Legislature(2001 - 2002)

04/25/2002 01:40 PM House TRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 500-ADVANCE ACQUISITION OF REAL PROPERTY                                                                                   
CHAIR KOHRING announced that before  the committee was HOUSE BILL                                                               
NO.  500, "An  Act relating  to the  advance acquisition  of real                                                               
property for  public purposes."   [Before the committee  was CSHB
Number 0117                                                                                                                     
MIKE KRIEBER,  Staff to Representative Vic  Kohring, Alaska State                                                               
Legislature,  testified on  behalf  of  the House  Transportation                                                               
Standing Committee, sponsor of HB  500.  He reminded members that                                                               
the  bill  concerns  the   advance  acquisition  of  right-of-way                                                               
through  the [use  of] "eminent  domain."   The bill  would still                                                               
require all  eminent domain cases  to be heard through  the court                                                               
process.    It  doesn't  provide   any  "declaration  of  takings                                                               
authority" for  any of  the entities.   The  only thing  the bill                                                               
changes is to provide for  advance acquisition further in advance                                                               
of what  is typically viewed  as authority under  eminent domain.                                                               
He  told  the committee  that  eight  other states  have  similar                                                               
MR.  KRIEBER   informed  members   that  the  bill   was  closely                                                               
scrutinized  in   the  [House  Community  and   Regional  Affairs                                                               
Standing Committee],  where changes  were made  to provide  for a                                                               
hold-harmless clause.   This  hold-harmless clause  would require                                                               
the purchasing entity  to sell the property back  to its original                                                               
owner at the price for which it  was acquired, if it had not been                                                               
used for the stated purpose within  20 years.  This would prevent                                                               
a purchasing entity  from speculating on land,  and would provide                                                               
some compensation  for the original  owner's lost  opportunity to                                                               
develop the property.                                                                                                           
Number 0285                                                                                                                     
REPRESENTATIVE  KOOKESH  asked  if  the  heirs  of  the  original                                                               
property owner  would have the  same opportunity to  purchase the                                                               
land at the original price [in  the event of the original owner's                                                               
MR. KRIEBER answered  that the option would be  made available to                                                               
heirs as well.                                                                                                                  
Number 0327                                                                                                                     
REPRESENTATIVE MASEK  moved to adopt Amendment  1, 22-LS0610\J.1,                                                               
Utermohle, 4/24/02, which read:                                                                                                 
     Page 1, line 1, following "purposes":                                                                                    
          Insert "; and authorizing pipeline carriers to                                                                      
       exercise the power of eminent domain for pipeline                                                                      
     Page 6, line 17, following "future public":                                                                                
          Insert "utility"                                                                                                      
     Page 6, line 19, following "public":                                                                                       
          Insert "utility"                                                                                                      
     Page 6, line 23, following "public":                                                                                       
          Insert "utility"                                                                                                      
     Page 6, following line 27:                                                                                                 
          Insert a new bill section to read:                                                                                    
        "* Sec.  12.   AS 42.06 is amended  by adding  a new                                                                  
     section to article 7 to read:                                                                                              
          Sec. 42.06.601.  Eminent domain.   (a)  A                                                                           
     pipeline  carrier may  exercise  the  power of  eminent                                                                    
     domain  for pipeline  uses  including present  pipeline                                                                    
     uses   or  for   advance  acquisition   for  reasonably                                                                    
     foreseeable future  pipeline uses.   This  section does                                                                    
     not authorize the use of a declaration of taking.                                                                          
          (b)  If a pipeline carrier does not use all or a                                                                      
     portion of land acquired  for advance acquisition for a                                                                    
     future  pipeline use  as authorized  under (a)  of this                                                                    
     section   for  pipeline   purposes   within  20   years                                                                    
     following  the  acquisition  of  the  land  or  if  the                                                                    
     pipeline  carrier  sells  all  or  a  portion  of  land                                                                    
     acquired for advance acquisition  for a future pipeline                                                                    
     use  as  authorized  under (a)  of  this  section,  the                                                                    
     pipeline carrier  shall offer  the land to  the person,                                                                    
     or the  person's successor in  interest, from  whom the                                                                    
     land was acquired  at the same price  that the pipeline                                                                    
     carrier  paid the  person when  the land  was acquired.                                                                    
     If  only a  portion of  the land  acquired for  advance                                                                    
     acquisition for  a future pipeline use  is available to                                                                    
     the  former owner  of the  land under  this subsection,                                                                    
     the  pipeline carrier  shall prorate  the price  of the                                                                    
     land  to be  sold based  on the  original price  of the                                                                    
     land  and  the  proportion  that  the  amount  of  land                                                                    
     available for  sale bears to  the total amount  of land                                                                    
     originally acquired."                                                                                                      
     Renumber the following bill sections accordingly.                                                                          
Number 0335                                                                                                                     
REPRESENTATIVE KOOKESH objected for purposes of discussion.                                                                     
REPRESENTATIVE  MASEK explained  that Amendment  1 would  specify                                                               
which entities  have the power  of eminent domain; it  would make                                                               
pipeline  carriers and  public utilities  equal  with respect  to                                                               
their ability to  carry out eminent domain in  the acquisition of                                                               
properties for the public good.   She noted that oversight of the                                                               
pipeline carriers is done by  the Regulatory Commission of Alaska                                                               
(RCA).    A  judge  would  still have  to  rule  on  whether  the                                                               
acquisition  of property  was in  the public's  interest in  each                                                               
specific  case.   Representative  Masek suggested  that with  the                                                               
prospect  of a  natural-gas pipeline  running through  the state,                                                               
and  increased  interest  in  natural-gas  extraction  by  small,                                                               
independent companies  around the state, this  amendment would be                                                               
in the best interest of the state  and the public.  She asked for                                                               
unanimous consent.                                                                                                              
Number 0420                                                                                                                     
REPRESENTATIVE KOOKESH  posited that the power  of eminent domain                                                               
resides  in  the state.    He  asked  what  would happen  if  the                                                               
pipeline were  built by  a private company;  how could  a private                                                               
company be given the power of eminent domain?                                                                                   
Number 0432                                                                                                                     
MR.  KRIEBER  replied  that AS  09[.55.240]  gives  authority  to                                                               
various types of utilities, whether privately or publicly owned.                                                                
REPRESENTATIVE KOOKESH said he appreciated  that, but pointed out                                                               
the current discussion in Alaska  about whether a private company                                                               
or the state would build and own the [proposed gas] pipeline.                                                                   
MR. KRIEBER  cited AS 09[.55.240, paragraph  (12)] as identifying                                                               
the  purposes  of eminent  domain.    He  told the  committee  AS                                                               
42.05[.631]  deals  with eminent  domain  for  utilities, and  AS                                                               
42.06  deals  with  eminent  domain  for  pipelines.    Both  are                                                               
regulated  by the  RCA.   Both share  the same  requirement of  a                                                               
certificate of public convenience and  need.  The amendment would                                                               
modify  the wording  concerning  eminent domain  for both  public                                                               
utilities and pipelines, so that they are identical.                                                                            
Number 0589                                                                                                                     
REPRESENTATIVE  SCALZI offered  his  understanding that  [eminent                                                               
domain] authority  is given by a  municipality or the state  to a                                                               
public utility.                                                                                                                 
MR. KRIEBER pointed out that  a "public utility" can be privately                                                               
owned.  The authorization of a  monopoly is given in exchange for                                                               
regulation by the RCA.  Mr. Krieber cited examples.                                                                             
REPRESENTATIVE SCALZI  remarked, "We're  only speaking  of right-                                                               
of-ways in terms of public utilities."                                                                                          
MR. KRIEBER agreed and said  eminent domain authority is given to                                                               
REPRESENTATIVE  SCALZI interjected,  "Through those  right-of-way                                                               
MR. KRIEBER disagreed, saying that  is a separate section of law.                                                               
He pointed to the existing law in AS 42.05.631.                                                                                 
REPRESENTATIVE  SCALZI  read  in  part from  AS  42.05.631,  "for                                                               
public utility  uses".  He  said, "'for public utility  uses' are                                                               
in the corridors and in the right-of-ways."                                                                                     
MR. KRIEBER  noted that  the bill is  for advance  acquisition of                                                               
right-of-way through  eminent domain.   He called it a  "cart and                                                               
horse issue."                                                                                                                   
REPRESENTATIVE  SCALZI said  it may  be, but  eminent domain  for                                                               
pipeline purposes may be outside of corridors or rights-of-way.                                                                 
Number 0710                                                                                                                     
MR. KRIEBER said the act of  eminent domain is to condemn private                                                               
property  for public  use, to  create  a public  use easement  or                                                               
right-of-way.   If the right-of-way already  exists, then eminent                                                               
domain doesn't come into play.                                                                                                  
REPRESENTATIVE  SCALZI said  he hoped  the language  in the  bill                                                               
would mirror what is done with regard to public utilities.                                                                      
MR. KRIEBER  said that is  the case, and  mentioned modifications                                                               
for future use.                                                                                                                 
REPRESENTATIVE SCALZI  asked what  modifications Mr.  Krieber was                                                               
speaking of.                                                                                                                    
MR.  KRIEBER  referred  to  Section   10  of  the  bill  and  its                                                               
underlined  wording.   He said  that  would be  the new  language                                                               
added  to  public  utility   authority  for  advance  acquisition                                                               
through eminent domain.                                                                                                         
REPRESENTATIVE SCALZI asked where the [amendment] came from.                                                                    
Number 792                                                                                                                      
REPRESENTATIVE MASEK  said Chair Kohring  was the sponsor  of the                                                               
bill  [although  the   House  Transportation  Standing  Committee                                                               
officially sponsored it], and the amendment was hers.                                                                           
REPRESENTATIVE SCALZI asked what  prompted the amendment, because                                                               
the issue was  heard in the House Community  and Regional Affairs                                                               
Standing  Committee.   He asked  why it  hadn't come  up in  that                                                               
MR. KRIEBER said  when the original bill was drafted,  all of the                                                               
eminent  domain  issues   in  statute  were  "pulled   up."    He                                                               
apologized  for  not  recognizing   that  eminent  domain  wasn't                                                               
specified under the Pipeline Act [AS 42.06].                                                                                    
REPRESENTATIVE SCALZI asked if it was an oversight.                                                                             
MR. KRIEBER  said it hadn't  popped up in the  original drafter's                                                               
review of existing statutes in order to make the modifications.                                                                 
Number 0902                                                                                                                     
CHAIR KOHRING  said the purpose  of the  amendment is to  help in                                                               
the building of a pipeline.                                                                                                     
MR.  KRIEBER  agreed,  adding  that  a  potential  pipeline-owner                                                               
entity  would still  have to  be certificated  by the  RCA, which                                                               
would have  to make a  finding to  issue a certificate  of public                                                               
convenience and need.   Not just any privately  owned company can                                                               
come forward and  [carry out an act of eminent  domain].  Rather,                                                               
legal  findings  of  fitness, willingness,  ability,  and  public                                                               
interest must be made.                                                                                                          
Number 0948                                                                                                                     
REPRESENTATIVE WILSON asked if anyone was against the bill.                                                                     
Number 0995                                                                                                                     
REPRESENTATIVE KOOKESH said he  was comfortable with transferring                                                               
the powers of eminent domain  within Alaska statutes and law, but                                                               
didn't want to find out  later that [the legislature] didn't have                                                               
authority to make that transfer.                                                                                                
REPRESENTATIVE KOOKESH withdrew his objection to Amendment 1.                                                                   
Number 1031                                                                                                                     
CHAIR  KOHRING  announced  that  Amendment 1  was  adopted.    He                                                               
clarified  that  before  the  committee  was  CSHB  500(CRA),  as                                                               
Number 1059                                                                                                                     
DENNIS POSHARD, Legislative Liaison,  Office of the Commissioner,                                                               
Department  of  Transportation   &  Public  Facilities  (DOT&PF),                                                               
testified  before the  committee.   He said  he'd understood  the                                                               
committee's  message from  the previous  meeting, that  it wished                                                               
the  department  to consider  the  concerns  of private  property                                                               
owners.   Therefore,  the department  had come  up with  language                                                               
that  might  strike  a  better  balance  between  the  state  and                                                               
property owners on  the issue of who receives a  benefit from the                                                               
increase  in  property  value  [in   cases  of  eminent  domain].                                                               
Sometimes an  increase in property  value is a  mitigating factor                                                               
in the department's taking on a  large project with a question as                                                               
to whether or not it will be completed, he noted.                                                                               
Number 1130                                                                                                                     
MR.  POSHARD agreed  with the  notion  - when  property taken  by                                                               
eminent domain isn't used in a  project - that the property owner                                                               
should have  the right to  reacquire the  property.  He  said the                                                               
department  didn't   like  the  idea  of   the  original  owner's                                                               
receiving all of the benefit  for the increase in property value,                                                               
however,  because the  state would  be  losing money.   The  fair                                                               
market  value  paid  by  the  state could  be  invested  and  the                                                               
interest  realized,  in  addition  to the  increase  in  property                                                               
MR.  POSHARD therefore  suggested changing  the language  to say,                                                               
"the lesser of the  fair market value of the land  at the time of                                                               
the  reconveyance,  or the  amount  paid  when the  property  was                                                               
acquired, plus  simple interest  at the rate  of 2.5  percent per                                                               
year."   Under this change,  the state could retain  some benefit                                                               
and  invest those  funds  into other  projects,  or the  previous                                                               
owner could  be paid fair market  value if the land  went down in                                                               
value.   This  would strike  a balance  between the  interests of                                                               
property owners and the state.                                                                                                  
Number 1232                                                                                                                     
REPRESENTATIVE  KOOKESH  responded  that   he  wouldn't  move  or                                                               
support  the  amendment  because eminent  domain  takes  property                                                               
against the  wishes of the owner.   He asked, "If  the state does                                                               
not realize the  appreciation of the property, ... so  what?"  He                                                               
told  the committee  that the  original [owner]  might have  been                                                               
able to  do other things [with  the property] besides let  it sit                                                               
for 20 years.  If the  state takes property against the wishes of                                                               
the  owner, the  only entity  that should  get a  benefit is  the                                                               
owner.   He  said it  would be  different if  the owner  sold the                                                               
property  of free  will.   But eminent  domain doesn't  leave the                                                               
owner any choice.                                                                                                               
Number 1290                                                                                                                     
REPRESENTATIVE  SCALZI   asked  Representative  Kookesh   if  his                                                               
concern was about the eminent domain itself.                                                                                    
REPRESENTATIVE KOOKESH  answered that he was  concerned about the                                                               
state's wanting to benefit from  property 20 years later, when it                                                               
has to sell it back to the individual.                                                                                          
REPRESENTATIVE  SCALZI pointed  out  that the  property would  be                                                               
sold back at the original price.                                                                                                
REPRESENTATIVE  KOOKESH agreed,  but  said the  owner would  also                                                               
have to pay interest to the  state.  "The state condemns at their                                                               
peril,  and  the individual  has  property  taken away  from  him                                                               
against his will," he added.                                                                                                    
Number 1333                                                                                                                     
CHAIR KOHRING asked  Mr. Poshard whether there would  be a choice                                                               
for an original  owner to either purchase at  original value plus                                                               
2.5 percent per year, or at  the current fair market value, under                                                               
the department's proposed amendment.                                                                                            
MR. POSHARD answered that it would be  the lesser of the two.  If                                                               
the property decreased in value,  the department wouldn't require                                                               
the original owner to pay more than fair market value.                                                                          
Number 1387                                                                                                                     
MR. KRIEBER suggested  the committee may wish  to consider adding                                                               
language which specifies that [the  price for the land should be]                                                               
the  lesser of  the  price the  land was  acquired  for, or  fair                                                               
market value,  in case the  land were to  decrease in value.   He                                                               
mentioned  the  concern  in  the  House  Community  and  Regional                                                               
Affairs Standing Committee about property owners' being harmed.                                                                 
REPRESENTATIVE  SCALZI   agreed  with   Representative  Kookesh's                                                               
earlier statement against the amendment.                                                                                        
CHAIR  KOHRING announced  that because  of lack  of support,  the                                                               
department's amendment would not be offered at the time.                                                                        
Number 1567                                                                                                                     
REPRESENTATIVE MASEK  moved to report CSHB  500(CRA), as amended,                                                               
out  of   committee  with  individual  recommendations   and  the                                                               
accompanying  fiscal  notes.   There  being  no  objection,  CSHB
500(TRA)  was  moved out  of  the  House Transportation  Standing                                                               

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