Legislature(1993 - 1994)
03/01/1993 01:35 PM Senate JUD
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* first hearing in first committee of referral
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+ teleconferenced
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SENATE JUDICIARY COMMITTEE
March 1, 1993
1:35 p.m.
MEMBERS PRESENT
Senator Robin Taylor, Chairman
Senator Rick Halford, Vice-Chairman
Senator George Jacko
Senator Dave Donley
Senator Suzanne Little
MEMBERS ABSENT
NONE
COMMITTEE CALENDAR
SENATE BILL NO. 67
"An Act amending provisions of ch. 66, SLA 1991, that relate
to reconstitution of the corpus of the mental health trust,
the management of trust assets, and to the manner of
enforcement of the obligation to compensate the trust; and
providing for an effective date."
PREVIOUS SENATE COMMITTEE ACTION
SB 67 - See Resources minutes dated 2/3/93 and 2/5/93.
WITNESS REGISTER
Attorney General Charles Cole
Department of Law
P.O. Box 110300
Juneau, Alaska 99811-0300
POSITION STATEMENT: Opposed SB 67
Tom Koester, Attorney
for the Department of Law
P.O. Box 110300
Juneau, Alaska 99811-0300
POSITION STATEMENT: Opposed SB 67.
R. B. Stiles, President/Owner
D. & R. Ventures
1227 W. 9th Avenue, Suite 210
Anchorage, Alaska 99501
POSITION STATEMENT: Supported SB 67.
Jeffrey Jessee, Attorney
Advocacy Services of Alaska
615 East 82, #101
Anchorage, Alaska 99518
POSITION STATEMENT: Opposed SB 67.
Tom Waldo, Attorney
Sierra Legal Defense Fund, Inc.
325 4th Street
Juneau, Alaska 99811
POSITION STATEMENT: Supported SB 67.
Peter Maassen
Marathon Oil
810 N Street
Anchorage, Alaska 99501
POSITION STATEMENT: Supported SB 67.
Charles Boddy
Usibelli Coal Company
122 First Avenue
Fairbanks, Alaska 99701
POSITION STATEMENT: Supported SB 67.
Jim Gottstein
Alaska Mental Health Association
406 G Street, #206
Anchorage, Alaska 99501
POSITION STATEMENT: Opposed SB 67.
David Walker, Attorney
for the Settling Plaintiffs
417 Harris Street
Juneau, Alaska 99801
POSITION STATEMENT: Opposed SB 67.
ACTION NARRATIVE
TAPE 93-19, SIDE A
Number 001
Chairman Robin Taylor called the Judiciary Committee meeting
to order at 1:35 p.m.
SENATOR TAYLOR brought SB 67 (MENTAL HEALTH TRUST
AMENDMENTS) before the Judiciary Committee. SENATOR TAYLOR
announced the list of those testifying on SB 67 in Juneau
and on the teleconference network in Anchorage, Fairbanks,
Kodiak, and MatSu.
SENATOR TAYLOR invited Attorney General Cole to testify.
ATTORNEY GENERAL COLE began his remarks to SB 67 entitled
"An Act amending provisions of ch. 66, SLA 1991, that relate
to reconstitution of the corpus of the mental health trust,
the management of trust assets, and providing for an
effective date," by objecting to the legislation. He
explained the legislation would involve the reconstitution
of lands formerly within the corpus of the trust which have
not been conveyed or encumbered by the state or reserved by
law from the public domain. He further explained it would
repeal sections of Chapter 66 of AS 37.14.036(c) to provide
compensation for the land that constituted the trust
established by the Alaska Mental Health Enabling Act in
1956.
ATTORNEY GENERAL COLE quoted the requirement, as proposed by
SB 67, to direct the state to make an annual payment of 6%
of the unrestricted general fund revenue of the state during
each fiscal year. He explained that section provides
further that the Commissioner of Revenue shall annually
allocate that amount from the general fund to the Mental
Health Trust Income Account established under Subsection A
of Section 2 of the bill.
ATTORNEY GENERAL COLE questioned the amount of land to be
reconstituted to the trust as provided by the proposed
legislation and explained the status of the original lands:
46 thousand acres to third parties, 43 thousand acres to
Municipalities, 39 thousand acres to the Native corporations
and the University of Alaska, 60 thousand to mining claims,
and legislatively designated areas - state forests, parks,
wildlife refuges, etc. - comprising 357 thousand acres, and
unencumbered lands comprising 352 thousand acres. He
thought this last figure of 352 thousand acres should be the
focus; however, about 550 thousand acres would be
reconstituted to the trust under the proposed legislation.
ATTORNEY GENERAL COLE discussed the process of placing
thousands of acres back into the trust and finding the
missing 550 thousand acres to make up the original one
million acres under the original enabling legislation.
ATTORNEY GENERAL COLE explained the legislation would
appropriate in perpetuity 6% of the unrestricted general
funds of the state, with last year's amount about $132
million, and he thought this year's bill would be about the
same general amount, or more depending on the recent British
Petroleum settlement.
Number 147
ATTORNEY GENERAL COLE suggested the proposed amount for this
year might be around $170 million to the Mental Health
Income Account, and would go on forever. He thought there
might be some constitution problems arising from this
legislation, and he expressed his firmly held view that 6%
of the unrestricted general funds forever was far too much
to pay to replace the missing 550 thousand acres.
ATTORNEY GENERAL COLE repeated his opposition to SB 67, and
he asked the committee to consider the effect of the 6%
provision. He explained the legislature would have no
further control over the appropriations for mental health,
and the legislation would effect money that goes to
education, to public safety, or any other legislative
priorities.
ATTORNEY GENERAL COLE thought the legislature should be free
to make appropriations pending upon the evaluation of state
appropriation needs. He thought the Weiss case should be
settled at fair market value, but the bill shouldn't lock
the legislature into 6% in perpetuity to pay for only 500
thousand acres of land.
Number 202
ATTORNEY GENERAL COLE explained, in the existing settlement,
the state waived the set-off which was granted by the Alaska
Supreme Court for sums previously appropriated to mental
health programs in the state. He said the amount was a
matter of debate, and he claimed the court had refused to
explain their actions. He stressed his main theme of "what
is fair?"
SENATOR LITTLE asked ATTORNEY GENERAL COLE if he was saying
it was a bad idea, and she asked if he had a better idea to
offer.
ATTORNEY GENERAL COLE explained why he thought SB 67 was a
profoundly bad deal, and he thought Chapter 66 was basically
fair, to reconstitute the trust as mandated by the supreme
court. He continued to discuss his opposition to the
changes which would be brought by SB 67.
Number 261
SENATOR LITTLE pushed for a better idea, and ATTORNEY
GENERAL COLE thought Chapter 66 was a good idea then and
now.
SENATOR TAYLOR expressed his primary concern at what he
considered the hostages, and he asked if the bill released
the hostages.
ATTORNEY GENERAL COLE thought those provisions in SB 67 that
seemed simple and straight forward would generate a plethora
of litigation, and he explained stipulations from the Weiss
case. He refused to elaborate further.
SENATOR TAYLOR asked if the proposed litigation would
release the hostages, and ATTORNEY GENERAL COLE said he
didn't see anything in the bill that would release them. He
explained the legislation would not end the quest, since
there still needed to be an agreement with the beneficiaries
in the Weiss litigation.
Number 310
SENATOR TAYLOR asked how the concerns could be
satisfactorily resolved for all of the various parties who
may wish to litigate, and he explained how the group
expanded to include many other groups. ATTORNEY GENERAL
COLE suggested SENATOR TAYLOR would not have that assurance
if SB 67 was enacted.
SENATOR JACKO asked whether it would be a dedicated fund,
and ATTORNEY GENERAL COLE quoted MR. KOESTER as saying it
was a dedicated fund, but he preferred to leave the answer
to MR. KOESTER. MR. KOESTER said it had been done
obliquely.
SENATOR TAYLOR suggested there should be time for both sides
of the dispute, and BOB STILES, President/Owner of D.& R.
Ventures, asked to testify for the settling plaintiffs.
Number 342
MR. STILES said he was not a plaintiff, but an affected
third party, who had become one of the hostages in the
mental health litigation. He clarified that SB 67 was not
an alternate to Chapter 66 but was amendments to Chapter 66.
He reviewed the objections put forth by the Department of
Law and the attorney general, and said he has instructed his
legal counsel to prepare some suggested legal fixes to SB
67. He addressed his concerns about the primary litigious
parts of Chapter 66 on the substitute land issue.
MR. STILES outlined two potential outcomes, both of which he
found onerous, the first being the ineffectiveness of
Chapter 66 if it survives. He predicted if Chapter 66 fails
quickly, it would precipitate reconstitution, dealing with 6
thousand transactions in the litigation. He described the
knowledge of the mental health land freeze in international
markets, and he said the details of the litigation are not
well known, but he explained they just don't invest or buy.
He outlined some dire results with regards to his
investments, and other investors, in the Wishbone Coal
Project and the Beluga Coal Company, thus, losing a new
project.
Number 416
SENATOR TAYLOR asked what assurances MR. STILES had that if
the amendments passed, the land freeze would be lifted.
MR. STILES said the legislature had removed the fuel from
the fire in the substitute language, and he quoted the
interveners as saying, "In the absence of the substitute
lands, they don't have anything to litigate about." He
claimed the original trust lands are trust lands, and he
gave his understanding of the way in which the lands should
be handled.
SENATOR TAYLOR clarified MR. STILES' explanation on the
treatment of the original trust lands, and MR. STILES said
they would be somewhere between private lands and municipal
lands.
Number 438
Next SENATOR TAYLOR invited JEFF JESSEE, Senior Attorney for
the Advocacy Services of Alaska, to testify.
MR. JESSEE said he was a former settling plaintiff, and now
a non-settling plaintiff, and represented people with
developmental disabilities, one of the four beneficiary
groups in the mental health lands trust case. He expressed
dismay that ATTORNEY GENERAL COLE was not able to stay to
listen to the remainder of the testimony.
SENATOR TAYLOR said that was why he had asked MR. KOESTER,
Attorney for the Department of Law, to return.
MR. JESSEE reminded the legislators that when they were
elected as legislators they were also elected as Trustees of
the Alaska Mental Health Lands Trust, and as such, have a
special relation to his clients, the developmentally
disabled.
MR. JESSEE traced his path from being a settling plaintiff
to a non-settling plaintiff, and his negotiations with
ATTORNEY GENERAL COLE and COMMISSIONER HAROLD HEINZE in the
land exchange. He reviewed their discussion as to whether
the land exchange would violate Section 6(i) of the
Statehood Act, and how it was put on a list of unresolved
problems.
MR. JESSEE continued his description of the negotiations,
the development of the settlement agreement, and the
emergence of the public interest interveners, who activated
the list of unresolved problems. He thought the suit
brought by the interveners would resolve most of the list of
problems and bullet proof the settlement.
Number 490
MR. JESSEE took one issue from the problem list, Section
6(i) of the Statehood Act, which, he said, must be resolved
before the land exchange can take place. He explained if
the land exchange was held in violation of Section 6(i), the
state could lose to the federal government all of those
exchange lands, while languishing in the courts.
MR. JESSEE took on the issue of hostages beginning with a
million acres of hostage land, the original trust land. He
added the 6.7 million acres of hypothecated or security
lands and the 550 thousand acres of proposed substitute
lands, which under the settlement agreement, has to be
segregated and closed to mineral entry. He summarized the
problems a person might have in wanting to develop any of
the hostage lands.
MR. JESSEE said the fatal flaw in the lands deal came when
he realized the concept of locating comparable lands to the
original lands was not realistic, and he listed such areas
as the Homer Spit, Mountain View, and Kenai River frontage
as part of the original trust. When the comparable land was
not found, he said they were forced to select Cook Inlet oil
and gas wells, the Glacier Winter Creek area, the Lease Lake
area, and hydro-electric sites in Southeast Alaska.
MR. JESSEE said the state was outraged when these lands were
selected, especially the Cook Inlet oil and gas wells, which
made him realize there would be additional hostages just to
get the chance to litigate against the state to see what
lands would be put into the trust. He explained that
realization wasn't in the best interest of the
beneficiaries.
Number 522
MR. JESSEE explained how the Mom and Pop designated land was
to be released, to lift the land freeze, so they could get
their patents, but the mental health trust had to reserve
the right to reassert claims to that land if the settlement
was never approved. He quoted the courts as saying it was a
cruel hoax, since selling the land would be selling a
lawsuit.
MR. JESSEE admonished ATTORNEY GENERAL COLE for his remark
about the 6% going on forever. He explained whoever had the
land would have it forever, and the mental health programs
would have it forever. He explained the 6% had been passed
in 1990 as a proposed settlement to the case, and he gave
the reasons why that settlement failed.
MR. JESSEE said the legislation had the same protection as
the legislature's ability to appropriate and control the
money contained in the current settlement before the court.
He linked the reduction in the 6% amount to the reduction in
the income in the state.
MR. JESSEE characterized the conservative philosophy of the
participants in regards to the use of the mental health
funds by the mental health programs and the Mental Health
Trust Authority as being more careful than the legislature.
He outlined all of the participants in the mental health
problems as to how they are paying for Chapter 66, and how
unpopular this has made the litigants in the mental health
case.
MR. JESSEE quoted PHILIP VOLLAND from last year when he
outlined what he believed would happen with SB 67, when the
land freeze would be lifted, and all the hostage lands
released. MR. JESSEE could not guarantee there would not be
any future litigation, but he couldn't imagine any more
problems than there presently were with Chapter 66.
MR. JESSEE described ATTORNEY GENERAL COLE'S $3 billion
offset as being untrue, and he quoted the supreme court as
stating the mental health trust was to have received all of
the original land possible, except for the lands that were
sold, where the plaintiffs were entitled to cash from the
state, and the state entitled to a credit for what they had
spent. He explained how crucial were the lands that had
been sold.
TAPE 93-19, SIDE B
Number 001
MR. JESSEE suggested the attorney general sit down and
realistically look at some of the remaining issues, because
he thought they could be solved.
SENATOR TAYLOR asked MR. JESSEE what assurance the
legislators have, if the amendments are passed, the hostages
will be released.
MR. JESSEE said the first would be all of the land hostages
would be released, and the cloud over the rest of the state
land would be lifted. He said he would present the letter
from PHILIP VOLLAND, who believes within a matter of months,
the injunction would be removed. He thought it would happen
more quickly than under the current Chapter 66 settlement.
SENATOR TAYLOR asked if the 315 thousand acres would be
returned to the trust under SB 67, and MR. JESSEE explained
there would be some variation in the number of acres of
totally unencumbered land. He said some of the encumbered
lands can also be returned under SB 67, because the trust
would take them subject to the encumbrance, and he gave an
example.
SENATOR TAYLOR quoted ATTORNEY GENERAL COLE as using the
figure of about 450 thousand acres that could be returned to
the trust. There ensued a discussion of these lands
including the legislatively designated lands, the
Municipality lands, and the Mom and Pop lands. They also
discussed the 6% to be spent currently on mental health
programs, and MR. JESSEE criticized ATTORNEY GENERAL COLE'S
attitude on the 6%.
SENATOR TAYLOR suggested, as the state has a decreased
income stream, the mental health programs might need more
money, and MR. JESSEE said none of the money currently
appropriated would ever completely pay for all of the mental
health programs of the state. MR. JESSEE thought the
settlement would give the mental health programs some
influence over the money to spend it smarter or better.
Number 050
SENATOR DONLEY asked if there were going to be any changes
to the legislation as it comes from Resources, and SENATOR
TAYLOR said there were none so far.
MR. JESSEE said MR. STILES would be presenting some
technical amendments, which MR. STILES explained were in
response to legal issues raised by the attorney general.
Next, SENATOR TAYLOR called on TOM WALDO, Attorney for the
Sierra Legal Defense Fund, Inc., to testify.
MR. WALDO explained, in addition to the Sierra Legal Defense
Fund, he was also one of the attorneys representing the
public interest interveners in the mental health litigation,
and he described the interveners as a coalition of 8 groups
- 5 environmental groups, 2 sport fishing organizations, and
the Susitna Valley Association, which he said promoted the
recreational and tourism values of the Susitna Valley.
MR. WALDO explained the public interest interveners
generally supported nearly all of Chapter 66, the provisions
dealing with the whole program side, and the administrative
provisions negotiated over which a consensus was reached.
He outlined their disagreement on the land exchange
provisions for reconstituting the trust that had been
hastily put together in the closing days of the 1991
legislative sessions. The disruption they saw in the
proposed land exchange led them to litigation over 11 claims
in October, 1991, a few months after the passage of Chapter
66. He quickly described some of the claims.
SENATOR DONLEY asked MR. WALDO if his group supported the
legislation, and MR. WALDO said they did. He cited Chapter
66 for not having enough safeguards for the public interest
and was a major raid on the permanent fund in violation of
the Alaska Constitution. He also explained how his group
had been working with the other claimants on SB 67.
Number 121
SENATOR TAYLOR asked if he represented all of the potential
litigants in the settlement, and MR. WALDO said he could
only speak on behalf of his own clients. He said he did
represent many people with concerns that have been
expressed.
SENATOR TAYLOR turned to the teleconference site in
Anchorage for PETER MAASSEN, an Attorney representing
Marathon Oil Company and the Union Oil Company of
California.
MR. MAASSEN said he represented recent interveners in the
Weiss litigation, as specified by JUDGE MEG GREEN. He
described Marathon and UNICAL as unlikely allies with some
of the other groups supporting SB 67, as well as unlikely
participants in a struggle over funding for mental health
programs. He explained the companies had scores of oil and
gas leases in Cook Inlet, currently tied up in the
litigation, because they had been pledged by the state as
security for the state's reconstitution of the trust, or
they have been named by the settling plaintiffs as proposed
substitute land to be included in the reconstituted trust.
MR. MAASSEN described their problems in terms of
foreclosures under the provisions of Chapter 66, inclusion
of the oil and gas leases in the trust by the settling
plaintiffs, and the issue of being transferred to another
lessor, who has no history of lease administration.
Because of this, MR. MAASSEN said Marathon and UNICAL had
brought suit saying their contract is with the state and
can't be transferred to the trust without doing violence to
the lease terms. He gave an example of the magnitude of the
timing problem under Chapter 66, in the specific context of
their claims. He predicted one lawsuit after another if the
state proceeded under Chapter 66.
Number 188
There were no questions, so SENATOR TAYLOR called on CHARLES
BODDY, representing the Usibelli Coal Company in Fairbanks.
Next he lined up JIM GOTTSTEIN, representing the Alaska
Mental Health Association, and DAVID WALKER, Lead Counsel
for the Settling Plaintiffs in the Weiss litigation, for the
remaining time.
MR. BODDY, Vice-President of Government Relations for
Usibelli Coal Mine, explained the coal mine was a company
that currently operated on three state coal leases that was
either original mental health trust lands, on the
hypothecated lands list, the proposed substitute lands list,
or on the "pizzle" list. He characterized SB 67 as a fire
fighting mechanism, and he said the fire was the replacement
or substitute lands. He thought without that one sole
provision, there would only be a few dim embers with which
to deal. MR. BODDY indicated he would be coming to Juneau
to help work through the technical amendments.
Number 223
MR. GOTTSTEIN deferred to MR. WALKER in Juneau, who
addressed the legislation before the committee as to what it
"is and isn't." He said he represented the group of
dwindling settling plaintiffs in the state who have urged
the state to stay the course on Chapter 66, and he praised
the settlement provided by chapter 66. He explained it took
the good faith effort of all three branches of government to
effect the settlement in the class action litigation, and SB
67 was an abandonment of that approach. He hinted the
governor would probably veto the bill, and he quoted the
court as saying the legislature cannot unilaterally resolve
the lawsuit. MR. WALKER spoke optimistically about Chapter
66 and suggested the committee conduct a hearing with people
who have worked in the settlement with their maps.
SENATOR TAYLOR apologized for the lack of time, but he
thought all of the speakers were essential. MR. WALKER
offered to be available to the committee whenever needed.
Number 296
SENATOR TAYLOR expressed some concerns that once the land
settlement was achieved, parties should be working together,
and he thought that process had broken down to the extent
that every square inch of Alaska Statehood land was
presently in jeopardy. He said he was willing to continue
the process if he could see some resolve, but at this point,
he told MR. WALKER, the state was never going to be able to
develop any lands in Alaska for the next ten years. SENATOR
TAYLOR thought some of the interest groups were concerned
about their own welfare and not the mental health patients.
MR. WALKER explained they were trying to reconstitute the
trust with what is left of some of the most valuable land in
the state of Alaska, and he said it was absolutely certain
there would be conflicts over the reconstitution as an all
land based trust, as a consequence of the decision.
MR. WALKER thought if all parties worked together the land
proposal exchanges would be possible, and he expressed some
reservations about the use of an income stream. He said the
proposals in Chapter 66 are manageable and a short cut way
to resolve the land exchange difficulties.
Number 359
SENATOR TAYLOR described a large block of retained lands
that are parks, wilderness, and forested lands, and he
suggested returning these park lands to the trust, instead
of using these lands as leverage to tie up every piece of
valuable land in the state.
MR. WALKER didn't quite understand the thrust of
legislatively designated areas, but he explained there would
be problems as there were legislatively designated areas.
SENATOR TAYLOR suggested that under SB 67 the 370 thousand
acres acts as security for a 6% annual payout, and he
complained the land had been leveraged up to 6.7 million
acres of land. MR. WALKER protested they were substitute
lands and would not all be included in the trust, but rather
a pool from which the trust would be reconstituted. He
explained the legislature had insisted on the legislatively
designated lands designation. SENATOR TAYLOR felt the
legislature should revisit the entire question of the
legislatively designated lands, because the real price is
more evident. He described the land transaction as having
some spendy parks if such as the Haines State Forest were
kept intact.
SENATOR TAYLOR and MR. WALKER traded questions and answers
in an exchange about legislatively designated lands, the
parks, and satisfying the supreme court decision. SENATOR
TAYLOR had some harsh comments on the potential litigants in
the trust lands reconstitution.
Number 462
SENATOR TAYLOR said the legislation would be resolved in
committee with consensus.
SENATOR LITTLE asked when the bill would be returned to
committee, and SENATOR TAYLOR indicated it would be Monday
of the following week. SENATOR DONLEY said he would like to
see the proposed amendments as soon as possible.
There being no further business to come before the
committee, the meeting was adjourned at 3:05 p.m.
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