03/01/2004 01:07 PM House RES
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= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
March 1, 2004
1:07 p.m.
MEMBERS PRESENT
Representative Nancy Dahlstrom, Co-Chair
Representative Beverly Masek, Co-Chair
Representative Cheryll Heinze, Vice Chair
Representative Carl Gatto
Representative Bob Lynn
Representative Nick Stepovich
Representative Kelly Wolf
Representative Beth Kerttula
Representative David Guttenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE CONCURRENT RESOLUTION NO. 28
Relating to the socioeconomic impacts of salmon harvesting
cooperatives.
- HEARD AND HELD
HOUSE BILL NO. 319
"An Act relating to the disposal of state land by lottery; and
relating to the disposal, including sale or lease, of remote
recreational cabin sites."
- HEARD AND HELD
HOUSE BILL NO. 486
"An Act relating to reclamation bonding and financial assurance
for certain mines; relating to financial assurance limits for
lode mines; establishing the mine reclamation trust fund; and
providing for an effective date."
- MOVED HB 486 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HCR 28
SHORT TITLE: STUDIES OF SALMON HARVESTING COOPERATIVES
SPONSOR(s): REPRESENTATIVE(s) SEATON BY REQUEST OF SALMON
INDUSTRY TASK FORCE
01/28/04 (H) READ THE FIRST TIME - REFERRALS
01/28/04 (H) EDT, RES
02/12/04 (H) EDT AT 10:00 AM CAPITOL 120
02/12/04 (H) Moved Out of Committee
02/12/04 (H) MINUTE(EDT)
02/19/04 (H) EDT AT 10:00 AM CAPITOL 120
02/19/04 (H) Mvd Out of Committee w/new fiscal notes
02/23/04 (H) EDT RPT 4DP
02/23/04 (H) DP: MCGUIRE, CISSNA, CRAWFORD, HEINZE
02/23/04 (H) FIN REFERRAL ADDED AFTER RES
03/01/04 (H) RES AT 1:00 PM CAPITOL 124
BILL: HB 319
SHORT TITLE: REMOTE REC.CABIN SITE SALES/LOTTERY SALE
SPONSOR(s): REPRESENTATIVE(s) FATE
05/14/03 (H) READ THE FIRST TIME - REFERRALS
05/14/03 (H) STA, RES, FIN
01/13/04 (H) STA AT 8:00 AM CAPITOL 102
01/13/04 (H) Heard & Held
01/13/04 (H) MINUTE(STA)
02/03/04 (H) STA AT 8:00 AM CAPITOL 102
02/03/04 (H) Heard & Held
02/03/04 (H) MINUTE(STA)
02/10/04 (H) STA AT 8:00 AM CAPITOL 102
02/10/04 (H) Heard & Held
02/10/04 (H) MINUTE(STA)
02/19/04 (H) STA AT 8:00 AM CAPITOL 102
02/19/04 (H) Moved CSHB 319(STA) Out of Committee
02/19/04 (H) MINUTE(STA)
02/23/04 (H) STA RPT CS(STA) 2DP 4NR 1AM
02/23/04 (H) DP: GRUENBERG, LYNN; NR: SEATON, HOLM,
02/23/04 (H) COGHILL, WEYHRAUCH; AM: BERKOWITZ
03/01/04 (H) RES AT 1:00 PM CAPITOL 124
BILL: HB 486
SHORT TITLE: MINING RECLAMATION ASSURANCES/FUND
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/16/04 (H) READ THE FIRST TIME - REFERRALS
02/16/04 (H) RES, FIN
03/01/04 (H) RES AT 1:00 PM CAPITOL 124
WITNESS REGISTER
REPRESENTATIVE PAUL SEATON, Sponsor
by request of the Joint Legislative Salmon Industry Task Force
Alaska State Legislature
POSITION STATEMENT: Presented HCR 28 as sponsor by request of
the Joint Legislative Salmon Industry Task Force.
REPRESENTATIVE HUGH FATE, Sponsor
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 319 as sponsor.
JIM POUND, Staff
to Representative Hugh Fate
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: During hearing on HB 319, provided
information and answered questions.
DICK MYLIUS, Deputy Director
Division of Mining, Land and Water
Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: During hearing on HB 319, provided
information and answered questions.
NANCY WELCH, Special Assistant
Office of the Commissioner
Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: During hearing on HB 319, provided
information and answered questions.
BOB LOEFFLER, Director
Division of Mining, Land and Water
Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 486.
ROGER FEATHERSTONE, Campaign Director
Alaskans for Responsible Mining
Anchorage, Alaska
POSITION STATEMENT: During hearing on HB 486, expressed
concerns about corporate guarantees.
STEVE BORELL, Executive Director
Alaska Miners Association
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 486.
ACTION NARRATIVE
TAPE 04-9, SIDE A
Number 0001
CO-CHAIR NANCY DAHLSTROM called the House Resources Standing
Committee meeting to order at 1:07 p.m. Representatives
Dahlstrom, Masek, Gatto, Lynn, Stepovich, Wolf, and Guttenberg
were present at the call to order. Representatives Heinze and
Kerttula arrived as the meeting was in progress.
HCR 28-STUDIES OF SALMON HARVESTING COOPERATIVES
CO-CHAIR DAHLSTROM announced that the first order of business
would be HOUSE CONCURRENT RESOLUTION NO. 28, Relating to the
socioeconomic impacts of salmon harvesting cooperatives.
Number 0130
REPRESENTATIVE PAUL SEATON, Alaska State Legislature, Sponsor by
request of the Joint Legislative Salmon Industry Task Force,
testified. He explained that HCR 28 was recommended by the
Joint Legislative Salmon Industry Task Force and the industry.
It involves an analysis of the Chignik fishery, which was
established as cooperative fishery in the summer of 2000. He
said this is the first time there has ever been a cooperative
that was actually allocated a share of a resource. This was a
restructuring program that went through the Board of Fisheries
process. He said HCR 28 attempts to get a better handle on the
social and economic impacts. The economic impacts of the
allocation co-op were looked at, but the social impacts and the
community impacts have really not been looked at in any detail.
He said the Joint Legislative Salmon Industry Task Force, while
looking to address some of the public policy issues that are
impacted by an allocation cooperative, found that it didn't have
the background information on which to do it. He said the
purpose of this is to ask the Institute of Social and Economic
Research (ISER), a division of the University of Alaska, to look
at these questions.
REPRESENTATIVE SEATON said the management becomes somewhat
controversial as any restructuring does. The proponents talked
about the efficiency that this promotes using less boats to
harvest the fish. He said working with the Alaska Department of
Fish & Game (ADF&G) improves quality because the fish can be
taken in a measured way over a much longer period of time only
harvesting what can be processed at that point in time to get
excellent quality. It decreases the operating costs to those
involved in harvesting and is less competitive and more relaxed
work. He said the opponents talk about the decreased number of
jobs because there are fewer boats, less deckhands employed, and
the possibility of decreased dollars flowing through the local
economy caused by a decrease in people going to that particular
area. He noted that there is non-participation from public
resources. Normally, he said fisheries require that a permit
holder operates his or her own gear. However, this allows a
fisherman who is a member of the cooperative not to be on board
harvesting fish. Representative Seaton said there are 100
permits, of which 77 permit holders were allocated. The
opponents maintain that it unfairly disadvantages the processing
sector, and there are some questions of fairness to independent
fishermen, he said.
REPRESENTATIVE SEATON said these are social economic questions
that are "hard to get to." He said the public policy questions
are about non-participation and allocation of a common property
resource to a group and the structure that promotes industry
versus a structure that spreads wealth among the absolute
maximum number of people. Representative Seaton said ISER is
being asked to look at the community aspects so the legislature
and other groups can address whether this is good restructuring
or is something to get away from. He said the fiscal note, from
University of Alaska, estimated this project to be $100,000.
Representative Seaton explained that the Joint Legislative
Salmon Industry Task Force has money left over from its budget
and is looking at several different things to do with that
money. He said this may be one of the things that it may decide
to do, but that decision hasn't been made yet. He brought
attention to the last page of a study contained in the bill
packet entitled, "Effects of the Chignik Salmon Cooperative:
What Permit Holders Say," and he noted that ISER is planning
several other studies of Alaska salmon management as part of its
"Understanding Alaska" project."
Number 0604
REPRESENTATIVE SEATON said it's not as if ISER doesn't know or
isn't considering that there is further investigation that needs
to be done on restructuring and the cooperative management tool.
He said although the $100,000 is listed as the price of the
project, it doesn't mean that ISER may not be investigating it
anyway.
Number 0644
CO-CHAIR DAHLSTROM asked Representative Seaton to comment on the
amount of funds left over in the [Joint Legislative Salmon
Industry Task Force's] budget. She asked whether it would equal
the $100,000 fiscal note.
REPRESENTATIVE SEATON said the study was done on the Chignik
cooperative fishery and the Joint Legislative Salmon Industry
Task Force felt [it was appropriate for the University of Alaska
to be involved] because it has already done some of the work.
He said there have been some suggestions that it go out to a
private bid; however, it seemed logical for the legislature to
request the University of Alaska to study this and provide
background data. Representative Seaton said there is more than
[$100,000] left in the Joint Legislative Salmon Industry Task
Force's budget, but there is more than one project, such as
studying the Chignik restructuring and looking at a request to
investigate several different methods of restructuring the
salmon industry. He said the determination of where that money
would be spent has not been made, and he couldn't say that the
money would be available. He said the University of Alaska
doesn't have to do the study if it doesn't have the money. He
noted that the initial report indicated that further studies are
needed.
Number 0831
REPRESENTATIVE LYNN asked if the University of Alaska had been
asked to conduct the study and whether it is necessary to use a
resolution for the request.
REPRESENTATIVE SEATON said the Joint Legislative Salmon Industry
Task Force, which was appointed by the legislature, asked the
legislature to request the University of Alaska to conduct the
study. He indicated that individual requests to can be made to
the University of Alaska, but it is not the same as legislation
asking for the study to be conducted.
Number 0921
REPRESENTATIVE GATTO asked if the $100,000 needed for the study
is within the normal range of the usual costs for this kind of a
study, and whether a graduate student could do the study.
REPRESENTATIVE SEATON replied that a social economic study can
be quite involved because the effects of a mismanagement
strategy on villages, processors, and employees could be
extensive. Noting that ISER had provided the [fiscal note], he
said he didn't know the [amount of funding] requested for the
original study, which was basically a survey, but this request
was something much more than that.
REPRESENTATIVE GATTO where the money would go and if it would
sidestep the university's administration if it went to a group.
REPRESENTATIVE SEATON said the fiscal note is from the
University of Alaska and therefore the process would be done
through it. He said it's Joint Legislative Salmon Industry Task
Force money; not something that the legislature itself controls.
Number 1054
REPRESENTATIVE GATTO turned attention to literature contained in
the bill packet relating to the Chignik salmon cooperative, and
he said he expected that the people in the co-op would like it
and people outside of the co-op would not like it. Noting that
it appeared that some people outside of the co-op where involved
in a lawsuit, he asked how many people are not in the co-op. He
commented that it almost sounded like agriculture.
REPRESENTATIVE SEATON explained that of the 100 permit holders
in Chignik, 77 permit holders joined the cooperative effort, and
23 did not. He said the permit holders who did not join do not
get paid for not participating, and are in a competitive open-
access fishery. He said an equal share would be 1 percent, so
the Board of Fisheries allocated nine-tenths of a percent to
each fisherman in the co-op, and if the co-op had over 80
participants, the allocation would be 1 percent. He said there
was a little more of a percentage left for those permit holders
that didn't join the co-op on an average basis than were in the
co-op.
REPRESENTATIVE SEATON said the [project] has been conducted that
way for two years and seems to be functioning fine for the
people that are in the co-op, but the people outside the co-op
would like more access. He said the biggest problem is, with an
allocation of fish, the co-op has a very slow harvesting rate
over time and has a lot of days to fish, whereas competitive
fishermen catch fish in a hurry and get fewer days to fish. He
said [it has been speculated] that competitive fishermen don't
get nearly as much time, but the co-op fishermen are catching a
maximum number of fish per day, rather than trying to catch as
many fish as possible. He said it is definitely a different
structure to the two fisheries.
Number 1225
REPRESENTATIVE GUTTENBERG said the Chignik co-op is a pretty
unique situation. He said some permits were not in use or were
about to be sold and have now come into play because of the co-
op. He said some of the permit holders are not from the area,
and it must have an economic impact. He asked who will form the
questions that for the study.
REPRESENTATIVE SEATON said those are the answers [are not known]
and it is the purpose for the study. He said the University of
Alaska is being asked to look at the other social aspects, such
as about all the crewmembers who are not hired under this new
format, and at the non-economic effects. He said the question
is whether this restructuring makes good sense for the state and
can be weighed and balanced. He said the University of Alaska
will be generating the questions and is being asked to do the
study because people within the university are skilled in doing
this kind of research.
Number 1354
REPRESENTATIVE GUTTENBERG asked if, regardless of the study, the
Joint Legislative Salmon Industry Task Force had developed a
criteria of questions it wanted answered.
REPRESENTATIVE SEATON said the Joint Legislative Salmon Industry
Task Force found it was lacking social and community data, and
[information related to] effects on non-participatory fishermen.
He said this would cover participatory fishermen, but the
effects on the community and the effects on how many jobs are
held locally versus non-locally, for crewmembers as well as
permit holders, are things that the Joint Legislative Salmon
Industry Task Force didn't have information on, and is the whole
purpose of this resolution.
Number 1413
REPRESENTATIVE WOLF asked if the Chignik fishery cooperative had
developed a "branding program."
REPRESENTATIVE SEATON replied yes.
REPRESENTATIVE WOLF expressed concern regarding language on page
1, lines 3-4, and he asked why the branding program is not
looking at it. He said regional branding programs are all over
the state, such as in Cook Inlet, and have expanded the
efficiency, education, and quality of Alaska salmon.
Representative Wolf suggested the University of Alaska would be
getting $100,000 to do the same thing the branding program does.
REPRESENTATIVE SEATON said the branding programs are basically a
marketing program and puts certain standards on fish to ensure
it is a certain quality. However, he said it is not a basic
restructuring of the industry, and hypothetically, if there was
a cooperative in Cook Inlet, half of the boats that are now
participating would not. He said other boats would go out
everyday, harvest a certain number of fish, and come in, so that
the flow of fish is different. He said Cook Inlet would still
have a fishery that opens, people would go out and catch as many
fish as they could that day, and it would still be quite
competitive.
REPRESENTATIVE SEATON said the Chignik salmon cooperative is no
longer competitive, because ADF&G determines how many fish will
be caught each day, and since it is no longer competitive, the
participants are seining the fish and taking them live to the
processor. He said there are 5 seiners harvesting for 77 permit
holders, so it is not necessary to worry about an over harvest.
Representative Seaton said the increased efficiency and quality
come from the fact that fishermen are not competitively
harvesting and are taking the processing capabilities of that
particular day. He said it is quite different than a
competitive fishery that has a branding program.
REPRESENTATIVE WOLF said a third of the fleet in Cook Inlet
didn't fish last year because of price restrictions. He said
the branding program is already restructuring the entire
industry in Cook Inlet, and he agreed that the branding program
has developed a higher quality branding, but it also expanded
the educational component. He said the marketing and the
industry itself are taking that quality to the next level and
are able to get a higher brand. Representative Wolf asked why
this money needs to be given to the University of Alaska if the
industry and the branding program are doing it.
Number 1697
REPRESENTATIVE SEATON said the difference is that the Board of
Fisheries has restructured the Chignik fishery, and the study is
needed to understand the impacts of that restructuring. He said
if there was a co-op in Cook Inlet, a few boats would go out
each day and catch a limited number of fish. If the fishing was
good, the boats wouldn't continue to fish, only the amount of
fish that the boat and the processor could handle that day would
be fished, he explained. He said there wouldn't be a situation
where 200,000 to 300,000 or 700,000 red salmon are caught in a
day, which is what the drift fleet can do in Cook Inlet, instead
there would be a limited number of boats that went out and it
would be changed to so those boats go out every day. He said
there is a restructuring that's taken place by the board in the
way the fishery is conducted. Representative Seaton said the
intention is to understand the impacts to the community when
there is a change in the way the fishery is conducted.
REPRESENTATIVE WOLF suggested he'd seen a change in Cook Inlet,
and he added that the Board of Fisheries has forcibly
restructured Cook Inlet over the years and there has been no
social economic study.
REPRESENTATIVE HEINZE asked how much money [U.S. Senator Ted
Stevens] has brought to Alaska for marketing fish and studying
the socio-economic impacts.
REPRESENTATIVE SEATON said an amount of money [was provided] for
salmon marketing but he was not sure how much that is, and it is
totally different from this money. Representative Seaton said
this study is looking at the restructuring of the industry and
at the effects of the restructuring. He said this study is not
looking at marketing the fish or at the value of the fish,
instead it is looking at the social impacts of the restructuring
of the industry, which made it so a few fishermen could harvest
many fishermen's fish. He said it is quite different than
marketing.
Number 1857
REPRESENTATIVE HEINZE asked if the $100,000 for the study will
be taken from [federal money].
REPRESENTATIVE SEATON replied that the money from the Joint
Legislative Salmon Industry Task Force has nothing to do with
[federal] money. He said some money allocated to the Joint
Legislative Salmon Industry Task Force is left in that pool for
operation of the task force and may be designated for conducting
the study.
Number 1906
REPRESENTATIVE STEPOVICH said he had no problem with the money,
but he did have a problem with the concept. He said the words
"fishermen" and "independent" seem to be the same, and "any time
you strike the word cooperative" it makes him wonder if that is
a part of the free market system. Representative Stepovich
asked if people who are a part of the cooperative that aren't
fishing or don't catch fish can still make money.
REPRESENTATIVE SEATON said yes; one of the public policy
questions that the Joint Legislative Salmon Industry Task Force
was trying to address was the non-participatory utilization by
fishermen that have a permit and don't participate in the
fishery and receive the benefit from that. He said that is one
of the major questions being looked at, and one of the problems
in addressing this whole issue was that there wasn't a good
handle on the real and whole effect of this restructuring that
the Board of Fisheries was legally able to adopt.
REPRESENTATIVE STEPOVICH asked if the number of jobs and money
in the community will decrease because of the co-op. He noted
that free markets are based on self-determination,
individualism, and entrepreneurship. He asked if Representative
Seaton felt that the cooperatives are the only way to
efficiently harvest the fish and why cooperatives weren't used
before.
Number 2025
REPRESENTATIVE SEATON said there are cooperatives across Alaska,
but the difference in this cooperative, established by the Board
of Fisheries, is that it receives an allocation. He said many
cooperatives occur that fishermen get together and participate
in, but are done in a competitive fishery in which fishermen are
pooling their resources and efforts. He said this is the first
cooperative that has been allocated a percentage of the harvest
of an area. Representative Seaton said this resolution does not
support or oppose the cooperatives; rather it is an attempt to
understand the effect of the cooperative. He said [the purpose
of the study] is to understand the effects on the communities
and the people of the region of the establishment of a
cooperative, which has been challenged in court and found to be
a constitutional use of [the Board of Fisheries] powers to
restructure the fisheries in this way. Representative Seaton
clarified that his bringing forward this resolution is not
supporting or expanding cooperatives.
Number 2107
CO-CHAIR MASEK asked Representative Seaton what the cost to the
state was for forming the Joint Legislative Salmon Industry Task
Force.
REPRESENTATIVE SEATON said the Joint Legislative Salmon Industry
Task Force was formed the year before he came to the
legislature. He said he believed the cost was $650,000, which
was designated federal money, but he couldn't say for sure.
Representative Seaton said he thought there was about $375,000
left from the initial phase, which was the amount the
legislature authorized the Joint Legislative Salmon Industry
Task Force to continue with last year.
CO-CHAIR MASEK asked why the Joint Legislative Salmon Industry
Task Force doesn't do the study with the remaining funds.
REPRESENTATIVE SEATON said the Joint Legislative Salmon Industry
Task Force is trying to go forward with the study, which is
looking at the Board of Fisheries process, so the decision
makers can weigh these subjects. He said there is no request
for funding in this resolution, it simply asks for a study to be
done. He explained that the university has identified that this
study may cost $100,000, and he didn't know if the Joint
Legislative Salmon Industry Task Force was going to dedicate
some of its remaining funds to this study.
CO-CHAIR MASEK said she thought it was important to know [where
the funding for this study would come from] before the committee
takes any action with this resolution. She noted that the Joint
Legislative Salmon Industry Task Force already has the [funding
needed for this study]. She said the [fiscal note] for the
resolution specifies that the money would come out of the
general fund.
REPRESENTATIVE SEATON said the [fiscal note] is from the
University of Alaska, which has indicated it would like $100,000
from the general fund to conduct this study.
CO-CHAIR MASEK suggested that Representative Seaton clarify that
the [the resolution] is requesting that the money come from the
general fund, "rather than having some hopes" that the money
would come out of the Joint Legislative Salmon Industry Task
Force funds.
REPRESENTATIVE SEATON replied that this resolution does not
request any money to be appropriated, rather it asks the
university to conduct this study. He noted that the university
had indicated during the previous study that is planning to
perform additional studies to understand the full effects of
restructuring in Alaska. He reiterated that this resolution is
a request to do the study, but does not put an appropriation
forward for the study.
Number 2324
CO-CHAIR MASEK said the study is dated for November 1, 2004, and
she asked what will happen to the study once it has been
produced. She said she didn't want to see $100,000 spent on a
study if it was going to sit on a shelf and collect dust.
Number 2345
REPRESENTATIVE SEATON explained that the study will form the
basis for the Board of Fisheries and for the legislature to
weigh the positives and negatives of this kind of restructuring.
He said the restructuring is in the Board of Fisheries, which is
legally allowed to do these things, and has done it in the past.
He noted it has been approved by the courts. Representative
Seaton said the legislature may look at this and say the social-
economic impacts are great and take the authority away from the
Board of Fisheries, but right now [the legislature] does not
have the information to say what those impacts are. He said
some people come forward and say it's great, and others come
forward and say it's bad, but there isn't really any social data
to show what those impacts are.
CO-CHAIR MASEK referred to the last paragraph of the sponsor
statement, which read, "Yet, this isolated coastal community and
the salmon cooperative have become the center of a statewide
controversy." She asked for more information regarding the
statement.
REPRESENTATIVE SEATON explained that the House Special Committee
on Fisheries held an overview of the Chignik cooperative, which
has been heard twice by the Board of Fisheries. He said the
controversy lies around those people in the co-op and those that
decided not to join the co-op; the amount of time that each
group gets to fish; and also the public policy issues of whether
someone that is not physically there operating gear should be
able to benefit from the fishery by putting his or her
allocation into the co-op and having that fish harvested. He
said Chignik is very unique because there are 100 permits and
basically all of them were fished every year, which is quite
different than most other areas, and it's also a very controlled
situation because the fish come in, are counted, and the [amount
to be caught is designated]. Representative Seaton said that
kind of thing can't be done in most areas, such as in Cook
Inlet. He said the applicability of co-ops to other regions of
the state is not known yet, and indicated the impacts of this
style of management, even in a place as confined and controlled
as Chignik, is what needs to be figured out.
Number 2508
REPRESENTATIVE HEINZE said the Joint Legislative Salmon Industry
Task Force puts a lot of thought and work into any request it
puts forward. She indicated she has a lot of trust in the
individuals that sit on the Joint Legislative Salmon Industry
Task Force [board] and applauds their work. Representative
Heinze asked about the sunset date.
REPRESENTATIVE SEATON replied that the sunset date is at the end
of this session.
Number 2537
REPRESENTATIVE HEINZE referred to Co-Chair Masek's point of
ensuring that the study is utilized once it is completed.
Number 2550
CO-CHAIR DAHLSTROM said her original intent was to move the
resolution today, but the fiscal note has changed since she
first heard the resolution, and that there are a lot of
questions and some apprehensions from committee members. Co-
Chair Dahlstrom said she would like to hold the bill and have
Representative Seaton meet with committee members to "hash out
this stuff" to get a better understanding, and to get the work
done in committee rather than on the floor.
REPRESENTATIVE SEATON said he appreciates the committee's time.
He noted that because of the fiscal note, the resolution will
receive a House Finance Committee referral to look at the fiscal
note and the date the [study is scheduled to begin on], which is
November 1. He said if money isn't allocated for this, the
Joint Legislative Salmon Industry Task Force will meet to figure
out where the money is going to be designated from. He said if
there isn't money designated for [the study], the date will
probably be moved back in the House Finance Committee, so the
university can conduct the study on it's own schedule.
CO-CHAIR DAHLSTROM asked Representative Seaton to touch base
with her in the next few days. She said the resolution would be
rescheduled back in committee once Representative Seaton
addressed the items that had been discussed.
REPRESENTATIVE SEATON said he thought the fiscal note is
something that's going to require a decision by the Joint
Legislative Salmon Industry Task Force, and he doesn't control
that process. He asked which questions the committee would like
him to address.
CO-CHAIR DAHLSTROM said she would provide him with a couple of
short questions.
REPRESENTATIVE SEATON said that would be great.
[HCR 28 was held over.]
HB 319-REMOTE REC.CABIN SITE SALES/LOTTERY SALE
CO-CHAIR DAHLSTROM announced that the next order of business
would be HOUSE BILL NO. 319, "An Act relating to the disposal of
state land by lottery; and relating to the disposal, including
sale or lease, of remote recreational cabin sites."
Number 2719
REPRESENTATIVE HEINZE moved to adopt the proposed committee
substitute (CS), labeled 23-LS0477\S, Bullock, 2/25/04, as the
work draft. There being no objection Version S was before the
committee.
Number 2740
REPRESENTATIVE HUGH FATE, Alaska State Legislature, speaking as
sponsor, characterized the bill as another tool for the
Department of Natural Resources (DNR) to allow private
individuals or other individuals, after nomination and at the
discretion of the commissioner, to finally secure private land
from public land in Alaska. He said with the hundreds of
thousands of acres available in the state, he hopes there will
never again be an excuse [for not allowing] this opportunity.
He said this bill will provide that opportunity, and noted that
the bill has gone through several iterations. Representative
Fate said the present iteration of the bill has been received
well by the Alaska Miners Association (AMA), although there are
still some "hurdles" to go over with respect to the fiscal note.
He said there are timeline issues [regarding the fiscal note]
that have to be worked out. Representative Fate said it is an
important bill that has been needed in Alaska.
Number 2839
REPRESENTATIVE KERTTULA noted that the bill is now discretionary
and had a lot of work done to it. She turned attention to page
2, lines 27-31, and page 3, lines 1-3, which read:
Filing of a claim for relief by an owner against the
state or a person entering, opening, developing,
drilling, and working mines or wells on these or other
lands, not based on physical damage to the owner's
land, that hampers these reservations constitutes a
breach of this contract and will result in an
immediate assessment against the owner for a penalty
equal to 150 percent of the current appraised value of
the land, including the value of improvements.
Failure to pay this assessment will result in
foreclosure proceedings by the state.
REPRESENTATIVE KERTTULA asked why this was put in this bill.
She said it is in the broader section of the Lands Act, so it is
going to apply "across the board." She said she has real
concerns about it.
Number 2888
JIM POUND, Staff to Representative Hugh Fate, Alaska State
Legislature, testified. Mr. Pound said this incident deals with
contractual law in statute, which this whole section essentially
is. He said as far as Section 2 is concerned, this is
contractual language that was basically put in the bill to take
care of some technical errors. Mr. Pound said one change was
made in addition to the contractual language. He said he and
Representative Kerttula's staff had discussed Section 3, and he
thought that could be fixed.
REPRESENTATIVE KERTTULA said she didn't understand because the
[bill contains] the reservations section of reserving the
mineral rights of the state for subsurface, which is correct
after statehood, but this section sounds as if filing a claim
alone is the breach of contract. She said she didn't like that
and it concerns her. She asked what the justification is.
MR. POUND said there have been situations in the news lately
about surface and subsurface rights. He said this is basically
to assure that that confusion does not take place from the very
beginning. Mr. Pound said for some reason people don't tend to
read that the State of Alaska maintains subsurface rights. In
this particular case, he said if a situation does occur in which
a remote recreational cabin site ends up being valuable for
subsurface rights, the [cabin owner] is not in a position to
immediately start filing a cause of action because the state or
government is going drill or mine underneath his or her
property.
TAPE 04-9, SIDE B
REPRESENTATIVE KERTTULA asked if that section would be better
left to other pieces of legislation, rather than bringing issues
raised in the coal bed methane situation into this bill.
MR. POUND said he questions why contractual law is being done in
statute.
REPRESENTATIVE KERTTULA indicated she would offer a clean up
amendment at some point.
Number 2958
REPRESENTATIVE GATTO asked if a neighbor would be subject to a
penalty for complaining about drilling or mining activities
occurring on adjacent property.
MR. POUND answered correct.
REPRESENTATIVE GATTO said the term "peaceful enjoyment of the
owner's property" had been used in a different bill. He said
this would certainly violate peaceful enjoyment.
MR. POUND suggested that the peaceful enjoyment of one's
property is probably unconstitutional.
REPRESENTATIVE GATTO said he didn't think that constitutionality
question could be addressed in the House Resources Standing
Committee. He said the language wasn't invented in Alaska; it
comes from other states, and he is suspicious about the
constitutionality or the unconstitutionality of it.
Representative Gatto mentioned that the issue of coal bed
methane has been at the [forefront], and four bills have been
introduced to address it. He said residents feel that maybe it
shouldn't be done in concentrated areas or in areas where the
water could be contaminated, and residents have several
justifiable reasons to be concerned. He remarked:
We are trying to address those reasons and it looks
like this ... just did a reversal on all of that, in
this regard, for this land, to bring all of those
thoughts and statements and considerations and
legislative attempts back to ground zero by saying you
don't have any rights.
REPRESENTATIVE GATTO asked if that is the intent. He said if he
bought five acres of wilderness area, he wouldn't want it to be
next to the Red Dog Mine.
MR. POUND said he used the example of coal bed methane because
it is obviously the one subject that has been on everybody's
minds. He said this is basically language that will go into the
contractual agreement between DNR and the buyer [of the
property], and should eliminate concerns that have been taking
place with coal bed methane by addressing it in the contract
right up front.
Number 2825
REPRESENTATIVE GATTO asked if that is done by the [Alaska]
Statehood Act.
MR. POUND said if that were the case, he didn't believe [the
state] would have the coal bed methane problem it has now.
REPRESENTATIVE GATTO said that is exactly the point. He said a
number of people to file lawsuits, and [the bill would create] a
big penalty just for filing the lawsuit.
MR. POUND said it is the intent because that question continues
without going back to coal bed methane, which is not the impetus
for this. He said it is to ensure that ownership of subsurface
rights are known up front.
Number 2785
REPRESENTATIVE HEINZE said less than one percent of Alaska's
land is in "private hands," and [she supports] moving more land
into private hands. She asked what dispute resolution the
department has if two parties nominate the same land.
REPRESENTATIVE FATE said the commissioner has the authority to
nominate the land; the nomination isn't automatic.
Representative Fate said the commissioner has the final say and
there is also a public process. He said constitutionally there
has to be a public notice and a process for [providing] public
notice. Representative Fate said there is ample opportunity for
any withdrawal for that, including the designation as to mineral
content. He said even though that possibility may exist, it is
very remote by the very nature that this bill embodies, which
makes it very difficult for that to happen. Furthermore, he
said there are also regulations in place, which were passed last
year, that if a permitting process is in place, the likelihood
for an injunction, for example, has not been negated. He said
there are several things in place that will mitigate the
problem, although there is never 100 percent assurance that a
property owner won't file a cause of action for some reason.
Representative Fate said there are other ways, after nomination,
to determine whether land can be disposed of.
REPRESENTATIVE HEINZE asked if the commissioner has the right of
refusal.
REPRESENTATIVE FATE said first rights of refusal are not
uncommon and are not prohibited in the constitution, and there
is already statute law giving first right of refusal to people
who are already leaseholders in Alaska. He said those laws have
been on the books for years, and there is nothing that prohibits
that first right of refusal, but equal opportunity is something
different.
Number 2627
REPRESENTATIVE GUTTENBERG expressed concerns, and he said the
Bureau of Land Management (BLM) had been talking about surveying
the state and the prohibitive costs. He said he is wondering
about the actual value of a piece of property or remote parcel,
besides the fair market value, and about adding an appraisal and
a survey cost to that. Representative Guttenberg asked if an
analysis had been done on the costs of an [appraisal and survey]
for 10 acres of property.
REPRESENTATIVE FATE said his staff, Jim Dieringer, did a lot of
the fiscal work, and did an exhausting analysis. He suggested
that [the costs are not] prohibitive and most people are willing
to pay them if certain they can get fee simple to the property.
He suggested that the person purchasing the property would
determine what's prohibitive. He added that the cost will not
accrue to the State of Alaska.
REPRESENTATIVE STEPOVICH said he is under the impression that
the commissioner has full discretion over who is nominated, what
that person is being nominated for, and whether that person can
have the land.
REPRESENTATIVE FATE said it is basically correct that [the
commissioner makes] the final [determination].
Number 2522
REPRESENTATIVE STEPOVICH said there are some inherent
difficulties in the point that people competing for the land are
going to be competing for the nomination. He said the
constitution calls for the highest yield possible, and talked
about destroying the whole concept of Alaskans owning land for
recreation as well as for the resource value.
REPRESENTATIVE FATE asked for clarification.
Number 2485
REPRESENTATIVE STEPOVICH said the commissioner has full power
over the nominations, and the people who want the land, Alaskans
and businesses working within Alaska, are going to be in
competition for the nomination. He said it kind of puts the
commissioner in a "sticky" position.
REPRESENTATIVE FATE said it may or may not be; it may be a
parcel of land that has been used for a single purpose, and
there may or may not be competition. He indicated that there is
equal opportunity to compete for the land, and said part of
equal opportunity is to allow people to do this. The assessed
evaluation will be the final judgment in what the state will
receive and how much it will cost the person who wins the
lottery. He said it is not as though people will be competing
or bidding on a price; there would be a determination of the
parcel's value, and when the value is fixed, somebody will pay
that value. He said unless there is an open bid, which usually
isn't done, it is done on a lottery basis or over-the-counter
sales "when it's not done in the other direction,"
REPRESENTATIVE FATE remarked, "When you maximize this
opportunity, you maximize the land available, so that you have
more money that accrues to the State of Alaska through these
sales." He said there has been a determination as to what the
lowest value of property is, what a low median is, and what the
highest evaluations of property are. He said very little
property with high value is sold in the state, either through
lottery or anything else. He said much of [the property value]
is low and only about 40 percent of it is successful. Noting
that the land ends up in over-the-counter sales, he suggested
the present lottery system isn't that successful for various
reasons.
REPRESENTATIVE FATE suggested that privatizing the land will
maximize the sales to the benefit of the state, in those
instances that don't maximize a sale.
REPRESENTATIVE STEPOVICH said Representative Fate's efforts to
privatize land are much needed. He said he thinks a land reform
is one of the biggest issues that will face the state in the
future with the lack of privately owned land. He said he could
still see the inherent problems that the state already has in
its leasing process with competitive leasing. He remarked, "If
you want to call it a true lottery, it has to go all the way to
the end; there has to be a lucky break for the Alaskan right up
to getting the land itself." Representative Stepovich suggested
that the ability of the commissioner to pick who [gets the
parcel] ruins the chance for Alaskans heavily.
REPRESENTATIVE FATE said he thought the leasing programs the
state has come under different statutes, provisions, and are
completely different than some of the other leases envisioned.
For example, he said private leases to individuals in which a
person can have a leasehold for some kind of a "manufacturing
side" or "something like this." He said the oil and gas leases
or the mineral leasing, even itself under the mining laws, are
far different than the leases being discussed. He remarked,
"We're not talking leasing ... here; we're talking outright fee
simple ownership."
Number 2216
REPRESENTATIVE GUTTENBERG, inquiring about the current land
disposal program, asked what is wrong with [the program] and why
land is not getting out to the public.
Number 2198
NANCY WELCH, Special Assistant, Office of the Commissioner,
Department of Natural Resources, testified. She explained that
the remote recreation parcel program is offered quite
differently; it was redesigned through statutory change from
some of the programs that were offered in the early 1980s. Ms.
Welch said the department has gained quite a bit of efficiencies
in the last few years that it has offered under this new program
in which an area is designated and a determination is made of
how many people can stake in the area. She said before the
sale, the surveyor provides a proposal of the costs to have the
survey done. That cost is spread uniformly across all of the
numbers that will be offered, so that people know up front what
the costs are that are going to be, she explained.
MS. WELCH added that the actual survey and appraisal cost is
borne by the applicant. The survey cost is a part of the fair
market value price. She said it is set in regulation that the
state will receive no less than $1,000. In the old program, she
said it was found that the state was almost giving the land away
and not getting any return to the state at all. She said it was
felt that the state should at least receive a minimum price on
that. She said she knows that the complaint has been that the
state is not offering larger blocks of land. She said [the
state] is working with a lot of municipalities, some of which
have limitations on what parcel sites [the state] can have
without having to do capital improvements such as roads or
power. She said the five acre rule, in the municipalities, may
be a problem; 20 acres is the current maximum amount that can be
staked, and the average staked by individuals is about 13.5
acres.
REPRESENTATIVE GUTTENBERG asked if parcels are still available
over-the-counter.
Number 2020
DICK MYLIUS, Deputy Director, Division of Mining, Land and
Water, Department of Natural Resources, testified. He explained
that there are parcels for sale over-the-counter, although not
in the remote recreation program, which is when parcels are
basically awarded through a lottery at an annual offering. He
said the parcels available over-the-counter are subdivision lots
for the most part.
REPRESENTATIVE GUTTENBERG asked if this bill represents a
process that is significantly different than what is currently
being done.
MR. MYLIUS indicated that the most significant difference is
that the areas and the amount of that can be staked are
identified up front. He said six or seven areas are offered a
year. One best interest finding and public notice is done for
all of those areas, and one appraiser and surveyor are
contracted with to do the appraisal. Under the proposed bill,
he said hundreds of individual applications would come in and
have to be processed separately. He said the best interest
finding, public notice, surveys, and appraisals are all
separate.
CO-CHAIR MASEK said CSHB 319(STA) is accompanied by a fiscal
note. She asked if the current CS is accompanied by a fiscal
note.
MR. POUND said he believes the fiscal note for $433,000 is
really comparable and may go up only slightly. He remarked,
"However, we do dispute the source of the revenue; this goes to
revenue (indisc.) receipts; not from the general fund."
Number 1902
REPRESENTATIVE HEINZE asked Ms. Welch if she is familiar with
the Commonwealth North asset study that was just completed.
MS. WELCH said she'd heard about it but had not read it.
REPRESENTATIVE HEINZE explained that it was a six-month study
that recommended increasing the financial portfolio of the
state. She said a large amount of that was for doing a better
management job with the state's land. Representative Heinze
asked Ms. Welch if she thought this bill would aid in increasing
that financial portfolio.
MS. WELCH said she wasn't sure she could answer that question
without reading the study. She said one concern the
commissioner had expressed is that the bill would allow random
staking without really consolidating the land disposals in a
particular area, so it could have an adverse effect on potential
development. She remarked, "You have to balance not only what
we can ... transfer as part of our responsibility of settlement
of our lands for individuals, but also having an economic return
to the state on the resources that are available to us, so in
that respect it could have a chilling affect."
REPRESENTATIVE FATE said the "old thinking" has always been to
condense those properties into a subdivision-type setting;
however, the [purpose] of the remote recreational cabin site
bill is to get remote parcels into private hands. He remarked,
"This is not under the concept where you take land under one
large setting, have it all surveyed at the same time into one
subdivision where you have your neighbor right next door." He
noted that buffer zones are embodied in the bill. He said too
many people talk about trying [to buy] the place where they've
either hunted or fished or just want some quiet recreation, and
can't get the piece of property. He said this [bill was
intended] to fill those desires.
REPRESENTATIVE HEINZE suggested that the bill backs up the
Commonwealth North study and provides for better management of
the state's financial portfolio. She noted that it also
provides Alaskans with remote cabin sites.
Number 1720
CO-CHAIR DAHLSTROM said [the committee] was in the process of
setting up a briefing to review the study by Commonwealth North
to become aware of and educated with the findings of the study
and it pertains to the different issues being worked on. She
said her intent is to hold the bill in committee for further
discussion. She noted her understanding that an amendment would
be brought forward, and asked the maker of the amendment to work
with Representative Fate's office to see if the amendment is
friendly. She said noted that after the amendment is reviewed
the committee would move forward.
[CSHB 319(RES) was held over.]
HB 486-MINING RECLAMATION ASSURANCES/FUND
CO-CHAIR DAHLSTROM announced that the final order of business
would be HOUSE BILL NO. 486, "An Act relating to reclamation
bonding and financial assurance for certain mines; relating to
financial assurance limits for lode mines; establishing the mine
reclamation trust fund; and providing for an effective date."
The committee took an at-ease from 2:22 p.m. to 2:25 p.m.
Number 1597
BOB LOEFFLER, Director, Division of Mining, Land and Water,
Department of Natural Resources (DNR), testified. Mr. Loeffler
explained that reclamation is the process in which mined land is
put back [in its original state] after being disturbed for the
[extraction] of minerals. Initially, he said the mining company
puts up a bond for the disturbance, and should the mining
company fail to reclaim the land or to put it back to a
productive state, the state can seize the bond and get the work
done to protect the citizens. When current statutory framework
was established in 1991, Alaska had mostly a placer-mining
industry, which is very different from the placer and hard rock
industry the state has today. He said when this was established
in 1991, the Red Dog Mine was just starting and Fort Knox Mine,
True North, Pogo Project, and Greens Creek Mine [were not
operating]. The state's statutory framework was really
appropriate for placer mining, he said.
Number 1436
MR. LOEFFLER said there is a $750 per acre cap on bonds charged
to companies for reclaiming the land. He suggested that may or
may not be close to appropriate for placer mines, but most large
hard rock mines, for example, the Pogo Project or Red Dog Mine,
can't reclaim the land for anywhere near that. The bonds are
expected to be $24-26 million for the Greens Creek Mine, $26
million for the Pogo Project, and $50-100 million for the Red
Dog Mine, he explained. He said for $750 per acre he couldn't
charge a bond that is appropriate for the large mining industry;
an industry that he hopes is growing. Mr. Loeffler said HB 486
removes the $750 per acre cap on lode mines, which are large
mines. For placer mines exploration, he said DNR will maintain
the current system, and for the large mines with big reclamation
expenses, DNR will charge the full and reasonable cost for a
bond. Secondly, he said the bill broadens the instruments
companies can use to satisfy the state's requirements. He said
it includes such things as letters of credit, surety bond
insurance, certificates of deposit, and corporate guarantees -
things of that nature.
MR. LOEFFLER said he would imagine that each individual company
will end up using a different suite of those things depending on
the size of the bond and the situation, and the suite may change
over the life of the mine. Mr. Loeffler said [DNR] would have
the ability to charge more, but would also have a greater
repertoire companies can use to satisfy the requirements. He
said the mine reclamation trust fund is a voluntary fund that
companies can use to satisfy the reclamation obligation. He
said [DNR] frequently has long-term reclamation obligations, for
example, Red Dog Mine may require water quality treatment
forever. He explained that [the state] has asked Fort Knox Mine
to leave the freshwater lake as a recreation site for Alaskans.
He said the Fort Knox Mine will leave a bond, but to maintain
the dam in perpetuity, unless the state can use the interest on
that in perpetuity, it doesn't really have a reclamation fund.
He said unless [the state] can keep the interest on the bond
that the Red Dog Mine provides, [the state] doesn't have a
perpetual reclamation mechanism.
MR. LOEFFLER said in place is a 30-year monitoring requirement
for Illinois Creek Mine, and if a mining company has to come up
with a bond for 30 years, it is easier if [the state] can keep
the interest. The reclamation trust fund is a way for the state
to deal with long-term reclamation bonding obligations or
perpetual, he said. He said it has a couple of advantages for
[the state], one of which is it allows the state to accommodate
the large industry, which often has long-term requirements. He
said while a company can use a variety of suites, "this is a
mechanism that the state could hold the cash." He said that's
best from the state's perspective. He said if a company is
putting money aside for long-term reclamation, it is expecting
to use the interest, which is taxable. The state is not a
taxable entity, and if the state holds the money for the
company, that interest accumulates tax-free, he explained. He
said there is an advantage for the companies should they choose
to use this voluntary mechanism of letting the state hold the
money, and noted that there are some other tax advantages.
Number 1147
REPRESENTATIVE STEPOVICH asked if the $750 per acre cap only
applied to lode mines.
MR. LOEFFLER said currently, the cap applies to all reclamation
and would only be eliminated for lode mines.
REPRESENTATIVE STEPOVICH asked why it would only be eliminated
for lode mines.
MR. LOEFFLER said it is believed that the placer industry and
exploration are operating just fine.
REPRESENTATIVE STEPOVICH asked, "Once they see the lode mines
getting this break do you think they will be just fine?"
MR. LOEFFLER said the cap is not [the state's] ability to charge
mining companies for reclamation, rather it is [the state's]
ability to require mining companies to put up a bond. He said
he didn't foresee the placer industry [volunteering] to "put up
more money."
REPRESENTATIVE STEPOVICH remarked, "They exclude the operation
that generates acid; is that obvious."
MR. LOEFFLER replied yes. He said the placer mining community
really doesn't put up a bond; they go into a placer mining pool
in which all of their assets are co-mingled. Mr. Loeffler said
mining operations that are too big for the placer bond pool
would be excluded, including mining operations that generate
acid. He said while large hard-rock mines have the potential to
create acid, placer mines do not.
REPRESENTATIVE STEPOVICH turned attention to page 4, line 20,
and he said of the two statutes on this line, one pertains to
minerals, and the other pertains to coal. He asked how the fund
would work.
MR. LOEFFLER said it's in the reclamation trust fund and it says
the trust fund can be used whether the reclamation obligation is
under AS 27.19, which is used for metal mines, or whether it's
under coal. He said this trust fund is available for either
opportunity.
REPRESENTATIVE STEPOVICH directed attention to page 5,
paragraphs (1)-(7), and he asked how those activities are
currently paid for.
MR. LOEFFLER said the company has the obligation to do the
reclamation and the [bill] doesn't change that; it says if [the
company gives the state] the money to hold, it can reimburse the
company if it does any of the [activities in paragraphs (1)-
(7)]. He said the company would still have the responsibility
to reclaim the mine.
REPRESENTATIVE STEPOVICH asked if this [bill] is an incentive or
a savings.
MR. LOEFFLER said he believes it will be both an incentive and a
savings for companies that need to accumulate cash in order to
do the reclamation later. It is an incentive for companies to
give the state cash and it will be a savings to those companies
because some of that cash can be held tax-free, he said.
Number 0909
REPRESENTATIVE HEINZE said she thinks this is a good bill, but
the corporate guarantee is a concern. She asked Mr. Loeffler to
explain the Alaska Bond Pool program.
MR. LOEFFLER, noting that the Alaska Bond Pool program is for
placer mines, said if small "mom and pop" [mining operations]
couldn't come up with a full bond, it would join a bond pool.
For each acre that is disturbed by mining, the placer mine gives
the state $150, of which [75 percent] or $112.50 per acre is
refunded upon [approval of the reclamation]. He explained that
the state has the ability to pull the full amount of money for
each operation's reclamation from the bond pool if necessary.
Mr. Loeffler said it's like an insurance pool [for participating
operations] that can be used to pay for any default.
REPRESENTATIVE HEINZE asked Mr. Loeffler to elaborate on the
corporate guarantee.
MR. LOEFFLER said the purpose of a corporate guarantee is to
guarantee that the mining company has the money to perform the
work, although if the company goes bankrupt, the corporate
guarantee is of no value. He said the coal program has
corporate guarantees in that the state puts a series of
financial tests together to ensure that the company is not in
any danger of going bankrupt. He said the company has to have
"four times the assets to liabilities ratio" and a number of
financial tests. Mr. Loeffler said [the state] hires a
consulting firm to go through Usibelli Coal Mine, Inc.'s
[financial records] each year to assure the state that it is a
"good risk" and that it meets the state's regulations. He said
he expects that the state will be writing regulations to ensure
that it doesn't accept corporate guarantees from companies that
are bad risks.
Number 0720
MR. LOEFFLER said he also expects that the state would be more
likely to accept corporate guarantees from a mine that has to
come up with a lot of money over 20 to 30 years to reclaim it.
He said in the first part of the mine life there is a little
less risk because there's less disturbance, and the state might
have some amount of actual cash and some amount of corporate
guarantees. He said as "it gets to the end" where the [state]
would need cash, it would probably want to change the mix, so
"we have less guarantee, less risk" that if the company went
bankrupt, "citizens would be holding the bag." He said he
expects that corporate guarantees would be used as one
instrument in some locations, and would only be used where [the
state] has done financial testing to ensure that the company's a
good risk. [Corporate guarantees] would not necessarily be used
in all parts of the mine life, he added. He said typically a
corporate guarantee is done with a parent corporation, for
example, the Red Dog Mine is run by Teck Cominco Limited. He
said there is a parent corporation with mines all over the
world, and a corporate guarantee is a way to bring some of those
assets to bear to guarantee the Alaskan operation.
MR. LOEFFLER, in response to a question from Representative
Heinze, said if a company wished to use a corporate guarantee,
[the state] would probably go towards that.
Number 0515
REPRESENTATIVE KERTTULA asked whether the [state] has drawn from
the bonding pool in the past, and how much was drawn out of it.
MR. LOEFFLER said this year [the state] seized about $4,000 from
the bonding pool for placer mines. He said [the state] managed
to reclaim two or three sites in the Petersville area and one in
the "forty mile" [area], and received a lot of help from mining
communities that donated a lot of time. Mr. Loeffler said a
bond for $1.5 million was seized in 1999 from Illinois Creek
Mine, which was a large mine that was not in the bonding pool.
REPRESENTATIVE KERTTULA asked if Illinois Creek Mine was a
company that went bankrupt.
MR. LOEFFLER said yes, and Illinois Creek Mine was not in the
bond pool.
REPRESENTATIVE KERTTULA asked what type of bond Illinois Creek
Mine had given the state.
MR. LOEFFLER said the company had cash in the bank. He said the
state wrote a letter [to the bank] and much to his surprise a
check appeared 3 days later. He said he was told that is not
the usual situation.
REPRESENTATIVE KERTTULA asked if the corporate guarantee will be
done "up front" when the agreement is made or if "they roll
over." She remarked, "I'm just wondering how you get from
having guarantee to having cash."
MR. LOEFFLER said he expects that the state will [put into
place] regulations that will require a relatively detailed
financial test, and the company must meet that financial test
yearly. He said he also expects [the state] will have a
reclamation agreement up front that would set out the
reclamation expectations for the life of the mine, but knowing
that mines and conditions change and that that agreement would
be revisited on a regular and periodic basis.
REPRESENTATIVE KERTTULA if other states do something similar to
this.
MR. LOEFFLER said he believes that the reclamation trust fund
itself is somewhat innovative, and he doesn't know that other
states do anything exactly like it. He said the concept of
reclamation agreements, full and reasonable costs, and corporate
guarantees are all done nationally. He said internationally
there are some states that have outlawed corporate guarantees.
He said some states use corporate guarantees and the federal
government uses them in some situations.
REPRESENTATIVE KERTTULA asked what the policy reason is for not
having corporate guarantees.
MR. LOEFFLER said the reason is that if the corporation goes
bankrupt, the guarantee is meaningless. He said corporate
guarantees should only be used in those situations where the
risk is low or where there is a plan to use it as part of an
instrument to put aside money. Mr. Loeffler said given a full
reclamation and a very large [amount of money] needed for a
multi-million dollar bond, he expects there situations will
arise in which a corporate guarantee is an absolute necessity
for at least some period of time. He said he expects the state
will have regulations to ensure that it is not used
inappropriately.
Number 0195
REPRESENTATIVE STEPOVICH asked who is opposed to the bill the
bill.
MR. LOEFFLER said he believed he should let those people speak
for themselves.
REPRESENTATIVE STEPOVICH asked if he knows who those people are.
MR. LOEFFLER said he believes this makes the world better for
reclamation. Mr. Loeffler, noting his belief that Alaskans for
Responsible Mining was present, said whether [Alaskans for
Responsible Mining] opposes the bill or not is up to them, but
he couldn't speak for them.
REPRESENTATIVE STEPOVICH asked if anyone had been in contact
with him.
MR. LOEFFLER said he had talked extensively with [Alaskans for
Responsible Mining] and there are parts of [the bill] they like
and parts they are not sure about, but he was uncomfortable
voicing their opinion.
REPRESENTATIVE STEPOVICH clarified that he is not asking for an
opinion, rather he is asking who contacted Mr. Loeffler in
opposition to this bill.
MR. LOEFFLER said he didn't know that anybody was against the
bill as a whole, and any concerns about corporate guarantees
would only be from the environmental community.
REPRESENTATIVE STEPOVICH said he is trying to get a more rounded
look at some of these issues. He remarked, "I've been hearing
that people who are writing the bills are bringing them in;
they're the ones that are the only ones we get." He said he
figured the proponents would know who the opponents are.
MR. LOEFFLER said he is often able to unify.
Number 0037
REPRESENTATIVE GATTO said the traditional opponents are the
Sierra Club and the Friends Of The Earth.
MR. LOEFFLER said he believes this bill strengthens [the
state's] position with reclamation. He said currently companies
give the state a voluntary reclamation bond and this bill would
make it a requirement.
TAPE 04-10, SIDE A
REPRESENTATIVE GATTO asked why miners are against it. He said
the bill is forcing miners to go from voluntary to compulsory.
MR. LOEFFLER deferred the question to [the mining industry].
Number 0046
CO-CHAIR MASEK directed attention to a handout in the bill
packet entitled "Alaskans for Responsible Mining," which read in
part [original punctuation provided], "Another mine that was
part of the Alaska Bond Pool Program is also bankrupt, with
clean-up costs likely to exceed $250,000 (Nixon Fork)." She
asked Mr. Loeffler if he cared to comment.
MR. LOEFFLER, noting that the mind was on federal land, said he
expects the mine to reopen again with a new operator, and did
not expect there would be any clean-up costs. He said nothing
has been taken from the bond pool for that mine, and he didn't
expect [any bond money] would have to be taken. He said it will
fully reclaim itself.
Number 0137
ROGER FEATHERSTONE, Campaign Director, Alaskans for Responsible
Mining, testified. He said Alaskans for Responsible Mining had
not taken a position on the bill, although there things about
the bill that the coalition likes and things it has concerns
about. He said in general, he thought the coalition is
supportive of removing the cap, which was put in to place at a
time when mining was substantially different in Alaska. He said
with large mines coming on line, it's clearly not adequate for
the business of mining responsibly. Mr. Featherstone said the
trust fund is intriguing and he was not sure if the coalition
has come up with a position yet on that portion of the bill. He
said his "gut feeling" is that if [the bill] brings in money and
fully reclaims the mines; protects the air and water, salmon,
and everything else; and most importantly, if the state isn't
left "holding the bag," then it's probably a good thing.
MR. FEATHERSTONE expressed concerns about corporate guarantees,
and he referred to the aforementioned handout, which outlines
those concerns. He said with companies going in and out of
business, the potential of bankruptcy does make [the corporate
guarantees] not worth a whole lot of money. Mr. Featherstone
said he is hopeful that if corporate guarantees do happen, the
parent companies [will be held responsible]. He said in
[bankruptcy situations] often "you're chasing after the person
that owns the license," but the parent company has tons of money
and doesn't put anything into reclamation or clean up, and he
hopes that can be avoided.
MR. FEATHERSTONE said Alaskans for Responsible Mining feels
there are other forms of financial assurances that aren't so
risky, and would like to ensure that those are utilized instead
of going with something that might be a problem in the future.
He said Alaskans for Responsible Mining is interested in looking
at the possibilities on these courses of action. He noted that
large mines are a fact in Alaska and are not going to go away,
and remarked, "We ... need to make sure that when they do
happen, ... they're done right and there is enough money left to
make sure that they're reclaimed at the end safely ...."
REPRESENTATIVE KERTTULA asked what kinds of assurances the state
should consider that would be less risky.
MR. FEATHERSTONE said the Alaskans for Responsible Mining is a
coalition, so coming to a consensus on everything is sometimes
difficult. He remarked:
The two things that we have the problems with, if any,
are corporate guarantees, and ... although it's been
explained somewhat by Mr. Loeffler, sinking funds or
any other form of financial insurance seems a little
vague to us. ... We would hope ... if this bill
should pass, that when it comes time to do the
regulations that those things at least can be defined
a little more, so it's not quite so much an open door
policy.
REPRESENTATIVE HEINZE said Jerry Gallagher was the director of
the Division of Mining when the $750 cap was put into place in
the 1990s. She asked, "From that point ... until now, when
we're looking at this bill before us, do you think we're almost
there?" Representative Heinze asked Mr. Featherstone how happy
he is with this bill on a scale of 1 to 10.
MR. FEATHERSTONE said it depends on what parts of the bill are
being looked at; "we're right up there" with regard to removing
the cap; "we're probably pretty close to that as well" regarding
the trust; and "we're probably on the lower end of the scale"
regarding corporate guarantees.
REPRESENTATIVE HEINZE asked if was fair to say that [this bill]
is a "leap forward."
MR. FEATHERSTONE said it is not a leap forward. He said he
thought the intent of this bill is good, but "the devil's in the
details." He remarked:
A lot of it will depend on what the regulations say.
A lot of it will depend on the nuts and bolts of
enforcement. A lot of it will depend on people being
responsible citizens - ... from the mining companies
making really good faithed effort to ... meet the
intent that, ... perhaps, ... DNR's looking at, and
not just the minimum that you'd buy. ... All of those
things will make a huge difference whether this is a
great leap forward or whether it's ... a good start.
REPRESENTATIVE KERTTULA asked if federal regulations are
applicable to mines in addition to state regulations, and she
indicated that Mr. Loeffler had responded no. She asked if the
reclamation is [entirely] the state's responsibility.
MR. FEATHERSTONE said he is the "policy person" and is dependant
on coalition members for technical expertise.
Number 0784
STEVE BORELL, Executive Director, Alaska Miners Association
(AMA), testified. He stated that AMA is in support of HB 486.
He said this bill will make several important changes to
requirements for mining and financial assurance for mining
operations. He said some of the changes clarify and define the
procedures and the requirement that DNR had been following for
several years regarding large mines. Other changes will
providing for a sinking fund or trust account approach to
collect funds over the life of a project to ensure that the
monies are in place with the state when long-term water
treatment or environmental monitoring or other related work is
needed after the mine has been reclaimed and closed. He said
the current statute requiring financial assurance for mining was
sponsored by the late Senator Betty Fahrenkamp in 1990, and the
statute and the approach it established has served Alaska and
the mining industry well for almost 14 years. However, he said
the statute has had some questions raised about it.
MR. BORELL said it was focused primarily on small family placer
mines. Since that time it has become clear that some changes to
statute are needed to effectively address the financial
assurances needed for large load mines, he explained. He said
the mining industry has been discussing this need for several
years, and over the past six months the industry has worked with
DNR and the Department of Environmental Conservation (DEC), and
participated in coming up with this approach. Mr. Borell said
[the bill] has been through many iterations to ensure that it
works for the state and the industry, and "we believe we have
found that in this." He remarked:
I appreciate the questions about corporate guarantees,
and not just corporate guarantees, but the entire
reclamation topic. It's far more important to the
mining industry than it is to any individual stream,
... any individual environmental group or anybody
else, because if somebody goes out and makes a mess
and it isn't corrected and there isn't an ability to
do that properly, it's the mining industry that gets
the bloody nose; it's not the environmental
organization that gets a bloody nose.
It's me and my membership that get the problem and so
it's extremely important that a corporate guarantee
not allow somebody to just walk away and not be able
to cover it or any of the other mechanisms. We look
at these not just from the standpoint of how can ...
some mining operator get out of something, not at all.
... It's far more important to the industry that this
be done right than it is to any other group at all.
MR. BORELL urged the committee to move the bill at the earliest
possible date.
Number 1061
CO-CHAIR DAHLSTROM, upon determining no one else wished to
testify, closed public testimony.
REPRESENTATIVE GUTTENBERG turned attention to page 6, line 5,
and he asked if that [language] was normal. He said it seems
like this is going to be a "regulation heavy" statute change.
MR. LOEFFLER said that sentence only pertains to the reclamation
trust fund. He said he believes the critical regulations about
corporate guarantee are regulations under AS 27.19, and are in
the existing regulatory authorities. He said he could guarantee
that [DNR] would be adopting regulations.
REPRESENTATIVE KERTTULA asked how quickly that would be done.
MR. LOEFFLER said he thought that would be started as soon as
the bill passes.
REPRESENTATIVE KERTTULA asked if [DNR] had any [personnel] left
to do it.
Number 1180
CO-CHAIR MASEK moved to report HB 486 out of committee with
individual recommendations and the accompanying fiscal notes,
and asked for unanimous consent. There being no objection, HB
486 was reported from the House Resources Standing Committee.
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 2:58 p.m.
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