Legislature(2017 - 2018)BUTROVICH 205

01/22/2018 03:30 PM RESOURCES

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Audio Topic
03:30:14 PM Start
03:30:45 PM Overview: Alaska's Mining Filing Claim Process
04:26:24 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overview: Alaska's Mining Filing Claim Process TELECONFERENCED
- Department of Natural Resources
Division of Mining, Land and Water
-- Testimony <Invitation Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                        January 22, 2018                                                                                        
                           3:30 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Cathy Giessel, Chair                                                                                                    
Senator John Coghill, Vice Chair                                                                                                
Senator Natasha von Imhof                                                                                                       
Senator Bill Wielechowski                                                                                                       
Senator Click Bishop                                                                                                            
Senator Kevin Meyer                                                                                                             
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Bert Stedman                                                                                                            
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
OVERVIEW: ALASKA'S MINING FILING CLAIM PROCESS                                                                                  
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
ED KING, Special Assistant to the Commissioner                                                                                  
Department of Natural Resources (DNR)                                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Presented an overview on how mining claims                                                                
function in the State of Alaska.                                                                                                
                                                                                                                                
BRENT GOODRUM, Director                                                                                                         
Division of Mining, Land, and Water                                                                                             
Department of Natural Resources (DNR)                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Briefly commented on mining claim history.                                                                
                                                                                                                                
ASHLEY BROWN, DNR Attorney                                                                                                      
Department of Law (DOL)                                                                                                         
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:  Answered  a question  regarding  filing  of                                                             
mining claims.                                                                                                                  
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:30:14 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  Bishop, Coghill,  von Imhof,  Wielechowski,                                                               
and Chair Giessel. Senator Stedman is excused.                                                                                  
                                                                                                                                
^Overview: Alaska's Mining Filing Claim Process                                                                                 
         Overview: Alaska's Mining Filing Claim Process                                                                     
                                                                                                                                
3:30:45 PM                                                                                                                    
CHAIR GIESSEL said the only order  of business today would be the                                                               
overview  of Alaska's  mining filing  claim process  and how  the                                                               
state  administers its  mineral properties.  Alaska's history  is                                                               
built on gold rushes and  prospectors, reminding her of the Trail                                                               
of '98, Skagway,  Nome, Girdwood, Hope, and  Fairbanks. There are                                                               
six large-scale  mines, but over  600 small placer miners  in the                                                               
State of Alaska,  more than in any other  state. Modern equipment                                                               
and techniques make  placer mining a 21st  Century practice. Laws                                                               
and traditions  underpinning it date  back to the  American Civil                                                               
War.  Alaska's Constitution  with  its unique  mandate of  common                                                               
ownership   of  the   state's  natural   resources  charges   the                                                               
Department of Natural Resources (DNR)  with the management of the                                                               
mineral wealth  of the state  lands. Today, they would  hear from                                                               
the   department   and   the  division   that   takes   up   that                                                               
responsibility. She welcomed Mr. Ed King to the committee.                                                                      
                                                                                                                                
3:31:48 PM                                                                                                                    
ED  KING, Special  Assistant to  the Commissioner,  Department of                                                               
Natural Resources  (DNR), Juneau, Alaska,  said he would  lay the                                                               
ground  work for  how  mining  claims function  in  the State  of                                                               
Alaska. This is  an informational hearing for the  public as well                                                               
as the legislature and doesn't represent department views.                                                                      
                                                                                                                                
3:33:31 PM                                                                                                                    
Mineral  rights in  Alaska: recreational  mining  is a  generally                                                               
allowed use on public land. No  permit is needed; you can just do                                                               
it.  If a  person is  successful,  the state  allows staking  the                                                               
deposit  and prevents  anyone else  from accessing  the minerals.                                                               
This is what a "mining claim" is.                                                                                               
                                                                                                                                
In Alaska,  the 100+ million  acres of state lands  are generally                                                               
open for claiming unless they  are closed: if they are designated                                                               
legislatively or  conveyed to a municipality,  for instance. They                                                               
have about 5 million acres  of residual land entitlement from the                                                               
Statehood Act.                                                                                                                  
                                                                                                                                
3:35:48 PM                                                                                                                    
SENATOR VON IMHOF asked if a miner  has to pay for his claim when                                                               
he stakes it and how big it can be.                                                                                             
                                                                                                                                
MR. KING  replied there is no  fee for the generally  allowed use                                                               
of  prospecting. However,  if  one files  a claim  it  has to  be                                                               
recorded,  which has  a  fee.  Also, he  must  also maintain  the                                                               
claim, which has a financial component.                                                                                         
                                                                                                                                
SENATOR BISHOP  asked if  it would be  safe to say  that it  is a                                                               
good idea to check to see if  there isn't already a claim in good                                                               
standing  from another  miner before  a  recreational miner  goes                                                               
out.                                                                                                                            
                                                                                                                                
MR. KING said  that would be a good idea;  one would be violating                                                               
someone else's claim by doing  a generally allowed use on someone                                                               
else's claim.                                                                                                                   
                                                                                                                                
3:37:09 PM                                                                                                                    
History of how we got to  where we are today, and the differences                                                               
between minerals  and oil  and gas. In  the 1840s,  the Southwest                                                               
region  of  the  U.S.  was  a  territory  acquired  from  Mexico.                                                               
California  and Colorado  didn't exist,  but mining  activity was                                                               
going  on in  those  areas. There  were no  federal  laws on  how                                                               
mining was  to be conducted  in those territories. In  that case,                                                               
people would  do things in a  traditional way. They would  go out                                                               
and  mine and  if  they  found something  they  would put  stakes                                                               
around it. During  the gold rush of 1848/49 when  a lot of people                                                               
were  moving into  the  California region,  and  gold mining  was                                                               
becoming a  very big business,  this tradition of  claims staking                                                               
became the norm.                                                                                                                
                                                                                                                                
3:38:49 PM                                                                                                                    
SENATOR MEYER joined the committee.                                                                                             
                                                                                                                                
MR. KING said past 1849 and  through the next decade as Colorado,                                                               
Nevada,  and some  of the  other  states began  to get  statehood                                                               
there  started to  be federal  interest in  management of  public                                                               
lands and the extraction of minerals.  So, a handful of laws were                                                               
passed after the Civil War in  the 1860s: The Load Law was passed                                                               
and a couple of others that  were dealt with the issue of allowed                                                               
uses  on  public  lands.  In  1872, the  General  Mining  Act,  a                                                               
comprehensive bill  codifying that  tradition was passed.  It was                                                               
called the "Location System." It  encouraged people to go out and                                                               
mine in  the underdeveloped  areas. It was  a generous  system in                                                               
that those  miners were also  allowed to purchase that  land from                                                               
the federal  government. This is important  for Alaska's context,                                                               
because  whenever the  state laws  are  silent or  unclear on  an                                                               
issue, those  federal laws  are still  referred to.  That federal                                                               
law of 1872 is still the guiding principle.                                                                                     
                                                                                                                                
At the  turn of century  big development came with  the discovery                                                               
of  oil. As  the U.S.  entered WWI,  our military  converted from                                                               
steam  to  diesel,  so  oil became  a  very  important  strategic                                                               
resource for the  country. The federal government  started to put                                                               
aside  "Naval Petroleum  Reserves." They  also realized  that the                                                               
Mining Act of 1792 didn't  prohibit someone from staking claim to                                                               
oil or coal resources.                                                                                                          
                                                                                                                                
3:42:52 PM                                                                                                                    
So, the Mineral Leasing Act of  1920 separated those two types of                                                               
strategic  minerals   from  other  resources  that   they  called                                                               
locatable minerals  (gold, silver, tin, zinc,  and other metallic                                                               
minerals).  A  different  suite   of  "strategic  minerals"  that                                                               
included  coal, gas,  and oil,  were  dealt with  in the  Mineral                                                               
Leasing Act  of 1920 and demanded  that if you were  going to get                                                               
access to  those, it had  to be done  through a lease.  That land                                                               
could not be "claimed." The General  Mining Act of 1872 was still                                                               
in place for the locatable minerals.                                                                                            
                                                                                                                                
MR. KING  explained that  another tranche  of minerals  is called                                                               
"materials,"  and includes  things  like gravel  and sand.  Those                                                               
don't get  leased or  claimed, but  are sold  by the  state. With                                                               
those  two  laws  in  place, the  General  Mining  Act  governing                                                               
locatable  minerals   and  the  Mineral  Leasing   Act  governing                                                               
strategic  minerals,  approaching  statehood in  1959  the  state                                                               
already had  a lot  of people  who were  either leasing  from the                                                               
federal  government  or  proclaiming locatable  minerals  in  the                                                               
state.  Protecting those  rights became  an important  issue when                                                               
drafting  the  Statehood Act  and  the  Constitution. Article  8,                                                               
Sections 11 and  12, of the Constitution are  almost a reflection                                                               
of  the  General  Mining  Act  and the  Mineral  Leasing  Act  in                                                               
separating those two  types of minerals. The  location system was                                                               
protected, as well.                                                                                                             
                                                                                                                                
He answered Senator  von Imhof's earlier question  saying that 40                                                               
acres is  the typical mining  claim, but  one can have  more than                                                               
one claim and "quarter section claims," which are 160 acres.                                                                    
                                                                                                                                
So,  the Constitution  really adopted  and  embodied the  federal                                                               
standard for  how things  were already  happening when  the state                                                               
entered the  Union. Congress  also inserted  Section 6(i)  in the                                                               
Statehood Act  saying that  the minerals of  the state  belong to                                                               
the state,  the idea  being that  is how the  state was  going to                                                               
fund  itself.  It prohibited  the  state  from divesting  of  its                                                               
mineral interests.  This is important  because in 1989  an Alaska                                                               
Supreme Court case,  Trustees of Alaska v. the  State, found that                                                               
if the  state was  not charging something  for those  claims that                                                               
meant it was  divesting them, which is  against the Constitution.                                                               
It basically said to the legislature  that it had to charge rents                                                               
or royalties or  some sort of recurring payment, and  so, in 1989                                                               
the  legislature passed  HB 99  introducing  rents and  royalties                                                               
into the mining claim system. "So, that's where we are today."                                                                  
                                                                                                                                
3:46:33 PM                                                                                                                    
Terminology:  "Mining claim"  means the  exclusive rights  to the                                                               
minerals, themselves. It doesn't  give the miner exclusive rights                                                               
to  the surface.  However, they  are allowed  to use  the surface                                                               
insofar as they need to in  order to reach those minerals, but it                                                               
doesn't  mean if  you  have  a mining  claim  that  you can  tell                                                               
somebody else that they can't walk  across it. You don't have any                                                               
exclusive rights to the surface.                                                                                                
                                                                                                                                
SENATOR VON IMHOF asked if a miner can build a cabin.                                                                           
                                                                                                                                
MR. KING  answered no. A  mining claim  itself does not  give any                                                               
authority  to put  up any  kind of  permanent structures.  A land                                                               
authorization would  be needed. As  a generally allowed  use, one                                                               
is allowed  to be on a  property for 14 consecutive  days, but he                                                               
can't erect a permanent structure.                                                                                              
                                                                                                                                
SENATOR VON IMHOF  asked when someone brings equipment  in in the                                                               
spring, mines over the summer, if  he is required to remove it in                                                               
the fall and leave no trace.                                                                                                    
                                                                                                                                
MR.  KING  answered  that  those   types  of  activities  need  a                                                               
miscellaneous  land  use  permit  and  it  would  likely  have  a                                                               
provision requiring the removal at some point.                                                                                  
                                                                                                                                
3:49:09 PM                                                                                                                    
He said that  a "leasehold location" is like a  mining claim, but                                                               
it's a claim in a place that  is only open for leasing not mining                                                               
claims.  So, if  an  area was  closed for  claims,  but open  for                                                               
leasing, one can go  in and stake a claim that  would be called a                                                               
"leasehold location."  Municipal entitlements would be  on lease-                                                               
only area.  Then the department would  adjudicate the application                                                               
and then  issue that  lease if it  was deemed to  be in  the best                                                               
interest of  the state. That is  a very different process  than a                                                               
mining claim, which is the department does not adjudicate.                                                                      
                                                                                                                                
A  "prospecting  site" is  very  similar  to  a claim;  it  gives                                                               
exclusive right to an individual to  look for minerals prior to a                                                               
discovery.                                                                                                                      
                                                                                                                                
The term "at-risk state-selected location"  refers to some of the                                                               
5 million acres  that have not been conveyed and  patented to the                                                               
state, although the state has  already selected them. A claim can                                                               
be staked and one  is first in line once the  land is conveyed to                                                               
the state. So, it's an "at-risk location."                                                                                      
                                                                                                                                
3:50:59 PM                                                                                                                    
He said  mining locations  can come  in all  shapes and  sizes. A                                                               
"mining claim" is the actual piece  of land and a "location" is a                                                               
document that someone files. The  Meridian Township Range Section                                                               
and  Claims System  (MTRSC),  are the  "tight  little boxes,"  on                                                               
residential maps, and  that is how claims are  typically filed in                                                               
modern  times. Prior  to that,  "traditional claims,"  were filed                                                               
and weren't tight little boxes. They  could be no greater than 40                                                               
acres  nor  longer   than  1,320  feet  in   one  direction.  The                                                               
boundaries  are  supposed  to  be  in  cardinal  directions,  but                                                               
sometimes rivers and other things cause exceptions.                                                                             
                                                                                                                                
3:52:09 PM                                                                                                                    
CHAIR GIESSEL asked if some claims are still non-MTRSC.                                                                         
                                                                                                                                
MR. KING answered yes.                                                                                                          
                                                                                                                                
BRENT  GOODRUM, Director,  Division of  Mining, Land,  and Water,                                                               
Department  of Natural  Resources (DNR),  agreed that  yes; today                                                               
there are still some  traditional non-MTRSC-located mining claims                                                               
within the state.                                                                                                               
                                                                                                                                
3:53:18 PM                                                                                                                    
MR. KING continued  that the requirements for making  a claim are                                                               
laid out in statute. AS  38.05.190 contains the qualifications of                                                               
the individual:  18 or  older, a U.S.  resident, and  things like                                                               
that.  Once the  claims  are  staked, they  need  to be  recorded                                                               
(certificate of location) at the Recorder's Office.                                                                             
                                                                                                                                
3:53:42 PM                                                                                                                    
CHAIR GIESSEL asked how much recording costs.                                                                                   
                                                                                                                                
MR. KING  replied $20  for the  first document  and $2  for every                                                               
additional  piece of  paper. As  a rule,  most people  pay $20-30                                                               
when they record  their fees, but some individuals have  a lot of                                                               
claims that result in much higher fees.                                                                                         
                                                                                                                                
3:54:32 PM                                                                                                                    
In order for the claim to be  valid, the land must not be already                                                               
claimed. Then  the land  must be  open for  claiming. So,  if all                                                               
those  four things  are  in  order, one  has  a  claim. Mr.  King                                                               
underscored the  importance of that  point: the DNR  doesn't have                                                               
to approve  or award mining claims,  but are bound by  statute to                                                               
issue the claim once legal criteria are met.                                                                                    
                                                                                                                                
MR. KING said  once one has a claim, it  is his responsibility to                                                               
maintain it,  and under the General  Mining Act of 1872  the only                                                               
requirement  for maintenance  is to  continue working  the claim.                                                               
When  you stop,  someone else  has the  right to  take over  that                                                               
claim. Alaska's  statutes have that  same provision; you  must do                                                               
at least  $100 of annual labor.  That was set in  statute in 1989                                                               
when the  rents and royalties  requirement was introduced  and it                                                               
hasn't been  adjusted since. Before  1989, it was $200,  but that                                                               
was reduced because of the rents and royalties burden.                                                                          
                                                                                                                                
3:56:50 PM                                                                                                                    
SENATOR  VON IMHOF  said she  assumed the  amount is  low because                                                               
gold and other minerals are commodities  and the prices go up and                                                               
down. And  one doesn't want to  necessarily abandon a mine  for a                                                               
year  just because  prices are  down. So,  the miner  could do  a                                                               
minimum of  work and  wait, hoping the  prices will  recover next                                                               
year.                                                                                                                           
                                                                                                                                
MR.  KING  replied  that  was   a  fair  representation.  Another                                                               
provision allows  one to simply  pay a fee  in lieu of  doing the                                                               
labor.  If one  doesn't  do  either of  those  things, the  claim                                                               
becomes abandoned. If one makes money  on a claim and doesn't pay                                                               
rent or royalty  to the state, the claim  also becomes abandoned.                                                               
The  department  doesn't  have  to make  any  decision:  by  your                                                               
actions you have abandoned the claim.                                                                                           
                                                                                                                                
3:58:16 PM                                                                                                                    
CHAIR GIESSEL  asked if  the fees  or the activity  are due  at a                                                               
certain time.                                                                                                                   
                                                                                                                                
MR. KING answered  September 1 is the deadline for  most of these                                                               
activities, and one has 90 days to complete it.                                                                                 
                                                                                                                                
SENATOR VON IMHOF asked if the annual rental payment is $100.                                                                   
                                                                                                                                
MR. KING replied the annual  rental payment was set originally by                                                               
statute  (AS  38.05.211),  and  every 10  years  the  payment  is                                                               
adjusted for inflation. The updated  rental fee is in regulation.                                                               
For a 40-acre claim,  if it's fairly new, the fee  is $35. As the                                                               
claim ages, the rental payment  increases. Part of the reason for                                                               
that is  if you are  sitting on a claim  for a long  time, you're                                                               
denying access to somebody else.  If you are not actively working                                                               
on the claim, then it might be  in the state's interest to have a                                                               
different  claimant.  Rental   payments  are  deductible  against                                                               
royalty.                                                                                                                        
                                                                                                                                
4:00:40 PM                                                                                                                    
CHAIR GIESSEL noted they were looking at slide 11.                                                                              
                                                                                                                                
SENATOR VON IMHOF asked if the  market is depressed for 3-5 years                                                               
and claims  remain idle, could a  miner (whose fee has  gone from                                                               
$140 to  $280) choose to abandon  the mine for a  year, hope that                                                               
no one  re-stakes assuming the  commodity price remains  low, and                                                               
then go back  the next year and re-stake it,  resetting the price                                                               
back down to $140.                                                                                                              
                                                                                                                                
MR.  KING answered  yes, though  the miner  in that  hypothetical                                                               
example is taking  the risk of someone else taking  that claim in                                                               
the intervening time.                                                                                                           
                                                                                                                                
SENATOR VON  IMHOF asked if  the fee  schedule could be  based on                                                               
the market versus an arbitrary  time frame outside of the market,                                                               
because  gold  going up  and  down  makes  a real  difference  in                                                               
activity level.                                                                                                                 
                                                                                                                                
MR. KING  said he would be  happy to have that  conversation, but                                                               
he  couldn't  speculate  on what  the  administration's  position                                                               
would be.  The next  inflation adjustment is  due to  happen next                                                               
year. It looks like the 0-5  years will increase to $40; the 6-10                                                               
years will  increase to $80; and  over 10 years will  increase to                                                               
about $190.                                                                                                                     
                                                                                                                                
4:02:50 PM                                                                                                                    
Back  to slide  7, Mr.  King reiterated  that the  inaction of  a                                                               
claimant is what abandons the claim under AS 38.05.265.                                                                         
                                                                                                                                
CHAIR GIESSEL asked  if paperwork is filed each  year, which also                                                               
sustains that claim.                                                                                                            
                                                                                                                                
MR.  KING  turned   to  slide  8  that  said   the  annual  labor                                                               
requirement is  that the locator  must either perform  $100 worth                                                               
of work or  pay cash in lieu  of that for up  to four consecutive                                                               
years; on  the fifth  year they  have to  submit an  affidavit of                                                               
annual  labor. He  noted  that the  statute  says, "statement  of                                                               
annual  labor," but  the regulations  says, "affidavit  of annual                                                               
labor," but they are talking about the same thing.                                                                              
                                                                                                                                
MR.  KING  explained  that  every  year,  because  that  work  is                                                               
required, there  has to be a  way for the department  to know the                                                               
requirement  was actually  met,  and since  it's unreasonable  to                                                               
send  staff out  to  every  claim, an  affidavit  is required  of                                                               
annual labor. That  document acts as "prima  facie evidence" that                                                               
the  annual   labor  was  conducted.  Part   of  the  abandonment                                                               
provision  in the  statute uses  this sentence:  "A statement  of                                                               
annual labor that does not  accurately set the essential facts is                                                               
void and has no  effect." It is a potential issue  for a miner if                                                               
some other  miner wants to  fight them on whether  that affidavit                                                               
was void  or not  and whether  that claim  was abandoned  or not.                                                               
Those requirements  are outlined  in 11  AAC 86.220(c)  that says                                                               
the  recorded  document must  have  the  name  or number  of  the                                                               
location; every meridian, township,  range, section and recording                                                               
district has to have the name  and mailing address of every owner                                                               
and it  has to have  the correct  dates, character, and  value of                                                               
the   labor  performed.   An  error   in  any   of  those   could                                                               
theoretically constitute an inaccuracy  and failure to accurately                                                               
set out  the essential facts,  so someone might argue  that those                                                               
claims are void.                                                                                                                
                                                                                                                                
MR. KING said the statement of  annual labor must be completed on                                                               
September 1, and that must be recorded within 90 days.                                                                          
                                                                                                                                
CHAIR GIESSEL  asked if  that meant 90  days before  and/or after                                                               
September 1.                                                                                                                    
                                                                                                                                
MR. KING  replied that he was  almost positive that it  is after,                                                               
but he would ask.                                                                                                               
                                                                                                                                
4:07:23 PM                                                                                                                    
MR. GOODRUM replied that it's 90 days after September 1.                                                                        
                                                                                                                                
CHAIR GIESSEL asked if they get until November 30.                                                                              
                                                                                                                                
MR. GOODRUM said that was correct.                                                                                              
                                                                                                                                
4:08:29 PM                                                                                                                    
MR. KING said opportunities to  cure for a statement or affidavit                                                               
error is  an issue  that has  come to his  attention more  in the                                                               
last  few years  (slide 10).  When  an error  occurs, or  someone                                                               
makes the accusation  that the essential facts  weren't laid out,                                                               
there are  ways to fix those  errors. In some cases,  a corrected                                                               
affidavit can be  made within two years. It will  record over the                                                               
previous affidavit.                                                                                                             
                                                                                                                                
SENATOR BISHOP asked what that costs.                                                                                           
                                                                                                                                
MR. KING  replied that one  would have  to pay the  recording fee                                                               
again if  one is using AS  38.05,210(c). The other way  to repair                                                               
an affidavit is  to re-record an affidavit that is  more than two                                                               
years old, but you have to  pay the equivalent of one-year annual                                                               
rent along with the recording fee.                                                                                              
                                                                                                                                
CHAIR GIESSEL asked  if an error is in the  labor report and they                                                               
have two years  to correct it, but in that  period, someone could                                                               
come forward and  make a claim, would the  original claimant have                                                               
priority and the opportunity to make the correction.                                                                            
                                                                                                                                
4:11:04 PM                                                                                                                    
ASHLEY BROWN,  DNR Attorney, Department of  Law (DOL), Anchorage,                                                               
Alaska, answered that if someone  else over-staked a claim, under                                                               
AS  38.05.265, a  person  cannot  cure that  error.  There is  an                                                               
intervening right.                                                                                                              
                                                                                                                                
4:12:28 PM                                                                                                                    
SENATOR BISHOP clarified  that the first claimant  can't cure the                                                               
so-called essential facts breach.                                                                                               
                                                                                                                                
MS. BROWN responded if there has  been an error in essential fact                                                               
and the claim  is abandoned and someone else stakes  a claim, the                                                               
first claimant cannot cure the  error in the essential fact under                                                               
AS 38.05.265.                                                                                                                   
                                                                                                                                
SENATOR BISHOP asked  who makes the call that there  is a failure                                                               
of essential facts.                                                                                                             
                                                                                                                                
MR. KING replied the decision ultimately  needs to be made by the                                                               
court.                                                                                                                          
                                                                                                                                
SENATOR BISHOP  said, so then it's  a civil case between  the top                                                               
filer and the original claimant.                                                                                                
                                                                                                                                
MR. KING said that was correct.                                                                                                 
                                                                                                                                
CHAIR  GIESSEL asked  what if  someone accidentally  puts in  the                                                               
wrong birthdate, is he informed of the opportunity to cure it.                                                                  
                                                                                                                                
MR. KING  replied that the  abandonment of  a claim happens  as a                                                               
self-initiated  process.  So, when  someone  makes  an error,  if                                                               
somebody else  finds that  error, they  can make  that accusation                                                               
that the affidavit is void, and  the claim is abandoned, and they                                                               
can stake  that claim. They  would have to  go to court  and make                                                               
their  case. The  department doesn't  go  through affidavits  and                                                               
ensure  they  are  in  compliance,  because  it  doesn't  make  a                                                               
decision on  whether a  claim is abandoned  or not.  When someone                                                               
finds an  error or someone fails  to pay rents or  royalties, the                                                               
department will  give a  notice to that  claimant that  his claim                                                               
has been abandoned.                                                                                                             
                                                                                                                                
CHAIR  GIESSEL asked  if the  person has  two years  to make  the                                                               
correction.                                                                                                                     
MR. KING replied  that failure to file is incurable.  If you fail                                                               
to record,  as long as no  one else intervenes, the  claim can be                                                               
revived. As a  general matter, as soon as  someone else top-files                                                               
that claim, the  ability for the department  to intervene becomes                                                               
very limited.                                                                                                                   
                                                                                                                                
SENATOR VON  IMHOF asked  if a  person or  family is  "mining the                                                               
heck" out of this claim, and  then between September 1, they file                                                               
their paperwork and make one  small paperwork error, they have no                                                               
intention  of abandoning  it and  have  paid everything  current,                                                               
what is the issue at that point.                                                                                                
                                                                                                                                
MR. KING  replied there would  potentially be an  opportunity for                                                               
someone else to make that claim to the court.                                                                                   
                                                                                                                                
SENATOR VON  IMHOF remarked  that it behooves  the miner  to file                                                               
the paperwork extremely carefully and accurately.                                                                               
                                                                                                                                
MR. KING agreed with that conclusion.                                                                                           
                                                                                                                                
4:17:28 PM                                                                                                                    
CHAIR GIESSEL asked how often  abandonments occur due to clerical                                                               
error.                                                                                                                          
                                                                                                                                
MR. KING replied he didn't have  that number, but he could try to                                                               
put something together.                                                                                                         
                                                                                                                                
CHAIR GIESSEL agreed to that.                                                                                                   
                                                                                                                                
4:18:54 PM                                                                                                                    
MR. KING  said another  opportunity a claimant  might have  is to                                                               
request  from  the  commissioner  a  certificate  of  substantial                                                               
compliance,   which  can   be  used   in  a   limited  scope   of                                                               
circumstances.  For  instance,  if  you're  on  the  way  to  the                                                               
recorder's office and  get into a car accident and  end up in the                                                               
hospital  and miss  your  deadline, maybe  you  can petition  the                                                               
commissioner  with the  accident report,  the hospital  admission                                                               
records, and ask  for forgiveness. That is what  a certificate of                                                               
substantial compliance would be. If  one abandons a claim, it can                                                               
be re-staked, but there is a one-year waiting period.                                                                           
                                                                                                                                
SENATOR VON IMHOF  asked if there is an updated  list that people                                                               
can look at  on line to monitor lands when  they become available                                                               
for any reason.                                                                                                                 
                                                                                                                                
MR. KING  replied that  the Alaska Mapper  System has  land claim                                                               
status and the  Recorder's Office records the  documents that are                                                               
publicly available. So, someone could  watch the claim status and                                                               
go to the Recorder's Office  and make sure everything is recorded                                                               
correctly.                                                                                                                      
                                                                                                                                
MR. GOODRUM added that both  are excellent resources to find that                                                               
information.                                                                                                                    
                                                                                                                                
4:20:42 PM                                                                                                                    
MR. KING said the next requirement  to maintain a mining claim is                                                               
to  pay  one's production  royalty.  Royalty  in the  context  of                                                               
mining is different  than oil and gas. The  production royalty on                                                               
mining  is 3  percent of  the  net income.  Oil and  gas is  12.5                                                               
percent of one's gross income.                                                                                                  
                                                                                                                                
SENATOR VON  IMHOF asked if  what constitutes  allowable expenses                                                               
is in statute.                                                                                                                  
                                                                                                                                
MR. KING replied  that it is enumerated within  the Department of                                                               
Revenue (DOR) under the mining tax law.                                                                                         
                                                                                                                                
4:21:52 PM                                                                                                                    
SENATOR BISHOP asked  if one has to file tax  returns in order to                                                               
get a mining license.                                                                                                           
                                                                                                                                
4:22:35 PM                                                                                                                    
MR.  KING replied  yes,  - and  added that  rental  payment is  a                                                               
deductible  expense against  one's royalty  payment. It  does not                                                               
reduce income, but it reduces one's liability.                                                                                  
                                                                                                                                
4:23:02 PM                                                                                                                    
He said  the mineral property  management team consists  of seven                                                               
people  who do  a  tremendous job  with  limited resources.  They                                                               
manage  34,461 active  state  mining claims,  in  addition to  47                                                               
upland and 80 offshore mining leases.                                                                                           
                                                                                                                                
CHAIR  GIESSEL asked  if the  34,461 active  state mining  claims                                                               
include placer and large mines.                                                                                                 
                                                                                                                                
MR.  KING  replied that  the  large  mines,  by and  large,  will                                                               
convert  their claims  to  a  lease before  they  go into  actual                                                               
development.  In reality,  only one  of those  mines is  on state                                                               
land and is being operated under a state lease.                                                                                 
                                                                                                                                
CHAIR GIESSEL asked if they  are under the 47-upland mining lease                                                               
number.                                                                                                                         
                                                                                                                                
MR. KING said he thought that was the case.                                                                                     
                                                                                                                                
CHAIR  GIESSEL commented  that it  looks like  many of  them have                                                               
multiple claims.                                                                                                                
                                                                                                                                
MR.  KING  said  that  was  correct. He  said  that  the  Mineral                                                               
Management Section administered 3,848  mining locations and 1,839                                                               
ownership  transfers. In  addition,  they  issued 47  prospecting                                                               
site licenses  and 2 mining  leases last year and  collected over                                                               
$7 million in rental payments. That concluded his presentation.                                                                 
                                                                                                                                
CHAIR GIESSEL thanked Mr. King  for being available today and the                                                               
simplicity and basic level of his presentation.                                                                                 
                                                                                                                                
4:26:24 PM                                                                                                                    
There being  no further  business to  come before  the committee,                                                               
Chair Giessel  adjourned the Senate Resources  Standing Committee                                                               
meeting at 4:26 p.m.