Legislature(1993 - 1994)

03/30/1994 08:15 AM House RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
  HB 515 - MANAGEMENT OF STATE LAND AND RESOURCES                              
  CHAIRMAN WILLIAMS stated he had met with Commissioner Noah                   
  about the Department of Natural Resource's (DNR) plans to                    
  introduce a Title 38 revision bill.  At that time,                           
  Commissioner Noah said the bill would be ready to introduce                  
  at the beginning of session and also said the bill would be                  
  a noncontroversial, housekeeping-type bill.  He stated the                   
  commissioner said the bill was mainly to clean up and                        
  clarify lands statutes, and would not contain significant                    
  changes in policy or procedures.  He pointed out the                         
  Administration did not introduce this legislation until                      
  almost halfway through this session, and it appears the bill                 
  has several sections which are controversial.  He asked if                   
  amending the bill to remove a few of the most controversial                  
  sections will help ensure the passage of the bill in the                     
  remaining time left, would the Administration object to                      
  Number 035                                                                   
  RON SWANSON, DIRECTOR, DIVISION OF LAND, DNR, stated the                     
  department's plan was to introduce housekeeping-type                         
  legislation this year, go through the hearing process, and                   
  during the interim, work on phase two which will involve                     
  controversial sections of the bill needing changes.  He said                 
  since the process began, it has been determined there are                    
  three controversial subjects; mariculture, shore fish, and                   
  timber.  He heard there is a plan to delete those particular                 
  sections out of the bill.  DNR is not going to oppose                        
  deleting those sections, since the department wants to get                   
  the housekeeping measures through this year, saving the                      
  department a lot of administrative time, processing and                      
  money.  Mr. Swanson stated Title 38 touches every Alaskan                    
  and is very important to everyone.  The subjects included in                 
  HB 515 are forestry, land, agriculture, oil and gas and                      
  Number 060                                                                   
  MR. SWANSON explained Sections 1 and 2 will merge the former                 
  "land disposal bank," which was required to have 500,000                     
  acres, into the existing land disposal program.  Under more                  
  recent laws, regional land use plans are used to identify                    
  land that will be offered for private ownership.  More than                  
  two million acres have been classified through this process,                 
  making the land bank obsolete.  Related references to the                    
  land disposal bank are repealed in Section 35.  The land                     
  disposal bank also requires DNR to hold statewide hearings                   
  throughout the state and in the last five years, he has                      
  attended these hearings, and has had only one person attend.                 
  He said the person who attended wanted to apply for land,                    
  not nominate any land into the land bank.  He stated on the                  
  area plans, DNR goes through at least three rounds of public                 
  hearings and land settlement is always well discussed by the                 
  MR. SWANSON said Section 3 will combine two separate                         
  legislative reports into one.  The annual report on land                     
  classification will include acreage of land classified for                   
  various types of land disposal.  He stated Section 4 will                    
  put the state land disposal program on the same footing as                   
  other natural resource sale programs.  DNR will submit a                     
  budget request each year which will be discretionary, not                    
  mandatory, but each budget proposal will be complete.  It                    
  will request the full funding needed to get the land                         
  disposal projects ready for sale, including any access roads                 
  or other capital improvements which might be required.                       
  MR. SWANSON stated Section 5 will make technical                             
  corrections, dropping an out-of-order classification                         
  reference, and classify land after the subdivision process                   
  instead of before.                                                           
  Number 084                                                                   
  REPRESENTATIVE JOE GREEN referring to Section 4, noted                       
  homesteads will be offered again.  He said there was a                       
  period of time when homesteading was curtailed.  He asked if                 
  this section implies homesteading will get back to an active                 
  MR. SWANSON responded a small amount of homestead land is                    
  offered each year.  He said last year, approximately 70,000                  
  acres of homestead land was offered.  He explained there                     
  have not been a lot of homestead land disposals in the past                  
  three years because there is a need to clean up the mental                   
  health legislation and there is also a lot of backlog to                     
  clean up from homestead projects in the past.  He stated                     
  homesteads have been a big administrative load for DNR in                    
  carrying past programs and trying to offer new.  He is                       
  hopeful that if the mental health legislation is passed this                 
  year, DNR can begin offering homesteads and many sorts of                    
  land disposal programs beginning next spring.                                
  REPRESENTATIVE GREEN felt homestead land disposals will help                 
  the state's fiscal problems if DNR can get that land into                    
  private hands and begin taxing that land.                                    
  MR. SWANSON said that is a good point.  He noted the only                    
  problem with homestead programs is that most of the good                     
  land within municipalities, suitable for subdivisions or                     
  homesteads, etc., is long gone.  He pointed out that                         
  carrying the homestead program is a very expensive burden on                 
  the department.  The department gets $10 for the application                 
  fee and nothing else until the land is disposed of.  The                     
  homesteader then has the option of getting the land for free                 
  or purchase it for fair market value but because of patent                   
  restrictions, the department usually does not get fair                       
  market value, but rather about 50 percent.                                   
  Number 118                                                                   
  REPRESENTATIVE PAT CARNEY asked what the residency                           
  requirement is for homesteads.                                               
  MR. SWANSON replied the residency requirement is one year                    
  for all land disposal programs.  Living requirements on the                  
  homestead are 35 months within a five year period.  He                       
  explained to apply for a homestead, a person has to be a                     
  resident for one year.                                                       
  MR. SWANSON said Section 6 will make it clear that the five-                 
  acre limit on subdivision lot sizes applies to residential                   
  and recreational sales, not agricultural parcels, commercial                 
  parcels, etc.  This section will also allow larger lots if                   
  they would be more profitable for the state.  Section 7 will                 
  update a list of state land disposal programs by adding the                  
  homestead law.  Section 8 will delete a reference to an                      
  annual land demand study.  Section 9 will let DNR create new                 
  land disposal programs by regulation, so long as they                        
  provide for competition and produce at least fair market                     
  value for the land.                                                          
  MR. SWANSON explained Section 10 clarifies the legislature's                 
  policy that sales of public land to private individuals                      
  should be at fair market value unless otherwise directed,                    
  and gives further guidance on the remote cabin program.                      
  Section 11 will help the department deal with Native                         
  allotments in state parks.  This section will let the                        
  department reconvey substitute land, located outside the                     
  parks, that the federal government could then grant to the                   
  allottee.  This will let the state take advantage of a 1992                  
  amendment to the Alaska Native Claims Settlement Act.                        
  Number 143                                                                   
  REPRESENTATIVE JOHN DAVIES recalled that Section 11 was                      
  addressed in another bill.                                                   
  MR. SWANSON said that is correct.  He stated this section is                 
  in a House Bill and also in a Senate Bill.  He explained the                 
  Senate Bill is different in that it allows DNR to reconvey                   
  substitute land on all state lands.                                          
  REPRESENTATIVE DAVIES felt Section 11 should be deleted or                   
  made consistent with the other bill.                                         
  CHAIRMAN WILLIAMS stated the committee had been asked by the                 
  sponsor of HB 404 to hold it.                                                
  MR. SWANSON stated Sections 12-14 respond to a Superior                      
  Court decision that it is unconstitutional to make state                     
  land purchasers appear in person at the sale.  He said                       
  Section 12 will make it discretionary where to hold land                     
  auctions and lotteries.  Section 13 will delete the personal                 
  appearance requirement for land auctions, allowing                           
  purchasers to be represented by an agent.  Section 14, and a                 
  related repealer in Section 35, will delete the requirement                  
  that purchasers appear in person at land lotteries and pay                   
  the down payment on the spot.  Instead, they will have a 30-                 
  day period to make the payment.  This section also drops                     
  language about consulting with the local assessor to                         
  determine land values, which is unnecessary because AS                       
  38.05.840 requires a formal appraisal before the land can be                 
  offered for sale.  He added that Section 32 deletes the                      
  authority to make applicants appear in person at a homestead                 
  Number 176                                                                   
  MR. SWANSON explained Sections 16-18 simplify the process of                 
  leasing tideland for setnet fishing and aquatic farm sites.                  
  These sections will substitute standard leasing laws for the                 
  current special purpose procedures.  He said Section 16 will                 
  allow standard leasing methods to be used for setnet fishing                 
  sites.  If only one person applies, the lease can be issued                  
  by negotiation.  This is in contrast to the current method,                  
  which requires that the most qualified applicant be                          
  selected, which results in numerous appeals.                                 
  MR. SWANSON stated Section 17 removes language limiting fees                 
  for setnet leases to administrative costs.  This change will                 
  put rentals on the same fair market value basis as other                     
  state lease rentals.  Section 18, with conforming amendments                 
  in Section 29 and several repealers in Section 35, will                      
  streamline authorizations for aquatic farming.  Leases could                 
  be issued directly, either competitively or by negotiation,                  
  instead of requiring a permit stage first.  However,                         
  existing permit holders will still have the right to a                       
  Number 192                                                                   
  MR. SWANSON explained Section 19 modernizes requirements to                  
  restore surface lease sites after lease termination,                         
  protecting the state against liability and high cleanup                      
  costs.  He said because Title 38 also applies this statute                   
  to homesites, homesteads, remote cabin permits, etc.,                        
  special measures are retained to compensate individuals for                  
  authorized private residential improvements that are not                     
  removed from the site and are worth more than $10,000 net                    
  value.  He stated Section 28 clarifies that the division can                 
  allow livestock grazing and similar low value uses by                        
  issuing permits, an authority the Department of Law recently                 
  MR. SWANSON said Sections 30 and 31 clarify that lottery                     
  procedures apply to homesites, make the application fees the                 
  same as for lottery parcels, and require a token rental of                   
  $100 annually.  The rental requirement will not apply to                     
  existing homesites.  Section 33 will raise the fee to                        
  receive a nonagricultural homestead entry permit to $20 per                  
  acre.  This is a one-time fee, lasting for the entry                         
  permit's five-year term.  Section 34 will ensure that the                    
  setnet leasing changes made in Sections 16-17 will not be                    
  affected by replacement legislation that goes into effect in                 
  1997.  This legislation requires land use plans be completed                 
  prior to issuing any leases and it applies to all leases.                    
  There was a waiver issued several years ago for setnet                       
  leases in the Cook Inlet, Bristol Bay and part of Kodiak                     
  that authorizes DNR to issue leases for existing leases                      
  where land use plans were not in place but required the                      
  department to get those land use plans completed by 1997.                    
  MR. SWANSON stated Section 36 protects valid existing rights                 
  of homesite entry permittees and aquatic farm site                           
  permittees.  Section 37 allows the department to adopt                       
  regulations in advance of the bill's effective date.                         
  Section 38 affects both the remote parcel program (which was                 
  repealed effective in 1984, but with many leases still                       
  pending conversion to purchase) and the homestead program.                   
  This section will prohibit the department from imposing the                  
  conditions of the former AS 38.05.078(d) in new remote                       
  parcel purchase contracts.  These conditions restricted the                  
  sale or subdivision of remote parcel land after it was                       
  conveyed into private ownership.  He stated this section                     
  will also allow the department to amend existing remote                      
  parcel or homestead purchase contracts or patents to remove                  
  these restrictions if the holder consented and reimbursed                    
  the state for the difference in value.  He noted each                        
  parcel's purchase price was cut by 50 percent to account for                 
  the resale restrictions.                                                     
  Number 243                                                                   
  REPRESENTATIVE CARNEY said Section 14 says the commissioner                  
  may sell land by lottery for less than the fair market value                 
  of the land on a determination that scarcity of land for                     
   private use...He felt it is odd to put in statute that the                  
  state can sell land for less than market value simply                        
  because somebody estimates the market value is higher than                   
  it should be.  He said normally land prices are based on                     
  MR. SWANSON stated that particular provision on page 6, line                 
  14, is in existing statute and has been in statute for over                  
  a decade.  He said DNR has not used this provision in years.                 
  DNR goes to auction and lets the auction set the price.                      
  REPRESENTATIVE ELDON MULDER recalled that Mr. Swanson had                    
  referred to Sections 16, 17, and 18 as being controversial.                  
  He asked Mr. Swanson to explain what the controversies are.                  
  MR. SWANSON responded those sections are special legislation                 
  dealing with shore fish and aquatic farming.  Those                          
  provisions apply only to those industries.  For all other                    
  types of land disposals, DNR uses other provisions in Title                  
  38.  The intent is to put everybody on equal footing and use                 
  the same leasing laws for everybody.  He stated those two                    
  industries are accustomed to current legislation, like to                    
  work under it and oppose any changes.  Mr. Swanson said the                  
  most qualified applicant provision for shore fish involves                   
  two people applying for the same site, where he (Mr.                         
  Swanson) is supposed to decide who is the most qualified for                 
  that particular site.  That provision creates many appeals                   
  to determine who is the most qualified.  He noted the                        
  difficulty is that DNR is getting more and more of these                     
  types of situations because many of the setnet permits are                   
  turning over to other family members.  For example, a father                 
  is deceased and a decision has to be made as to who is the                   
  most qualified for the site, the mother or the son.                          
  MR. SWANSON stated DNR is also limited on shore fish sites                   
  to charge only what it costs to administer the program.                      
  Currently, DNR charges $300 per site statewide.  DNR would                   
  like to get the shore fish sites back under normal leasing                   
  procedures, so in sites where the value is higher, the                       
  program could be balanced out.  He said aquatic farming                      
  currently is under a three year permit and if the                            
  development standards are met, they come in and apply for a                  
  lease for seven additional years and can renew for two more                  
  terms.  DNR's proposal is to issue the lease up-front.  DNR                  
  thought that would give the industry a better chance to go                   
  to the bank with something they have a longer term                           
  authorization on.                                                            
  MR. SWANSON said DNR wants to go to an appraisal schedule,                   
  instead of a formal appraisal, which would cost the                          
  applicant a lot less money.  He said an appraisal schedule                   
  will also allow DNR to change the survey standards, so if                    
  someone is in a remote location with no competition, an                      
  aerial photo can be used, instead of the formal appraisal.                   
  He pointed out the industry and various interest groups                      
  worked very hard several years ago on this current                           
  legislation and this is a compromise which they came up with                 
  and they like it the way it is.                                              
  Number 317                                                                   
  CHAIRMAN WILLIAMS stated in regard to Section 12, it is very                 
  difficult for people from rural areas to attend auctions.                    
  MR. SWANSON stated an auction will be held in the location                   
  where the land is located.  He said there are two types of                   
  disposals--an actual auction which can either be an outcry                   
  or a sealed bid, or a lottery.  He noted for lotteries it                    
  does not matter what location is used to pull the names out                  
  of the hat.  This section says DNR may have the land                         
  disposal one way or the other and it is up to the                            
  department, using common sense, where to hold a particular                   
  auction or lottery.  He said the Superior Court decision                     
  clearly said that the applicant does not have to be in the                   
  location where the auction or lottery is being held.                         
  REPRESENTATIVE DAVID FINKELSTEIN asked how Section 38                        
  affects someone who has received a homestead in the past two                 
  years.  He assumed the homesteader is subject to a                           
  requirement that they not sell or subdivide for five years.                  
  MR. SWANSON said that is correct.  He stated in the                          
  transition, DNR will propose that if they want that                          
  restriction in place, it will be left in place and the                       
  homesteader will pay less money.  If the homesteader wants                   
  the restriction lifted, DNR will do so but the homesteader                   
  will have to pay the difference in value.                                    
  REPRESENTATIVE FINKELSTEIN asked about future homesteaders                   
  and asked if there will be any limitation on their right to                  
  MR. SWANSON responded there will not be any limitation.                      
  REPRESENTATIVE FINKELSTEIN asked why.                                        
  MR. SWANSON replied DNR has heard little, if any support,                    
  for the current restrictions.  Rather, DNR hears complaints                  
  about the restrictions not being equal with the public and                   
  private sector and how they do business.  People are used to                 
  paying fair market value and being able to do what they want                 
  with their land.  He said many times, a family situation is                  
  involved--the family went out and homesteaded, the children                  
  have grown, and now there is a desire to cut up the                          
  homestead into smaller pieces to give to family members.                     
  DNR cannot let them do it.  He said there are also market                    
  considerations but DNR does not hear much about that.                        
  REPRESENTATIVE FINKELSTEIN said the analogy to the private                   
  market does not make much sense because no one offers                        
  homesteads.  The concept of homesteads is not making as much                 
  money as possible off the land, it is trying to give people                  
  an opportunity to go live on the land.  Homesteading is very                 
  different than other land disposal programs.  He felt the                    
  idea of limiting homesteads from subdividing is a reasonable                 
  Number 408                                                                   
  MR. SWANSON responded everyone thinks of homesteading as                     
  something different.  DNR is trying to make the state's                      
  homestead program comparable with the federal                                
  (indiscernible)--once a person completes the requirements,                   
  that person gets title to the land and can do what they want                 
  with the land.  He pointed out there are two ways to obtain                  
  titles to homesteads in Alaska.  He explained the first way                  
  is to live on the land for 35 months within five years and                   
  he noted those people tend not to subdivide.  Other people                   
  who do homestead can purchase the land at fair market value,                 
  with the restriction they cannot subdivide.  He stressed the                 
  state loses 50 percent on that option.                                       
  REPRESENTATIVE FINKELSTEIN clarified the person who decides                  
  to get title by living on the land can subdivide it.                         
  MR. SWANSON said that is correct.                                            
  REPRESENTATIVE CON BUNDE stated the program for lease and                    
  purchase of recreational pieces of property requires a ten                   
  year wait before the property can be sold.  He said                          
  miniature land speculators are produced out of the program.                  
  He felt there should be some delay when a person gets a                      
  homestead, pays fair market value and the state loses 50                     
  percent and then the homesteader subdivides and become a                     
  land baron.                                                                  
  MR. SWANSON stated what Representative Bunde is referring to                 
  is the remote disposal program which was repealed in 1984                    
  and was later replaced by the homestead and homesite                         
  programs.  He noted there was a ten year restriction, but                    
  those are coming to an end.  He said if one were to look at                  
  the state's homesteads, the majority are in remote                           
  (CHAIRMAN WILLIAMS noted for the record that REPRESENTATIVES                 
  GREEN AND JAMES had joined the committee at 8:26 a.m. and                    
  8:42 a.m., respectively.)                                                    
  Number 465                                                                   
  TOM BOUTIN, DIRECTOR, DIVISION OF FORESTRY, DNR, stated                      
  Sections 20 and 21 in HB 515 deal with forestry.  Section 20                 
  will permit the commissioner of DNR, after making a best                     
  interests determination, to sell timber that will quickly                    
  lose substantial economic value due to insects or disease or                 
  when the land is going to be cleared of timber and converted                 
  to some nonforest use such as mining or agriculture.  This                   
  section will allow those types of sales to be put up                         
  immediately as opposed to complying with provisions of AS                    
  38.05.113.  He said AS 38.05.113 requires the division to                    
  annually have a five year timber sale harvest schedule and                   
  further requires that no timber be offered for sale unless                   
  it has been in at least the two prior years of the five year                 
  harvest schedules.  In the case of disease, insects, or                      
  timber which is going to be cleared, salvage sales will be                   
  allowed.  Mr. Boutin stated AS 38.05.115 presently requires                  
  that negotiated sales be no larger than 500,000 board feet                   
  and these salvage sales will be exempt from that                             
  REPRESENTATIVE BUNDE asked how many board feet are in an                     
  acre or a square mile.                                                       
  MR. BOUTIN said the best timber he has seen in Alaska is                     
  75,000 board feet to the acre.  He stated he has seen many                   
  stands in the Interior which run 20,000 board feet to the                    
  acre, which is good.  In the Mat-Su area, 3,000 board feet                   
  is the norm.                                                                 
  Number 523                                                                   
  REPRESENTATIVE CARNEY wondered about clearing timber for                     
  conversion to nonforest uses.  He said in many cases, if a                   
  person is going to put together a farm on state land, that                   
  person will want to have some control over when the trees                    
  are cut.  He asked if the intent of this section is to clear                 
  land prior to disposal for agricultural purposes.                            
  MR. BOUTIN replied that decision is up to the Division of                    
  Agriculture, but added there have been situations where                      
  because of AS 38.05.113, timber could not be sold in a                       
  timely manner and so timber which would have been put up for                 
  sale was instead chained and burned.  He said these sales                    
  will be sold at a positive value but agreed that in some                     
  instances, it would be better if the timber went with the                    
  MR. SWANSON said DNR recently went through the                               
  permitting/leasing process for the Fort Knox Gold Mine in                    
  Fairbanks.  DNR was able to issue all of the permits and                     
  leases.  One of the problems which DNR faced was the trees.                  
  None of the trees had been on the five year schedule and DNR                 
  wanted to be able to sell the trees to make a little money,                  
  but because the timber was not in the five year schedule,                    
  DNR could not sell it.  DNR worked with the Fort Knox people                 
  who cut and stacked the trees enabling local people from                     
  Fairbanks to pick up the logs for personal firewood use.                     
  REPRESENTATIVE JEANNETTE JAMES asked if salvage sales might                  
  be due to fire.                                                              
  MR. BOUTIN responded occasionally salvage sales do follow a                  
  fire.  Timber left standing after a burn loses it value                      
  slowly but sometimes can bring in an insect epidemic.  He                    
  said often insects and disease will follow a buffer.                         
  REPRESENTATIVE DAVIES said the discussion about having                       
  timber sales on a five year plan leads people to believe                     
  that the plan has to be noticed for five years but in                        
  reality, the sale only has to be on the plan two times,                      
  which actually means a total of 12 months.                                   
  MR. BOUTIN said many people say the two prior years can mean                 
  a year and a day, but that is not true.  He stressed there                   
  has not been one instance where these five year plans have                   
  actually been done on time.  Every timber sale requires two                  
  separate public processes:  AS 38.05.113 which is the five                   
  year harvest schedule which every sale has to be in it at                    
  least the two prior years; and then separately, the forest                   
  land use plan under AS 38.05.112 which is a decision                         
  document and a grocery list of considerations completely                     
  distinct from the five year harvest schedule process.  Each                  
  sale has to pass through both of those processes.  He cannot                 
  envision getting out the five year plan in a timely manner,                  
  let alone being able to get one out in 12 months, and then                   
  the next one out in the first day of the fiscal year.                        
  REPRESENTATIVE DAVIES felt it should be possible under the                   
  five year plan to get a sale on the offering blocks in less                  
  than two years.                                                              
  MR. BOUTIN asked Representative Davies if there is a way to                  
  not comply with AS 38.05.113.                                                
  REPRESENTATIVE DAVIES stated he will discuss the issue at a                  
  later date.  He observed Fort Knox has been around for a                     
  long time and he felt it could have been on the normal                       
  MR. SWANSON stated in regard to Fort Knox, DNR did not know                  
  the exact layout of where things were going to be, but only                  
  knew up front where the hole in the ground was going to be,                  
  which was easy to deal with.  The rest of the facilities,                    
  which are four times the size of the hole in the ground,                     
  were not determined until later in the process.                              
  REPRESENTATIVE FINKELSTEIN stated one of the reasons Section                 
  20 is difficult to envision is because it is such a complete                 
  exception.  He felt there may be some portions of the law                    
  which should be exempted but wholesale exemption may not be                  
  TAPE 94-45, SIDE B                                                           
  Number 000                                                                   
  MR. BOUTIN stated the public process in the forest land use                  
  plan will still be required for the salvage sales.                           
  Therefore, it is only the separate five year harvest                         
  schedule process in AS 38.05.113 which is being discussed.                   
  REPRESENTATIVE FINKELSTEIN wondered if the controversy on                    
  the Kenai Peninsula was about AS 38.05.113 provisions.                       
  MR. BOUTIN stated the controversy was the state's five year                  
  plan which proposes going from what has been a normal two                    
  million board feet a year offered on the Kenai Peninsula, to                 
  what the Division of Forestry proposes for this year, which                  
  is 75 million board feet, in response to the spruce bark                     
  beetle.  That proposal first came out in the five year plan,                 
  so that plan was controversial and examined quite                            
  thoroughly.  If the forest land use plans had come out                       
  instead with that 75 million board feet, and if there was no                 
  AS 38.05.113, then the forest land use plan would have                       
  received that level of examination.  The five year plan was                  
  the first time people had an opportunity to examine the                      
  Kenai timber sales and he added it was not just this year's                  
  75 million board feet, but also sales in the future since it                 
  is a five year plan.                                                         
  REPRESENTATIVE JAMES stated in many areas, the state has                     
  opportunities for something the state can not foresee.  It                   
  seems in other laws there are plenty of protections and                      
  particularly with the commissioner finding the determination                 
  which is in the best interest of the state.  She felt there                  
  is a need to have some way of dealing with emergency                         
  situations that the state is not aware of when doing the                     
  best laid plans.                                                             
  MR. BOUTIN said all the protections in Title 41, the Forest                  
  Practices Act, protecting fish habitat, water quality, etc.,                 
  remain for salvage sales.  What is being discussed is                        
  exemption from the five year planning process in instances                   
  where the timber is going to lose its value within a couple                  
  of years and there is no way to get the five year planning                   
  process speeded up.                                                          
  Number 062                                                                   
  MR. BOUTIN said Section 21 will modify existing AS 38.05.118                 
  which allows a long-term negotiated sale if certain                          
  conditions exist such as a high level of local unemployment,                 
  underutilized timber manufacturing capacity, and an                          
  underutilized allowable cut of state timber.  Section 21                     
  will allow the commissioner to negotiate that type of sale                   
  if it is determined these conditions will exist within two                   
  years, and adds, as a circumstance, that timber will lose                    
  substantial economic value due to insects, disease, fire, or                 
  land use conversion.                                                         
  REPRESENTATIVE FINKELSTEIN wondered since all of the                         
  conditions mentioned are necessary in order to make this                     
  determination, how is the commissioner going to know two                     
  years ahead of time what the local employment is going to                    
  MR. BOUTIN said that is a valid question.  He stated the                     
  wording in Section 21 was worded with respect to                             
  Southcentral Timber Development versus the state of Alaska                   
  which threw out the state's primary manufacturing                            
  requirement in its timber sales.  He pointed out that                        
  currently the state does not have a way to put together a                    
  timber sale for an underutilized resource.                                   
  REPRESENTATIVE FINKELSTEIN thought the Southcentral suit was                 
  the primary manufacture suit.                                                
  MR. BOUTIN replied that is correct.                                          
  REPRESENTATIVE FINKELSTEIN said Section 21 does not relate                   
  to primary manufacture.                                                      
  MR. BOUTIN responded underutilized timber manufacturing                      
  capacity is a primary manufacturing...  If the state can                     
  require in its timber sales that bidders must have timber                    
  manufacturing capacity, it will be helpful.                                  
  REPRESENTATIVE FINKELSTEIN stated Section 21 does not                        
  require primary manufacture, it only notes there is some                     
  sort of manufacturing capacity.                                              
  MR. BOUTIN said many people, including mill owners on the                    
  Kenai, have looked at AS 38.05.118 and in talking with a                     
  person in research at the Department of Labor to determine                   
  if the Kenai Peninsula would meet the test, that person said                 
  the Kenai Peninsula will always meet the test because                        
  Anchorage is such a high part of the sample.                                 
  Number 152                                                                   
  REPRESENTATIVE DAVIES said there are areas in the state                      
  where the unemployment rate is chronically high due to the                   
  seasonal nature of employment and therefore, the                             
  unemployment rate does not really reflect true market                        
  conditions.  He asked what the definition of high level of                   
  local unemployment is in Section 21.                                         
  MR. BOUTIN responded in regulation, the high level of local                  
  unemployment is set out as 135 percent of the statewide                      
  REPRESENTATIVE DAVIES clarified there could be a situation                   
  where there is a chronic high unemployment which is                          
  reflective of a normal economy of an area that will always                   
  qualify for the standard in Section 21.                                      
  MR. BOUTIN replied the area Representative Davies is                         
  describing is similar to the Kenai Peninsula.                                
  REPRESENTATIVE CARNEY stated the Mat-Su valley will always                   
  qualify also.                                                                
  Number 185                                                                   
  MR. SWANSON stated Section 22 of HB 515 amends existing AS                   
  38.05.180(c) to remove restrictions on DNR's ability to                      
  delay an oil and gas lease sale for more than 90 days after                  
  the sale's scheduled date in the five year oil and gas                       
  leasing schedule submitted annually to the legislature.                      
  Under the existing statute, an oil and gas lease sale may be                 
  delayed only for a maximum of 90 days after the last day of                  
  the calendar quarter for which the sale was scheduled.                       
  After that time, the sale must be delayed until the sale has                 
  again appeared in the annual five year leasing schedules                     
  submitted to the legislature for two calendar years.                         
  MR. SWANSON said although the purpose of the 90-day                          
  restriction was to prevent arbitrary delays in lease sales,                  
  that has not been shown to be a problem.  DNR has concerns                   
  that administrative appeals and court challenges to lease                    
  sales might cause the 90-day limit to be exceeded.  Also,                    
  DNR might wish to extend the comment period for a lease sale                 
  beyond 90 days to facilitate unique needs of residents in                    
  the area.  For example, the comment period might otherwise                   
  occur during peak subsistence hunting or fishing seasons.                    
  This amendment will delete the 90-day restriction to                         
  accommodate unavoidable delays, while still allowing for                     
  timely scheduling of lease sales.  He stated timely                          
  scheduling of future sales is important in encouraging                       
  Number 201                                                                   
  MR. SWANSON explained Section 23 of HB 515 amends existing                   
  AS 38.05.185(a) to eliminate overly broad provisions                         
  allowing land to be closed to mining.  The existing statute                  
  allows DNR to determine which state land should be closed to                 
  mining or mineral entry.  The commissioner of DNR must first                 
  find that mining would be incompatible with significant                      
  surface uses of the land.  Although not defined in AS 38.05,                 
  the term mining generally refers to the activities and                       
  operations involved in extracting, processing, and marketing                 
  minerals.  He stated mining presupposes the existence of                     
  valid mining rights under mining claims or losses.                           
  MR. SWANSON said existing AS 38.05.185(a) is overly broad                    
  because it allows land to be closed to mining without                        
  provision for valid existing mining rights.  The existing                    
  statute could be viewed as effecting a taking of valid                       
  mining rights, since it authorizes a mineral closure without                 
  requiring an eminent domain action or providing for                          
  compensation; and may therefore run afoul of                                 
  AS 37.05.170 and Article 6, Section 13 of the Alaska                         
  Constitution.  This amendment will provide that land may be                  
  closed to location under AS 38.05.185 - 38.05.275, which                     
  will prevent the acquisition of new mining rights, thus                      
  avoiding these potential pitfalls.                                           
  Number 224                                                                   
  MR. SWANSON stated Section 24 clarifies the qualifications                   
  for mining claim ownership by aliens and foreign                             
  corporations.  Under the existing statute, an alien at least                 
  18 years old from a country that grants like privileges to                   
  United States citizens may acquire or hold exploration and                   
  mining rights.  He said a corporation in which more than 50                  
  percent of the stock is owned or controlled by aliens whose                  
  country does not grant reciprocal rights to U.S. citizens                    
  may not acquire or hold exploration and mining rights.                       
  However, determinations of which countries grant like                        
  privileges to U.S. citizens have never been made or enforced                 
  in any consistent manner due to the number and complexity of                 
  mining laws worldwide.                                                       
  MR. SWANSON explained that the federal mining laws, upon                     
  which Alaska laws were initially based, allow an alien to                    
  form a domestic corporation that would be qualified to                       
  obtain mining rights, without inquiry into like privileges.                  
  The Alaska laws governing the acquisition and holding of oil                 
  and gas rights also do not inquire into like privileges.  He                 
  said amending AS 38.05.190(a) to delete these requirements                   
  will be consistent with modern business practices, similar                   
  federal laws, and state laws affecting other types of                        
  mineral rights.                                                              
  MR. SWANSON said HB 515 makes several changes regarding                      
  mining operations.  Section 35 of the bill repeals AS                        
  38.05.207 in its entirety.  That statute requires a                          
  production license for every mining operation.  This                         
  provision was added in 1982 in an effort to resolve issues                   
  arising under Section 6(i) of the Alaska Statehood Act.  He                  
  pointed out that in Trustees for Alaska v. State, AS                         
  38.05.207 was held not to satisfy the Statehood Act                          
  provision and the existing rent and royalty measures in AS                   
  38.05.211 and AS 38.05.212 subsequently were enacted.  The                   
  production license requirement in AS 38.05.207 is thus                       
  outmoded and serves no public purpose at this time.                          
  MR. SWANSON stated Section 25 of HB 515 will repeal and                      
  reenact AS 38.05.211(d) to simplify the adjustments to be                    
  made in the annual rental amounts due on mining claims and                   
  leases.  The existing statute requires the rental amounts to                 
  be adjusted every 10 years based on changes in the consumer                  
  price index for Anchorage.  He said this statutory                           
  adjustment would most likely result in odd rental amounts                    
  that would make calculating, accounting, and collection more                 
  difficult.  Additionally, adjusting rental amounts only at                   
  10-year intervals could result in large changes at one time.                 
  MR. SWANSON explained the repeal and reenactment will allow                  
  rent adjustments to be made whenever the change in the                       
  consumer price index for all urban consumers in the                          
  Anchorage area equals or exceeds $5, and will restrict the                   
  change to multiples of $5.  Both DNR and the mining claim or                 
  lease owners will appear to be better served if changes can                  
  be made more often, and in smaller increments than at                        
  cumulative 10-year intervals.  This amendment also more                      
  clearly identifies the consumer price index on which changes                 
  are to be based.                                                             
  Number 267                                                                   
  MR. SWANSON stated Section 26 amends AS 38.05.255 to provide                 
  a more workable surface use authorization for mine                           
  millsites.  The existing statute requires a millsite permit                  
  for millsites and tailings disposal.  Millsites and tailings                 
  disposal sites involve large, long-term structures such as                   
  mills, dams, and tailing impoundments, often constructed or                  
  installed at considerable expense.  He said the permit                       
  traditionally refers to an authorization to use land for a                   
  limited purpose, with the authorization revocable at the                     
  will of the grantor of the permit.  A permit does not                        
  accommodate the realistic needs of a mining project, which                   
  requires long-term surface occupancy and some certainty of                   
  continuance if the authorization is maintained in good                       
  MR. SWANSON continued that a prudent operator would be                       
  reluctant to invest the large amounts of capital and time                    
  necessary for a major mining project if the millsite                         
  authorization can be revoked without cause at any time.                      
  This amendment substitutes lease for permit in AS 38.05.255                  
  and provides other conforming changes relating to that                       
  change of term.  A lease provides for use of the land for a                  
  definite period of time if the leasehold is maintained in                    
  good standing.  A lease generally requires good cause and                    
  notice for cancellation.                                                     
  MR. SWANSON said this amendment also exempts millsite leases                 
  from the requirements of AS 38.05.070 - 38.05.105, which                     
  govern leases not for the extraction of natural resources.                   
  Those statutes require competitive bidding as the disposal                   
  method.  A millsite lease, however, should not be                            
  competitively bid since there will almost always be only one                 
  party, the mine operator, applying for a particular tract                    
  for a millsite lease, and the characteristics of each mine                   
  probably will not generate more than one or two acceptable                   
  millsite tracts for disposal.  Instead, HB 515 requires the                  
  commissioner of DNR to adopt regulations establishing                        
  appropriate procedures and annual rent amounts for millsite                  
  MR. SWANSON stated Section 27 of HB 515 amends AS 38.05.265                  
  to eliminate the failure to file a lease application within                  
  a prescribed period of time as grounds for abandonment of a                  
  mining claim.  In areas open to mining only under lease, a                   
  person who locates a mining claim first must record the                      
  certificate of location with DNR under AS 38.05.205(a).  DNR                 
  then issues a public notice of the proposed mining lease and                 
  mails a lease application to the locator.  The locator of                    
  the mining claim is required to return the lease application                 
  within 90 days after receipt of it.  Under existing AS                       
  38.05.265, if a lease applicant fails to file the                            
  application within 90 days after receipt, the mining claims                  
  included within the proposed lease area are abandoned.                       
  MR. SWANSON said the 90-day deadline for return of the lease                 
  application appears to be for the purpose of issuing a lease                 
  timely after the required public notice, so that the notice                  
  is not stale when the lease is finally issued.  However, if                  
  the application is not timely filed, the notice period could                 
  be repeated without the severe penalty of loss of the mining                 
  applicant's leasehold property rights.  Under HB 515, an                     
  applicant would still be prohibited from mining the claims,                  
  except for testing or sampling purposes, until a lease is                    
  issued and other filing requirements are met.                                
  Number 314                                                                   
  REPRESENTATIVE FINKELSTEIN asked where in the law is the                     
  provision mining cannot begin until the lease is issued.                     
  MR. SWANSON said he will have to figure that out later.                      
  REPRESENTATIVE DAVIES asked if no time limit is involved, is                 
  it possible for a person to sit on this process                              
  MR. SWANSON responded that is possible but added the lease                   
  is being driven by the applicant.  DNR will not force                        
  someone to go to a lease.                                                    
  REPRESENTATIVE DAVIES wondered if that does not open up the                  
  possibility for speculations.                                                
  REPRESENTATIVE FINKELSTEIN said one of the unintended                        
  outcomes of the changes made based on 6(i) was that not only                 
  did it lead to some revenue to the state but it also helped                  
  clear up paper claims.  He recalled claims dropped by a huge                 
  percentage because people had to take some action.                           
  MR. SWANSON stated once the department started getting                       
  payments, the first year drop was tremendous.  He said the                   
  annual turnover currently is about 20 percent.                               
  REPRESENTATIVE FINKELSTEIN said his point is that there is                   
  value to future miners who can look at an area that does not                 
  have a lot of nonworking paper claims cluttering up the                      
  area, keeping them from prospecting.  He stated he can                       
  understand the argument for eliminating the 90-day                           
  requirement but if there is no time limit set, there may be                  
  more nonworking paper claims.  He felt there should be some                  
  sore of cutoff date.                                                         
  MR. SWANSON said he will check with the Director of Mining.                  
  He stated if a person wants to file a mining claim, he can                   
  file a mining claim, as long as he makes his annual payment                  
  and does his labor, and he can continue that forever.  He                    
  stressed moving a mining claim up to a lease is a higher                     
  level of protection.  If a person really wants a lease, he                   
  will pursue it.                                                              
  Number 387                                                                   
  MR. SWANSON stated Section 15 repeals and reenacts AS                        
  38.05.069(e)(2).  This particular statute defines                            
  approximate vicinity, a term that is not used elsewhere in                   
  AS 38.05.069, the agricultural preference right statute.  HB
  515 will replace approximate vicinity with a definition of                   
  adjacent, a term that is used elsewhere in that statute.                     
  REPRESENTATIVE CARNEY asked what adjacent really means.  He                  
  knows of situations where a farmer has exercised preference                  
  rights for land a mile or two away.  He asked if HB 515 will                 
  eliminate that option.                                                       
  MR. SWANSON said it will not.                                                
  REPRESENTATIVE DAVIES pointed out Section 15 says "or is                     
  separated from the presently held land only by a physical                    
  barrier such as a road or stream."  He thought land a mile                   
  or two away will not be adjacent.                                            
  MR. SWANSON responded it says physical barrier and if the                    
  barrier is a mile away then yes you can do it, but otherwise                 
  no.  He reiterated this section is the preference rights                     
  REPRESENTATIVE CARNEY felt Section 15 will not work the way                  
  it is written because it will be difficult to find state                     
  land that borders or is adjacent to existing farm land and                   
  is available for purchase or lease.                                          
  MR. SWANSON stated he needed to talk to John Cramer about                    
  the issue.                                                                   
  Number 440                                                                   
  REPRESENTATIVE JAMES said there may be quite a bit of that                   
  type of land in the Delta area and perhaps in the North Pole                 
  area.  She expressed concern about the language in Section                   
  15 as it is very restrictive.                                                
  REPRESENTATIVE CARNEY stated the intention of that                           
  particular law is to allow farmers to increase their land                    
  base so they can function more economically, and he thought                  
  the limitation was up to 640 acres total land mass.                          
  MR. SWANSON thought that is correct.                                         
  REPRESENTATIVE CARNEY felt Section 15 is too restrictive.                    
  REPRESENTATIVE DAVIES asked if the salvage sale language in                  
  Sections 20 and 21 is redundant with what may happen if SB
  310 passes.                                                                  
  MR. BOUTIN said he did not believe so.  He stated arguably,                  
  Section 21 is a less useful tool than the forest management                  
  agreement under SB 310.                                                      
  REPRESENTATIVE DAVIES felt whatever is desired in Section 21                 
  can be accomplished through the forest management agreement.                 
  MR. BOUTIN agreed and said Section 21 is certainly more                      
  cumbersome and has unanswered questions.                                     
  REPRESENTATIVE DAVIES clarified there is a provision in SB
  310 allowing the department to go forward with an                            
  abbreviated process if the sale is less than 500,000 board                   
  MR. BOUTIN said yes but with a limit by region.                              
  REPRESENTATIVE DAVIES asked if small scale salvage sales can                 
  be conducted under that provision.                                           
  MR. BOUTIN said that is correct.                                             
  CHAIRMAN WILLIAMS stated the committee will schedule HB 515                  
  again in the near future to take public testimony.                           
  CHAIRMAN WILLIAMS announced the committee will meet next on                  
  Wednesday, April 6 at 8:15 a.m.                                              
  There being no further business to come before the House                     
  Resources Committee, Chairman Williams adjourned the meeting                 
  at 9:45 a.m.                                                                 

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