Legislature(2017 - 2018)BUTROVICH 205

04/07/2017 03:30 PM RESOURCES

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* first hearing in first committee of referral
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Heard & Held
-- Public Testimony --
Bills Previously Heard/Scheduled:
Moved CSSB 65(RES) Out of Committee
Moved SB 28 Out of Committee
Moved SB 89 Out of Committee
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                         April 7, 2017                                                                                          
                           3:30 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Cathy Giessel, Chair                                                                                                    
Senator John Coghill, Vice Chair                                                                                                
Senator Natasha von Imhof                                                                                                       
Senator Bert Stedman                                                                                                            
Senator Shelley Hughes                                                                                                          
Senator Kevin Meyer                                                                                                             
Senator Bill Wielechowski                                                                                                       
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 65                                                                                                              
"An Act establishing the Jonesville Public Use Area."                                                                           
     - MOVED CSSB 65(RES) OUT OF COMMITTEE                                                                                      
SENATE BILL NO. 28                                                                                                              
"An Act relating to the general grant land entitlement for the                                                                  
Petersburg Borough; and providing for an effective date."                                                                       
     - MOVED SB 28 OUT OF COMMITTEE                                                                                             
SENATE BILL NO. 89                                                                                                              
"An Act relating  to management of enhanced  stocks of shellfish;                                                               
authorizing   certain  nonprofit   organizations  to   engage  in                                                               
shellfish enhancement projects; relating  to application fees for                                                               
salmon hatchery permits; and providing for an effective date."                                                                  
     - MOVED SB 89 OUT OF COMMITTEE                                                                                             
SENATE BILL NO. 86                                                                                                              
"An Act relating to the sale or other disposal, leasing, or                                                                     
encumbrance of Alaska Railroad Corporation land; and providing                                                                  
for an effective date."                                                                                                         
     - HEARD & HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: SB  65                                                                                                                  
SHORT TITLE: JONESVILLE PUBLIC USE AREA                                                                                         
SPONSOR(s): SENATOR(s) DUNLEAVY                                                                                                 
02/22/17       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/22/17       (S)       RES, FIN                                                                                               
04/03/17       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
04/03/17       (S)       Heard & Held                                                                                           
04/03/17       (S)       MINUTE(RES)                                                                                            
04/05/17       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
04/05/17       (S)       <Bill Hearing Canceled>                                                                                
04/07/17       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
BILL: SB  28                                                                                                                  
SHORT TITLE: MUNICIPAL LAND SELECTIONS: PETERSBURG                                                                              
SPONSOR(s): SENATOR(s) STEDMAN                                                                                                  
01/20/17       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/20/17       (S)       CRA                                                                                                    
02/02/17       (S)       CRA AT 3:30 PM BELTZ 105 (TSBldg)                                                                      
02/02/17       (S)       Heard & Held                                                                                           
02/02/17       (S)       MINUTE(CRA)                                                                                            
02/07/17       (S)       CRA AT 3:30 PM BELTZ 105 (TSBldg)                                                                      
02/07/17       (S)       Moved  SB 28 Out of Committee                                                                          
02/07/17       (S)       MINUTE(CRA)                                                                                            
02/08/17       (S)       CRA RPT 3DP 1NR                                                                                        
02/08/17       (S)       DP: BISHOP, GARDNER, STEDMAN                                                                           
02/08/17       (S)       NR: MACKINNON                                                                                          
03/20/17       (S)       RES REFERRAL ADDED AFTER CRA                                                                           
04/05/17       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
04/05/17       (S)       Heard & Held                                                                                           
04/05/17       (S)       MINUTE(RES)                                                                                            
04/07/17       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
BILL: SB  89                                                                                                                  
SHORT TITLE: SHELLFISH ENHANCE. PROJECTS; HATCHERIES                                                                            
SPONSOR(s): SENATOR(s) STEVENS                                                                                                  
03/10/17       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/10/17       (S)       RES, FIN                                                                                               
04/05/17       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
04/05/17       (S)       Heard & Held                                                                                           
04/05/17       (S)       MINUTE(RES)                                                                                            
04/07/17       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
BILL: SB  86                                                                                                                  
SHORT TITLE: ALASKA RAILROAD CORPORATION LAND                                                                                   
SPONSOR(s): SENATOR(s) COGHILL                                                                                                  
03/10/17       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/10/17       (S)       RES, FIN                                                                                               
04/07/17       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
WITNESS REGISTER                                                                                                              
AKIS GIALOPSOS, staff to Senator Giessel and the Senate                                                                         
Resources Committee                                                                                                             
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Explained the changes in version R of SB 65.                                                              
FORREST BOWERS, Deputy Director                                                                                                 
Division of Commercial Fisheries                                                                                                
Alaska Department of Fish and Game (ADF&G)                                                                                      
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Answered questions on SB 89.                                                                              
TIM LAMKIN, staff to Senator Stevens                                                                                            
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Commented on SB 89 for the sponsor.                                                                       
RYNNIEVA MOSS, staff to Senator Coghill                                                                                         
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Commented on SB 86 for the sponsor.                                                                       
JON COOK, Chairman of the Board                                                                                                 
Alaska Railroad Corporation (ARRC)                                                                                              
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT: Supported SB 86.                                                                                          
BILL O'LEARY, President & CEO                                                                                                   
Alaska Railroad Corporation (ARRC)                                                                                              
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Offered to answer questions on SB 86.                                                                     
JIM KUBITZ, Vice President                                                                                                      
Real Estate and Facilities                                                                                                      
Alaska Railroad Corporation (ARRC)                                                                                              
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Offered to answer questions on SB 86.                                                                     
BRUCE BUSTAMANTE, President                                                                                                     
Anchorage Chamber of Commerce                                                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Supported SB 86.                                                                                          
DAVE HANSON, representing himself                                                                                               
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Supported the concept of SB 86.                                                                           
ACTION NARRATIVE                                                                                                              
3:30:16 PM                                                                                                                    
CHAIR  CATHY   GIESSEL  called  the  Senate   Resources  Standing                                                             
Committee meeting  to order at 3:30  p.m. Present at the  call to                                                               
order were  Senators Stedman, Coghill, Hughes,  Wielechowski, and                                                               
Chair Giessel.                                                                                                                  
               SB  65-JONESVILLE PUBLIC USE AREA                                                                            
3:30:32 PM                                                                                                                    
CHAIR  GIESSEL  announced  consideration  of SB  65  saying  that                                                               
changes to meet  the intent of the legislation  were requested by                                                               
Senator Coghill, the Department  of Natural Resources, Department                                                               
of Transportation and Public Facilities, and the Court System.                                                                  
3:30:53 PM                                                                                                                    
SENATOR MEYER joined the committee.                                                                                             
3:31:10 PM                                                                                                                    
SENATOR COGHILL moved to adopt  CS SB 65, version 30-LS0387\R, as                                                               
the working document.                                                                                                           
CHAIR  GIESSEL objected  for an  explanation of  the changes  and                                                               
invited her staff to present those.                                                                                             
AKIS  GIALOPSOS,   staff  to  Senator  Giessel   and  the  Senate                                                               
Resources  Committee, Alaska  State Legislature,  Juneau, Alaska,                                                               
explained  the changes  in CSSB  65\R,  corrected explanation  of                                                               
changes from version \J.                                                                                                        
He noted  that Mr. Cox  from the Department of  Natural Resources                                                               
(DNR) and Mrs. Fair, Statewide  Right-of-Way Chief, Department of                                                               
Transportation and  Public Facilities  (DOTPF) were  available to                                                               
answer questions.                                                                                                               
The changes are:                                                                                                                
3:32:39 PM                                                                                                                    
1.  Page  1,  Lines  10-12:  Simplifies  and  clarifies  language                                                               
stating  protecting fish  and wildlife  habitat  will ensure  the                                                               
continued recreational use of the proposed area.                                                                                
2.  Page 2,  Line  10: Adds  the words  "to  the extent  workload                                                               
permits"  to  protect  the state  against  any  potential  action                                                               
regarding  timely creation  and  implementation  of a  management                                                               
plan,  particularly  since  no   funding  was  attached  to  this                                                               
3. Page  2: Removes language  in previous version (Page  2, Lines                                                               
15-16)  preventing  the  Department  of  Natural  Resources  from                                                               
selling surface estate within the proposed use area.                                                                            
4. Page 2: Removes language  from previous version (Page 2, Lines                                                               
23-25) requiring the Department  of Natural Resources to identify                                                               
wetlands within the proposed use area.                                                                                          
3:33:25 PM                                                                                                                    
5. Page 2, Line 20-24:  Clarifies language stating that the state                                                               
cannot exercise eminent domain to  add private land for placement                                                               
into the proposed  use area. It also  specifically clarifies that                                                               
any  privately-owned   parcels  within  the  proposed   area  are                                                               
protected from eminent domain for inclusion. (DOTPF concerns)                                                                   
3:33:44 PM                                                                                                                    
6. Page 6, Lines 8-18: Restructures  Section 2. to conform to the                                                               
current  process  for  adoption   of  a  bail  schedule.  Removes                                                               
language  from the  previous version  that unintentionally  would                                                               
have placed the  Alaska Supreme Court out of  compliance with the                                                               
adoption of a bail schedule. (Court System and DNR concerns)                                                                    
CHAIR GIESSEL  thanked him, removed her  objection, and announced                                                               
that version R was adopted.                                                                                                     
3:34:49 PM                                                                                                                    
SENATOR COGHILL  moved to report  CSSB 65(RES), version  \R, from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
note(s). There were no objections and it was so ordered.                                                                        
3:35:06 PM                                                                                                                    
At ease from 3:35 to 3:36 p.m.                                                                                                  
          SB  28-MUNICIPAL LAND SELECTIONS: PETERSBURG                                                                      
3:36:23 PM                                                                                                                    
CHAIR GIESSEL announced consideration  of SB 28. Public testimony                                                               
was concluded and  closed in last meeting. She  asked the sponsor                                                               
for closing remarks.                                                                                                            
SENATOR STEDMAN said it's nice  that communities around the state                                                               
are   continuing   to   "boroughize,"   as   they   pursue   this                                                               
constitutional mandate  and he  looks forward  to action  on this                                                               
SENATOR COGHILL moved to report  SB 28, version 30-LS0056\D, from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
note(s). There were no objections and it was so ordered.                                                                        
3:38:04 PM                                                                                                                    
At ease 3:38 to 3:39 p.m.                                                                                                       
         SB  89-SHELLFISH ENHANCE. PROJECTS; HATCHERIES                                                                     
3:39:41 PM                                                                                                                    
CHAIR GIESSEL announced  consideration of SB 89, noting  it was a                                                               
bill that  had significant work  last year. Public  testimony was                                                               
opened  and  closed on  April  5.  She  asked the  committee  for                                                               
discussion or questions.                                                                                                        
SENATOR  WIELECHOWSKI asked  the  Alaska Department  of Fish  and                                                               
Game (ADF&G) how  cost recovery would work for salmon  and how it                                                               
would work for shellfish, because the two are so different.                                                                     
FORREST   BOWERS,  Deputy   Director,   Division  of   Commercial                                                               
Fisheries, Alaska  Department of  Fish and Game  (ADF&G), Juneau,                                                               
Alaska, referring  to SB 89,  explained that the  department uses                                                               
two  approaches for  salmon cost  recovery. The  first is  a cost                                                               
recovery  fishery whereby  the hatchery  operator contracts  with                                                               
one  or  more   harvest  vessels  to  harvest   excess  fish  for                                                               
broodstock  needs,  and  those  are  sold  to  pay  for  hatchery                                                               
operating costs.                                                                                                                
The second approach happens in the  case of a remote release site                                                               
where salmon  fry are reared away  from a hatchery and  return to                                                               
this  remote  release  site. A  common  property  fishery  occurs                                                               
there, and  anyone who  harvests salmon  in that  designated area                                                               
pays  an assessment  fee  to fund  those  operations. Under  both                                                               
approaches, those  monies are  collected by  the State  of Alaska                                                               
and redistributed back to the hatchery operators.                                                                               
MR. BOWERS  said that  because hatchery-produced  shellfish don't                                                               
come  home to  a  natal  area to  reproduce  they  will mix  with                                                               
natural stock,  therefore, it's most  likely that  the assessment                                                               
fee approach would be used for cost recovery.                                                                                   
3:43:15 PM                                                                                                                    
SENATOR WIELECHOWSKI  asked how  far shellfish  typically migrate                                                               
and  how  special and  terminal  harvest  areas are  defined  for                                                               
3:43:39 PM                                                                                                                    
SENATOR VON IMHOF joined the committee.                                                                                         
MR.  BOWERS replied  that some  shellfish don't  migrate at  all,                                                               
like clams and scallops. Crabs  walk around, but require specific                                                               
habitat  to be  successful.  So, their  fishery management  areas                                                               
have  been designed  around  stock boundaries  that  are a  known                                                               
range  of distinct  stocks. In  the  case of  Pribilof blue  king                                                               
crab, a species of interest in  this bill, the Board of Fisheries                                                               
has defined  a registration  area and that  would most  likely be                                                               
the assessment area.                                                                                                            
SENATOR WIELECHOWSKI asked if he  expected some of the wild stock                                                               
would get  caught and  if the  money would be  given back  to the                                                               
hatchery  when they  are caught.  Is there  some sort  of genetic                                                               
3:45:23 PM                                                                                                                    
MR.  BOWERS said  that is  a good  question. In  some cases,  the                                                               
hatchery-produced  shellfish  would   be  mixed  with  naturally-                                                               
produced animals.  There is  no way  to mark  them, and  the cost                                                               
recovery fee would accrue from all the catch in the area.                                                                       
SENATOR MEYER  said it seemed like  some money could be  saved if                                                               
notice  of  hearing  was  just  done  on-line  instead  of  in  a                                                               
newspaper, language on page 3, line 3.                                                                                          
MR.  BOWERS  responded  that is  standard  Alaska  Administrative                                                               
Procedures Act language.                                                                                                        
3:47:33 PM                                                                                                                    
SENATOR MEYER asked if "reasonable period"  on page 4, line 9, is                                                               
MR. BOWERS replied not in this  bill. It would likely be laid out                                                               
in the implementing regulations.                                                                                                
SENATOR WIELECHOWSKI asked if this would impact harvest quotas.                                                                 
MR. BOWERS  answered that it  could increase them  if successful,                                                               
and that is the intent.                                                                                                         
SENATOR WIELECHOWSKI asked if there  is any scientific opposition                                                               
to this bill within ADF&G.                                                                                                      
MR. BOWERS answered that he  hasn't seen any opposition expressed                                                               
by staff or the leadership team.                                                                                                
3:49:17 PM                                                                                                                    
SENATOR WIELECHOWSKI said a concern  was raised about the ability                                                               
to stop permits that were already issued.                                                                                       
MR. BOWERS  replied that  language was  in section  3 on  page 4,                                                               
line 8, a provision about  alterations, suspension, or revocation                                                               
of a permit.                                                                                                                    
CHAIR GIESSEL thanked him for his expert answers.                                                                               
3:50:33 PM                                                                                                                    
TIM LAMKIN,  staff to Senator Stevens,  Alaska State Legislature,                                                               
Juneau, Alaska, expressed the sponsor's  gratitude for hearing SB                                                               
89 that will improve and diversify Alaska's fisheries portfolio.                                                                
3:51:04 PM                                                                                                                    
SENATOR MEYER  said this may  seem minor, but "in  the discretion                                                               
of  the commissioner"  on  page 4,  line 11,  should  be "at  the                                                               
discretion of the commissioner."                                                                                                
CHAIR GIESSEL  said that Senate  Finance Committee could  take it                                                               
up, because  that is where  the bill goes next.  Also, publishing                                                               
in the newspaper  is template language that is  currently part of                                                               
state law. Changing  it was attempted about three  years ago, but                                                               
it didn't pass.                                                                                                                 
SENATOR COGHILL moved to report  SB 89, version 30-LS0691\A, from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
note(s). There were no objections and it was so ordered.                                                                        
3:52:30 PM                                                                                                                    
At ease from 3:52 to 3:54 p.m.                                                                                                  
            SB  86-ALASKA RAILROAD CORPORATION LAND                                                                         
3:54:22 PM                                                                                                                    
CHAIR  GIESSEL announced  consideration  of SB  86, sponsored  by                                                               
Senator Coghill.  She said  it grants  flexibility to  the Alaska                                                               
Railroad Corporation  (ARRC) to  make longer-term lease  and land                                                               
sales without legislative approval.                                                                                             
SENATOR COGHILL,  sponsor of SB  86, explained that ARRC  has the                                                               
authority to lease  land, but not to sell  it without legislative                                                               
approval. His  district has a  lot of sub-divisible  and business                                                               
land that won't  be leased because of the equity  issue, and this                                                               
measure  would give  the ARRC  some much  needed revenue  that it                                                               
wouldn't otherwise get. He said  the ARRC has had land management                                                               
issues and those  would probably continue, but  they brought this                                                               
solution to him and he is willing to entertain it.                                                                              
3:55:53 PM                                                                                                                    
RYNNIEVA   MOSS,  staff   to   Senator   Coghill,  Alaska   State                                                               
Legislature,  Juneau,  Alaska,  further   explained  that  SB  86                                                               
repeals the  current requirements for the  legislature to approve                                                               
land sales by the ARRC and land  leases that are over 95 years in                                                               
length.  This bill  would enable  the  railroad to  sell land  on                                                               
which  development wouldn't  occur  with a  land  lease, such  as                                                               
residential land.                                                                                                               
She  said the  ARRC  board  chairman, Jon  Cook,  was on-line  to                                                               
provide some  of the logic  behind introduction of this  bill and                                                               
the fact  that at  least two areas  are interested  in purchasing                                                               
ARRC land for residential subdivisions.                                                                                         
MS. MOSS  said the ARRC feels  that this bill will  allow them to                                                               
monetize  non-performing  land  assets,  generate  cash  flow  to                                                               
respond to opportunities  in the real estate  market, and enhance                                                               
their overall  real estate portfolio  allowing it to  comply with                                                               
state law that requires them to be self-sufficient.                                                                             
She  noted four  letters of  support, Eklutna,  Inc., being  one,                                                               
that  said their  corporation has  been involved  in real  estate                                                               
development  in Alaska  for quite  some time  and they  see great                                                               
potential in  this legislation for  them to move quickly  to take                                                               
advantage as development  opportunities arise.  SB  86 will align                                                               
the ARRC with  other state entities they have worked  with in the                                                               
past, such as Department of  Transportation and Public Facilities                                                               
(DOTPF), to be able to sell land without legislative approval.                                                                  
3:57:59 PM                                                                                                                    
MS.  MOSS provided  a sectional  analysis for  SB 86,  explaining                                                               
that the  ARRC statutes are in  AS 42.40. and SB  86 deletes each                                                               
place where language requires legislative approval.                                                                             
        Section 1.  Deletes from AS 42.40.120 (delegation                                                                       
        of  powers  and  duties  to  the chief  executive                                                                       
        officer)    the   requirement   for   legislative                                                                       
        approval  of land transactions  affecting utility                                                                       
        corridors,  land leases, or land  disposals if it                                                                       
        is a land sale or a lease longer than 95 years.                                                                         
        Sec.    2.   Deletes    from    AS   42.40.120(c)                                                                       
        (transactions   requiring  board   approval)  the                                                                       
        requirement for legislative approval.                                                                                   
        Sec. 3.     Deletes    from    AS    42.40.350(b)                                                                       
        (authorization of  use of a utility corridor) the                                                                       
        requirement  for  legislative  approval  of  such                                                                       
        Sec.  4. Deletes  from AS  42.40.350(c) (granting                                                                       
        easements  on railroad land)  the requirement for                                                                       
        legislative approval.                                                                                                   
        Sec. 5.     Deletes  from AS  42.40.350(d) (lease                                                                       
        or  disposal of  land at  fair market  value) the                                                                       
        requirement for legislative approval.                                                                                   
        Sec.  6.  Deletes from  AS  42.40.352 (sale  of                                                                         
        land  not   necessary  for  railroad  purposes)                                                                         
        language  requiring the board to  make findings                                                                         
        that   land  is  not  necessary   for  railroad                                                                         
        purposes  and  that the  sale  is  in the  best                                                                         
        interest of the  state; and it also deletes the                                                                         
        requirement   to  provide  notice   to  persons                                                                         
        having leasehold  interest in the land proposed                                                                         
        to  be sold  and offered.  It also  deletes the                                                                         
        provision  that  requires  them  to  offer  the                                                                         
        leaseholders  the right of first  refusal. They                                                                         
        feel it's  very important to know  that if land                                                                         
        is   sold  to  someone,   the  lease   is  held                                                                         
        harmless.  So, if  they purchase  the land  and                                                                         
        there  is  a  lease  active the  Railroad  must                                                                         
        honor the lease.                                                                                                        
        This  section also  deletes language  requiring                                                                         
        legislative approval.                                                                                                   
        Sec.  7.  Repeals  AS  42.40.285,  "Legislative                                                                         
        approval required" so language is:                                                                                      
         Unless the legislature approves the action by                                                                          
        law, the corporation may not:                                                                                           
           (l) exchange, donate, sell, or otherwise                                                                             
           convey its entire interest in land;                                                                                  
           (4)  lease land for  a period in  excess of 95                                                                       
           years  unless  the  corporation  reserves  the                                                                       
           right  to terminate the  lease if  the land is                                                                       
           needed for ARRC purposes.                                                                                            
        Sec 8. Provides for an immediate effective date.                                                                        
4:01:46 PM                                                                                                                    
CHAIR GIESSEL opened invited testimony.                                                                                         
JON  COOK, Chairman  of the  Board,  Alaska Railroad  Corporation                                                               
(ARRC), Fairbanks,  Alaska, supported SB  86. He said  the reason                                                               
they are doing  this is that the state was  given an endowment of                                                               
land  when it  purchased the  railroad. It  was one  of the  most                                                               
valuable  assets that  came along  with the  purchase. Its  lease                                                               
revenues predominantly come  from Fairbanks, Anchorage, Whittier,                                                               
Seward, and  the Healy  area and  have sustained  the corporation                                                               
through trying times including now.                                                                                             
Very little land  sales have been done through  either federal or                                                               
state  ownership.  Only three  transfers  have  happened: two  to                                                               
Eklutna,  Inc.,  and  one  to  DOTPF. The  fact  that  a  private                                                               
individual or developer  would have to go through  the process of                                                               
getting a  bill introduced,  passed, and signed  into law  by the                                                               
governor is an inherent deterrent.                                                                                              
4:05:50 PM                                                                                                                    
MR. COOK  said the  railroad leaves  money on  the table  by only                                                               
being able to  lease land. He explained that  some leased parcels                                                               
could be  used for  single family homes,  like Chena  Landings in                                                               
Fairbanks. It  is a  beautiful piece  of river-front  real estate                                                               
right on the Chena River; utilities  are in and it has a southern                                                               
exposure.  Those lots  should have  the most  expensive homes  in                                                               
Fairbanks on them and yet that  subdivision has sat vacant for 16                                                               
years, because  the market  just doesn't  exist for  leased land.                                                               
ARRC  also  has  remote  and rural  lands,  like  the  Tri-Valley                                                               
Subdivision, and  those should be in  the hands of the  folks who                                                               
have lived  there a long  time. The Alaska Railroad  doesn't need                                                               
to be in the business of single family homes.                                                                                   
Lastly, Mr. Cook said, there are  some "buckets" of land that are                                                               
below-market leases  including Ship  Creek in  Anchorage. Because                                                               
the  railroad is  a  political entity  and  charges "fair  market                                                               
value," there  have been  pressures to  curb increases  that have                                                               
happened as the  real estate market has  dramatically improved in                                                               
Anchorage. It  ends up  with leases  that are  less than  half of                                                               
fair market  value, because of  the lease caps. However,  some of                                                               
the same  folks that lease  that land are  willing to buy  it for                                                               
fair market value, which would make sense for the railroad.                                                                     
MR. COOK said  the legislative approval process  is terrifying to                                                               
some  people and  off-putting to  the  development community.  He                                                               
said two things need  to be taken out of the  bill other than the                                                               
legislative approval process. One is  the right of first refusal,                                                               
and this  is because it is  a severe impediment to  being able to                                                               
market  a  piece of  property.  For  instance, someone  wants  to                                                               
purchase some land  and does several hundred  thousand dollars of                                                               
due diligence  and gets all  the way to  the finish line,  and is                                                               
trumped by  someone who  says, "Thanks for  doing all  that work.                                                               
I'm just going to exercise my right of first refusal."                                                                          
It is  also not the  ARRC's position to  sell land that  is being                                                               
leased  by somebody  else,  he  said, but  if  that  did need  to                                                               
happen,  the  existing  leaseholder  would be  protected  by  his                                                               
4:08:50 PM                                                                                                                  
Lastly, requiring  a formal best interest  finding is repetitive.                                                               
Either the deal  makes sense and is at fair  market value or not.                                                               
It just adds in  a layer and slows the railroad  down in terms of                                                               
being able to put deals together in a timely manner.                                                                            
4:09:57 PM                                                                                                                    
SENATOR VON  IMHOF said a  letter from the Denali  Borough states                                                               
that  some ARRC  land is  currently leased  to the  Usibelli Coal                                                               
Mine  for the  development of  a residential  subdivision at  the                                                               
center of  the Healy  Community, and a  letter from  the Usibelli                                                               
Coal  Mine  said  they  would  be  interested  in  exploring  the                                                               
purchase  of  the  Tri-Valley  Subdivision  land.  They  are  the                                                               
current  lessors and  she asked  if  they would  be denied  first                                                               
refusal under this bill.                                                                                                        
MR. COOK replied that Usibelli  Corporation is the lessor and the                                                               
ARRC doesn't  have a  sublease. It's  likely that  Usibelli would                                                               
purchase that  land and turn  around and sell  individual parcels                                                               
to those  who wish  to purchase them.  He assumed  Usibelli would                                                               
purchase the entire subdivision.                                                                                                
SENATOR VON IMHOF  asked if Usibelli leases the  entire parcel at                                                               
this time.                                                                                                                      
MR. COOK answered yes.                                                                                                          
SENATOR  VON  IMHOF  asked  if  Usibelli  could  be  provided  an                                                               
opportunity to make a bid on  the land prior to ARRC marketing it                                                               
to others.                                                                                                                      
MR.  COOK responded  that their  intent is  not to  solicit third                                                               
parties to purchase that land.                                                                                                  
SENATOR VON IMHOF  said, rather than removing the  first right of                                                               
refusal from the current leaseholders,  she hoped this body would                                                               
consider a  way to  structure the  bill so there  is at  least an                                                               
ability for  the ARRC to  notify the current leaseholders  of the                                                               
intent  to  sell   and  provide  at  least  60   days  for  those                                                               
leaseholders  to  do   their  own  due  diligence   and  have  an                                                               
opportunity to put a down payment on the property.                                                                              
4:14:08 PM                                                                                                                    
SENATOR  STEDMAN asked  why the  ARRC doesn't  come forward  with                                                               
tracts  that  it would  like  to  sell  off versus  requesting  a                                                               
blanket authority for all its lands.                                                                                            
MR. COOK answered  that they must have an offer  in hand to bring                                                               
to the legislature and people  just haven't been interested. They                                                               
have brought three deals to  the legislature since 1983. He added                                                               
that notification provisions for any  lease or sale are currently                                                               
so in section 6.                                                                                                                
SENATOR  STEDMAN  responded  that  it's  common  for  someone  to                                                               
express interest  in a  particular parcel  to the  landowner, and                                                               
then  the landowner  considers  the  sale. It  seems  that he  is                                                               
saying they must have a viable offer  in hand, and that is a less                                                               
drastic change to existing law.                                                                                                 
4:16:37 PM                                                                                                                    
MR.  COOK replied  he  understands  what he  is  saying, but  for                                                               
example,  if the  board wants  to sell  Chena Landing  right now,                                                               
legislation  to obtain  permission  to sell  that  block of  land                                                               
would  have to  be introduced  and  passed and  signed into  law,                                                               
which might  happen in one  session or the second  year. However,                                                               
markets and opportunities don't wait that long.                                                                                 
SENATOR STEDMAN  said sometimes the  developer gets out  ahead of                                                               
the  market. He  said  that this  issue comes  down  to how  much                                                               
authority the legislature  wants to give the ARRC on  the sale of                                                               
state-owned land.                                                                                                               
SENATOR HUGHES  asked if  a nimbler process  to respond  had been                                                               
proposed  before and  if not,  why not.  Has there  been a  trust                                                               
factor problem?                                                                                                                 
4:19:16 PM                                                                                                                    
MR. COOK said  that is an interesting question to  which he would                                                               
answer  from  being  on  the board  since  2009:  management  and                                                               
certain board members have a great  deal of fear that there would                                                               
be political  pressure to  dispose of  income producing  lands in                                                               
"sweet-heart,  below fair-market  value deals."  Their intent  is                                                               
not  to sell  the  best income  producing lands,  but  to have  a                                                               
complete  tool kit  to monetize  the  lands and  get the  maximum                                                               
value from  them, and  having a lease-only  policy has  made that                                                               
MR.  COOK said  he has  a  background in  commercial real  estate                                                               
development and a lot of  Senator Hughes' constituents have asked                                                               
to   purchase  some   of  these   lands,  both   residential  and                                                               
commercial, but  the board has  evolved its understanding  of the                                                               
need for a "full tool kit" and as  well as the need to be able to                                                               
say "no."                                                                                                                       
SENATOR  HUGHES   remarked  that  Eklutna,  Inc.,   has  been  "a                                                               
wonderful community partner,"  and asked if this  structure is in                                                               
place to provide protection against  "sweetheart deals" in future                                                               
MR.   COOK  answered   yes.  First,   there  are   public  notice                                                               
requirements  as   well  as  appraisal  and   fair  market  value                                                               
requirements, and all land sale  transactions must be reported to                                                               
the legislature.                                                                                                                
4:23:33 PM                                                                                                                    
SENATOR  WIELECHOWSKI   asked  if   he  would   support  language                                                               
prohibiting the sale of land unless it is at fair market value.                                                                 
MR. COOK said he thought that  language was already in there, but                                                               
the appraisal  process might not  be the  best way to  get there.                                                               
Competitive bid  is another way to  do that, and might  be better                                                               
for rural  lands than  "fair market  value" language.  Having the                                                               
flexibility to do both is important.                                                                                            
SENATOR  WIELECHOWSKI asked  the total  amount and  value of  the                                                               
land that ARRC owns.                                                                                                            
MR. COOK answered about 36,000 acres  of land and some of that is                                                               
in reserves. The  value is impossible to say; it  depends on what                                                               
they  would be  used for:  highest and  best use.  A fair  market                                                               
value appraisal is  required in section 5, and for  the ARRC that                                                               
means  a Member  of the  Appraisal Institute  (MAI) appraisal  or                                                               
competitive bid.                                                                                                                
SENATOR  WIELECHOWSKI asked  if  he would  support  capping at  a                                                               
certain value without having to go to the legislature.                                                                          
MR. COOK answered  no, because one never knows what  kind of deal                                                               
is going  to walk through  the door.  Curbs are the  reason there                                                               
haven't  been  more  sales;  they  have  a  diverse  real  estate                                                               
portfolio and are reluctant to do that.                                                                                         
SENATOR WIELECHOWSKI said it's got  to be hundreds of millions of                                                               
dollars  in  value,  and  he has  trouble  with  the  legislature                                                               
completely giving up control of its disposal.                                                                                   
MR. COOK answered  that other entities don't have to  come to the                                                               
legislature  to  dispose  of  land.  The ARCC  has  a  board  and                                                               
fiduciary obligations and public  notice requirements. Right now,                                                               
there is nothing to prevent DOTPF  or DNR from doing that. Why is                                                               
the Railroad different?                                                                                                         
4:28:51 PM                                                                                                                    
SENATOR WIELECHOWSKI  asked if anything  would prohibit  the ARRC                                                               
from selling  the terminal  in Seward  or some  large asset  to a                                                               
cruise ship  company, or  sell the entire  railroad to  a private                                                               
corporation, for that matter.                                                                                                   
MR.  COOK answered  the ARRC  can't sell  land that  is used  for                                                               
operations like track or terminals.                                                                                             
4:29:49 PM                                                                                                                    
SENATOR  VON  IMHOF  asked  if  any parcels  of  land  have  been                                                               
identified that have railroad tracks running through them.                                                                      
MR. COOK answered no.                                                                                                           
SENATOR  VON IMHOF  said at  some point  in the  future, assuming                                                               
this land  sale gains momentum,  the railroad might want  to sell                                                               
tracts of land that the tracks run through.                                                                                     
MR. COOK answered that tracks  have a 100-foot right-of-way where                                                               
land could never be sold.                                                                                                       
SENATOR  VON  IMHOF  said  another  bill  traveling  through  the                                                               
legislature  is  about right-of-way  and  permit  user fees,  and                                                               
asked  if this  bill passes,  will the  railroad want  to address                                                               
potential user fees for the new owner.                                                                                          
MR.  COOK replied  that a  user fee  wouldn't be  part of  a sale                                                               
document. Any  land subject to  user fees  would be found  in the                                                               
title search.                                                                                                                   
4:32:09 PM                                                                                                                    
SENATOR VON IMHOF said another specific bill addresses right-of-                                                                
way user fees with some  of her district's private landowners and                                                               
she wanted to know how  the railroad's practice may affect future                                                               
land sales with future landowners.                                                                                              
4:32:48 PM                                                                                                                    
MR. COOK replied that the  right-of-way itself and any areas that                                                               
are  potentially under  dispute will  never  be sold,  but if  an                                                               
adjacent  landowner has  some  sort of  permitting  rights for  a                                                               
garden or something else, those  rights will be assignable by the                                                               
individual when  the owner sells  the land. The ARRC  has rights-                                                               
of-way and  easements, which will never  be sold, so the  two are                                                               
not related to this legislation.                                                                                                
4:34:15 PM                                                                                                                    
MS. MOSS said  she spoke with Representative  Kopp yesterday, the                                                               
sponsor of  the other legislation  Senator von  Imhof referenced,                                                               
who said  he has  in agreement  with the  ARRC and  supports this                                                               
SENATOR STEDMAN remarked why does  the state own the railroad and                                                               
why doesn't it sell it?                                                                                                         
4:35:43 PM                                                                                                                    
BILL  O'LEARY,  President  &  CEO,  Alaska  Railroad  Corporation                                                               
(ARRC), Anchorage,  Alaska, said  he was available  for questions                                                               
on SB 86 and that the chairman  had done a good job of explaining                                                               
the bill.                                                                                                                       
4:36:33 PM                                                                                                                    
JIM KUBITZ,  Vice President, Real  Estate and  Facilities, Alaska                                                               
Railroad  Corporation  (ARRC),  Anchorage, Alaska,  said  he  was                                                               
available for questions  on SB 86, and he also  said the chairman                                                               
had done a good job of explaining the bill.                                                                                     
BRUCE  BUSTAMANTE,  President,  Anchorage  Chamber  of  Commerce,                                                               
Anchorage, Alaska, supported SB 86  to encourage more real estate                                                               
development  in the  Anchorage Bowl.  He said  they had  provided                                                               
recommendations to the municipality and  have found a shortage of                                                               
useful  land,  particularly land  zoned  for  industrial use.  He                                                               
agreed that  one must move quickly  on some real estate  deals to                                                               
be  competitive.   This  bill  provides  an   advantage  for  the                                                               
Municipality of  Anchorage in facilitating  land swaps in  a more                                                               
expeditious manner.                                                                                                             
4:39:41 PM                                                                                                                    
DAVE HANSON,  representing himself, Anchorage,  Alaska, supported                                                               
the concept  of SB 86.  He had  been involved in  land management                                                               
and natural  resource development for  the last 40 years  and had                                                               
worked with  many rural areas  on subdivision development  and is                                                               
sympathetic  to  some  things  he  is  hearing.  He  worked  with                                                               
Representative Talerico when he was  mayor on several projects up                                                               
in the Healy area.                                                                                                              
He said  the ARRC  is in  the position of  a Native  allottee who                                                               
can't do  anything without  the Bureau  of Indian  Affairs giving                                                               
them approval.  The railroad  is a  semi-autonomous body  and not                                                               
really a part of the  administration directly under the governor.                                                               
Also, it's  very clear that  if land is  sold to a  developer the                                                               
buyer  must   have  full  title,   so  they  can   finance  their                                                               
development.  Many  villages have  had  that  problem with  doing                                                               
long-term leases.                                                                                                               
4:41:40 PM                                                                                                                    
MR.  HANSON  had two  concerns;  one  being  the first  right  of                                                               
refusal. It's  one thing for a  current board to say  this is the                                                               
intent to  honor that, but it's  another thing over time  to have                                                               
no   assurance  that   will  be   the  case   as  personnel   and                                                               
circumstances  change. He  supported some  kind of  first refusal                                                               
right for the existing lessee with  a limited time period, so the                                                               
lessee doesn't hold things up forever.                                                                                          
Secondly, he is hearing a lot  of concern from the committee, and                                                               
rather than going forward with this  bill, they might want to try                                                               
it  out by  applying it  to  a couple  of parcels  first -  Chena                                                               
Landing and  Tri-Valley land, maybe  - before applying it  to the                                                               
whole 36,000 acres to observe how it would really work.                                                                         
SENATOR COGHILL  noted those were  good suggestions and  he would                                                               
do his best to find some answers and a pathway forward.                                                                         
CHAIR  GIESSEL said  she would  leave public  testimony open  and                                                               
held SB 86 in committee.                                                                                                        
4:45:27 PM                                                                                                                    
CHAIR GIESSEL  adjourned the Senate Resources  Standing Committee                                                               
meeting at 4:45 p.m.                                                                                                            

Document Name Date/Time Subjects
SB 86 - Version A.PDF SRES 4/7/2017 3:30:00 PM
SB 86
SB 86 - Sponsor Statement.pdf SRES 4/7/2017 3:30:00 PM
SB 86
SB 86 - Sectional Analysis.pdf SRES 4/7/2017 3:30:00 PM
SB 86
SB 86 - Supporting Document - ARRC Fact Sheets.pdf SRES 4/7/2017 3:30:00 PM
SB 86
SB 86 - Fiscal Note - AK Railroad - 3 - 31 - 17.pdf SRES 4/7/2017 3:30:00 PM
SB 86
SB 86 - Support- Denali Borough.pdf SRES 4/7/2017 3:30:00 PM
SB 86
SB 86 - Support - Usibelli Coal Mine.pdf SRES 4/7/2017 3:30:00 PM
SB 86
Updated Agenda - 4 - 7 - 17.pdf SRES 4/7/2017 3:30:00 PM
SB 65- Proposed Senate Resources CS - 4 -6 - 17.pdf SRES 4/7/2017 3:30:00 PM
SB 65
SB 65- Corrected Explanation of Changes - Version J to Version R.pdf SRES 4/7/2017 3:30:00 PM
SB 65
SB 86 - Support - Eklutna Inc.pdf SRES 4/7/2017 3:30:00 PM
SB 86
SB 86 - Support - Anchorage Chamber of Commerce.pdf SRES 4/7/2017 3:30:00 PM
SB 86