Legislature(1993 - 1994)
03/30/1994 08:15 AM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 that. 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 mining. 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 Related references to the land disposal bank are repealed in Section 35.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 public. 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 status. 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 lottery. 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 lease. 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 questioned. 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 demand. 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 sell. 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 limitation. 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 locations. (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 requirement. 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 land. 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 schedule. 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 appropriate. 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 be. 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 average. 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 development. 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 standing. 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 leases. 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 indefinitely. 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 statute. 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 feet. 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. ANNOUNCEMENTS CHAIRMAN WILLIAMS announced the committee will meet next on Wednesday, April 6 at 8:15 a.m. ADJOURNMENT There being no further business to come before the House Resources Committee, Chairman Williams adjourned the meeting at 9:45 a.m.