Legislature(2013 - 2014)BARNES 124

01/30/2013 01:00 PM House RESOURCES


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 77 LAND DISPOSALS/EXCHANGES; WATER RIGHTS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 80 CRUISE SHIP WASTEWATER DISCHARGE PERMITS TELECONFERENCED
Moved Out of Committee
          HB 77-LAND DISPOSALS/EXCHANGES; WATER RIGHTS                                                                      
                                                                                                                                
1:55:11 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE announced  that  the next  order  of business  is                                                               
HOUSE  BILL NO.  77, "An  Act relating  to the  Alaska Land  Act,                                                               
including certain authorizations,  contracts, leases, permits, or                                                               
other   disposals  of   state  land,   resources,  property,   or                                                               
interests; relating  to authorization for  the use of  state land                                                               
by general permit;  relating to exchange of  state land; relating                                                               
to  procedures for  certain administrative  appeals and  requests                                                               
for  reconsideration to  the commissioner  of natural  resources;                                                               
relating  to the  Alaska  Water  Use Act;  and  providing for  an                                                               
effective date."                                                                                                                
                                                                                                                                
1:55:24 PM                                                                                                                    
                                                                                                                                
DAN  SULLIVAN,  Commissioner,  Department  of  Natural  Resources                                                               
(DNR), introduced  HB 77 on  behalf of the  governor by way  of a                                                               
PowerPoint presentation  entitled "Statewide  Permitting Reform."                                                               
He acknowledged  that there has  been a lot  of focus on  oil and                                                               
gas  and a  gas  line,  but HB  77  illustrates that  [permitting                                                               
reform] is  an important  issue in terms  of the  state's future.                                                               
Work has  been occurring  on permitting reform  for the  past few                                                               
years,  and  it  is  an   area  that  has  received  very  strong                                                               
bipartisan  support   that  he  hopes  to   continue  [slide  2].                                                               
Permitting reform is  also a big issue nationally that  is also a                                                               
bipartisan  effort  to  modernize   and  gain  efficiencies  with                                                               
permitting.   He then highlighted  an Economist  article entitled                                                             
"Over-regulated America" that concludes  "America needs a smarter                                                               
approach  to regulation  that will  mitigate a  real danger  that                                                               
regulation  may  crush  the  life   out  of  America's  economy."                                                               
Furthermore,  there  was  a  Newsweek  article  in  which  former                                                             
President Clinton  laid out  what he  viewed as  the top  ways in                                                               
which to  get the economy  moving, and number one  was regulatory                                                               
reform and  [granting waivers on  environmental rules]  to hasten                                                               
start times of  construction projects.  Alaska is  trying to lead                                                               
in the area of permitting  reform, which is a multi-year process.                                                               
With regard to  competitiveness for the U.S., he  pointed out the                                                               
Behre Dolbear  Group, an investment  bank in Canada,  performs an                                                               
annual survey of  mineral sector investment [slide 3].   In terms                                                               
of  regulatory permitting,  last year  the U.S.  ranked last  and                                                               
this year tied  for last with Papua New Guinea.   He then pointed                                                               
out that federal  rules negatively impact states and  result in a                                                               
7- to 10-year waiting period before mine development can begin                                                               
In  other  industrialized  countries,  the  time  to  reach  mine                                                               
development is  a lot less,  particularly in Australia  where the                                                               
timeframe is  three to  four years.   The  Kensington Mine  as an                                                               
example of  lengthy waiting periods,  and might not  be producing                                                               
had  there not  been the  Supreme Court  decision.   In contrast,                                                               
construction  of the  1,500-mile  Alcan Highway,  which has  been                                                               
characterized as a big moment  in history, took only nine months.                                                               
Places  with high  environmental standards,  such as  Alaska, can                                                               
have lengthy [permitting] delays  that result in investment going                                                               
to  places  that have  much  less  stringent standards,  such  as                                                               
Russia  [slide   4].     Commissioner  Sullivan   maintained  the                                                               
commitment  to  high  environmental standards,  but  opined  that                                                               
permitting reform helps  maintain global environmental protection                                                               
because it  keeps projects in  locations with  high environmental                                                               
standards, which is important.                                                                                                  
                                                                                                                                
2:02:28 PM                                                                                                                    
                                                                                                                                
COMMISSIONER SULLIVAN mentioned the  strategies the department is                                                               
undertaking with  regard to  Trans-Alaska Pipeline  System (TAPS)                                                               
throughput  decline  [slide  5]  with  regard  to  strategic  and                                                               
critical  minerals.    Permitting  reform,  he  emphasized,  cuts                                                               
across  a number  of different  issues, including  jobs, economic                                                               
growth,  and   responsible  resource  development.     Therefore,                                                               
permitting  reform is  part of  a broader  strategy in  which the                                                               
department recognizes the need to  enhance coordination among the                                                               
state agencies  [slide 6].   To  that end,  DNR has  sought input                                                               
from various  communities and groups  regarding ways to  make the                                                               
permitting  system  more efficient,  timely,  and  certain.   The                                                               
department  has also  worked on  trying  to improve  coordination                                                               
between  the state  and federal  government.   Federal permitting                                                               
impacts almost  every project in  Alaska, whether it is  on state                                                               
or federal  land, a  prime example being  Point Thomson  which is                                                               
located on state  land.  The department has also  tried to get in                                                               
front of issues  that it believes will be important  to the state                                                               
in order  to be prepared  when they  arise, an example  being the                                                               
Shale Oil  Task Force.  He  then related that the  next couple of                                                               
slides  highlight  the  strong  bipartisan  legislative  progress                                                               
support the department has experienced.   The legislative support                                                               
has  been in  the form  of statutory  changes as  well as  budget                                                               
increments  [slide  7].   For  example  there was  a  significant                                                               
increment to  Division of Mining,  Land and Water  for personnel,                                                               
revamping and modernizing the permitting  system, which has had a                                                               
positive effect.   Commissioner Sullivan then  directed attention                                                               
to slide  8 regarding  backlogged permits.   Although there  is a                                                               
host of reasons for the  backlog, having 2,600 backlogged permits                                                               
is not  good for  jobs, economic growth,  or the  private sector.                                                               
Therefore, with  this committee and the  legislature's assistance                                                               
DNR  has been  very focused  on  decreasing the  backlog to  zero                                                               
within  three years.   Since  the beginning  of fiscal  year (FY)                                                               
2012, the  backlog has been  reduced by  38 percent for  which he                                                               
complimented the efforts  of Mr. Goodrum and Mr.  Menefee.  While                                                               
the backlog  reduction and  modernization efforts  are occurring,                                                               
the  department  continues  to  receive a  lot  of  new  permits.                                                               
Commissioner  Sullivan said  he  believes  the backlog  reduction                                                               
effort is on track.                                                                                                             
                                                                                                                                
2:08:33 PM                                                                                                                    
                                                                                                                                
COMMISSIONER SULLIVAN  reminded the committee that  last year the                                                               
governor introduced House Bill 361,  which the legislature passed                                                               
with  strong  bipartisan  support  [slide  9].    The  department                                                               
realizes that there  is no panacea, and therefore  it has focused                                                               
on statutory changes that create  efficiencies.  Although some of                                                               
those changes are not that  large, taken together there becomes a                                                               
system  that  is more  rational  and  brings the  timeliness  and                                                               
certainty.   Addressing the  backlog is  a combination  of ideas,                                                               
some of  which have come through  the ranks.  The  department has                                                               
also reached out  to entities involved in  the permitting process                                                               
and  system  and   some  of  the  changes  were   the  result  of                                                               
constituent suggestions to legislators.                                                                                         
                                                                                                                                
2:11:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON asked what constitutes a backlog.                                                                        
                                                                                                                                
COMMISSIONER SULLIVAN  deferred to the  team, but added  that the                                                               
department has attempted to define that.                                                                                        
                                                                                                                                
2:12:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON,  referring to  slide 6  and the  Shale Oil                                                               
Task Force,  requested an  update on the  progress the  agency is                                                               
making [in terms of anticipating  and planning for permitting the                                                               
next phases of resource development].                                                                                           
                                                                                                                                
COMMISSIONER SULLIVAN agreed to provide such an update.                                                                         
                                                                                                                                
2:12:47 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE passed the gavel to Co-Chair Saddler.                                                                            
                                                                                                                                
2:13:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  inquired whether  the same standard  is used                                                               
year-to-year.                                                                                                                   
                                                                                                                                
COMMISISONER SULLIVAN believed so, but deferred to Mr. Goodrum.                                                                 
                                                                                                                                
REPRESENTATIVE  TUCK commented  that it  looks like  the division                                                               
has gotten  off to a really  good start by addressing  over 1,000                                                               
of  the backlogged  permits.    He imagined  that  it would  only                                                               
continue to get better.                                                                                                         
                                                                                                                                
2:13:48 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SADDLER inquired as to  the anecdotal comments regarding                                                               
Alaska's permitting  regime that Commissioner Sullivan  has heard                                                               
during his travels advocating Alaska as a resource state.                                                                       
                                                                                                                                
COMMISSIONER  SULLIVAN responded  that often  there are  positive                                                               
comments, particularly with  regard to the North  Slope as having                                                               
a great  resource potential and  a basin that has  potential with                                                               
various  types of  oil  fields.   There  are  also comments  with                                                               
regard  to costs,  which relate  to tax  issues, competitiveness,                                                               
remoteness,  and permitting  and  litigation delays.    A lot  of                                                               
focus has been on Shell's  drilling problems; however, from DNR's                                                               
perspective  there  have  been real  problems  with  the  federal                                                               
government delaying  permitting for  the drilling  of exploration                                                               
wells in  that area of  Alaska.  Broadly,  there is a  sense that                                                               
there is  a lot of delay  in Alaska, which is  why the department                                                               
wants to address [permitting reform].                                                                                           
                                                                                                                                
CO-CHAIR SADDLER  noted the House  just passed HR 5,  which calls                                                               
the federal  government to  coordinate with  the state  and state                                                               
agencies as they consider Outer Continental Shelf (OCS) work.                                                                   
                                                                                                                                
2:16:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR,  referring  to the  slides  specifying  the                                                               
operating  budget  increases,  directed  attention  to  the  FY12                                                               
appropriation for  approximately $2.7 million in  operating funds                                                               
to the Division  of Mining, Land and Water  to create efficiency,                                                               
timeliness, and certainty  in the permitting process  and in FY13                                                               
an  additional $950,000  to cover  increased personnel  costs and                                                               
fill vacant positions  focused on permitting.   She then recalled                                                               
that in the  mid 1990s the legislature went  through $250 million                                                               
worth of  budget cutting  that is  cuts of  $50 million  from the                                                               
budget each  year.  The  aforementioned was  largely accomplished                                                               
by eliminating  staff of some  of the  departments.  Some  at the                                                               
time felt  those cuts were  penny wise and pound  foolish because                                                               
it  would  limit  DNR's  and  DEC's ability  in  terms  of  being                                                               
efficient   with  the   permitting  process.     Therefore,   she                                                               
questioned whether the  legislature now has to make  up for those                                                               
budget cuts.   She further questioned how the  legislature can do                                                               
a better job to achieve a stable level of funding.                                                                              
                                                                                                                                
COMMISSIONER  SULLIVAN  said  he  does not  have  the  historical                                                               
context to  comment on the  past.   However, some of  the backlog                                                               
and permitting efficiency issues  are related to personnel issues                                                               
and some are  related to modernizing the systems  and making them                                                               
more efficient.   Therefore, it  was a combination of  things and                                                               
the current desire is to continue to address permitting reform.                                                                 
                                                                                                                                
2:19:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR acknowledged the bill  has a zero fiscal note                                                               
and asked  whether the legislature  will entertain  any operating                                                               
budget increases for additional permitting staff.                                                                               
                                                                                                                                
COMMISSIONER SULLIVAN believed  the answer is no,  but offered to                                                               
get back to the committee on that.                                                                                              
                                                                                                                                
2:20:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAWKER clarified  that  budget cuts  in the  mid-                                                               
1990s were  not so  much a  budget reduction  as the  creation of                                                               
off-budget  accounting so  that  they were  treated as  (indisc.)                                                               
receipt supported  services.   He further  clarified that  it was                                                               
more of a matter of  changing it from general fund appropriations                                                               
to other categories of appropriations.                                                                                          
                                                                                                                                
2:21:37 PM                                                                                                                    
                                                                                                                                
BRENT  GOODRUM,  Director, Division  of  Mining,  Land and  Water                                                               
(DMLW),  Department of  Natural Resources  (DNR), in  response to                                                               
Representative   Johnson's  earlier   question,  explained   what                                                               
constitutes the  "backlog" are  those [permit]  applications that                                                               
are deemed complete and considered  an authorization that need to                                                               
be adjudicated that  are at the point of issuance,  whether it be                                                               
approved  or  denied.   In  further  response  to  Representative                                                               
Tuck's earlier question, Mr. Goodrum  confirmed that the division                                                               
is considering "apples to apples" in  the chart [on slide 8].  As                                                               
the Unified Permit  Project continues, he opined  that there will                                                               
be  far greater  granularity  and transparency  into the  system.                                                               
Therefore,  the  division  will  be able  to  talk  in  different                                                               
metrics  and  specify  the  amount  of  time  that  it  takes  an                                                               
authorization at  a specific time  of year and determine  when it                                                               
will  be adjudicated  and communicate  that  with the  applicant.                                                               
The  system the  division is  moving to  with the  Unified Permit                                                               
Projects  will provide  greater  visibility  into the  division's                                                               
process.  In response to  Co-Chair Saddler, Mr. Goodrum confirmed                                                               
that he  is using  the term "granularity"  to mean  precision and                                                               
detail.                                                                                                                         
                                                                                                                                
2:23:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON remarked  he believes DNR is  doing a good                                                               
job, but  said he  wants to  get a benchmark  for the  backlog to                                                               
ensure that not just the easy permits are being addressed.                                                                      
                                                                                                                                
MR. GOODRUM  agreed that not all  permits are equal as  some have                                                               
greater significance  to the state and  various industries, which                                                               
is weighted  when the  application is  considered.   The division                                                               
works to  expedite those  projects of  great significance  and is                                                               
not just addressing the easy permits.                                                                                           
                                                                                                                                
2:25:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK commented  that it would be nice  to know how                                                               
many new permits were applied  for in 2012, particularly since it                                                               
does not  seem that  the division will  ever reach  zero permits.                                                               
He  then expressed  interest in  having data  that specifies  the                                                               
number  of years  a permit  application  has been  in the  system                                                               
before being closed.                                                                                                            
                                                                                                                                
2:26:08 PM                                                                                                                    
                                                                                                                                
MR.  GOODRUM,  responding  to   Co-Chair  Saddler,  informed  the                                                               
committee that  he served 20  years of  active duty service  as a                                                               
marine  infantry  officer/reconnaissance  officer.   During  that                                                               
time, he pursued  a post graduate education and  earned a Masters                                                               
in operations research, which is about  how to look at systems of                                                               
systems and improve  efficiencies, and his work in  this area for                                                               
the U.S.  Marine Corps is  what brought him  to Alaska.   He told                                                               
the committee that  Mr. Menefee has been a public  servant of the                                                               
state  with  DNR  for  over  20 years,  and  that  as  the  chief                                                               
operations  officer Mr.  Menefee  has a  broad  knowledge of  the                                                               
statutes that impact many of the authorizations.                                                                                
                                                                                                                                
2:27:13 PM                                                                                                                    
                                                                                                                                
WYN MENEFEE,  Chief of Operations,  Division of Mining,  Land and                                                               
Water  (DMLW), Department  of Natural  Resources (DNR),  informed                                                               
the  committee that  he began  his career  as a  park ranger  and                                                               
worked his  way up through the  department.  He said  he has been                                                               
in his current position about eight  years.  He then directed the                                                               
committee's attention  to the briefing document  entitled "HB 77:                                                               
Land  Disposals/Exchanges;  Water  Rights Briefing  Paper"  dated                                                               
January  30, 2013.   He  explained the  division already  has the                                                               
authority to  perform general permits,  but there is  no explicit                                                               
statutory language that specifies  general permitting is allowed.                                                               
Because the  division will be  doing more general permits,  HB 77                                                               
will explicitly clarify in statute  that the division can perform                                                               
general permits.   Currently, there  is an application  for state                                                               
land use,  the division then puts  it out for public  notice, and                                                               
then makes a  decision whether it is appropriate or  not.  With a                                                               
general  permit, there  is the  knowledge  that there  will be  a                                                               
certain amount  of applications  for a  certain activity  and the                                                               
division prescribes  the parameters  in which  those applications                                                               
should fit in order  to obtain a permit.  The  notion is that the                                                               
aforementioned  will  reduce costs  and  time  for the  applicant                                                               
because, after  a full public  notice and review is  completed of                                                               
setting up  a general permit, the  subsequent authorizations from                                                               
the  general permit  do  not  go through  the  full decision  and                                                               
public notice process.                                                                                                          
                                                                                                                                
2:29:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON inquired how  to constrain a general permit                                                               
so that it will be most  applicable to particular regions or land                                                               
types.                                                                                                                          
                                                                                                                                
MR. MENEFEE responded  there has to be the ability  to define the                                                               
[parameters] and most often, general  permits will be specific to                                                               
a region/area  or activity.   However, there may be  some general                                                               
permits for  which the parameters  can be defined well  enough to                                                               
apply statewide.  For example,  the division has a general permit                                                               
for non-timber  forest product  sales, which is  the result  of a                                                               
full-blown  process  regarding  how  the harvest  has  to  occur,                                                               
including  quantities   and  harvest  methodologies,   and  those                                                               
statewide  general  permits  can  be applied  for  and  purchased                                                               
online.   An example  of a  regional general  permit is  the boat                                                               
storage in Cook  Inlet that went through a  process that resulted                                                               
in specific  parameters that if  met by the applicant  results in                                                               
the awarding of a permit.                                                                                                       
                                                                                                                                
2:32:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON,   referring  to  the  inability   of  the                                                               
legislature  to implement  statutes  of statewide  applicability,                                                               
asked  whether  there  are any  identified  legal  problems  with                                                               
passing the  authority for  those general  permits that  could be                                                               
restricted and not be statewide.                                                                                                
                                                                                                                                
MR. MENEFEE  said the  Department of Law  is available  to answer                                                               
any specific  legal questions.   He reiterated that  the division                                                               
already has this authority; it  is just not explicitly stated for                                                               
general permits.  In the  past, the division has issued statewide                                                               
and regional general  permits that were vetted  by the Department                                                               
of Law and accomplished without any legal ramifications.                                                                        
                                                                                                                                
2:33:32 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE asked  whether there are precedents  for this type                                                               
of general permit in other agencies besides state agencies.                                                                     
                                                                                                                                
MR.  MENEFEE  replied yes,  and  cited  the  U.S. Army  Corps  of                                                               
Engineers  nationwide general  permits.   Other federal  agencies                                                               
process   general  permits   for  various   authorizations  under                                                               
regulatory   schemes,  and   the   Department  of   Environmental                                                               
Conservation (DEC)  issues general permits.   General permits are                                                               
also used in Western states as a  way to help get more done while                                                               
doing so in an effective manner.                                                                                                
                                                                                                                                
2:34:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR  remarked that the non-timber  forest product                                                               
sales  and boats  [general permits]  seem noncontroversial.   She                                                               
asked  what   other  types  of  activities,   including  resource                                                               
development activities, would fall under a general permit.                                                                      
                                                                                                                                
MR.  MENEFEE  said  that  general   permits  could  be  used  for                                                               
commercial  filming on  state land,  personal use  cabin permits,                                                               
float   home  renewals,   commercial   recreation  permits,   and                                                               
installation  of heat  pumps for  renewable energy.   In  further                                                               
response,  Mr. Menefee  confirmed that  general permits  could be                                                               
used for  resource extraction activities.   Although there  is no                                                               
prohibition for  using a general permit  for resource extraction,                                                               
the  challenge is  accurately prescribing  the parameters  of the                                                               
activity in which the operator has  to fit such that it is common                                                               
to  whoever  applies.     He  noted  that  the   public  has  the                                                               
opportunity  to  participate  and  appeal  a  decision  prior  to                                                               
issuing a general permit.                                                                                                       
                                                                                                                                
2:36:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  asked  then  whether is  it  possible  to                                                               
statutorily  give  the  division   authority  to  establish  best                                                               
practices for  mines.  He posed  a scenario in which  there is an                                                               
open pit  mine in  the state for  which the  division establishes                                                               
six criteria.   In such a  case, would the DNR  permit already be                                                               
granted  under a  general permit  for a  mine that  says it  will                                                               
follow those criteria, he asked.                                                                                                
                                                                                                                                
MR.  MENEFEE opined  that it  would  be very  difficult to  cover                                                               
everything  that would  be necessary.   He  pointed out  that the                                                               
suggestions he put forth are very  limited in scope, which is how                                                               
general permits  can work.  Regarding  resource extraction, there                                                               
may be a  certain aspect [that would fit into  a general permit].                                                               
However, it  is hard to envision  that a general permit  could be                                                               
developed  to encompass  everything necessary  for a  large mine.                                                               
Mr. Menefee said  he does not believe that is  the intention with                                                               
the general permit.   Again, this authority  already exists under                                                               
AS 38.05.0202(a)(1) and HB 77  merely specifies [the action] as a                                                               
general  permit in  order  to  clarify to  the  public that  this                                                               
authority exists.                                                                                                               
                                                                                                                                
2:38:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK   questioned  what   a  general   permit  is                                                               
currently titled.                                                                                                               
                                                                                                                                
MR. MENEFEE  clarified that currently there  are general permits,                                                               
but they  are not  referred to  that in statute.   He  offered to                                                               
read the committee  the statute from which  the division believes                                                               
it  has the  authority to  issue general  permits.   Most of  the                                                               
challenges  against the  division are  related to  procedure, and                                                               
therefore  the division  can eliminate  a  legal risk  if it  can                                                               
provide absolute clarity  that general permits are  allowed.  The                                                               
aforementioned is what is targeted with HB 77.                                                                                  
                                                                                                                                
REPRESENTATIVE  TUCK stated  that  it would  be  helpful for  Mr.                                                               
Menefee to  point out,  when he  reaches that  section in  HB 77,                                                               
where the language  specifying general permits is  being added in                                                               
statute.                                                                                                                        
                                                                                                                                
2:39:52 PM                                                                                                                    
                                                                                                                                
MR.  MENEFEE,  moving  on  to  point 2  of  the  briefing  paper,                                                               
explained  that  currently DMLW  has  the  authority to  exchange                                                               
lands.   That authority is specified  in Titles 29 and  38.  When                                                               
DMLW  does  exchanges  for  state land,  they  are  disposals  of                                                               
interest.   Currently, Title 38  land exchange language  makes it                                                               
difficult to fulfill  all the requirements in  statute to perform                                                               
a land exchange.  As  municipal entitlements are completed, there                                                               
will  be more  complicated  land  exchanges.   There  is a  mixed                                                               
ownership   pattern,  and   therefore  development   projects  or                                                               
municipalities  may need  to consolidate  land or  exchange land.                                                               
Under the  proposed change in  HB 77, Title 38  exchange statutes                                                               
would  be modified  such that  the  exchange would  go through  a                                                               
normal AS 38.05.035(e)  decision process, which is  a disposal of                                                               
interest  decision  process.   The  process  utilizes public  and                                                               
agency review and  a formal decision that is in  the state's best                                                               
interest is being  made.  The aforementioned  is already utilized                                                               
for  many  disposals  of  state  land  and  DMLW  does  not  view                                                               
exchanges  of  state  land  as any  different.    Therefore,  the                                                               
division  wants  to  ensure  that   it  can  perform  its  duties                                                               
efficiently  and the  same  way that  other  decisions are  made.                                                               
However,  currently there  is a  higher burden  on the  exchanges                                                               
that make it difficult to  complete; for example, the False Creek                                                               
land exchange took 25 years to  complete.  The change proposed in                                                               
HB 77 would reduce the time and cost to the applicant.                                                                          
                                                                                                                                
2:42:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK inquired  as  to why  the  False Creek  land                                                               
exchange  took so  long to  complete  and whether  that would  be                                                               
fixed by HB 77.                                                                                                                 
                                                                                                                                
MR. MENEFEE  explained that in  general there was a  situation in                                                               
which appraisals were performed, but  they would become stale due                                                               
to the  requirements of the  process.  Therefore,  a re-appraisal                                                               
and further negotiations would occur,  which took more time.  The                                                               
idea  came from  his discussions  with the  land exchange  staff,                                                               
which  revealed  that  very few  exchanges  have  occurred  since                                                               
enactment of  the [existing]  statute.   The suggestion  was that                                                               
performing land  exchanges with a  disposal of  interest decision                                                               
would speed the process.                                                                                                        
                                                                                                                                
2:43:59 PM                                                                                                                    
                                                                                                                                
MR. MENEFEE, returning to his  briefing paper, related that point                                                               
3 addresses  reducing the  risk of  litigation, which  could have                                                               
some  adverse  ramifications.   Currently,  part  of the  statute                                                               
addresses the types  of payments, all upfront or over  time per a                                                               
contract, that  can be  utilized with land  sales.   Existing law                                                               
only speaks  to land sold  by auction,  although land is  sold in                                                               
situations other than by auction.   The desire for all land sales                                                               
is to  be able to  enter into a  contract to  pay over time.   If                                                               
there was a  challenge and the challenger  prevailed, there would                                                               
be the  risk of  losing millions  of dollars  in land  sales each                                                               
year.   Therefore,  the division  wants to  able to  continue the                                                               
practice of entering into contracts  that allow payment over time                                                               
and the individual eventually obtains their patent.                                                                             
                                                                                                                                
2:45:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER,  referring to  Section 7  of HB  77, asked                                                               
why "or  property" is being  added when the  overarching section,                                                           
Title 2, is the sale of land.                                                                                                   
                                                                                                                                
MR.  MENEFEE responded  that  a  development on  the  land -  for                                                               
example,  a   house  -  is   an  issue  that   sometimes  occurs.                                                               
Therefore, the development has to be sold as well as the land.                                                                  
                                                                                                                                
2:46:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER  related his understanding that  DMLW has a                                                               
practice  of  accepting  full  payment  at closing.    In  a  bid                                                               
situation,  the  division would  take  a  5 percent  deposit  and                                                               
accept cash at  closing or offering term payments.   The idea, he                                                               
surmised, is  to make  it very  clear that  term payments  may be                                                               
made in all  instances in which the division disposes  of land or                                                               
property.                                                                                                                       
                                                                                                                                
MR. MENEFEE confirmed that to be correct.                                                                                       
                                                                                                                                
2:47:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAWKER  asked  whether the  mandate  language  of                                                               
"shall" potentially prohibits the  division from offering cash at                                                               
closing  payments.   He suggested  consideration of  changing the                                                               
language  to read  as follows:   "the  remainder of  the purchase                                                               
price to be paid at the time of closing or in monthly ...."                                                                     
                                                                                                                                
MR. MENEFEE deferred to the  Department of Law (DOL), although he                                                               
said he  believes the division still  has the ability to  put all                                                               
the money down right away.                                                                                                      
                                                                                                                                
2:49:45 PM                                                                                                                    
                                                                                                                                
ASHLEY  BROWN,  Assistant Attorney  General,  Oil,  Gas &  Mining                                                               
Section, Natural  Resources Section, Department of  Law, said she                                                               
would get back to the committee with an answer.                                                                                 
                                                                                                                                
2:50:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR, referring  to  [Section 22,  page 15,  line                                                               
11], pointed out that the  reference to "the mineral estate" does                                                           
not appear  to have been  in the  previous statute that  is being                                                               
eliminated  with these  changes.   She requested  Mr. Menefee  to                                                               
speak to that.                                                                                                                  
                                                                                                                                
MR. MENEFEE explained  that in cases where someone  owns both the                                                               
surface  and mineral  estate and  is willing  to give  it to  the                                                               
state, the  value of it would  have to be determined  in order to                                                               
achieve an exchange.                                                                                                            
                                                                                                                                
2:51:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK  inquired  as  to whether  the  state  could                                                               
exchange mineral rights away.                                                                                                   
                                                                                                                                
MR. MENEFEE  answered that although  it is  unlikely, technically                                                               
the state  could do so.   In further response, he  said the state                                                               
would  always like  to  maintain the  opportunity  for people  to                                                               
stake mining claims,  particularly where it will  have no adverse                                                               
effect.  Typically, the state  aggressively tries to protect that                                                               
right because  it is the  dominant estate.   Still, there  may be                                                               
some situation where it may be advantageous to do so.                                                                           
                                                                                                                                
2:52:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR related  her  understanding  that the  state                                                               
owns  the  mineral  rights/subsurface  rights.    Therefore,  she                                                               
questioned who  as a private  landholder, save the  Alaska Native                                                               
corporations,  would  be a  private  landholder  who holds  their                                                               
mineral rights.                                                                                                                 
                                                                                                                                
MR. MENEFEE responded that there  are quite a few individuals who                                                               
do own their own mineral rights, but  he could not name them.  He                                                               
specified  that private  individuals do  hold mineral  estates to                                                               
their properties,  which often are  from the  federal government.                                                               
For instance,  someone could have  staked a federal  mining claim                                                               
and that  individual could apply  and obtain a federal  patent to                                                               
that mineral claim as the individual owns the mineral estate.                                                                   
                                                                                                                                
2:53:52 PM                                                                                                                    
                                                                                                                                
MR. MENEFEE, returning to his  briefing paper, directed attention                                                               
to point 4, which proposes extending  a lease for up to two years                                                               
in  two specific  instances.   Per  statute,  a long-term  lessee                                                               
allows  a preference  right to  purchase the  land, which  merely                                                               
means that there  is an option to sell the  land to the long-term                                                               
lessee.  The  aforementioned can be applied for up  to the end of                                                               
their lease.   Therefore, at the  end of a lease, the state could                                                               
face  having to  authorize structures  that are  already improved                                                               
for the  period while  the state  decides whether  to sell  it or                                                               
not.   The division wants a  two-year window in which  to perform                                                               
that  activity,  adjudication,  or  decision.    There  are  also                                                               
situations  in which  a lessee  finds  the need  to expand  their                                                               
business.  If the lessee  has substantially changed what they are                                                               
doing,  [DMLW] has  to review  it.   The aforementioned  two-year                                                               
extension would  keep the business  legal with a lease  while the                                                               
division adjudicates the request.                                                                                               
                                                                                                                                
2:55:59 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SADDLER inquired as to what a preference right is.                                                                     
                                                                                                                                
MR. MENEFEE explained that a  preference right means that without                                                               
having to go to competition,  the lessee can apply for something.                                                               
Normally,  disposal   of  state   land  is   done  competitively.                                                               
However, in a  case in which a lessee has  a long-term lease, the                                                               
lessee could  apply for  a preference  right under  AS 38.05.102.                                                               
Although the statue  does not specify the lessee  will obtain it,                                                               
it allows for  the lessee to request it  noncompetitively and the                                                               
[division]  can adjudicate  whether  it is  in  the state's  best                                                               
interest to sell that land to the lessee.                                                                                       
                                                                                                                                
2:57:09 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE surmised that being  able to grant that preference                                                               
right  could be  considered an  incentive for  making investments                                                               
and to further the settlement of the land.                                                                                      
                                                                                                                                
MR. MENEFEE  replied yes,  adding that  for long-term  leases the                                                               
division does  not dictate how  much the lessee invests.   Still,                                                               
it could be considered an  incentive because the lessee would not                                                               
lose  their  investment  since  they would  have  the  option  to                                                               
purchase it.                                                                                                                    
                                                                                                                                
2:57:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  clarified   his  understanding  that  the                                                               
proposed extension in point 4 is only for leases not permits.                                                                   
                                                                                                                                
MR. MENEFEE confirmed that to be the case.                                                                                      
                                                                                                                                
2:57:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK  asked whether  there  is  a definition  for                                                               
long-term lease.                                                                                                                
                                                                                                                                
MR. MENEFEE offered to get that information to the committee.                                                                   
                                                                                                                                
2:58:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK surmised  that  the two-year  window is  not                                                               
just for a preference right for  the lessee to purchase the land,                                                               
but also to extend the lease.                                                                                                   
                                                                                                                                
MR. MENEFEE  posed a scenario in  which there is a  40-year lease                                                               
and  explained that  to extend  the  lease [DMLW]  must still  go                                                               
through a decision  process.  However, last  year the legislature                                                               
approved    a   renewal    statute    that   allowed    one-time,                                                               
noncompetitive,  equal-term extensions.    In this  case, if  the                                                               
lessee is in  good standing, the lessee could  obtain another 40-                                                               
year lease.   Although the aforementioned  change encouraged more                                                               
development, it did not take  into account whether the lessee had                                                               
substantially changed their operations.   A substantial change in                                                               
operations would  result in the  need for  DMLW to perform  a new                                                               
and full adjudication  of that lease.  Meanwhile,  there would be                                                               
unauthorized development on  the land.  In  further response, Mr.                                                               
Menefee confirmed  that once  an individual has  a lease  and has                                                               
made investments in the land, it makes sense to continue it.                                                                    
                                                                                                                                
3:00:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P.  WILSON asked  whether point  3 would  apply to                                                               
waterfront leases as well.                                                                                                      
                                                                                                                                
MR. MENEFEE  said yes,  specifying that they  are referred  to as                                                               
upland leases and tideland leases.                                                                                              
[HB 77 was held over.]                                                                                                          

Document Name Date/Time Subjects
HB80 Amendment 1.pdf HRES 1/30/2013 1:00:00 PM
HB 80
HB80 Amendment 2.pdf HRES 1/30/2013 1:00:00 PM
HB 80
HB80 Amendment 3.pdf HRES 1/30/2013 1:00:00 PM
HB 80
HB80 Amendment 4.pdf HRES 1/30/2013 1:00:00 PM
HB 80
HB80 Amendment 5.pdf HRES 1/30/2013 1:00:00 PM
HB 80
HB80 Amendment 6.pdf HRES 1/30/2013 1:00:00 PM
HB 80
HB80 Amendment 7.pdf HRES 1/30/2013 1:00:00 PM
HB 80
HB36 Clean Water Act Overview.pdf HRES 1/30/2013 1:00:00 PM
HB 36
HB36 DMVA Letter.pdf HRES 1/30/2013 1:00:00 PM
HB 36
HB36 DoD Environmental Region 10 Letter.pdf HRES 1/30/2013 1:00:00 PM
HB 36
HB36 Fiscal Note DEC.pdf HRES 1/30/2013 1:00:00 PM
HB 36
HB36 Sponsor Statement.pdf HRES 1/30/2013 1:00:00 PM
HB 36
HB36 Version A.pdf HRES 1/30/2013 1:00:00 PM
HB 36
HB 77 Briefing Paper 1 29 13.pdf HRES 1/30/2013 1:00:00 PM
HB 77
HB 77 HRES Hearing Request Memo.pdf HRES 1/30/2013 1:00:00 PM
HB 77
HB 77 Permitting Reform Transmittal Letter.pdf HRES 1/30/2013 1:00:00 PM
HB 77
HB 77 Sectional Analysis 1.30.13.pdf HRES 1/30/2013 1:00:00 PM
HB 77
HB0077.pdf HRES 1/30/2013 1:00:00 PM
HB 77
HB0077-1-2-011813-DNR-N.pdf HRES 1/30/2013 1:00:00 PM
HB 77
HB0077-2-2-011813-DFG-N.pdf HRES 1/30/2013 1:00:00 PM
HB 77
HB77 Water briefing points.pdf HRES 1/30/2013 1:00:00 PM
HB 77
HB77 HRES - Overview by Comm. Sullivan.pdf HRES 1/30/2013 1:00:00 PM
HB 77
HB80 Franklin Dock Ent. Letter.pdf HRES 1/30/2013 1:00:00 PM
HB 80
HB80 Village of Kake Letter.pdf HRES 1/30/2013 1:00:00 PM
HB 80
HB 80 DEC Response to CCTHITA 2.6.13.pdf HRES 1/30/2013 1:00:00 PM
HB 80