Legislature(2013 - 2014)NOME
07/20/2013 09:30 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB181 | |
| HB166 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| = | HB 181 | ||
| = | HB 166 | ||
HB 181-MINING LICENSE REVENUE; REVENUE SHARING
9:35:55 AM
CO-CHAIR NAGEAK announced that the first 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."
9:36:18 AM
REPRESENTATIVE FOSTER, speaking as the sponsor of HB 181,
thanked the committee for visiting Nome. The visit, he
remarked, is an opportunity to see rural Alaska, the Nome port
and inner harbor, and the strategic location of Nome as it's the
gateway to the Arctic.
9:37:49 AM
PAUL LABOLLE, Staff, Representative Foster, Alaska State
Legislature, speaking on behalf of Representative Foster,
sponsor, explained that HB 181 redistributes the minerals mining
tax and offshore lease sales on mineral mining. The current
version of HB 181 is targeted as it only applies to offshore
lease sales located within municipal boundaries. Nome, he
highlighted, is somewhat of a special case since the city
property corners stretch out approximately 1.2 miles into the
sea. The distribution method for the revenue stream from the
lease sale and mineral mining tax would be split in half as is
currently the case. Therefore, half of the revenue would be
deposited into the permanent fund and half into the general fund
(GF). Of the half deposited into the GF, half would be split
again and separately accounted for such that the funds would
still be in the GF but be part of a separate account that could
be a revenue stream to share with affected communities upon
request of the commissioner.
9:39:25 AM
REPRESENTATIVE FOSTER noted that the committee packet includes
maps depicting the municipal boundaries in the ocean and the
lease sale tracts, some of which are overlapping. He noted that
state lease sales have resulted in an increase in traffic [in
the area].
9:40:10 AM
CO-CHAIR NAGEAK opened the public hearing for HB 181.
9:40:25 AM
DENISE MICHELS, Mayor, City of Nome, thanked the committee for
visiting Nome as it provides members a better understanding of
the situation. She then related that the City of Nome supports
HB 181. Mayor Michels then informed the committee that [this
year] the City of Nome has faced an increase in staffing that
cost about $60,000 and the growth of the Nome port facilities
has cost approximately $302,000 to support the gold dredging
fleet. She thanked Commissioner Sullivan for providing a part-
time seasonal position for the Department of Natural Resources
(DNR) in Nome to help with permitting application issues and
other issues the dredges might have in the water. The proposed
revenue sharing would allow the City of Nome the additional
resources necessary to construct the infrastructure to support
the dredging industry. More floats, another barge ramp, and
transient housing are necessary. Mayor Michels provided the
committee with a PowerPoint presentation that includes the data.
She then highlighted that Nome city staff has had to deal with
oil spills as there is no Department of Environmental
Conservation (DEC) staff in the community. In fact, last year
the city had to ship out four totes of contaminated absorbent
pad as well as other materials used in the burners. Therefore,
additional support from DEC, particularly for enforcement, would
be greatly appreciated, she relayed.
9:42:57 AM
MAYOR MICHELS, in response to Co-Chair LeDoux, clarified that
there is no DEC staff in Nome to address oil spills. For the
summer, a lot of petroleum, hydraulics, and fuel are used to
power the dredging industry and sometimes there are spills in
the inner harbor. Currently, Nome harbor staff addresses these
issues, although last year DEC staff came to Nome twice to
perform water quality and turbidity samples.
9:44:01 AM
JOY BAKER, Harbormaster, City of Nome, informed the committee
that there have been numerous reports of offshore spills, which
typically are unnoticed because the currents move them down the
coast. Therefore, it's difficult to determine the source of
such offshore spills. The harbor staff does try to respond to
everything that occurs in the harbor and reports are always
filed with the National Response Center (NRC), which sends a
report immediately to DEC and the U.S. Coast Guard. If the
spill is large enough, they come to town otherwise they follow-
up, identify the responsible party if possible, and report to
that person to work on the problem. Ms. Baker characterized it
as an ongoing and growing problem because of the fast growth of
the fleet in a short time. She said that a full-time position
could be hired to just deal with the aforementioned. In
response to Co-Chair Nageak, Ms. Baker confirmed that all the
cost is absorbed by the city.
9:45:28 AM
REPRESENTATIVE REINBOLD, recalling a discussion she had with a
dredger, related her understanding that there is "green"
hydraulic fluid that's much safer for the environment.
MS. BAKER confirmed that some dredgers are using the "green"
hydraulic fluid. Frequently, fuel is spilled.
MAYOR MICHELS then informed the committee that last year 74
permits were approved while this year 204 permits were approved.
The growth, she noted, is related to the price of gold.
9:46:28 AM
REPRESENTATIVE DRUMMOND inquired as to whether the reports filed
with NRC are filed by the harbor staff.
MS. BAKER answered that typically that's the case. However,
periodically the larger operators will call the U.S. Coast
Guard. If the harbor staff discovers that a report has not been
filed, it will do so.
9:47:12 AM
REPRESENTATIVE HERRON inquired as to Commissioner Hartig's
response to the need for department staff in Nome.
MS. BAKER answered that for enforcement one has to have the
training and the background required for oil spill containment
and reporting. Commissioner Hartig is aware of the issue and
with his limited staff he has provided DEC staff visits to Nome
a couple of times in the summer.
REPRESENTATIVE HERRON suggested the committee write a letter to
the DEC Finance subcommittee chair encouraging a reallocation of
the resources within the state such that this emerging industry
becomes a priority for the state.
9:49:07 AM
REPRESENTATIVE HERRON asked whether the City of Nome is impacted
by other state [mining] leases in the area.
MAYOR MICHELS acknowledged that there is mining activity on land
in Nome, but it's regulated differently than ocean leases for
mining. In further response to Representative Herron, Mayor
Michels said the [city] wants to support the [mining] industry.
9:50:43 AM
BILL JEFFRESS, SRK Consulting (U.S.) Inc., Alaska Miners
Association, disclosed to the committee that he is chairman of
the Alaska Minerals Commission and also represents a number of
the offshore and onshore mining companies in Alaska that are
doing exploration mining or development work in the Seward
Peninsula area. Mr. Jeffress related support for the concept of
revenue sharing. The Alaska Minerals Commission report, he
highlighted, cited an improved tax climate for mineral
investment and resource revenue sharing as the number one item.
Although the association supports the mayor's efforts, the
effort needs to be much broader, he opined. Nome as well as
other communities is impacted by increases in exploration and
mining activities. Several of those impacted communities are
municipalities that aren't within boroughs and thus there is no
mechanism for additional taxation. The plane rentals, lease
payments, royalties, and mining license tax could be distributed
much like the fisheries tax. The fisheries tax implemented by
the Department of Revenue (DOR) provides for an annual sharing
of the fish tax collected outside the municipal boundaries to
municipalities that can demonstrate they suffer significant
effects from fishing industry activities. Mr. Jeffress said the
association would be willing to work with the committee to draft
additional language that would broaden the legislation so that
other communities impacted by mining could share in the revenue
that's generated from the mining industry either through the
mining license tax or plane rentals and other royalties.
9:54:00 AM
REPRESENTATIVE HERRON suggested the committee request
Legislative Legal Services draft such an amendment for
unincorporated areas of the state.
CO-CHAIR NAGEAK agreed to do so.
9:54:36 AM
CO-CHAIR LEDOUX related her understanding that HB 181 only
relates to royalties for mining on tide and submerged lands.
Therefore, she inquired as to how the legislation addresses
mining not in tide and submerged lands.
MR. JEFFRESS answered that HB 181 doesn't include any provisions
for upland mining leases, mill site leases, or any of the
mechanisms the state has including annual plane rental fees that
would go to municipalities of unincorporated areas. Under the
current narrow language of HB 181, Nome is the only city that
would qualify.
9:55:39 AM
CO-CHAIR LEDOUX asked whether there is any provision in statute
that would provide a community impacted by mining activities
part of the revenue the state receives.
MR. JEFFRESS replied no, other than what the legislature
appropriates through general revenue sharing.
REPRESENTATIVE DRUMMOND reminded the committee that the
legislature acts on behalf of the unincorporated parts of the
state as their city council/municipal assembly. Therefore, she
opined it's the legislature's responsibility to step in when
communities aren't located within incorporated boroughs or
municipalities.
9:56:40 AM
MR. JEFFRESS added that the Alaska Miners Commission and the
mining community feel that [HB 181] is a fair and equitable way
to address some of the impacts. He pointed out that there are
always issues with local municipalities that don't have
additional revenue to implement something along the lines of a
severance tax. The Alaska Miners Commission and the mining
industry, he related, are concerned that additional taxes kill
investment in Alaska. He opined that passing legislation to
enable the potential revenue streams is all that's necessary.
9:57:58 AM
MR. LABOLLE informed the committee that the sponsor is working
with Senator Olson's office to try to mirror the fish tax.
However, there are some issues that Legislative Legal Service is
struggling to make work. With the fish tax there is an
automatic distribution of funds, whereas under HB 181 the funds
are deposited into the state coffers and are subject to
appropriation by the legislature. Ideally, the desire is to
have true revenue sharing such that the funds are distributed
when initially received. He reminded the committee that the
creation of dedicated funds is prohibited. Regarding other
municipal options, Mr. LaBolle said that normally one can look
at a severance tax or property tax when the activity is within
municipal borders. However, there is no way to collect property
tax on [operations] in state waters, although the property
corners in this case are at sea.
9:59:56 AM
CO-CHAIR LEDOUX related that she owned a piece of property in
Kodiak that was once land, but became submerged land after the
1964 earthquake. The Kodiak Island Borough still collects
property tax on the submerged land.
REPRESENTATIVE DRUMMOND commented that it sounds like an
annexation would be necessary, but that would be difficult to do
after the fact.
CO-CHAIR NAGEAK interjected that the Local Boundary Commission
(LBC) should address that.
MAYOR MICHELS, in response, stated that it's state land.
REPRESENTATIVE DRUMMOND reiterated that the legislature is
responsible for the unincorporated communities.
CO-CHAIR LEDOUX surmised then that the problem is there is state
land within municipal boundaries; there wouldn't be a problem
taxing municipal land within municipal boundaries.
10:02:08 AM
REPRESENTATIVE HERRON, regarding having something similar to the
fisheries tax, suggested implementing an impact tax.
10:02:53 AM
NANCY MCGUIRE told the committee that as a citizen of Nome she
is concerned with the impacts of the [increased mining] to the
City of Nome. For instance, there are impacts to the police
department and the use of the Kids Don't Float Life Preservers
used by dredgers. Therefore, it would be nice for the City of
Nome to receive a share of the lease sales, which doesn't total
much. Other impacts, she highlighted, include that the food
bank is empty at the end of the mining season. Ms. McGuire then
remarked that it would've been nice to have more public notice
of this meeting so that more of the public could've been
present.
10:05:10 AM
CHUCK WHEELER pointed out that the 2011 lease sale provided $96
million to the state and provided leaseholders interest in the
minerals in the submerged lands. The legislation, HB 181,
before the committee is difficult to deal with because the
property [submerged lands] can't be taxed and it's designed to
address impacts to the port. However, the trend of port activity
is that the trawlers will replace the smaller dredgers.
Furthermore, more dredgers are moving upland seeking properties
to mine for gold. Mr. Wheeler highlighted that most of the
money from the dredges doesn't stay in Nome as it goes South
with them. He then said it's unfortunate that the dredgers and
mining industry aren't present to testify.
10:08:37 AM
REPRESENTATIVE HERRON asked whether the number of permits should
be limited.
MR. WHEELER noted that DNR is likely changing regulations
because it hasn't addressed the large-scale offshore dredgers
but rather have primarily addressed the recreational dredgers.
However, the 2011 leases don't reflect anything related to the
recreational dredgers, which are the ones impacting the harbor.
He noted that DNR has the statistics which relate that although
there were 100 applications, 40-50 are actively dredging.
10:10:25 AM
REPRESENTATIVE DRUMMOND expressed concern with regard to the
lack of public notice of this meeting. She then inquired as to
how Mr. Wheeler knew of the meeting.
MR. WHEELER answered that as a retired resident, he follows
[legislative] activity. He, too, expressed concern with the
lack of notice.
REPRESENTATIVE DRUMMOND agreed that when a legislative committee
travels to the City of Nome the public, not just insiders,
should know it is present.
10:11:11 AM
MAYOR MICHELS informed the committee that the meeting was
advertised on the radio. She further informed the committee
that the City of Nome asked DNR, with which it has a good
working relationship, to limit its acceptance of permits, which
resulted in a deadline of May 31st. Still, there is no limit to
the number of dredgers one permit can have on the lease.
10:12:15 AM
REPRESENTATIVE HERRON requested that the co-chairs request from
the mayor and the commissioner that staff be present at the fall
meeting and that the committee has a hearing on this issue in
January 2014.
CO-CHAIR NAGEAK directed staff to do so.
10:13:11 AM
CO-CHAIR NAGEAK, upon determining no one else wished to testify,
closed public testimony.
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