Legislature(1995 - 1996)
01/27/1995 08:02 AM House RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE RESOURCES STANDING COMMITTEE
January 27, 1995
8:02 a.m.
MEMBERS PRESENT
Representative Joe Green, Co-Chairman
Representative Bill Williams, Co-Chairman
Representative Scott Ogan, Vice Chairman
Representative Alan Austerman
Representative Pete Kott
Representative John Davies
Representative Irene Nicholia
MEMBERS ABSENT
Representative Ramona Barnes
Representative Eileen MacLean
COMMITTEE CALENDAR
Overview by the Department of Natural Resources (DNR)
WITNESS REGISTER
NICO BUS, Acting Director
Division of Support Services
Department of Natural Resources
400 Willoughby Ave.
Juneau, AK 99801
Phone: 465-2406
POSITION STATEMENT: Provided an overview of the division and
answered questions
JERRY BROSSIA, Coordinator
Joint Pipeline Coordinators Office
Department of Natural Resources
411 W. 4th Ave., Ste. 2C
Anchorage, AK 99510
Phone: 271-4135
POSITION STATEMENT: Provided an overview of the division and
answered questions
MARTY RUTHERFORD, Acting Commissioner
Department of Natural Resources
P.O. Box 107005
Anchorage, AK 99510
Phone: 762-2483
POSITION STATEMENT: Answered questions
KEN BOYD, Deputy Director
Division of Oil and Gas
Department of Natural Resources
P.O. Box 107304
Anchorage, AK 99510
Phone: 762-2547
POSITION STATEMENT: Provided an overview of the division and
answered questions
RON SWANSON, Director
Division of Land
Department of Natural Resources
P.O. Box 107005
Anchorage, AK 99510
Phone: 762-2692
POSITION STATEMENT: Provided an overview of the division and
answered questions
TOM BOUTIN, Director
Division of Forestry
Department of Natural Resources
400 Willoughby Ave.
Juneau, AK 99801
Phone: 465-2491
POSITION STATEMENT: Provided an overview of the division and
answered questions
BILL GARRY, Southeast Area Superintendent
Division of Parks and Outdoor Recreation
Department of Natural Resources
400 Willoughby Ave.
Juneau, AK 99801
Phone: 465-4563
POSITION STATEMENT: Provided an overview of the division and
answered questions
TOM SMITH, Director
Division of Geological & Geophysical Surveys
Department of Natural Resources
794 University Ave., Ste. 200
Fairbanks, AK 99707
POSITION STATEMENT: Provided an overview of the division and
answered questions
JULES TILESTON, Director
Division of Mining and Water
Department of Natural Resources
P.O. Box 107016
Anchorage, AK 99510
Phone: 762-2165
POSITION STATEMENT: Provided an overview of the division and
answered questions
JOHN CRAMER, Director
Division of Agriculture
Department of Natural Resources
P.O. Box 949
Palmer, AK 99645
Phone: 745-7200
POSITION STATEMENT: Provided an overview of the division and
answered questions
ACTION NARRATIVE
TAPE 95-3, SIDE A
Number 000
The House Resources Committee was called to order by Co-Chairman
Green at 8:02 a.m. No roll call was taken.
CO-CHAIRMAN JOE GREEN announced the plane which was to bring in the
majority of presenters could not make it into Juneau. He said the
meeting will be on teleconference and the presenters would
participate via teleconference.
NICO BUS, ACTING DIRECTOR, DIVISION OF SUPPORT SERVICES, DNR, said
the committee had been presented with an overview handout
containing a flow chart of the department. He noted the
commissioner designee, John Shively, will begin his duties February
13. He stated Marty Rutherford is serving as acting commissioner
and manages the various divisions. There are several functions
reporting to the commissioner's office including the Mental Health
Trust Land Office. This office will reside within the department
but will take direction from the trust authority under contract and
work with the department to implement their policies as well as
manage the land.
MR. BUS explained the Soil and Water Conservation Board is under
the direction of Bill Long, Executive Director, who directs the
various functions and serves as a facilitator for the different
soil and water districts. He said there is also an Exxon Valdez
Restoration Team staff working with trustees to manage the land and
determine a plan.
MR. BUS noted there are eight divisions in the DNR: Division of
Land, Division of Mining and Water, Division of Oil and Gas,
Division of Forestry, Division of Agriculture, Division of Parks
and Outdoor Recreation, Division of Geological and Geophysical
Surveys, and Division of Support Services. He said DNR is charged
with the mission of stimulating the resource based economy while
conserving Alaska's wild, scenic, and cultural values. In
accomplishing that mission, the department would like to simplify
and accelerate regulatory processes and organizational structures
to allow rapid and sustained economic growth.
MR. BUS stated DNR would like to raise the public's awareness of
Alaska's natural resource assets, its market potential within
Alaska and the world, and the effects on daily lives.
Number 088
JERRY BROSSIA, COORDINATOR, JOINT PIPELINE COORDINATORS OFFICE
(JPCO), DNR, testified via teleconference and said the JPCO is a
joint federal/state office and has eleven different agencies which
issue various authorizations for pipelines, particularly the Trans-
Alaska Pipeline System (TAPS). He stated the JPCO was also set up
to handle permitting for a large gas pipeline and a number of
smaller pipelines feeding into the TAPS at the Prudhoe Bay end.
MR. BROSSIA noted the last few years have been hectic. Staffs have
been combined into the joint office. There are 83 people in the
office with only 15 in DNR. He said the Department of
Environmental Conservation (DEC) has 28 staff members, the Alaska
Department of Fish and Game (ADF&G) has two staff members, the
Department of Labor (DOL) has two staff members, Governmental
Coordination has one staff member, the Bureau of Land Management
(BLM) has 30 staff members, the Environmental Protection Agency
(EPA) has one staff member, the U.S. Corps of Engineers has one
staff member and the U.S. Coast Guard has one staff member. He
added the office also has access to Stone and Webster Consulting
Services for engineering assistance.
MR. BROSSIA stated the staff was combined in a way to avoid
duplicate efforts. He said currently there are seven agencies
requiring oil spill plans for Alyeska and the staff has been able
to develop one oil spill plan, integrating the various interests of
the different state and federal agencies, so Alyeska only has to do
the plan once.
Number 120
MR. BROSSIA told committee members that during the past year, the
U.S. Congress severely criticized Alyeska for its maintenance
operation. He noted because of that criticism, a number of
congressional hearings and investigations were held by the
Government Accounting Office (GAO), resulting in a number of
audits. The audits looked at the status of the TAPS and whether or
not it met regulatory standards. A number of deficiencies were
found and the JPCO brought in Stone and Webster for assistance in
looking at how to address a large audit project containing 5,000
deficiencies.
MR. BROSSIA said the JPCO, over the past few years, has tried to
move into a more pro-active approach and is monitoring safety and
environmental and engineering aspects of the pipeline, thus helping
to avoid repeat audit problems. He stated there are five major
areas which are looked at in connection with the pipelines. The
JPCO wants to ensure that if there is any kind of oil spill, they
are ready. He noted that one of the risk areas is to prevent oil
spills.
Number 141
MR. BROSSIA explained a second area considered in the monitoring of
the pipelines is the prevention of accidents. He felt Alyeska has
shown a good safety record. The third area is overall
environmental protection. The fourth area is general regulatory
compliance which helps ensure there is not a failed audit.
Finally, he said the JPCO is very concerned about concerned
employees. Therefore, the office is sensitive to criticism and
internal complaints from employees within the companies.
MR. BROSSIA pointed out that heard often at Alyeska currently is
the idea of quality programs. He said some of the concepts
developed in the past year is what the JPCO is calling a
configuration management approach to quality. Simply stated, that
approach involves the design of something using various specs,
codes and laws. He stressed that the necessary documentation needs
to be present to show that what was designed is what was received.
He noted that in itself was an issue that covered approximately
one-half of the various audit criticisms which have evolved over
the last year. Alyeska was not able to show that what they
designed is what they got and proper record keeping was not in
place.
Number 167
MR. BROSSIA explained the main goal of the JPCO is to remove, in
the next year, all continuous issues which have appeared in the
audits on the TAPS, enabling Alyeska to get a clean bill of health
so the issues will not be an issue in the Arctic National Wildlife
Refuge (ANWR) debate. He said a number of Congressmen have made it
clear there will not be any more future oil field development in
ANWR unless the TAPS maintenance problems are corrected. He noted
currently one-half of the audit issues have been resolved.
MR. BROSSIA summarized that the JPCO is trying to serve as a single
point of contact for the government when addressing pipeline
concerns such as regulatory authorizations, safety issues, etc.,
and ensuring the proper fixes are done during maintenance and
operations on the pipelines. He noted the JPCO is an industry
funded office. Therefore, the monies to the office come directly
from the companies. He added that the JPCO did work for Yukon
Pacific in the last year and will do maintenance work for them to
keep their right of way. There is also a proposed small pipeline
project 40 miles east of Prudhoe Bay under consideration. He
reiterated the JPCO will continue to do as much pro-active work as
possible.
CO-CHAIRMAN GREEN asked for a roll call. Members present at the
call to order were Representatives Green, Williams, Ogan,
Austerman, Davies, Kott and Nicholia. Members absent were
Representatives Barnes and MacLean. He noted there was a quorum
present.
Number 217
REPRESENTATIVE JOHN DAVIES asked Mr. Brossia to give the committee
background on the development of the GAO audits. He wondered how
a situation could develop where there are 4,000 - 5,000 problems.
He wondered if the JPCO is too underfunded to accomplish the
required monitoring.
MR. BROSSIA responded GAO began their investigation as a result of
several concerned employees who raised issues. He said those
concerned employees felt they had no platform because in 1990 the
state government had not operated the JPCO office for about 12
years. The JPCO was defunct between 1977 and 1990. Therefore, the
employees had no place to bring their concerns. He stated the BLM
office was down to three to five people. After the Exxon Valdez
spill, the employees were concerned about corrosion, oil spills,
electrical safety, etc. and they did not have a platform. Thus,
the employees took that platform to the U.S. Congress, resulting in
Congressmen Miller and Dingell specifically asking the GAO to
investigate the TAPS in general, and the hearings then took place.
REPRESENTATIVE DAVIES clarified the main problem was the employees
had no platform. He wondered if that kind of situation can now be
addressed on a more timely basis.
MR. BROSSIA replied yes. He said the JPCO has gone through an
intensive learning process and now realizes who their customers and
clients are. The JPCO has learned that the TAPS needs to be dealt
with as a system, from Prudhoe Bay to the tankers. He noted that
looking at all of the components as a system has helped the JPCO
understand some of the concerns of the original whistle blowers.
He explained the JPCO has developed a comprehensive monitoring
program that has an underlying platform of safety and has also
developed a good quality program with procedures and processes in
place to do the various kinds of work at Alyeska. He felt the JPCO
is much better prepared to address future concerns and problems in
the oil pipeline industry in general.
Number 276
CO-CHAIRMAN GREEN stated the federal government has the authority
to take over operations or the scrutiny of the pipeline unless the
state shows it can do it adequately. He questioned if there is any
indication that could happen or will the oversight stay with the
state.
MR. BROSSIA responded there is always a possibility that something
could happen but added that under current laws, the authority to
monitor the TAPS specifically is very splintered and fractionated.
The federal government clearly has the authority to monitor 400
miles of the pipeline for the right-of-way agreement. The DNR
monitors 400 miles of that agreement. There are several pump
stations which are on private land and the authority of DNR and BLM
is limited. He stated DEC has authority on oil spill types of
issues and DOL has authority in electrical, pressure vessels, and
Occupational Safety and Health Administration (OSHA) issues. He
said if all of that is pieced together, there is a cohesive unit
which is under the authority of the state. He felt it would be
doubtful that Congressmen Dingell or Miller could take over without
major legislative changes.
CO-CHAIRMAN GREEN said he is aware of drills conducted in the
shipping lanes and repairs to the lines. He wondered if the JPCO
oversees drills for possible spills where the lines cross rivers,
etc.
MR. BROSSIA replied yes. He said the JPCO has a specific unit in
the office involving an integrated approach where DEC is the lead
agency for conducting those drills and EPA is the co-leader. The
JPCO supplies necessary assistance to ensure the various functions
within the drill are met. He stated everyone works together to
plan the drills.
Number 337
REPRESENTATIVE SCOTT OGAN questioned what the ratio is on what the
state pays and what the federal government pays for the operation.
MR. BROSSIA responded he did not have specific information to
answer the question. However, he said there are 83 people in the
office. Most of the people who work on the pipeline are funded
from the industry. BLM has a direct reimbursement from Alyeska, so
the 30 BLM people are completely federally funded. In regard to
the 15 DNR staff members, the department is on a negotiated
agreement with Alyeska and monies also come in from the sale of
gravel, rentals, etc. The two ADF&G people are funded through the
state mechanism. The two DOL staff members are funded by BLM.
Three of DEC's staff of 28 are funded by BLM and one is funded by
DNR through the rental sales and agreement with Alyeska. One
Governmental Coordination person is also funded through the state
process. EPA pays for their one person, the Corps of Engineers
pays for their one person and the U.S. Coast Guard pays for their
person. He stated Alyeska reimburses the federal government for
the effort.
MARTY RUTHERFORD, ACTING COMMISSIONER, DNR, testified via
teleconference and stated she will withhold her comments until all
of the divisions have testified.
Number 390
KEN BOYD, DEPUTY DIRECTOR, DIVISION OF OIL AND GAS, DNR, testified
via teleconference and discussed a pie chart entitled "Where Our
Money Comes From" which committee members did not have. He said
the pie chart showed income of 85 percent from petroleum income and
15 percent from non-petroleum income. He stated the major sources
of income for fiscal year 1994 included bonus: $1.2 million;
rentals: $7.8 million; royalties: $696 million; and taxes $727
million. He stressed those numbers are getting smaller.
MR. BOYD explained the Division of Oil and Gas employs 53 people
who are divided into three major groups. The first group is the
director's office. The two other groups are Leasing/Evaluations
and Lease Administration/Royalty Accounting or essentially covering
things happening before a lease sale and things happening after a
lease sale. He said before the lease sale, there is an evaluation
by the area geologist and geophysicist and an economic analysis,
which provides the commissioner the means to determine what the
lease sale parameters will be. A best interest finding is created
which is presented to the public and shows the ins and outs of how
a lease sale will work and provides the social and economic impact
in the different areas. He noted there is also the title and sale
preparation. Finally, there are support groups such as cartography
and the computer group. He added that a five year schedule showing
the oil and gas lease sale schedule for the next five years should
be available next week.
Number 463
MR. BOYD explained the other broad group of people in the division
is in lease administration and royalty accounting. After the lease
sale, the royalty accounting involves people who count the millions
of dollars coming into the state. Then there is the permit and
compliance group who ensures that certain terms and conditions are
being met. These people issue the permit and check on compliance
in conjunction with the Division of Land.
MR. BOYD stated the director's office provides policy guidance,
public outreach and information and in the past, royalty
settlements completed over the past two years. He added there are
still some small royalty issues to be settled (indiscernible)
Native corporations. He said one of the provisions of the royalty
settlements is that the (indiscernible) reopen for various and
sundry reasons. He felt something which might come forward as a
result is the lifting of the export ban.
MR. BOYD explained the director's office also is responsible for
marketing. The division has a booth at some of the international
trade shows to promote Alaska, exploration licensing, incentive
credits, etc. He said the director's office also does market
analyses for oil price valuation to ensure the state is getting a
fair amount of dollars for its oil.
MR. BOYD stated the Leasing/Evaluation section issues the five year
schedule. The best interest finding for sale 79, the sale in the
Gulf of Alaska, is on the table currently. He added this section
also does public hearings, title searches and sale preparations,
geology/geophysics and economics.
MR. BOYD said the Lease Administration/Royalty Accounting section
is redoing the oil and gas royalty accounting system, which should
give the division more flexibility in reporting and accounting. He
stated this section is responsible for in-kind sales and explained
the process. He noted unitization is under this section which
involves grouping together leases with common interests. Permit
compliance, lease enforcement and production forecasting is also in
this section.
MR. BOYD told committee members that recent initiatives include
exploration licensing, exploration incentive credits, and coalbed
methane. He noted the regulations for exploration licensing are
very far along. He noted that some changes have been made to the
regulations and the division is very close to getting them out for
public comment. He said the expansion of the exploration incentive
credit program is already in place and will apply to unleased state
land and private land. Those regulations have been written and are
currently with the Department of Law.
Number 570
MR. BOYD said the legislature appropriated funds a couple of years
ago for a capital project involving the drilling of a well near
Wasilla. He stated a report is almost finished which shows that
even though there is not coalbed methane everywhere, the project
proves there is a coalbed methane resource in Alaska. He noted it
is hoped that industry will take the results of that well into the
broader spectrum of what extent that resource can be used in remote
villages.
CO-CHAIRMAN GREEN concurred with Mr. Boyd's optimism and his desire
to do something with coalbed methane, especially in remote
villages.
Number 597
REPRESENTATIVE DAVIES noted the handout the committee received (may
be found in the House Resources Committee Room, Capitol Building,
Room 124, and after adjournment of the second session of the 19th
Alaska State Legislature, in the Legislative Reference Library),
which indicates there are three lease sales scheduled for 1995. He
recalled that Mr. Boyd had mentioned sale number 79 in the Gulf of
Alaska. He wondered what other sales would be taking place.
MR. BOYD responded the two sales are the Shaviovik sale which is on
the western border of ANWR and the Cook Inlet reoffering sale,
which is a combination sale of old acreage previously leased or
unleased. He added in regard to the reoffering sale, as long as
the commissioner determines there are no new circumstances, the
original best interest finding can be used and the land can get on
the sale quickly.
MS. RUTHERFORD added the department would be giving the legislature
a copy of the five year oil and gas lease sale schedule soon.
CO-CHAIRMAN GREEN wondered how the royalty accounting section works
with the Department of Revenue.
MR. BOYD stated they work closely, particularly in the audit
function. He said it is a matter of shared information and
responsibilities. He felt the two groups are working very well
together as a result of a series of meetings as well as better
communication. The two groups meet on a regular basis to discuss
common problems and concerns.
Number 668
CO-CHAIRMAN GREEN stated occasionally there are royalty sales in-
kind and local refineries actually buy oil from the state out of
their royalty share. He wondered if those are handled through Mr.
Boyd's office or through the Oil and Gas Royalty Board.
MR. BOYD responded both. The Division of Oil and Gas would
initiate the potential sale through a letter or some sort of
communication with a particular entity. He said there are several
different ways the oil can be sold either through competitive or
non-competitive bids. In most cases there is a non-competitive
sale, either long term (more than a year) or short term (less than
a year). In all cases, the Division of Oil and Gas is involved.
In come cases the Oil and Gas Royalty Board is involved, where the
division takes the terms of the sale to the board, the board
reviews the terms and then makes a recommendation to the
legislature. In all cases, the legislature has the opportunity to
review the terms.
MR. BOYD said for a competitive sale it is different because even
though the Oil and Gas Royalty Board is involved, legislative
approval is not required. Therefore, it depends on how the sale is
structured.
CO-CHAIRMAN GREEN clarified the state would get at least as much
from the sale of royalty in-kind as it would get if the state sold
it in value.
MR. BOYD said there is a rule in law which says royalty in-kind
equals royalty in value.
REPRESENTATIVE OGAN noted the division advocates petroleum resource
development throughout the state. He wondered how much money is
devoted to that advocation. He also asked if Mr. Boyd could cite
specific petroleum resource developments which the advocation has
resulted in.
TAPE 95-3, SIDE B
Number 000
MR. BOYD stated for the last four years, the division has tried to
attend one of the international meetings (held in the U.S.) of the
American Association of Petroleum Geologists, which has an
international scope, or the Society of Exploration Geophysicists.
The attendance usually runs from 7,500 to 10,000 people. The
division usually sends three to four knowledgeable people and has
a booth which features posters on whatever is of interest at the
time. He said in the past, the booth has focused on the Arctic
National Wildlife Refuge (ANWR), the state's five year oil and gas
leasing schedule, and in the last couple of years, on exploration
licensing, exploration incentive credits and coalbed methane. He
added the costs involved depend on where the meeting is located.He
noted on the average, attendance at the meeting costs $8,000. MR.
BOYD said specific successes are hard to name but he felt Alaska's
name has been circulated amongst the smaller companies who attend
the meetings. He added there has been a lot of interest in coalbed
methane. He observed it is difficult to say the booth made all the
difference in the world. However, the division does a lot of phone
calling and many questions are answered. He said the division has
a mailing list of 1,200 small companies and develops brochures to
keep people current. He felt the costs are low compared to the
benefits. He stated he could not count the number of dollars
generated.
Number 033
CO-CHAIRMAN GREEN said there has been a lot of press about
incentives to increase interest in petroleum development within the
state. The Governor has gone and toured three of the major oil
companies. He wondered if incentives would be negotiated through
the Division of Oil and Gas.
MR. BOYD answered it would depend on what the incentive might be.
For example, royalty issues would come through the Division of Oil
and Gas and tax issues would go through (indiscernible).
RON SWANSON, DIRECTOR, DIVISION OF LAND, DNR, testified via
teleconference and said the Alaska Statehood Act land acquisitions,
in which the Division of Land plays a key role, establishes the
foundation for Alaska's economic and resource base. He explained
that after clear title is secured for this land, these state-owned
lands and resources are analyzed for their appropriate uses. He
stated in a process which brings together a representation of
Alaska's citizens and all major landowners, the Division of Land
plans for use and development of its land and resources,
guaranteeing through such planning activities access through
issuance of rights-of-way, continued public use through
designations such as recreation rivers system, and areas designated
for mining and other development.
MR. SWANSON told members that land use plans and their resulting
land use classifications are required by law before the division
can dispose of state land. The division has also found that land
use plans greatly diffuse individual objections as land and
resource uses are addressed on a more global scale rather than as
an individual basis. He said that little more than one-third of
state land still has no land use plan in place. By this spring,
the division will have completed the Yakataga and Kenai area plans.
He stressed important areas needing plans include most of
Southeast, Kodiak, Nenana River Corridor, including the Wolf
Townships, and the 40-Mile to include the Taylor Highway. Other
plans are over ten years old and need to be reviewed and updated
because of changed conditions, uses and the need to convey land to
local municipalities. He noted that some of these include Bristol
Bay, Susitna Basin, and the Copper River Basin.
MR. SWANSON said the Division of Land serves the state as a real
estate developer and property manager by providing land for
Alaskans to own and use. The division currently maintains about
1,000 sale contracts for parcels of land purchased by Alaskans, and
the division will have a land disposal late summer for an
additional 500 parcels for about 3,000 acres. He stated the
division also issues leases that range from set-net fishing sites
or aquatic farms to shore-based fish or timber processing
facilities, to North Slope oil support industry sites and
commercial recreational lodge sites.
Number 086
MR. SWANSON explained the Division of Land makes gravel and other
materials available for residential, commercial, and industrial
development and is the state's survey authority to establish
property boundaries. He said the division protects the state's
assets by establishing and enforcing reasonable conditions to
protect the environment when authorizing land use, stopping
unauthorized uses, and planning for land and resource use and
conservation.
MR. SWANSON commented the division is responsible for stewardship
of land retained in state ownership for public access, energy
development, legislatively designated public use and recreation
areas, and a host of the public use purposes. He said the division
is available to serve as project manager on major development
projects such as the Fort Knox Gold Mine, coordinating state
agencies with industry to form a working project team. He noted
the division maintains offices in Juneau, Anchorage, and Fairbanks
to provide these essential services to all Alaskans.
MR. SWANSON said the division receives many requests for leasing
state uplands and tidelands for long term commercial and non-
commercial activities. Many of these requests are associated with
oil and gas development, shore-based fisheries
development/processing, and recreational and business development
for lodge or guiding activities. He noted the division presently
has 530 lease applications awaiting action.
MR. SWANSON noted that many requests for use of state land do not
require the user to obtain an interest in the land as the use or
project is only for a short term and no permanent improvements are
involved. In such situations, the division issues a permit, such
as a land use permit, tidelands permit, military maneuver permit,
trapping cabin permit, or guide permit. He said the division
presently has 237 permits to process.
MR. SWANSON stated material sales play an important role to
industry as the state sells material from sources normally where
private sources are not available. Within the next several months,
the division will sell an estimated 2.8 million cubic yards of
gravel in the Northern Region, 2.5 million of which is in support
of oil and gas development activities on the North Slope. He said
over 50 material sales remain to be processed. He noted at this
time, there are 687 right-of-ways awaiting processing statewide.
These range from the simplest small drive to complex utility lines.
Number 114
MR. SWANSON advised the division has approximately 142 remote and
homestead parcels awaiting appraisal at this time. He said just as
the federal government conveys land to the state, municipalities
are certified to select land from the state. The total acreage
committed by the legislature to municipalities under AS 29.65 is
over 1.2 million acres. He stated the Division of Land is
responsible for certifying the acreage due municipalities and for
processing municipal selections. This year, the division has
certified three municipalities' entitlements including the
Northwest Arctic (41,438 acres), Lake and Peninsula (125,000
acres), City of False Pass (0 acres) and will be certifying three
more including Aleutians East, Yakutat, and Denali.
Number 125
MR. SWANSON noted that so far this fiscal year, the division has
conveyed 19 parcels, totalling approximately 4,000 acres. He said
most of these parcels are needed for specific projects or public
purpose. These include parcels in Whittier, Aleutians East
Borough, Juneau, Chignik, Perryville, Wrangell, Fairbanks North
Star Borough and Sitka. He stated during the remaining year, the
division will be processing 38 additional parcels, totalling
approximately 93,000 acres. This will include small high parcels
in Anchorage (Girdwood), Cordova, and Valdez. The division will
also process larger parcels for the North Slope Borough, Aleutians
East, Anderson, and Skagway.
MR. SWANSON said the current land obligation is approximately
648,000 acres to 21 municipalities. The division currently has
applications pending for 315,000 acres, leaving approximately
333,000 acres not yet selected by municipalities. He stated the
division has conveyed 430,000 acres to date and has another 250,000
acres pending survey by the affected municipalities.
Number 142
REPRESENTATIVE DAVIES wondered how many staff members will be
involved in the mental health land trust office.
MR. SWANSON said currently that office has a staff of four people
and will be contracting with the other divisions within the
department to conduct the activities.
MS. RUTHERFORD added that the Mental Health Trust Land Office is
not yet up and running. Until that time, the department will not
have a real sense of how many people the land trust unit will need.
She felt the office could expand beyond the four and one-half
people currently in the budget.
REPRESENTATIVE DAVIES recalled as a part of the settlement
agreement there was a portfolio of DNR lands which will be sold to
raise cash. He wondered what the status of that transaction is.
MR. BUS said that sale had been advertised and the portfolio was
sold this past December. The First National Bank of Anchorage won
the bid and the contracts have been transferred.
REPRESENTATIVE DAVIES asked how successful the sale was.
MR. BUS responded the portfolio was sold for $15 million which was
less than what the legislation called for. He noted that the
legislation asked for the sale in May and between May and December
many of the contracts paid off. He added that at the time of
session, the prime interest rate was five percent and by the time
the portfolio was sold the interest rate was eight percent.
Number 185
REPRESENTATIVE AUSTERMAN recalled that Mr. Swanson had mentioned
the land use plans for the state. He requested Mr. Swanson to do
another quick overview.
MR. SWANSON said Title AS 38.04 requires that land use
classifications be in place before any land is disposed and noted
that disposed is defined as sold or leased. In order to complete
a land use classification, a land use plan must be in place. He
stated Alaska has been divided into geographical areas which
involve area plans. Area plans involve seven major steps. He
explained the first step is to identify the issues and the second
step is to gather the necessary technical and scientific
information to answer questions which the public and people who
analyze the issues might have.
MR. SWANSON stated next, alternatives are prepared and taken to the
public. He noted this would involve a first draft. The public has
three opportunities to comment. The first round of public comment
includes an open house type format or in many cases, a full public
hearing. After input from the public, the division then prepares
a draft plan which goes out to the second round of public meetings
and is much more focused with actual recommendations. Based on the
comments received during the second round, the final plan is
prepared and a legal notice is done for an additional 30 days.
Finally, the plan is adopted.
MR. SWANSON said the areas of the state which are covered by area
plans are about two-thirds of the state-owned land in the state
including the Northwest (indiscernible) Borough, additional lands
on the Seward Peninsula, Tanana Basin, Kuskokwim, Bristol Bay,
Copper River, Southwest Prince of Wales Island, and Juneau. He
said there is also a plan in place for Haines and Skagway. He
noted the majority of Central Southeast does not have a plan in
place and a plan is needed. Kodiak also needs a plan in place
mainly because of shore fishery activities.
MR. SWANSON explained the major areas which do not have a plan in
place include the North Slope, Brooks Range, and the upper Yukon
(basically the 40-Mile area). He said in some areas there is not
a pressing need for a plan but in others there is. He said once
someone goes through a planning process and sees the give and
takes, it can been seen that the process solves problems in the
long run. He noted it is a three year process and usually a plan
is put in place. Once a plan is done, authorizations can be issued
quickly because everyone can see the give and take which happened.
He stated without a plan, there is usually a "not in my backyard"
attitude.
Number 243
REPRESENTATIVE IRENE NICHOLIA wondered if there were any plans to
get a plan for the upper Yukon, lower Yukon and Yukon-Koyukuk.
MR. SWANSON said there are no plans at this time. The division
will complete plans for Kenai and Yakataga this spring. The
division will then start the Central Southeast and Kodiak areas
which will take two to three years to complete. When those are
complete, the division will then go to the upper Yukon and Yukon-
Koyukuk. He stressed because it is a matter of staffing, it is not
possible to go any faster.
CO-CHAIRMAN GREEN stated there has been an outcry from people
regarding privatization both from a taxing standpoint and
ownership. He recalled that Mr. Swanson had given the number of
acres going to municipalities and the reasons land use plans take
so long. He wondered if there has been any thought, in budgeting,
to contracting out some of the preparatory land use planning to
expedite the process.
MR. SWANSON agreed the land use planning process could be
contracted out. However, the division does not have the money to
do so.
CO-CHAIRMAN GREEN wondered if in the division's budget presentation
to be made this year, if there has been any thought of going to a
contract rather than a state employee situation.
MS. RUTHERFORD felt one of the items this Administration will be
looking at is new approaches to do what needs to be accomplished.
She added there have been discussions about contracting out for
things such as best interest findings and consistency
determinations for oil and gas leasing. At this point in time,
however, those possibilities are just in the discussion mode but
are worthy of consideration.
REPRESENTATIVE DAVIES wondered if Representative Austerman's
question about the percentage of state land having land use plans
had been answered.
MR. SWANSON replied about two-thirds of state-owned lands have a
plan in place. He added that some of these plans are very stale
and need to be redone.
TOM BOUTIN, DIRECTOR, DIVISION OF FORESTRY, DNR, testified via
teleconference and stated the division has ten area offices located
throughout the state. The majority of the offices are located
where staff can cost effectively manage wildland fires on the 134
million acres which the division is responsible for. From a cost
accounting standpoint, the division is two-thirds fire suppression,
one-sixth enforcement of the Forest Resources and Practices Act,
and one-sixth other programs including timber sales.
MR. BOUTIN updated the committee on current activities of the
division. He mentioned the Kenai timber management program which
was initiated as a result of the spruce bark beetle epidemic. He
said the division has been able to offer eleven timber sales thus
far and noted the division has been in court on nine of the sales.
He stated the division does plan to continue with the timber sale
program.
MR. BOUTIN said in September, the legislative budget and audit
committee approved up to $600,000 of fiscal year 1995 stumpage
receipts. To date the division has received about $400,00 which
will go toward reforestation. He added that more of the money will
be spent in the Fairbanks area than originally intended because of
a strong rise in wood chip prices there.
MR. BOUTIN stated the department and the university reached an out
of court settlement with plaintiffs in the 1987 lawsuit against the
timber settlement with the university, allowing the university to
proceed with logging 230 million board feet east of the
(indiscernible) River. He added it is the largest amount of timber
in a single state plan. He mentioned that Steve Kallick, an
environmentalist, helped the division mediate the settlement,
proving that environmentalists will allow logging if they are
comfortable with the plan and are brought in early in the process.
MR. BOUTIN told committee members that 1995 will be about the most
active forest practices year yet. Southeast notifications are up
already, much more logging is being seen on the Kenai Peninsula and
much more logging is being done in the Interior. The division is
looking at what can be done in areas where the area forester is the
sole forester. He noted the Forest Practices Act requires the
division to be out on the ground within a certain period of time
from when notifications are received. From a budget standpoint,
this requirement will require dipping into those programs which are
not required by law, predominantly the timber sale program. He
said this fiscal year, the division no longer has a timber sale
forester in Tok and the timber sale program will probably bear the
brunt of the increases in forest practices enforcement.
MR. BOUTIN said recently the division made a sales pitch to the
U.S. Forest Service region to take over all (indiscernible) and
responsibilities on the Chugach National Forest to be funded by the
federal government. He felt the Chugach National Forest is a very
logical place where the division can displace some of its fixed
costs over a greater number of fires since the Chugach averages
only 21 fires a year and the division is already involved with over
half of those fires.
Number 415
REPRESENTATIVE DAVIES asked Mr. Boutin to update the committee on
how the inventories are proceeding.
MR. BOUTIN replied the (indiscernible) forest inventory has been
completed and published. He said the soft wood inventory in the
Interior, particularly in the Tanana Valley State Forest is in a
draft stage. The hard wood inventory is much less further along.
BILL GARRY, SOUTHEAST AREA SUPERINTENDENT, DIVISION OF PARKS AND
RECREATION, said the division operates 133 different park units
around the state. The division has a very diverse operation
because the division takes care of small parks as well as very
large parks. He noted the large parks have fewer staff and the
small parks have more staff because the smaller parks are on the
road system and get large numbers of people.
MR. GARRY stated that back in the 1980s it was apparent that the
division was not going to survive budget wise due to large
increases in tourism throughout the state. To overcome the funding
problem, the division pushed for the fee bill which was received in
1988. Since then, the fee bill has been the catalyst for many of
the division's responsibilities and programs. He said it was
obvious the way people used parks was influenced by whether or not
they paid. If there was no payment required, people would tear the
parks up. Once people were required to pay, there was a dramatic
reduction with problems in the parks.
MR. GARRY explained the fees do not directly relate to how much a
park costs. He said the division gets about 30 percent of its
budget from fees currently. He noted the general fund base is
constantly decreasing and the fee revenue keeps going up.
Therefore, the division has been able to stay level and keep
services going. He said with the use of day fees, many problems
have been stopped. He reiterated that the fee program has been
very successful.
MR. GARRY said the other successful program in the division is the
volunteer program. He stated nowhere else in the system has there
been that much support. He noted if the division did not have the
volunteer program, there would be a problem because volunteers are
now as much a part of the division's management team as staff.
Number 540
REPRESENTATIVE OGAN stated there has been press about different
parks being closed due to lack of funding. He asked Mr. Garry to
update the committee on that situation.
MR. GARRY replied parks have not been closed. He said through the
fee programs and the use of volunteers, the division has been able
to keep most parks open. He noted a few of the parks along the
Alaska Highway have been transferred back to federal ownership and
management.
MS. RUTHERFORD noted there had been a lot of press on the
possibility of some parks being closed due to lack of funding. As
it turned out, the cut which was projected never happened.
However, because of the press and ongoing discussions, there has
been a lot of interest raised by surrounding communities and
municipalities in partnerships, co-managing with the department or
developing some type of program where those interested could
participate in the management of facilities having high operating
costs and low usage. She noted the division is now beginning to
develop some of those opportunities.
Number 597
REPRESENTATIVE DAVIES stated he had toured the House of Wickersham
in Juneau and said it is in sad repair. He said some of the
artifacts there are fascinating and easy to view. He wondered if
there are any plans for the house.
MR. GARRY replied the house is in better shape than how it appears
inside. In the last several years, the division has put a lot of
money into the foundation which was the major problem. He said the
reason for the cracks inside and the demise of the walls is because
the house was not on a good foundation. Once a good foundation was
put in and the house was leveled, the number of cracks increased
because the house was moved back to a level plane. He stated the
problem is now cosmetic.
MR. GARRY said the division is currently in the process of going
out with request for proposals (RFP) to privatize the house. He
noted the first time the division came out with the RFP no
responses were received. He talked to industry people and found
out what needed to be changed. He felt because there are now
enough interested people, the house will probably go to a private
commercial operator by this summer. He stated the division does
have a request for money to improve the first and second floor.
Last year's capital request was $250,000 but the request did not
rank high because of the plans to get a private operator.
Number 671
TOM SMITH, DIRECTOR, DIVISION OF GEOLOGICAL & GEOPHYSICAL SURVEYS,
testified via teleconference and said the division is a strategic
information agency. He stated the division's mission was clarified
in statute to take a long strategic look at potential Alaska land
for minerals, fuels, geological hazards, construction materials,
water resources to some degree and other investigations which are
concentrated on state lands. He noted the division also serves as
a research agency.
MR. SMITH told members the division is headquartered in Fairbanks,
near the state's main research university and can often take
advantage of the libraries, human resources, student interns,
faculty specialists, etc., there. He said the division currently
has a staff of 30. All staff except for one are at the Fairbanks
headquarters and the other is in Eagle River. Additionally, the
division has plus or minus about ten student interns.
MR. SMITH stated the (indiscernible) houses most of the subsurface
record of Alaska (indiscernible) from almost every oil and gas well
ever drilled in the state, as well as many mineral properties. The
division's estimate of the cost to acquire that data initially is
in excess of $12 million. He noted most of the work the division
does is heavily people oriented...acquiring new information and
giving it out to all users. He added that the division tries to
distribute about 10,000 publications a year and also tries to
market Alaska's resources at eight to ten professional conferences
held each year.
TAPE 95-4, SIDE A
Number 000
MR. SMITH said the division's organizational structure mirrors the
statute which the division was created under. The division has
sections addressing minerals, energy, engineering and geologic
hazards, and publications.
REPRESENTATIVE DAVIES asked what percentage of state land has been
mapped geologically.
MR. SMITH responded ten percent of state lands have been mapped.
He added that the division's profile is heavily cooperative. The
division works with many kinds of agencies, institutes,
universities worldwide, Department of Energy, etc.
REPRESENTATIVE AUSTERMAN wondered if the division looks at areas
having potential for hydroelectric projects.
MR. SMITH said the hydroelectric issue falls under the surface and
water analysis function of the state. He noted that at one time,
this issue was a part of the division's responsibilities but now it
is in the Division of Mining and Water. He added that his division
is heavily involved in looking at alternative energy sources for
rural areas.
REPRESENTATIVE OGAN asked if there are any plans, or have sources
been identified to enable a switch to different forms of energy to
generate electricity.
MR. SMITH replied alternative energy sources for rural Alaska is
another major area of emphasis for the future. The division is
interested in coal which is scattered in various basins throughout
the state. He said the division is currently working in the Bethel
area on an alternative gas source. He noted there is also an
enormous energy component in peat and added that the division
completed peat inventories in the past. He also mentioned coalbed
methane. He stressed that alternative energy sources is an issue
of high priority for the division.
CO-CHAIRMAN GREEN wondered if the division made a macro evaluation
of an area and an individual built a cabin in the area and slumping
or a fault movement occurred, is there any protection for the
division since the division was not able to go out and detail the
situations. He also questioned if the state would be subject to
any liability.
MR. SMITH responded the division performs pre-engineering tasks.
The division does not get involved with actual on-site drilling or
evaluating the therma (indiscernible). The division's efforts are
geared more toward defining areas and tracks of high hazard
probability. He stressed the division has never had a liability
problem and he felt the division's work is not specific enough to
constitute a land condemnation in a detailed sense.
JULES TILESTON, DIRECTOR, DIVISION OF MINING AND WATER, testified
via teleconference and stated the division is currently pursuing
the integration of water and mining functions, including the
determination of how the division can be more efficient for
clients. The division is converting, in several cases, what were
supervisory positions to tech staff and putting those people in the
field where the work is.
MR. TILESTON said the division just initiated the first meeting
with the Department of Interior to determine if a system can be
devised to reduce litigation costs in connection with water bodies
and the question of who owns submerged lands. He noted the
division has 188 jurisdictional dams which are periodically
inspected and the division also approves new structures such as the
one at Red Dog. The other area the division is working on is
multi-year permits for mining plans. This would enable a miner to
tell the division his plans in sufficient detail to enable
monitoring for up to five years. He said the program will be cost
saving for the division and will be a paper reduction for the
miners.
Number 136
MR. TILESTON said the division recently received from Cominco and
Nana the reclamation plan and the division has $1 million in
bonding to (indiscernible) that plan which they have already
submitted. The plan will be going out for review to interested
agencies and publics. (Indiscernible) creek a large gold deposit
located on the Yukon near Galena. The division has been asked to
start an interagency meeting so a detailed plan can be developed
and permitting determined.
MR. TILESTON stated several things can be done in the state to
remove uncertainties and reduce costs. The division has set in
motion a symposium which will start this spring to look at
reclamation standards and requirements on a pre-geographic basis in
connection with the major coal fields on the North Slope, the north
side of the Alaska Range, and the Cook Inlet area to see if the
division can develop an approach which makes sense on what needs to
be done.
MR. TILESTON said the division is in the process of determining
whether or not it is in the state's best interest to go to a
competitive lease for a small (indiscernible) coal field in the
Delta. There have been three public hearings and there has been a
request for an extension. That extension has been granted. The
record to date suggests that the division may proceed. As a
result, there have been some very significant concerns about coal
truck traffic on the access road to the mine as well as recreation
use. A mitigation workshop has been scheduled to look at those
issues and determine what can be done if the division goes to a
full lease.
Number 177
MR. TILESTON told committee members the division is working closely
with mental health because a major part of the division's long term
revenue is associated with minerals. The division's mineral
section is assisting in developing evaluations and ensuring the
division does not inadvertently take an action on a state mine
claim which belongs to the mental health side of the claim.
MR. TILESTON mentioned the state mining claims in the Cooper
Landing area. He said in that area, the division has state mining
claims which have turned into primary places of residence of people
who are mining two weeks out of the year. As a result, they are
paying $20 or $40 for 40 acres. He stressed that is not the intent
of the state mining law.
REPRESENTATIVE AUSTERMAN asked if the division is in the process or
is on an ongoing basis assessing or looking at coastal areas for
hydro projects.
MR. TILESTON stated the division does. He said normally the
division only gets involved when there is an application being
filed with the federal energy regulatory agencies.
MS. RUTHERFORD said that something the department is beginning to
do quite well is work with all aspects of (indiscernible) including
the environmental community. She stated the department feels
strongly about doing a good job with the public process.
Number 230
JOHN CRAMER, DIRECTOR, DIVISION OF AGRICULTURE, testified via
teleconference and said over the past several years the agriculture
community has found itself under the critical scrutiny of the
public's eye. The infusion of Alaska's capital in the agricultural
business has provided a six-fold increase in total gross farm
income and over the past six years has remained relatively stable.
To maintain the stability and provide for continued growth, the
state must continue to support the industry by providing access to
reasonably priced lands, low interest operating loans, and local as
well as foreign market development.
MR. CRAMER pointed out that agriculture represents a $30 million
renewable resource industry. In 1993, agriculture employed in
excess of 1,200 Alaska residents at an average hourly salary of
$7.50. He said the agricultural business also represents one of
many opportunities to diversify the Alaskan economy by creating
opportunities for in-state production and marketing of food and
fiber. He stated the division supports the Alaska agricultural
community through marketing and inspection services, agricultural
land management and resource conservation services, competitive
farm development and operating loans, and plant materials
development and testing.
MR. CRAMER stated the authority to provide the assistance is
specifically outlined in Title 3 and 41. Land and resource
management responsibilities on lands classified for agricultural
purposes are carried out in close cooperation with the Division of
Land under authorities outlined in Title 38. In addition, a number
of federally funded programs are provided through specific
agreements with the U.S. Department of Agriculture.
MR. CRAMER explained that the division is divided into six basic
programs. The first is the Agriculture Revolving Loan Fund (ARLF).
He said conventional financing for agribusiness is not available in
Alaska due to restricted ag land title, perceived risk, and lack of
private sector experience in agricultural lending practices. He
stated in fiscal year 1994, the ARLF filled the gap by providing
$1.9 million of low interest farm development, chattel, operating,
and product processing loans. He noted the ARLF, through the
Director's office, has focused a great deal of its attention toward
improving the delinquency rate of an inherited portfolio by
restructuring loans to low risk borrowers with a productive
history.
MR. CRAMER stated the ARLF aggressively pursued delinquent loans
through settlement action and/or litigation. As a result of this
aggressive asset management program, the projected value of land,
equipment, stocks, judgments, and cash revenue returned to the ARLF
portfolio in 1993 was $7.7 million.
MR. CRAMER said some of the highlights in 1994 include seeing the
most successful year ever for the farmers markets in Fairbanks and
Anchorage. The pork production went up 15 percent over 1993. The
division is seeing new farmers coming into the market and has over
50 new listings in the Food and Farm Products directory this year.
He stated the division sold over 126 pieces of repossessed
equipment and disposed of 15,902 acres this past year.
Number 294
REPRESENTATIVE OGAN noted there is a lot of state-owned farm land
in the Palmer area. He wondered what steps are being taken to get
farming back into private hands.
MR. CRAMER reiterated the state has disposed of 15,902 acres this
past year. He said much of the land having the greatest potential
for private ownership and farming successes is located at Point
Mackenzie and is mental health land. He hoped that the settlement
will go through and disposal of that property can begin. He
mentioned the division is working with the borough on future land
sales.
CO-CHAIRMAN GREEN thanked Mr. Cramer and told him everyone is
impressed with the fungus free seeds the division has been working
on.
MR. BUS said the last division is the Division of Support Services.
He explained there are three sections in the division: the
Administrative Services, the Recorder's Office, and Information
Resource Management.
MS. RUTHERFORD clarified the mental health settlement has released
the Point Mackenzie agricultural land from mental health ownership.
However, a lawsuit is pending before the Supreme Court. The
department will be carefully watching the original trust lands.
She said the issue has been resolved pending appeal and the
department feels it will succeed with the appeal.
MS. RUTHERFORD reemphasized DNR plays a very vital role in the
state's economic viability.
CO-CHAIRMAN WILLIAMS announced the committee will meet in Ketchikan
on February 18. At this meeting the committee will gather
information from the U.S. Forest Service, Ketchikan, and
environmental groups to try and get a resolution from the committee
in support of the timber industry.
ADJOURNMENT
There being no further business to come before the House Resources
Committee, Co-Chairman Green adjourned the meeting at 10:00 a.m.
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