HOUSE RESOURCES STANDING COMMITTEE April 25, 1994 8:15 a.m. MEMBERS PRESENT Representative Bill Williams, Chairman Representative Bill Hudson, Vice Chairman Representative Con Bunde Representative Pat Carney Representative John Davies Representative David Finkelstein Representative Jeannette James Representative Eldon Mulder MEMBERS ABSENT Representative Joe Green OTHER LEGISLATORS PRESENT Senator Jim Duncan COMMITTEE CALENDAR SB 306: "An Act relating to an antitrust exemption for persons engaged in the fishing industry." MOVED OUT OF COMMITTEE WITH INDIVIDUAL RECOMMENDATIONS SB 374: "An Act extending the period of regulation of material sites used for timber operations under the Forest Practices Act and extending a corresponding exemption from provisions regulating mining reclamation; and providing for an effective date." MOVED OUT OF COMMITTEE WITH INDIVIDUAL RECOMMENDATIONS SB 310: "An Act relating to the management and sale of state timber and relating to the administration of forest land." HCS CSSB 310(RES) MOVED OUT OF COMMITTEE WITH INDIVIDUAL RECOMMENDATIONS WITNESS REGISTER SENATOR JIM DUNCAN Alaska State Legislature State Capitol, Room 119 Juneau, Alaska 99801-1182 Phone: 465-4766 POSITION STATEMENT: Prime Sponsor SB 306 JIM FORBES, Assistant Attorney General 1031 W. 4th, Ste. 200 Anchorage, Alaska 99501-1994 Phone: 269-5100 POSITION STATEMENT: Answered questions on SB 306 CHRIS GATES, Director Division of Economic Development Department of Commerce and Economic Development P.O. Box 110804 Juneau, Alaska 99811-0804 Phone: 465-2017 POSITION STATEMENT: Supported SB 306 and supported SB 310 JOHN ABSHIRE, Deputy Commissioner Department of Labor P.O. Box 21149 Juneau, Alaska 99802-1149 Phone: 465-2700 POSITION STATEMENT: Supported SB 306 TORIE BAKER, Member Board of Directors Cordova Fishermen United P.O. Box 1159 Cordova, Alaska 99574 Phone: 424-3820 POSITION STATEMENT: Supported SB 306 KATE TROLL, Executive Director Southeast Alaska Seiners 9226 Long Run Juneau, Alaska 99801 Phone: 789-5117 POSITION STATEMENT: Supported SB 306 JERRY MCCUNE, President United Fishermen of Alaska 211 Fourth Street, #211 Juneau, Alaska 99801 Phone: 586-2820 POSITION STATEMENT: Supported SB 306 JERRY GALLAGHER, Legislative Liaison Department of Natural Resources 400 Willoughby Avenue Juneau, Alaska 99801-1724 Phone: 465-2400 POSITION STATEMENT: Supported SB 374 TOM BOUTIN, Director Division of Forestry Department of Natural Resources 400 Willoughby Avenue Juneau, Alaska 99801-1724 Phone: 465-2491 POSITION STATEMENT: Answered questions on SB 310 RON WOLFE, Chief Forester Klukwan Forest Products 3017 Clinton Blvd. Juneau, Alaska 99801 Phone: 789-7104 POSITION STATEMENT: Supported SB 310 RICK SOLIE, Aide Senator Steve Frank State Capitol, Room 518 Juneau, Alaska 99801-1182 Phone: 465-3709 POSITION STATEMENT: Answered questions on SB 310 PREVIOUS ACTION BILL: SB 306 SHORT TITLE: ANTITRUST EXEMPTION FOR FISHERMEN SPONSOR(S): SENATOR(S)DUNCAN,Zharoff,Little,Taylor, Kerttula,Lincoln,Salo,Donley JRN-DATE JRN-PG ACTION 02/14/94 2828 (S) READ THE FIRST TIME/REFERRAL(S) 02/14/94 2828 (S) RES, JUD 02/23/94 2943 (S) COSPONSOR(S): ZHAROFF 03/25/94 (S) RES AT 3:30 PM BUTROVICH RM 205 03/29/94 3390 (S) RES RPT 2DP 3NR 03/29/94 3390 (S) ZERO FISCAL NOTE PUBLISHED (LABOR) 04/08/94 (S) JUD AT 01:30 PM BELTZ ROOM 211 04/12/94 (S) JUD AT 01:30 PM BELTZ ROOM 211 04/13/94 3624 (S) JUD RPT 4DP 04/13/94 3624 (S) PREVIOUS ZERO FN (LABOR) 04/14/94 (S) RLS AT 00:00 AM FAHRENKAMP ROOM 203 04/18/94 3752 (S) RULES TO CALENDAR 4/18/94 04/18/94 3753 (S) READ THE SECOND TIME 04/18/94 3753 (S) ADVANCED TO THIRD READING UNAN CONSENT 04/18/94 3753 (S) COSPONSOR(S): LITTLE, TAYLOR, KERTTULA, 04/18/94 3753 (S) LINCOLN, SALO, DONLEY 04/18/94 3753 (S) READ THE THIRD TIME SB 306 04/18/94 3754 (S) PASSED Y18 N1 E1 04/18/94 3762 (S) TRANSMITTED TO (H) 04/18/94 3552 (H) READ THE FIRST TIME/REFERRAL(S) 04/18/94 3552 (H) FSH, RESOURCES, JUDICIARY 04/19/94 3611 (H) FSH REFERRAL WAIVED 04/25/94 (H) RES AT 08:15 AM CAPITOL 124 BILL: SB 374 SHORT TITLE: MATERIAL SITES FOR TIMBER OPERATIONS SPONSOR(S): RESOURCES JRN-DATE JRN-PG ACTION 04/05/94 3448 (S) READ THE FIRST TIME/REFERRAL(S) 04/05/94 3449 (S) RESOURCES 04/13/94 (S) RES AT 4:15 PM BUTROVICH RM 205 04/14/94 (S) RLS AT 00:00 AM FAHRENKAMP ROOM 203 04/14/94 3665 (S) RES RPT 5DP 1NR 04/14/94 3665 (S) ZERO FISCAL NOTE PUBLISHED (DNR) 04/18/94 3752 (S) RLS RPT 4CAL 1NR 4/18/94 04/18/94 3755 (S) READ THE SECOND TIME 04/18/94 3755 (S) ADVANCED TO THIRD READING UNAN CONSENT 04/18/94 3755 (S) READ THE THIRD TIME SB 374 04/18/94 3755 (S) PASSED Y18 N- E1 A1 04/18/94 3756 (S) EFFECTIVE DATE SAME AS PASSAGE 04/18/94 3762 (S) TRANSMITTED TO (H) 04/18/94 3552 (H) READ THE FIRST TIME/REFERRAL(S) 04/18/94 3552 (H) RESOURCES 04/25/94 (H) RES AT 08:15 AM CAPITOL 124 BILL: SB 310 SHORT TITLE: STATE/PRIVATE/MUNI TIMBER OPERATION/SALE SPONSOR(S): SENATOR(S)FRANK,Taylor,Pearce,Sharp, Miller,Kelly,Halford;REPRESENTATIVE(S) Olberg JRN-DATE JRN-PG ACTION 02/14/94 2829 (S) READ THE FIRST TIME/REFERRAL(S) 02/14/94 2829 (S) RESOURCES 03/02/94 (S) RES AT 3:30 PM BUTROVICH RM 205 03/02/94 (S) MINUTE(RES) 03/05/94 (H) MINUTE(ECO) 03/16/94 (S) RES AT 3:30 PM BUTROVICH RM 205 03/16/94 (S) MINUTE(RES) 03/22/94 (S) RES AT 1:30 PM BUTROVICH RM 205 03/24/94 (S) RES AT 3:30 PM FAHRENKAMP RM 203 03/28/94 (S) RES AT 3:30 PM BUTROVICH RM 205 03/30/94 3406 (S) RES RPT CS 4DP 1DNP NEW TITLE 03/30/94 3407 (S) ZERO FN TO SB & CS PUBLISHED (DNR) 03/30/94 (S) RLS AT 11:35 AM FAHRENKAMP ROOM 203 03/30/94 (S) MINUTE(RLS) 04/05/94 3448 (S) RULES RPT 3CAL 2NR 4/5/94 04/05/94 3449 (S) HELD TO 4/6/94 04/06/94 3476 (S) READ THE SECOND TIME 04/06/94 3477 (S) RES CS ADOPTED UNAN CONSENT 04/06/94 3477 (S) AM NO 1 MOVED BY LITTLE 04/06/94 3478 (S) AM NO 1 FAILED Y9 N11 04/06/94 3478 (S) AM NO 2 MOVED BY LITTLE 04/06/94 3479 (S) AM NO 2 FAILED Y9 N11 04/06/94 3479 (S) AM NO 3 NOT OFFERED 04/06/94 3479 (S) AM NO 4 MOVED BY LITTLE 04/06/94 3479 (S) AM NO 4 FAILED Y9 N11 04/06/94 3480 (S) AM NO 5 MOVED BY DUNCAN 04/06/94 3480 (S) AM NO 5 FAILED Y8 N12 04/06/94 3480 (S) AM NO 6 MOVED BY DUNCAN 04/06/94 3481 (S) AM NO 6 FAILED Y9 N11 04/06/94 3481 (S) AM NO 7 MOVED BY DUNCAN 04/06/94 3482 (S) AM NO 7 FAILED Y9 N11 04/06/94 3482 (S) AM NO 8 MOVED BY DUNCAN 04/06/94 3482 (S) AM NO 8 FAILED Y9 N11 04/06/94 3483 (S) AM NO 9 MOVED BY LINCOLN 04/06/94 3483 (S) AM NO 9 FAILED Y9 N11 04/06/94 3483 (S) AM NO 10 MOVED BY ZHAROFF 04/06/94 3484 (S) AM NO 10 FAILED Y9 N11 04/06/94 3484 (S) AM NO 11 MOVED BY ZHAROFF 04/06/94 3484 (S) AM NO 11 FAILED Y9 N11 04/06/94 3485 (S) AM NO 12 MOVED BY LINCOLN 04/06/94 3485 (S) AM NO 12 FAILED Y10 N10 04/06/94 3486 (S) AM NO 13 MOVED BY ZHAROFF 04/06/94 3486 (S) AM NO 13 FAILED Y9 N11 04/06/94 3486 (S) AM NO 14 MOVED BY ADAMS 04/06/94 3487 (S) AM NO 14 FAILED Y8 N12 04/06/94 3487 (S) ADVANCE TO THIRD READING FLD Y11 N9 04/06/94 3487 (S) THIRD READING 4/7 CALENDAR 04/07/94 3506 (S) READ THE THIRD TIME CSSB 310(RES) 04/07/94 3506 (S) PASSED Y11 N8 E1 04/07/94 3506 (S) Adams NOTICE OF RECONSIDERATION 04/08/94 3527 (S) RECON TAKEN UP/IN THIRD READING 04/08/94 3527 (S) PASSED ON RECONSIDERATION Y11 N7 E2 04/08/94 3531 (S) TRANSMITTED TO (H) 04/08/94 3212 (H) READ THE FIRST TIME/REFERRAL(S) 04/08/94 3212 (H) RESOURCES 04/08/94 3220 (H) CROSS SPONSOR(S): OLBERG 04/15/94 3526 (H) FIN REFERRAL ADDED 04/15/94 (H) RES AT 08:15 AM CAPITOL 124 04/15/94 (H) MINUTE(RES) 04/20/94 (H) RES AT 08:15 AM CAPITOL 124 04/20/94 (H) MINUTE(RES) 04/22/94 (H) RES AT 08:15 AM CAPITOL 124 04/22/94 (H) MINUTE(RES) ACTION NARRATIVE TAPE 94-65, SIDE A Number 000 The House Resources Committee was called to order by Chairman Bill Williams at 8:30 a.m. Members present at the call to order were Representatives Williams, Hudson, Bunde, Carney, Davies, James, and Mulder. Members absent were Representatives Finkelstein and Green. CHAIRMAN BILL WILLIAMS stated there is a quorum present. He said the meeting is on teleconference with Anchorage, Cordova, and Fairbanks. (CHAIRMAN WILLIAMS noted for the record that REPRESENTATIVE FINKELSTEIN joined the committee at 8:32 a.m.) SB 306 - ANTITRUST EXEMPTION FOR FISHERMEN SENATOR JIM DUNCAN, PRIME SPONSOR, stated SB 306 confers state antitrust immunity on fishermen, allowing them to negotiate raw fish prices with processors in order to improve the market price of Alaska seafood. It also permits fishermen and fish processors to agree to the minimum price for which processors will sell the processed fish. He said in recent years, salmon prices have fallen dramatically. Alaska needs to offer greater support to the state's fishing industry, which is the state's largest private employer. SENATOR DUNCAN pointed out that fishing affects every segment of the state's economy, from small coastal villages to the state's general fund. Ex-vessel value of Alaska salmon declined by 67 percent between 1988 and 1993, yet salmon fishermen caught 64 percent more fish. As raw fish prices continue to drop, fishing communities and boroughs suffer from poor local economies, as well as decreased state revenue sharing from fisheries taxes. He stated British Columbia fishermen have consistently been getting higher salmon prices than Alaska fishermen, in part because of multi-year collective bargaining agreements with processors. SB 306 provides for a similar system, allowing fishermen to form associations to negotiate prices with processors. SENATOR DUNCAN said this legislation was recommended in the 1993 Alaska attorney general's report on the Bristol Bay sockeye salmon industry. A state antitrust exemption is the first step. He stated once the legislature has approved a state exemption, the state will request a federal exemption. Collective bargaining between fishermen and processors will help stabilize commercial fishing prices, bolstering local and state economies. He stressed stable raw fish prices also will promote stable consumer prices for processed seafood products, which means greater sales of Alaska seafood. Number 046 JIM FORBES, ASSISTANT ATTORNEY GENERAL, testified via teleconference and said SB 306 is a first step in the recommendation given by the attorney general. REPRESENTATIVE JEANNETTE JAMES asked if there are any negatives to SB 306. MR. FORBES replied he cannot think of any negatives. He pointed out there is a zero fiscal note. He said SB 306 will help facilitate communications between the fishers and processors. REPRESENTATIVE JAMES wondered if there will be fees involved which might be a burden on the small fishermen. MR. FORBES stated SB 306 is neutral on that type of issue. Number 070 REPRESENTATIVE BILL HUDSON asked if it would be possible to require value-added prior to exportation. MR. FORBES replied SB 306 is neutral on that issue as well. CHRIS GATES, DIRECTOR, DIVISION OF ECONOMIC DEVELOPMENT, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT (DCED), expressed support for SB 306. JOHN ABSHIRE, DEPUTY COMMISSIONER, DEPARTMENT OF LABOR, expressed support for SB 306. He stated the department is involved in mediation in trying to reach a price and SB 306 will help the entire industry. Number 093 TORIE BAKER, MEMBER, BOARD OF DIRECTORS, CORDOVA FISHERMEN UNITED (CFU), testified via teleconference and said CFU supports SB 306 for all of the reasons mentioned. KATE TROLL, EXECUTIVE DIRECTOR, SOUTHEAST ALASKA SEINERS, said in 1991, she was involved in a five day strike and realized at that time that fishermen are stuck in limbo, as they are not the cannery operated and dominated fleet anymore but are also not independent businessmen either. She stated the fishing industry is an industry in transition. She felt SB 306 will help bridge that transition to where the fishermen want to be perceived--as business partners entering into negotiations on price. MS. TROLL said a group got together shortly after the strike to determine how they could best help their industry to be positive and it was felt that supporting value-added products and price stability was important. She stated to get to price stability, there was a need to enter into multi-year contracts. She explained they had a conference to discuss the concept and the major processors were not allowed to attend the conference. After that conference, a pink salmon working group was formed and a formula was developed to spur the idea of multi-year contracts. That formula was sent to the processors. She noted the response was silence because the processors had been counseled by their attorneys that they cannot enter into conceptual types of discussions without conflicting the antitrust regulations. She stressed that is why SB 306 is important-- to get that type of dialogue and constructive negotiations going. MS. TROLL noted SB 306 is a first step. In response to Representative James's question about fees, she anticipates the existing associations will take up the initiative and noted there is a dues structure. She said there are also organizations looking at possibly forming a marketing association, which would be based on a small percentage of whatever was negotiated. She urged committee members to pass SB 306. Number 164 REPRESENTATIVE PAT CARNEY made a MOTION to MOVE SB 306 out of committee with INDIVIDUAL RECOMMENDATIONS. REPRESENTATIVE HUDSON asked if there were any representatives of the processors association present. SENATOR DUNCAN said the processors were represented at Senate hearings on the bill and expressed support for SB 306. REPRESENTATIVE HUDSON asked if anyone has talked to Senator Stevens and the Congressional delegation to get them moving on the second step. SENATOR DUNCAN responded he has not yet spoken to anyone because he wanted to ensure SB 306 gets passed first. He noted the state of Washington has received a federal exemption. REPRESENTATIVE ELDON MULDER asked if there was a committee substitute (CS) coming out of the Senate on SB 306. SENATOR DUNCAN stated no. He said when the bill was in the Judiciary Committee, Senator Taylor wanted to look at what it would take to set up a state agency and have state oversight, instead of going through a federal exemption. REPRESENTATIVE MULDER clarified that is one of the options outlined in the attorney general's memo. SENATOR DUNCAN replied it is one option and the other option is the federal exemption. He felt the federal exemption is the option which should be pursued because it does not require the costs, efforts, etc., involved in creating a state agency. REPRESENTATIVE MULDER asked how realistic it is to get the federal exemption. SENATOR DUNCAN responded he is not sure, but pointed out it has been done in the state of Washington. REPRESENTATIVE JAMES felt the simplest way to go is to get the federal exemption and leave setting up a state agency as the last option. REPRESENTATIVE CON BUNDE felt the demand for fish is a driving force and not just individual tastes but also price. He said a possible negative to SB 306 is these associations and long-term agreements might increase consumer price. JERRY MCCUNE, PRESIDENT, UNITED FISHERMEN OF ALASKA, felt there will not be any increase in price because of the negotiations on price. He said fishermen are currently being paid less than they have ever been paid and the consumer price remains the same. He stressed the middle person is the person making the money. He noted fishermen are currently at the whim of supply and demand and what the processors will pay. He pointed out that in Japan the price is continually going up on the retail level for the export. REPRESENTATIVE BUNDE said that is his concern. The fishermen are not getting paid--it is the middle people who are marking up the price. If the middle people do not chose to reduce their mark-up, the consumer price is going to go up to reflect the increase to the fishermen and a decreasing spiral occurs. He wondered if the middle people will absorb enough so the fishermen can get an increase without the end product costing more to the consumer. Number 264 MR. MCCUNE stated many processors are cutting out the middle people, such as the broker, and are going to market for themselves resulting in less costs to the fishermen. He explained in the United States, the fishermen send their fish to a broker, the broker takes bids and gets the highest price possible. Many processors are going direct to the consumer, so they get lower costs in their business which does reflect a higher price for the harvester. However, the problem is the harvester has no leverage to get a higher price and the only options are a strike or delivering to one processor. REPRESENTATIVE HUDSON felt SB 306 could lead to an expansion of marketing of the state's fish product in the domestic market particularly because at the present time, the antitrust constraint against the fishermen talking to the processors is the same constraint of them talking to each other. He said when he was involved on the seafood marketing side, one of the big problems was that everyone was cutting their own deal with their own broker and their own distributors, yet they could not share that information in order to get a uniformly higher price for the product. He said the lowest price tended to establish the price on a regional basis. REPRESENTATIVE HUDSON thought if the federal exemption can be approved, SB 306 will be revolutionary in providing for some price negotiations which would expand marketing and at the same time, improve quality. He said there would be an ability to not only negotiate a three year contract for price but also control the quality, which would ultimately lead to an increase in the consumer price on the product. If the consumer perceives the product is going to be available, the quality is going to be consistent, and the price is going to be known, the fishermen in Alaska would get more money for their fish on a raw fish basis. Number 327 MR. MCCUNE stated if he could stabilize the price on a three year basis, he could then do some financial planning. In addition, the processor would know what he needs to do to make his profit with the consumer. He stressed unfortunately fish are currently like oil, the price is up and down. He did not feel it will be difficult to get the federal exemption. CHAIRMAN WILLIAMS asked if there were any objections to the motion. Hearing none, the MOTION PASSED. SB 374 - MATERIAL SITES FOR TIMBER OPERATIONS JERRY GALLAGHER, LEGISLATIVE LIAISON, DEPARTMENT OF NATURAL RESOURCES (DNR), expressed support for SB 374. He said material sites which support timber activities such as building roads, etc., are regulated under both the Forest Practices Act (FPA) and the Mine Reclamation Act. He stated the Mine Reclamation Act had an exemption for two years. The intention of the exemption was to have DNR develop regulations so that it would defer to the FPA regulation of these sites. He noted the FPA regulation is more rigorous. MR. GALLAGHER said DNR did not get the regulations done and the exemption expires June 30, 1994. He explained SB 374 gives DNR an extra six months to get the regulations in place. He stated the regulations are currently out for public comment. He noted the more rigorous FPA standards still apply. Without the six months extension, a timber operator will be required to get an approval both under the FPA plan and the Mine Reclamation Act, for exactly the same permit. REPRESENTATIVE JOHN DAVIES made a MOTION to MOVE SB 374 with zero fiscal note out of committee with INDIVIDUAL RECOMMENDATIONS. CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, the MOTION PASSED. SB 310 - STATE/PRIVATE/MUNI TIMBER OPERATION/SALE REPRESENTATIVE MULDER made a MOTION to AMEND CSSB 310(RES) as follows: Page 8, line 6, following "industry;": Delete "and" Insert "[AND]" Page 8, line 7, following "habitat": Insert new material to read: "; and (8) to the fullest extent practicable, harvested forest land shall be reforested, naturally or artificially, so as to result in a sustained yield of merchantable timber from that land; if artificial planting is required, silviculturally acceptable seedlings must first be available for planting at an economically fair price" Page 8, following line 7: Insert a new bill section to read: "*Sec. 5. AS 41.17.060 is amended by adding a new subsection to read: (d) With respect to private forest land only, to the fullest extent practicable, harvested forest land shall be reforested, naturally or artificially.If artificial planting is required, silviculturally acceptable seedlings must first be available for planting at an economically fair price." Renumber the following bill sections accordingly. Page 8, following line 23: Insert a new bill section to read: "*Sec. 8. AS 41.17.060(b)(4) is repealed." Number 442 TOM BOUTIN, DIRECTOR, DIVISION OF FORESTRY, DNR, said this amendment will modify only the wording for sustained yield and reforestation on private land. He stated last summer, the Sierra Club Legal Defense Fund (SCLDF) wrote a brief which said DNR should be requiring private landowners to comply with a continuous even flow harvest on their private land. He felt the existing FPA does not require that and AS 41.17.060 says that private land complies with sustained yield, so long as it is reforested. However, private landowners were concerned upon reviewing the brief. Therefore, this amendment makes it even more clear that reforestation is required on private land, not an even flow harvest. REPRESENTATIVE CARNEY asked what the definition of "economically fair price" is. MR. BOUTIN stated the definition is in existing law, except it says in the state. He said seedlings are purchased as needed. Reforestation is required by law and DNR buys seedlings at the market price. REPRESENTATIVE DAVID FINKELSTEIN wondered if Mr. Boutin had talked to anyone involved in the deliberations on the FPA to determine whether or not there was any discussion on the application of the sustained yield concept to private lands. MR. BOUTIN replied he has. He said the part of the law which the SCLDF used to represent an even flow should be required on state land came from 1978. He stated clearly sustained yield is reforestation and he cannot get some kind of an even flow requirement from that wording. He noted the accepted gossip at that time was the SCLDF had written the brief to help the attorney general in his negotiations with a corporation. Number 557 REPRESENTATIVE HUDSON stated Section 8 repeals the (b)(4) of AS 41.17.060 and the new Section 4 takes out the "so as to result in a sustained yield of merchantable timber from the land;". He clarified private land only is being talked about. MR. BOUTIN said that is correct. REPRESENTATIVE HUDSON asked why the private timber operators want this amendment. MR. BOUTIN said private landowners were nervous as a result of the SCLDF brief because the wording in existing law does not adequately define sustained yield, so as long as there is reforestation. He noted the state is under a different test with the definition of sustained yield under Title 41 and the stronger definition of sustained yield in Title 38. He felt in existing law, sustained yield is met on private land just by reforestation and that was understood until the brief. REPRESENTATIVE DAVIES asked why this amendment is necessary in SB 310, which addresses forest management agreements (FMAs). MR. BOUTIN replied the amendment is not related in any way whatsoever and has no impact on state land. He said this amendment is a private land amendment and FMAs are a different method of sale for the sale of state timber. REPRESENTATIVE DAVIES felt the FPA was negotiated under a consensus environment. He expressed concern that changes are being made to the FPA just because there is a convenient vehicle available to do so. He thought if changes are going to be made to the FPA, they should be introduced as a separate bill package. He opposed the amendment for that reason. REPRESENTATIVE JAMES said she could envision an extension of the amendment into the availability of timber under a FMA, particularly when collaboration between landowners and the amount of timber which could be included from a private landowner is included. Number 642 REPRESENTATIVE FINKELSTEIN made a MOTION to AMEND the AMENDMENT to CSSB 310(RES) as follows: Page 8, following line 7: Insert a new bill section to read: "*Sec. 5. AS 41.17.060 is amended by adding a new subsection to read: (d) With respect to private forest land only, to the fullest extent practicable, harvested forest land shall be reforested, naturally or artificially so as to result in a continuing yield of merchantable yield from that land. REPRESENTATIVE FINKELSTEIN said the idea is to leave the language as it is without the words "sustained yield" for private lands and leave it exactly as it is for state lands. The change will not undermine the concept of reforestation. CHAIRMAN WILLIAMS OBJECTED. REPRESENTATIVE FINKELSTEIN said sustained yield is defined in existing law. He stated there has been an attempt to interpret sustained yield as not applying beyond reforestation to actual harvest limitations. He explained continuing yield means continued regeneration. He felt the main amendment goes beyond what is described because it takes the concept of reforestation and deletes it from the law. TAPE 94-65, SIDE B Number 000 MR. BOUTIN stated existing law provides that a private landowner with 50,000 acres can log those acres, as long as reforestation occurs naturally or artificially. Eighty years from now that private landowner could log those acres again. He said the concern brought forth by the SCLDF brief is that the private landowner would have to take the 50,000 acres, divide it by the 80 year rotation and log only 1/100th of it each year. He did not feel the law requires that, but he can understand the concern. MR. BOUTIN stated Representative Finkelstein's words "continuing yield" in the amendment to the amendment might also give a private landowner the same concern. CHAIRMAN WILLIAMS noted continuing yield is not defined in law. RON WOLFE, CHIEF FORESTER, KLUKWAN FOREST PRODUCTS (KFP), expressed support of SB 310. He said in written and oral testimony, KFP has requested the amendment. He noted the amendment says "harvested forest land shall be reforested." Existing regulation provides a very specific standard with respect to the number of seedlings per acre, per region that must exist in a well distributed manner. The regulation also establishes a standard as to what is an acceptable seedling. KFP feels it is very clear that the land has to be reforested. KFP feels the reference to sustained yield is confusing and continual yield would be equally confusing. MR. WOLFE said the removal of sustained yield weakens what is viewed as a very specific standard in law. He stressed the threat of lawsuit is what generates KFP's concern. He stated his understanding of the FPA affords KFP, as a private landowner, certain protections against a third party lawsuit. The threat of litigation would most likely go against the DNR commissioner rather than the private landowner, but the concept of the litigation would be such a threat to private landowners that they would have to be involved to protect their interests. MR. WOLFE stated the amendment is more of a clerical matter, reducing some confusion. He added that he participated extensively in the FPA review and he did not recall any reference to a sustained yield concept being applied to specific parcels of private land. Number 068 REPRESENTATIVE FINKELSTEIN felt "recurring yield" might be a better word and MODIFIED his AMENDMENT to the AMENDMENT to change the word "continual" to "recurring." REPRESENTATIVE HUDSON said he looked up continue, sustain, and recur in the dictionary and all of the definitions are very similar. He read the definitions of each. REPRESENTATIVE FINKELSTEIN noted there is a definition of sustained yield in law. Legislative action was taken to change sustained yield to recurring, which ties to the concept in subsection (4) which is reforestation. CHAIRMAN WILLIAMS asked for a roll call vote on the amendment to the amendment. Voting in favor of the motion were REPRESENTATIVES DAVIES, CARNEY, and FINKELSTEIN. Voting against the motion were REPRESENTATIVES JAMES, HUDSON, BUNDE, MULDER, and WILLIAMS. The MOTION FAILED 5-3. REPRESENTATIVE DAVIES asked if the FPA was in fact negotiated in a consensus format over a period of time. MR. WOLFE replied over a period of time it was primarily consensus. REPRESENTATIVE DAVIES asked if there has been any instance where a private landowner has been sued under this section of the law. MR. WOLFE replied not to his knowledge. He said part of the FPA has a third party protection, meaning a private landowner cannot be sued. Number 150 REPRESENTATIVE DAVIES asked Mr. Wolfe's view on the effect of the words "fullest extent practicable" in Section (4). He felt when that type of phrase is used in law, it makes it difficult for someone to lose in court. MR. WOLFE responded if an area is going to be artificially replanted, there is an attempt to use seed which is from an acceptable source. He said a popular concept in forest management is using a seed which is of the same species and same geographic origin. He stated for spruce, seed crops are not on a regular basis. There is a periodicity of one in seven or one in five years where there is a bumper crop. He stressed the seed desirable is not always available. From a forester's perspective, if he is unable to get acceptable seed to grow seedlings, that would mean it is not practicable for him to be able to reforest. Mr. Wolfe said KFP has invested, wherever they have harvested, efforts in trying to collect seed. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES JAMES, CARNEY, MULDER, HUDSON, BUNDE, and WILLIAMS. Voting against the amendment were REPRESENTATIVES DAVIES and FINKELSTEIN. The MOTION PASSED 6-2. Number 188 REPRESENTATIVE MULDER made a MOTION to RESCIND the committee's action in adopting the following amendment to CSSB 310(RES): Page 2, line 30: Delete "shall" Insert "may" REPRESENTATIVE FINKELSTEIN OBJECTED. He felt there was a persuasive case as to why this amendment was a good idea. He asked why the committee should change their action. REPRESENTATIVE MULDER stated after reviewing the amendment and visiting with the sponsor of SB 310, it was felt the amendment weakens the intent of the legislation. He said there is no requirement there has to be FMAs but the commissioner will at least have to look at a FMA by retaining the word "shall". He stressed if the committee is serious about the legislation and economic development and diversity, they should force the commissioner to look at the possibility of these agreements in the future. REPRESENTATIVE DAVIES recalled there has been a huge amount of testimony about allowing a certain amount of discretion on the commissioner's part. He felt to force the commissioner to make a solicitation when in the commissioner's best judgment it would be a waste of the state's effort is inconsistent with the other debate on the bill. He described several instances in the future where there is no way possible that a FMA could be granted. He stated giving the commissioner discretion to offer a FMA in one part of the state and not necessarily in the other part of the state makes sense. REPRESENTATIVE DAVIES stated the Division of Forestry is going to offer FMAs wherever it makes sense. With the interest in diversifying the economy, the division is going to offer FMAs whenever they can. He felt to force them to do that, when in their judgment it does not make sense, is a waste. REPRESENTATIVE FINKELSTEIN agreed with Representative Davies. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the motion were REPRESENTATIVES BUNDE, MULDER, HUDSON, JAMES, and WILLIAMS. Voting against the motion were REPRESENTATIVES DAVIES, CARNEY, and FINKELSTEIN. The MOTION FAILED 5-3. REPRESENTATIVE MULDER made a MOTION to AMEND CSSB 310(RES) as follows: Page 5, line 13: Delete "regarding" Insert "requiring" Page 5, lines 15-16: Delete "regarding compensation, if required by the department," Insert "requiring compensation" Page 5, line 23: Delete "regarding responsibilities" Insert "requiring the proposer to be responsible" Page 5, line 28: Delete "for" Insert "requiring" Page 6, lines 5-7: Delete all material and insert: "(N) provisions requiring the proposer to reforest, stabilize, monitor, and meet other residual obligations upon deactivation or termination; these provisions may include bonding;" RICK SOLIE, AIDE, SENATOR STEVE FRANK, said this amendment incorporates suggestions made by the former attorney general, Charles Cole, in a letter to the House Resources Committee. Mr. Cole suggested the language in the FMAs was permissive. CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, the MOTION PASSED. Number 282 REPRESENTATIVE MULDER made a MOTION to AMEND CSSB 310(RES) as follows: Page 4, line 7: Delete "proposed agreement" Insert "proposal" REPRESENTATIVE DAVIES OBJECTED. MR. SOLIE stated this amendment is also in response to Charles Cole's concerns that the bill was not clear on financial feasibility. CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, the MOTION PASSED. REPRESENTATIVE FINKELSTEIN made a MOTION to AMEND CSSB 310(RES) as follows: Page 4, lines 10-13: Delete all material and insert new subsections (6) and (7) to read: (6) economic benefits and liabilities from the proposed agreement to the region in which the land that is to be covered by the agreement is located;" (7) economic benefits and liabilities to the State and to the state forest land under the proposed agreement;" REPRESENTATIVE FINKELSTEIN said when the Division of Forestry is considering factors in evaluating proposals, not only will they consider the economic benefits but as provided with this amendment, consider the liabilities as well. REPRESENTATIVE MULDER OBJECTED. He felt the amendment is redundant as the financial feasibility is already being considered. REPRESENTATIVE FINKELSTEIN stated that argument would say get rid of subsections (6) and (7) completely. He said there are risks to the state involved and gave an example. He stated this amendment is a suggestion of Charles Cole. He pointed out the state has been sued before and had to settle for millions of dollars. Therefore, the liabilities the state might face should be considered. REPRESENTATIVE DAVIES felt the financial feasibility is a much narrower factor because it addresses the agreement itself. Economic benefits and liabilities are much broader terms and apply to other considerations. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES FINKELSTEIN, DAVIES, and CARNEY. Voting against the amendment were REPRESENTATIVES HUDSON, MULDER, JAMES, BUNDE, and WILLIAMS. The MOTION FAILED 5-3. Number 369 REPRESENTATIVE FINKELSTEIN made a MOTION to AMEND CSSB 10(RES) as follows: Page 3, lines 10-11: Delete: "unless the evaluation under (d) indicates it is unlikely that the proposed agreement will be selected as a tentatively successful proposed agreement" Page 3, line 12: Delete "30" Insert "60" Delete "60" Insert "120 Page 5, line 1: After "government agencies" Insert "and hold public hearings" Page 5, line 5: After "Section," Insert "and determining that the tentatively proposed agreement is in the best interests of the State," Page 6, line 8: Delete "The" Insert "After soliciting public comment, holding public hearings, and determining that the proposed final agreement is in the best interests of the State, the" Page 7, line 5: After "shall" Insert "solicit public comment, hold public hearings," REPRESENTATIVE FINKELSTEIN said this amendment increases the time period for public comment. REPRESENTATIVE DAVIES stated the single issue which aroused the most concern about SB 310 was the perceived attack on the ability of the public to comment. He felt this amendment would help alleviate those concerns. MR. SOLIE expressed opposition to the amendment. It is felt the amendments made in the Senate Resources Committee, which added an additional public comment period to the one initially contained in the bill, will allow for sufficient public involvement. He said this amendment goes further than what is necessary to protect the public interest. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES CARNEY, DAVIES, and FINKELSTEIN. Voting against the amendment were REPRESENTATIVES JAMES, HUDSON, BUNDE, MULDER, and WILLIAMS. The MOTION FAILED 5-3. Number 399 REPRESENTATIVE FINKELSTEIN made a MOTION to AMEND CSSB 310(RES) as follows: Page 5, line 2, following "agreement.": Insert "If a tentatively successful proposed agreement includes land within a municipality, the commissioner shall submit the tentatively successful proposed agreement to the municipality to determine if the agreement is consistent with municipal land use plans. The municipality shall make a consistency determination within 60 days of receipt of the tentatively successful proposed agreement and, if the agreement is not consistent with municipal land use plans, specifically set forth the provisions of the agreement that are not consistent." Page 5, following line 8: Insert a new paragraph to read: "(2) must be consistent to the maximum extent practicable with municipal land use plans if the agreement includes land within a municipality;" Renumber the following paragraph accordingly. REPRESENTATIVE FINKELSTEIN said this amendment requires FMAs to be consistent with municipal land use plans. He stated this is another issue which was brought forward in public testimony. REPRESENTATIVE MULDER OBJECTED REPRESENTATIVE DAVIES expressed support for the amendment. He recently went through an extremely unnecessary set of objections to proposed actions in his area which resulted from the state taking action without consideration for local laws first. He felt this type of consistency check will smooth the process and keep the state from local hearings that get at odds with what the state action is. MR. SOLIE expressed opposition to the amendment. MR. BOUTIN expressed two concerns with the amendment. He felt sooner or later the land use plan process would become a referendum on the FMA and would be the overriding feature in consideration. Second, he said the Kenai Peninsula Borough has no timber sale program but recently by ordinance did require 300 foot buffer strips on streams on timber sales based on no scientific evidence. He expressed concern that a FMA might be constrained by some similar requirement. REPRESENTATIVE FINKELSTEIN stated there is nothing which would prevent a municipality from putting a buffer strip in place anytime they wanted, regardless of this amendment. He said a municipality can restrict activities within its land. REPRESENTATIVE DAVIES agreed and said municipalities have the ability to zone. He felt it makes more sense to have the state coordinating with municipalities rather than getting into positions where a state agency is suggesting one thing and the municipality is suggesting another. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES HUDSON, DAVIES, CARNEY, and FINKELSTEIN. Voting against the amendment were REPRESENTATIVES MULDER, JAMES, BUNDE, and WILLIAMS. The MOTION FAILED 4-4. Number 490 REPRESENTATIVE FINKELSTEIN made a MOTION to AMEND CSSB 310(RES) as follows: Page 4, line 31: After "agreement." Insert "The commissioner shall conduct a competitive bidding procedure in order to determine the highest qualified bidder for the proposed agreement; in addition to the bid price, the commissioner shall consider the value of the area for the long-term production of timber, the extent that local hire will be increased, the intent of the bidder to process a value added product within the State of Alaska, and the experience of the bidder in the forest products industry. REPRESENTATIVE FINKELSTEIN said the amendment sets up a procedure that once a FMA proposal is submitted, bidding will not involve just the price, but also a variety of other considerations including the bidders intent to process within the state. REPRESENTATIVE MULDER OBJECTED. He asked the sponsor's representative to speak to the value of competitive bidding. He thought the value of local hire and value-added were included in amendments adopted previously. MR. SOLIE expressed opposition to the amendment. He said in-state processing language was adopted previously. He stated this amendment goes in a different direction. It is felt that a negotiated agreement with a FMA is the best way to achieve the in-state processing and local hire. REPRESENTATIVE HUDSON felt there is considerable value in setting up intent language and he thought someone representing the state's interest was going to come back with that language. He said if the committee does not like the competitive bidding procedure, then the committee should consider adopting the second sentence of the amendment. REPRESENTATIVE JAMES felt this amendment, as written, would set the state up for a challenge on constitutionality. She did not think the state can enter into a competitive bidding process containing these stipulations. She said the value of the area for long-term production of timber is included in the economic and feasibility considerations. She stressed this amendment will make all FMAs unconstitutional. REPRESENTATIVE HUDSON made a MOTION to AMEND the AMENDMENT to CSSB 310(RES) as follows: Delete "The commissioner shall conduct a competitive bidding procedure in order to determine the highest qualified bidder for the proposed agreement; in addition to the bid price, The amendment would then read: Page 4, line 31, after "agreement." insert: "The commissioner shall consider the value of the area for the long-term production of timber, the extent that local hire will be increased, the intent of the bidder to process a value-added product within the State of Alaska, and the experience of the bidder in the forest products industry." REPRESENTATIVE HUDSON stated this amendment to the amendment enhances the bill by setting up intent language but does not force the state to go into a competitive bidding process. MR. GATES expressed support to the amendment to the amendment. He said the intent language would help focus FMAs on items of long-standing interest to the state in terms of value-added production of the state's timber resources and in-state local hire. REPRESENTATIVE FINKELSTEIN said although he prefers the entire amendment, he will consider the amendment to the amendment as a friendly amendment. REPRESENTATIVE MULDER questioned whether this is the appropriate location in the bill for the amendment. REPRESENTATIVE FINKELSTEIN MODIFIED his AMENDMENT to add: Location of the amendment is uncertain and is left to the bill drafter. CHAIRMAN WILLIAMS asked if there were any objections to the amended amendment. Hearing none, the AMENDED AMENDMENT was ADOPTED. REPRESENTATIVE FINKELSTEIN made a MOTION to AMEND CSSB 310(RES) as follows: Page 7, line 4, after "(1)": Insert "The commissioner shall strictly enforce the provisions of the final agreement. The commissioner shall perform an annual review of the operator's performance under the agreement." REPRESENTATIVE FINKELSTEIN stated this amendment comes from his experience in watching the bigger projects which states have had problems with. He said one of the ways to avoid problems is to ensure there are strict enforcement provisions and annual reviews so the problems get addressed. REPRESENTATIVE MULDER OBJECTED. He felt the amendment was redundant because a similar amendment was defeated previously. REPRESENTATIVE JAMES made a MOTION to AMEND the AMENDMENT to CSSB 310(RES) deleting the entire second sentence. CHAIRMAN WILLIAMS asked if there were any objections to the amended amendment. Hearing none, the AMENDED AMENDMENT was ADOPTED. REPRESENTATIVE FINKELSTEIN made a MOTION to AMEND CSSB 310(RES) as follows: Page 5, line 13: Delete "regarding compensation from the proposer" Insert "requiring the proposer to compensate the state for full costs incurred" Page 5, lines 15-16: Delete all material and Insert "(D) provisions requiring the proposer to pay the state's cost of administering, monitoring, and enforcing the terms and conditions of the agreement and other requirements of state law;" Page 5, line 17: Delete "regarding responsibilities for" Insert "making the proposer responsible for all costs of" Page 5, line 22, following "agreement;": Insert "provisions under this paragraph must provide that the proposer shall pay fair market value for all material purchased from the state;" REPRESENTATIVE FINKELSTEIN said there has been discussion about the costs the FMA operator should be responsible for. He stressed at a minimum, the costs to the state should be paid so the state cannot be accused of engaging in something which is actually losing money from the state. REPRESENTATIVE MULDER OBJECTED. He said total costs are very ill-defined. REPRESENTATIVE FINKELSTEIN disagreed. He pointed out that later in the amendment those costs are outlined. REPRESENTATIVE HUDSON felt this issue has been addressed by the adoption of amendment X39 and the last amendment. TAPE 94-66, SIDE A Number 000 REPRESENTATIVE FINKELSTEIN said this amendment goes a little further and says the state's full costs. REPRESENTATIVE JAMES stated she has no problem with the second and fourth parts of the amendment. REPRESENTATIVE JAMES made a MOTION to AMEND the AMENDMENT as follows: Delete: Page, 5, line 13: Delete "regarding compensation from the proposer" Insert "requiring the proposer to compensate the state for full costs incurred" Page 5, line 17: Delete "regarding responsibilities for" Insert "making the proposer responsible for all costs of" REPRESENTATIVE WILLIAMS OBJECTED. MR. SOLIE stated the sponsor opposes the amended amendment because there has been no review of it. REPRESENTATIVE FINKELSTEIN stated the proposed amended amendment only accomplishes two things. It says for the materials purchased, the fair market value has to be paid and second, those direct costs which come from administering, monitoring, and enforcing the terms and conditions of the agreement... must be paid. REPRESENTATIVE FINKELSTEIN WITHDREW his MOTION on the original amendment. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES DAVIES, FINKELSTEIN, HUDSON, and CARNEY. Voting against the amendment were REPRESENTATIVES MULDER, JAMES, BUNDE, and WILLIAMS. The MOTION FAILED 4-4. REPRESENTATIVE FINKELSTEIN made a MOTION to AMEND CSSB 310(RES) as follows: Page 1, line 4, through page 2, line 21: Delete all material Page 2, line 22: Delete "*Sec. 3." Insert "*Section 1." Page 7, line 18, through page 8, line 23: Delete all material. REPRESENTATIVE FINKELSTEIN stated this amendment deletes the portions of the bill which do not relate to FMAs. REPRESENTATIVE MULDER OBJECTED. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES DAVIES, CARNEY, and FINKELSTEIN. Voting against the amendment were REPRESENTATIVES MULDER, BUNDE, JAMES, HUDSON, and WILLIAMS. The MOTION FAILED 5-3. REPRESENTATIVE FINKELSTEIN made a MOTION to AMEND CSSB 310(RES) as follows: Page 8, lines 8-15: Delete all material. Renumber the following bill section accordingly. REPRESENTATIVE FINKELSTEIN felt this section has not received the attention it deserves. He did not think it is appropriate to change the purpose of state forests retroactively since there were discussions each time the state forests were established as to what their purpose was. REPRESENTATIVE MULDER OBJECTED. REPRESENTATIVE DAVIES expressed support for the amendment. He felt changing the state forest purposes is not necessary for FMAs. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the amendment were REPRESENTATIVES DAVIES, FINKELSTEIN, and CARNEY. Voting against the amendment were REPRESENTATIVES HUDSON, BUNDE, MULDER, JAMES, and WILLIAMS. The MOTION FAILED 5-3. Number 073 REPRESENTATIVE MULDER made a MOTION to MOVE CSSB 310(RES), as amended, with accompanying fiscal notes, out of committee with INDIVIDUAL RECOMMENDATIONS. REPRESENTATIVE DAVIES OBJECTED. He stated he has another motion to offer. REPRESENTATIVE MULDER WITHDREW his MOTION. REPRESENTATIVE DAVIES made a MOTION to RESCIND the committee's action in failing to adopt amendment X35. REPRESENTATIVE DAVIES said he has a series of petitions from around the state saying the amendment should be adopted. REPRESENTATIVE MULDER OBJECTED. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the motion were REPRESENTATIVES FINKELSTEIN, DAVIES, and CARNEY. Voting against the motion were REPRESENTATIVES BUNDE, MULDER, JAMES, HUDSON, and WILLIAMS. The MOTION FAILED 5-3. REPRESENTATIVE MULDER made a MOTION to MOVE CSSB 310(RES), as amended, with accompanying fiscal notes, out of committee with INDIVIDUAL RECOMMENDATIONS. REPRESENTATIVES FINKELSTEIN and DAVIES OBJECTED. REPRESENTATIVE FINKELSTEIN felt there is a way to do FMAs and to get public and legislative support but with the time available, that support cannot occur. CHAIRMAN WILLIAMS asked for a roll call vote. Voting in favor of the motion were REPRESENTATIVE JAMES, HUDSON, BUNDE, MULDER, and WILLIAMS. Voting against the motion were REPRESENTATIVES CARNEY, DAVIES, and FINKELSTEIN. The MOTION PASSED 5-3. ADJOURNMENT There being no further business to come before the House Resources Committee, Chairman Williams adjourned the meeting at 10:20 a.m.