01/28/2014 08:00 AM House COMMUNITY & REGIONAL AFFAIRS

         HB 181-MINING LICENSE REVENUE; REVENUE SHARING                                                                     
                                                                                                                                
9:48:08 AM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX announced that the  final order of business would                                                               
be HOUSE  BILL NO. 181,  "An Act  relating to the  accounting for                                                               
money received by  the state from the mining  license tax, mining                                                               
lease  payments, and  royalties  from mining  on  state tide  and                                                               
submerged land  seaward of a  municipality, and  the availability                                                               
of  that   money  for  appropriation  to   certain  boroughs  and                                                               
municipalities outside of a borough."   [Before the committee was                                                               
CSHB  181,  Version  28-LS0649\U, Bullock,  3/25/13,  adopted  on                                                               
April 9, 2013.]                                                                                                                 
                                                                                                                                
9:48:59 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FOSTER, speaking  as the sponsor of  HB 181, began                                                               
by  thanking the  committee  for visiting  Nome  this interim  to                                                               
observe firsthand what  is occurring with mining  and the gateway                                                               
to the Arctic.  He then provided the following testimony:                                                                       
                                                                                                                                
     In 2011  the Department of Natural  Resources conducted                                                                    
     an offshore mineral  lease sale off the  coast of Nome.                                                                    
     The sale prompted a spike  in demand for docking at the                                                                    
     Nome harbor  and it was  space the harbor  doesn't have                                                                    
     and  can't afford  to build.    In the  year after  the                                                                    
     mineral  lease sale,  dockings went  from  271 to  436.                                                                    
     While the  state received revenue from  this, there was                                                                    
     no   framework  to   help  the   city   with  the   new                                                                    
     infrastructure  that was  needed and  so ...  this bill                                                                    
     would help to provide that framework.                                                                                      
                                                                                                                                
9:50:39 AM                                                                                                                    
                                                                                                                                
PAUL   LABOLLE,  Staff,   Representative  Foster,   Alaska  State                                                               
Legislature,  added   that  Nome  finds  itself   in  the  unique                                                               
situation  of having  mining operations  on  municipal land  that                                                               
would normally  be subject to  property tax.  However,  since the                                                               
land is  out at sea, the  city can't avail itself  of that option                                                               
and  HB 181  provides another  angle  from which  to address  the                                                               
matter.  He then informed the  committee of the drafting error on                                                               
page 2,  line 20,  where the  term "gross"  needs to  be replaced                                                               
with "net".                                                                                                                     
                                                                                                                                
9:52:52 AM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK  moved that the  committee adopt Amendment  1, as                                                               
follows:                                                                                                                        
                                                                                                                                
     Page 2, line 20;                                                                                                           
          Delete "gross"                                                                                                        
          Insert "net"                                                                                                          
                                                                                                                                
                                                                                                                                
There being no objection, Amendment 1 was adopted.                                                                              
                                                                                                                                
9:53:17 AM                                                                                                                    
                                                                                                                                
MR.  LABOLLE  then  explained  that  the  Department  of  Natural                                                               
Resources (DNR)  pointed out that  Section 1 of Version  U refers                                                               
to  "AS  38.05.135",  which  is the  leasing,  royalty,  and  net                                                               
profits  share payments  and interest.    However, the  authority                                                               
used  for the  lease sales  in Nome  was based  on AS  38.05.250,                                                               
which is  the prospecting, permits,  and leases on  tidelands and                                                               
submerged  lands.    Therefore,   those  references  need  to  be                                                               
changed.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  FOSTER  characterized  the  change  in  statutory                                                               
references as housekeeping.                                                                                                     
                                                                                                                                
9:55:29 AM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK  moved that the  committee adopt Amendment  2, as                                                               
follows:                                                                                                                        
                                                                                                                                
     Page 1, lines 6 and 9                                                                                                      
          Delete "38.05.135"                                                                                                    
          Insert "38.05.250"                                                                                                    
                                                                                                                                
     Page 1, line 10                                                                                                            
          Delete "38.05.160 and "38.05.142"                                                                                     
                                                                                                                                
9:56:45 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DRUMMOND pointed  out that  on page  1, line  10,                                                               
there is no reference to "38.05.142".                                                                                           
                                                                                                                                
MR.  LABOLLE  acknowledged  the   mistake  and  stated  that  the                                                               
deletion should be to "38.05.181".                                                                                              
                                                                                                                                
9:58:19 AM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK withdrew his motion.                                                                                            
                                                                                                                                
9:58:25 AM                                                                                                                    
                                                                                                                                
BRENT  GOODRUM, Director,  Division  of Mining,  Land and  Water,                                                               
Department  of   Natural  Resources,  confirmed  that   with  the                                                               
correction to  Amendment 2  to refer  to "38.05.181"  Amendment 2                                                               
would be correct.                                                                                                               
                                                                                                                                
9:58:45 AM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK moved that the  committee adopt Amendment 2 [with                                                               
handwritten changes], as follows:                                                                                               
                                                                                                                                
     Page 1, lines 6 and 9                                                                                                      
          Delete "38.05.135"                                                                                                    
          Insert "38.05.250"                                                                                                    
                                                                                                                                
     Page 1, line 10                                                                                                            
          Delete ""38.05.160" and "38.05.181"                                                                                   
                                                                                                                                
There being no objection, Amendment 2 was adopted.                                                                              
                                                                                                                                
9:59:15 AM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX opened public testimony.                                                                                        
                                                                                                                                
9:59:59 AM                                                                                                                    
                                                                                                                                
JOY BAKER, Port Project Manager,  City of Nome, read Mayor Denise                                                               
Michaels' letter in support of HB 181 as follows:                                                                               
                                                                                                                                
     With  the recent  sustained  high  prices for  precious                                                                    
     metal  and  the State  of  Alaska  DNR sponsored  lease                                                                    
     sale, Nome  has experienced  an influx of  offshore and                                                                    
     placer miners.  These  miners have provided an economic                                                                    
     boost to local merchants and  the local economy, but at                                                                    
     that  same  time has  adversely  impacted  some of  the                                                                    
     city's  services to  the community.    Even though  the                                                                    
     City of Nome normally  funds services with (indisc.) of                                                                    
     revenue sources  like property  or sales  tax, revenues                                                                    
     to cover  the cost of an  additionally $60,000 annually                                                                    
     for  staffing associated  with the  seasonal influx  of                                                                    
     miners is  not sufficient.   In  addition, the  City of                                                                    
     Nome has expended  $302,000 for the growth  of our port                                                                    
     facility and  to expand facilities to  support the gold                                                                    
     dredging  fleet.   Similar effects  are experienced  in                                                                    
     other  communities  from  the seasonal  nature  of  the                                                                    
     fishing industry  on coastal communities.   A potential                                                                    
     solution to a  portion of the revenue  shortfall may be                                                                    
     possible with  the reallocation of the  State of Alaska                                                                    
     mining license  tax.   This tax  applies to  all mining                                                                    
     operations   regardless  of   land  status,   size,  or                                                                    
     location.  Presently, there is  no uniform mechanism to                                                                    
     allocate  portions   of  the  revenue  back   into  the                                                                    
     communities  impacted  by   the  resource  development.                                                                    
     Such  a  revenue  sharing model  is  effective  in  the                                                                    
     Alaska fishing industry and a  similar program has been                                                                    
     successful  in revenue  sharing  from the  oil and  gas                                                                    
     industry in  the Gulf of  Mexico.  Sharing  portions of                                                                    
     state  revenue  from  mining  developments  with  local                                                                    
     communities in  a predictable  fashion will  reduce the                                                                    
     need  for   local  governments  to  impose   their  own                                                                    
     targeted  taxes   on  the  industry  and   allow  local                                                                    
     communities to provide services  to all entities in the                                                                    
     community.                                                                                                                 
                                                                                                                                
10:02:48 AM                                                                                                                   
                                                                                                                                
MS.  BAKER  then provided  her  own  comments relating  that  the                                                               
demand  for the  offshore dredging  fleet increases  each season.                                                               
The  aforementioned  increases  costs  of  labor,  management  of                                                               
overcrowding,  and design  and study  engineering to  accommodate                                                               
the  increased vessel  space demands.   During  the 2013  season,                                                               
there  were  two  vessel  fires   that  required  volunteer  fire                                                               
response.  One  of the vessels was located 50  feet away from the                                                               
shore, which limited the shore-side  response and highlighted the                                                               
need  for   a  vessel  with   firefighting  capabilities.     She                                                               
characterized   the  management   of   this   growing  fleet   as                                                               
challenging to the  City of Nome.  Ms. Baker  related her support                                                               
for HB 181.                                                                                                                     
                                                                                                                                
10:03:59 AM                                                                                                                   
                                                                                                                                
CO-CHAIR LEDOUX, upon determining no  one else wished to testify,                                                               
closed public testimony.                                                                                                        
                                                                                                                                
10:04:11 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  FOSTER reiterated  that currently  50 percent  of                                                               
the funds from the mining tax  revenue goes to the permanent fund                                                               
and that  will continue under HB  181.  However, under  HB 181 up                                                               
to half  of the other  50 percent that  goes to the  general fund                                                               
would be allocated  to impacted communities at  the discretion of                                                               
the legislature.   Although  the legislature  can already  do the                                                               
aforementioned, this  legislation would correlate the  impacts of                                                               
the  state's leasing  activities for  offshore mining  to cities'                                                               
resources.                                                                                                                      
                                                                                                                                
10:05:19 AM                                                                                                                   
                                                                                                                                
CO-CHAIR NAGEAK  moved to report  CSHB 181,  Version 28-LS0649\U,                                                               
Bullock, 3/25/13,  as amended, out  of committee  with individual                                                               
recommendations and  the accompanying  fiscal note.   There being                                                               
no  objection,   CSHB  181(CRA)  was  reported   from  the  House                                                               
Community and Regional Affairs Standing Committee.