Legislature(1993 - 1994)

02/03/1993 08:00 AM House RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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               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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