Legislature(1997 - 1998)
05/05/1998 09:23 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL 340
"An Act relating to the University of Alaska and
university land, and authorizing the University of
Alaska to select additional state land."
RALPH BENNETT, STAFF, SENATOR ROBIN TAYLOR, stated that the
provisions of SB 340 would allow the University of Alaska
to select 250,000 acres of state land, subject to approval
by the legislature. Land approved for transfer would
include interest in minerals and oil and gas (subject to
certain limitations). He noted that land subject to a coal
lease or with a pending lease application would not
available for selection. The university would bear the cost
of selection, platting, surveying, and conveyance. All land
selections had to be made by December 31, 2012, and 20
percent of income derived from selected land had to be used
at the campus closest to the income-generating parcel or
parcels. All lands conveyed under the program would be
exempt from municipal taxation.
Mr. Bennett reported that SB 340 was compatible with
Senator Murkowski's SB 660, legislation pending in Congress
that would convey additional public lands to the University
of Alaska. The Alaska system was created under federal
authority as a land-grant institution to provide for the
higher-education requirements of Alaska's people in
perpetuity. Most colleges established under the land-grant
program were endowed with sizeable land bases from which to
generate income to be used for operating purposes. Unlike
most institutions in the Lower 48, the University of Alaska
did not have a large population base and proximity to other
beneficial support services. The University of Alaska also
suffered from a smaller pool of alumni and other normal
sources of endowment income, which many institutions relied
on to help support operations, especially subsidies for
teaching positions. In the past decade, several legislators
had introduced legislation allowing the university to
select additional lands from the state. The purpose of all
such legislation had been to provide more lands for the
university's state-wide system and to provide more income-
producing assets where monetary resources were more scarce
and unpredictable.
Mr. Bennett maintained that SB 340 would continue the
effort to give the university a larger and more productive
land-base. The bill would also provide clear expectations
that land conveyed be used for the development of value-
added industries where appropriate.
Mr. Bennett provided a sectional analysis of SB 340:
· Section 1: Findings and purposes section, including
that the University of Alaska should own income-
producing land to provide income for the support of
higher education.
· Section 2: Legislative intent language for the
university to encourage the development of in-state,
value-added industries in developing the land conveyed
to it.
· Section 3: Technical amendment, adding that the
provisions grant the Board of Regents the care,
control, and management of other university lands.
· Section 4: Technical amendment to account for the land
conveyed under the bill.
· Section 5: A major section adding new subsections
dealing with new land selections:
· Subsection 14.43.65: Would allow the university to
select 250,000 acres of state land. The list of land
proposed to be conveyed by the state would be
periodically submitted to the legislature; the
legislature could approve or disapprove the list.
The section would also set requirements for the land
that could be selected. Transfer of ownership of the
land to the university would include the interest of
the state in minerals and to oil and gas, but only
related to land selected at least five years after
the effective date of the bill. The subsection
describes the power of the state to manage the land
selected but not yet conveyed, and lists types of
land that could not be conveyed, including land the
conveyance of which was determined by the
Commissioner of the Department of Natural Resources
not to be in the best interests of the state. The
university would bear the cost of selecting,
platting, surveying, and conveying the land; the
state would pay costs of recording patents and
documents of interim conveyance. The university must
make all selections by December 31, 2012. Land would
revert to the state if the commissioner found the
university was not actively managing the land to
provide income on the tenth anniversary of the
conveyance.
· Subsection 14.43.66: Provides that the Board of
Regents must establish procedures substantially
similar to state procedures for mineral leasing on
the conveyed lands. The board must prepare an annual
plan for the management of the land and seek public
comment on the plan. At least 20 percent of the
income derived from the management of selected land
must be used at the campus closest to the land from
which the income was derived.
· Subsection 14.43.67: A new section in Section 5 that
would deal with confidential records; Mr. Bennett
noted that the section did not appear in the
committee's copy of the sectional.
· Subsection 14.43.67: Provides for land conveyed that
would be subject to certain types of agreements
(leases, claims, permits, and so on); the state
would be entitled to receive the income and the
management would be turned over to the university
only after the terms of the agreement expired.
· Subsection 14.43.69: Provides that before conveying
or disposing of interest in selected lands, the
university would be required to manage the land in a
manner that would permit customary and traditional
uses of resources to the maximum extent practical.
· Sections 6 and 7: A new section related to torte
immunity on unimproved land. He noted that the section
did not appear in the committee's sectional. Section 6
was a renumbered Section 7 and would provide an income
derived from the management of selected land in the
endowment trust fund.
· Section 8: Previously Section 7; exempts the
university lands from municipal taxation.
Senator Parnell referred to Section 6 related to torte
immunity for personal injury. He noted that the state
already had some immunity from certain actions on state
property. He asked whether the doctrine applied to the
university and university actions; if so, he questioned
making torte immunity for the university higher than the
immunity of state property in general.
WENDY REDMOND, EXECUTIVE VICE-PRESIDENT, UNIVERSITY
RELATIONS, UNIVERSITY OF ALASKA, answered that the language
in the bill was exactly the language used for state
immunity. She emphasized that the language was not the
university's preference, and was not the torte immunity
language that had been in the bill previously. She wanted
the previous language, which took the immunity to a
slightly higher level. The higher level was the result of a
previous section (14.43.69) requiring the continued
provision of customary and traditional use on all
university land until transferred to a third party; the
university felt it was important to have the higher level
of torte immunity.
Senator Parnell asked whether the level requested was the
same level as granted the state of Alaska on other
unimproved land. Ms. Redmond replied yes; she noted that
the Resources Committee had lifted the language directly
out of statute.
Co-chair Sharp asked whether there was a section dealing
with returning the land if it was not used appropriately.
Ms. Redmond replied that there were still a few sections of
the bill that were troubling to the university. One of the
sections had been referred to as the "use it or lose it"
clause, and was found on page 9, beginning on line 17 and
extending to page 10, line 9. The clause stipulated that
the university would have ten years to actively manage the
property for income or the land would revert to the state
of Alaska.
Co-chair Sharp stated concerns about another item (page 10,
lines 30 to 31 to page 11, lines 1 and 2). Ms. Redmond
agreed that the clause was even more troubling. The section
was new and stipulated that 20 percent of the income from
the management of the land had to go to the closest campus.
She detailed that currently, all of the income from the
land-grant trust went into the Natural Resources fund,
established in statute to generate income to support
resource development in Alaska. The fund was inflation-
proofed and the university spent the earnings through
grants; approximately $3.7 million had been given out in
the current year.
Ms. Redmond continued that the language would target money
to the campus closest to where the money was generated
regardless of need, in addition to diverting the money
before it got to the endowment. She did not think the
clause was in the best interest of the university and did
not accomplish what the trust fund was set up to do, which
was to support resource development in the state.
Senator Torgerson queried language that had previously been
suggested to address the issue. Ms. Redmond replied that
she had suggested broadening the language to use the money
within the region and linking it to the purpose of the
fund.
Senator Torgerson asked how she would define "region." Ms.
Redmond did not have the answer. She conjectured that it
would be broader than an election district.
Senator Torgerson believed Senator Taylor had intended to
work on the language. Mr. Bennett replied that a work draft
had been prepared dealing only with the 20-percent issue;
it did not address the problem of broadening the regions.
He had not been instructed to bring the changes before the
committee and did not have suggested changes.
CAROL CARROLL, DIRECTOR, DIVISION OF SUPPORT SERVICES,
DEPARTMENT OF NATURAL RESOURCES, wanted the committee to
have the department's opinion of the bill.
JANE ANGVIK, DIRECTOR, DIVISION OF LAND, DEPARTMENT OF
NATURAL RESOURCES (via teleconference), testified that the
department opposed the bill for seven reasons:
1. While the state owned a great deal of acreage, only a
very small amount of the land produced revenue. The
university would most likely select the most
productive land, which would remove it from state
management and decrease revenue to the general fund;
currently, 85 percent of all general-fund revenues
came from state-owned land.
2. It would be difficult to find 250,000 acres of
suitable state lands for the university to select. In
addition, there would be a large public outcry
resulting from the transfer of specific parcels. She
noted that the department had witnessed such a
response when it had tried to reconstruct the Mental
Health Trust.
3. It would be costly to transfer titles for the amount
of land; it could cost over $800,000 per year for ten
years to convey the amount of land to the university.
4. The municipalities would be in competition with the
university for the same land. The state currently owed
the municipalities over 600,000 acres under the
municipal-entitlement program. There were a limited
amount of revenue-generating lands that both the
municipalities and the university wanted. While the
legislation would protect existing selections, most
municipalities found it necessary to modify their
collections over time as their priorities changed and
land-ownership patterns evolved due to federal
conveyances to the state and to Alaska Native Claims
Settlement Act (ANCSA) corporations. Furthermore,
about one-half of Alaska was in unorganized boroughs.
When those areas organized, the state would have an
obligation to convey 10 percent of certain state lands
within the municipal boundaries, but much of the best
land might have already gone to the university.
5. Timber harvesting could be negatively impacted by the
bill. The university would most likely select the most
productive timber lands, reducing the state's timber
base used to calculate the sustained yield and
limiting the state's current efforts to establish
timber sales that supported local value-added
processing. As a trust, the university would manage
its lands for maximizing revenue, and therefore would
sell timber for export. She argued that the Department
of Natural Resource's ability to offer sales for local
value-added processing would be decreased if the
university selected timber lands.
6. The university would be exempt from most state land
laws adopted by the legislature to protect the public
interest. For example, Title 38 requirements for
public notice and the state's best-interest findings
process would not apply to the university lands. The
university forest operations were not subject to
public review for the forest land-use plan and five-
year schedule. Also, university land was not subject
multiple-use management requirements and the lands
would be exempt from conformance in CNR area plans.
7. The bill lacked a method by which to resolve
disagreements between DNR and the university regarding
what lands should be submitted to the legislature.
Without supervision, disagreements could result in no
land list being submitted or the state and university
could end up in costly litigation. She thought the
bill needed a provision to allow the governor to make
the final decision and submit the land list to the
legislature if there was disagreement between DNR and
the university. Senate Bill 340 would require DNR to
re-enter and re-convey title back to CNR if the
university was not managing lands to generate revenue.
She argued that the provision was unreasonable, since
most state land did not generate revenue. Furthermore,
enforcement would be costly and was likely to result
in litigation. The department recommended that the
provision be deleted.
Ms. Angvik referred to amendments that had been recommended
and conveyed to the committee through a May 1 letter. She
noted that the director of the Division of Mining, Land and
Water was available to answer questions about the effect of
the bill on mining in Alaska.
Senator Phillips reported that the members did not have the
letter with the proposed amendments. Ms. Angvik offered to
get a copy to the committee.
JULES CHARLESTON, DIRECTOR, DIVISION OF MINING, LAND AND
WATER, DEPARTMENT OF NATURAL RESOURCES (testified via
teleconference), stated that SB 340 (Version F) had
significant potential to damage the enthusiasm of mining
companies to invest in the mineral wealth of Alaska. He
reported that for the past two years, the mining industry
had created value totaling over $1 billion. He referred to
the "we are open for business" message from both the
governor and the legislature. He noted that DNR anticipated
about $1.7 million in direct revenue to the state treasury
during FY 99 from mineral rents, royalties, and application
and administrative fees from state-owned, locatable
minerals. The department projected a total of about 50,000
mineral properties and about 1,000 ownerships (mining
claims, mining leases, mill-site leases, prospecting sites,
and prospecting permits); about 1 million acres of state-
owned or state-collected land would be encumbered.
Mr. Charleston emphasized that the version as drafted would
create financial and legal uncertainties for the mining
industry similar to those experienced during the Mental
Health Trust lands litigation, which would not be resolved
until after 2012. He pointed out that the language in
Section 5 of the bill (dealing with minerals on state
properties) was difficult to understand; Sections
14.40.365(a)(3) and (4) appeared to exempt only certain
state lands associated with state oil, gas, and coal
leases. The language of Section (a)(4), line 5 on page 5
and lines 3 through 7 stipulated that the university could
select any of approximately 40,000 mining claims, as well
as any of about 5,000 prospecting sites (covering about
650,000 acres). He referred to another kind of prospecting
site that the state did not have at the present time, but
could in the future. The university could also select any
of approximately 100 mineral leases covering abut 100,000
acres, or any of five existing or pending mill-site leases.
In addition, the university could select any land that was
slated for both intensive and extensive mineral inventory
for the Division of Geological and Geophysical Surveys,
thereby excluding the public and the industry from a fair
chance to locate mining claims and prospecting sites under
existing Alaska laws covering mines and mining.
Mr. Charleston continued that Section 14.40.365(b)(1) on
page 5, lines 19 to 20 reaffirmed that state-owned coal,
ores, minerals, geothermal resources, and fossils would be
under the exclusive ownership and management of the
university for the sole benefit of the university. He
believed there would be substantive questions about who
must deal with whom for continued operation of new
development of mineral property (not in the Mental Health
Trust) to the extent that SB 340 authorized university
selection of mineral properties other than certain oil,
gas, and coal leases. He listed properties the version
would permit the university to select, including parts of
Fort Knox Mine, Golden Zone Mine, Red Dog Mine, True North
Mine at Fairbanks, and any of more than 200 small- or
medium-sized placer mines and claims.
Mr. Charleston argued that if SB 340 authorized the
selection of mineral properties including oil, gas, and
coal (which were not expressly excluded), the requirements
of Section 6(i) of the Alaska Statehood Act in its
reversionary provisions as well as revenues to the
permanent fund would raise substantial legal issues that
could further delay any mineral development on state land
that the university selected. He claimed the stigma that
influenced adverse investment by the mineral industry
during the Mental Health Trust litigation would be
reinstituted. In addition, there could be a handle for
litigation that was otherwise prudently and environmentally
responsible when there was opposition to some oil, gas, and
coal projects.
Mr. Charleston maintained that questions could be raised
about severing the surface from the sub-surface mineral
estate. In addition, there would be adverse impacts from
added costs resulting from fees the university would have
to charge in order to avoid relinquishment of the property,
even if minerals were not selectable by the university. The
fees could stop marginally economical projects and cause
delay for others waiting for better world-market
conditions; the end result could be the loss of local jobs
and otherwise prudent and timely economic development.
Mr. Charleston questioned whether meeting the proposed
requirements for timely economic development of university
lands could cause other economic uses such as the
subdivision for homes, commercial lodges, business sites,
or recreational cabins, which could then become non-
conforming land use that the mineral property development
had to buy. He feared there could be other additional costs
to an otherwise prudent development. The mineral lease
could last as long as 55 years; the average lease was
currently about 20 years. Mineral leases had a right for
renewal when other conditions were met. He asked what the
university would gain from selecting mineral properties if
the existing lease income continued to go to the general
treasury and permanent fund for the life of the mine.
Mr. Charleston noted that under Alaska mining law, mineral
property owners had the exclusive right for regular renewal
of property rights as long as they otherwise complied with
the law; under SB 340, he questioned the period the annual
rental fees would come to the general treasury. He
questioned whether the university could select the Red Dog
mine loading facilities on a DNR lease or select a small
tract across the new road to Fort Knox mine and then charge
a trespass fee and reduce income. He worried that there
could be charges against Fort Knox mine vehicles and reduce
income to the Mental Health Trust or to the Fairbanks North
Star Borough. He did not think the bill answered any of his
questions. He pointed out that unanswered questions in the
mineral industry automatically meant a delay.
Mr. Charleston concluded that SB 340 would send a strong
message to the mineral industry that until sometime after
the year 2012, state mineral property should be considered
as having significant investment risk because of
uncertainty about who the landlord would be, prospective
litigation over deposits to the general treasury and
permanent fund, and adverse impact similar to the Mental
Health Trust litigation. He strongly recommended that SB
340 be amended by the Senate Finance Committee to expressly
exclude selection of any state minerals: coals, ore,
minerals, and other materials, as well as oil and gas that
were presently in mining claims, mineral leases, mill-site
leases, or other mineral property rights under Alaska law,
the Alaska Statehood Act, and the Alaska Constitution. He
also recommended that land selected by the state for its
mineral value be excluded, whether encumbered or not, as
well as land that the legislature had authorized to the
Division of Geological and Geophysical Survey to conduct
mineral-related studies as a result of suspected mineral
potential.
SB 340 was SET ASIDE until later in the meeting.
SENATE BILL 340
"An Act relating to the University of Alaska and
university land, and authorizing the University of
Alaska to select additional state land."
Senator Torgerson MOVED Amendment 1:
Page 10, line 30, subsection (c):
Delete line 30 through 31, and lines 1 and 2 on the
top of page 11.
Insert new language:
Subject to appropriation of the income, the Board
of Regents shall have an amount up to 20 percent
of the income derived from the management of
university land selected under AS 14.43.65 for
the campus of the university that is located
closest to the land from which the income is
derived, if the borough or unified municipality
within which the campus is located agrees to
provide a match for the same amount to the
campus.
Senator Torgerson MOVED amendment 1 to Amendment 1:
Page 11, line 2
Delete the word "unified"
Senator Parnell OBJECTED. He asked for clarification
regarding the amendment to the amendment. He queried
whether the intent was to broaden the word municipalities
to include cities as well.
Senator Torgerson responded that the existing language
would not include home-rule, first-class, or second-class
cities. Deleting the word "unified" would open the
provision up to municipalities, including unified
municipalities.
Senator Parnell REMOVED his OBJECTION.
Senator Adams clarified that there was an Alaskan campus in
Barrow (Ilisagvik College) not related to the University of
Alaska. He queried the revenues that would be available to
the Barrow institution.
Senator Torgerson did not think SB 340 would apply to a
campus that was not attached to the University of Alaska.
There being no further objection, the Amendment 1 as
amended was ADOPTED.
Senator Torgerson MOVED Amendment 2:
Page 9, line 17 through page 10, line 9 Subsection
(m):
Delete in its entirety
Senator Adams OBJECTED. He asked whether the work would be
done (by the Department of Natural Resources) to issue the
documents necessary to convey the land.
Senator Torgerson believed the issue was covered. He wanted
to take out the parts related to land not developed in ten
years that would then revert back to the state. He thought
the land-selection process and the duties and
responsibilities of both the Board of Regents of the
University of Alaska and the Division of Land would remain
intact.
Senator Adams MAINTAINED his OBJECTION.
A roll call was taken on the amendment.
In favor: Parnell, Phillips, Torgerson, Sharp, Pearce
Against: Adams
Senator Donley was absent from the vote.
The motion FAILED (5/1). Amendment 2 was adopted.
Co-chair Sharp informed the committee that the Department
of Natural Resources (DNR) had just faxed several pages of
amendments. He believed the DNR amendments would be
addressed on the floor of the Senate.
Co-chair Sharp stated that he did not like the fiscal notes
attached to the bill. He referred to a $1.5 million
request; he did not know how it would be used.
Senator Pearce opined that the bill could not be reported
out with the fiscal notes. She believed the item could be
addressed in Conference Committee. She did not want to give
the university $1.5 million each year. In addition, DNR was
asked for another $800,000 in inter-agency receipts.
WENDY REDMOND, EXECUTIVE VICE-PRESIDENT, UNIVERSITY
RELATIONS, UNIVERSITY OF ALASKA, thought there might be an
error. She stated that the university fiscal note should be
university receipts and not general funds.
Co-chair Sharp noted that the fiscal note said general
funds, so there could be an error.
Ms. Redmond agreed that the item should be university
receipts. She added that the land development would be paid
from the proceeds from the fund.
Senator Pearce commented that the item was showing as
interagency receipts; it was expected that the university
would pay those. Ms. Redmond responded that there had been
agreements in past land bills about how interagency
receipts would be handled; the department would pay the
costs for surveying and platting, and would share the
conveyance cost. She offered to get a corrected fiscal note
for at least the university's portion to make sure it was
university receipts.
Senator Torgerson asked whether the department would be in
favor of university receipts to DNR. Ms. Redmond responded
that it would not be university receipts but would
appropriately show as interagency receipts if they received
some university receipts to handle the costs of the
platting.
Senator Torgerson asked whether the impact to the general
fund would be zero. Ms. Redmond answered in the
affirmative.
JANE ANGVIK, DIRECTOR, DIVISION OF LAND, DEPARTMENT OF
NATURAL RESOURCES (via teleconference), added that the
department's understanding of the DNR fiscal note was that
it was to be paid by the university for all costs
associated with the conveyance.
Senator Torgerson agreed.
Senator Pearce opined that there was still a problem, as
the budget would increase. The interagency receipt account
was general funds. She thought the issue could be worked on
in Conference Committee.
Co-chair Sharp asked for the fiscal note from the
university to be changed from a fund source of general
funds to university receipts. He wanted it to be clear on
the DNR fiscal note that the interagency receipts would be
from university receipts upon agreement and request from
the university for services desired. He noted that it would
not be dictated by DNR.
Ms. Angvik clarified that the University of Alaska would
pay all costs associated if the bill was adopted.
Co-chair Sharp agreed.
Senator Torgerson MOVED to REPORT CSSB 340(FIN) from
committee with individual recommendations and the attached
fiscal notes.
Senator Adams OBJECTED. He believed the bill was being set
up to be vetoed because it would appropriate resources of
the state that would hurt the economic development of the
state. He also believed the bill would hamper the process
of organizing for unorganized municipalities. He thought
the economic development and selection of non-oil-and-gas
properties would be hampered as well as mining and timber
harvesting. He asserted that the bill would create an
exemption from most state law. He noted past allowance of
Mental Health Trust selection of lands. He did not think
the selection would be known with the University of Alaska.
He argued that the bill would set bad public policy.
A roll call was taken on the motion.
In favor: Torgerson, Parnell, Phillips, Sharp, Pearce
Against: Adams
Senator Donley was absent from the vote.
The motion PASSED (5/1).
CSSB 340(FIN) was REPORTED out of committee with "no
recommendation" and attached fiscal notes by the Department
of Natural Resources and the University of Alaska.
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