr. Loeffler added that while the legislation would require
the department to offer 75,000 acres, most of that land
would not be sold for a couple of years. Until the land was
sold, he stressed no money would be earned back.
Mr. Loeffler then answered a question by Co-Chair Torgerson
saying that the state currently holds approximately $8
million in the land disposal's accounts receivable. He added
that approximately $2 million was collected each year.
Co-Chair Torgerson commented that while the entire $9.4
million would not be recouped in the first two years, more
land would be sold and the accounts receivable balance would
increase. Mr. Loeffler concurred but noted that until the
land was actually sold, there would be no revenue of any
kind.
Co-Chair Torgerson understood but stressed that the new land
the department would offer for sale under this program would
not be of the same poor quality of earlier offerings.
DAVID SNEED testified via teleconference from Wrangell
commenting on the Land Disposal Advisory Committee and the
Land Disposal Advisory Board, that were both mentioned in
the committee substitute. He asked if these bodies were the
same entity or two separate groups. He also questioned the
makeup of membership appointments saying that five seats
were too many for the governor to control. He suggested the
governor be given appointment authority for three seats and
that legislative leadership each be given four seats.
Mr. Sneed then relayed his concerns that the department
offers no agriculturally suitable state land is offered in
Southeast Alaska even though such state-owned land did
exist. He extolled the benefits of fresh produce grown
within the state.
Mr. Sneed next addressed the matter of raising the up front
costs to the buyer to prevent default. He stressed that too
many people were trying to make ends meet in their daily
life to afford large down payments. Otherwise, he said,
these people would have already purchased private land.
Mr. Sneed stated that many parcels were offered as suitable
for agriculture but in actuality were not because of their
proximity to the marketplace or growing conditions. He added
that he was also concerned that suitable parcels were not
offered in every region of the state.
Co-Chair Torgerson noted the reference to an "Advisory
Board" was a technical error in the committee substitute and
would be changed to read "Advisory Committee".
Co-Chair Torgerson said he thought the suggestions regarding
the appointment of committee members were good comments.
However, he defended the existing membership statutes for
the Mineral Commission, which also operated in conjunction
with the Division of Mining, Land and Water' and appeared to
work well.
Co-Chair Torgerson next addressed regional jurisdiction
saying he hoped the department would offer land statewide.
He noted there would be an opportunity for public input as
the department developed the five-year plan and the
nomination process. He assured that he would review the
matter to see if regional land distribution requirements
could be put in statute, but qualified that it would be
difficult.
Co-Chair Torgerson then asked the sponsor's representative
why Section 8 was included in the committee substitute
offered by the sponsor, 1-LS0071/H. Section 8 stipulated
that the commissioner shall annually submit to the governor
an appropriation request for funding necessary for survey of
land to be offered for disposal, preliminary feasibility
studies, engineering design work, right-of-way acquisition,
construction of necessary capital improvements and
identification of land for future disposal.
Mr. Pound replied this was due to the trend of the
department in decreasing the amount of land made available
as shown in a 1999 Department of Natural Resources report to
the legislature. [Copy not provided] The report, he said,
shows a reduction from 11,800 acres sold in 1996 to 3,574
acres in 1997, 3,028 acres in 1998, and 1,963 acres in 1993.
Therefore, the provision was included to give the then
proposed advisory board the latitude to select land for
disposal that buyers were interested in purchasing.
Co-Chair Torgerson noted the committee substitute changed
the board to an advisory committee, which put Section 8 in
conflict. Because of the advisory capacity of the committee,
he surmised, the director does not have to comply with the
will of the committee. He asked the sponsor to review the
language.
Co-Chair Torgerson announced that a final committee
substitute for the bill would be drafted. He ordered the
bill HELD in Committee.
SENATE BILL NO. 175
"An Act relating to state mining law, to methods of
locating mining claims, to the granting of larger
mining claims using a legal subdivision based on
rectangular survey descriptions, and to mandatory
rental payments for prospecting rights."
This was the first hearing for this bill in the Senate
Finance Committee.
JULIE LUCKY, Staff to the Senate Resources Committee, read a
statement into the record. She said the intent of the bill
was to streamline and make more efficient, Alaska's
procedures to locate and process mining claims. She spoke of
a backlog of sites waiting to be listed on the state land
status plats.
Ms. Lucky told the Committee that the Department of Natural
Resources had established an electronic format known as
Meridian, Township, Range, Section and Claim (MTRSC) that
would allow the department to electronically input
information regarding claims on the plats.
Ms. Lucky said the bill provides an incentive to use the
MTRSC format or convert existing claims to the new format.
She stated that the bill also clarifies the rental and labor
rates for the claims and establishes a rental rate for
prospecting sites where there was currently no rental rate.
She added the bill would reduce the time allowed for an
individual staking a claim or locating a prospecting site,
to record a certificate of location from 90 days to 45 days.
She stated the bill allows large claims, which would require
less fieldwork and less paperwork.
Ms. Lucky continued saying the bill would repeal a
limitation on the number of sites one could hold in a
township, increase the terms from one to two years and make
those terms non-extendable. She concluded that the bill
removes a requirement that claim lines be marked.
Senator Phillips expressed confusion on the fiscal note and
the statement that the industry would pay up to $150,000 for
the service.
BOB LOEFFLER, Director, Division of Mining, Land and Water,
Department of Natural Resources stated that the department
supported the bill because it would allow the program to
move into 21st century using automation and the Global
Positioning System (GPS).
Senator Phillips and Mr. Loeffler had dialog regarding the
contribution of the industry to this service and that half
of the money would be deposited to the permanent fund.
Senator Phillips requested that future fiscal notes reflect
any revenues that go into the permanent fund.
Mr. Loeffler stated that this legislation would make
operations more efficient to the state and even if the
fiscal note were not adopted, he hoped the bill would still
pass into law. He told the Committee that the department was
not providing the level of service to the mining industry
that it could be proud of. This bill, he said, would reduce
the processing time to three months. However, because the
industry willing to advocate $150,000 of new revenue to the
state, he thought it would be beneficial to capture those
funds to help decrease the processing time even further to
four to six weeks. He believed that time frame would provide
a level of service that would better secure land tenure for
the industry.
Senator Leman noted the $75,000 in the personal services
component of the fiscal note, and asked what that money
would buy. Mr. Loeffler replied that an additional staff
person would be hired. He also detailed the plan to fund
currently vacant and unfunded positions. He explained that
these were clerk positions with a low pay range that would
be charged with inputting data into the electronic system.
STEVE BORELL, Executive Director, Alaska Miners Association,
Inc. testified via teleconference from Anchorage in support
of the legislation. He referred to a letter to the Committee
from the Association. [Copy on file] In addition to the
letter, he commented that the bill was a result of several
years of work between the mining industry and the
department. He detailed the efforts of various committees
and described the representation of the involved parties.
Mr. Borrell stressed that the bill only changes the process
for locating claims and does not increase or decrease the
rights established by mining claims. He shared that the
catalysis behind the industry's interest in making changes
was the on-going budget challenge in terms of manpower and
time.
He believed the bill would simplify the process and reduce
errors and paperwork from the miner's standpoint partially
due to using GPS and also because of the larger allowed
claim size. He stated, "this is a win-win for everyone."
Co-Chair Torgerson asked what was different about a
prospecting site. Mr. Loeffler explained a prospecting site
does not require discovery, which a mining claim requires.
For this reason, he noted this bill takes away the ability
to extend prospecting sites beyond two years. He said this
was because the department wanted the miner to "put their
money into the ground to protect their discovery."
Co-Chair Torgerson then asked if the leasehold location and
mining discovery were the same. Mr. Loeffler explained that
the leasehold location is open to mining only after a lease
is obtained. Typically, he said the areas subject to leases
had additional stipulations because they were near
anadromous fish streams or other special circumstances.
Mr. Loeffler responded to Co-Chair Torgerson's next query
saying that prospecting sites are often staked by major
companies who were tying up ground for their exploration
program or simply for speculation. He reiterated that the
time limitations were included in the committee substitute
to ensure the company would develop the sites and therefore
generate royalties for the state.
Co-Chair Torgerson returned to the fiscal note and the
additional personnel, wanting to know if the bill would
still accomplish its goals without the additional staff. Mr.
Loeffler gave a background of the program saying that in the
early 1990's, the state had 3000 mining claims staked each
year, and that by 1995, 10,000 claims were staked. While
this has resulted in a mining boom, he pointed out that the
cost to process the claims has increased. He shared that
claims that used to take 3-4 weeks to process were now
taking 4-6 months. He warned that the workload would
continue to increase. With the inception of this
legislation, he predicted the processing time would be
reduced to 12 weeks in this fiscal year without the
additional funding and to only six weeks if the fiscal note
was adopted. He qualified that without the funds, the 12
weeks would increase to 14 weeks and then to 16 weeks, etc.
each year. The fully funding program would keep the
processing time to 11-12 weeks, according to Mr. Loeffler.
Co-Chair Torgerson how many of the 10,000 claims the
department processed were on state land. Mr. Loeffler
answered all claims.
Co-Chair Torgerson next asked how much of the $1 billion
generated came from state land. Mr. Loeffler replied that
all but the proceeds from the Red Dog mine and the Greens
Creek mine.
Co-Chair Torgerson pointed out that the mining revenues to
the state was only $1.2 million in 1998 and $1.6 in 1999.
Mr. Loeffler corrected and explained that in 1999, state and
local governments received $13 million from the mining
industry not including income tax.
Co-Chair Torgerson asked how much of the revenue was from
royalties. Mr. Loeffler replied that the state received
approximately $4 million for coal royalty and rents, hard
rock mining claim rent and mining license taxes, but that
only $16,000 in revenues were royalties from hard-rock
minerals, such as gold. He stated the reason was because
gold prices tumbled and the major producers were not making
money. He explained how the royalties were calculated from
the net profits. He stated that while Fort Knox was a boom
to the Fairbanks economy, the operation did not make much of
a profit. He added that in early part of a mine process,
there are many of write-offs, which also lower the net
profit. He said the net profit calculation method and the
exemptions were set by the legislature as a trade-off for
new jobs and higher production. He believed this trade-off
"was bearing fruit."
Mr. Borell interjected to agree with the Ft. Knox example
and to note that the site is located on mental health land.
He surmised that the Mining Incentive Act as described by
Mr. Loeffler had no impact on current revenues but has a
large impact on how the state is perceived for new
development. He also pointed out that there were few mines
in the state, only four mines have more than 100 employees
and that other mines were in bankruptcy because of the
adverse effects of gold prices.
Co-Chair Torgerson expected that the state would realize
increased royalties from the mining incentive credits
beginning in the next several years.
Co-Chair Torgerson stated that his biggest concern was news
reports that talk about the healthy mining industry in
Alaska but the state's revenue report shows the resources
almost given away.
Senator Leman asked for an explanation of the claims
processing and what could be done to streamline the process.
Mr. Loeffler explained that the department has begun to put
the status plats on-line, which informs others of areas
available for claims. He gave detail of the automation in
the platting process and how this bill would assist the
department in achieving more automation.
Senator Leman thought the process could be set up in "real
time" to automatically show the claim status. Mr. Loeffler
replied that was the hope and noted that 20 years ago, the
department employed 40 people to upkeep the status plats and
that there were only three or four people doing the same
amount of work.
Senator Adams stated that because the fiscal note reflected
a commitment of the mining industry, he hoped the fiscal
note would be adopted along with the bill.
Co-Chair Parnell offered a motion to move from Committee, SB
175, LS0955/G. There was no objection and the bill MOVED
FROM COMMITTEE.
ADJOURNED
Senator Torgerson adjourned the meeting at 10:27 AM.
SFC-00 (12) 02/29/00
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