HOUSE RESOURCES STANDING COMMITTEE March 22, 1995 8:08 a.m. MEMBERS PRESENT Representative Joe Green, Co-Chairman Representative Bill Williams, Co-Chairman Representative Scott Ogan, Vice Chairman Representative Alan Austerman Representative Ramona Barnes Representative John Davies Representative Pete Kott MEMBERS ABSENT Representative Eileen MacLean Representative Irene Nicholia COMMITTEE CALENDAR *HB 191: "An Act relating to the management and disposal of state land and resources; relating to certain remote parcel and homestead entry land purchase contracts and patents; and providing for an effective date." HEARD AND HELD HRES - 03/22/95 HB 207: "An Act relating to adjustments to royalty reserved to the state to encourage otherwise uneconomic production of oil and gas; relating to the depositing of royalties and royalty sale proceeds in the Alaska permanent fund and providing for an effective date." SCHEDULED BUT NOT HEARD HRES - 03/22/95 HB 209: "An Act relating to the authority of the commissioner of natural resources to allow reductions of royalty on oil and gas leases; and providing for an effective date." SCHEDULED BUT NOT HEARD HRES - 03/22/95 *HB 265: "An Act relating to the export of live dungeness crab." SCHEDULED BUT NOT HEARD (* First public hearing) WITNESS REGISTER REPRESENTATIVE GENE THERRIAULT Alaska State Legislature State Capitol, Room 421 Juneau, AK 99801 Phone: 465-4797 POSITION STATEMENT: Prime Sponsor of HB 191 RON SWANSON, Director Division of Land Department of Natural Resources 3601 C Street Anchorage, AK 99503 Phone: 762-2692 POSITION STATEMENT: Answered questions and explained amendments on HB 191 NICO BUS, Acting Director Division of Support Services Department of Natural Resources 400 Willoughby Avenue Juneau, AK 99801 Phone: 465-2406 POSITION STATEMENT: Answered questions on HB 191 HUGH MALONE, Representative Kenai Peninsula Fishermen's Association 119 Seward St. Juneau, AK 99801 Phone: 586-3516 POSITION STATEMENT: Expressed a concern regarding HB 191 PREVIOUS ACTION BILL: HB 191 SHORT TITLE: MANAGEMENT OF STATE LAND AND RESOURCES SPONSOR(S): REPRESENTATIVE(S) THERRIAULT JRN-DATE JRN-PG ACTION 02/22/95 448 (H) READ THE FIRST TIME - REFERRAL(S) 02/22/95 448 (H) RESOURCES, FINANCE 03/15/95 741 (H) SPONSOR SUBSTITUTE INTRODUCED- REFERRALS 03/15/95 741 (H) READ THE FIRST TIME - REFERRAL(S) 03/15/95 741 (H) RESOURCES, FINANCE 03/22/95 (H) RES AT 08:00 AM CAPITOL 124 03/29/95 (H) RES AT 08:00 AM CAPITOL 124  BILL: HB 207 SHORT TITLE: ADJUSTMENTS TO OIL AND GAS ROYALTIES SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR JRN-DATE JRN-PG ACTION 02/27/95 501 (H) READ THE FIRST TIME - REFERRAL(S) 02/27/95 501 (H) OIL & GAS, RESOURCES, FINANCE 02/27/95 501 (H) FISCAL NOTE (DNR) 02/27/95 501 (H) 2 ZERO FISCAL NOTES (DNR, REV) 02/27/95 501 (H) GOVERNOR'S TRANSMITTAL LETTER 03/08/95 665 (H) CORRECTED FISCAL NOTE (DNR) #3 03/09/95 (H) O&G AT 12:00 PM CAPITOL 17 03/09/95 (H) MINUTE(O&G) 03/14/95 (H) O&G AT 10:00 AM CAPITOL 124 03/14/95 (H) MINUTE(O&G) 03/15/95 (H) O&G AT 05:00 PM BELTZ ROOM 211 03/15/95 (H) MINUTE(O&G) 03/16/95 (H) O&G AT 10:00 AM CAPITOL 124 03/17/95 (H) O&G AT 05:00 PM CAPITOL 124 03/20/95 (H) O&G AT 05:00 PM CAPITOL 106 03/21/95 (H) O&G AT 10:00 AM CAPITOL 124 03/22/95 (H) RES AT 08:00 AM CAPITOL 124  BILL: HB 209 SHORT TITLE: OIL & GAS ROYALTY REDUCTION SPONSOR(S): REPRESENTATIVE(S) GREEN,Rokeberg JRN-DATE JRN-PG ACTION 02/27/95 503 (H) READ THE FIRST TIME - REFERRAL(S) 02/27/95 503 (H) OIL & GAS, RESOURCES, FINANCE 03/01/95 551 (H) COSPONSOR(S): ROKEBERG 03/09/95 (H) O&G AT 12:00 PM CAPITOL 17 03/09/95 (H) MINUTE(O&G) 03/14/95 (H) O&G AT 10:00 AM CAPITOL 124 03/14/95 (H) MINUTE(O&G) 03/15/95 (H) O&G AT 05:00 PM BELTZ ROOM 211 03/15/95 (H) MINUTE(O&G) 03/16/95 (H) O&G AT 10:00 AM CAPITOL 124 03/17/95 (H) O&G AT 05:00 PM CAPITOL 124 03/22/95 (H) RES AT 08:00 AM CAPITOL 124 BILL: HB 265 SHORT TITLE: EXPORT OF DUNGENESS CRAB SPONSOR(S): REPRESENTATIVE(S) WILLIAMS JRN-DATE JRN-PG ACTION 03/17/95 778 (H) READ THE FIRST TIME - REFERRAL(S) 03/17/95 778 (H) FSH, RESOURCES 03/22/95 (H) RES AT 08:00 AM CAPITOL 124 ACTION NARRATIVE TAPE 95-38, SIDE A Number 000 The House Resources Committee was called to order by Co-Chairman Green at 8:08 a.m. No roll call was taken. C0-CHAIRMAN JOE GREEN announced the committee would only hear HB 191. He stated HB 207 will be heard on Friday, March 24, HB 209 has been incorporated into HB 207, and HB 265 will be rescheduled for another date. HRES - 03/22/95 HB 191 - MANAGEMENT OF STATE LAND AND RESOURCES REPRESENTATIVE GENE THERRIAULT, PRIME SPONSOR, told committee members HB 191 is a housekeeping measure intended to clarify certain Title 38 statutes governing the Department of Natural Resources (DNR) management of state land and resources. He said HB 191 is intended to bring greater efficiency to the management of state lands without sacrificing public involvement in land use decisions. He stated as the House Finance subcommittee chairman for the DNR budget, he has worked with the department to come up with changes to Title 38 which would simplify programs and reduce costs to the DNR. He felt the passage of HB 191 would result in a more administratively efficient agency. He noted although the bill is not intended to be a complete rewrite of Title 38, he believes it is a positive effort, supported by the Administration, to streamline state government. REPRESENTATIVE THERRIAULT said there was a Title 38 bill last year that worked its way through the process and was not passed in the closing hours of the session. He stated his staff took a look at that bill, identified those provisions pulled out and put into HB 121, and picked up the remaining pieces. He noted since that time, he and his staff have had discussions with the department and a number of additions have been suggested for the bill. He pointed out HB 191 comes from the budget subcommittee level, where he has worked with the commissioners and different division directors, telling them that because the state does not have enough money to support their agency activities to the point they desire, they need to tell him and the committee what structural changes are needed in the statutes to enable the department to live with the budget provided this year and future years. REPRESENTATIVE THERRIAULT said the discussions held also included comments from the Senate side. He stated the DNR subcommittee has met a number of times jointly with members of the Senate budget subcommittee for DNR. He noted that Ron Swanson from the Division of Land, DNR, is present to answer technical questions. He added there is a packet of proposed changes from the DNR in committee members folders. He explained the proposed amendments having a period before them have already been included in the bill and the proposed amendments having an asterisk before them are those he hopes the committee will consider for a possible committee substitute. REPRESENTATIVE THERRIAULT noted he was approached by Representative Williams about the possibility of having a timber provision put into HB 191. He asked Representative Williams, through his staff, not to propose that provision because he would like to keep HB 191 strictly land management, aside from timber. CO-CHAIRMAN GREEN noted for the record that Representatives Davies, Kott, Austerman, Ogan and Green are present. Number 124 REPRESENTATIVE ALAN AUSTERMAN noted on page 1, the bill talks about adopting regional land use plans. He wondered if those plans have already been done or are they something which need to be done. REPRESENTATIVE THERRIAULT responded the plans have already been done. He said the desire is to clean up the language in the statutes which deals with the old land disposal bank. Number 140 RON SWANSON, DIRECTOR, DIVISION OF LAND, DNR, said in the 1970s, the state had a land disposal bank where the public could nominate land for disposal, which was before the land use planning statutes were on the books. The land disposal bank is still in the statutes and the department does what is required every year--that is to hold a public hearing annually, where people can nominate land to go into the disposal bank. He stated for the last three years no one has ever showed up at the public hearing and no one has proposed land. Rather, the land use planning process is used. He told committee members the desire is to eliminate the duplication. He stressed the land use planning process is the process which works. REPRESENTATIVE AUSTERMAN said on page 4, line 24, the word "should" is being changed to "shall" be at fair market value. He questioned why the word "shall" is being used. He stated sometimes the fair market values are high. MR. SWANSON responded all land the state disposes of has to go through an appraisal process. He stated there still is discretion for the commissioner to lower those values for various reasons--act of God, depressed economies, raised economies, etc. He said any time there is discretion on what the market value is, it leads to constant appeals. Therefore, the "shall" is saying appraise the land and whatever the fair market value is, that is what the land will be sold for. MR. SWANSON noted the state also has the discretion to dispose of land either by lottery or auction. He felt an auction is the better way to go and that is what the state will be doing this summer. He stated an auction does establish what the fair market value is. He said a minimum bid will be set, which will probably be less than the fair market value, and then the auction method will be used, using sealed bids. He pointed out it is difficult, in some locations, to determine a fair market value because the only other sales are state sales--there is not a mixed private, municipal, state market to pull from. Number 213 REPRESENTATIVE AUSTERMAN noted that on page 8, line 23, the bill talks about set net fishing and on line 29, the bill repeals and reenacts the next section. He wondered how the old section compares with the new section. MR. SWANSON said Section 20 addresses shore fishery leases and Section 21 deals with aquatic farming. REPRESENTATIVE AUSTERMAN stated he was more concerned with Section 21 as to how it compares to the old section. MR. SWANSON responded the real difference is the state will get fair market value for the aquatic farm leases. He explained presently an applicant comes in for the first three years just to get a land use permit. He said on aquatic farming and hatchery site leases, it takes three years to bring something to market. Therefore, the desire is to give a person the chance to do that-- not pay fair market up-front for leasing state land when there is no return. He noted that also in the first three years, it gives the DNR, the Alaska Department of Fish and Game (ADF&G), and the Department of Environmental Conservation (DEC) the opportunity to determine whether or not it is a viable farm. At that point, the state would convert the farm over to a fair market value lease, instead of just covering the costs of administering the program. REPRESENTATIVE AUSTERMAN asked what does a fair market value lease mean. MR. SWANSON responded the fair market value lease involves a regular appraisal and a percentage of that is paid each year. He said it usually is approximately 5 to 7 percent per year, depending on location. Number 257 CO-CHAIRMAN GREEN asked if a piece of land is taken to establish an aquatic farm, the farm is successful and then the person purchases the land, does that person purchase the fair market value before anything is started or the fair market value as it is when it is purchased. MR. SWANSON responded the state identifies a location for an aquatic farm and the applicant applies for it. He said at that point, the state gives the person a land use permit. He stated for the first three years, that person has the opportunity to develop the farm. Once it is proven the farm will work, the state then converts the farm over to a fair market value lease from year four up to year ten. CO-CHAIRMAN GREEN stated that person then has come in and established a higher value. MR. SWANSON replied no. He said the state does not appraise the improvements to the farm--it appraises the value of the land. Number 278 REPRESENTATIVE PETE KOTT wondered how much revenue is generated through state land sales versus what is spent by the division to operate the program. MR. SWANSON stated he cannot give the exact dollar figures but stressed the department spends a lot more than what it brings in, particularly in home sites and homesteads, as the applicant pays $10 to go out and do something for 10 years and does not pay anything during the interim period. The applicant can then prove up that land and get it for nothing or they can purchase it. He said the current requirements are very heavy on the administrative side, with no return to the state. REPRESENTATIVE THERRIAULT added that was one of the frustrations of the DNR budget subcommittee--there are all kinds of things which have been put on the books to keep people from speculating, to make sure a person gets a recreational use permit, etc., and the department has many requirements to check and double check things. He stressed DNR does not do those checks because the department does not have the budget. He said the subcommittee discussion was if the state sells, conveys, or leases the land under a fair market value, the state will be done with the land and the administrative costs will decline and hopefully the revenues will increase. He noted now since there is a concern that someone might make a dollar off of state land, the state spends millions and millions of dollars to keep that from happening. He stressed it is a very cumbersome system. REPRESENTATIVE KOTT noted that Section 1 of HB 191 says land must have an adopted regional land use plan before it is eligible for the land disposal program. He asked how much state land currently has an adopted regional land use plan. MR. SWANSON replied the state currently owns about 87 million acres and has land use plans in place for about 65 million acres. He said the only areas in the rail belt, road belt and ship belt areas not having a plan in place is the Kenai Peninsula and Kodiak which will have plans in place shortly. He said the only region where a land use plan is not in place is in some of the Yukon River areas where there is no demand for land disposals. He estimated two- thirds of the state has land use plans. Number 335 REPRESENTATIVE KOTT noted in Section 15 of HB 191, it appears that the DNR retains itself as the loan servicer. MR. SWANSON stated that is correct. He said most private financial institutions will not loan money on undeveloped land because there is no collateral. REPRESENTATIVE KOTT asked if the state would be in a position to contract the loan provision out to a financial institution. MR. SWANSON replied the department has found, through the Mental Health process, that banks are willing to buy the loans once they have been made, but basically all the banks do is collect the money. He reiterated that financial institutions are not willing to loan the money up-front. REPRESENTATIVE KOTT noted that in Section 17, the interest rate is suggested at 4 percent over the prime rate. He felt that interest rate is high. CO-CHAIRMAN GREEN noted for the record that Representative WILLIAMS had joined the committee. NICO BUS, ACTING DIRECTOR, DIVISION OF SUPPORT SERVICES, DNR, stated this interest rate is suggested for unimproved land. He noted the prime rate is for the very best lending situations. He said the department is suggesting 4 percent with a cap so the rate does not go over 13 percent. He pointed out that most of the department's rates are 12-13 percent currently. He added there is no credit check involved for the people who apply. Number 371 CO-CHAIRMAN GREEN said he shared Representative Kott's concern. He thought 4 percent over the federal reserve rate and 2 percent over the prime rate were more customary. MR. BUS reiterated the department's rates currently are 12-13 percent. He explained the reason for that rate is the department does not do any credit checks. He said if people are willing to pay that rate, then after a period of time, people either keep paying or they default. He noted the default rate currently is 3 percent. He stressed if the 12-13 percent is lowered, the department might experience more defaults because more people will just give it a go. CO-CHAIRMAN GREEN asked if the higher interest rate precludes some private ownership which otherwise might become private. MR. BUS said last year when the prime rate was low, the interest rate would have been 7 percent, so the rate is fluctuating. He stated currently the department has the rate locked in at approximately 12 percent. He explained this proposal will make the interest rate more in line with the market. He felt if the interest rate is dropped 1 or 2 percent, he is not sure whether or not more people will be interested. He thought with a lower rate, more people would apply. MR. SWANSON added that the current interest rate is 12.7 percent and if that is lowered, there will be a run on every contract the department has to refinance. He said the current statute refers to the Federal Land Bank, which no longer exists. The department is attempting to establish a rate that anyone can look up and figure out what the interest rate is going to be. He expressed concern also that the state has many contracts, which were sold, that were Mental Health funds and if the interest rate is lowered too much, there will be a run on those contracts also. That situation would put the department in a position of having to reimburse the bank that purchased all of the contracts. Number 421 REPRESENTATIVE THERRIAULT noted the existing statutes talk about the Federal Land Bank which does not exist anymore, so that mechanism is very confusing as to what the interest rate should be. Therefore, what is proposed is a clarification. REPRESENTATIVE AUSTERMAN clarified the normal bank rate is approximately 2 percent above the prime rate. MR. SWANSON stated a bank usually has a variable rate, the prime rate plus another percentage, and the rate is based on credit checks, amount of down payment, and many other factors. He added that most banks will not say how their interest rate is determined. Most banks gear their interest rates to various markets. He explained the department only requires 5 percent down, there are no credit checks involved, and many factors are considered. He pointed out that most lending institutions have a AAA to C rating and the interest rate for a AAA or A rating is approximately 2 percent. The department chose a rate in the middle, which they felt was fair. MR. BUS agreed with Mr. Swanson's comments. He added that the 4 percent over prime is an average rate--it is not the best rating, but it is also not the worst rating. Number 459 MR. SWANSON noted the committee received a packet of possible amendments to HB 191. He said at the DNR subcommittee hearings there were various questions on land disposals and how the state could minimize future impacts to the state. The proposed amendments address specific concerns. MR. SWANSON stated AS 38.05.069(a) mandates that when DNR sells land at an auction, particularly agricultural land, the adjacent landowner has a preference for purchase. He noted that the word "adjacent" is defined elsewhere in the bill. He said the department would like to make this subsection discretionary in regard to a preference. He pointed out there are times when the department would definitely want to grant a preference. For example, if a farm were to be enlarged, it would become profitable. He explained there have been instances where people use their preference to suppress the local economy, to take over the land to prevent someone else from coming in. He noted preference rights suppress the fair market value because no one is going to bid against people with preference rights. MR. SWANSON reviewed the next amendment. He said in 1988, the homestead law was changed to make it mandatory that the state survey particular tracts of land and then those be offered as pre- designated homesteads. Previously, people could go out and stake whatever area they wanted. He stated since the department has to survey those tracts of land, the department would like to make it mandatory the state recoup the costs of the survey from the successful applicant. The department could then reinvest that money to do additional surveys and offer more homesteads in the future. He stressed the department wants to make the program self- sustaining. MR. SWANSON stated the next amendment refers to a similar subject. He explained previous to 1988, an applicant could go out and stake a particular tract. However, when the legislature passed the law making it mandatory for the DNR to survey that tract, the requirement for the applicant to go out and stake the tract was left in. He said it was odd the department has survey markers in the ground and then the applicant is required to put a wooden post on top of the department's survey monument. He felt it was a useless requirement. Number 511 MR. SWANSON said the next amendment refers to remote cabin permits AS 38.05.079. He stated this is a program which has never been implemented. The provision allows an applicant to go out and stake a remote location for recreational use. The applicant automatically gets a 25 year lease, pays $100 and never has to survey the land. He noted the department never implemented the program because of the possible administrative nightmare behind all the overstaking, the non-requirement of survey, and no return of fair market value. He explained an opportunity is at hand to amend that particular statute to ensure that the land does get surveyed. He thought it was also an excellent opportunity to have these recreational disposals and require the department to get a fair market value for them. MR. SWANSON noted the next few proposed amendments address concerns about public service costs and expectations, basically disclaiming any future infrastructure costs to the state. He said the amendments would put into statutes that the state would not be obligated to provide any services to land which is subject to homesite entry and patent. The disclaimer would be made right in the statute. He explained currently, there are a number of disclaimers in AS 38.04, the planning statutes, which say when the department does land disposal plans, it should consider things that do not create obligations. He did not feel the disclaimers necessarily protect the state from people coming in later and wanting particular services. He said if the disclaimer is placed in the particular land disposal statute, people will know when they go out and get one of these things, they cannot come back and require that to happen. Number 546 MR. SWANSON stated a concern was also expressed about the "not in my back yard" syndrome and the fact that once the department disposes of a particular tract of land, people come in and oppose any future land disposals. He said the next several suggestions relate to that concern. MR. SWANSON noted the land planning statute directs the department to consider the availability of timber, firewood, and water when doing particular land disposals. He said many people feel that once they purchase state land, all the state land around them should be used for that particular purpose. He explained the suggested language would eliminate that assumption. He said in the next suggestion, the department is saying (indiscernible) AS 38.04 requirements fit right into the statutes that eliminate the "not in my back yard" attitude, particularly with unforeseen problems of scattered land disposals throughout the state. CO-CHAIRMAN GREEN clarified the state would make a disclaimer on the conveyance, so a person cannot come back and say they have lived in a certain place for so many years and was not aware of something which happened in 1995, etc. MR. SWANSON responded the land disposal brochures the department has issued the past few years do contain a disclaimer, but there is not much to back up that disclaimer. He said if it is put in statute, the department can clearly indicate in the conveyance document that a person will get such and such, but will not get these additional things which that person may desire. Number 571 REPRESENTATIVE AUSTERMAN recalled that Mr. Swanson had discussed remote cabin permits, AS 38.05.079. He wondered if there are any sites out there now which have just been staked, are being used and will have to get a survey done. MR. SWANSON replied the department has never offered anything under the remote cabin permit program because of the heavy administrative costs to the agency. Number 585 HUGH MALONE, REPRESENTATIVE, KENAI PENINSULA FISHERMEN'S ASSOCIATION, stated in Sections 19 and 20 the department deals with an issue which has caused administrative difficulties in regard to the determination of who should get a shore fisheries lease. He said the proposal in HB 191 would put those leases up for public auction. He stressed the change from the present system, where the leases are allocated based on a priority of use, is causing a concern to the present shore fishery lease holders. He noted he does not have a solution for the concern, but did want to bring the concern to the committee. He pointed out that last year, this section was taken out of the legislation. CO-CHAIRMAN GREEN stated the committee will be looking at a committee substitute at the next hearing which will incorporate several, if not all of the amendments discussed and any other issues which may be brought up as committee members address HB 191. He asked Mr. Malone if he would be able to have his position worked out with the sponsor in the next few days. MR. MALONE said he certainly will try. REPRESENTATIVE AUSTERMAN commented he does want to follow up with his constituents on the fisheries issues contained in HB 191. CO-CHAIRMAN GREEN wondered if the follow up would take just a few days or is there a need to extend the period of time before hearing HB 191 again. REPRESENTATIVE AUSTERMAN thought he would be ready early next week. CO-CHAIRMAN GREEN noted that Representative BARNES had joined the committee. Number 646 REPRESENTATIVE THERRIAULT inquired what the time line will be on HB 191. CO-CHAIRMAN GREEN asked Representative Austerman if there will be a need for a teleconference. REPRESENTATIVE AUSTERMAN stated he did not think that was necessary. Number 661 REPRESENTATIVE OGAN asked if the disposal of agricultural lands, such as Point McKenzie, will be affected by HB 191. MR. SWANSON responded currently there is a concern with Point McKenzie because it is original mental health land now converted to non-mental health land. The department is now waiting for the Supreme Court to make a ruling. He said the department could technically do a disposal at this time but chooses not to because the department does not want to create another mom and pop situation, in case the Supreme Court reverses the decision of the lower court. REPRESENTATIVE OGAN asked if any of the changes represented in HB 191 affect the disposal of the Point McKenzie land. MR. SWANSON responded the changes do not. He said a couple of the changes make the disposal simpler. He noted agricultural disposals have been excluded from the subdivision definition. Number 685 CO-CHAIRMAN GREEN said on page 4, open-to-entry is being excluded and on page 16, the bill talks about the holder of a homesite and on page 17, the bill talks about an applicant for a homestead. He asked Mr. Swanson to clarify the difference. TAPE 95-38, SIDE B Number 000 MR. SWANSON stated in regard to the open-to-entry on page 4, the open-to-entry program was repealed in the 1980s, so the department is basically taking that program off the books. He said homesteads and homesites currently are on the books. Currently, under the homesite and homestead program, the applicant pays the department $10 for an application, the applicant receives a permit and for 10 years, the applicant does not reimburse the state anything. The applicant can get the land in two ways--they can pay fair market value if they do the prove up or they can live on it and get it for free. The department is recommending these people pay the state at least $100 for use of the state land for 10 years instead of using the land for free. CO-CHAIRMAN GREEN said he heard that earlier, but wondered what the difference is between homesteads and homesites. MR. SWANSON replied a homesite is a subdivision lot which a person can get for free if they can prove up on it. A homestead is a 40 acre tract...the bigger ones. He added that homesites are very popular, particularly in Southeast. REPRESENTATIVE RAMONA BARNES clarified that homestead parcels go from 40-160 acres. MR. SWANSON said that is correct. He said homestead parcels are a minimum of 40 acres. He noted there are two different types of homestead parcels--agricultural and residential. He explained agricultural homestead parcels are 40-160 acres and residential homestead parcels are 20-40 acres. CO-CHAIRMAN GREEN clarified that Point McKenzie was a special situation since it was 640 acres. MR. SWANSON stated those were not homesteads but rather plain agricultural disposals. CO-CHAIRMAN GREEN noted HB 191 will be heard again on Wednesday, March 29. REPRESENTATIVE BARNES clarified that Point McKenzie was a different type of disposal. She thought there was a lottery involved and then there were specific improvements required which caused the failure of many of those farms. MR. SWANSON stated that was correct. He said the department required the successful applicant to come in with a development schedule and to then follow the development schedule which caused the failures. REPRESENTATIVE BARNES stated when the parcels in the Big Delta were developed in the late 1970s, one of the big problems which caused the failure of those parcels was the department only allowed the agricultural rights to those parcels of land. Therefore, the people could not go to banks to borrow money, they could not pass the land on to their heirs, and that is how the state got such a large investment into the Delta-Barley project. She recalled that the state had over $100 million in those parcels up in the Big Delta. MR. SWANSON agreed there was a substantial investment involved. ADJOURNMENT There being no further business to come before the House Resources Committee, Co-Chairman Green adjourned the meeting at 9:55 a.m.