Legislature(1993 - 1994)
02/03/1993 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 February 3, 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 Representative David Finkelstein MEMBERS ABSENT None OTHER HOUSE MEMBERS PRESENT Representative Kay Brown Representative Ed Willis Representative Gene Therriault Representative Brian Porter SENATE MEMBERS PRESENT Senator Suzanne Little COMMITTEE CALENDAR Overview on Alaska Mental Health Lands Trust Settlement WITNESS REGISTER David Walker Attorney for settling plaintiffs 417 Harris Street Juneau, Alaska 99801 Phone: 586-3537 Position Statement: Suggested current settlement agreement be given a chance to work Jim Gottstein, Attorney for the Alaska Mental Health Association 406 G Street, No. 206 Anchorage, Alaska 99501 Phone: 274-7686 Position Statement: Believed it most important to reconstitute the trust with appropriate lands Jeff Jessee Attorney for non-settling plaintiffs 615 East 82nd Street, Suite 101 Anchorage, Alaska 99518 Phone: 344-1002 Position Statement: Gave the history of his involvement in the issue Bob Stiles, President Alaska Coal Association 1227 West 9th, Suite 201 Anchorage, Alaska 99501 Phone: 276-6868 Position Statement: Spoke of the problem of developable coal on trust lands Tom Waldo, Staff Attorney Sierra Club Legal Defense Fund 325 Fourth Street Juneau, Alaska 99801 Phone: 586-2751 Position Statement: Supported 95% of Chapter 66 Peter Maassen Unocal/Marathon Oil 810 N Street Anchorage, Alaska 99501 Phone: 276-6100 Position Statement: Felt threatened by implementation of Chapter 66 Lois Ann Reeder Susitna Valley Association 9600 Slalom Drive Anchorage, Alaska 99516 Phone: 346-1943 Position Statement: Concerned about land exchange aspects of Chapter 66 Jim Barnett, Assembly Member Municipality of Anchorage P.O. Box 196650 Anchorage, Alaska 99519-6650 Phone: 343-4431 Position Statement: Hoped for repeal of Chapter 66 Deborah Smith, Executive Director Alaska Mental Health Board 431 N. Franklin Juneau, Alaska 99801 Phone: 465-3071 Position Statement: Testified on the interests of the trust beneficiaries Representative Gene Therriault State Capitol, Room 421 Juneau, Alaska 99801-1182 Phone: 465-4797 Position Statement: Inquired about foreclosure under Section 6(i) ACTION NARRATIVE TAPE 93-12, SIDE A Number 000 The House Resources Committee was called to order by Chairman Bill Williams at 8:05 a.m. Members present at the call to order were Representatives Williams, Hudson, Bunde, Carney, Davies, Green, James. Members absent were Representatives Mulder and Finkelstein. CHAIRMAN BILL WILLIAMS announced the meeting was being held by teleconference with the Anchorage Legislative Affairs Office as the other site. He stated the purpose of the meeting would be to hear testimony from other parties to the Mental Health Lands Trust settlement agreement. He recalled the Attorney General's Office and the Department of Natural Resources had testified on the state's perspective in a committee meeting held on January 27, 1993. CHAIRMAN WILLIAMS asked those testifying to restrict their comments to five minutes so there would be time for questions. Number 105 DAVID WALKER, LEAD COUNSEL FOR THE SETTLING PLAINTIFFS, addressed the committee. Accompanying him at the witness table was Jim Gottstein, who also represented the settling plaintiffs. Mr. Walker advised of his presence at the meeting on January 27, where the state had presented a summary of the Mental Health Lands issue, as well as the state's viewpoint on the settlement agreement. He did not disagree with the state's presentation of the factual background. MR. WALKER stressed that the agreement was a result of some of the most acrimonious negotiations in the state's history. He suggested the current settlement agreement should be given a chance to work, and that the plan to reconstitute the trust was in keeping with the federal government's intent of the original land grant. He said the land exchanges were ready to go forward. Number 152 JIM GOTTSTEIN, a land attorney representing the ALASKA MENTAL HEALTH ASSOCIATION and others in the class, told the committee his clients constituted the traditional segment of beneficiaries of the trust. He said he had listened to the testimony of the committee's January 27 overview. Regarding a statement during that meeting by the state that no oil or gas properties were included in the original trust lands, Mr. Gottstein believed there were a couple of such properties around Beluga and Nikiski. He said his clients had nominated some lands for inclusion in the settlement, and the state had indicated they would resist the transfer of those lands to the trust. He added Chapter 66 provided a mechanism for resolving the issue. MR. GOTTSTEIN mentioned the question of Glacier Winter Creek, the Girdwood property, and said no single piece of property was sacrosanct. The most important thing, he believed, was to reconstitute the trust with appropriate lands. He reminded the committee that while listening to the complaints about the proposed settlement, it was important to remember how things were before the enactment of Chapter 66. He recommended realistic alternatives be considered, and noted that of all alternatives previously considered, the current Chapter 66 was the only one that all parties had agreed to. Number 250 CHAIRMAN WILLIAMS noted for the record that Senator Suzanne Little was in attendance. Number 253 JEFF JESSEE, COUNSEL FOR THE NON-SETTLING PLAINTIFFS in the settlement, reminded legislators they were trustees of the trust, and were responsible to the beneficiaries of the trust. Regarding the beneficiaries, he defined the four qualifying groups: 1) the developmentally disabled (the group represented by Mr. Jessee); 2) the mentally ill; 3) the elderly with dementia and other related mental disabilities; and, 4) chronic alcoholics with psychosis. MR. JESSEE spent almost two years as a settling plaintiff in the negotiations, and signed the agreement believing it was a settlement he could recommend to his clients. Finally, he said, he reached a conclusion that the settlement agreement would not work. He felt it was working against the interests of his clients, and had turned out not to be the deal everyone thought it was when it was negotiated in May, 1991. Number 278 MR. JESSEE explained the reason for his change in perception of the settlement agreement. In May, 1991, he said, everyone was eager to resolve the issue. The land exchange appeared to be a good idea. In the process of negotiating the land exchange, there were a number of legal issues that arose but were not addressed at that time because the parties believed it was important to reach an agreement quickly. Those problems included section 6(i) of the Statehood Act and land use laws. Once Chapter 66 was in place, the problem issues resurfaced and it became apparent the process was more complex than anticipated. MR. JESSEE referred to the suit filed by the public interest interveners. Their suit was anticipated, and the intervention welcomed because at the time it was believed it would be better to get the problem issues resolved by the courts, "bullet-proofing" the settlement, he said. By January, 1992, the parties realized the problems were impediments to carrying out Chapter 66 quickly. For example, Mr. Jessee pointed to section 6(i), which prohibited the state from disposing of the mineral estates, with the penalty of forfeiting the land back to the federal government. MR. JESSEE described the steps for resolving the problem issues in the courts. From the Superior Court, the suit would go to the Supreme Court, and since it related to a Statehood Act provision, it could likely go before the U.S. Supreme Court. He said it was known now that there would be litigation over the land exchanges. In his view, it was not in the beneficiaries' interests to go through years of litigation to get the settlement approved only for the opportunity to litigate against the state, the public interest interveners, the oil companies and additional third parties concerned about the valuable assets in the state that were tied up in the agreement. He believed it was not in the public's interest to settle now when lawsuits were inevitable. MR. JESSEE referred to the so-called "moms and pops," the innocent third parties affected by the settlement and litigation. He displayed a thick three-ring binder filled with names of those parties. He said the parties to the trust agreed to modify the injunction and remove the lis pendens from their titles, but reserved the right to come back and assert claims against the third parties' lands if the deal did not go through. MR. JESSEE directed the members' attention to the Summary Decision and Order regarding the joint motion, and referred to page eight which said, in part: "This relief in this motion becomes nothing more than a cruel hoax visited on the third parties. They will not get any better title than they have now, they transfer an interest in the land, they would be selling a lawsuit both they and the purchasers would ultimately have to litigate." On page nine: "The court concludes at this point in time, before all these things have happened, the likelihood of final approval is speculative at best." Number 397 (Chairman Williams noted for the record that Representative Mulder had joined the meeting.) BOB STILES, PRESIDENT, ALASKA COAL ASSOCIATION, told the committee he was also the general manager of a coal export project located in Beluga Field. The problem coal concerns had was that most of the state's developable coal was located on original mental health trust lands. Some reserves, he said, were partially on original lands. In 1956,when the lands were selected, he told the committee, coal was one of the easiest minerals to find. Mr. Stiles reported the Coal Association had no problem with the parts of Chapter 66 that dealt with the trust itself, but took exception to those portions that dealt with lands. MR. STILES pointed out in the case of his company, the land would be owned by the trust authority. When this will happen was not known, he said, and this caused problems in marketing coal. He gave an example of an attempted sale of Wyoming coal to Japanese utility executives, who asked the representative if Wyoming had mental health lands. Alaska's perceived land freeze, he told the committee, was holding up marketing efforts of Alaska coal, and was known worldwide by potential customers, investors and competitors. MR. STILES saw no end to the situation as long as the settlement agreement was tied up in the courts. As an example of the impact of the problem, Mr. Stiles referred to the Wishbone Hill project. He said the project had its mining permits in place, but could not go forward because of the injunction, and it had lost markets. Market share was lost in two ways, he said: Through the loss of investment dollars in the exploration and development of mineral resources; and, the direct loss of sales opportunities. This was a long-term loss, he argued, because sales were made as long-term contracts. A sale lost one year would affect the Alaska economy for perhaps ten years, he said. Number 459 (Chairman Williams noted for the record that Representative Finkelstein had joined the meeting.) TOM WALDO, STAFF ATTORNEY, SIERRA CLUB LEGAL DEFENSE FUND, testified on behalf of the public interest interveners in the settlement. He said his clients were a coalition of environmental groups, sportfishing groups, and the Susitna Valley Association, whose focus was on recreation and tourism. MR. WALDO reported his clients supported about 95% of the provisions of Chapter 66, specifically those dealing with the mental health programs. The part that the public interest interveners opposed was the land provisions, which he said were put together in closed sessions among a few people in a period of a few days at the end of the 1991 legislative session. Those provisions, he said, required the state to convey a huge amount of land to the trust authority with no opportunity for public participation in the selection process. Once the lands were in the hands of the trust, he argued, there would be no provisions for public input in the way the lands were managed. MR. WALDO explained that the complaint of the public interest interveners raised eleven claims, mostly under the Alaska Constitution, which challenged the legality of the settlement agreement. The key points as he described them included three claims based on Article VIII, Section 10 of the Alaska Constitution. That article permitted the state to dispose of lands or interest in lands only in compliance with safeguards of the public's interest. Because of the lack of public participation, Mr. Waldo, on behalf of his clients, alleged that the statute and the settlement lacked the kinds of safeguards of the public's interest that were contemplated in Article VIII, Section 10 of the Constitution. MR. WALDO raised another claim, also mentioned by Mr. Jessee, that being Section 6(i) of the Alaska Statehood Act, which restricted the state from selling or giving away its mineral rights. He pointed out the trust authority would act independently of the state, much like a city or borough. He believed it would be inappropriate to convey lands with their mineral rights to the trust authority. MR. WALDO addressed a third claim of the public interest interveners, which was that Chapter 66 was potentially a raid on the permanent fund. Chapter 66, he said, did not provide for payment of mineral revenues on new trust lands into the permanent fund. He relayed his clients' eagerness to avoid protracted litigation and to reach an agreeable settlement that met the interests of all the parties. Number 525 PETER MAASSEN, representing the interests if Unocal and Marathon oil companies, told the committee that Judge Green had granted a motion to let the two companies intervene in the litigation. The companies felt their interests as oil and gas producers were being threatened by the way Chapter 66 was being implemented. MR. MAASSEN referred to the Weiss litigation and said it had not concerned the major oil and gas producers initially, but in 1991, with the passage of Chapter 66 and its incorporation of the hypothecated lands list, the concern was with the hundreds of oil and gas leases that were pledged as security for the state's performance of its obligations under Chapter 66, and the provisions for foreclosure procedures by which leases would be transferred to the trust. As a result, the producers faced the prospect of getting a new landlord, which they had not seriously considered before, since major leases were not on original mental health trust lands. (Chairman Williams noted for the record that Representative Hudson had joined the meeting.) MR. MAASSEN told the committee the state had a greater amount of discretion than landlords were ordinarily given in oil and gas leases. He said the oil and gas companies knew what their obligations were. In April, 1992, he said, the settlement agreement was made public and it concerned the producers that the document said the state would share with the settling plaintiffs confidential information regarding any lands the plaintiffs nominated as proposed substitute lands. MR. MAASSEN also referred to the Department of Natural Resources (DNR) departmental order number 135, created as a result of the settlement agreement, which instructed employees of the DNR to manage all lands on the hypothecated lands as if they had already been transferred into the trust. This raised issues of concern to the oil and gas producers. The first issue was to prove that the state did not have the contractual right under its lease terms to transfer the oil and gas rights out of state ownership. They also hoped to prove the administrative order, number 135, should have been passed pursuant to the Administrative Procedure Act. MR. MAASSEN concluded it would be in the interest of Marathon and Unocal to keep their leases in state ownership. He said litigation would continue as long as the efforts to settle the mental health lands issue presented conflicts with the state's contractual agreements with third parties. Number 582 LOIS ANN REEDER testified by teleconference from Anchorage, on behalf of the Susitna Valley Association (the Association), which represented tourism and recreational interests. The Association intervened to protect its interests in public use and sound management of public lands. The concern the Association had with the settlement centered on the land exchange aspect of Chapter 66 advanced in the last days of the 1991 legislative session. Ms. Reeder said the Association objected to the replacement lands being tied up and public access being denied or restricted to those lands. MS. REEDER referred to a land use plan, the Susitna Valley Plan, developed by a coalition of 81 organizations. Every acre of that land had been included in the hypothecated lands list, she said. She did not believe Chapter 66 was a workable solution. The lands would not be able to generate the funds necessary to meet the needs of the state's mental health beneficiaries, she concluded. Number 652 JIM BARNETT of the ANCHORAGE CITY ASSEMBLY testified via teleconference from Anchorage. He mentioned the development of the Valley Girdwood winter recreation area. One of the parcels he described as a potentially important development was the up-valley area known as Glacier Winter Creek. The Municipality of Anchorage, he said, had been unable to acquire rights to that property without getting rid of mining claims. At the time the city was trying to negotiate those issues with the Bureau of Lands, Chapter 66 had already passed, but the municipality was not advised, he said, of the impact of the Mental Health Lands agreement on the transfer of that land. TAPE 93-12, SIDE B Number 000 MR. BARNETT expressed the belief that the land troubles could not be resolved until the matter was appealed to the Supreme Court. The Director of Lands, he said, had indicated the city would receive the thousand acres first. He told the legislators that the future of the Glacier Winter Creek lands was in their hands. The municipality and the people of Girdwood expected the current land use planning process to govern the way those lands were developed. If the Mental Health Trust intervened, he said, the Title 38 land use process would not be applicable. MR. BARNETT concluded his remarks by saying that unless Chapter 66 was repealed, at least as it affected Glacier Winter Creek, and its ability to select lands that were never contemplated, the development potential would be lost. Number 058 CHAIRMAN WILLIAMS noted Tom Koester, on contract to the Department of Law on the Mental Health Lands issue, was present at the meeting and available to respond to questions. REPRESENTATIVE CON BUNDE addressed a question to Mr. Waldo. Regarding the hand-out, "Principles of an Alternative Settlement," referring to paragraph two, he asked Mr. Waldo to clarify the position on transferral of subsurface rights to the Mental Health Trust Authority. He asked whether that position was endorsed, even though it might raise Section 6(i) questions to be resolved in federal courts. MR. WALDO explained the principles referred to by Representative Bunde were for a settlement that involved transferring only the original trust lands back to the trust, with another form of compensation for the original trust lands that could not be conveyed back to the trust. He added that the claim under section 6(i) applied only to the replacement lands. The section 6(i) restriction, he said, did not apply to those original trust lands. REPRESENTATIVE BUNDE referred to public notice requirements of AS 38.05.945(b) and (c). He asked Mr. Waldo to paraphrase the requirements of that statute. MR. WALDO responded that the statute required 30 days' notice before the disposal of any state lands, with the notice provided to a list of organizations and people specified in the statute. REPRESENTATIVE BUNDE then asked for clarification of the settlement's reference to return to the Mental Health Authority all unencumbered lands that were in the original settlement, additional lands that might be necessary, plus the state's contribution of six percent of unrestricted general fund revenues. MR. WALDO affirmed that was correct, but did not know what the additional lands would be. In addition to the original trust lands that were returnable, he said, there would be the six percent revenue. Regarding that six percent, he clarified it would not mean the state would have to spend six percent of the unrestricted revenues on mental health programs. He explained that the six percent would be placed into a mental health income account within the general fund of the state, and would still require state appropriation before it could be spent. The legislature, he said, would be able to exercise discretion over the spending of the revenue, as long as the needs of the mental health programs were being met. Other purposes might also receive funding from the account. Number 150 REPRESENTATIVE BUNDE asked about the lands that would be used to secure the six percent revenue stream. Specifically, he asked about the role of state forests, parks, and recreation areas. He also asked what would be done with those lands, assuming foreclosure. MR. WALDO answered that they would likely be involved in the foreclosure proceedings, urging the court to allow foreclosure over certain lands, and specifying which restrictions would be appropriate. He reiterated the purpose of compensating the trust for the state's failure to make a six percent transfer into the income account. Ultimately, he said, they would be subject to whatever became necessary to achieve that compensation. That could be a significant risk to his clients, he added, and a compromise his clients were willing to make to avoid having to live with the Chapter 66 settlement. Number 181 REPRESENTATIVE BUNDE questioned the income potential of lands that were already dedicated to preservationist activities. MR. WALDO answered that some development might be necessary to generate the six percent revenue. That would likely be a subject of the foreclosure proceedings, he added. REPRESENTATIVE BUNDE next asked if all those who had testified during the meeting would submit a written reaction to the alternative settlement presented by the environmental interveners. Number 202 REPRESENTATIVE JEANNETTE JAMES directed her question to Mr. Walker. She referred to the beginning of the Weiss lawsuit, and commented that the whole purpose of the long process was to be certain the state's mental health needs were met. One concern she had was that Chapter 66 was not effective until the courts made their decisions and all appeals were completed. She pointed out the December, 1994 deadline and asked for a realistic projection on when the land transactions would be completed, and what would happen if it did not happen by the December, 1994 deadline. Number 232 MR. WALKER explained the timetable. He believed the exchanges would be complete by the deadline, and noted the land exchanges were mandated under Chapter 66. He referred back to the congressional intent of the original million- acre land trust, and said that it had been anticipated problems might arise regarding the management of the trust. The record showed, he said, that Congress never intended the land trust would guarantee full funding of mental health needs. The settlement that was finally reached, he said, had the support of all parties, in lieu of any alternative. He expressed confidence all land exchanges would be complete by the deadline. The litigation schedule in Chapter 66, he said, was an abbreviated schedule. Number 285 REPRESENTATIVE JAMES asked for clarification that the litigation time frame spelled out in Chapter 66 did not include litigation that might go on for years regarding the land transfer. MR. WALKER doubted there would be litigation that would continue for years. The transfer itself would not take place until final acceptance of the settlement by the court, he said. He suggested this process would take less time than the original litigation. Number 328 REPRESENTATIVE JAMES asked Mr. Walker if he believed the court would accept the settlement once the lands were identified. MR. WALKER expressed absolute confidence in the court's approval. He suggested there remained disagreement among the parties regarding the trust's ability to develop properties, and the reasons for selection. REPRESENTATIVE JAMES again questioned the intended use of the six percent revenue for mental health programs, and said it had been her impression that the funds were for the specific purpose of meeting mental health needs. She asked Mr. Walker to clarify the use of that funding source. MR. WALKER said it was intended that the incoming proceeds of the trust be used to meet the mental health program needs of the state of Alaska, and that was the primary purpose. To the extent it was needed to meet the mental health needs, it had to go to that purpose, he said. He clarified, however, that Congress had not guaranteed a trust that would necessarily provide adequate funding for mental health needs. He said at the time the trust was established, Congress just did not know whether the trust could adequately fund the programs. Number 348 REPRESENTATIVE JAMES asked Mr. Walker whether he agreed with the interpretation of the Enabling Act that gave the legislature the authority and responsibility to appropriate those funds for the mental health uses, as well as the authority to put additional funds into the mental health lands trust from other sources. MR. WALKER answered that this was clear under both the Enabling Act and Chapter 66. Number 356 REPRESENTATIVE JOHN DAVIES asked Mr. Walker to respond to the issue raised by the interveners regarding the need for public involvement in the process of land selection and disposal, under Chapter 66. MR. WALKER told the committee that the public's involvement in the process was provided for in the public notice requirements. The settlement attempted to put the trust authority in the position of a private land owner, he explained, as it would have been if the lands had not been taken from the trust in the first place. Number 385 REPRESENTATIVE DAVIES asked about the negotiation process between the beneficiaries and the state, and what opportunities there were for public comment on what lands would reconstitute the trust. MR. WALKER answered that the exchanges themselves had not taken place yet, but a large amount of publicity had surrounded the process. No single piece of property, he said, was essential to the trust. MR. GOTTSTEIN also responded to the question regarding public participation. He directed members' attention to page 24 of the settlement agreement. He addressed a provision for notice of proposed exchanges, which called for identification of parcels and notice to the public. Both parties had the right under the agreement to change their positions after hearing public comment. He said the process carefully balanced the state's and public's interests in retaining certain parcels. The complaint from the interveners, he said, was that there were not as many procedural mechanisms available to them to block exchanges, because multiple layers of public participation were not provided for in Chapter 66. Number 439 DEBORAH SMITH, EXECUTIVE DIRECTOR, ALASKA MENTAL HEALTH BOARD (the Board), expressed the Board's eagerness to have the issue settled. She described the Board's responsibilities to review any legislation relating to the mentally ill. She clarified that the Board was not a party to the settlement, and described the Board's prior position on the settlement agreement, specifically surrounding the question of section 6(i). Since that time, an amendment to the settlement agreement had been made which resolved the section 6(i) issue as much as possible. She read the motion passed by the Board in July, 1992, which accepted Chapter 66 as the basis of settlement, subject to the adoption of the June 22, 1992 amendment. MS. SMITH discussed the section 6(i) issue and its possible application to the replacement lands. She understood the issue would have to be decided by the courts, but nothing in Chapter 66 imposed those restrictions on the original trust lands. The Board's interest, she said, was in what was best for the beneficiary groups. Number 493 REPRESENTATIVE DAVIES asked about the principles of an alternative settlement; specifically, how the six percent figure had been arrived at. Number 508 MR. GOTTSTEIN explained that in 1987, under Chapter 48, an interim provision of five percent of unrestricted general fund revenues was specified to go into the trust fund until the trust was reconstituted. In 1990, Chapter 210 was passed as an attempt to unilaterally resolve the litigation without the plaintiffs' concurrence, and the percentage was increased to six percent to gain the concurrence of the plaintiffs. The current six percent was a continuation of that figure, he added. Number 523 REPRESENTATIVE JOE GREEN was concerned with the assertion that the problems could be settled in a timely manner. He remarked on the considerable difference of opinion that could evolve around land rights, and even surface rights. He was not optimistic that Alaska's land use problems could be quickly resolved, and could see the disagreements going on and on, requiring an endless morass of litigation. Number 566 MR. WALKER suggested the reconstitution of the trust had caused some problems, but the court had ordered reconstitution of the trust. He was heartened by the professional efforts to reach a mutual conclusion. Number 590 REPRESENTATIVE GREEN was more concerned with the amount of time allotted than with the process itself. It seemed that the interests of some parties were being ignored in the land exchange, he said. Potential income to the state had to be deferred because of uncertainty over the land exchange. MR. GOTTSTEIN responded, saying he had worked closely with the DNR to allow appropriate development to go on. Transactions were occurring, he said, on lands in every category in the exchange pool. It was in the trust's interest, he said, to have opportunities for income generation, and to avoid tying up the lands unnecessarily. Number 624 MR. GOTTSTEIN described the cooperative effort and said the process was designed to avoid multiple appeals. He referred to provisions of Chapter 66 which called for abbreviated litigation, with hearings by a special master as quickly as possible. Regarding the overselection problem of the Alaska Native Claims Settlement Act, he mentioned that had been a concern of the state. He directed members' attention to Article 3, Section 11(b) of the settlement agreement, on page 16, which included a provision for the state to knock out selections that were inappropriate or if there were too many. Selections would expire after one year unless they were under active consideration. He said that around 550 - 600,000 acres had been nominated as substitute lands, and that did not constitute the kind of massive selections that had been raised as a problem. Mr. Gottstein said the most suitable lands had been the focus of the selection. Number 649 MR. STILES commented on Representative Green's question. He said that although process and procedures were important in settling the lands' question within the state, those aspects were irrelevant to international markets. Rather, he said, the perception was what affected the markets. With high levels of competition for customer markets on an international scale, he said investors became nervous at the perception of a land freeze. The investment decisions to put money into other countries affected Alaska for many years, he said, because the companies needed to make a ten year investment in a market. TAPE 93-13, SIDE A Number 000 MR. JESSEE expressed pessimism that the land exchange and trust reconstitution could be implemented quickly, in spite of all the good-intentioned efforts of the parties. While the identification phase was going smoothly, Mr. Jessee said, that did not mean the more time-consuming actual land exchanges would be less time-consuming. All parties were trying to make it work, he said, but as an example of the potential problems with the exchange, he referred to Chapter 66, where it was expected that the Trust Authority would be appointed and would have passed regulations regarding the management of the land and the program, and would have issued reports about the status of the Mental Health Lands by January, 1993. He pointed out that date was two weeks prior to this meeting of the House Resources Committee. Number 089 REPRESENTATIVE BILL HUDSON agreed the process of resolution seemed to be no further along than it was four years ago. He asked if each of the parties represented would provide a viewpoint on which lands would include subsurface rights, as well as commenting on the subsurface rights of the legislatively designated areas (LDAs), and the lands with contracts on them. He also asked for a response on the question of dedicated funding, with the six percent revenue fund for mental health programs. It appeared to be dedicated funding, which the Alaska Constitution prohibited, and that question needed to be clarified, he said. He suggested it should be decided whether to take legislative action or let the courts work it out. He also asked for a matrix describing where the parties were in the process. Number 189 REPRESENTATIVE GENE THERRIAULT offered a question stemming from the proposed alternative settlement. He asked if the state had set aside the LDAs as collateral, what was the answer on the question of foreclosure under the restrictions of Section 6(i). Number 214 REPRESENTATIVE HUDSON reiterated his concern about the subsurface rights in the LDAs, and their status in the land exchange. Number 218 MR. JESSEE commented on the aspect of the six percent general fund revenues for mental health programs. With the LDAs, he said those were original trust lands, and the Section 6(i) issue was not a concern with those lands. Those mineral rights came to the state with the trust lands through the Enabling Act, not through the Statehood Act, he added. MR. JESSEE, regarding the dedicated fund issue, said a constitutional amendment would be needed to dedicate state funds. He said that in Chapter 210, the initial six percent figure was a "promise to pay" with lack of security. Now the LDAs were held as collateral so future legislatures did not have to pay the six percent and it was, therefore, not a dedicated fund. They had appropriated original trust lands in LDAs into a collateral status. From the plaintiff's standpoint, that was security for the promise to pay, and it created a trust authority. This gave the plaintiffs some influence over whether the funds were spent on the needs of the beneficiaries. It was understood the state was not going to put the LDAs back into jeopardy by failing to make the allocation of the six percent, especially when they retained the authority to spend those funds as they saw fit. Number 266 CHAIRMAN WILLIAMS asked the parties to provide any information requested giving legislators some direction on how to proceed on the issue. ANNOUNCEMENTS Number 288 REPRESENTATIVE GREEN suggested the committee defer action until written comments had been provided to the committee. He announced a joint House and Senate Oil and Gas Committee meeting at 10 a.m. on Thursday, February 4, 1993, in the Butrovich Room, regarding the repeal of the 65-day deadline for oil spill response plans. Number 314 CHAIRMAN WILLIAMS announced the House Resources Committee would not meet on Friday, February 5, 1993, but invited members to attend a Fisheries Committee meeting that morning. ADJOURNMENT There being no further business to come before the House Resources Committee, Chairman Williams adjourned the meeting at 9:50 a.m.
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