Legislature(2017 - 2018)BUTROVICH 205

01/19/2018 03:30 PM RESOURCES

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Audio Topic
03:30:24 PM Start
03:31:07 PM Overview: Forestry Development, Opportunities, and Restrictions
04:45:13 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overview: State of Alaska Mining Claims TELECONFERENCED
and Filing Process
- Department of Natural Resources
Division of Mining, Land, and Water
-- Testimony <Invitation Only> --
<Above Item Removed from Agenda>
+ Overview: Forestry Development, Opportunities, TELECONFERENCED
and Restrictions
- Department of Natural Resources Division of
Forestry
-- Testimony <Invitation Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                        January 19, 2018                                                                                        
                           3:30 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Cathy Giessel, Chair                                                                                                    
Senator John Coghill, Vice Chair                                                                                                
Senator Kevin Meyer                                                                                                             
Senator Click Bishop                                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Natasha von Imhof                                                                                                       
Senator Bert Stedman                                                                                                            
Senator Bill Wielechowski                                                                                                       
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
OVERVIEW: FORESTRY DEVELOPMENT, OPPORTUNITIES, AND RESTRICTIONS                                                                 
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
HEIDI HANSEN, Deputy Commissioner                                                                                               
Department of Natural Resources (DNR)                                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Introduced Division of Forestry overview.                                                                 
                                                                                                                                
CHRIS MAISCH, Director                                                                                                          
Division of Forestry                                                                                                            
Department of Natural Resources (DNR)                                                                                           
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT: Provided Division of Forestry overview.                                                                   
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:30:24 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 Coghill, Bishop, and Chair Giessel.                                                                         
                                                                                                                                
^Overview: Forestry Development, Opportunities, and Restrictions                                                                
Overview: Forestry Development, Opportunities, and Restrictions                                                             
                                                                                                                              
3:31:07 PM                                                                                                                    
CHAIR GIESSEL announced  the only order of business  today was the                                                              
overview    on   forestry    development,    opportunities,    and                                                              
restrictions  by  the  Department   of  Natural  Resources'  (DNR)                                                              
Division of Forestry.  She related that 20 million  acres of state                                                              
land is  managed by  the State  Forester. Alaska  has the  largest                                                              
forest in the country, the Tongass National Forest.                                                                             
                                                                                                                                
In terms of access  for multiple use, the Tongass  has also been a                                                              
source of  contention between  the state  and federal  government.                                                              
The  Alaska  State Forests  are  therefore  the primary  means  of                                                              
keeping  the timber  industry viable.  Managing  timber sales  and                                                              
the  economy of  the  communities  that rely  on  the forests  for                                                              
their way of life is the charge of the presenters.                                                                              
                                                                                                                                
3:31:23 PM                                                                                                                    
HEIDI   HANSEN,  Deputy   Commissioner,   Department  of   Natural                                                              
Resources  (DNR),  introduced  the presentation  saying  it  would                                                              
provide an  overview of timber  industry regional  differences and                                                              
scale,  markets,  products,  and   types  of  facilities,  primary                                                              
manufacturing,  log  export, secondary  manufacturing,  non-timber                                                              
forest products,  and woody biomass  projects including  the scale                                                              
and types of fuels.                                                                                                             
                                                                                                                                
CHRIS  MAISCH,  Director,  Division  of  Forestry,  Department  of                                                              
Natural Resources (DNR),  said he would start with  an overview of                                                              
the  primary  forest  products   businesses  and  their  locations                                                              
around  the  state.  He used  a  2015-map,  explaining  that  this                                                              
information  gets updated  every five  years in  a timber  product                                                              
output report  that comes out through  a program using  the forest                                                              
inventory analysis  and their federal partners. This  document has                                                              
all  kinds of  information  about forest  products  in the  state.                                                              
Three of  the reports cover different  sections (the URLs  will be                                                              
provided) and are  provided by the University of  Montana that has                                                              
contracted nationally to help states do this type of work.                                                                      
                                                                                                                                
3:32:38 PM                                                                                                                    
SENATOR MEYER joined the committee.                                                                                             
                                                                                                                                
MR. MAISCH  pointed  out that the  map displayed  mill types:  saw                                                              
mills,  log home  manufacturing facilities,  cedar products,  fire                                                              
wood,  tone wood  (for  musical  instruments), and  fuel  pellets.                                                              
There  were  about  60 primary  forest  product  manufacturers  in                                                              
Alaska as of 2015,  and the Alaska forest products  industry had a                                                              
total sales  value of about  $114 million including  sawn material                                                              
and  export  logs.  This  trend   represents  about  a  19-percent                                                              
decrease  from  2011  (the five-year  span  between  reports).  It                                                              
dropped  35 percent  during  the  previous five-year  period.  The                                                              
trend  line  has been  "pretty  horrendous"  for the  decrease  in                                                              
value, primarily occurring in Southeast Alaska.                                                                                 
                                                                                                                                
He pointed  out a  bright spot  hidden in  those numbers:  exclude                                                              
the  log export  and  residual part  of  those  numbers show  that                                                              
primary wood  products manufacturing  actually rose by  28 percent                                                              
in the  last five-year  period, and their  sales were  $23 million                                                              
in  value.  Sixty-six  percent  of  those  products  are  sold  to                                                              
markets in the state.                                                                                                           
                                                                                                                                
MR. MAISCH said  the workforce peaked during 1989,  and the forest                                                              
products sector  had 4,200 workers.  Today, there are  about 1,215                                                              
workers.  That  includes  logging,  forestry  work  such  as  tree                                                              
planting  and  thinning,  as  well as  the  actual  wood  products                                                              
manufacturing. About  58 percent of those numbers are  in the wood                                                              
manufacturing  piece and  the  remainder are  in  the service  and                                                              
logging side of things.                                                                                                         
                                                                                                                                
3:35:31 PM                                                                                                                    
MR. MAISCH  said there are  different scales of  timber production                                                              
in the  state, because  of the different  forest types.  Southeast                                                              
has the  Viking Sawmill located  in Craig.  It is the  largest saw                                                              
mill currently  operating  in Alaska.  They make  a wide range  of                                                              
sawn  products for  export  and domestic  use,  but primarily  for                                                              
export.  Very important  for this  facility  is that  it has  both                                                              
deep-water port  tidewater and road  access. Those are  key things                                                              
for  any type  of  facility to  have  if it  is  in Southeast.  He                                                              
showed a picture  of a head rig  cutting an old growth  log inside                                                              
the mill,  which is  producing lumber  and 35 different  specialty                                                              
products  for customers  around  the  world, but  primarily  Asian                                                              
customers.  A by-product  of this  process is  wood chips  and saw                                                              
dust,  some  of which  gets  used  in  the  biomass piece  of  the                                                              
equation.   He said this  mill produces  way more volume  than can                                                              
be used in-state.  So, a lot of the chips go down  south via barge                                                              
to a paper mill.                                                                                                                
                                                                                                                                
CHAIR  GIESSEL asked  the difference  between old  growth and  new                                                              
growth timber.                                                                                                                  
                                                                                                                                
MR. MAISCH  answered that old growth  is a term that  is typically                                                              
used to  describe large,  older  logs for forests  that occur  all                                                              
over  Alaska, both  the boreal  forest and  the Southeast  Alaskan                                                              
coastal rain forest  that has much larger trees than  up north. It                                                              
is  typically an  age-based measurement  that depends  on who  you                                                              
talk to about where  the cut-off is between old  and young growth.                                                              
But, typically  once a  tree in Southeast  Alaska is  pushing into                                                              
the 150+ range in  age, it is talked about as  an old growth tree.                                                              
It  can  get  much  older. The  California  Redwoods  are  a  good                                                              
example  of  old  growth  by  most  people's  definition.  In  the                                                              
Interior to  be old growth, a white  spruce tree would  have to be                                                              
in the 150+  age class. That doesn't  happen a lot because  of the                                                              
fires there.  He has measured a  white spruce as old as  360 years                                                              
old on an  island in the Yukon  River where the fire  couldn't get                                                              
to it, and that eventually got killed by bark beetles.                                                                          
                                                                                                                                
Young growth is  timber that has been harvested once.  Most of the                                                              
Lower  48 is on  third, fourth,  and fifth  growth forests;  sixth                                                              
and seventh  in some places. He  showed a picture of  young growth                                                              
logs in  the Kasciusko  area of Southeast  Alaska where  the trees                                                              
are 65  years old  with the  largest being  about 25-26  inches in                                                              
diameter at the butt.                                                                                                           
                                                                                                                                
3:38:55 PM                                                                                                                    
SENATOR MEYER  asked if  timber is  considered a renewable  energy                                                              
source.                                                                                                                         
                                                                                                                                
MR.  MAISCH answered  yes: the  UK and  EU countries,  as part  of                                                              
their  climate  mitigation  strategies,  consider  wood  fuels  as                                                              
carbon neutral.  The one key is  that they have to  be sustainably                                                              
(not  cutting  into the  principal  of  the forest)  produced  and                                                              
managed appropriately.                                                                                                          
                                                                                                                                
SENATOR MEYER  asked if trees in  Southeast are second  growth and                                                              
if they were all cut down at one time.                                                                                          
                                                                                                                                
MR. MAISCH answered  yes; it was developed pretty  heavily for the                                                              
mining activity.                                                                                                                
                                                                                                                                
3:40:17 PM                                                                                                                    
He showed a  picture of another important piece  of infrastructure                                                              
in  Southeast called  a log  transfer facility  (LTF). It's  where                                                              
logs are  placed from  the land  into the  water. They  are mostly                                                              
destined for  one of  the state's Asian  customers of  which China                                                              
is the  main one for young  growth material. Another  map depicted                                                              
some of the Chinese ports that logs are shipped to.                                                                             
                                                                                                                                
3:41:24 PM                                                                                                                    
MR. MAISCH gave  a "shout out" to a sister division,  the Division                                                              
of Agriculture,  because it provides  a very important  inspection                                                              
service  for a  "phytosanitary certificate"  that  must be  issued                                                              
before  the logs can  move into  other countries.  It ensures  the                                                              
importing country  that the logs  are free from insect  pests. One                                                              
particular pest of concern is a pinewood nematode.                                                                              
                                                                                                                                
They also  have an  option to do  third-party fumigation,  because                                                              
when China  first opened-up  its market  there weren't  many ports                                                              
that had onshore  fumigation facilities. So, the  fumigations were                                                              
being  done onboard  the  ship in  South  Korea;  the logs  didn't                                                              
leave the  ship, but  they were  fumigated in  place in  the hull.                                                              
Alaska's Division  of Agriculture sends a  phytosanitary inspector                                                              
there to  observe that  process and  to certify  that it  was done                                                              
correctly and for  the amount of time required.  Industry pays for                                                              
that: inspection fees  as well as all the travel  association with                                                              
that activity. It's critical to this market.                                                                                    
                                                                                                                                
MS. HANSEN said  last year the state sold 80.3  million board feet                                                              
of timber for export, valued at $74.3 million.                                                                                  
                                                                                                                                
MR.  MAISCH  added for  the  period  of  2003-2013, the  value  of                                                              
exported logs was about $1.2 billion.                                                                                           
                                                                                                                                
CHAIR GIESSEL asked  if the fumigation process could  be done here                                                              
in Alaska.                                                                                                                      
                                                                                                                                
MR. MAISCH  replied in  most cases fumigation  is done  before the                                                              
logs depart  the country of origin,  but not in Alaska  because it                                                              
has  cold  weather,  lack  of  facilities   to  do  this  kind  of                                                              
fumigation, and  primarily because there  is not enough  volume to                                                              
amortize the  investment costs. That  could change at  some point,                                                              
but this  map depicts  the ports  in China  that all have  onshore                                                              
fumigation facilities. Two were added just this last year.                                                                      
                                                                                                                                
3:43:50 PM                                                                                                                    
CHAIR GIESSEL  asked if Canada is  a competitor and if  they go to                                                              
China, also.                                                                                                                    
                                                                                                                                
MR. MAISCH  answered yes; there  are many world-wide  competitors:                                                              
New Zealand,  Canada, South  America, the Scandinavian  countries,                                                              
and Russia  (their  logs move across  their border  as opposed  to                                                              
through  the ports).  Another  map depicted  that  Alaska is  very                                                              
close from  sailing time to the  Asian market and that  provides a                                                              
cost advantage.                                                                                                                 
                                                                                                                                
3:44:33 PM                                                                                                                    
He said Superior  Pellets, LLC, is located in North  Pole. It is a                                                              
primary  manufacturing facility  that produces  wood pellets.  The                                                              
wood comes  in as a wood  chip and goes  through a hammer  mill to                                                              
make  them  even  finer,  almost   like  a  rock  flour.  That  is                                                              
processed,  dried, and  forced  through dies  that  press it  into                                                              
pellets.  These   pellets  are   used  both  in   residential  and                                                              
commercial space heating facilities.                                                                                            
                                                                                                                                
3:46:22 PM                                                                                                                    
He   next   depicted  the   different   scale   of   manufacturing                                                              
facilities:  a  log  turning  mill  that  turns  logs  to  uniform                                                              
diameters to make  it easy to produce log homes,  a Wood Miser ban                                                              
mill for dimension timber.                                                                                                      
                                                                                                                                
3:47:00 PM                                                                                                                    
He  said secondary  hi-value manufacturing  is  not as  prevalent,                                                              
and  Haines  Fairweather Ski  Works  is  one  product that  has  a                                                              
world-wide   reputation.  Custom-nested   birch  bowls   are  from                                                              
Fairbanks  and  Mat-Su  Kahiltna  Birch Works  makes  syrup  using                                                              
reverse osmosis to concentrate the sap first to a 70:1 ratio.                                                                   
                                                                                                                                
3:50:24 PM                                                                                                                    
MR. MAISCH  next looked at the types  of wood fuels and  the scale                                                              
of  the operations.  Wood biomass  consists of  wood chips,  solid                                                              
wood, and pellets.  Some systems in Alaska use all  three of these                                                              
fuel sources to produce heat and some power.                                                                                    
                                                                                                                                
The Alaska  Energy Authority (AEA)  produces a map  of feasibility                                                              
studies  for wood  biomass projects  that have  been completed  in                                                              
the state  as part  of its  renewable energy  program, as  well as                                                              
where projects  are actually operating  and under  construction or                                                              
design.  Tremendous  progress  has  been  made over  the  last  12                                                              
years. The  smaller the community  the more impact these  kinds of                                                              
facilities have.                                                                                                                
                                                                                                                                
3:51:23 PM                                                                                                                    
Ketchikan has a  relatively new project that uses  pellets to heat                                                              
the airport. One  can look right into the boiler  room and see the                                                              
boilers that  use locally  produced pellets  and pellets  from the                                                              
Pacific Northwest.                                                                                                              
                                                                                                                                
3:52:48 PM                                                                                                                    
A  two-year  old  Galena  woody  biomass  heating  system  uses  a                                                              
Messerschmidt boiler  that burns wood chips. The one  boiler is on                                                              
a loop  that heats  17 old  military buildings.  Notably,  some of                                                              
the wood  comes from Native corporation  land and a  20-year state                                                              
sale.                                                                                                                           
                                                                                                                                
3:54:21 PM                                                                                                                    
The Village  of Tanana  uses model  2000 solid  wood boilers  that                                                              
are like  a big  wood stove. The  community is  not big  enough to                                                              
support  a chip  system. The  boilers need  to be  fired only  two                                                              
times a day even  in the coldest weather, because  it is so clean-                                                              
burning. The  energy is stored  in a big  water jacket  around the                                                              
boilers. The biggest  installation he had seen of  one of these is                                                              
a school that has three boilers chained together.                                                                               
                                                                                                                                
SENATOR  BISHOP  commented  that  he is  telling  the  truth:  the                                                              
exhaust emission from these boilers is amazingly clean.                                                                         
                                                                                                                                
3:55:43 PM                                                                                                                    
MR. MAISCH  demonstrated the  employment opportunities  that occur                                                              
in  a community  like this.  A resident  goes  out on  his own  on                                                              
either  tribal or  state lands  with  a permit  and harvests  wood                                                              
that he brings  into the city,  which owns the boilers,  and sells                                                              
the wood  to the  city. Quite  a few  people sell  wood. The  best                                                              
story  about this is  that a  family from  Stevens Village  worked                                                              
for  about a  month putting  together a  large raft  of wood  that                                                              
they harvested;  they floated  the logs down  the Yukon  River and                                                              
pulled it  up to the shore  and sold it  the city of  Tanana. Just                                                              
operating and maintaining this equipment creates jobs.                                                                          
                                                                                                                                
An exciting development  is happening in Fairbanks  called Volter.                                                              
It  is the  first small-scale  opportunity  to produce  electrical                                                              
energy from  wood and comes  out of Finland.  Many of  these units                                                              
are installed  in community buildings  and provide power  and heat                                                              
to 15  homes. The process  is called "gasification."  Biomass goes                                                              
in  the  top  -  in  this  case,  wood  chips.  It  is  dried  "in                                                              
paralysis" and  when air  is added, it  combusts. That  produces a                                                              
gas  that is  forced  out  of the  system  and  gets burned  in  a                                                              
regular  combustion  engine. The  product  is cleaned  and  called                                                              
syn-gas. This  machine operates very  reliably, and the  heat load                                                              
goes  to the  Big Dipper  Ice Arena  in  Fairbanks. It  is in  the                                                              
process of being  set up and tested over the course  of this year,                                                              
including air  emission testing which  is going to be done  by the                                                              
University  of Alaska  Cold Climate  Housing  Research Center.  If                                                              
this pans  out, it  can make a  big difference in  a lot  of small                                                              
rural communities.                                                                                                              
                                                                                                                                
3:59:26 PM                                                                                                                    
MR. MAISCH said  that concluded the overview on  what the industry                                                              
looks like  in the  state right  now, and next  he wanted  to talk                                                              
about  what is  needed  to maintain  and  grow  the industry.  The                                                              
first thing  is a stable  land base that  is dedicated  for forest                                                              
management and produces  a consistent reliable offering  of timber                                                              
sales.  The  best  way  to  do that  is  through  a  mix  of  land                                                              
ownership:  private, state,  Mental  Health  Trust and  University                                                              
Land Trust,  and federal land (weak).  Next is access  to domestic                                                              
and international markets.                                                                                                      
                                                                                                                                
The state has a  range of timber sale options. Long  term sales of                                                              
10-25 years  is what  the industry  likes to amortize  investments                                                              
if they  are building  capital investments.  The continued  use of                                                              
the "Good  Neighbor Authority,"  a relatively  new authority  with                                                              
the federal  government, allows  the state to  do work  on federal                                                              
lands on  their behalf, helping  them get wood and  other products                                                              
moving again off the national forests.                                                                                          
                                                                                                                                
Next,  Mr.  Maisch  said,  Alaska  has  three  distinct  types  of                                                              
forests: the  boreal forest  up North  (Region 3), the  transition                                                              
forest  where the  boreal forest  meets the  coastal rain  forest,                                                              
and  the  true   coastal  rain  forest.  The   division  regulates                                                              
commercial  timber harvests  on state, private,  and public  lands                                                              
in the state as part the Alaska Forest Practices Act.                                                                           
                                                                                                                                
4:02:24 PM                                                                                                                    
There are  three state forests:  the Haines State  Forest (286,000                                                              
acres)  created  in 1982,  the  Tanana  Valley State  Forest  (1.8                                                              
million acres)  created in  1983, and  the Southeast State  Forest                                                              
(48,500 acres) created  in 2010 and expanded in  2011. Those acres                                                              
have played  a large role in  keeping the current  timber industry                                                              
alive in Southeast Alaska.                                                                                                      
                                                                                                                                
He explained  that Alaska has  candidate state forests  identified                                                              
in   [Administrative    Order]   AO-258,   (under    the   Parnell                                                              
administration)  that have been  recommended to be  considered for                                                              
state  forest designation  including  the  Susitna, Copper  River,                                                              
Icy Bay, and on the Kenai.                                                                                                      
                                                                                                                                
4:03:22 PM                                                                                                                    
He displayed  a map depicting the  Tanana Valley State  Forest. It                                                              
has two  parts; one  is the  actual designated  acres that  are in                                                              
the state forest  (in the dark colors), and the  classified forest                                                              
lands  that  have been  classified  for  forest  use in  the  Area                                                              
Planning process.  So, they aren't  actually in the  state forest,                                                              
but still  are managed by  the division.  All the area  plans zone                                                              
different   parts  of   state  ownership   for  either   wildlife,                                                              
forestry,  recreational, disposals,  and  hi-level zoning.  Having                                                              
the  long-term management  piece of  being classified  or a  state                                                              
forest are the  two key things that potential  investors are going                                                              
to look for in terms of a secure land base, he said.                                                                            
                                                                                                                                
4:04:25 PM                                                                                                                    
MR.  MAISCH displayed  a slide  of  the Haines  State Forest  that                                                              
showed  what kind  of mills  Alaska had  about 10  years ago.  Icy                                                              
Straits  Lumber is  still  there  in Hoonah.  It  is a  relatively                                                              
small  mill that  can do  a couple  million feet  of production  a                                                              
year of  very specialized  material. The Viking  Mill is  the last                                                              
large mill in Southeast  Alaska. The other two are  gone since the                                                              
map was produced.                                                                                                               
                                                                                                                                
4:05:12 PM                                                                                                                    
MR.  MAISCH  next  reviewed  the state  timber  sale  methods  and                                                              
types. Statutes have five ways to offer timber sales:                                                                           
     -Competitive sale process (AS 38.05.120).                                                                                  
      -Small negotiated sales (AS 38.05.115). Under a half-                                                                     
     million  feet  to  smaller  operators  in  the  Interior                                                                   
     mostly.                                                                                                                    
     -High-value  added,  negotiated sales  (AS  38.05.123.).                                                                   
     Only  one  sales   in  Fairbanks  has  been   done  with                                                                   
     Superior Pellets.  Although with the energy  price crash                                                                   
     they have not signed the contracts.                                                                                        
     -Large  negotiated sales  (AS  38.05.118). In  Southeast                                                                   
     mostly.  It's a similar  process to  the .123; the  main                                                                   
     difference is  they do not  have to be producing  value-                                                                   
     added products.  This is the way state wood  is moved to                                                                   
     local  mills  in  Southeast,   because  they  are  at  a                                                                   
     competitive  disadvantage  to  the logs  in  the  export                                                                   
     market.                                                                                                                    
     -Salvage  sales (AS  38.05.117). Have  to be  distressed                                                                   
     wood, either disease or insects.                                                                                           
     -Personal use  sales (AS 38.05.850). Individual  permits                                                                   
     and wood for a family, basically.                                                                                          
                                                                                                                                
4:09:02 PM                                                                                                                    
MR.  MAISCH  next listed  the  steps  in  a timber  sale  program,                                                              
adding  that the  state's process  is much  more streamlined  than                                                              
the  federal   process.  The   two  trusts   have  an   even  more                                                              
streamlined process than the state does.                                                                                        
     -Five-year   schedule  of   timber  sales  (FYSTS):   AS                                                                   
     38.05.113. These  are put out about every  two years for                                                                   
     each of the  area offices, although they can  be put out                                                                   
     yearly.  A buyer can  look out  over a five-year  period                                                                   
     to  see   what  kind  of   volume  and  sales   will  be                                                                   
     available.  They take  comment on  it, but  it is not  a                                                                   
     document that requires a decision.                                                                                         
     -Best  Interest Finding (BIF):  AS 38.05.035  (e)(6)(A).                                                                   
     A decision  is made to  dispose of  a timber or  not. It                                                                   
     is  appealable.   Appeals   go  to  the   commissioner's                                                                   
     office. There  were very few  appeals until a  few years                                                                   
     ago when  more work was  happening in Southeast  Alaska.                                                                   
     Some of the  NGOs that do not like wood to  be sold have                                                                   
     filed  administrative appeals.  Every sale  in the  last                                                                   
     two years  have been administratively appealed,  but the                                                                   
     department  has won all  five cases  in court. They  are                                                                   
     currently  working through  several  appeals and  expect                                                                   
     to bring those sales out this year.                                                                                        
     -Forest  Land  Use  Plan  (FLUP):   AS  38.05.112.  Site                                                                   
     specific information  (seeing where the roads  are going                                                                   
     to  go) about  a sale once  it has  been designed.  This                                                                   
     information is  for the industry  and the public.  It is                                                                   
     also   a   decision   document  that   can   be   issued                                                                   
     concurrently  to  save time  or  separately.  Typically,                                                                   
     the  regular  sale program  (0-5  years in  length)  are                                                                   
     issued  concurrently.  The BIF  is  required  to run  21                                                                   
     days,  but FLUPS  are required  to run 30.  So, he  just                                                                   
     runs them both 30 days to avoid confusion.                                                                                 
                                                                                                                                
MR.  MAISCH said  one of  the challenges  for  long-term sales  of                                                              
FLUPS is that all  the work on the ground needs  to be done, which                                                              
requires staff and  money. So, they have been  preparing the FLUPS                                                              
in five-year increments within the 20-25-year sale.                                                                             
                                                                                                                                
4:12:57 PM                                                                                                                    
Unfortunately, these  sales haven't worked out in  every case. The                                                              
one they  spent a lot  of time and energy  on was a  combined heat                                                              
and power  facility (AP&T) in Tok.  When energy prices  spiked, it                                                              
made a lot of  sense, because they are an isolated  grid that only                                                              
used diesel  for producing energy,  and they proposed  to purchase                                                              
a long-term sale  from Alaska to help convert  their facility into                                                              
a wood-fired  power  plant. They  started with  the .118  process,                                                              
because  they didn't  think  anyone else  would  compete with  the                                                              
local utility.  But they got  a long way  through the  process and                                                              
all of  a sudden competition,  Young's Timber, showed  up. Quickly                                                              
the department  became  convinced it  did not  want to choose  the                                                              
winner or  loser there and went  to a .120 process  (a competitive                                                              
sale). This happened  over a two-year period, but  when it finally                                                              
came time to put the sale up, no one bid on it.                                                                                 
                                                                                                                                
4:14:00 PM                                                                                                                    
SENATOR BISHOP  asked what  it cost  to do that  and then  have no                                                              
sale.                                                                                                                           
                                                                                                                                
MR. MAISCH  replied  a lot of  time, staff,  funding, and  energy,                                                              
but added that this was done during the fiscal "good days."                                                                     
                                                                                                                                
4:14:44 PM                                                                                                                    
SENATOR BISHOP asked  if there is any kind of  recourse. Didn't he                                                              
have performance contracts?                                                                                                     
                                                                                                                                
MR. MAISCH  said that has been  discussed a lot and  some up-front                                                              
bonding  is being  considered. Both  these  parties were  serious,                                                              
but conditions changed.                                                                                                         
                                                                                                                                
4:15:27 PM                                                                                                                    
The Galena space  heating project is a real success,  he said. The                                                              
.120 process  was used.  Usually a community  has one  utility, so                                                              
they are  not really competing. This  is a 20-year sale  that will                                                              
provide  a commitment  to provide  the wood  resources needed  for                                                              
that  facility.  The  agreement  is  ready  to  execute,  and  the                                                              
community  is  very   happy  about  it.  They   are  cutting  some                                                              
cottonwood  hard wood stands  and some  spruce stands.  Cottonwood                                                              
and aspen  come right back,  and all of  a sudden moose  and other                                                              
animals  are  attracted,  a  food   security  piece.  So,  biomass                                                              
protects from fire, provides employment and moose for food.                                                                     
                                                                                                                                
4:16:47 PM                                                                                                                    
MR. MAISCH  said Japan  is committed  to turning  off its  nuclear                                                              
power   generators  to   produce  electricity,   because  of   the                                                              
Fukushima incident  in 2011.  One of the  things they  are looking                                                              
at is going to  biomass, because it's climate  friendly as opposed                                                              
to some of  their other options.  So, they are looking  around for                                                              
potential  commitments for  long-term  fiber  supplies. The  state                                                              
has had  three or four  companies "kick  tires" with  the Division                                                              
of Forestry  about what  kind of  commitments can  be made  in the                                                              
Susitna  Valley  (that  has  no  state  forest)  to  supply  wood.                                                              
Because this wood  is going to be used in utility  generation, the                                                              
power production  has to be certified by a  third-party certifier,                                                              
the Forest Stewardship Council or the SFI, as being sustainable.                                                                
                                                                                                                                
4:18:31 PM                                                                                                                    
He  said  getting  certification  is not  a  simple  process.  For                                                              
instance, certifying  the Southeast State Forest would  be done in                                                              
two  phases. Phase  I  is review  of  the SFI  standard  including                                                              
required   documentation   (evidence  manual)   that   third-party                                                              
auditors will look  at. The third-party consultant  works with the                                                              
division  to  develop  the documents  and  basically  dry-runs  an                                                              
audit. Then an  accreditation certified body,  another consultant,                                                              
comes  in and  runs  through the  audit  to the  SFI  [Sustainable                                                              
Forest  Initiative] standard.  The SFI  takes about  8 months  and                                                              
for the Southeast  State Forest (about 50,000 acres)  it will cost                                                              
about $19,000 plus  travel expenses for the auditors,  which might                                                              
double that.                                                                                                                    
                                                                                                                                
Luckily the SFI  has a Partner Program, that consists  of the five                                                              
biggest paper-using  customers  that want  certified wood  and are                                                              
willing to  underwrite some  of the  certification costs,  because                                                              
they want  to assure having a  good supply world-wide.  This would                                                              
save the division about $9,300.                                                                                                 
                                                                                                                                
4:21:01 PM                                                                                                                    
SENATOR  BISHOP asked  who the  Sustainable  Forest Initiative  is                                                              
and where they are located.                                                                                                     
                                                                                                                                
MR.  MAISCH  replied that  SFI  is  a U.S.-based  initiative  that                                                              
originally came  out of  the Pulp and  Paper Association,  but has                                                              
spun off into  its own non-profit organization in  response to the                                                              
FSC [Forest  Stewardship Council]  standard, which was  started up                                                              
by environmental  interests.  He explained  that the FSC  standard                                                              
takes a lot more  time and looks at some social  and environmental                                                              
considerations  and  has some  restrictions  on certain  types  of                                                              
timber, like old growth.                                                                                                        
                                                                                                                                
4:22:20 PM                                                                                                                    
Phase II  is the ongoing  audit after  certification. One  part of                                                              
an operation is audited every year to "keep you on your toes."                                                                  
                                                                                                                                
MR.  MAISCH  said  accessing  the   energy  market  requires  this                                                              
process.  A good  example is  the exploding  southern U.S.  pellet                                                              
industry that goes  to the UK and EU to produce  energy. They shut                                                              
off their  coal plants and are  switching to wood, because  of the                                                              
climate  piece.  They  need  that   sustainability  certification.                                                              
Recently,  Florida,   North  Carolina,   and  Arkansas   have  all                                                              
certified  under the  SFI  standard. Almost  all  of the  southern                                                              
states  are certified  under  that standard  and  some states  are                                                              
dual-certified.                                                                                                                 
                                                                                                                                
The Asian  markets have not  moved as quickly  in this  arena, but                                                              
they  will  potentially  be  a  customer  for  the  same  type  of                                                              
product.                                                                                                                        
                                                                                                                                
He  said that  certification  also  helps  the social  license  to                                                              
actually  manage a  forest,  because a  third-party  comes in  and                                                              
gives a top-to-bottom  review of a business, which  would probably                                                              
help in court  in the case of  a challenge. The Forest  Service in                                                              
Southeast  is  considering  certification  at the  same  time  the                                                              
state does,  because it  will help  with costs  and some  of their                                                              
litigation.                                                                                                                     
                                                                                                                                
4:24:47 PM                                                                                                                    
SENATOR  COGHILL asked  if the 48,000  acres  in Southeast  is the                                                              
critical  element  in  this  certification,  because  it  is  more                                                              
likely to be an international sale.                                                                                             
                                                                                                                                
MR. MAISCH replied  that it isn't, because some of  the volume off                                                              
Forest Service  lands can be exported  in the round. It  is unique                                                              
to Alaska, but  it requires an exemption by the  Regional Forester                                                              
for each  project. However,  there is no  market for  young growth                                                              
logs here,  and that is  the only way  to move that  material. The                                                              
state is  managing both kinds  of logs  and the young  growth ones                                                              
are  coming  into   their  own.  In  15-20  years   there  may  be                                                              
significant  volumes (100+-year).  The division  is in  year-three                                                              
of  conducting a  forest  inventory looking  at  the young  growth                                                              
resource   on  federal   and  state   lands   to  provide   better                                                              
projections  on how much  wood comes  on year-by-year  and decade-                                                              
by-decade.                                                                                                                      
                                                                                                                                
4:26:27 PM                                                                                                                    
He  said  there  are  some  real  benefits  and  risks  with  this                                                              
certification,  but if he diverts  staff to  work on it,  he won't                                                              
get  a timber  sale out,  and he  has to  get a  timber sale  out,                                                              
because that is what the timber industry is surviving on now.                                                                   
                                                                                                                                
4:27:21 PM                                                                                                                    
In Southeast  and all around the  state, access is key  to all, as                                                              
well  as  keeping  it  and developing  it.  In  better  days,  the                                                              
department got some  roads to resources funds from  DOTPF, through                                                              
receipt services  authority (RSAs),  and direct appropriations  to                                                              
help build  infrastructure around the  state. He said  eight miles                                                              
of  road and  six  bridges were  completed  this  year on  Gravina                                                              
Island  that  will   access  a  significant  new   volume  in  the                                                              
Southeast State  Forest as  well as  Forest Service volume.  These                                                              
are  resource  development  roads  and  not  meant  to  be  public                                                              
highways.  They have  turn-outs and  are made  for truck  hauling,                                                              
but they  are still  multiple use  roads that can  be used  by the                                                              
public.                                                                                                                         
                                                                                                                                
He  said  that   DNR  is  the  only  other  state   agency  beside                                                              
Department of  Transportation and  Public Facilities  (DOTPF) that                                                              
has  road construction  authorities  and those  come them  through                                                              
their  timber   sale  program.   Typically,   the  costs   of  the                                                              
infrastructure are  taken off against  the appraised value  of the                                                              
wood in their timber  sales. They take a lower price  on the stump                                                              
for the  wood, but get a  road system or  a bridge for it.  It has                                                              
kept things going in the absence of capital appropriations.                                                                     
                                                                                                                                
4:30:22 PM                                                                                                                    
MR.  MAISCH  said  the division  has  partnered  with  the  Forest                                                              
Service on several  fronts to make the Tongass  a friendlier place                                                              
to  do  business.  He  does  the   inventory  work  and  workforce                                                              
developing under  the Good Neighbor  Authority and  challenge cost                                                              
share program  and has developed  "five working circles."  Each of                                                              
the working  circles has  a log transfer  facility at  the center.                                                              
This is  important  to the Forest  Service, because  that  is when                                                              
they appraise the  timber sale. Right now, they  don't have enough                                                              
appraisal points  around Southeast  and the  farther away  they do                                                              
it the  more it  costs. He  also has lists  of key  infrastructure                                                              
pieces that  would be helped by  connecting road systems  that are                                                              
currently isolated.                                                                                                             
                                                                                                                                
4:31:46 PM                                                                                                                    
MR.  MAISCH said  19  states participated  in  the "Good  Neighbor                                                              
Authority," which allows  them to do work for  the Forest Service.                                                              
His division's  first work  was a  29-million-foot timber  sale on                                                              
Kosciusko  Island. It  is most of  the volume  the Forest  Service                                                              
sold this  year on the  Tongass and is  all young growth.  It went                                                              
for double the  appraised value ($2.6 million).  The division uses                                                              
a unique "purchaser  layout," where the state lays  out a third of                                                              
the sale  and the  purchaser of  the sale will  lay out  the other                                                              
two-thirds  (monitored by  the division).  The goal  is to  do two                                                              
Good Neighbor Authority  projects a year with  the Forest Service.                                                              
Teed-up for  this coming year  is one at  Gravina Island,  which a                                                              
new road will help access, and a salvage sale on Heceta Island.                                                                 
                                                                                                                                
4:33:26 PM                                                                                                                    
CHAIR GIESSEL asked if "layout" means cutting the trees down.                                                                   
                                                                                                                                
MR. MAISCH  answered no; it  is when the  sale is designed  on the                                                              
ground:   marking   the   boundaries    and   figuring   out   the                                                              
transportation system,  skid trails, and  such, so the  timber can                                                              
be harvested.                                                                                                                   
                                                                                                                                
4:34:40 PM                                                                                                                    
Another product  for Alaska young  growth is called  "mass timber"                                                              
or "cross  laminated timber"  (CLT); and  another is mass  plywood                                                              
panels (MPP). These  products were used in Europe  for 15-20 years                                                              
before  migrating to  North America.  It  allows building  hi-rise                                                              
buildings  out  of  wood,  and  it  has  revolutionized  mid-level                                                              
buildings. Basically,  panels of wood  are laminated one  over the                                                              
other on  a 90-degree  rotation, creating  a very strong  product.                                                              
Several  buildings have  been built  in North  America using  CLT,                                                              
but building  codes had to be  adjusted, because most  codes don't                                                              
allow  more than  three stories  for wood.  Studies have  revealed                                                              
that this  produce  chars on the  outside and  that insulates  the                                                              
rest of  the core from  burning. A steel  beam will fail  before a                                                              
piece of CLT will fail on the weight test.                                                                                      
                                                                                                                                
Interestingly,   an    engineering   firm   partnered    with   an                                                              
architectural  firm  in  designing  a  building.  So,  when  these                                                              
products are  made each panel is  custom-cut. It saves  about one-                                                              
third of building  costs over concrete and steel.  It saves labor,                                                              
because  you pick  them right  off the  truck; you  don't have  to                                                              
wait for  concrete to  cure and  don't need the  steel to  go into                                                              
it. This allows  linear integration for selling  a building rather                                                              
than just  dimension material.  It has quite  a lot  of potential,                                                              
especially in  China or Japan.  This is  the vision that  some are                                                              
starting to  think about for the  young growth wood  in Southeast,                                                              
because  it  can't  compete  with   the  rest  of  the  world  for                                                              
dimension lumber.  The forest inventory  will tell them  when that                                                              
will happen, which could be as soon as 10 or 15 years.                                                                          
                                                                                                                                
4:38:29 PM                                                                                                                    
SENATOR COGHILL said  the rotation would have to  be well-thought-                                                              
out,  because new  growth  comes  out at  about  65  years. Is  it                                                              
exactly  the same  kind  of  tree and  is  the rotation  every  65                                                              
years?                                                                                                                          
                                                                                                                                
MR. MAISCH  replied  that is  not same  kind of tree,  and an  old                                                              
growth log  will have much  different growth characteristics  than                                                              
a young growth  log. The old  growth log will have  tighter grain,                                                              
for instance.  It will also depend  on the site and soil,  but for                                                              
good sites  in Southeast,  65 years  would be  the rotation  life,                                                              
maybe 50  or 45,  but on  average 90-120  years for all  different                                                              
types of forests.                                                                                                               
                                                                                                                                
SENATOR COGHILL  said our partnership with the  federal government                                                              
will be  pretty important since  part of the certification  is for                                                              
sustained growth.                                                                                                               
                                                                                                                                
MR. MAISCH answered  yes. When calculating an annual  cut, all the                                                              
differences  will be  taken  into account  in  predicting what  an                                                              
even flow off the  forest might look like based  on growth. Stands                                                              
that are  further away have  to be mixed  up with stands  that are                                                              
closer, as well,  so all the expensive stuff isn't  offered in one                                                              
year and the  cheap stuff in another  year - to keep  the costs in                                                              
line. "Regulating a forest" is the technical term.                                                                              
                                                                                                                                
SENATOR COGHILL discussed the merits of Interior white spruce.                                                                  
                                                                                                                                
MR. MAISCH agreed  that it is "nice wood to build  with," and that                                                              
Interior white spruce grows slowly.                                                                                             
                                                                                                                                
SENATOR  COGHILL said  that the  Interior  was doing  most of  the                                                              
harvesting in Alaska.                                                                                                           
                                                                                                                                
MR. MAISCH  agreed and  said the  Interior is  a bright  spot, but                                                              
the  industry is  slowly  growing while  the  state establishes  a                                                              
stable land base that people can bank on.                                                                                       
                                                                                                                                
SENATOR COGHILL  said the Interior  state forest bumps  up against                                                              
Park land  and Bureau of Land  Management (BLM) land and  asked if                                                              
the division gets to work with the Park Service much.                                                                           
                                                                                                                                
MR. MAISCH  answered no; the Park  Service doesn't cut  trees. His                                                              
division has  done some work  with BLM,  but they don't  sell much                                                              
timber.  He didn't  know if  they even  had a  forester. The  Good                                                              
Neighbor  Authority  could be  used  with the  BLM,  but the  NEPA                                                              
process would have to be followed                                                                                               
                                                                                                                                
4:43:15 PM                                                                                                                    
SENATOR COGHILL asked what tone wood sells for.                                                                                 
                                                                                                                                
MR.  MAISCH replied  that  is a  closely  guarded secret.  Several                                                              
piano  companies buy  it. It  is  old growth  wood and  has to  be                                                              
evaluated after it is cut to meet criteria.                                                                                     
                                                                                                                                
SENATOR  COGHILL said  it is great  that someone  looks to  Alaska                                                              
for that product.                                                                                                               
                                                                                                                                
MR. MAISCH  said that  one mill in  Southeast specializes  in tone                                                              
wood. It's a small  operation that does veneers out  of the spruce                                                              
for string instruments.                                                                                                         
                                                                                                                                
4:45:13 PM                                                                                                                    
CHAIR  GIESSEL said  that was  a  really interesting  presentation                                                              
and  thanked them  for it.  Finding  no further  business to  come                                                              
before  the   committee,  she   adjourned  the  Senate   Resources                                                              
Committee meeting at 4:45 p.m.                                                                                                  
                                                                                                                                

Document Name Date/Time Subjects
Sen Resources Agenda - 1 - 19 - 2018 - 330pm.pdf SRES 1/19/2018 3:30:00 PM
Forestry
Sen Resources - Presenation - Division of Forestry - 1 - 19 - 2018.pdf SRES 1/19/2018 3:30:00 PM
Forestry