Legislature(2005 - 2006)SENATE FINANCE 532
01/18/2006 01:00 PM Senate RESOURCES
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| Start | |
| Overview: Department of Natural Resources | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
JOINT MEETING
SENATE RESOURCES STANDING COMMITTEE
HOUSE RESOURCES STANDING COMMITTEE
January 18, 2006
1:08 p.m.
MEMBERS PRESENT
SENATE RESOURCES
Senator Thomas Wagoner, Chair
Senator Ben Stevens
Senator Bert Stedman
Senator Kim Elton
HOUSE RESOURCES
Representative Jay Ramras, Co-Chair
Representative Jim Elkins
Representative Kurt Olson
Representative Paul Seaton
Representative Harry Crawford
MEMBERS ABSENT
SENATE RESOURCES
Senator Ralph Seekins, Vice Chair
Senator Fred Dyson
Senator Albert Kookesh
HOUSE RESOURCES
Representative Ralph Samuels, Co-Chair
Representative Carl Gatto
Representative Gabrielle LeDoux
Representative Mary Kapsner
OTHER MEMBERS PRESENT
Representative Mike Kelly
Representative David Guttenberg
Representative Mark Neuman
COMMITTEE CALENDAR
Overview: Department of Natural Resources by Commissioner
Michael Menge
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
COMMISSIONER MICHAEL MENGE
Department of Natural Resources
400 Willoughby Ave.
Juneau, AK 99801-1724
POSITION STATEMENT: Presented DNR overview.
DICK MYLIUS, Director
Division of Mining, Land and Water
Department of Natural Resources
400 Willoughby Ave.
Juneau, AK 99801-1724
POSITION STATEMENT: Answered questions on state lands issues.
ACTION NARRATIVE
CO-CHAIR JAY RAMRAS called the joint meeting of the Senate and
House Resources Standing Committees to order at 1:08:53 PM. He
announced that Chair Wagoner would arrive shortly. Present were
Representatives Elkins, Crawford and Seaton, Senator Stedman and
Co-Chair Ramras.
^OVERVIEW: Department of Natural Resources
1:10:13 PM
MICHAEL MENGE, Commissioner, Department of Natural Resources
(DNR) introduced Ed Fogel and Ken Griffin, DNR Deputy
Commissioners, William Van Dyke, Director, Division of Oil and
Gas, Chris Maisch, Director, Division of Forestry and Dick
Mylius, Director, Division of Mining, Land and Water.
COMMISSIONER MENGE said he takes his job seriously and said he
doesn't tolerate lack of accountability. His department has the
dual responsibility of marketing Alaska's resources and
protecting them.
1:19:29 PM
He expressed that the department needs to encourage resource
development across the entire state and not in just one spot. He
looks at what can be done in areas that are particularly
underdeveloped. An example of this is the development of the Red
Dog mine. He emphasized that development ideas must be based on
good science as well as sustainability.
He said the state manages its resources through its sales,
leases and permitting functions and while competition is
important, partnerships, especially concerning the gasline, must
be based on the concept of finding common ground and working
together to make a project happen rather than taking stands and
gridlock.
1:27:46 PM
CHAIR WAGONER arrived and took up the gavel.
1:27:59 PM
COMMISSIONER MENGE related that oil supplies in Alaska are
declining and noted that the state's regulatory structure could
allow more oil to go into the pipeline using the concept known
as minimum economic field size. He explained that historically,
wells were drilled outside of Prudhoe Bay in which oil and gas
were found, but if enough oil wasn't found to make a stand-alone
prospect, that well was shut down and written off as a non-
discovery. If the gasline is brought on line now, the fact that
there is both oil and gas will allow the oil to be developed by
virtue of the gas being there.
1:32:15 PM
He reflected how the Joint Federal State Pipeline Monitoring
Office was created in the 1980s to deal with the complexities of
state and federal regulations by bringing them together in one
place, but not trying to seat authority within one single
individual. Each agency was recognized has having its own
statutory responsibilities and common ground was developed over
different issues.
COMMISSIONER MENGE explained that the state's resource issues
are often wrapped in controversy and that often manifests itself
in agencies becoming gridlocked. He has tried to spread the
common ground concept into DNR agencies so they do not become
gridlocked and afraid to act. He philosophized that there is a
remedy for an agency that takes wrong action, but there is no
remedy for an agency that refuses to take action at all. The
department's large project management team gets together and if
one agency has a problem, they all figure out how to solve it.
This concept is a core element in accomplishing the partnerships
the state is putting together.
He complimented Randy Bates, Director, Office of Project
Management and Permitting, for working on the Coastal Zone
Management Program with coastal communities so they could
understand what their roles and authorities would be and to
assist them in succeeding.
1:36:01 PM
He highlighted how the Division of Habitat was moved from the
Alaska Department of Fish and Game (ADF&G) to DNR a few years
ago and it now has the responsibility of protecting the
resources as well as for establishing the partnerships involved
with developing them. The division has created a forum in which
to work on contentious projects. Multinational corps can afford
to hire the brightest and the best and he thanked the
legislature for providing the resources necessary to the
Division of Oil and Gas to build its staff and their skill
level.
1:39:26 PM
SENATOR BEN STEVENS arrived.
1:39:56 PM
COMMISSIONER MENGE continued relating that the Division of Oil
and Gas has a remarkable track record in successfully backing up
their contentions in court. It recently brought an additional
$22 million to the state coffers through the Exxon Valdez
reopener, for example.
He explained how the first oil fields brought in a tremendous
amount of money relative to the oversight they needed. But the
now smaller reserves outside of Prudhoe Bay take more energy to
manage, because their economic viability is so marginal.
1:43:22 PM
He said that oil and gas development in Bristol Bay is new. One
of the Governor's major initiatives is to bring new explorers to
Alaska and smaller companies are now coming in to explore the
Basin. Smaller companies are less risk averse. He reported that
fourteen independent and two major oil companies and eight
individuals participated in the last lease sale.
1:46:35 PM
Lack of development guidelines on the North Sloped had plagued
the department in the past and the Division of Mining, Land and
Water recently completed the first comprehensive analysis of the
appropriate snow cover and temperature to allow off-road travel
there lengthening the exploration period by six weeks a year.
1:49:38 PM
COMMISSIONER MENGE said that Alaska has only scratched the
surface of developing its mineral resources and while mining had
been drying up in the Lower 48, Alaska is embracing it - as in
development of the Pogo Mine. Mining contributed $1.6 billion to
Alaska's economy last year.
1:56:54 PM
He mentioned that his department has the responsibility of
coordinating fire fighting and timber management with the Bureau
of Land Management (BLM). But the Division of Mining, Land and
Water's key responsibility is receiving land from the federal
government as per the Statehood Compact and making that land
available for municipalities to select.
2:04:04 PM
He stated that ownership of navigable waters is still a
challenging issue and that the department has just received
disclaimers for 26 rivers and 15 lakes, which clears up those
titles. RS2477s is one of the most contentious federal issues.
He explained that unlike the rest of the country, Alaska is
still putting in infrastructure. Our roads are trails that
miners used, but they are no less valid than wagon trails that
were used down south. The burden of proof is very significant
and DNR has to continue to develop the record for that
litigation.
2:06:27 PM
CO-CHAIR RAMRAS asked where the department is on that project.
COMMISSIONER MENGE deferred that question to the director of the
Division of Mining, Land and Water.
DICK MYLIUS, Director, Division of Mining, Land and Water
answered that quiet title was filed on two routes, which
required a lot of research and the Division of State Parks is
performing that function. It has contracted with a firm to
locate where the trail is.
2:08:46 PM
He explained that to file quite title, the department must file
on all property owners, but his goal is to assert the RS2477
against the federal government only. Thirty or forty other
parties had property interests and for the last year the
division had been working on getting those dismissed. Of those,
three are remaining - an owner of property on Chandalar Lake, a
private corporation that has land selection rights and the
federal government.
2:10:09 PM
CHAIR WAGONER commented that most mine production is being done
by companies that are based in Canada and asked what the State
of Alaska can do to encourage Alaska and other U.S. companies to
participate in its mining ventures.
MR. MYLIUS responded that a company needs lots of capital to
develop a mine and most of those big companies are based outside
of the U.S.
2:12:06 PM
CHAIR WAGONER asked what revenues the state receives from mines
that are on state lands like the Pebble Mine.
MR. MYLIUS replied that it is hard to tell, because the Pebble's
production size is not known yet, but the state's main source of
revenue is royalty. The state doesn't have a lot of experience
with major mines because right now all the major producing mines
are not on state land. Pogo is the first one on state land and
he didn't anticipate receiving a lot of revenue from it for the
first few years at least because of its large capital start up
costs. The largest source of mining revenue currently is
property taxes paid to local governments. When companies show a
profit, the state receives its royalties.
2:14:07 PM
CO-CHAIR RAMRAS asked how the University's 250,000-acre land-
transfer with the federal government is proceeding.
MR. MYLIUS answered that the transfer of the 250,000 acres of
state land to the University is being worked on since the bill
passed last year. An RFP is being worked on for the title work.
Two parcels have access issues. But there is no movement on the
University lands bill in Congress.
The BLM has ramped up its land transfer program to the state and
the state has received 91 million out of its 105-million acre
entitlement. He recently submitted his revised land selection
priorities to the BLM.
2:16:29 PM
CHAIR WAGONER asked if they are shooting for completion by the
year 2008.
MR. MYLIUS replied that his calculation comes out to 2010
through 2012, but substantial progress is being made.
2:17:16 PM
REPRESENTATIVE PAUL SEATON said he heard that some companies
were going to try to escape paying corporate tax by using LLCs
or sub S structures and asked how prevalent that would be in the
future.
COMMISSIONER MENGE responded that that action would not be in
the best interests of a good partner relationship and he
wouldn't stand by and let that happen.
REPRESENTATIVE SEATON clarified that he wasn't accusing anyone
of wrongdoing since those structures are specifically provided
for in law.
2:20:36 PM
COMMISSIONER MENGE responded that he believes in partnerships
that are fair and if he sees a problem, he will bring it to the
legislature and lay it on the table.
COMMISSIONER MENGE moved his discussion to state parks that he
summarized are suffering from benign neglect. Over four million
people visit Alaska's parks every year and 80 percent of those
are Alaskans. The division has tried to innovate with
privatization, but that has had limited success. The park system
has had no strategic plan since 1971 and is in need of some
serious attention. He said we can't ignore them or the parks
will become liabilities instead of assets. He will be embarking
on providing a new strategic plan.
2:23:38 PM
COMMISSIONER MENGE said the Division of Agriculture has
diminishing stature within the state and he wants to strengthen
those programs.
2:27:05 PM
REPRESENTATIVE HARRY CRAWFORD asked if he is considering
alternative and renewable energy like wind, water and
geothermal. He urged the commissioner to be forward-looking.
2:28:52 PM
COMMISSIONER MENGE replied that he is working on geothermal
energy projects at Chena Hot Springs and in the Aleutians. The
department is also working on a methane hydrate project on the
North Slope where as much as 33 TCF of hydrates are capable of
being produced using conventional technology. The wind farm at
Kotzebue is at the forefront of that technology.
2:31:34 PM
REPRESENTATIVE MARK NEUMAN asked him if there would be a smooth
transition of Mt. McKinley Meat and Sausage into private hands
relative to its being a USDA certified packaging plant.
COMMISSIONER MENGE replied that two of his staff would go over
the plan with him regarding that issue on the following day.
2:33:10 PM
CHAIR WAGONER asked what he thought of the "one-stop-shopping"
for permitting bill introduced by Senator Guess.
COMMISSIONER MENGE replied that he had not looked at the bill
and that while one-stop-shopping is an important concept, it is
unwise to give one agency authority over other agencies. He
promised to examine the issue carefully.
2:34:12 PM
REPRESENTATIVE SEATON asked him to comment on the proposed Farm
Service Agency office closings in Homer and Wasilla.
COMMISSIONER MENGE replied that he was not aware of the closures
and would check into them.
2:35:11 PM
SENATOR ELTON arrived.
CHAIR WAGONER thanked the commissioner and his staff for their
comments and adjourned the meeting at 2:35:54 PM.
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