Legislature(1993 - 1994)
01/27/1993 08:00 AM House RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE RESOURCES STANDING COMMITTEE
January 27, 1993
8:00 a.m.
MEMBERS PRESENT
Representative Bill Williams, Chairman
Representative Bill Hudson, Vice-Chairman
Representative Con Bunde
Representative Pat Carney
Representative John Davies
Representative Joe Green
Representative Jeannette James
Representative Eldon Mulder
MEMBERS ABSENT
Representative David Finkelstein
OTHER LEGISLATORS PRESENT
Representative Tom Brice
Representative Kay Brown
Representative Ron Larson
Representative Harley Olberg
Representative Brian Porter
Representative Gene Therriault
Representative Cynthia Toohey
Representative Al Vezey
Representative Ed Willis
COMMITTEE CALENDAR
Overview of Mental Health Lands Trust Settlement
WITNESS REGISTER
Charles E. Cole, Attorney General
Department of Law
P.O. Box 110300
Juneau, AK 99811-0300
(907) 465-3600
Position Statement: Gave the State's position on the Mental
Health Lands Issue
Ron Swanson, Director
Division of Land
Department of Natural Resources
P.O. Box 107005
Anchorage, AK 99510-7005
(907) 762-2692
Position Statement: Explained lands affected by settlement
Representative Kay Brown
State Capitol, Room 517
Juneau, Alaska 99801-1182
(907) 465-4998
Position Statement: Questioned whether pending settlement
included oil and gas leases
Bruce Phelps, Project Manager
Mental Health Lands
Department of Natural Resources
P.O. Box 107005
Anchorage, AK 99510-7005
(907) 762-2692
Position Statement: Gave an overview of the settlement
agreement
Representative Cynthia Toohey
State Capitol, Room 104
Juneau, Alaska 99801-1182
(907) 465-4919
Position Statement: Inquired about mineral development
potential
Tom Koester, Attorney
229 4th Street
Juneau, AK 99801
(907) 463-3242
Position Statement: Testified on legal aspects of settlement
Representative Ron Larson
State Capitol, Room 502
Juneau, Alaska 99801-1182
(907) 465-3878
Position Statement: Supported the solution presently before
the courts
ACTION NARRATIVE
TAPE 93-8, SIDE A
Number 000
The House State Affairs Committee was called to order by
Chairman Bill Williams at 8:03 a.m. Members present at the
call to order were Representatives Williams, Bunde, Carney,
Davies, Green, James, and Mulder. Members absent at the
call to order were Representatives Hudson and Finkelstein.
CHAIRMAN WILLIAMS announced the meeting was being
teleconferenced to Anchorage and Kodiak. He said the
Department of Natural Resources (DNR) and the Department of
Law would present a brief history and current status of the
Mental Health Lands Trust Settlement. He stated that a bill
had been introduced in the Senate, but there would be no
bill before the committee. After the meeting, the committee
would discuss any action it wanted to take on this issue, he
said, and asked that questions be held until after the
presentation. He directed members to their folders for
information on the Mental Health Lands Trust Settlement.
(Chairman Williams noted for the record that Representative
Hudson joined the Committee at 8:10 a.m.)
Number 078
CHARLES COLE, ATTORNEY GENERAL, STATE OF ALASKA, said he
would like to give a history of the Mental Health Lands
dispute and present some views regarding Chapter 66, how it
was working and its problems. He said his testimony would
be followed by Bruce Phelps and Ron Swanson from the DNR on
the implementation of Chapter 66 and problems faced.
MR. COLE referred members to a legal opinion on the Weiss
case (State v. Weiss, 706 P.2d 681 (Alaska 1985)), a copy of
which was in members' folders. He said the case provided a
good basic summary of the history of the Mental Health Lands
issue.
(Chairman Williams noted for the record that the committee
had been joined by Representative Eldon Mulder and
Representative Kay Brown.)
MR. COLE continued his testimony by citing federal
legislation. In 1956, Congress enacted the Alaska Mental
Health Enabling Act, as a mechanism to enable the territory
of Alaska to deal with mental health problems. Prior to
that, Alaska's mental health program was unsatisfactory.
The Enabling Act was a mechanism to make Alaska's mental
health program consistent with mental health programs
throughout the rest of the country. Mr. Cole said Congress
granted the Territory of Alaska one million acres of land in
the territory, along with the proceeds of the disposition of
those lands, and any income derived from the land.
MR. COLE directed members' attention to maps showing where
those one million acres were located.
Number 137
RON SWANSON, DIRECTOR, DIVISION OF LAND, DNR, showed the
lands concentrated around major city areas.
MR. COLE said that under the terms of the Enabling Act the
state could not establish a separate account for the
proceeds of income received from those lands. A record of
trust land income was kept until 1973, he said, and a board
was set up to oversee the management of those lands.
Expenditures greatly exceeded the income from the lands, Mr.
Cole reported. Demands for lands from municipal and private
parties in the late 1970's resulted in the passage of
Chapters 181 and 182, Session Laws of Alaska 1978. Those
chapters redesignated all Alaska mental health lands as
general grant lands. The acts provided for the trust to be
compensated by the payment of 1.5% of all state land
revenues to a permanent trust fund.
MR. COLE explained the problem of this action was that
Chapter 182 was subject to a legislative appropriation and
the legislature did not make any appropriations. In ensuing
years, Mr. Cole said there had been many transactions in
respect to the general grant lands.
MR.COLE summarized what had happened to those lands over the
years: 1) conveyed to third parties by way of sale or other
transfer, approximately 50,000 acres comprised of roughly
3,162 separate parcels; 2) conveyed to municipalities,
84,000 acres, consisting of 888 parcels; 3) conveyed to
Native Corporations under land settlements, 36,000 acres; 4)
conveyed to the University of Alaska, 3,000 acres; 5)
condemnation actions, 5,000 acres; 6) leases to third
parties, approximately 90,000 acres; 7) small sales, about
2,000 acres; 8) mining claims, 60,000 acres; 9)
legislatively designated areas, 113,000 acres in state
forests and 245,000 acres in parks and wildlife refuges; 10)
miscellaneous inter-agency land management agreements, about
4,500 acres; and 11) a large tract of 315,000 remained in
state ownership and was unencumbered.
NUMBER 300
MR. SWANSON showed the committee areas on the map indicating
state-owned lands, legislatively-designated lands,
encumbered lands, and state forests.
MR. COLE asked Mr. Swanson to point out the legislatively-
designated areas that were part of the original trust lands.
MR. SWANSON also pointed out lands with no encumbrances.
Number 310
(Chairman Williams noted for the record that Representative
Hudson had joined the meeting.)
MR. COLE described for the committee the facts surrounding
the 1978 litigation designating the mental health lands as
general grant lands. He said that in November 1982, there
was a suit filed by a class of plaintiffs alleging the state
had breached its trust obligations under the 1956 Alaska
Mental Health Lands Enabling Act. He said there was too
much detail to go into before the committee, and promised to
furnish a ten-page handout describing that suit.
MR. COLE referred to the court opinion on the Weiss case,
page 684, where the Supreme Court said, "It follows from our
conclusion that the redesignated legislation is invalid;
that the trust must be reconstituted to match as nearly as
possible the holdings which comprised the trust when the
1978 law became effective." The opinion continued to say
that the case was remanded so requisite findings could be
made. The opinion said lands must be returned to their
former trust status. In the case of lands which had been
exchanged, properties involving identified mental health
lands would also be included in the trust. For former
mental health lands that had been sold, the trust must be
reimbursed for the fair market value at the time of sale, he
said.
Number 385
MR. COLE described the system established to calculate the
total amount owed, including a set-off granted for mental
health expenditures during the same time period. In the
event the expenditures exceeded the value of the lands sold,
the state need not furnish cash as a part of the
reconstitution. Mr. Cole said the goal of the court was to
restore the trust to its position just prior to the
conveyance effected by the redesignated legislation.
MR. COLE equated the court's decision with a directive to
"put Humpty Dumpty back together again." He then described
some of the problems faced by the state as a result of the
court decision. Referring to information in committee
members' folders, he summarized the state's obligations.
The state would have to return to the trust the 3,162
parcels of land comprising 50,000 acres that had been sold
to third parties. Mr. Cole said that as he read the
opinion, the state would have to take back the land from the
people who own and occupy the parcels.
Number 400
MR. COLE said the 888 parcels conveyed to municipalities
would also have to be taken back and put into the trust, as
well as the acres leased to third parties, legislatively-
designated areas (state forests, parks and wildlife
refuges). Mr. Cole said there were also other problems
resulting from the Weiss decision. He directed the members'
attention to page 684, the last paragraph, which says the
trust must be reimbursed for the fair market value at the
time of sale for former mental health lands that had been
sold since the date of the conveyance. Mr. Cole said there
was considerable dispute among the parties over what was
meant by the term "sale."
MR. COLE identified areas of the court decision's language
that were vaguely defined and how the interpretations led to
disputes over how to implement the court decision. He said
the court did not give the state guidance in how to proceed.
Number 478
MR. COLE referred again to Chapter 66, and pointed out that
the set-off of mental health expenditures would be asserted
in another round of negotiations. Approximately one billion
dollars was at stake, he said. Referring to Chapter 48,
Session Laws of Alaska 1987, Mr. Cole said that legislation
provided for a four-step settlement. Under that settlement,
the first step would be for the Commissioner of the DNR to
value the original one million acre land grant, effective as
of September, 1987.
MR. COLE added that in step two, the original lands would be
exchanged for lands within legislatively-designated areas of
equal value, which would then comprise the reconstituted
Mental Health Lands Trust corpus. Third, the state would
then rent the reconstituted corpus for eight percent of its
fair market value annually, adjusted after every five years.
And fourth, pending the conclusion of the valuation and
exchange process, the state would pay five percent of
unrestricted general fund revenues as a transitional
measure.
MR. COLE said that process had been underway, but stalled
when no agreement could be reached on the value of the
lands. The DNR's Commissioner proposed procedures that
produced a value of $574 million. The commission set up
under Chapter 48 came up with a value of $2.243 billion.
The Commissioner then declared an impasse and said the
legislature would need to look at the issue.
MR. COLE reported that the 1990 Legislature tried to resolve
the impasse by enacting an alternative resolution mechanism
not predicated on the valuation of the lands. In Chapter
210, Alaska Session Laws 1990, all lands that were in
legislatively-designated areas as of September 1987, were
exchanged for the original Mental Health lands not in
legislatively-designated areas. The state would then rent
those lands from the trust for six percent of the
unrestricted general fund revenues, plus all incidental
revenues received from those lands.
MR. COLE said following that legislative action, there was
another round of litigation. He referred again to Chapter
66, and said the injunctions arising from the litigation
effectively froze any transactions. The state gave up its
claim for the expenditure set-off, Mr. Cole said, which was
a massive concession.
Number 532
MR. COLE continued to address Chapter 66, and said the next
major point was to reconstitute the trust by putting back
into the trust the unencumbered state lands, approximately
315,000 acres. Then the original trust lands would be
replaced as nearly as practical with lands of comparable
character and value. This plan, Mr. Cole said was intended
to cause as little disruption as possible to comply with the
Weiss decision.
Number 571
MR. COLE reported that a Mental Health Authority had been
set up, and that six percent of general revenues would phase
down over a period of years. He acknowledged a recognized
desire that the lands generate income. Mr. Cole cited
objections by environmental interests who opposed income-
generating land use. Those parties, he said, would rather
see the trust reconstituted by the payment of money.
Number 610
MR. COLE also made reference to the interests of the oil
companies, including Marathon, who had concerns over the so-
called hypothecated lands. The plaintiffs in the settlement
negotiations said the state never lived up to its
obligations with respect to the Mental Health Lands, and the
plaintiffs requested security for the performance of the
state's obligations under Chapter 66.
MR. COLE questioned the need for security when there was
legislation directing the DNR's Commissioner to perform the
required acts, and also provisions for the courts to order
that the obligations be met. Those arguments, Mr. Cole
said, did not prevail. As a concession, the state agreed to
give some lands as security for the performance of the
state's obligations. Those were the "mortgaged," or
hypothecated lands.
MR. COLE told the committee there was no way those lands
would be foreclosed as security because the DNR was under
statutory obligation and court order to perform its duties.
He then referred to ongoing litigation in Fairbanks and
lengthy negotiations that resulted in a settlement
agreement. The agreement was presented to the court in
Fairbanks, and was now under advisement.
Number 667
MR. COLE said that in his opinion Chapter 66 was working in
spite of being embroiled in litigation. He discussed the
alternatives available, which included: 1) compliance with
the mandate in the Weiss decision, (the administration's
position); and, 2) putting back into the trust the land that
could easily be put back (315,000 acres plus legislatively-
designated lands) with the balance compensated in money. He
clarified that Chapter 66 did not do away with the
legislature's power to make annual appropriations for the
mental health lands program. He called Chapter 66 a
"mechanism" to deal with the trust lands problem.
TAPE 93-8, SIDE B
Number 000
MR. COLE defined the third alternative as dedication of a
certain percentage of general revenues to the mental health
programs. He believed it could be done, but he thought it
was a poor settlement for the problems created by the Weiss
litigation. Six percent, he said, was too much. At present
that percent of unrestricted state revenues was about $143
million. If state revenues increased, up to $200 million or
more could be required to be spent on the mental health
programs. It would be more appropriate, he said, to have
the legislature retain the power to deal with the mental
health program as it saw fit.
MR. COLE referred to potential constitutional problems with
dedicated funding, as well as potential conflicts with
moving state funding out of other programs to meet the six
percent spending amount for mental health programs. With
that, he concluded his presentation.
NUMBER 075
CHAIRMAN WILLIAMS noted for the record that the committee
had been joined by Representative Vezey. He then announced
the committee would spend the remaining hour hearing from
Mr. Swanson and Representative Larson, as well as taking
questions regarding the Mental Health Lands settlement.
Number 080
REPRESENTATIVE BILL HUDSON asked Mr. Cole the status of
funding.
MR. COLE responded that Chapter 210 remained the current
state of the law, and appropriations were being made under
that guideline. The process of reconstituting the trust
under Chapter 66 had been going on and should be completed
in the near future.
Number 100
REPRESENTATIVE PAT CARNEY asked the Attorney General to
expound on the status of the hypothecated lands.
MR. COLE responded that Mr. Swanson would address that issue
in greater detail during his presentation.
Number 113
REPRESENTATIVE JOE GREEN asked about the process that
determined the value of the lands, whether funds in excess
of what was needed by the mental health programs would come
back into the general fund. He also asked about
restrictions on potential land users.
MR. COLE answered that encumbrance of the land would have
the effect of restricting its use. He said the rule of
reason would demand that no unnecessary problems be created
for innocent parties, who had been referred to as the "moms
and pops." As part of the settlement, Mr. Cole said, the
state agreed with the plaintiffs' lawyers that the court
could release the injunction, and the court rejected that
request. He said the state would petition for review of
that order with the Supreme Court.
Number 202
REPRESENTATIVE ELDON MULDER asked whether the legislature
could take any action right now to release the hypothecated
lands.
MR. COLE doubted whether there was any such action. He said
that would have to be negotiated with the plaintiffs'
lawyers.
REPRESENTATIVE MULDER then inquired if any sort of finality
had been provided for in Chapter 66.
MR. COLE acknowledged Chapter 66 provided for finality, but
could not say when. The courts control that factor, he
said. December 1, 1994 was one date mentioned in the
interim time-line, he added.
Number 235
REPRESENTATIVE JEANNETTE JAMES expressed concern with the
six percent revenue stream and appropriation of the funds
for other programs. She asked Mr. Cole to confirm whether
it was correct that the legislature reserved the right to
appropriate the six percent to mental health issues and also
on other issues.
MR. COLE confirmed that under Chapter 66, this was the case.
Number 269
REPRESENTATIVE JOHN DAVIES had two questions for the
Attorney General. First, he asked for a review of exactly
who were the parties to the settlement agreement, and
whether the parties could back out of the agreement. His
second question was whether 6(i) of the statehood act would
be a factor in the court's findings on the settlement.
MR. COLE responded that Tom Koester would answer those
questions. He said 6(i) had been the subject of extensive
arguments before the court recently. Regarding the parties'
ability to back out, Mr. Cole said he thought not, although
he said Mr. Jesse's clients had backed out but had signed
the agreement.
Number 287
REPRESENTATIVE CON BUNDE asked for more information about
the obstructionist role of the environmental community and
the legislature's role in that. He then referred to the six
percent revenue stream and asked Mr. Cole the number of
clients served by the state's mental health programs, and
how much of the allocated funds were spent per person.
Number 303
MR. COLE responded that Mr. Koester would have more detail,
but in regards to the environmental community, he said their
intent was to litigate the settlement to the point that the
legislature would change its mind and provide a different
settlement.
Number 311
REPRESENTATIVE KAY BROWN asked Mr. Cole if the settlement
pending before the court included oil and gas leases, and if
so, what was the income generated from those leases.
MR. COLE responded in the negative. He added the state was
opposed to including such land in the settlement.
Number 337
MR. SWANSON again addressed the committee. He introduced
Bruce Phelps, the project manager for the DNR, who worked on
the Mental Health Lands Settlement. He commented that the
DNR was working on the implementation of Chapter 66. He
said the DNR was well on its way to meeting the deadline of
December 1, 1994 to complete the reconstitution. He
anticipated the DNR would be able to come back to the
legislature next May and report that the land reconstitution
was completed and ready for conveyance.
MR. SWANSON referred to essential elements of the
reconstitution. In particular, he mentioned the comparable
character of lands. He reiterated that lands selected for
the reconstitution should match as nearly as possible those
in the original lands' trust. He pointed out on the map the
lands that were in the hypothecated category. He said those
lands could be developed as long as the land value was not
diminished.
MR. SWANSON said there were about six million acres on that
list and he offered the figure of approximately 500,000
acres of the hypothecated lands that would actually be
selected by the Mental Health settlement. Contrary to
perception, he explained, that land was not locked up. He
then asked Mr. Phelps to explain the implementation of
Chapter 66.
MR. BRUCE PHELPS, PROJECT MANAGER, DIVISION OF LANDS, DNR,
delivered a brief overview of the settlement agreement,
Chapter 66, and the project itself. Since October, 1991, he
said, a lot of work had been done. He referred to a project
overview manual before the members. This document, he said,
laid out the framework for the rules and procedures for
meeting the trust reconstitution goal. Chapter 66, he
explained, established a Mental Health Trust authority. It
attempted to recreate the original mental health lands trust
as much as possible, and to include as many of the original
acres. He said about 335,000 acres of the original trust
lands were conveyable.
MR. PHELPS defined a certain portion of the original trust
lands that could not be conveyed because of third party
interests that the state no longer owned or controlled. He
said that portion included 665,000 acres of original trust
lands. That portion had to be replaced from other state
lands, according to Chapter 66's guidelines for identifying
comparable lands. The primary criteria, he said, were
comparable characteristics, equal fair market value, and
overall public interest. He told the committee there was
also a project manager working with the DNR for the
plaintiffs. He said there was good integration between the
two staffs.
Number 439
MR. PHELPS led the committee through the parts of the
project. First, what the project was in relation to Chapter
66; second, what had been accomplished so far; and third,
what remained to be done in the immediate time frame. The
first aspect was to try to regain as much land as possible,
which was accomplished through the title review process.
This process, he said, identified original trust lands that
were conveyable, original trust lands that were not
conveyable back to the state, and original trust lands that
might go back to the trust. It also identified and
prepared, he said, conveyance documents.
MR. PHELPS described the second component, of comparable
characteristics analysis. The attributes of resources in
both the original trust and possible replacement lands were
studied. Attributes reviewed included income potential,
development potential, location, and access. He said these
attributes were spelled out in Chapter 66. Land was divided
into resource units in terms of surface features such as
forests, gravel, etc. In terms of subsurface resources,
three classifications were used: oil and gas, coal, and
minerals. The parties have agreed on the classification of
resource attributes, Mr. Phelps said.
Number 484
MR. PHELPS told the committee what role the parties were
playing in attribute identification, with the state doing
large parts of the surface analysis, and the plaintiffs
doing the evaluation related to minerals. The results would
go into a jointly accessible database. The process allowed
for fast evaluation of lands in the selection, he added.
Number 500
MR. PHELPS addressed the third component, which was the
value analysis. Both the non-conveyable original trust
lands and the replacement lands would be evaluated, in order
to assure equal fair market value in the exchanges. He
advised 665,000 acres of the original trust lands were
involved, as well as 550,000 acres of replacement lands.
The parties were dividing the land for valuation into
resource components. A series of independent panels was
doing the surface valuations around three parts of the
state: Southcentral, the Interior, and Southeast, he said.
MR. PHELPS described how the commercial forest lands were
being valuated, using independent contractors who developed
the estimations of value based upon industry practice.
Subsurface values were determined by a value model being
developed by the DNR and the plaintiffs. Results of the
value analyses would go into the database, along with the
attributes, he advised.
Number 520
MR. PHELPS said a major component was identification of
replacement lands. Both the state and the plaintiffs could
nominate the lands, both surface and subsurface. Presently,
he said, the plaintiffs had nominated approximately 555,000
acres of replacement land. About 40,000 acres of that land,
he said, were associated with commercial forestry, 200,000
were associated with minerals and coal, and 310,000 were
associated with land and minerals. The DNR was reviewing
the nominations, and on the basis of that review they might
oppose some and nominate additional land, he stated.
Number 540
MR. PHELPS said the next step was to make matches between
the original trust lands and the nominated replacement lands
based on the attributes and value comparison data. The
exchange process was complex, but the software being used
should make it go quickly. Finally, he reported, a public
review process would occur in regional meetings set for
June, 1993, and July, 1994. The reason for those dates was
that in the first review, the results of the first tentative
land exchange process would be evaluated. A refinement
process would follow that first review, with adjustments
made in the land exchange based on recommendations made
during public review. In June, 1994, a second review
process would allow final consideration of the exchange,
still allowing time for changes based on recommendations.
Number 560
MR. PHELPS delivered an overview of what had been
accomplished thus far in the process by the DNR, which
included: identification of original trust lands;
categorization of those lands into non-conveyable and
conveyable lands, and property that might be conveyable;
performance of title review of all lands nominated by the
plaintiffs; completion of comparable characteristics
analysis for all non-conveyable original trust lands; and,
identification of comparable characteristics of forestry
tracts and mineralized areas.
MR. PHELPS said what remained to be done was identification
of the attributes of the replacement lands, in terms of the
surface characteristics. Contracts had been initiated to
complete this last component, he told the committee. The
due date was April 2, 1993. In terms of the evaluation
analyses, he said it was set up on a contractual approach in
three regional panels who would go through a mass appraisal
process. The request for proposals have been initiated on
this phase, and the due date was the end of April of this
year, he added.
MR. PHELPS next addressed the land exchange component, and
said a database had been established, and the data was
available to the public and parties of the settlement. The
lands have been mapped also. In the next six months, he
said, there was still much to be accomplished. This
included identification of encumbrances on conveyable
original trust lands. The settlement agreement provided for
a valuation process to compensate for the diminishment of
value by the encumbrance. Additionally, they would begin to
develop the patent documents on the original trust lands, he
advised.
Number 600
MR. PHELPS reported that the contractual work on the
comparable characteristics evaluations would be completed
around April, 1993. The valuation analyses contract for
forest tracts was underway now and should be completed by
April 2, or April 15. The land evaluations of the surface
involving the mass appraisal process of 500,000 acres should
be complete by the end of April. Evaluations of the
mineralized areas including coal, would also be done by
April. The title work necessary to identify original trust
lands and replacement lands and the description of all the
attribute features, the valuation of all the resource units,
would lead to the pairing of the replacement lands with the
original trust lands. Then the lands to be conveyed would
be known. They would be tentative land exchanges, he
explained, and added that a finalized exchange could not
take place until after the public review process.
Number 630
MR. PHELPS explained that the state would be in a position
to accomplish the majority of the generalized work in
Chapter 66 by April or May of this year. More detailed work
would be completed in terms of title documents and
conveyance evaluations after that time. He then referred to
a project outline with a time-line for each of the
components he described, and concluded his statements by
saying he believed the state and plaintiffs were making
rapid progress.
Number 654
CHAIRMAN WILLIAMS noted Representative Gene Therriault had
joined the meeting.
REPRESENTATIVE CYNTHIA TOOHEY asked how a parcel like the
Winter Creek/Glacier Creek area that was designated for ski
resort development would fall into the settlement, in terms
of mineral development potential.
MR. PHELPS advised the Winter Creek/Glacier Creek area would
be addressed in terms of comparable characteristics, looking
at the attributes of the land, and comparing it to the
original trust lands that were non-conveyable to see if it
was comparable.
Number 668
MR. SWANSON also responded to the question, referring to
municipalities that had large amounts of original mental
health lands within their boundaries, including Ketchikan
and Anchorage. He said the DNR was working with those
municipalities to see if some of the original mental health
lands could be freed up. Glacier/Winter Creek was included
in those discussions, he said.
Number 673
REPRESENTATIVE DAVIES returned to his previous question on
6(i) lands, asking if 6(i) provisions would be violated.
Number 680
TOM KOESTER, a former assistant attorney general who
represented the state in this case in 1982 and was currently
on contract with the state, responded to the question
regarding section 6(i). He said the question had been
submitted to the court for a decision. The legal issues
raised by the environmental interveners in the case were the
subject of summary judgment motions filed with the court.
The issue was under advisement. In the event the court
ruled a conveyance of the mineral estate to the trust
authority, the settlement agreement provided that would
violate 6(i) and the parties had 60 days to reach an
accommodation of some kind. If they failed to do so, the
settlement agreement would be terminated.
MR. KOESTER said the state had tried to set out a procedure
whereby the parties would have an opportunity to solve
problems.
TAPE 93-9, SIDE A
Number 000
MR. KOESTER briefly summarized the potential problem with
section 6(i). That section of the Statehood Act required
that mineral rights could be leased but not conveyed from
the state to another party. The question now was whether
the conveyance of lands from the state to the mental health
lands trust was a violation of that requirement. He said
conveyance documents would include a restriction saying the
conveyances were subject to the restrictions of section 6(i)
of the Statehood Act. He said the attorney general's office
believed there was no 6(i) problem, but he acknowledged that
others might have a contrary opinion and the court would
ultimately resolve the issue.
Number 042
REPRESENTATIVE DAVIES asked if the 60-day window for
resolution of problems would defeat the settlement.
MR. KOESTER responded that it would depend on whether the
parties could come up with an alternative valuation
methodology and an alternative structure to the settlement
that did not involve the conveyance of mineral estates. He
said it was the opinion of the attorney general's office
that 6(i) would not be a problem.
Number 070
REPRESENTATIVE BUNDE asked Mr. Koester to characterize the
attitude of the plaintiffs toward seeking a speedy
resolution.
MR. PHELPS answered that the plaintiffs had been very
cooperative and had worked quickly for solutions. Both
parties, he said, have worked to minimize conflicts.
Number 105
REPRESENTATIVE JAMES referred to the December, 1994
deadline, and the penalties if the deadline was not met,
such as the foreclosure of hypothecated lands. She also
remarked on the effective dates of Chapter 66, and the
process for appeals.
Number 129
MR. PHELPS said he could respond to the issue of the project
itself, and said the vast majority of that work would be
done in the next six months. This would include the
conveyance of title which could be done by that date, he
added.
Number 145
MR. KOESTER answered Representative James' question
regarding the legal appeals process. He said the state had
no control over the amount of time the courts took in making
their decision. He added the court system could be speedy
when it wanted to. He referred to cases like the
reapportionment case which was settled in a matter of
months. When there was a pressing deadline, he said, the
court would try to honor it.
Number 165
REPRESENTATIVE GREEN asked if the land comparison was based
on the unimproved value of the original trust lands.
MR. PHELPS answered in the affirmative.
REPRESENTATIVE GREEN then asked about subsurface mineral
rights, like coal, and whether the subsurface mineral rights
would be preserved by the state.
MR. PHELPS answered that in terms of coal, the majority of
coal resources were in conveyable original trust lands. He
mentioned other areas that were inside Legislatively
Designated Areas (LDA), which would have to go through
valuation analysis. Data on determining the value of land
with coal deposits was readily available, he said.
Number 200
REPRESENTATIVE GREEN was concerned that the mineral rights
would be reserved by the state.
MR. PHELPS clarified that in LDA lands, the mineral rights
would be reserved.
REPRESENTATIVE GREEN asked about the speculation value of
similar properties.
Number 220
MR. PHELPS responded that those situations presented some
difficulty so the valuation model included probability as a
large part of the model. He said there was a strong
weighing of probability.
REPRESENTATIVE GREEN asked whether valuations were being
made on lands that had not been patented to the state, or
lands that were clouded because of over-selection by a
Native corporation.
MR. PHELPS answered that in terms of title review, the state
was making valuations. They had also recommended that to
the plaintiffs where there was a problem with conveyance, he
added.
Number 233
REPRESENTATIVE RON LARSON distributed handouts to the
committee, one of which he said would help to answer
Representative James' questions. He referred specifically
to the Congressional Record from May 25, 1956. Regarding
the granting of lands to the State of Alaska, it said: "The
purpose of the grant is to afford revenue to the territory
for support of its mental health programs. If such revenues
are in excess of the program, they may be used as a public
trust for the public purposes."
REPRESENTATIVE LARSON said he would make himself available
to the committee in addressing this issue. The six percent
revenue stream issue, he said, had been addressed two years
ago at the end of the legislative session. He spoke of his
increased involvement in the issue. The priority was to
meet the congressional mandate, and also to meet the
instructions of the supreme court, he said, and believed the
solution before the courts was the best solution to date,
and that it would save time to let it run its course.
Number 318
REPRESENTATIVE DAVIES asked that the committee hear from
other parties to the settlement, such as the plaintiffs and
interveners.
Number 334
CHAIRMAN WILLIAMS said the committee would have an overview
hearing during which those parties could air their views.
He announced that at the committee's next meeting, it would
consider three executive orders.
ADJOURNMENT
There being no further business to come before the
committee, Chairman Williams adjourned the meeting at 9:55
a.m.
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