Legislature(1999 - 2000)
02/29/2000 09:02 AM Senate FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 175
"An Act relating to state mining law, to methods of
locating mining claims, to the granting of larger
mining claims using a legal subdivision based on
rectangular survey descriptions, and to mandatory
rental payments for prospecting rights."
This was the first hearing for this bill in the Senate
Finance Committee.
JULIE LUCKY, Staff to the Senate Resources Committee, read a
statement into the record. She said the intent of the bill
was to streamline and make more efficient, Alaska's
procedures to locate and process mining claims. She spoke of
a backlog of sites waiting to be listed on the state land
status plats.
Ms. Lucky told the Committee that the Department of Natural
Resources had established an electronic format known as
Meridian, Township, Range, Section and Claim (MTRSC) that
would allow the department to electronically input
information regarding claims on the plats.
Ms. Lucky said the bill provides an incentive to use the
MTRSC format or convert existing claims to the new format.
She stated that the bill also clarifies the rental and labor
rates for the claims and establishes a rental rate for
prospecting sites where there was currently no rental rate.
She added the bill would reduce the time allowed for an
individual staking a claim or locating a prospecting site,
to record a certificate of location from 90 days to 45 days.
She stated the bill allows large claims, which would require
less fieldwork and less paperwork.
Ms. Lucky continued saying the bill would repeal a
limitation on the number of sites one could hold in a
township, increase the terms from one to two years and make
those terms non-extendable. She concluded that the bill
removes a requirement that claim lines be marked.
Senator Phillips expressed confusion on the fiscal note and
the statement that the industry would pay up to $150,000 for
the service.
BOB LOEFFLER, Director, Division of Mining, Land and Water,
Department of Natural Resources stated that the department
supported the bill because it would allow the program to
move into 21st century using automation and the Global
Positioning System (GPS).
Senator Phillips and Mr. Loeffler had dialog regarding the
contribution of the industry to this service and that half
of the money would be deposited to the permanent fund.
Senator Phillips requested that future fiscal notes reflect
any revenues that go into the permanent fund.
Mr. Loeffler stated that this legislation would make
operations more efficient to the state and even if the
fiscal note were not adopted, he hoped the bill would still
pass into law. He told the Committee that the department was
not providing the level of service to the mining industry
that it could be proud of. This bill, he said, would reduce
the processing time to three months. However, because the
industry willing to advocate $150,000 of new revenue to the
state, he thought it would be beneficial to capture those
funds to help decrease the processing time even further to
four to six weeks. He believed that time frame would provide
a level of service that would better secure land tenure for
the industry.
Senator Leman noted the $75,000 in the personal services
component of the fiscal note, and asked what that money
would buy. Mr. Loeffler replied that an additional staff
person would be hired. He also detailed the plan to fund
currently vacant and unfunded positions. He explained that
these were clerk positions with a low pay range that would
be charged with inputting data into the electronic system.
STEVE BORELL, Executive Director, Alaska Miners Association,
Inc. testified via teleconference from Anchorage in support
of the legislation. He referred to a letter to the Committee
from the Association. [Copy on file] In addition to the
letter, he commented that the bill was a result of several
years of work between the mining industry and the
department. He detailed the efforts of various committees
and described the representation of the involved parties.
Mr. Borrell stressed that the bill only changes the process
for locating claims and does not increase or decrease the
rights established by mining claims. He shared that the
catalysis behind the industry's interest in making changes
was the on-going budget challenge in terms of manpower and
time.
He believed the bill would simplify the process and reduce
errors and paperwork from the miner's standpoint partially
due to using GPS and also because of the larger allowed
claim size. He stated, "this is a win-win for everyone."
Co-Chair Torgerson asked what was different about a
prospecting site. Mr. Loeffler explained a prospecting site
does not require discovery, which a mining claim requires.
For this reason, he noted this bill takes away the ability
to extend prospecting sites beyond two years. He said this
was because the department wanted the miner to "put their
money into the ground to protect their discovery."
Co-Chair Torgerson then asked if the leasehold location and
mining discovery were the same. Mr. Loeffler explained that
the leasehold location is open to mining only after a lease
is obtained. Typically, he said the areas subject to leases
had additional stipulations because they were near
anadromous fish streams or other special circumstances.
Mr. Loeffler responded to Co-Chair Torgerson's next query
saying that prospecting sites are often staked by major
companies who were tying up ground for their exploration
program or simply for speculation. He reiterated that the
time limitations were included in the committee substitute
to ensure the company would develop the sites and therefore
generate royalties for the state.
Co-Chair Torgerson returned to the fiscal note and the
additional personnel, wanting to know if the bill would
still accomplish its goals without the additional staff. Mr.
Loeffler gave a background of the program saying that in the
early 1990's, the state had 3000 mining claims staked each
year, and that by 1995, 10,000 claims were staked. While
this has resulted in a mining boom, he pointed out that the
cost to process the claims has increased. He shared that
claims that used to take 3-4 weeks to process were now
taking 4-6 months. He warned that the workload would
continue to increase. With the inception of this
legislation, he predicted the processing time would be
reduced to 12 weeks in this fiscal year without the
additional funding and to only six weeks if the fiscal note
was adopted. He qualified that without the funds, the 12
weeks would increase to 14 weeks and then to 16 weeks, etc.
each year. The fully funding program would keep the
processing time to 11-12 weeks, according to Mr. Loeffler.
Co-Chair Torgerson how many of the 10,000 claims the
department processed were on state land. Mr. Loeffler
answered all claims.
Co-Chair Torgerson next asked how much of the $1 billion
generated came from state land. Mr. Loeffler replied that
all but the proceeds from the Red Dog mine and the Greens
Creek mine.
Co-Chair Torgerson pointed out that the mining revenues to
the state was only $1.2 million in 1998 and $1.6 in 1999.
Mr. Loeffler corrected and explained that in 1999, state and
local governments received $13 million from the mining
industry not including income tax.
Co-Chair Torgerson asked how much of the revenue was from
royalties. Mr. Loeffler replied that the state received
approximately $4 million for coal royalty and rents, hard
rock mining claim rent and mining license taxes, but that
only $16,000 in revenues were royalties from hard-rock
minerals, such as gold. He stated the reason was because
gold prices tumbled and the major producers were not making
money. He explained how the royalties were calculated from
the net profits. He stated that while Fort Knox was a boom
to the Fairbanks economy, the operation did not make much of
a profit. He added that in early part of a mine process,
there are many of write-offs, which also lower the net
profit. He said the net profit calculation method and the
exemptions were set by the legislature as a trade-off for
new jobs and higher production. He believed this trade-off
"was bearing fruit."
Mr. Borell interjected to agree with the Ft. Knox example
and to note that the site is located on mental health land.
He surmised that the Mining Incentive Act as described by
Mr. Loeffler had no impact on current revenues but has a
large impact on how the state is perceived for new
development. He also pointed out that there were few mines
in the state, only four mines have more than 100 employees
and that other mines were in bankruptcy because of the
adverse effects of gold prices.
Co-Chair Torgerson expected that the state would realize
increased royalties from the mining incentive credits
beginning in the next several years.
Co-Chair Torgerson stated that his biggest concern was news
reports that talk about the healthy mining industry in
Alaska but the state's revenue report shows the resources
almost given away.
Senator Leman asked for an explanation of the claims
processing and what could be done to streamline the process.
Mr. Loeffler explained that the department has begun to put
the status plats on-line, which informs others of areas
available for claims. He gave detail of the automation in
the platting process and how this bill would assist the
department in achieving more automation.
Senator Leman thought the process could be set up in "real
time" to automatically show the claim status. Mr. Loeffler
replied that was the hope and noted that 20 years ago, the
department employed 40 people to upkeep the status plats and
that there were only three or four people doing the same
amount of work.
Senator Adams stated that because the fiscal note reflected
a commitment of the mining industry, he hoped the fiscal
note would be adopted along with the bill.
Co-Chair Parnell offered a motion to move from Committee, SB
175, LS0955/G. There was no objection and the bill MOVED
FROM COMMITTEE.
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