Legislature(1995 - 1996)
03/08/1996 08:07 AM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE RESOURCES STANDING COMMITTEE March 8, 1996 8:07 a.m. MEMBERS PRESENT Representative Joe Green, Co-Chairman Representative William K. "Bill" Williams, Co-Chairman Representative Scott Ogan, Vice Chairman Representative Alan Austerman Representative John Davies Representative Pete Kott MEMBERS ABSENT Representative Ramona Barnes Representative Don Long Representative Irene Nicholia COMMITTEE CALENDAR CS FOR SENATE BILL NO. 162(FIN) "An Act relating to land used for agricultural purposes and to state land classified for agricultural purposes or subject to the restriction of use for agricultural purposes only; and annulling certain program regulations of the Department of Natural Resources that are inconsistent with the amendments made by this Act." - PASSED CSSB 162(FIN) OUT OF COMMITTEE HOUSE BILL 394 "An Act authorizing a program of natural gas and coal bed methane development licensing and leasing; relating to regulation of certain natural gas exploration facilities and coal bed methane exploration facilities for purposes of preparation of discharge prevention and contingency plans and compliance with financial responsibility requirements; amending the duties of the Alaska Oil and Gas Conservation Commission as they relate to natural gas exploration activities and coal bed methane exploration activities; and amending the exemption from obtaining a waste disposal permit for disposal of waste produced from coal bed methane drilling." - HEARD AND HELD *HOUSE BILL 511 "An Act relating to deposits into the fish and game fund." - SCHEDULED BUT NOT HEARD (* First Public Hearing) PREVIOUS ACTION BILL: SB 162 SHORT TITLE: AGRICULTURAL LAND SPONSOR(S): SENATOR(S) GREEN, Torgerson, Lincoln; REPRESENTATIVE(S) Austerman JRN-DATE JRN-PG ACTION 04/20/95 1108 (S) READ THE FIRST TIME - REFERRAL(S) 04/20/95 1108 (S) RES, FIN 10/24/95 (S) RES AT 2:00 PM MAT-SU LIO 10/24/95 (S) MINUTE(RES) 01/17/96 (S) RES AT 3:30 PM BUTROVICH ROOM 205 01/17/96 (S) MINUTE(RES) 01/22/96 (S) RES AT 3:30 PM BUTROVICH ROOM 205 01/24/96 2212 (S) RES RPT CS 5DP 1NR 1AM SAME TITLE 01/24/96 2212 (S) FISCAL NOTE TO SB (DNR-#1) 01/30/96 2250 (S) FISCAL NOTE TO SB & CS (DNR-#2) 01/30/96 2250 (S) FISCAL NOTE TO CS (DNR-#3) 01/24/96 2214 (S) COSPONSOR(S): TORGERSON 02/01/96 (S) FIN AT 9:00 AM SENATE FINANCE 532 02/01/96 (S) MINUTE(FIN) 02/07/96 (S) FIN AT 9:00 AM SENATE FINANCE 532 02/09/96 (S) FIN AT 9:00 AM SENATE FINANCE 532 02/09/96 (S) MINUTE(FIN) 02/14/96 2423 (S) FIN RPT CS 3DP 3NR SAME TITLE 02/14/96 2423 (S) FISCAL NOTES TO CS (DNR-2) 02/19/96 (S) RLS AT 11:35 AM FAHRENKAMP RM 203 02/19/96 (S) MINUTE(RLS) 02/21/96 2489 (S) RULES TO CALENDAR 2/21/96 02/21/96 2493 (S) READ THE SECOND TIME 02/21/96 2493 (S) FIN CS ADOPTED Y18 N- E1 A1 02/21/96 2494 (S) ADVANCE TO 3RD RDG FLD Y11 N8 X1 02/21/96 2494 (S) THIRD READING 2/23 CALENDAR 02/23/96 2517 (S) READ THE THIRD TIME CSSB 162(FIN) 02/23/96 2517 (S) PASSED Y16 N2 E2 02/23/96 2518 (S) DUNCAN NOTICE OF RECONSIDERATION 02/26/96 2540 (S) RECON TAKEN UP - IN THIRD READING 02/26/96 2541 (S) PASSED ON RECONSIDERATION Y16 N4 02/26/96 2540 (S) COSPONSOR(S): LINCOLN 02/26/96 2550 (S) TRANSMITTED TO (H) 02/28/96 2897 (H) READ THE FIRST TIME - REFERRAL(S) 02/28/96 2897 (H) RESOURCES, FINANCE 03/08/96 (H) RES AT 8:00 AM CAPITOL 124 BILL: HB 394 SHORT TITLE: GAS & COAL METHANE LICENSES & LEASES SPONSOR(S): REPRESENTATIVE(S) OGAN, ROKEBERG, James, Kohring JRN-DATE JRN-PG ACTION 01/05/96 2369 (H) PREFILE RELEASED 01/08/96 2370 (H) READ THE FIRST TIME - REFERRAL(S) 01/08/96 2370 (H) O&G, RESOURCES, FINANCE 02/08/96 (H) O&G AT 10:00 AM CAPITOL 124 02/08/96 (H) MINUTE(O&G) 02/13/96 (H) O&G AT 10:00 AM CAPITOL 124 02/13/96 (H) MINUTE(O&G) 02/21/96 2846 (H) COSPONSOR(S): JAMES 02/27/96 (H) O&G AT 10:00 AM CAPITOL 124 02/27/96 (H) MINUTE(O&G) 02/28/96 2909 (H) O&G RPT CS(O&G) NT 2DP 4NR 1AM 02/28/96 2910 (H) DP: ROKEBERG, OGAN 02/28/96 2910 (H) NR: BRICE, B.DAVIS, G.DAVIS, WILLIAMS 02/28/96 2910 (H) AM: FINKELSTEIN 02/28/96 2910 (H) FISCAL NOTE (DNR) 02/28/96 2910 (H) ZERO FISCAL NOTE (DEC) 02/29/96 2972 (H) COSPONSOR(S): KOHRING 03/08/96 (H) RES AT 8:00 AM CAPITOL 124 WITNESS REGISTER SENATOR LYDA GREEN Alaska State Legislature Capitol Building, Room 423 Juneau, AK 99801 Telephone: (907) 465-3805 POSITION STATEMENT: Sponsor of SB 162 BRETT HUBER, Legislative Assistant to Senator Lyda Green Alaska State Legislature Capitol Building, Room 423 Juneau, AK 99801 Telephone: (907) 465-3805 POSITION STATEMENT: Available for questions on SB 162. RON SWANSON, Deputy Director Division of Land Department of Natural Resources 3601 C Street, Suite 1122 Anchorage, AK 99503-5947 Telephone: (907) 269-8503 POSITION STATEMENT: Answered questions on SB 162. MICHAEL SWAN Alaska Soil & Water Conservation Board P. O. Box 987 Soldotna, AK 99669 Telephone: (907) 262-1014 POSITION STATEMENT: Supports SB 162. RAY DEVILBIS HC 04 Box 9190 Palmer, AK 99645 POSITION STATEMENT: Testified on SB 162. BILL WARD Ward Farms P. O. Box 350 Soldotna, AK 99669 Telephone: (907) 262-5135 POSITION STATEMENT: Supports SB 162. PETE ROBERTS Fox R. Cattleman P. O. Box 1134 Homer, AK 99603 Telephone: (907) 235-4113 POSITION STATEMENT: Supports SB 162. ED BOSTROM P. O. Box 56822 North Pole, AK 99705 Telephone: (907) 488-3940 POSITION STATEMENT: Supports SB 162. DAVE SCHMITZ P. O. Box 57268 North Pole, AK 99705 Telephone: (907) 488-4984 POSITION STATEMENT: Supports SB 162. JIM ELLISON P. O. Box 55590 North Pole, AK 99705 Telephone: (907) 488-1970 POSITION STATEMENT: Supports SB 162. ANNE CRANE 4790 A University Drive Anchorage, AK 99508 Telephone: (907) 563-0224 POSITION STATEMENT: Testified on SB 162. ALLAN KLATT 411 West 123 Avenue Anchorage, AK 99515 Telephone: (907) 522-5528 POSITION STATEMENT: Supports SB 162. MIKE CROUCH HC 62 Box 5780 Delta Junction, AK 99737 Telephone: (907) 895-4329 POSITION STATEMENT: Supports SB 162. JON DUFENDACH P. O. Box 309 Delta Junction, AK 99737 Telephone: (907) 895-4309 POSITION STATEMENT: Supports SB 162. BILL SPENCER Nenana, AK 99760 Telephone: (907) 832-5280 POSITION STATEMENT: Supports SB 162. SCOTT SCHULTZ Schultz Farm, Inc. HC 62 Box 5440 Delta Junction, AK 99737 Telephone: (907) 895-4865 POSITION STATEMENT: Supports SB 162. SARA HANNAN, Executive Director Alaska Environmental Lobby 419 6th Street Juneau, AK 99801 Telephone: (907) 463-3366 POSITION STATEMENT: Testified on SB 162. WILLIAM H. MONTANO 597 Kay Street Fairbanks, AK 99709 Telephone: (907) 479-4418 POSITION STATEMENT: Supports SB 162. ACTION NARRATIVE TAPE 96-28, SIDE A Number 000 CO-CHAIRMAN JOE GREEN called the House Resources Committee meeting to order at 8:07 a.m. Members present at the call to order were Representatives Green, Williams, Ogan, Austerman and Davies. Representative Kott arrived late. Representatives Barnes, Long and Nicholia were absent. CO-CHAIRMAN GREEN announced that SB 162 and HB 394 would be heard, but HB 511 was postponed. He invited Senator Lyda Green to testify. SB 162 - AGRICULTURAL LAND Number 100 The first order of business was CSSB 162(FIN) "An Act relating to land used for agricultural purposes and to state land classified for agricultural purposes or subject to the restriction of use for agricultural purposes only; and annulling certain program regulations of the Department of Natural Resources that are inconsistent with the amendments made by this Act." SENATOR LYDA GREEN, Sponsor of the measure, recounted that agriculture parcel owners and potential agriculture parcel owners experiencing or anticipating ownership problems contacted her and requested changes in the law. SB 162 was introduced to address those concerns and to assist in encouraging agriculture production, thereby assisting the state, as agriculture consumers, to take part in an industry that is in excess of $30,000,000 in Alaska. SENATOR GREEN stated that the primary intent of SB 162 provides for the conveyance of fee simple title to agriculture lands subject to a restrictive covenant running with the land, limiting the use to agricultural purposes. SENATOR GREEN said other provisions of the bill provide greater autonomy for the farmer or the agriculture parcel owner ensuring that the state's interests are still protected. Under this bill, agricultural owners and operators have greater autonomy and ability to make business decisions based on their particular needs and circumstances. SENATOR GREEN advised that SB 162 has gained great support among agriculture industry supporters across the state. It is good for Alaska's producers as well as consumers. CO-CHAIRMAN GREEN noted the arrival of Representative Pete Kott and mentioned that the meeting was on statewide teleconference. Number 324 CO-CHAIRMAN GREEN asked Senator Green to explain fee simple, is it inclusive of subsurface. SENATOR GREEN responded that it is not. CO-CHAIRMAN GREEN asked if the bill included gravel or water. SENATOR GREEN said gravel was included. Number 354 REPRESENTATIVE JOHN DAVIES clarified that gravel was included but only if it was directly used for agricultural purposes such as building roads. Number 413 REPRESENTATIVE DON LONG wondered if the gravel was considered a mineral resource. Number 453 REPRESENTATIVE DAVIES advised that he had several amendments and would hold them until after testimony. Number 480 CO-CHAIRMAN BILL WILLIAMS asked explanation of certain restrictive covenants, "If you have the land, would you immediately be able to borrow money on it? What happens to the land after that? SENATOR GREEN said one of the impediments to an agricultural land holder or producer who does not have other assets to collateralize is the inability to borrow money for development based on using that land as collateral because lending institutions will not do that if it is agriculture rights only. SENATOR GREEN stated that there are private vendors who would be delighted to have access to this market and would likely have competitive rates to offer farmers and agricultural producers who are in need of money. SENATOR GREEN advised that there are federal reinsurance or "reborrowing" monies that are offered at a competitive rates. Number 603 CO-CHAIRMAN WILLIAMS asked the procedure should the borrower be unable to repay the money. SENATOR GREEN said that is between the landowner and the lender. Number 649 REPRESENTATIVE DAVIES understood that if that situation arose and the bank foreclosed, the agricultural covenant would follow with the land. The bank would have fee simple title but the covenant would still be on the land so the agricultural use of the land is protected. Number 679 CO-CHAIRMAN WILLIAMS expressed concern that after borrowing money on a piece of state acquired land, the money was lost and the state loses title to the property. SENATOR GREEN clarified that the state sold the land to these agricultural parcel owners, but it is agricultural rights only and some have explained it as "lifetime tenant farmer." Number 735 CO-CHAIRMAN GREEN added that was probably the lending institution's concern that the land would revert to the state as opposed to having fee simple and they have a commodity to recover their loss. REPRESENTATIVE ALAN AUSTERMAN inquired whether a farmer having title to the land, has a better value than just having agricultural rights only, subject to the covenant. CO-CHAIRMAN GREEN responded that should the farmer acquire fee simple title to the land, it is still restricted to agricultural uses only and subject to the covenant meaning that it is not free to subdivide and turn into a parking lot, for example. Number 821 REPRESENTATIVE DAVIES agreed and stated that the value of the land would rise up to some intermediate value between agricultural rights only and pure fee simple ownership. He wondered then if the land would be subject to increased property tax and, if in the process of acquiring this increase in value, subject to IRS taxes. Number 861 SENATOR GREEN said the utilization of the land remains unchanged, it is still agricultural covenant land, and an increase in value is not anticipated. She elaborated on the tracking of various sizes of agricultural parcels. Number 941 BRETT HUBER, Legislative Staff to Senator Lyda Green, said the question of the tax assessed or the IRS assessed value was based on the utilization of the land not the form of title. The category is agricultural utilization and the utilization does not change under these provisions. It does change from rights only to a covenant situation but the utilization remains the same. Number 1026 REPRESENTATIVE DAVIES theorized that in a free market, the value of the land rises and the ability to subdivide and sell off a portion makes it a more desirable commodity. More desirable commodities generally increase in price, and if the price increases, it seems there would be some tax liability associated. Number 1050 CO-CHAIRMAN GREEN agreed stating that if the evaluation does go up the land owner would be subject to that taxation. SENATOR GREEN said, "This is an applicant driven process and if you are a parcel owner who did not desire to avail yourself of the change in title, you would not have to." Number 1086 REPRESENTATIVE ALAN AUSTERMAN expressed his support of SB 162 but inquired about the rationale of the state giving the land owner the benefit of the land and a banking institution willing to lend money on it, but not willing to lend money on merely the agricultural ability of the land. He wondered what that perceived value is by the bank, to lay its money on the line that it did not have before. Number 1174 CO-CHAIRMAN GREEN and Representative Austerman debated several analogies and hypothetical situations involving banking institutions willingness to lend. Number 1220 REPRESENTATIVE SCOTT OGAN pointed out that the state is giving someone the opportunity to make a living and that is a significant difference than a recreational situation. CO-CHAIRMAN GREEN asked Ron Swanson to respond. Number 1246 RON SWANSON, Deputy Director, Division of Land, Department of Natural Resources, explained that currently the department does convey the land in fee simple but subject to an agricultural covenant that says the state may enter the land and recoup it if it is not being used for agricultural purposes. MR. SWANSON said, under this bill, conveying fee simple with a covenant means going to court instead of the administrative process and the state will not get the land back. The department can only afford the agricultural covenant meaning that a person can keep doing what they are doing, and without the agricultural purpose, the burden of proof is on the state. MR. SWANSON said the advantage of what the bill's sponsor is trying to do is to be able to borrow money from a different source where the person that retains title to the land does not have to worry about the state coming in and taking it away. Number 1313 MR. HUBER confirmed with Mr. Swanson that the state basically ends up in court anyway. He said the reversionary clause of the current title transfer is the major concern of lending institutions not the agricultural utilization or the agricultural process of the farm but the reversionary clause itself. MR. SWANSON responded that is correct, "Most of the time you do end up going to court under the existing system because the person has the right to appeal an administrative process and go to court. The difference is that the burden of proof is on the applicant instead of the state which would happen under this case." Number 1347 MR. HUBER explained several areas of judiciary action and said the court will issue an immediate injunctive relief to stop whatever action is taking place on the land outside of the covenant. SENATOR GREEN elaborated that there are greater opportunities for a neighbor, borough representative or a city official, and nothing to prohibit the state from doing this as well, to say that land is not being utilized as agricultural land. She said SB 162 takes the responsibility out of the sole hands of the commissioner of the Department of Natural Resources. Number 1420 MR. HUBER indicated to Chairman Green that today's testimony would reflect that agricultural rights land owners contend that they have bought and are working the land, yet are not afforded due process. Number 1454 REPRESENTATIVE DAVIES asked Ron Swanson to address earlier question about the increase in value of the land and whether the land is being used according to the covenant. Specifically, the management plans and how that is affected by this bill. MR. SWANSON replied that the change in the type of deed the department would issue would make a negligible increase in the appraisal. He said the advantage definitely goes to the land holder and his ability to borrow money. MR. SWANSON stated that the department only uses management plans when they prequalify bidders which the department has not done for many years. Number 1520 SENATOR GREEN responded to Chairman Green that the issuances of agricultural land is applicant driven. Number 1600 MR. HUBER repeated Mr. Swanson's testimony that the value is very negligible. "The sponsor began this bill with a broader subdivision allowance and looked at two ways of addressing the situation, (1) is there increased value; and (2) how would the state be paid for that increased value. Senator Green took the route through the committee process on the Senate side with limiting the subdivision under four parcels and a one-time only subdivision." MR. HUBER said the big concern with increased valuation is that a thousand acre tract turned into scores of 40 acre tracts means more money will be made on that than the change in title. Number 1665 SENATOR GREEN theorized subdividing a parcel requiring departmental approval and the future possibility of surveying and subdividing at the expense of the owner, but the only thing that can be done with that subdivided parcel is a crop or grazing. There can be no facilities and no structures. SENATOR GREEN said there are cases where people have bought these subdivided pieces and now cannot build structures or live there or be resident farmers. Number 1749 REPRESENTATIVE AUSTERMAN wanted to know who classifies the land as agricultural, the state? The municipality? MR. SWANSON responded that the state classifies the land for agricultural purposes and currently there are 550,000 acres of classified agricultural land around the state. REPRESENTATIVE AUSTERMAN asked if there is a revert clause that if land is lying dormant, not being used as agricultural land, that it reverts back to the state for reclassification. MR. SWANSON replied that there is a clause in the contract that says if the land is not being used for the purposes designated, it can come back to the state. Once the land has been conveyed to the land owner, it is out of the state's hands. Number 1800 MR. HUBER addressed Representative Austerman that the bill still provides that the department and the commissioner establish farm development plans and set benchmarks through the regulation process. Number 1899 SENATOR GREEN addressed Chairman Green that there is always the opportunity to retrieve the land through non-utilization of the land as agricultural land. It is the same standard that is held now. She said the question is how many inspections are there and how many parcel owners are having their land taken back for non- utilization as agricultural rights land. Number 1947 MR. SWANSON replied there is no difference between before or after. The covenant states that the land can be used for agricultural land only. If a community wanted to expand on that area they have to condemn it and buy the additional rights to be able to use it for other than agricultural purposes. MR. SWANSON responded to the Chair that the community would pay the state because the state is the owner of the other interests. CO-CHAIRMAN GREEN understood that if the land is paid off and the surface rights are vested with the individual, even though the subsurface rights are still with the state, we are talking here about a rezoning on the surface only. MR. SWANSON agreed with Chairman Green's statement. CO-CHAIRMAN GREEN wanted to know who pays in an ownership situation of fee land subject to agricultural restrictions. Number 1993 MR. SWANSON explained the land use planning process end result being land reclassification. At that point, if somebody buys the land, the agricultural rights would be held by the land owner and all other rights would be purchased from the state. Number 2009 MR. HUBER said what we have is a patent transfer between the state and individual landowners that says the surface rights of the state in fee simple is transferred. He said the major changes in this bill is how the state enforces that: SB 162 makes it by civil proceeding instead of administrative action and removes the condition subsequent, or the reversionary clause, in the title. Other than that there is no great change in what is currently transferred, it is just transferred in a different way by a covenant instead of a condition subsequent under the current title. Number 2116 REPRESENTATIVE DON LONG understood that the bill makes a multiple use land transfer of agricultural land and once the owner has possession it is up to the owner to determine the use of that land whether it be agricultural, recreational, mining or transportation. SENATOR GREEN said the bill is agricultural only, it does spell out agricultural related businesses but it does not expand to anything else. It is still agricultural covenant land and the use and utilization has not changed. CO-CHAIRMAN GREEN discussed instances with Mr. Swanson concerning ownership of agricultural land and state subsurface rights and who gets compensation for damage or loss of use of the surface. Number 2224 REPRESENTATIVE DAVIES comprehended the motivation of the bill saying he had learned that banks do not want to loan money on the agricultural rights situation that exists now. He had a hard time understanding that if so little is changed by what we are doing here and SB 162 only eliminates the reversionary clause, why is it that the banks have so much heartburn. REPRESENTATIVE DAVIES asked why banks would not loan money if they ended up with, in a developed situation, the agricultural rights to the land. Why can't they sell the rights to another person who wants to farm the land. Number 2304 MR. HUBER disclosed that financial institutions, as well as real estate attorneys and title companies, have expressed that the biggest problem with the agricultural rights only transfer is the cloudy title. He said no title insurance company will come in and insure this because of the title and until a determination is made by the court, nobody is sure where that title is going to be. It is such a cloudy title that no one will issue title insurance on it. MR. HUBER said SB 162 brings the issue to a specific one entity title and the title insurance companies do not have a problem with coming in and doing insurance. If there is a change in value, then it is a very minimal change. REPRESENTATIVE DAVIES debated that Mr. Swanson had testified that the state has title to all other rights on the land so the state still has multiple ownership of the land. The person who gets this new fee simple title with the covenant on it, only has agricultural rights on the land and that individual cannot do anything else with the land. The subsurface rights are still with the state. Number 2424 MR. SWANSON explained that currently an individual had difficulty borrowing from an outside institution, meaning not the state, because the state can take the land back and the bank is stuck with the third party holding the money and has no way to recoup the loss. MR. SWANSON further explained that under this bill's process, the individual would borrow money, the state could only go to court and get the agricultural issues protected. If the bank thought the land was not being used for agricultural purposes they could foreclose on it and then own that agricultural interest themselves. Basically, they have something to attach as collateral. Number 2453 REPRESENTATIVE DAVIES asked why the bank could not foreclose and end up with the agricultural rights now. MR. SWANSON responded that it goes to the state. SENATOR GREEN reaffirmed that the reversionary reverts to the state. Number 2466 REPRESENTATIVE AUSTERMAN expressed interest in understanding the bill and conjectured about a hypothetical situation.....(change tape) TAPE 96-28, SIDE B Number 000 REPRESENTATIVE AUSTERMAN was concerned about the individual who speculates on a piece of property and then holds it because he was unsuccessful as a farmer and, years later, finds that land has substantial value. CO-CHAIRMAN GREEN asked Mr. Swanson whether the transfer of title allows that land not utilized for agriculture to remain idle or does the covenant express that it must be used for agriculture or it reverts. Number 110 MR. SWANSON said the land can only be used for agricultural purposes but it can lay dormant. He said the department is not considering a person's economic conditions, the department's only concern is that the land be used for agricultural purposes. Number 139 MR. HUBER wondered if Mr. Swanson would elaborate on the problems that were encountered when Pt. McKenzie and Delta were put out with performance criteria. CO-CHAIRMAN GREEN announced that a plethora of people were waiting to testify on the teleconference network. Number 174 REPRESENTATIVE OGAN voiced his support of SB 162 and stated his opinion that agriculture has had a bad rap through state controlled programs in the past. He said the Agriculture Revolving Loan Fund funding is threatened and may need to be recapitalized in the near future. That fund capitalizes the farmers and the state has a tremendous amount of land coming available because of the mental health trust land resolution and emphasized that land become available in fee simple. This bill is a major shift in policy and provides less government control. He said the state has a track record of micromanagement, which he felt, caused farmers to fail. He said that SB 162 will help to bring Alaskan farming into a free enterprise market driven business that will allow them to prosper. Number 275 MICHAEL SWAN, President, Alaska Soil & Water Conservation District, and Chairman, Kenai Soil & Water Conservation District, testified in support of SB 162 and urged passage by the committee. Number 300 RAY DEVILBIS, Mat-Su farmer, said he agreed with Representative Davies assertion that a value is being given away. He recommended that fee simple title not be retroactive but set aside for the future. He referred to Senator Green's statement about fee simple title being applicant driven and wanted to know how this will work in future. Number 373 BILL WARD representing the Alaska Farm Bureau, Board of Directors, read a resolution from the Bureau supporting SB 162 and encouraging passage of the legislation. Number 480 PETE ROBERTS, Fox R. Cattleman Ranch, testified that he has an agricultural rights parcel in Homer. He related past participation on the Alaska Soil and Water Conservation Board and his involvement in developing fee simple title 12 years ago because of the same issue with the banks. The issue was right of reentry, the revisionary clause, meaning bureaucrats in the state wanted to have the first right to reenter if they did not like what the farmer was doing. He encouraged passage of the bill and suggested the bill be amended to not let the state micromanage. He said, "A farmer cannot be in the tractor repair business, his wife cannot be in the weaving business, they cannot run a bed and breakfast and they cannot be in the wilderness ranch/lodge business." He said parcels would lend themselves to an economic agricultural unit if the people could also have guests on the place. He emphasized that the requirements need to be changed. Number 632 CO-CHAIRMAN GREEN confirmed with Ron Swanson that a tractor repair service would be a permissible business on agricultural land but a bed and breakfast would not. Number 710 REPRESENTATIVE OGAN expressed support for farmers to have the means of making their farms economically viable. It is a very realistic concern. Number 763 MR. HUBER stated that the language in the bill provides for a business as long as it is not inconsistent with the primary intent of agricultural use. He noted that 90 percent of the farms in the lower 48 do not survive on sole farm income. Number 800 ED BOSTROM testified in support of SB 162 stating that he is owner of a 240 acre agricultural parcel in the Eielson agricultural project which is 40 tracts totalling 3,500 acres twenty miles south of Fairbanks. He related personal background information of developing his agricultural property emphasizing that the state's regulations have been detrimental to the agricultural economic development. Number 1041 REPRESENTATIVE DAVIES said that SB 162 addresses agricultural purposes but does not reference horticulture and stated that he was considering an amendment to add horticulture. CO-CHAIRMAN GREEN announced to the teleconference sites that the committee would not have time to hear HB 394. Number 1100 DAVE SCHMITZ testified in support of SB 162 stating that he is a new farmer recently purchasing 160 acre farm on Eielson Farm Road near Fairbanks. Present regulations are restricting his ability to construct additional permanent structures on the farm, hamstringing his ability to best utilize the farm's potential. Senate Bill 162 will stimulate agricultural and economic development. Number 1202 JIM ELLISON, Owner, Farm Alaska, stated that his business is an equipment repair shop slated toward agriculture equipment. He pointed out that one American farmer feeds 128 people because the farmer owns the land and can control the financial concern. Senate Bill 162, "it's about time." Number 1311 MR. SWANSON clarified that Section 8 fixes the interest rate at no higher than 9.5 percent which is the only land type program with that cap. He wanted to make it clear that the department will not do any refinancing for existing contracts. Number 1367 MR. SWANSON referenced Section 9, by current regulation you can subdivide into 40 acre parcels but you can not do any construction with this bill you would be able to do some additional construction. There is possibly some increase in value in that but there are only four subdivisions and I think pretty minimal. Number 1407 REPRESENTATIVE DAVIES presumed that Mr. Swanson did not have a problem with the deletion of the prequalification language. MR. SWANSON said there was not a problem, there have been no prequalifications since Point McKenzie went to court. The court found that prequalifications were illegal and the statute was changed to allow prequalifications but it has not been done since. Number 1440 REPRESENTATIVE DAVIES asked if the Division of Land had any problems with the change in survey requirements. MR. SWANSON said the language was changed to may, the commissioner still has the authority to require a survey where necessary, it is not a mandatory issue. Number 1459 REPRESENTATIVE OGAN asked Mr. Swanson to address the size, or the maximum acreage, of the current agricultural parcels. MR. SWANSON responded there are, currently, 150 parcels of zero to 100 acres; 100 parcels at 100 - 160 acres; 200 parcels at 160 - 640 acres; and 54 parcels at 640 acres or more. Number 1502 REPRESENTATIVE OGAN inferred that, a 640 acre parcel subdivided into a total of four parcels, the smallest that one of those subdivided parcels could be is 40 acres. Number 1535 ANNE CRANE, Trapper Creek, testified in support of SB 162, "It is a step in the right direction, but it does not solve my problem." She stated that her parcel is classified as "Class VI Soil," it does not meet the statutory definition of agricultural land which is 60 percent Class II and III soil. She explained that her land is essentially useless and requested that the legislature provide some remedy for people who do not have agricultural soil. CO-CHAIRMAN GREEN informed Ms. Crane that her recommended solution did not address this legislation. Number 1758 REPRESENTATIVE DAVIES asked Mr. Swanson what kind of remedies might be available to Ms. Crane. He felt a solution for land which is clearly not suitable for agricultural should be reclassified so it could be disposed of some other way. Number 1781 MR. SWANSON responded that solution is a possibility that the land could be reclassified and those additional (indisc.) parts be purchased by the landowner. Number 1811 ALAN KLATT testified in support of SB 162 explaining that he is an agricultural parcel owner at Moose Creek. Number 1920 MIKE CROUCH, Alaskan resident since 1977, farming in the Copper River Valley, the Mat-Su Valley and Delta stated that the biggest benefit of SB 162, which he supports, is the ability to divert the five-year operation and be more like the farming operations in the lower 48. He said, "When you go through a farming area in the lower 48 there all kinds of agricultural related businesses that help support that community and diversify the income base." Number 1999 JON DUFENDACH, Delta farmer since 1967, testified in support of SB 162. He said this legislation will make farming more economically viable, and stated he felt that the banking institutions would be more sensible to loans. He said landowners rights will be more flexible without destroying the intent and he appreciates the due process the bill brings. Number 2146 BILL SPENCER testified that he had met his neighbors, there are 18 agricultural holders in the Nenana area, and they unanimously ask the committee to support and pass SB 162. Number 2220 SCOTT SCHULTZ, Delta Junction resident since 1982, testified in support of SB 162. He explained that his family is more interested in combining agricultural parcels than subdividing them. He encouraged the committee to pass the bill as soon as possible.... (END TAPE). TAPE 96-29, SIDE A Number 000 SCOTT MILLER, President, Delta Junction Farm Bureau, informed that the organization passed a resolution unanimously supporting SB 162. He related that at the February board meeting of the Agricultural Revolving Loan Fund, $600,000 was approved in loans for Delta alone. He said, "If anybody thinks that agriculture is not happening in Alaska, particularly, in Delta, then they are not paying attention." He also related that agriculture development was voted the most popular economic development idea for Delta's long term economic stability. Number 165 SARA HANNAN, Executive Director, Alaska Environmental Lobby, said that the Lobby does not necessarily support the bill but neither do they oppose it. She reported that Senator Green's office had addressed many initial concerns of the AEL. Primarily, the AEL constituency was concerned that agricultural land would be turned into strip malls, such as the lower 48. As communities expanded, green space and productive economic liability of farms disappeared as there were much higher values to use them as real estate development and second homes. MS. HANNAN felt that Senator Green's bill is fairly narrow in scope and meets a real concern of economic farmers in Alaska. The AEL wants to see farmers in Alaska farming on land, but in the deliberations of this morning, the legislature is raising questions that should be addressed for future land use policies that are outside the scope of this bill. Number 240 MS. HANNAN said two concerns were that the land would stay in agricultural development and that it not be subdivided into small enough parcels that someone would be encouraged to subdivide to make a profit off their land. MS. HANNAN encouraged the committee to think about some problems the state has had in land use development where the state has given people specific rights to mine, or to develop a shell fish farm and they received a lease hold from the state. "People do not have access to fee simple land so what we have found is that within the Kenai Peninsula Borough the people were getting a lease to mine but using it as a primary residence. Ongoing litigation has erupted and evictions have taken place, it put policies in conflict with users. Neighbors in conflict with neighbors, when people get a leasehold, a right to do something on the land and they are paying for a very narrow scope of use, but their neighbors have paid a higher value for more use, they have built a home and they want to live there. You have heard today from active farmers, those people are in a tough economic situation and this bill remedies the conflict that has arisen by them not having fee simple title. You did not hear, and you will not hear, from someone who is a speculator who bought agricultural rights land and is not working it. If the land is laying dormant and you were a speculator, you probably had the cash and not looking for a bank to help you with your ongoing economic interests. You are waiting for the future when the land goes up." Number 434 MS. HANNAN asked the committee to think about looking at those agricultural lands in the future. She said, "What we want in Alaska is some economic stimulus from land that we put out under agreement to provide economic stimulus. Keep the bill narrowly crafted and keep looking at crafting some other language to address policy questions raised today." Number 486 REPRESENTATIVE DAVIES referred to the second covenant, on page 6, which specifies that not more than four divisions, not less than 40 acres each, and asked Ms. Hannan if the AEL is comfortable with that language. MS. HANNAN responded that the AEL is comfortable with that section. Number 573 WILLIAM H. MONTANO, Delta parcel owner, referred to page 3, line 29 "(7) waive, postpone or otherwise modify the development requirements of a contract for the sale of agricultural land, if" and page 4, lines 1 and 2. He said, "I have been discussing this with the Department of Natural Resources for the past ten years and we are being held to standards that were set up, they have taken some of these parcels away from people and given them much more (indisc.) clearing schedules." He said there needs to be some flexibility in dealing with these agricultural parcels to deal with the changes in times. Number 700 CO-CHAIRMAN GREEN closed teleconferenced testimony and stated that Representative Davies had several amendments. Number 712 REPRESENTATIVE DAVIES stated that some concerns had been alleviated by testimony and withdrew two amendments. He moved Amendment No. 1. Page 7, line 10: Following "are" Delete "not in violation of the minimum parcel size set out in (a)(2) of this section." Insert "consistent with the covenants described in (a)." Number 750 REPRESENTATIVE OGAN objected. REPRESENTATIVE DAVIES said his concern was subsection (C) "the landowner's right to subdivide and sell the land," and the only constraint is the covenant in (a)(2). He felt the landowners right to subdivide and/or sell the land should be subject to both of the covenants in subsection (a): the agricultural rights and the parcel size. The amendment does not change the intent, but clarifies that when the landowner has a right to subdivide and sell, it is subject to both of the covenants. Number 857 MR. HUBER replied that the covenant section limits the parcel subdivision. "The intent of Section 11, subsection 3, the commissioner may not limit. So, we are back to making this not a decision of the Administration on the subdivision which it currently is. You have to go through the process of applying to the division and at the discretion of the commissioner whether you can or cannot subdivide. What we are saying is those subdivision rights will be inherent with the agricultural covenant. It references the agricultural covenant but the agricultural covenant itself is the one that allows the subdivision down to 40 acres, no more than four parcels. The reference in Section 11, back to Section 9, basically says that it is not the commissioner's call, it is a call of the covenant and then those subdivision rights will be part of the covenants that will conveyed with the title document." "There is a question of who gets to subdivide and that is all done through the sale. If I have the initial land and I want to sell half of my 640, 320 acres, to somebody else then it will be part of sale whether I retain the rest of the subdivision rights or the subdivision rights go from there. So, we are just basically trying to take it out of a call of the commissioner and putting it in with the covenant and saying that the commissioner may not limit what is described in the covenants." Number 949 REPRESENTATIVE DAVIES said, "Surely, the commissioner cannot permit something to occur that is in violation of the basic, underlying, agricultural rights covenant." He expressed concern that the state would be placed in a position for potential litigation because a portion of the statute appears to allow the commissioner make the decision. MR. HUBER countered that the issue was clearly covered in the covenant itself. The covenant is the instrument that will define what subdivisions are allowable and how it is allowable. Number 1006 CO-CHAIRMAN GREEN clarified whether Mr. Huber felt Representative Davies amendment conflicted with the intent. MR. HUBER said he did not feel the amendment would change the intent but believed that it is clear and defined in the covenant. CO-CHAIRMAN GREEN asked for a roll call vote. Number 1057 Representatives Davies and Long voted in favor of Amendment Number 1. Representatives Austerman, Kott, Ogan, Williams and Green voted against the amendment. The amendment failed. Number 1093 REPRESENTATIVE DAVIES moved that on page 7, line 16, following "trees." Insert "flowering plants." REPRESENTATIVE KOTT objected for purposes of discussion. REPRESENTATIVE DAVIES explicated that agricultural purposes is understood to, generally, include horticulture. In the list of examples on line 16, there is not a single illustration of horticultural purpose, and explained that he wanted the statute to be more explicit in providing one example of horticulture. REPRESENTATIVE DAVIES reported that in the Fairbanks area, about 50 percent of the market value in agriculture is in horticulture, as in greenhouse (indisc.) and flowering plant sales. The amendment would add one example of horticulture to this list. CO-CHAIRMAN GREEN asked if marijuana has a flower. Number 1212 REPRESENTATIVE KOTT stated that the amendment would only clog up the statutes. He felt the language on lines 15 and 16, "including forage and sod crops, grains, etc.," was not meant to be all inclusive. He maintained that the amendment was unnecessary. Number 1249 REPRESENTATIVE AUSTERMAN remembered a prior problem with Christmas trees. He said that he did not have a problem with the amendment and thought that it would clarify the language. Number 1277 SENATOR GREEN felt the amendment was superfluous. REPRESENTATIVE DAVIES argued that it was not necessary either to specify fruits, trees, vegetables or dairy animals. "All those things are clearly agricultural purposes. The purpose of the string in here is to be illustrative of what we mean by agricultural purposes and it concerns me, slightly, that there is not a single horticultural example in this list. Sometimes, courts do weird things with constructing statutes." He explained, they look at a list like that and see agricultural purposes and there is a long list of illustrations there that are all on the food side and none on the horticulture side, some court, in the future, might construe that to be significant. Number 1383 Representatives Austerman, Davies and Long voted in favor of Amendment Number 2. Representatives Kott, Ogan, Williams and Green voted against the amendment. So the amendment failed. REPRESENTATIVE DAVIES moved Amendment Number 3, page 9, lines 2-5, delete all material. He debated that it is unnecessary for the legislature to annul these regulations. He said the statutory language will take care of the regulations. REPRESENTATIVE OGAN objected. Number 1425 MR. HUBER recalled that testimony today indicated that overly restrictive regulations have got in the way of a lot of farmers and agricultural producers doing business and being able to successfully do business. "We believe that all of these are inconsistent with statutory changes made in this Act. We would like to make sure that the department does go out and promulgate regulations that fall under the statutory guidelines of this Act and relieve those burdens. It would be our position that we ought to repeal those specific regulations and let them go back to the regulatory process under the new statutory language." Number 1463 REPRESENTATIVE DAVIES said this is an issue of separation of powers, the regulations is the Administrative function. He said he, personally, had not had the time to go through each one of the regulations. He further said, "Our purview here is to deal with the statutes and it is the Administration's purview, who understand the details of how the statutes are implemented through regulation, to deal with the regulations." Number 1512 SENATOR GREEN stated that the department had no objection to the repeal of these specific amendments knowing that they would be promulgating new regulations. Representative Davies vote in favor of Amendment Number 3. Representatives Austerman, Kott, Long, Ogan, Williams and Green voted against the amendment. So Amendment Number 3 failed. Number 1551 CO-CHAIRMAN WILLIAMS moved that CSSB 162(FIN) move from the House Resources Committee with individual recommendations and attached fiscal note. There being no objection, it was so ordered. HB 394 - GAS & COAL METHANE LICENSES & LEASES Number 1580 CO-CHAIRMAN GREEN brought committee substitute for HB 394 before the committee to adopt the committee substitute. REPRESENTATIVE OGAN moved for the adoption of CSHB 394(RES), Version "M," dated 03/07/96 as a work draft for discussion on 03/11/96. Hearing no objection, it was so ordered. ADJOURNMENT There being no further business to come before the House Resources Committee, Chairman Green adjourned the meeting at 10:07 a.m.