Legislature(1999 - 2000)

02/29/2000 09:02 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
SENATE BILL NO. 175                                                                                                             
"An Act relating to state mining law, to methods of                                                                             
locating mining claims, to the granting of larger                                                                               
mining claims using a legal subdivision based on                                                                                
rectangular survey descriptions, and to mandatory                                                                               
rental payments for prospecting rights."                                                                                        
                                                                                                                                
                                                                                                                                
This was the first hearing for this bill in the Senate                                                                          
Finance Committee.                                                                                                              
                                                                                                                                
JULIE LUCKY, Staff to the Senate Resources Committee, read a                                                                    
statement into the record. She said the intent of the bill                                                                      
was to streamline and make more efficient, Alaska's                                                                             
procedures to locate and process mining claims. She spoke of                                                                    
a backlog of sites waiting to be listed on the state land                                                                       
status plats.                                                                                                                   
                                                                                                                                
Ms. Lucky told the Committee that the Department of Natural                                                                     
Resources had established an electronic format known as                                                                         
Meridian, Township, Range, Section and Claim (MTRSC) that                                                                       
would allow the department to electronically input                                                                              
information regarding claims on the plats.                                                                                      
                                                                                                                                
Ms. Lucky said the bill provides an incentive to use the                                                                        
MTRSC format or convert existing claims to the new format.                                                                      
She stated that the bill also clarifies the rental and labor                                                                    
rates for the claims and establishes a rental rate for                                                                          
prospecting sites where there was currently no rental rate.                                                                     
She added the bill would reduce the time allowed for an                                                                         
individual staking a claim or locating a prospecting site,                                                                      
to record a certificate of location from 90 days to 45 days.                                                                    
She stated the bill allows large claims, which would require                                                                    
less fieldwork and less paperwork.                                                                                              
                                                                                                                                
Ms. Lucky continued saying the bill would repeal a                                                                              
limitation on the number of sites one could hold in a                                                                           
township, increase the terms from one to two years and make                                                                     
those terms non-extendable. She concluded that the bill                                                                         
removes a requirement that claim lines be marked.                                                                               
                                                                                                                                
Senator Phillips expressed confusion on the fiscal note and                                                                     
the statement that the industry would pay up to $150,000 for                                                                    
the service.                                                                                                                    
                                                                                                                                
BOB LOEFFLER, Director, Division of Mining, Land and Water,                                                                     
Department of Natural Resources stated that the department                                                                      
supported the bill because it would allow the program to                                                                        
move into 21st century using automation and the Global                                                                          
Positioning System (GPS).                                                                                                       
                                                                                                                                
Senator Phillips and Mr. Loeffler had dialog regarding the                                                                      
contribution of the industry to this service and that half                                                                      
of the money would be deposited to the permanent fund.                                                                          
                                                                                                                                
Senator Phillips requested that future fiscal notes reflect                                                                     
any revenues that go into the permanent fund.                                                                                   
                                                                                                                                
Mr. Loeffler stated that this legislation would make                                                                            
operations more efficient to the state and even if the                                                                          
fiscal note were not adopted, he hoped the bill would still                                                                     
pass into law. He told the Committee that the department was                                                                    
not providing the level of service to the mining industry                                                                       
that it could be proud of. This bill, he said, would reduce                                                                     
the processing time to three months. However, because the                                                                       
industry willing to advocate $150,000 of new revenue to the                                                                     
state, he thought it would be beneficial to capture those                                                                       
funds to help decrease the processing time even further to                                                                      
four to six weeks. He believed that time frame would provide                                                                    
a level of service that would better secure land tenure for                                                                     
the industry.                                                                                                                   
                                                                                                                                
Senator Leman noted the $75,000 in the personal services                                                                        
component of the fiscal note, and asked what that money                                                                         
would buy. Mr. Loeffler replied that an additional staff                                                                        
person would be hired. He also detailed the plan to fund                                                                        
currently vacant and unfunded positions. He explained that                                                                      
these were clerk positions with a low pay range that would                                                                      
be charged with inputting data into the electronic system.                                                                      
                                                                                                                                
STEVE BORELL, Executive Director, Alaska Miners Association,                                                                    
Inc. testified via teleconference from Anchorage in support                                                                     
of the legislation. He referred to a letter to the Committee                                                                    
from the Association. [Copy on file] In addition to the                                                                         
letter, he commented that the bill was a result of several                                                                      
years of work between the mining industry and the                                                                               
department. He detailed the efforts of various committees                                                                       
and described the representation of the involved parties.                                                                       
                                                                                                                                
Mr. Borrell stressed that the bill only changes the process                                                                     
for locating claims and does not increase or decrease the                                                                       
rights established by mining claims. He shared that the                                                                         
catalysis behind the industry's interest in making changes                                                                      
was the on-going budget challenge in terms of manpower and                                                                      
time.                                                                                                                           
                                                                                                                                
He believed the bill would simplify the process and reduce                                                                      
errors and paperwork from the miner's standpoint partially                                                                      
due to using GPS and also because of the larger allowed                                                                         
claim size. He stated, "this is a win-win for everyone."                                                                        
                                                                                                                                
Co-Chair Torgerson asked what was different about a                                                                             
prospecting site. Mr. Loeffler explained a prospecting site                                                                     
does not require discovery, which a mining claim requires.                                                                      
For this reason, he noted this bill takes away the ability                                                                      
to extend prospecting sites beyond two years. He said this                                                                      
was because the department wanted the miner to "put their                                                                       
money into the ground to protect their discovery."                                                                              
                                                                                                                                
Co-Chair Torgerson then asked if the leasehold location and                                                                     
mining discovery were the same. Mr. Loeffler explained that                                                                     
the leasehold location is open to mining only after a lease                                                                     
is obtained. Typically, he said the areas subject to leases                                                                     
had additional stipulations because they were near                                                                              
anadromous fish streams or other special circumstances.                                                                         
                                                                                                                                
Mr. Loeffler responded to Co-Chair Torgerson's next query                                                                       
saying that prospecting sites are often staked by major                                                                         
companies who were tying up ground for their exploration                                                                        
program or simply for speculation. He reiterated that the                                                                       
time limitations were included in the committee substitute                                                                      
to ensure the company would develop the sites and therefore                                                                     
generate royalties for the state.                                                                                               
                                                                                                                                
Co-Chair Torgerson returned to the fiscal note and the                                                                          
additional personnel, wanting to know if the bill would                                                                         
still accomplish its goals without the additional staff. Mr.                                                                    
Loeffler gave a background of the program saying that in the                                                                    
early 1990's, the state had 3000 mining claims staked each                                                                      
year, and that by 1995, 10,000 claims were staked. While                                                                        
this has resulted in a mining boom, he pointed out that the                                                                     
cost to process the claims has increased. He shared that                                                                        
claims that used to take 3-4 weeks to process were now                                                                          
taking 4-6 months. He warned that the workload would                                                                            
continue to increase. With the inception of this                                                                                
legislation, he predicted the processing time would be                                                                          
reduced to 12 weeks in this fiscal year without the                                                                             
additional funding and to only six weeks if the fiscal note                                                                     
was adopted. He qualified that without the funds, the 12                                                                        
weeks would increase to 14 weeks and then to 16 weeks, etc.                                                                     
each year. The fully funding program would keep the                                                                             
processing time to 11-12 weeks, according to Mr. Loeffler.                                                                      
                                                                                                                                
Co-Chair Torgerson how many of the 10,000 claims the                                                                            
department processed were on state land. Mr. Loeffler                                                                           
answered all claims.                                                                                                            
                                                                                                                                
Co-Chair Torgerson next asked how much of the $1 billion                                                                        
generated came from state land. Mr. Loeffler replied that                                                                       
all but the proceeds from the Red Dog mine and the Greens                                                                       
Creek mine.                                                                                                                     
                                                                                                                                
Co-Chair Torgerson pointed out that the mining revenues to                                                                      
the state was only $1.2 million in 1998 and $1.6 in 1999.                                                                       
Mr. Loeffler corrected and explained that in 1999, state and                                                                    
local governments received $13 million from the mining                                                                          
industry not including income tax.                                                                                              
                                                                                                                                
Co-Chair Torgerson asked how much of the revenue was from                                                                       
royalties. Mr. Loeffler replied that the state received                                                                         
approximately $4 million for coal royalty and rents, hard                                                                       
rock mining claim rent and mining license taxes, but that                                                                       
only $16,000 in revenues were royalties from hard-rock                                                                          
minerals, such as gold. He stated the reason was because                                                                        
gold prices tumbled and the major producers were not making                                                                     
money. He explained how the royalties were calculated from                                                                      
the net profits. He stated that while Fort Knox was a boom                                                                      
to the Fairbanks economy, the operation did not make much of                                                                    
a profit. He added that in early part of a mine process,                                                                        
there are many of write-offs, which also lower the net                                                                          
profit. He said the net profit calculation method and the                                                                       
exemptions were set by the legislature as a trade-off for                                                                       
new jobs and higher production. He believed this trade-off                                                                      
"was bearing fruit."                                                                                                            
                                                                                                                                
Mr. Borell interjected to agree with the Ft. Knox example                                                                       
and to note that the site is located on mental health land.                                                                     
He surmised that the Mining Incentive Act as described by                                                                       
Mr. Loeffler had no impact on current revenues but has a                                                                        
large impact on how the state is perceived for new                                                                              
development. He also pointed out that there were few mines                                                                      
in the state, only four mines have more than 100 employees                                                                      
and that other mines were in bankruptcy because of the                                                                          
adverse effects of gold prices.                                                                                                 
                                                                                                                                
Co-Chair Torgerson expected that the state would realize                                                                        
increased royalties from the mining incentive credits                                                                           
beginning in the next several years.                                                                                            
                                                                                                                                
Co-Chair Torgerson stated that his biggest concern was news                                                                     
reports that talk about the healthy mining industry in                                                                          
Alaska but the state's revenue report shows the resources                                                                       
almost given away.                                                                                                              
                                                                                                                                
Senator Leman asked for an explanation of the claims                                                                            
processing and what could be done to streamline the process.                                                                    
Mr. Loeffler explained that the department has begun to put                                                                     
the status plats on-line, which informs others of areas                                                                         
available for claims. He gave detail of the automation in                                                                       
the platting process and how this bill would assist the                                                                         
department in achieving more automation.                                                                                        
                                                                                                                                
Senator Leman thought the process could be set up in "real                                                                      
time" to automatically show the claim status. Mr. Loeffler                                                                      
replied that was the hope and noted that 20 years ago, the                                                                      
department employed 40 people to upkeep the status plats and                                                                    
that there were only three or four people doing the same                                                                        
amount of work.                                                                                                                 
                                                                                                                                
Senator Adams stated that because the fiscal note reflected                                                                     
a commitment of the mining industry, he hoped the fiscal                                                                        
note would be adopted along with the bill.                                                                                      
                                                                                                                                
Co-Chair Parnell offered a motion to move from Committee, SB
175, LS0955/G. There was no objection and the bill MOVED                                                                        
FROM COMMITTEE.                                                                                                                 

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