Legislature(2017 - 2018)BUTROVICH 205
02/09/2018 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| SB86 | |
| SB166 | |
| Overview: Arctic Strategic Transportation & Resources Project (astar) | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 86 | TELECONFERENCED | |
| *+ | SB 166 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
SB 166-MINING: CLAIMS;RIGHTS;RENTAL RATES;LABOR
3:56:04 PM
CHAIR GIESSEL announced consideration of SB 166 relating to
mining statements of labor. This bill is from the administration
and it is being managed by the Department of Natural Resources
(DNR). This committee held an informational hearing on the
subject of the mining claim process on January 22, 2018.
ED KING, Special Assistant to the Commissioner, Department of
Natural Resources (DNR), Juneau, Alaska, introduced himself and
said the deputy commissioner would start with opening remarks.
HEIDI HANSEN, Deputy Commissioner, Department of Natural
Resources (DNR), Juneau, Alaska, said SB 166 is an attempt to
help the mining community solve an increasingly prevalent
problem of the unintentional abandonment of mining claims. This
bill provides one option to begin the dialogue, but the
department is happy to work with the committee and the public to
find a best outcome for all the parties involved.
She noted that a mining claim is structurally different than a
lease agreement. A mining claim is a self-initiated right, which
is perpetuated by the miner's actions. Failure to meet the legal
requirements to maintain a claim results in the automatic
termination of the claim by operation of law not by departmental
action. The department has little discretionary authority under
the current statute to "forgive" errors on affidavits or failure
to pay rent. The rights, themselves, and the preservation of
those rights fall to the claimant.
She explained that over the last few years, the department has
received numerous complaints that the current statutory
requirements are too rigid and punitive, and they agree in many
regards. The department is looking for a solution that will
decrease rather than increase DNR's administrative burden in the
face of budget cuts and staff reductions.
3:58:29 PM
MS. HANSEN said the labor requirement for a mining claim is
minimal, but the reality is that the holder of the mining claim
is very likely to want to work their claim to generate value
from their exclusive right to the locatable minerals. A legal
requirement to do that work is not necessary. Meanwhile the
requirement to pay rents already provides an additional economic
incentive to do that same work.
As the options to address this issue were evaluated, it became
clear that a simple fix was not available. A waiver system was
considered but administering it would require additional staff.
A grace period was contemplated along with a required
notification but that, too, would put an increased burden on
staff, and as did other alternatives.
The department came up with the idea of repealing the annual
labor requirement as a win/win way to improve miners' tenure
security without increasing departmental workload and SB 166
begins the dialogue.
MR. KING said they had received a lot of feedback since the bill
was introduced and are preparing a frequently asked questions
(FAQ) to supplement the materials early next week.
4:00:40 PM
Section 1 is a conforming change since the annual labor
requirement is being removed throughout the statute.
Sections 2 and 3 surround the idea of a "bonafide miner" that
they are recommending as a new term in state statutes.
Basically, someone that is taking the exclusive rights to the
state's resources should have a responsibility to develop those
resources. In many ways the annual labor requirement was
ensuring that work was happening, and the department wanted to
be very clear that their intention is that a holder of a mining
claim still has that obligation to develop those resources. They
think that all the miners who are out there doing their annual
labor today by their actions have already demonstrated that they
are bonafide miners. This language is not an intent to take away
anyone's claims. Even without this language, the department
believes it is implied. The bonafide miner in section 2 is added
to the qualifications to hold a mining claim in good faith.
4:02:25 PM
SENATOR WIELECHOWSKI asked the definition of "bonafide miner."
MR. KING replied that the definition is added in section 3
subsection (d) as follows:
An entity or person who seeks to acquire, acquires, or
holds exploration or mining rights under AS 38.05.185
- AS 38.05.275 in good faith for the purpose of
mineral exploration and development and not for the
prevention of mineral exploration and development.
SENATOR WIELECHOWSKI asked if he sees a lot of instances of
people acquiring land not for the purpose of mineral exploration
or development.
MR. KING replied they don't go through that exercise now but
that doesn't mean people aren't doing it. What they are trying
to make clear through this legislation is that they don't want
to open up a new way for someone to get this new opportunity to
withhold minerals from development.
SENATOR WIELECHOWSKI asked him to cite some examples of lands
where people are holding exploration or mining rights for the
prevention of mineral exploration or development.
MS. HANSEN replied more to the point, they are trying to
encourage the development of mineral exploration and production.
SENATOR WIELECHOWSKI said he took that as a no.
MR. KING said that was correct. In removing the annual labor
requirement, they don't want to create an opportunity for
someone to get those exclusive rights and deny them indefinitely
to someone who wants to develop them.
4:05:01 PM
CHAIR GIESSEL remarked that the annual labor report is kind of
like a plan of development for an oil lease by documenting that
work was done. But if that requirement is to be removed, they
want to make sure something is in place that says some work
still has to be done even though the department is not asking
for the written document.
MR. KING replied that is their expectation.
4:06:02 PM
MR. KING said section 3 (c) of AS 38.05.090 adds a new
subsection intended to address how the department will
administer this bonafide miner requirement. He elaborated that
in applying for a lease, the applicant would have to submit an
affidavit that says they are intending to work that claim. A
mining claim doesn't have that requirement, because a miner has
self-initiated rights: it is assumed that they are bonafide
unless the department asks for verification, which can be in the
form of a recorded sworn statement.
SENATOR WIELECHOWSKI asked if it is correct that under current
law, someone has to provide an affidavit that they are doing the
work on the property.
MR. KING answered yes.
SENATOR WIELECHOWSKI remarked that they are changing that now so
that someone doesn't have to do the work, and he asked if they
think that is going to encourage more mining.
MR. KING replied the issue is that these unintended abandonments
create a lot of uncertainty about whether a claim is still under
claim. If that can be clarified, they believe it would encourage
more investment. The economic incentives themselves will drive
that investment.
SENATOR WIELECHOWSKI asked how much the annual labor costs.
MR. KING said the labor requirement amounts to $100 per year.
SENATOR WIELECHOWSKI asked if he had thought about extending the
time someone has to actually perform labor on their property
from one to two years. He added that he just didn't see how this
encourages people to do more.
MR. KING said he saw his point, but the purpose of this bill
isn't to encourage more development. It's to secure a miner's
tenure and to take away that uncertainty that they might be
working a claim that has been invalidated and that someone else
can take away from them (by going out and staking that claim).
He pointed out that $100 per year labor is required, but more
labor above that rolls forward into the next year(s) - a miner
don't have to be out there every year. And if a miner can't get
out to his claim and actually perform the labor, he can just
send a check for $100.
The current environment isn't doing anything to necessarily
encourage that investment. It's the miners' actions and their
motivation for economic gain that is generating this resource
development. That isn't being taken away, but the department is
trying to help secure that tenure to make them very comfortable
to continue investing.
4:10:03 PM
SENATOR BISHOP asked if the $100 is for a one-quarter quarter
section claim and commented that adding quarter sections gets
expensive really quick.
CHAIR GIESSEL said she was trying to interpret the problem this
legislation is trying to solve and thought it was the question
of top-filing. Someone else seeing an unintentional error in an
annual filing, top-files on a miner and he loses that claim. DNR
is trying to fix that problem by removing the requirement for
that paperwork. Is that close to what they are doing?
MR. KING clarified when that erroneous affidavit is recorded,
the abandonment already occurred. It's not the action of someone
else staking over that claim that invalidates the previous
claim, and it's not a notification from the department that
abandons that claim either. The claimant's actions making that
error is what abandoned that claim.
CHAIR GIESSEL said she was trying to drill down to the
motivation and asked if there is no grace period or notification
of the mistake, and are they trying to fix that, too.
MR. KING said that was correct. Under current statute the
department doesn't have any leeway to forgive an error. It's not
a decision that the department makes and therefore, it's not a
decision they can rescind.
If the requirement for annual labor and the recording of the
annual labor affidavits is removed, the problem goes away. If
they don't want to go that far, they could consider a grace
period. However, in doing that, one of the goals they had in
providing this legislation was not to increase the state budget
and they are worried that a grace period would create more work
for the department.
4:13:43 PM
SENATOR VON IMHOF asked if a 60-day grace period could alleviate
some of Senator Wielechowski's concerns. She asked how many
errors were made in the past and how much staff time a grace
period would take.
MR. KING responded because the abandonment actually occurs when
the error occurs, the error may have happened 10 years ago. In
that case, a 60-day grace period would have also expired. So,
unless the grace period is attached to a notification that the
abandonment has occurred, there would be no opportunity to cure
it, but then the department has to provide the staff to do that.
SENATOR VON IMHOF said she thought paperwork is required
annually and therefore, it should be caught before 10 years.
MR. KING indicated no.
SENATOR WIELECHOWSKI asked how someone could have abandoned
their claim 10 years ago and still be paying the annual fee for
the same claim. He asked how many mining claims there are each
year and how many are abandoned.
MR. KING answered there are about 35,000 mining claims today and
about 5-10 percent per year are known to be abandoned, but he
would get better figures for him.
SENATOR WIELECHOWSKI asked if people are checking the records
and taking over a claim.
4:16:38 PM
MR. KING answered yes, people are finding mistakes on
affidavits, over-staking those claims, and accusing the senior
claimant of being in default or having abandoned their claim and
claiming ownership of it. He corrected that his earlier estimate
was for "known" abandonments. It's possible other errors haven't
been detected. It creates a property rights issue that needs to
be settled in civil court ultimately, because when these issues
have been brought to the department's attention, it doesn't have
any tools to do anything about it.
MS. HANSEN added that a number of people have expressed concern
to DNR that when they believe that their claims are abandoned,
they have to go back and re-stake them, and depending on the
number of claims, that could cost a lot, as well. So, this is
not only curing the problem that Mr. King just mentioned, but it
also cures this re-staking issue.
MR. KING said he was sure some of the committee members had
heard about this from their constituents.
CHAIR GIESSEL said, yes, many.
SENATOR VON IMHOF said she was eager to get his FAQs and asked
him to put them in layman's terms and start with what concerns
they are trying to address, what they are proposing to do and
what the consequences are.
MS. HANSEN said she would be happy to do that.
4:19:19 PM
SENATOR BISHOP said he would provide a little historical
perspective on why this discussion is taking place: his office
has files from people who have been on a staked claim for 10
years and through an error on recording the affidavit of annual
labor they were sent an abandonment notice. In the meantime,
someone top-filed over them. So, after 10 years' worth of effort
and one mistake, it's gone. The top-filer now has the ground.
That is just one example but there are more. Hopefully, a
solution can be found, because he thinks this is wrong.
4:21:24 PM
MR. KING said if there is a problem with the definition of
"bonafide miner" in sections 2 and 3 the rest of the bill can
survive without those provisions.
Section 4 is a conforming change and removes the reference to
"annual labor" elsewhere in statute. Section 5 is the increase
in the annual rental payment.
The fiscal analysis for SB 166 indicates that repealing the
annual labor requirement would result in an annual loss of
$584,000 to the state. Currently there are 21,000 quarter claims
(each claim has four 40-acre claims within them), which
calculates into a total of 85,000 40-acre claims. There are
57,975 acres under lease; if each of those leases were converted
to 40-acre claims that would result in 1,449 equivalent claims.
Then they have 13,294 actual 40-acre claims; for a total of just
under 100,000 40-acre equivalent claims.
4:26:52 PM
The rental amount goes from $20 to $50 on page 3, line 29, of
the bill. It looks like it's more than double. But he pointed
out that $20 was put in place in 1989 and adjusted for inflation
every 10 years. So, today, miners pay $35 (for that same zero to
five-year old 40-acre claim). The last time this number was
adjusted for inflation was 2009, so next year it will be
adjusted again. Applying that inflation adjustment today brings
one to the numbers on the fifth line of that box on the third
page of the fiscal analysis. If this bill were not to pass, the
miners would be paying $40, $85, and $200. The correct way to
look at the rental increase in this bill is to compare it to
that baseline.
4:28:07 PM
SENATOR BISHOP asked if the 10-year consumer price index (CPI)
increment in the statute is still at the discretion of the
commissioner.
MR. KING replied yes; the fee schedule is updated every 10 years
by regulation: so, to the extent that the commissioner has the
authority to implement a regulation.
SENATOR BISHOP said that could be in the FAQ sheet at the
chair's prerogative.
CHAIR GIESSEL indicated that would be fine.
SENATOR WIELECHOWSKI asked if this bill affects claims on
federal property.
MR. KING replied that they talked to the Bureau of Land
Management (BLM) to make sure what this measure doesn't affect
federal claims. There are state requirements that do govern
federal claims, but a federal claim must also follow federal
law, and that is what state law says. The department thought it
made sense because they were removing the annual labor
requirement from state law that it got removed everywhere. If
that creates a problem, there is no requirement that the Title
27 references to annual labor should be repealed.
4:29:47 PM
SENATOR WIELECHOWSKI asked what the federal requirements are to
establish and keep a mining claim.
MR. KING replied that the federal law is still the General
Mining Act of 1872, and it requires just an annual work
assessment that is also $100 for 40 acres.
SENATOR WIELECHOWSKI asked if the state system is identical to
the federal system currently.
MR. KING replied prior to 1989 it was; Alaska adopted the
federal law and the federal system at statehood. However, in
1989, the Supreme Court ruled against the state and started
requiring that the state also impose annual rental and royalty
payments, which don't exist for federal claims. The debate was
always if Alaska wants a location system like the federal
government or a leasing system that requires rents and
royalties, and right now, we have both. So, they are suggesting
removing that annual labor requirement that is really kind of
unnecessary.
4:31:08 PM
MR. KING said they have received many questions about section 5
and he hoped his answer is adequate. He would be happy to
discuss the fiscal note with the committee at any time.
He said section 6 is the inflation adjustment, and because the
rental payments are being adjusted, it makes sense to inflation-
adjust the statutory requirements into today's dollars. So,
section 6 rebases the inflation index to the 2018 timeframe
instead of the 1989 timeframe in the original rental
requirements.
Section 7 maintains definitions that would otherwise be lost
through repeal and those are found in the annual labor chapter,
AS 38.05.242. Because most of those definitions are related to
things associated with annual labor the only surviving
definition that needs to be maintained is the meridian,
township, range section claim (MTRSC). So, that section is
pulled out of section .242 and moved into section .211.
Section 8 is a conforming change that removes the repealed
statutes from the abandonment provision in AS 38.05.065.
Section 9 is a new subsection (c) that is added to the
abandonment section. It is intended to help existing errors on
affidavits that are in existing files. Because the department
doesn't have the discretion to grant them immunity, they were
trying to figure out the best way to allow those cures to occur
and decided to waive the penalty associated with curing those
abandoned claims. He explained that section .265 already allows
one to cure an abandoned claim that is the result of an error in
an essential fact, but it requires paying a penalty.
SENATOR BISHOP asked the timeline on that.
MR. KING replied that no time is defined in statute to cure an
abandonment. It is indefinite. He added that the only caveat is
that the cure provision doesn't apply whenever there is a
competing interest. If two people assert their rights to a claim
the cure can't happen and it must be litigated before going
forward.
4:36:03 PM
Section 10 repeals the annual labor requirement.
Section 11 is transition language that was inserted to clarify
what happens when annual labor is removed in the middle of an
annual labor year. It creates transition language to go along
with an effective date of September 1.
SENATOR WIELECHOWSKI asked if section 10 repeals a number of
statues that are conforming changes.
MR. KING answered yes. It is the annual labor requirement and
all the statutes surrounding the enforcement of it.
He said section 12 clarifies the timing in which the
commissioner can calculate the changes of rentals in each year.
It clarifies that the next inflation adjustment will happen in
the year 2028.
Section 13 authorizes the department to adopt regulations and
implement changes that are made by this act.
Section 14 authorizes the department to amend existing leases to
conform with statutory changes in this bill. The reason that is
important is because a lease, unlike a claim, is an actual
contract and has contract terms, and the legislature can't just
strike a term of a contract. This language allows the department
to take those terms out of the lease to conform with the
statutory changes this bill would be making.
Section 15 provides for an immediate effective date for section
13, and section 16 provides for the effective date of September
2 for first day of the next annual labor year. That concluded
the provisions in SB 166.
CHAIR GIESSEL thanked him and finding no further questions, held
SB 166 in committee.