Legislature(2017 - 2018)BUTROVICH 205
04/06/2018 03:30 PM Senate RESOURCES
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| Overview: University of Alaska's Land Grant Status and Land Use Update | |
| Adjourn |
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ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
April 6, 2018
3:30 p.m.
MEMBERS PRESENT
Senator Cathy Giessel, Chair
Senator John Coghill, Vice Chair
Senator Kevin Meyer
MEMBERS ABSENT
Senator Natasha von Imhof
Senator Bert Stedman
Senator Bill Wielechowski
Senator Click Bishop
COMMITTEE CALENDAR
OVERVIEW: UNIVERSITY OF ALASKA'S LAND GRANT STATUS AND LAND USE
UPDATE
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
MILES BAKER, Associate Vice President
Government Relations
University of Alaska (UA)
Juneau, Alaska
POSITION STATEMENT: Provided overview of the University of
Alaska's (UA) land grant status and land use update.
CHRISTINE KLEIN, Chief
Facilities and Land Officer
University of Alaska (UA)
Anchorage, Alaska
POSITION STATEMENT: Discussed current trust land holdings.
WYN MENEFEE, Executive Director
Land Office
Alaska Mental Health Trust
Anchorage, Alaska
POSITION STATEMENT: Reviewed Mental Health Trust land holdings.
HEIDI HANSEN, Deputy Commissioner
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: Provided background information on
presentation.
CHRIS MAISCH, State Forester and Director
Division of Forestry
Department of Natural Resources (DNR)
Fairbanks, Alaska
POSITION STATEMENT: Provided update of Division of Forestry's
intermingled-ownership land issues.
ANDY HARRINGTON, Associate General Counsel
University of Alaska
Fairbanks, Alaska
POSITION STATEMENT: Commented on potential land use issues.
ACTION NARRATIVE
3:30:25 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 Meyer, Coghill, and Chair Giessel. Senators
Bishop and von Imhof were engaged in Senate Finance meetings and
would attend if possible.
^Overview: University of Alaska's Land Grant Status and Land Use
Update
Overview: University of Alaska's
Land Grant Status and Land Use Update
3:30:49 PM
CHAIR GIESSEL announced the committee had one item on its agenda
today, the update from the University of Alaska's (UA) land
grant status and its upcoming timber sale in Southeast Alaska in
conjunction with the Department of Natural Resources (DNR). She
said this committee began this legislative session hearing about
the State of Alaska's timber opportunities, and the State
Forester pointed out the lack of available timber to make sales
economic.
CHAIR GIESSEL said the DNR is the state's land manager, but
Alaska also has a public land grant university based in
Fairbanks. Land grant universities are not dissimilar to
Alaska's Statehood Compact in that they were given lands to
monetize to sustain the operations of the organization. Land
grants are not only necessary for public universities to
function, but also to unburden students from accessing higher
education.
Last year, the committee heard from University President Jim
Johnsen about the rock and a hard place that the land grant
status finds itself between. The university never got its land
entitlement from the federal government and the state
constitution bars the state from transferring state land to the
university.
CHAIR GIESSEL said today they would hear from the university
about a new concept to solve this problem and hopefully work out
a solution to these lands for Alaska's students. She welcomed
Miles Baker to the committee.
3:32:14 PM
MILES BAKER, Associate Vice President, Government Relations,
University of Alaska (UA), Juneau, Alaska, said last year they
did some presentations to again "socialize this issue" in the
legislature, because it had been a while, and he would give an
update on recent efforts to resolve the land grant deficit.
He related that UA is part of a system of over 70 land grant
universities around the country. These universities were granted
federal land to sell to raise funds to establish and endow a
college in every state. Ultimately, most of these became public
universities offering a full range of educational opportunities.
A few are private schools: MIT and Cornell University, for
example. However, in this process, only Hawaii and Delaware
received a smaller land grant, Hawaii because it received an
appropriation from Congress in lieu of land. UA only received
about 110,000 acres of its original entitlement, which leaves it
due about 360,000 acres.
3:35:29 PM
Currently, Mr. Baker said, the University of Alaska has 150,000
acres of which 12,000 are used for educational research
properties. He explained that the concept of land grant colleges
started in the mid-late 1800s, and three federal laws
established what the University of Alaska should have received.
Of those three, Alaska ended up receiving land under the
Sutherland Act of 1929. The reason for that is related to the
problems the state has had with getting its statehood land, in
general, due to issues like surveying and remoteness. When
discussions of statehood started, the university still had not
received most of what should have been the entitlement under the
original federal law.
Some of the statehood acts that were worked on in Congress
conceived of giving the university as much as 10 million acres.
Ultimately, the Statehood Act that passed actually repealed some
of the early federal laws that would have ensured the university
got its land. Congress's view was that the state was getting 103
million acres and that the state should, therefore, take
responsibility for fulfilling the unfulfilled federal obligation
to the university.
Since that time, the legislature has been extremely supportive;
even the very first Alaska state legislature passed legislation
to transfer 1 million acres to the University, but that was
vetoed by Governor Egan at the time, largely because of an early
concern about dedicating resources, violating the anti-
dedication provision of the state constitution. And for some of
those same reasons we find ourselves in this position today, the
theory being if the university needs money and it needs to be
appropriated, that it is a legislative responsibility.
3:38:08 PM
MR. BAKER said moving forward, complications with transferring
land arose when land freezes were imposed by Congress as
legislation from the Alaska National Interest Land Conservation
Act (ANILCA) and Alaska Native Claims Settlement Act (ANCSA)
went through. Post that period, the Alaska and federal
delegation worked on several pieces of legislation to resolve
it. Most recently, the legislature took action in 2005 when it
actually listed the pieces of land that would come to the
university. That resulted in a lawsuit by the Southeast Alaska
Conservation Council (SEACC), and the Supreme Court ultimately
ruled that transferring that land for the purpose of generating
revenue would be a violation of the anti-dedication clause in
the State Constitution.
MR. BAKER said today the university finds itself with about
150,000 acres. It has received other private land and municipal
contributions, but the deficit of 360,000 acres remains. He said
the university obviously feels strongly and has gotten strong
direction from the legislature over the last few years that they
need to monetize the lands they already have and to lower their
reliance on state general funds. Filling this deficit is a top
priority for the university.
3:40:22 PM
MR. BAKER said the university has been working with the federal
delegation on possible opportunities, because the State
Constitution has an exemption saying that dedication of land
would be permissible if it is done to comply with a federal
program's requirement for state participation. The feeling for
quite some time has been that the state will not get new land
from the federal government beyond the 105,000 acres and the
federal government still feels that they extinguished their
responsibility and it's really now the state's responsibility to
fulfill the remaining obligation. But a federal program is
needed to make this happen.
3:41:28 PM
MR. BAKER explained they have proposed a one-page concept for
the DNR and the university to identify lands that either are
existing DNR lands or that potentially are lands that the state
has selected or top-filed that haven't been transferred from the
federal government as part of the 5 million outstanding acres
that are still due to the state. Many of these parcels are
inholdings in national parks or in other conservation units that
don't have a lot of monetary value but are of tremendous
potential public benefit for the country. So, they are working
on a program that would potentially allow them to transfer back
to the federal government some of those lands that would allow
the parks to be contiguously managed, a good fit for the federal
government from that perspective, but it would obviously have to
come with some sort of an exchange.
He said DNR is trying to work out the state's remaining
selections on the administrative and procedural sides. The
thought is that they would develop a piece of legislation that
would resolve many of the remaining issues and it would include
the university's land grant.
So, the change from last year's presentation is that they
weren't looking at the concept of potentially identifying acres
within the yet-to-be-transferred lands. Obviously, both DNR and
the university are looking for the most attractive pieces of
land to generate revenue, which is what they want to do with the
University Trust.
3:44:26 PM
CHRISTINE KLEIN, Chief, Facilities and Land Officer, University
of Alaska (UA), Anchorage, Alaska, discussed UA's current
limited trust land holdings. There are two categories of land in
the 150,000 total acres; one is educational, and one is
investment. Educational parcels are what the campuses reside on
as well as a few research sites. The remaining 130,000 acres are
investment (slide 9), the primary purpose being to monetize to
provide positive revenue to the Trust Endowment.
MS. KLEIN pointed out that of those holdings, generally the
largest portion are very remote and largely inaccessible. For
example, about 10,000 acres are within the Wrangell Mountains
and many others are on mountain tops, and one parcel is under
Brady Glacier and has a mine claim on it. Other parcels are on
the Alaska Peninsula. One of the largest holdings is in forested
lands and they also have some subdivisions. They do not have oil
and gas but a few active mining claims. They have very few, if
any, urban parcels of any value to monetize.
She compared that to other land grant universities like the
University of Washington (UW) that has two blocks of "some of
the most valuable property" in downtown Seattle that they are
able to monetize for their endowment and the University of Texas
that has a percent of oil and gas revenues going to its
endowment.
Slide 10 illustrated the trust's current land holdings broken
down into six investment classes that the Board of Regents
approved a couple of years ago in terms of their value.
These parcels are being assessed to get the best value out of
them, but most are very remote.
MS. KLEIN explained that the lands for land grant universities
were granted by Congress for the specific purpose of being
monetized to help universities be a little more self-sustaining.
They are dedicated exclusively for the benefit of public
education. Three acts of Congress set up these public university
trusts and they are further memorialized in AS 14.40.
3:49:24 PM
MS. KLEIN showed how the money had been generated over the past
years. Some lands were transferred to the university pre-
statehood; however, the majority of revenue really didn't start
to be generated until 1987/88 and that was from land sales; the
most valuable parcels being sold off early. The second revenue
generator has come from forest timber sales and gravel, rock,
and peat extraction in Fairbanks. They have some commercial and
private leases, and some limited potential for mining coal and
gas. The land department has generated over $210 million since
1987 from trust assets. The trust balance over the last 30 years
has fluctuated based on the market, but the one thing that has
been fairly steady is the revenue generated by real property.
CHAIR GIESSEL remarked it's interesting that they started
renting land in 1986 when people were leaving the state during a
significant recession.
MS. KLEIN agreed and said that is when the department got very
active in monetizing its lands. Slide 13 showed a comparison of
land returns over the last 30 years. The university generated
$116 per acre overall while the trust timber harvest, which did
not occur every year but were held continuously, accounted for
$2,735 per acre. Now not much land is left that is of much value
in terms of monetization.
3:53:36 PM
MS. KLEIN said she gets many questions about just selling the
land, but that is a one-time benefit and the endowment is very
small, a quarter of what it was owed. And they found that many
of the granted parcels had actually been harvested before they
were given to the state and many of them are now forested with
second growth timber that is still in their inventory; so that
is a long-term sustainable program. They have a very positive
forester stewardship program that has provided higher revenue
and jobs in the local communities and a much greater return for
the State of Alaska.
3:54:42 PM
SENATOR MEYER asked if they ran into opposition with their
timber harvests.
MS. KLEIN answered yes, mostly from communities that were close
to the parcels. She explained that most of their parcels are
very small and isolated, so they are often combined with other
private lands and lands from other agencies like the Division of
Forestry, the Mental Health Trust, and the U.S. Forest Service,
to do collaborative efforts.
SENATOR MEYER asked if people have left land to the university
when they passed.
MS. KLEIN answered yes; they go through a process for their land
to be earmarked or designated for certain things. A majority of
the ones she has seen have been dedicated specifically to
certain schools or programs. Very few go to the endowment in
general.
MS. KLEIN said slide 14 illustrated some of their approximately
17,000 acres of forested parcels across Alaska that could
actually be harvested. Over $50 million of their endowment is
from timber receipts over a 16-year period, and that has been
their highest-return investment. These are primarily second-
growth forests that are harvested on rotation cycles. When they
put a tract up for sale, only part of it is actually harvested
based on the type of timber, the species, the age, the number of
flukes, the condition, market rates, and factors like that. A
couple of sites are Coffman Cove, Icy Bay, Mitkof Island,
Whipple Creek, Blank Inlet, Edna Bay, and Nenana. They try to do
one to two per year, but that is highly dependent on having
other collaborators to help with expenses.
4:00:25 PM
MS. KLEIN showed slide 15, a picture of one of their ongoing
timber harvest sales in Edna Bay in southern Southeast Alaska
saying it has been a highly successful model, especially for the
community. It's the first-time use of the U.S. Forest Service
Federal Good Neighbor Authority in Alaska. It was negotiated
with site-specifics in order to give the university more
flexibility to address concerns in the area. It has resulted in
better use of the resource and its assets. The university has
worked collaboratively with five partners on utilizing one
another's infrastructure and not charging high rates, so they
can all be more effective at what it is they do.
Edna Bay is also an example of a timber harvest that was highly
controversial. The community was almost totally opposed to it
and now through the process, which took some time, they are
totally supportive and have asked when there will be another
sale.
CHAIR GIESSEL asked Ms. Klein if she was from Southeast.
MS. KLEIN answered yes; she is from one of the original
homesteads in Alaska near Ketchikan. They have had two sales in
the last years; one sale was of about 400 acres on the Chilkat
Peninsula in Haines. But the community was not super thrilled
about it; it was near some properties they had previously
developed for a residential subdivision. So, they have rethought
that and are looking at doing some residential development on
that particular parcel, some of which had already been logged.
They didn't get any bids although they got "clear interest in
the area," which is where the majority of the remaining forested
trust lands are located. It came with some conditions from the
buyer.
4:04:42 PM
She reported that the sale that is going on now is in public
notice and will be a 10-year negotiated timber sale to provide
supply to Asia and domestic markets for timber as well as a new
market that has never occurred in Alaska before, which is
cottonwood for furniture.
Their partners are the Alaska Division of Forestry, the Mental
Health Trust, and the University of Alaska, so hopefully it will
provide a 10-year supply. Their combined target volume is 150
million board feet. That particular holding is 13,400 acres; it
had been closer to 14,000 acres but taking the Chilkat parcel
off the table reduced it.
MS. KLEIN explained the reason they partner with some of the
other folks is that they are adjacent to the university's lands,
so they can have easier access. Their partners also have similar
missions and fiduciary responsibilities with respect to being a
trust or having beneficiaries. This negotiated sale will have to
be at or above fair market value and the project will comply
with all applicable local, state, and federal laws, in
particular with the Forest Practices Act, which crosses multiple
agencies in Alaska (DEC, ADF&G, and DNR).
Currently, the university has a development and disposal plan
out for public comment and that will also need approvals from
the Haines Borough. A public open house is scheduled for Haines
on April 26th to help answer more questions and explain the
process in more detail. This sale is anticipated to generate
$10-15 million. It will also infuse the local community economy
with $90 million in private capital and infrastructure. It would
also require 40-45 new local jobs: 20-25 to support maritime
activities and 20 in construction.
4:08:36 PM
CHAIR GIESSEL remarked that is amazing news for the Haines
economy, plus the mining opportunity in that area.
MS. KLEIN acknowledged the Constantine Mine that has some
encouraging potential developments.
CHAIR GIESSEL asked who the other entities are that they are
partnering with in this sale.
MS. KLEIN replied the other land owners are the Alaska Division
of Forestry and the Mental Health Trust Lands Office; and the
U.S. Forest Service is helping them with work force development.
So, the university recently obtained some small grants to help
with that.
4:09:26 PM
CHAIR GIESSEL asked if she had seen local interest in the job
preparation area.
MS. KLEIN said they were just notified this morning that the
grant was successful, so they were not at that point, yet.
Private land holders and the buyer's names are confidential.
CHAIR GIESSEL said she was struck by the cottonwood market and
extended an invitation to interested parties to also come to
Southcentral.
MS. KLEIN said they want to diversify their revenues, but last
year the legislature's intent was that the University of Alaska
further develop and improve upon utilization of its land grants
in order to generate additional revenue, and she takes that very
seriously. The Board of Regents wants to sustain its trust
endowment and directed them to do so as their fiduciary
responsibility. If that can be done, it would reduce reliance on
state general funds.
4:11:47 PM
Timber resources are the largest remaining trust assets and
several sales are in progress: the Edna Bay sale will be
completed this year. The 1,000-acre Vallenar Bay Spring timber
sale near Ketchikan has not started yet but will be another
joint effort. The Haines 10-year parcel is another one.
Mineral resources are the next valuable potential that they
don't know much about yet, Ms. Klein said. Those assessments
require capital. Right now, they have primarily gravel and coal
resources.
The remaining real estate the trust has is remote and about 10-
15,000 acres are in federal land holdings and they have two oil
and gas leases on Kenai Peninsula, but they are very, very
small.
MS. KLEIN summarized that she is trying to do the best she can
with what she has, which is very little. She is basically
turning over every stump and rock have to see what can be done
to create revenue.
4:13:48 PM
SENATOR MEYER asked how much revenue the university gets from
its land annually.
MS. KLEIN replied on average about $6.5 million.
SENATOR MEYER said she made a good case that the university has
a grant deficit of 360,000 acres and asked how the legislature
can help.
MR. BAKER answered that legislature has been very supportive in
the past and has pushed it as far as possible. The State Supreme
Court has now said that absent some sort of federal construct
the state won't be able to continue doing that. In short, they
need the continued support of the legislature recognizing that
federal government thinks it is now a state obligation with what
the state already received or might receive. That is the new
thing from their perspective. They want whatever this becomes to
be defensible and a legitimate federal program that accomplishes
good things for Alaska, in general.
4:16:11 PM
SENATOR MEYER asked if resolutions urging the delegation to get
those lands would help.
MR. BAKER answered yes. The other body had introduced a
resolution in that vein.
SENATOR MEYER said it seems like they have been fighting this
battle for some time and asked if the university gets any
feedback from the Washington delegation.
MR. BAKER replied that they have had many conversations with the
delegation who have asked for "clear communication" from the
state that it is a priority and that the administration, the
university, and the DNR are "shoulder to shoulder" on it.
Because of competing priorities for land, the lands that have
been discussed that would come to the university over the years
have been heavily identified in the Tongass National Forest, and
that is a very difficult place to do any sort of land work.
SENATOR MEYER said with Senator Murkowski as Chair of the U.S.
Senate Committee on Energy and Natural Resources, this is a good
time to show that the state is shoulder to shoulder with the
university on making this happen. He asked how UA land compares
with Mental Health Trust lands in terms of acres and stated, "If
we can get ANWR, we can surely get you 360,000 acres."
4:19:54 PM
WYN MENEFEE, Executive Director, Land Office, Alaska Mental
Health Trust (AMHT), Anchorage, Alaska, replied that AMHT
manages about 1 million acres, which could be either fee simple
or subsurface.
SENATOR MEYER asked where AMHTH got its acreage.
MR. MENEFEE replied that the trust got its land originally
through the Alaska Mental Health Enabling Act in 1958. But a
lawsuit said the state mismanaged the trust lands in 1984-94 and
that resulted in a reconstitution of the trust. Some was
original trust land, but because some lands were already
encumbered and used for things that didn't benefit the trust
other parts came from state lands in approximately equal parts.
The reconstitution made whole the one million-plus acres and an
endowment of money in addition.
4:21:40 PM
SENATOR COGHILL said he agreed with Senator Meyer that the state
needs to demonstrate alignment on this issue.
CHAIR GIESSEL also agreed and invited DNR Deputy Commissioner
Heidi Hansen to come to the table and tell the committee where
DNR is in terms of supporting transferring land to the
university.
4:22:31 PM
HEIDI HANSEN, Deputy Commissioner, Department of Natural
Resources (DNR), Anchorage, Alaska, apologized and said she just
recently learned about this issue, and would be happy to get
back to her with the information.
CHAIR GIESSEL asked the Division of Forestry the same question.
4:23:30 PM
CHRIS MAISCH, State Forester and Director, Division of Forestry,
Department of Natural Resources (DNR), Fairbanks, Alaska,
answered that he collaborated with both organizations around the
state on intermingled-ownership properties. This concept isn't
new, but the projects have gotten larger over time.
The Edna Bay joint project is a great example of many landowners
getting together to finance the construction of a log transfer
facility (LTF) with DNR funds that they will all use. And the
university is using that site to facilitate the sale of its
timber.
He said the next one will be the Good Neighbor Authority (GNA)
Project, a U.S. Forest Service-owned timber sale, but the State
of Alaska has completed the sale and will manage it on behalf of
the Forest Service through the GNA authority.
MR. MAISCH said the state will follow up with a sale of its own
on the state forest at Edna Bay. SEALASKA Native Corporation may
also use the same LTF. So, it's a great example of collaboration
between many landowners to keep costs down and be very efficient
in managing the resource.
The Haines project is the most recent one and is quite exciting.
A fair amount of investment will be required on some of the
infrastructure pieces and the university is taking the lead on
that. It has real potential to duplicate what was done at Edna
Bay.
CHAIR GIESSEL said last fall there were some potential buyers of
timber in the Interior and MatSu Valley, and one of the
impediments had to do with our forests being certified. She
asked if any of the university land is adjacent to those
properties that the state has and how this could go forward for
both entities.
MR. MAISCH replied that all three, the two trusts and the State
of Alaska have intermingled ownerships in that location. But he
would have to look at ownership maps to assess the timber
resources, but that could be an opportunity to collaborate. The
one difference is that area doesn't have a state forest and that
puts state land in a little different perspective in terms of
potential sales.
The certification question was more important to the Valley
proposal, because much of that wood would have gone into the
energy markets in Japan and the certification piece was an
energy market requirement for entry. The projects in Haines and
Southeast are not energy projects, so those don't have a similar
requirement at this time.
4:27:42 PM
Slide 8
CHAIR GIESSEL noted the state anti-dedication clause as an
explicit exception when it is required by the federal government
to participate in federal programs. So, that means students
going to the university are certainly getting federal loans and
she wondered if there could be some kind of state match for
loans that would get past the anti-dedication clause.
ANDY HARRINGTON, Associate General Counsel, University of
Alaska, Fairbanks, Alaska, replied that is the type of creative
thinking he is looking for, and he would look into it.
CHAIR GIESSEL said the legislature really wants to help in any
way it can. She offered to get a Senate Resolution passed if
that would be helpful.
SENATOR COGHILL encouraged them to also think creatively along
the lines of using the federal programs involved with the Arctic
universities working with the National Oceanic and Atmosphere
Administration (NOAA) to their benefit.
MR. BAKER responded that they will do that. He noted the
resolution introduced in the other body was HJR 39.
CHAIR GIESSEL said they would look that up and spruce up the
language a bit. She thanked the presenters for the update.
4:32:03 PM
CHAIR GIESSEL adjourned Senate Resources Standing Committee
meeting at 4:32 p.m.