Legislature(1997 - 1998)
01/22/1997 03:35 PM Senate RES
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* first hearing in first committee of referral
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SENATE RESOURCES COMMITTEE
January 22, 1997
3:35 P.M.
MEMBERS PRESENT
Senator Rick Halford, Chairman
Senator Lyda Green, Vice Chairman
Senator Loren Leman
Senator Bert Sharp
Senator Robin Taylor
Senator Georgianna Lincoln
Senator John Torgerson
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
Department of Natural Resources Overview
WITNESS REGISTER
Commissioner John Shively
Department of Natural Resources
400 Willoughby Ave.
Juneau, AK 99801-1724
Mr. Nico Bus, Chief
Financial Services
Division of Support Services
Department of Natural Resources 99801-1724
ACTION NARRATIVE
TAPE 97-1, SIDE A
Number 001
CHAIRMAN HALFORD called the Senate Resources Committee meeting to
order at 3:35 p.m. and announced that Commissioner Shively would
give an overview of the Department of Natural Resources.
COMMISSIONER SHIVELY said they didn't have much of a legislative
agenda this year and there are no administrative bills on behalf of
the Governor for DNR. However, individual legislators are
introducing some legislation and the most complicated is the Title
38 revisions. He said there may be some technical mining issues
like the amendments to the coal bed and shallow gas bill that was
passed last year. There will also be another piece of legislation
relating to the Shiak State Park.
Number 90
He said other priorities of the Department are the large-mine
permitting program, because there are a number of new mines that
might open; securing the title to municipal lands which is
complicated in some areas; improvement of services in our state
parks; and assuring the safe transportation of oil.
In their agriculture unit they have seen some moderate growth and
some increase in farm bank activity. It is an industry that stands
on a very unstable base because the state owns the creamery and
slaughter facilities. He has encouraged people in the industry to
come up with some creative solution to resolve that ownership
problem.
COMMISSIONER SHIVELY noted that the revenue from timber for last
year was down to $1.2 million although the number of contracts had
increased from 52 to 70. He said that a lot of the timber that was
sold was beetle kill and the market just disappeared.
Geological and geophysical airborne surveys have been one of the
huge success of government, he said. He said there would be
another request in this year's capital budget for that.
A three-year coal-bed methane study project was funded last year
and the first phase of that had been achieved, he reported.
The Joint Pipeline Office is involved in other pipelines and the
ones that are active now are the Badami, North Star, and Alpine.
Number 148
Not many dramatic things are happening in the land arena. One of
the important things is that they have completed the transfer of
land to the Mental Health Land Trust which was done with less money
than was originally thought. They have transferred in the last
couple of years about 30,000 acres of municipal land entitlements.
There have been no land sales this past year and the State has
gotten title on about 750,000 acres from the federal government.
In mining the major projects are Fort Knox, Nixon Court, Illinois
Creek, Red Dog Expansion, True North, Stone Boy, and Kennsington.
He commented that the AJ Mine had always had a number of hurdles to
overcome and the resource was just not there as the company hoped
it would be.
COMMISSIONER SHIVELY said he has seen a whole new attitude in the
oil industry about what is possible in Alaska. Some of it has to
do with technology and some of it has to do with the industry's
ability to drive down their costs and with recognition that there
is a huge investment in the State and that investment can be used
for smaller fields. The message has been sent by the
administration and the legislature that we are willing to look at
different and better ways of doing business with the industry.
HB 207 has not been a major factor and they have not had one
request from the Slope even though there were a variety of
opportunities for people to be talking to them about that. There
is one request from Cook Inlet which they are currently reviewing
from UNOCAL which they are still reviewing.
He said BP has met their commitments at North Star. They have let
their local contracts. They are prepared to build the sea lift
modules in Anchorage.
The new five-year oil and gas leasing schedule will be out this
week and the value-added timber bill has not had much success, but
there has been some interest from Fairbanks, Copper Center, and a
little bit in Southeast.
The exploration credit for mining legislation has had a positive
impact. There were 12,000 new mining claims staked - about 4 times
our average.
Number 244
SENATOR LEMAN asked the status of exploration licensing.
COMMISSIONER SHIVELY replied that the regulations are out. They
asked for nominations on companies in April, but they had not, as
required by law, identified the areas people could request in.
After doing that, they have one large one and several smaller ones
they are looking at. Within the next year at least one of those
agreements should be signed.
SENATOR TORGERSON asked if he could comment on UNOCAL's problems.
COMMISSIONER SHIVELY answered that they are discussing a reduction
of royalty and looking at the economics with UNOCAL. A lot of time
has been spent on it. He is not certain that the company needs the
reduction in all the places they have asked for.
Number 291
SENATOR TORGERSON asked who might be the State Forester.
COMMISSIONER SHIVELY explained that there were 38 applicants and
the Board of Forestry must keep them confidential while under
review. They will recommend at least two people whose names will
become public. He thought it would take 1 - 2 months to get
through the process.
SENATOR LEMAN asked the status of Mr. Boutin and what was the
reason for his departure. COMMISSIONER SHIVELY replied that his
last day was today and he didn't think it was appropriate to
discuss a personnel situation in public. He said the most
contentious resource he manages is timber because there is almost
no middle ground. There are people who want to harvest to the max
and people who don't want to harvest at all. Good decisions have
been made by Mr. Boutin, but the issues had taken their toll and he
made the decision that it was time for a change.
Number 322
SENATOR GREEN said Mat-su has a number of small timber salvage
users who are trying to develop a business, but they need a
consistent supply of useable timber. She asked if solving that
problem, which is regional, was one of the criteria they used in
reviewing for a new State Forester. COMMISSIONER SHIVELY said in
most regions they would like to see timber processed to the maximum
extent possible and some of the little operators are the ones that
do that. They have not had a good method of assuring a long-term
supply, but he thought HB 212 (last year) did offer some
opportunities. He thought that timber sales should be made more in
that regard than in the traditional sales. It makes more sense to
look at who can use the resource and give them some kind of terms
so they can make investments in their business, if they will use
that timber to create additional jobs.
SENATOR GREEN asked why he didn't think land disposal was within
his purview. COMMISSIONER SHIVELY said his higher priority is to
get land to the municipalities and have them look at individual
distributions of it. This is because he has a lot of
responsibilities in terms of land disposal and he doesn't have the
budget to do them all. He thinks that local governments are in a
far better position to decide where they want homesites,
recreational and other areas developed than the State is. The
State has had a very spotty record in land disposals creating a
number of problems for local governments by developing land
disposals and then telling the local government to deal with the
problems. He thought it was a better way to do it.
COMMISSIONER SHIVELY emphasized that he did not say he didn't want
any more State land disposals. However, they take a huge effort
because every parcel has to be appraised before they are put out to
disposal in order to guarantee that the State gets its fair market
value. He said there are about 50,000 parcels that ultimately
could go into one land disposal or another.
Number 389
SENATOR GREEN asked if that would be in addition to the total
acreage originally allotted to each borough. COMMISSIONER SHIVELY
replied that this is part of what their entitlement is at this
point. There is proposed legislation that would change that.
CHAIRMAN HALFORD commented that in the past the State has disposed
of land to municipalities like they are disposing it to people, and
they aren't. It means there won't be any disposals where there are
no municipalities. Also, municipalities have a built-in conflict
of interest if you look at the composition of local assemblies,
etc. which have all the people who have vested interest in the
existing land and whose interests are not helped by more land
becoming available.
COMMISSIONER SHIVELY replied that he didn't disagree with that.
However, he said the State does not have a lot of holdings in what
is left of the unorganized boroughs. He said most of the demand is
from organized boroughs. He thought that the municipalities have
to bear the brunt of it if the State makes the disposals. In the
past, he said, the State had put in telephone and electric lines
and roads. Of course, we don't have that kind of money right now
and sometimes people think they are going to get something that
they don't get.
SENATOR HALFORD said everyone who takes the land should recognize
that it's their responsibility to provide everything that everybody
else has to provide.
Number 400
SENATOR TORGERSON said he introduced legislation that says you
can't have it unless you sell it or put it in development. He said
this could be a good economic development bill which would help
local governments to increase land holdings within their boundaries
and add land to their tax roll. It's all land that the State is
doing nothing with.
Number 439
SENATOR LINCOLN asked where we are with local hire in the North
Star. COMMISSIONER SHIVELY answered that the contracts for the
major modules have been let to local companies. BP has assigned a
person to do nothing but local-hire and he believes that they have
looked at it seriously. He said there is some discussion about
what an Alaskan is.
SENATOR LINCOLN asked who in the administration is monitoring this.
COMMISSIONER SHIVELY replied that Commissioner Cashen is keeping
track of it.
SENATOR LINCOLN requested a written report from Commissioner Cashen
on the matter prior to talking with BP and ARCO.
Number 489
SENATOR GREEN asked what future plans there were for Hatcher Pass.
COMMISSIONER SHIVELY said that Mr. Rogers who holds the lease on
that land has not paid his taxes; the borough has gone to court to
get a judgement against him; he has been notified that the
judgement violates the terms of his lease; he has 30-days from
January 9 to correct; otherwise the lease is voided. If it is
voided, he is not sure what the next step would be, but it would be
done in conjunction with the local government. However, if there
is another lease, it will have specific performance deadlines.
Number 512
SENATOR SHARP asked what FY 98 expenditures there were for south
Denali. COMMISSIONER SHIVELY replied that they have on-going staff
work with the Plan and they would continue that. The major work,
if any, would be DOT road work.
SENATOR SHARP asked if the proposed site where the development was
supposed to take place was on State land or federal land.
COMMISSIONER SHIVELY replied that it was in the State Park.
SENATOR HALFORD commented that another issue that concerned him is
prohibition of traditional access to lands to Alaskans and then it
being sold to the highest bidder - outside interests on a
commercial basis.
Number 550
SENATOR LEMAN asked the status of the RS 2477 issue and if we were
doing all we could to protect the State's rights. COMMISSIONER
SHIVELY said we had not made any more legal assertions on RS
2477's. DNR has done a fair amount of looking at RS 2477
designations which they are now reviewing. They have been more
active in the navigability area and have reestablished a unit
headed by Jim Culverson. They have centralized the issue and have
a web page and set policy. They have formed an inter-agency task
force with ADF&G to look at legal issues and established litigation
priorities. They are primarily involved in the two major cases,
PLO 82 assertion and the Candy Blacken Nation.
SENATOR HALFORD asked if there had been any 17 B reservations
asserted by the State in the last year. COMMISSIONER SHIVELY
replied that he didn't think so, but he thinks it's less of a
problem than anticipated. He said he would check further on it.
TAPE 97-1, SIDE B
Number 590
SENATOR HALFORD asked about the status of the Six Rivers Plan.
COMMISSIONER SHIVELY said it was his understanding about the
subtleties of this issue that the Recreation Rivers Plan is a
result of legislation that the administration carried out and it
was the consensus of, at least, some of the people who worked on
it. Currently the Plan is being put into regulations. It is a
reflection of State policy and law.
SENATOR HALFORD asked if there would be an opportunity for a
further review for changes at the regulatory level or does it have
to be reviewed by statute.
SENATOR LINCOLN asked if they had been coping with monitoring the
12,000 new claims with budget cuts. COMMISSIONER SHIVELY replied
that claims don't need environmental monitoring. A lot of the
claims are by large mining companies who are looking for large
mining projects. If they identify a large project, that is the
time they will permit the work. He said the increase was four
times as much as they are used to and explained that smaller miners
are finding it difficult because it is too expensive to meet the
State and federal environmental requirements. Bigger companies are
coming back to look at mines and it is difficult to have the
resources to work through the permitting, although they have
sometimes asked the companies to pay for the permitting.
SENATOR HALFORD commented that Ted Holmes and Margaret Misheld at
Nixon Fork had worked for 30-years to get it going and they are
finally getting there.
Number 538
SENATOR LEMAN asked about the time-line on lease-sale 85 A and the
90-day moratorium. COMMISSIONER SHIVELY responded that 90-days was
not a drop dead date and in terms of permitting for exploration
drilling it doesn't present any problem. It takes six to seven
months minimum to permit an exploration site and no one has asked
for a drilling permit on the new leases. Mr. Jean Burden is out
talking to people to get a feeling for what the major issues are;
Marilyn Heiman, Governor's Office, and he were in Kenai last week
talking to the Kenai River Board about what kind of process might
go on. He thought most or all of the concerns could be resolved.
He thought a further set-back would make sense.
The Homer Tract has an old lease and a segment of people in Homer
are much less accepting of oil and gas development, but he was
relatively confident about it. The State has a good record and the
industry and its technology has changed a lot. They are paying
more attention to people's concerns.
SENATOR TAYLOR said he was concerned with people who don't have any
stake in a project, writing letters and stopping developments that
have nothing to do with them. COMMISSIONER SHIVELY agreed that he
thought some of the public process was useless because it is an
opportunity for people to stand up and yell at one another and then
let government decide. He thought they could do away with some of
that and get to a point where people could sit down and discuss
issues. He thought they could do a better job of getting people to
understand what works and what doesn't. He wanted to substitute at
least one step in the public hearing process where people would be
forced to discuss the issues rather than just yelling at one
another.
Number 435
SENATOR TAYLOR asked if they were going to wait to fill the
position in Ketchikan until the new Forester is hired.
COMMISSIONER SHIVELY answered that they have tried to fill the
Ketchikan position, but the register for that particular level has
not provided them with a qualified person who wants to go to
Ketchikan. The temporary person will continue to help until they
find someone. He did not want to drop the range.
SENATOR TAYLOR also commented that there are log salvage permits
that used to be made by a woman in Ketchikan and the position was
lost and they were assured there would be no slow-down in the
issuance of those permits, but it now takes months instead of
weeks. COMMISSIONER SHIVELY said he would look into that and he
was also wanted to lengthen the salvage log permits.
Number 409
MR. NICO BUS , Chief, Financial Support, reviewed the hand-out
before the committee. The fire suppression appropriation for
Miller's Reach was carried over from 96 into 97. Other than that,
they have modified the budget to accommodate the contractual
requirements for salary increases, health premiums, and minor
adjustments for better business practices like combining
subscriptions and getting efficiencies out of travel reservations.
They tried to eliminate the Citizens Advisory Commission along with
the reduction in the Division of Lands. There are some increases
in some areas. Funding for the State Fair has been deleted.
MR. BUS said there is an increase to the budget for new development
projects for the pipeline office, the Alpine project, and $100,000
for the Division of Parks with a required match from them.
MR. BUS added that The Division of Lands started out with
significant budget short falls and their staff asked if they could
participate in the State incentive retirement program. Twelve have
elected to retire.
Number 330
CHAIRMAN HALFORD asked for the status of Millers Reach funding.
MR. BUS explained that there was $10 million in State funding and
$10 million in federal funding and they had already spent $15.5
million on the fire. That is allocated based on land ownership.
The BLM owns 14.8% of the land, so they pay $2.2 million. The
State owned 85.2%, so our share would have been about $14 million.
Because it was a federally declared disaster, federal funding came
in for 70% or $7 million; and the State came in with $3 million.
After the fire was under control, there was another $3 million of
expenditures which was paid 75% by FEMA and 25% by the State. So
the total in State funds was really $3.8. The rest was federal
funding.
CHAIRMAN HALFORD asked the status of the appropriation. MR. BUS
said about $2.5 million was carried into 97. He thought they might
need a small supplemental for the May and June activity in 1997.
SENATOR TAYLOR asked what they reduced in the Division of Lands.
MR. BUS replied there was a reduction of $205,000 in general funds
for land assertions which are those areas where there is a dispute
about land ownership - mostly between the State and federal
governments.
SENATOR TAYLOR asked if they didn't need as much money to assert
our State position in the past? MR. BUS replied that they could
always use more. COMMISSIONER SHIVELY commented that there isn't
as much activity as there used to be because native conveyances are
down. Most of the issues in the future are going to be of a
litigious nature. In some of the early native conveyances a
different standard was used for navigability and these need to be
sorted out with the native corporations.
SENATOR TAYLOR asked if the Department did begin a program of land
distribution, did they have the current capacity to handle it.
COMMISSIONER SHIVELY said the issue is appraisals because the State
is required by law to get fair market value for State assets and to
determine that, it has to be appraised.
Number 215
CHAIRMAN HALFORD stated the things he thought they didn't need to
do were to complete the master plan for Afognak Island State Park,
revise the Kenai River Management Plan, inspect approximately 20
dams, and publish the Kenai Area plan. He said with all area plans
it seems to be more important to plan to keep the land than it does
to ever do anything with the land.
COMMISSIONER SHIVELY responded that some people would disagree
about the Kenai Plan which has been a higher priority because of
the difficult management issues which involve the Kenai River and
he added that it is almost complete.
SENATOR GREEN asked what he had planned for agriculture.
COMMISSIONER SHIVELY replied that they hadn't gotten much further
than before. SENATOR GREEN said that it was important to find a
solution for privatization or something like it. COMMISSIONER
SHIVELY said he had encouraged the industry to come to him with a
solution. He didn't think the government could come up with a plan
to privatize. He hoped they could work with industry so there
would not be a threat to the people who are now running the
creamery and slaughter house.
Number 130
SENATOR GREEN asked the status on consolidation of the forestry
project in Palmer. COMMISSIONER SHIVELY replied that it was a city
project, but he thought it was proceeding.
SENATOR TAYLOR asked if they were going to do anything more
meaningful on bug-kill timber than last year. COMMISSIONER SHIVELY
answered that they are continuing to offer timber for sale, but the
market is weak. He said it is a difficult issue. There is nothing
he has seen that leads him to believe you can cut the beetle out of
existence. There are some concerns about fisheries and other uses
and how much volume the system can take. With prices down the
volume has dropped significantly. It's a different issue if the
State wants to pay to have it cut. Former Commissioner Sandor's
Canadian consultants found that it would cost $50 - $100 million
per year to do that. And that kind of money is not available.
SENATOR TAYLOR commented that he didn't think there was any push
from the Department of Forestry to get out any level of volume.
COMMISSIONER SHIVELY replied that their first priority is fires,
the second is the Forest Practices Act, and the third priority is
timber sales.
TAPE 97-2, SIDE A
Number 001
CHAIRMAN HALFORD noted that they had lost the quorum and would
continue the discussion informally and adjourned the meeting at
5:10 p.m.
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