HB 155-AK MENTAL HEALTH TRUST LAND EXCHANGE 2:43:04 PM CO-CHAIR JOSEPHSON announced that the final order of business would be HOUSE BILL NO. 155, "An Act authorizing a land exchange in which certain Alaska mental health trust land is exchanged for certain national forest land and relating to the costs of the exchange; and providing for an effective date." 2:43:28 PM REPRESENTATIVE DAN ORTIZ, Alaska State Legislature, as the prime sponsor, introduced HB 155. He explained that the bill would authorize a land exchange between the Alaska Mental Health Trust Authority ("Trust") and the U.S. Forest Service (USFS). The bill would be a triple win, he said, because it would protect viewsheds, enhance the timber industry, and help fund the Trust's mental health programs. Lands vital to the recreation and tourism industries would be protected, such as Ketchikan's Deer Mountain, while at the same time the exchange would make available other lands of comparable value to the timber industry. Projects would be created, he continued, that would act as a "bridge" in the industry until young-growth timber is ready to be logged, which would address Representative Rauscher's question about what can be done to stimulate logging in the state. Because the bill would allow for time-sensitive logging it would help sustain the timber industry, which is beneficial to Southeast Alaska's economy. The Trust would gain resources and revenue from the timber industry to fund programs that serve some of the most vulnerable people in Alaska, he said. The Trust provides funding to programs and services across the state that benefit people with mental illness, developmental disabilities, Alzheimer's disease, traumatic brain injuries, and substance abuse disorders. He noted that the Alaska Mental Health Trust Land Office has been working with the U.S. Forest Service, communities, and interest groups to conduct an administrative land exchange between the Trust and the USFS. Additionally, he explained, U.S. Senator Lisa Murkowski and U.S. Senator Dan Sullivan have introduced similar legislation in the U.S. Congress with Senate Bill 131, and U.S. Representative Don Young introduced [House Resolution] 513. Also, Senator Stedman has introduced parallel legislation [SB 88] in the Alaska State Senate. Overall, he said, HB 155 would increase revenue for mental health programs and the timber industry, while still protecting iconic lands used for recreation and tourism. REPRESENTATIVE BIRCH asked whether an assessment of the mineral value and other economic assessments have been done on the lands that would be exchanged. REPRESENTATIVE ORTIZ assured the committee the Trust would not trade away lands for less valuable lands. 2:48:15 PM REPRESENTATIVE JOHNSON requested the sponsor to expound on why he thinks the Trust would not trade for lands of lesser value. REPRESENTATIVE ORTIZ responded that the Trust was established initially with land grants across the state and its activities are funded through the monetization of these lands. The Trust is bound to act in its own best interest, he said, so it can further the goals for which it was founded. If the Trust currently controls lands that offer large monetization potential through mining, he wouldn't think the Trust would trade away that land because it would go against the Trust's basic tenant to maximize the potential of the lands it has been given. REPRESENTATIVE RAUSCHER drew attention to the bill, beginning on page 1, line 14, and continuing to page 2, lines 1-2, which name the Southeast communities of Wrangell, Sitka, Juneau, Meyers Chuck, Petersburg, and Ketchikan. He inquired whether the bill is specific to "an area only." REPRESENTATIVE ORTIZ answered it is his understanding that the lands that would be exchanged with USFS are primarily lands in Southeast Alaska and so in that sense it is region specific. In further response to Representative Rauscher, he said the bill could not apply to other lands in the state, but affects lands illustrated by maps in the committee packet describing the lands that are part of this exchange. He said his understanding is that all the lands described on those maps are within Southeast Alaska. REPRESENTATIVE TALERICO offered his understanding that for the exchange to happen, a bill must be passed by the Alaska State Legislature as well as an action by Congress to authorize an exchange between USFS and the Trust. REPRESENTATIVE ORTIZ responded yes, the legislature needs to do what it needs to do on the state's end, but the exchange won't happen unless Congress also passes federal legislation. They both must happen for this exchange to take place. REPRESENTATIVE TALERICO opined moving HB 155 forward would help with the decision-making in Congress. REPRESENTATIVE ORTIZ agreed. 2:53:04 PM REPRESENTATIVE RAUSCHER inquired whether this has been vetted through all the important channels. REPRESENTATIVE ORTIZ said yes. REPRESENTATIVE PARISH noted the letters of opposition propose a federal buyout of the land [instead of an exchange], but observed that a buyout would not create jobs in the timber industry, which is one of the primary benefits of the bill. He asked whether there is something the legislature would need to do to accommodate a buyout option if at a federal level it became a possibility. REPRESENTATIVE ORTIZ replied he is not prepared to answer that question at this time. He agreed that a buyout option might help the Trust and the tourism industry, but not the timber industry, which is the third part of his "win-win-win." REPRESENTATIVE PARISH inquired as to how many "job years" would be enabled under the bill, job years meaning one job for one year. REPRESENTATIVE ORTIZ deferred to Mr. Wyn Menefee for an answer. The bill is about making timber offerings more of a possibility, he said, but it is out of his realm to quantify how much. CO-CHAIR JOSEPHSON announced that a sectional analysis of HB 155 will be presented at the bill's next hearing and that a proposed committee substitute will also be discussed at that time. He then invited Mr. Menefee to provide a presentation on the bill. 2:55:50 PM WYN MENEFEE, Deputy Director, Alaska Mental Health Trust Land Office, Office of the Commissioner, Department of Natural Resources (DNR), provided a PowerPoint presentation entitled, "HB 155 - Alaska Mental Health Trust Land Exchange with the USFS." Displaying slide 2, he explained that the Alaska Mental Health Trust ("Trust") is a perpetual trust with the purpose of improving the lives of its beneficiaries. The Trust has programs that it funds to help create a comprehensive integrated mental health program in Alaska, as the enabling Act dictated for it to do. For example, he said, the Trust puts about $20 million a year in projects and activities at state agencies and nonprofits, has provided about $3 million in grants since 2013 in Southeast Alaska, approved $10 million to help fund Medicare, and a sundry of other things. MR. MENEFEE turned to slide 3, and noted that the Trust puts out money to help mental health. It needs money to do that, which leads to the Alaska Mental Health Trust Land Office (Trust Land Office). The job of the Trust Land Office, he said, is to make money off the non-cash assets of the Trust and to improve the lives of the beneficiaries. The land office manages multiple asset classes and timber is one of those asset classes. Although he is within the Department of Natural Resources, the Trust Land Office basically acts as a contractor to the Alaska Mental Health Trust Authority and manages the Trust's lands. MR. MENEFEE provided slide 4, that illustrated Trust lands are managed according to [four] principles as follows: make money by maximizing long-term revenue from the land; protect and improve the corpus; encourage diverse revenue-producing uses of trust land; manage trust land. He said timber harvest is just one aspect of a diverse portfolio, and the land exchange will help diversify the Trust's portfolio and increase the Trust's revenue stream, which will directly benefit beneficiaries. The land exchange will protect the corpus by not allowing the timber assets to become devalued, which could happen "if the timber industry goes away." The Trust cannot sell timber if there is nobody to buy it, he said, and revenue would be lost at that point. It is very important to sell timber to a timber industry while it still exists. MR. MENEFEE displayed slide 5, "Land Distribution," and said the map depicts the Trust's approximate land holdings that are located throughout Southeast Alaska. MR. MENEFEE addressed slide 6, that was a map showing that about 18,000 acres of Trust lands are adjacent to the communities of Wrangell, Petersburg, Sitka, Juneau, Meyers Chuck, [and Ketchikan]. The Trust also holds land in No Name Bay, he said. The U.S. Forest Service has about 20,000 acres of remote land on Prince of Wales Island and Shelter Cove. The reason for the different acreages, he explained, is that it is an expected amount of acreages that are being offered; however, it is an equal value land exchange, which means that after the lands are appraised, an equal value exchange must be done and so at the end it won't be those acreages. Those acreages are being put on the table and it is specific to just those parcels. It is done in two phases, he continued. The first phase is exchanged within one year. The key about rushing through the first year, giving a smaller amount exchange, is the need to get timber to market. The rest is exchanged within two years and this is when parcels may be adjusted to equalize the value. MR. MENEFEE brought attention to slide 7 depicting two maps, one entitled, "Trust Land To Be Exchanged in Southeast Alaska," and one entitled, "National Forest Service Land to be Exchanged." He said the exchange is a consolidation [of Trust land ownership]. 3:00:55 PM MR. MENEFEE turned to slide 8, and stated that the Trust Land Office expects to receive between $40 and $60 million over the next 20 years from timber sales from these parcels if they are acquired through this exchange. Right now, he advised, trying to cut timber on the lands currently owned by the Trust does not go well last year's Deer Mountain episode being an example. The communities do not want the Trust cutting timber. However, he continued, the resources of the Trust are supposed to be managed solely for the interests of the Trust, which means the public can be ignored in that sense. Even if the public says it doesn't like it, if it is in the best interests of the Trust, the Trust is supposed to still do it. But, he said, the Trust is trying to work it out by doing this exchange, so timber can be cut where there is no opposition. MR. MENEFEE stated that the Trust sees the land exchange and the selling of the timber as a sustainable thing because trees grow back, and another harvest will provide revenue in the future. The land exchange will protect the timber and tourism industries because it protects the viewsheds while giving the timber industry the capability of having timber to market, which is critical right now, because the timber industry is failing due to lack of timber. He said the timber industry has multiple layers of great economic impact because it includes stevedores, equipment rental, maintenance, purchases, transportation, timber fellers, and cruisers. Timber harvest on the exchanged lands would be done in an environmentally responsible manner, he maintained, because the Trust must follow the Alaska Forest Resources and Practices Act. MR. MENEFEE addressed slide 9. He explained that the Trust has been working on this exchange for 10 years. The Trust tried to do it administratively and entered into an agreement to initiate with USFS to exchange these very lands. The problem, he said, is that USFS's estimate of how much it would cost to get it done and how long it would take goes well past when the timber industry would fail in Alaska. "We're the only ones with timber that potentially could be brought to market right now in any amount that will keep the timber industry alive," he stated. He reiterated that he is concerned about the timber industry because if the timber industry is not viable, the Trust has nobody to sell its timber to, and that is the devaluing of its asset. MR. MENEFEE stated that the Tongass Futures Roundtable [a group of stakeholders convened by USFS, Alaska Region] had about 35 entities, everything from governments to boroughs to conservation groups, and they all came out with the same idea that the exchange is a good idea for the communities, the timber industry, and the Trust. In working through this exchange, the Trust has worked with conservation groups and other interested parties. The Trust has modified boundaries and addressed concerns to try to make the exchange successful. The only group that has expressed concern in recent time, he said, is the Southeast Alaska Conservation Council (SEACC). Primarily SEACC has expressed concern about a litigation it has on No Name Bay. He assured the committee that the Trust has clear title in No Name Bay, can go forward with the exchange, and that there is nothing in the litigation that would stop the Trust going forward. He related that in its testimony on SB 88, [the companion bill] in the other body, SEACC said it wanted No Name Bay to go to USFS. He further related that SEACC has stated it would like to have the Trust's lands purchased. However, he continued, $40 million-$60 million doesn't seem to be available, and the Trust does not have other options that compare with the proposed exchange. 3:05:34 PM MR. MENEFEE continued to slide 10, and noted USFS owns the majority of land [in Southeast Alaska]. He said the areas on the map colored in brown or tan cannot be cut, and the areas colored in green could be cut, which is a small portion of the forest. The U.S. Forest Service used to be the primary seller of timber in Southeast Alaska; however, when USFS cut back on the amount of timber sold each year, the timber industry started failing and the number of jobs declined. The Trust is attempting to bridge the interim while USFS transitions to a sustainable young-growth harvest. It is critical right now to get timber to market during that two-year period, he added, and that is why the state and federal legislation needs to get through. MR. MENEFEE moved to slide 11, and explained that both the federal and state legislation need to pass and are compatible. The federal legislation directs USFS to complete the exchange, he said, and the state legislation allows the Trust to go forward with the exchange. Passage of both the federal and state legislation would enable consummation of this exchange, get the lands appraised and surveyed, and get timber to market within the two-year timeframe. MR. MENEFEE turned to slides 12 and 13, and concluded by pointing out that there are many supporters of the exchange. He reiterated that the bill is a positive revenue-generating exchange that would help improve the lives of beneficiaries and would help communities by preserving jobs, economies, viewsheds and watersheds. He urged for the passage of HB 155. REPRESENTATIVE BIRCH asked whether an appropriate assessment of minerals has been done on the lands currently owned by the Trust to assure that there is not another gold mine within. MR. MENEFEE acknowledged assessing mineral potential is difficult. However, to the best of the Trust's knowledge from surveys that have been done, there is not a mineral potential that would be lost. 3:09:01 PM [HB 155 was held over.]