Legislature(2001 - 2002)

03/05/2002 01:38 PM Senate L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                    
                SENATE LABOR & COMMERCE COMMITTEE                                                                             
                          March 5, 2002                                                                                         
                            1:38 p.m.                                                                                           
MEMBERS PRESENT                                                                                                               
Senator Ben Stevens, Chair                                                                                                      
Senator Loren Leman                                                                                                             
Senator John Torgerson                                                                                                          
Senator Bettye Davis                                                                                                            
MEMBERS ABSENT                                                                                                                
Senator Alan Austerman                                                                                                          
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 280                                                                                                             
"An Act  permitting grants to  certain regulated  public utilities                                                              
for water quality enhancement projects  and water, wastewater, and                                                              
solid waste systems."                                                                                                           
     MOVED CSSB 280(L&C) OUT OF COMMITTEE                                                                                       
SENATE BILL NO. 309                                                                                                             
"An Act  relating to  actions to  quiet title  to, eject  a person                                                              
from, or  recover real property  or the  possession of it,  and to                                                              
acquisition of real property by adverse  possession; and providing                                                              
for an effective date."                                                                                                         
     MOVED CSSB 309(L&C) OUT OF COMMITTEE                                                                                       
SENATE BILL NO. 324                                                                                                             
"An  Act providing  that a  utility or  electric operating  entity                                                              
owned  and  operated  by  a political  subdivision  of  the  state                                                              
competing  directly  with  a  telecommunications  utility  is  not                                                              
subject to the Alaska Public Utilities Regulatory Act."                                                                         
     MOVED CSSB 324(L&C) OUT OF COMMITTEE                                                                                       
SENATE BILL NO. 328                                                                                                             
"An  Act  requiring   that  a  nonresident  big   game  hunter  be                                                              
accompanied by a big game guide who  is providing big game hunting                                                              
services to the nonresident under  a contract with the nonresident                                                              
or who  is employed  by a  big game  guide who  has a contract  to                                                              
provide big game hunting services to the nonresident."                                                                          
          MOVED SB 328 OUT OF COMMITTEE                                                                                         
SENATE BILL NO. 320                                                                                                             
"An Act relating to certain motor  vehicle repairs and prohibiting                                                              
discrimination in motor vehicle insurance rates based on credit                                                                 
rating or credit scoring; and providing for an effective date."                                                                 
     SCHEDULED BUT NOT HEARD                                                                                                    
PREVIOUS SENATE COMMITTEE ACTION                                                                                              
SB 309 - No previous action.                                                                                                    
SB 320 - See Transportation minutes dated 2/28/02.                                                                              
SB 324 - No previous action.                                                                                                    
SB 328 - No previous action.                                                                                                    
WITNESS REGISTER                                                                                                              
Ms. Wilda Rodman                                                                                                                
Staff to Senator Therriault                                                                                                     
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Explained the proposed committee substitute                                                              
to SB 280 for the sponsor                                                                                                       
Mr. Dan Easton                                                                                                                  
Director, Facility Construction and Operation                                                                                   
Department of Environmental Conservation                                                                                        
410 Willoughby                                                                                                                  
Juneau, AK 99801-1795                                                                                                           
POSITION STATEMENT:  Answered questions about CSSB 280(L&C)                                                                   
Senator Gene Therriault                                                                                                         
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Introduced SB 309 to the committee                                                                       
Mr. Bryan Merrell                                                                                                               
First America Title Insurance Co.                                                                                               
Anchorage, AK                                                                                                                   
POSITION STATEMENT:  Opposed to SB 309                                                                                        
Mr. Jon Tillinghast                                                                                                             
Simpson, Tillinghast, Sorenson and Longenbaugh                                                                                  
One Sealaska Plaza                                                                                                              
Juneau, AK                                                                                                                      
POSITION STATEMENT:  Supports SB 309                                                                                          
Mr. Russell Dick                                                                                                                
Sealaska Corporation                                                                                                            
One Sealaska Plaza                                                                                                              
Juneau, AK                                                                                                                      
POSITION STATEMENT:  Supports SB 309                                                                                          
Mr. Bill Cummings                                                                                                               
Assistant Attorney General                                                                                                      
Department of Law                                                                                                               
PO Box 110300                                                                                                                   
Juneau, AK  99811-0300                                                                                                          
POSITION STATEMENT:  Expressed concerns about SB 309                                                                          
Mr. Jim Voetberg                                                                                                                
Ketchikan Public Utilities                                                                                                      
2930 Tongass Ave.                                                                                                               
Ketchikan, AK                                                                                                                   
POSITION STATEMENT:  Supports SB 324                                                                                          
Ms. Heather Graham                                                                                                              
No address provided                                                                                                             
Anchorage, AK                                                                                                                   
POSITION STATEMENT:  Counsel to City of Ketchikan Telephone                                                                   
 Utilities Legislative Affairs Agency                                                                                           
Mr. Bill Stoltze                                                                                                                
Staff to Senator Halford                                                                                                        
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Testified for the sponsor of SB 328                                                                      
Senator Rick Halford                                                                                                            
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Explained the intent of SB 328                                                                           
Mr. Arthur Andres                                                                                                               
PO Box 55878                                                                                                                    
North Pole, AK 99705                                                                                                            
POSITION STATEMENT:  Supported SB 328                                                                                         
ACTION NARRATIVE                                                                                                              
TAPE 02-10, SIDE A                                                                                                            
Number 001                                                                                                                      
CHAIRMAN BEN STEVENS called the Senate  Labor & Commerce Committee                                                            
meeting to  order at  1:38 p.m. Senators  Leman, Torgerson,  Davis                                                              
and Stevens were  present. Chairman Stevens informed  members that                                                              
SB 320  would be pulled  from today's  calendar at the  request of                                                              
the sponsor  and would  be rescheduled  at a  later date.  He also                                                              
announced  that today is  Debbie Grundmann's  birthday. The  first                                                              
order of business to come before the committee was SB 280.                                                                      
          SB 280-WATER/SEWER/WASTE GRANTS TO UTILITIES                                                                      
MS.  WILDA RODMAN,  staff to  Senator Therriault,  sponsor of  the                                                              
measure,  informed members  that  she was  asked to  submit a  new                                                              
committee substitute (CS) to deal  with the following concerns: SB
280 would open  up the pool of  applicants too wide; and  it would                                                              
allow utilities to  be eligible for solid waste  grants, which was                                                              
not  the intent.  The original  bill allowed  public utilities  to                                                              
apply if their rates were subject  to the Regulatory Commission of                                                              
Alaska (RCA). Under the proposed  CS, a water and sewer utility is                                                              
eligible  to apply  if  it serves  as the  primary  utility for  a                                                              
municipality and  its rates are regulated  by the RCA.   The field                                                              
was not narrowed down in the CS specifically  to Fairbanks because                                                              
the sponsor  wanted to  create an  incentive to other  communities                                                              
that want to privatize.                                                                                                         
In  regard to  the solid  waste issue,  the  proposed CS  excludes                                                              
solid waste grants  by restricting eligibility to  AS 46.03.030(b)                                                              
(1)-(3).  On page  1, line 11, of the CS, utilities  are no longer                                                              
eligible to apply for "(4) a solid  waste processing, disposal, or                                                              
resource recovery system."                                                                                                      
MS. RODMAN explained one last change  in the proposed CS bases the                                                              
grant  match  ratios on  the  population  of a  municipality.  The                                                              
original bill  based the  grant match ratio  on the population  of                                                              
the public  utility service  area. The  change is consistent  with                                                              
current  statute.  She  pointed  out  that  she  worked  with  the                                                              
Department  of  Environmental  Conversation  (DEC) to  narrow  the                                                              
scope and used its definition of "primary."                                                                                     
SENATOR LEMAN asked  where the definition of "primary"  is located                                                              
in the proposed CS.                                                                                                             
MS.  RODMAN  said  it is  not  and  asked  Mr. Easton  of  DEC  to                                                              
elaborate.  She said  the  rationale is  that  "primary" is  self-                                                              
explanatory in  that a primary  utility serves the  largest number                                                              
of people in a service area.                                                                                                    
SENATOR LEMAN said it is not obvious  to him in looking at Section                                                              
1 that  the bill is  restricted to  water and wastewater  projects                                                              
and not solid waste. He asked for clarification.                                                                                
MS. RODMAN said that language is  in Section 3 on page 2, line 15.                                                              
With no  further questions or  discussion, SENATOR LEMAN  moved to                                                              
adopt the proposed CS to SB 280 (Craver, 03/04/02).                                                                             
CHAIRMAN STEVENS  announced that with no objection,  CSSB 280(L&C)                                                              
was adopted.                                                                                                                    
MR. DAN EASTON,  Director of Facility Construction  and Operations                                                              
for   DEC,  informed   members  that   he   worked  with   Senator                                                              
Therriault's office on the committee  substitute. It maintains the                                                              
focus of  the program  on municipal  systems,  be they private  or                                                              
publicly   owned,   as   opposed  to   systems   serving   private                                                              
developments, such  as trailer parks  or subdivisions.  One effect                                                              
of the committee  substitute is to limit the increase  in the size                                                              
of  the pool  of eligible  systems  so instead  of  having 50  new                                                              
eligible systems,  there will be one  or two. That means  DEC does                                                              
not anticipate an effect on its workload  and expects to provide a                                                              
zero fiscal note to the committee substitute.                                                                                   
SENATOR  LEMAN asked  Mr. Easton  his understanding  of a  primary                                                              
utility, for the record.                                                                                                        
MR. EASTON  said he  is thinking of  the Webster's definition,  in                                                              
other words, the primary utility  would be the most significant or                                                              
main utility.                                                                                                                   
SENATOR LEMAN said  he could not think of any  competing water and                                                              
sewer utilities,  but both  Chugach Electric  and Municipal  Light                                                              
and  Power  are located  in  Anchorage  and are  both  significant                                                              
electrical  utilities. He  could argue that  both utilities  could                                                              
meet the  definition of primary. He  asked Mr. Easton if  he could                                                              
think of a similar example in the water and sewer business.                                                                     
MR. EASTON said he could not. He  noted there are two utilities in                                                              
Fairbanks, but they have a common owner so would not qualify.                                                                   
SENATOR LEMAN commented that some  communities have competing haul                                                              
systems  but DEC will  have to  sort out  whether those  companies                                                              
meet  the definition  of  a primary  utility  and  might not  even                                                              
CHAIRMAN STEVENS noted there was  no further testimony or proposed                                                              
SENATOR  LEMAN moved  CSSB  280(L&C) from  committee  with a  zero                                                              
fiscal note.                                                                                                                    
There being  no objection, CHAIRMAN  STEVENS announced  the motion                                                              
carried and that the committee would take up SB 309.                                                                            
                    SB 309-ADVERSE POSSESSION                                                                               
SENATOR  GENE  THERRIAULT,   sponsor  of  SB  309,   said  he  was                                                              
approached  after  the session  began  about this  issue.  Adverse                                                              
possession is  a doctrine under which  a person - even  a squatter                                                              
acting  in  bad  faith  -  can  take  another's  property  without                                                              
compensation by simply possessing  it. Although the doctrine began                                                              
in the  Middle Ages under circumstances  that do not  apply today,                                                              
it creates an  interesting policy issue so he  agreed to introduce                                                              
the bill.                                                                                                                       
SB  309   limits  the  current   statute  pertaining   to  adverse                                                              
possession to  two narrow circumstances:  (1) where a  person has,                                                              
in  good faith,  occupied property  under  color of  title for  20                                                              
years; and (2)  where a property owner occupies  property adjacent                                                              
to his  own land  under a  reasonable, good-faith  error over  the                                                              
actual  boundaries  of  his  property.  After  reading  about  the                                                              
history of  the doctrine, he decided  he falls on the side  of the                                                              
private property  owner. Arguably, Alaska has the  largest private                                                              
property   owners  in   the  nation,   those   being  the   Native                                                              
corporations. The  old doctrine that requires a  property owner to                                                              
keep tabs  on who  might be squatting  on the  land might  put the                                                              
owner at risk of  losing a portion of that property.  He said some                                                              
of  his constituents  own  property  in  locations that  they  are                                                              
unable to visit regularly. Under  current doctrine, they must make                                                              
sure their property  has not been encroached upon,  otherwise risk                                                              
losing it.                                                                                                                      
1:52 p.m.                                                                                                                       
SENATOR LEMAN asked  the significance of increasing  the timeframe                                                              
from seven to 20 years.                                                                                                         
SENATOR  THERRIAULT told  members that  20 years  is an  arbitrary                                                              
timeframe  that was suggested  to him  but that  he is willing  to                                                              
consider shortening that period.                                                                                                
SENATOR  LEMAN  said he  would  like  to  hear testimony  on  that                                                              
question.  He believes  the other  provisions  are reasonable  and                                                              
will help limit the application of adverse possession.                                                                          
CHAIRMAN STEVENS said he shares Senator Leman's concern.                                                                        
The committee took a brief at-ease.                                                                                             
SENATOR THERRIAULT  informed members,  regarding the  selection of                                                              
20 years,  as people  from England started  to purchase  land when                                                              
the country  was established,  it was  often difficult  to journey                                                              
across the  ocean to check on the  land so the New  England states                                                              
established a 20  year period of time.  With  the Manifest Destiny                                                              
movement, the nation  wanted land to be put into  productive use.,                                                              
The time period was shortened to  allow another to take possession                                                              
of the  land if the  titleholder was not  using it. He  noted that                                                              
circumstances have  changed so the  shorter time period  no longer                                                              
makes sense.  A 20-year  time period still  exists in a  number of                                                              
the New England states.                                                                                                         
CHAIRMAN STEVENS  suggested basing  the timeframe on  Henry VIII's                                                              
days when it was 60 years.                                                                                                      
SENATOR  LEMAN  expressed  concern  about  copying  what  the  New                                                              
England states are doing.                                                                                                       
MR.  BRYAN  MERRELL,  state  counsel  and  underwriter  for  First                                                              
America Title Insurance  Company, informed members that  SB 309 is                                                              
a  double-edged sword  for  First America.  For  certain types  of                                                              
title insurance  policies, title  insurers issue coverage  against                                                              
adverse possession  to assure policyholders that no  one can claim                                                              
adverse possession  to their property.  First America does  a risk                                                              
evaluation using surveys and questions  directed to the landowners                                                              
involved  in  the transaction.  In  essence,  SB 309  is  somewhat                                                              
favorable to First America because  it will make it more difficult                                                              
for someone  to raise an issue  of adverse possession.  However, a                                                              
cause for  concern is  clearing or  correcting title defects  that                                                              
may  have occurred  in the  past.  One of  First America's  better                                                              
allies  for assisting  private landowners  who  are attempting  to                                                              
insure  titled real  property is  to suggest,  in cases where  old                                                              
deeds  of  records  exist  but the  people  who  may  claim  those                                                              
interests  cannot  be  tracked  down  or  are  not  interested  in                                                              
clearing the  record, to use  the doctrine of adverse  possession.                                                              
Likewise,  there are  times  when those  interests  may have  been                                                              
missed or  in which  the underwriter  decides to  take a  risk and                                                              
provide insurance. If  they do come up during a  title search, the                                                              
underwriter can  use adverse  possession as a  means to  clear the                                                              
title.  The  restrictive nature of  SB 311 will make  that process                                                              
harder  for people with  those concerns.  In his  experience  as a                                                              
title  examiner, it  is  a good  tool  to use  to  fix some  title                                                              
Regarding the  timeframe, MR. MERRELL  said shortening it  from 20                                                              
to  10 years  would  help. Some  of the  aspects  involved in  the                                                              
codification  of  the statute  would  be  required by  the  Alaska                                                              
Supreme  Court  to  claim adverse  possession,  for  example,  the                                                              
concept of  having claimed  the right in  an open and  hostile way                                                              
and notoriously, which  is what the Supreme Court  has determined.                                                              
Some of the other aspects, particularly  the concept of paying for                                                              
the property  that one  is adversely  possessing, are unusual.  He                                                              
has not been able to do a survey  to figure out where other states                                                              
fall on this  issue. But, in his experience, he  cannot recall any                                                              
other states being this restrictive as to the statute.                                                                          
MR. MERRELL asked  members to consider the need for  some folks to                                                              
be able to  clear title in a  state like Alaska where  there are a                                                              
lot of  old interests,  errors and flaws  in the recording  system                                                              
that make it difficult to get clear title.                                                                                      
CHAIRMAN STEVENS thanked  Mr. Merrell and called Mr.  Dick and Mr.                                                              
MR.  RUSSELL   DICK,  Natural   Resources  Manager   for  Sealaska                                                              
Corporation, stated strong support  of SB 309. Native corporations                                                              
established under the Alaska Native  Claims Settlement Act (ANCSA)                                                              
are  the  largest  private  landowners  in the  state  of  Alaska.                                                              
Sealaska  is  the  largest  private   property  landowner  in  the                                                              
Southeast  region. He  noted  he  would address  SB  309 from  two                                                              
fronts: ANCSA conveyed lands and non-ANCSA lands.                                                                               
MR. DICK  said that lands  conveyed to Native corporations  served                                                              
two purposes: (1) to settle Alaska  Natives aboriginal claims; and                                                              
(2) to  meet the social, cultural  and economic needs  of Natives.                                                              
In that  sense, these  lands are  the foundation  of existence  of                                                              
Native  peoples   and  Native   corporations.  Recognizing   that,                                                              
Congress imposed  a prohibition of  adverse claims  against Native                                                              
lands  as long  as the  lands remained  in  an undeveloped  state.                                                              
Although that  was effective when  ANCSA was first enacted,  it is                                                              
inadequate  now.  He  does not  believe  Congress  recognized  how                                                              
expansive these land bases would  become. Congress didn't consider                                                              
the degree  of development on these  lands nor the  burden created                                                              
by having to  actively patrol large remote  landholdings. Sealaska                                                              
Corporation has 290,000  acres of land with an  entitlement, which                                                              
will total  upwards of 350,000  acres spread throughout  Southeast                                                              
Alaska. If  development is  minimal or  occurs in specific  areas,                                                              
the  cost  of patrolling  the  lands  will  be burdensome  and  an                                                              
economic waste that serves no valid public policy.                                                                              
MR.  DICK informed  members  that  Sealaska Corporation  has  also                                                              
purchased non-ANSCA  lands. These types  of lands do  not maintain                                                              
the same prohibition of adverse claims  so that adverse possession                                                              
can  occur  regardless  of  whether or  not  they  are  developed.                                                              
Sealaska  purchased a  piece of  property  in Cordova  on which  a                                                              
squatter built  a house. Sealaska  had to spend  considerable time                                                              
and  money to  evict  the squatter.  Had  Sealaska  not known  the                                                              
squatter was  there, a tackings issue  may have arisen.   In other                                                              
words, if the squatter had lived  on the land for six years at the                                                              
time  of the  purchase, that  time  would apply  toward the  seven                                                              
years required for adverse possession.                                                                                          
MR. DICK  stated that  the State  of Alaska  has always  respected                                                              
private  property  rights  because  there  is  so  little  private                                                              
property  here. The  doctrine of  adverse possession  seems to  be                                                              
inconsistent with the recognition  of the importance of protecting                                                              
and  preserving  private  property ownership  and  its  associated                                                              
rights. The  only lands  subject to  adverse possession  in Alaska                                                              
are  private property  lands. He  repeated that  Sealaska is  very                                                              
supportive of SB  309 as it goes a long way  toward protecting the                                                              
rights of private property landowners.                                                                                          
MR. JON  TILLINGHAST, legal  counsel to  Sealaska, told  committee                                                              
members that  New Hampshire is among  the New England  states that                                                              
use or  used 20  years. He  said in his  discussion about  adverse                                                              
possession,  he will put  two types  of claims to  the side  - the                                                              
first being  claims premised on color  of title, meaning  a person                                                              
has a deed with a problem. Those  are the claims Mr. Merrell spoke                                                              
of and SB  309 preserves those  claims. The second type  of claims                                                              
he  would  like  to  put aside  are  those  involving  a  boundary                                                              
dispute, for  example when a property  owner built a fence  in the                                                              
wrong location 20  years earlier. SB 309 puts  new restrictions on                                                              
bringing  those kinds  of claims.  For example,  it says a  person                                                              
must possess the property for 20 years rather than seven.                                                                       
MR. TILLINGHAST said the heart of  the bill is in Section 1, which                                                              
is aimed  at a  person one could  only call  a squatter;  a person                                                              
with  no claim  to title  who is  simply  there with  the hope  of                                                              
staying long  enough to  acquire the  title. He  said he  will not                                                              
review  the   historical  reasons  for  adverse   possession,  but                                                              
explained the only  justification at this time for  a squatter law                                                              
is that a squatter will make more  productive use of the land than                                                              
the absentee  landowner. He noted  that modern courts  have upheld                                                              
that doctrine. He finds the concept  frightening because the state                                                              
is  saying   that  if  a  private   landowner  is  not   making  a                                                              
sufficiently  socially   valuable  use  of  his   or  her  private                                                              
property, it will be given to someone else.                                                                                     
MR. TILLINGHAST  said the  fact that a  person cannot  get adverse                                                              
possession  from   the  state  or   federal  government   is  well                                                              
established. The  state and federal  governments have  argued that                                                              
it  would  be too  burdensome  to  police  property they  own.  In                                                              
Alaska, ANCSA regional  corporations own roughly  80 million acres                                                              
of land:  those corporations have  precisely the same  problem the                                                              
state  has yet  the state  wishes  to maintain  its immunity  from                                                              
adverse  possession but  maintain its  right to  squat on  private                                                              
property  without paying.  That  philosophy  reflects a  different                                                              
value  judgment than  Sealaska,  as to  the  relative sanctity  of                                                              
public  property  ownership  and private  property  ownership.  He                                                              
offered to answer questions.                                                                                                    
SENATOR LEMAN asked Mr. Tillinghast  to clarify whether there is a                                                              
difference   between   ANCSA  and   non-ANCSA   property  in   the                                                              
application of adverse possession.                                                                                              
MR. TILLINGHAST explained that ANCSA  protects ANCSA property from                                                              
being  divested  by  adverse  possession  as long  as  it  remains                                                              
SENATOR  LEMAN  asked if,  "...somebody  could  put that  road  in                                                              
MR.  TILLINGHAST  said  he  does  not  know  the  answer  to  that                                                              
MR. DICK said a more likely scenario  is that Sealaska might build                                                              
an advance logging  road which would provide a  convenient way for                                                              
a squatter to drive in.                                                                                                         
SENATOR LEMAN  asked if  that ANCSA land  would not have  the same                                                              
protection as adjoining state or federal land.                                                                                  
MR. DICK said that is correct.                                                                                                  
CHAIRMAN STEVENS asked  how many cases of adverse  possession have                                                              
been claimed against ANCSA land in the past.                                                                                    
MR. DICK said he knows of two cases with Sealaska.                                                                              
CHAIRMAN  STEVENS  noted  no  representation   from  other  Native                                                              
corporations in  the room and then  asked Mr. Dick if he  is aware                                                              
of positions from any other corporations on this legislation.                                                                   
MR. DICK said he is not.                                                                                                        
CHAIRMAN STEVENS said  he would like to get more  input from large                                                              
landowners and discuss  the 20-year issue before  taking action on                                                              
the bill.                                                                                                                       
MR. BILL CUMMINGS,  assistant attorney general,  Department of Law                                                              
(DOL),  said DOL is  not unmindful  of the  problems with  adverse                                                              
possession that  Sealaska and other  ANCSA corporations  have with                                                              
lands they  acquire and might  minimally develop. However,  DOL is                                                              
concerned  that  SB  309  stands   the  whole  notion  of  adverse                                                              
possession on its  head. In some situations, it could  work to the                                                              
public's detriment  and could  be used  to commit outrages.  DOL's                                                              
biggest concern is  the large number of highway  rights-of-way the                                                              
state  claims under  adverse possession.  The  state is  currently                                                              
embarking  on a program  called "gravel  to paving"  in which  the                                                              
state is paving many gravel roads  in rural areas. The presumption                                                              
is that the state  has been doing this for 20  to 30 years without                                                              
any objections  so the state is  assuming it has title  by adverse                                                              
possession. If  SB 309 comes to pass,  the state will have  to re-                                                              
examine  its presumption  and possibly kill  the program.  Another                                                              
example is  a state  program to  build roads  and put in  drainage                                                              
culverts. The  culverts are located  within the highway  right-of-                                                              
way and  carry water away  from the highway.  The state  has never                                                              
acquired  any  easements below  the  outfall  so,  if SB  309  was                                                              
enacted,  the state  would have to  go back  and redo  engineering                                                              
decisions that were made up to 50  years ago, render compensation,                                                              
all after  everyone in the chain  of title has acquiesced  to what                                                              
the state  has been  doing to  carry off  the drainage water.  Mr.                                                              
Cummings  said the  state needs  some  way to  address these  very                                                              
valid public concerns.                                                                                                          
MR. CUMMINGS  said DOL's  final concern  is that  SB 309  could be                                                              
used to the detriment of the public.  He cited a case named Veazey                                                              
(ph) v. Green, (35  P.3d 14) and said under SB  309, the plaintiff                                                              
would have  lost. The facts  of the case  are as follows:  a woman                                                              
was given a tract of land by her  grandmother but the deed was not                                                              
transferred; the woman  spent 10 years building  a house, clearing                                                              
the land and planting on it; then  the grandmother advanced in age                                                              
and  lost some  of  her  mental faculties  and  went  into a  land                                                              
transaction with a developer who  acquired the property. The woman                                                              
would have lost her 10 years of labor  under this bill. He offered                                                              
to answer questions.                                                                                                            
SENATOR LEMAN  asked, regarding  the drainage  issue, if  one goes                                                              
back 30 or  40 years when  some of the engineering  decisions were                                                              
made, whether they would be barred  from claim by Section 4 of the                                                              
MR. CUMMINGS  said it is  not clear. The  rules that are  used now                                                              
when one  combines the  10 years  of use along  with the  rules of                                                              
inverse condemnation,  would imply the  state took it a  long time                                                              
ago so nothing  can be done about  it now. However, under  SB 309,                                                              
particularly Section 1, anyone could  bring an action at any time.                                                              
He noted  the need for  legislation that  is much more  precise to                                                              
protect the state's interests on the culverts.                                                                                  
SENATOR  LEMAN suggested  that Mr.  Cummings  work with  committee                                                              
members  and the  sponsor  on ways  to find  ways  to address  the                                                              
issues he has raised.                                                                                                           
CHAIRMAN STEVENS asked Mr. Cummings his position on SB 309.                                                                     
MR. CUMMINGS  said DOL is opposed  to the bill because  of what it                                                              
does to the state's interests.                                                                                                  
CHAIRMAN STEVENS  asked about DOL's  position on  applying adverse                                                              
protection requirements to protect private landownership.                                                                       
MR. CUMMINGS replied there is room  for improvement as long as the                                                              
changes are not too burdensome or allow for outrages.                                                                           
TAPE 02-10, SIDE B                                                                                                              
CHAIRMAN STEVENS repeated his desire  to hold the bill and request                                                              
positions from other large landowners.                                                                                          
SENATOR THERRIAULT  agreed and  said that this  is his  first time                                                              
dealing with this  area of the statutes. He said  he is willing to                                                              
discuss  the  matter further  and  find  language to  address  the                                                              
issues raised.                                                                                                                  
SENATOR  LEMAN expressed  concern that  SB 309  not overreach  and                                                              
create unintended difficulties.                                                                                                 
         SB 324-PUBLIC UTILITIES EXEMPT FROM REGULATION                                                                     
CHAIRMAN STEVENS  then announced  the committee  would take  up SB
SENATOR  ROBIN  TAYLOR, District  A,  gave the  following  sponsor                                                              
     SB 324 would  ensure that the City of  Ketchikan retains                                                                   
     the ability  to set rates  for its telephone  utility in                                                                   
     the  event it  faces  competition from  another  utility                                                                   
     company. Alaska  law provides that where  a municipality                                                                   
     owns  and operates  a public  utility, the  municipality                                                                   
     may  regulate the  terms  and conditions  governing  the                                                                   
     provisions of  that public utility and has  the power to                                                                   
     set the  terms and conditions  for the utility  services                                                                   
     that they  offer. That is  probably obvious  to everyone                                                                   
     because that is  how we all started in Alaska,  was with                                                                   
     towns that set  up a generating plant or  built a little                                                                   
     dam,  started building  water  lines,  sewer lines,  and                                                                   
     because they had an elected  city council and they owned                                                                   
     the  utility,  there  was  no   need  for  oversight  or                                                                   
     regulation by some state entity.                                                                                           
     Alaska  law also provides  that if  a municipal  utility                                                                   
     faces competition, all of the  municipalities' utilities                                                                   
     become  fully  subject  to economic  regulation  by  the                                                                   
     Regulatory  Commission  of  Alaska [RCA].  The  RCA  may                                                                   
     grant an exception to this rule.  Principles of fairness                                                                   
     and regulatory  parity provide that this  statute should                                                                   
     be amended when a municipality  faces competition from a                                                                   
     telecommunications  company.  New competitive  providers                                                                   
     are  subject  to  less  regulation  by  the  RCA.  Under                                                                   
     federal law,  some new telecommunications  companies are                                                                   
     not regulated at all, cellular  providers as an example.                                                                   
     By  contrast,  if  the municipality  owned  a  telephone                                                                   
     utility becomes  subject to economic regulation  by RCA,                                                                   
     it will be  more heavily regulated than the  new entrant                                                                   
     that  is competing  with it because  we cannot  regulate                                                                   
     those  folks under  federal law.  So, a  guy comes  into                                                                   
     your  town and wants  to set  up a  cellular system  - a                                                                   
     wireless system - he's not regulated  because of federal                                                                   
     law  but,   because  he's   competing  with  the   local                                                                   
     telephone  company,   he  would  now  be   subjected  to                                                                   
     regulation by  RCA. And we've all been here  long enough                                                                   
     to go  through various telephone  wars and utility  wars                                                                   
     and  so  on,  that  have  been  created  and  caused  by                                                                   
     decisions made by the RCA or  decisions that are pending                                                                   
     before the  RCA or haven't been  made by them,  and then                                                                   
     we end  up seeing - there's  always an attempt  it seems                                                                   
     like every  year for  the 18 I've  been here -  somebody                                                                   
     always  wants to  reach out  and touch you.  In the  way                                                                   
     they  draft their  legislation, they're  going to  reach                                                                   
     out and all of a sudden, all  of the municipalities that                                                                   
     had  been  running their  own  utilities for  years  get                                                                   
     pulled   into   this  regulatory   scheme.   Well,   the                                                                   
     regulatory  scheme  can cost  hundreds  and hundreds  of                                                                   
     thousands of dollars for a utility  to comply with, just                                                                   
     on a rate  change. We've seen a lot of  examples of that                                                                   
     even recently.  I think  many of us  had hoped,  when we                                                                   
     restructured the RCA, that we  would not be running into                                                                   
     these huge costs  for utility rate changes  but they are                                                                   
     still  ongoing and  are still  a major  problem. It's  a                                                                   
     tremendous burden to cast upon  a small community merely                                                                   
     because  somebody wants  to  show up  and start  cherry-                                                                   
     picking a telephone company on you.                                                                                        
     By   economically   regulating   the   municipally-owned                                                                   
     utility, while  allowing the  new entrant to  set prices                                                                   
     without regulatory oversight,  the marketplace is unable                                                                   
     to provide  the benefits of  competition to  the public.                                                                   
     The new entrant  will be able to set its  rates based on                                                                   
     market   forces   and   competitive   need   while   the                                                                   
     municipality which owns the  utility will be required to                                                                   
     set its  rates based  on its  costs through rate  cases.                                                                   
     These cases  could be expensive and time  consuming, and                                                                   
     sometimes  attract  input from  other  interveners.  The                                                                   
     unregulated  entity  has  only   to  price  its  service                                                                   
     slightly under the regulated  rates of its competitor to                                                                   
     gain market  share. Such prices are not  necessarily the                                                                   
     lowest possible rates and are  not necessarily as low as                                                                   
     the  rates   that  would  be  given   during  unfettered                                                                   
     competition.  And that's  in essence  what we're  facing                                                                   
     right  now in  Ketchikan. That's  the  only reason  this                                                                   
     bill  was  brought is  to  make  certain that  not  only                                                                   
     Ketchikan  but  other municipally-owned  utilities  that                                                                   
     may face  some form of  competition don't get  drug into                                                                   
     this entire  AKPIRG affected regulatory scheme  that can                                                                   
     take months and months.                                                                                                    
2:40 p.m.                                                                                                                       
SENATOR LEMAN  said he agrees it  doesn't make sense  that because                                                              
one utility  becomes regulated,  all others  should be  unless the                                                              
concern  is that  funds  are being  shifted  from  one utility  to                                                              
another in  the case of common  ownership. He said he  also agrees                                                              
the rate  cases are expensive. He  then asked, since a  utility is                                                              
not  regulated  until  it has  market  power,  if  it would  do  a                                                              
disservice to the  bill to insert the word "unregulated,"  on page                                                              
2, line 4, language so that it reads:                                                                                           
     operated by a political subdivision that competes with an                                                              
     unregulated telecommunications utility.                                                                                
He asked if a  circumstance might occur where  a competing utility                                                              
would become regulated.                                                                                                         
SENATOR  TAYLOR said  he  believes  that would  take  a change  in                                                              
federal law.                                                                                                                    
SENATOR LEMAN said he is wondering  if a company that is regulated                                                              
would come in to compete even though  they may not be regulated in                                                              
that marketplace.                                                                                                               
SENATOR TAYLOR said he did not know.                                                                                            
SENATOR  TORGERSON  asked why  the  phrase "electric  company"  is                                                              
included in the bill.                                                                                                           
SENATOR TAYLOR said  he believes that is what  some utilities call                                                              
themselves.  He said it  does not  include telecommunications  and                                                              
speaks to not reaching out to cover all of the other utilities.                                                                 
SENATOR TORGERSON pointed out the qualifier is "that competes                                                                   
with telecommunications" and he said he is not aware of any                                                                     
electric companies that do compete with them.                                                                                   
SENATOR TAYLOR hoped that answer would become clear in later                                                                    
MR. JIM VOETBERG, Assistant City Manager of the City of                                                                         
Ketchikan, stated support for SB 324. He informed members that he                                                               
submitted written testimony and would touch on the main points.                                                                 
     The City  of Ketchikan and  the City of Ketchikan  doing                                                                   
     business   as  Ketchikan  Public   Utilities  owns   and                                                                   
     operates        several       utilities        including                                                                   
     telecommunications,   electric,   water,   solid   waste                                                                   
     collection and  disposal, and wastewater  collection and                                                                   
     treatment.  This legislation  is important  to the  city                                                                   
     because it allows  the city to operate its  utility in a                                                                   
     cost-effective  manner and  allows the  city to  utilize                                                                   
     its utilities  to assist in the economic  development of                                                                   
     Ketchikan.  Should the city  become regulated under  the                                                                   
     RCA, the cost to the rate payers  is estimated at around                                                                   
     $700,000 annually, which does  not include the cost of a                                                                   
     rate  study that,  for  each utility,  could  be in  the                                                                   
     range of $250,000. These costs  include annual fees paid                                                                   
     to  the  RCA  plus  additional   staff  to  perform  the                                                                   
     increased  workload  under a  regulated  utility.  These                                                                   
     costs  would  be directly  passed  on to  our  customers                                                                   
     resulting  in higher utility  bills. Given the  economic                                                                   
     situation  in  Ketchikan,  this   is  not  the  time  to                                                                   
     increase costs to its residents and businesses.                                                                            
     By  transferring regulatory  control from  a local  city                                                                   
     council to  the state RCA eliminates the  local decision                                                                   
     making process that has worked  for over 50 years and it                                                                   
     takes  away a tool  to assist  in economic  development.                                                                   
     Finally,  given  the  advancement  of  telecommunication                                                                   
     technology and  the varying levels of  regulation placed                                                                   
     on    telecommunication   companies,    this    proposed                                                                   
     legislation  creates   a  level  playing   field.  Under                                                                   
     current regulations, should  a cable company such as GCI                                                                   
     use  its cable  plant to  provide  telephone service  in                                                                   
     Ketchikan,  GCI would not  be regulated while  Ketchikan                                                                   
     would be  fully rate regulated.  If a wireless  company,                                                                   
     such as APT, were to compete  in Ketchikan, APT would be                                                                   
     lightly regulated  and, again, Ketchikan would  be fully                                                                   
     rate  regulated.  And  should  a company  compete  as  a                                                                   
     competitive local exchange carrier  - a CLEC- again, the                                                                   
     CLEC would  be lightly  regulated while Ketchikan  would                                                                   
     be  fully  regulated. In  any  case, under  the  current                                                                   
     regulation, the playing field would not be level.                                                                          
     In  closing I  want  to stress  the  importance of  this                                                                   
     relatively  small change to  AS 42.05.711(b)(2),  to the                                                                   
     community of  Ketchikan, and to  point out that  it only                                                                   
     affects the  City of Ketchikan  because we are  the only                                                                   
     municipally  owned telephone company  in the state,  and                                                                   
     actually we're only one of three,  we think, nationwide.                                                                   
     The  city looks  to the state  to allow  it to  preserve                                                                   
     local control as it has for  over 50 years and to ensure                                                                   
     that local government  has the tools it needs  to better                                                                   
     serve  our  community  and   better  assist  in  turning                                                                   
     Ketchikan's  economy around. Thank  you for allowing  me                                                                   
     to testify and I'll address  any questions you may have.                                                                   
MR. VOETBERG  said, in response  to Senator Torgerson's  question,                                                              
Section 1(b) follows the language in current [statute].                                                                         
SENATOR  LEMAN said he  noticed that  "electric operating  entity"                                                              
was used everywhere  else in the subsections and  that perhaps the                                                              
drafters decided  to use "electric  company." He  suggested making                                                              
the  phrase consistent  throughout.  He  then asked  Mr.  Voetberg                                                              
whether     inserting     the    word     "unregulated"     before                                                              
"telecommunications  company" would do  any disservice to  what he                                                              
is trying to accomplish. He commented  that Mr. Voetberg expressed                                                              
concerned  about an unregulated  company  coming in and  competing                                                              
with the  Ketchikan utility. However,  once they get  market share                                                              
they would become a regulated utility.                                                                                          
MR.  VOETBERG said  he  was not  certain  about  the market  share                                                              
issue.  He  noted there  are  various  levels of  regulation,  for                                                              
example,  a wireless  company is  looking  at providing  telephone                                                              
service  to Ketchikan  customers  through a  wireless system.  The                                                              
wireless company  is regulated  but not  fully rate regulated.  To                                                              
his understanding,  "fully  rate regulated"  means that costs  and                                                              
revenues have to  match. If not fully rate regulated,  one can set                                                              
and submit  rates to the RCA, which  does not make sure  the costs                                                              
and revenues balance  each other. He suggested  inserting the word                                                              
"unregulated" will  not address the  issue in Ketchikan.  He asked                                                              
that Heather Graham address this  issue on the City of Ketchikan's                                                              
SENATOR LEMAN  said the  goal is  a level  playing field  and that                                                              
there might be a more artful way to get there.                                                                                  
MR. VOETBERG  said the  City of Ketchikan  has considered  several                                                              
versions of this  and found SB 324 to be the closest  to the level                                                              
playing field that it can come.                                                                                                 
MS.  HEATHER  GRAHAM,  legal  counsel  to the  City  of  Ketchikan                                                              
telephone  utilities  division,  said  that  when  a  new  telecom                                                              
company seeks  to provide  service and market,  it is  never fully                                                              
rate regulated. Therefore,  at most, it would be  required to post                                                              
a  tariff  of  its  prices.  It   is  not  subject  to  full  rate                                                              
regulation,  which  means the  RCA  would carefully  evaluate  and                                                              
review  all of  the  new entrants  and require  them  to charge  a                                                              
certain  rate based  on their costs.  The new  entrant can  charge                                                              
whatever it wishes  and can raise and lower its rates  at will. By                                                              
contrast, if the  existing law is applied to Ketchikan  without an                                                              
exemption, the City  of Ketchikan would be required  to go through                                                              
an exhaustive  rate setting process that  takes a lot of  time and                                                              
is very expensive.  The city would not be able to  raise and lower                                                              
its rates at will.  In effect, it would be hamstrung  and would be                                                              
unable to compete  effectively with a new entrant  because the new                                                              
entrant  will either  be  unregulated  or lightly  regulated.  She                                                              
explained that lightly regulated  means the new entrant would have                                                              
to get a  certificate from the RCA,  a minor matter, and  agree to                                                              
post  tariffs. She  maintained that  Mr.  Voetberg has  accurately                                                              
reflected why the City of Ketchikan supports SB 324.                                                                            
SENATOR LEMAN asked at what stage  a new entrant would become rate                                                              
regulated and whether it is related to market share.                                                                            
MS.  GRAHAM said  there  is  no threshold  at  which  point a  new                                                              
entrant  would become  fully rate  regulated. She  noted the  best                                                              
example in Anchorage  is GCI. GCI has acquired 40  percent or more                                                              
of the local  exchange market in  Anchorage but is not  fully rate                                                              
regulated. The incumbent, ACS, is fully rate regulated.                                                                         
SENATOR LEMAN asked Ms. Graham if  she could suggest language that                                                              
would provide a level playing field.                                                                                            
MS. GRAHAM said she does not believe a change is necessary.                                                                     
MR. HOWARD  GARNER, Executive Vice  President of Alaska  Power and                                                              
Telephone (APT)  Company, and an  officer of the  Alaska Telephone                                                              
Company,  a  subsidiary,  informed   members  that  APT  owns  the                                                              
wireless  company in  Ketchikan.  APT  has been  a  member of  the                                                              
Ketchikan community  for a  substantial amount  of time and  has a                                                              
large investment  there. APT opposes  SB 324 for  several reasons,                                                              
the primary one being that there  is a ready solution available to                                                              
the City  of Ketchikan.  A mechanism is  available to the  City to                                                              
apply for an  exemption from the  RCA. He has worked with  the RCA                                                              
for over  10 years as  APT has  extensive regulated operations  on                                                              
both the  electric and  telephone  side. He does  not believe  the                                                              
process to  be as  difficult as earlier  testimony indicated.  The                                                              
RCA does a reasonable  job of protecting the public  interest.  He                                                              
maintained  that some of  the previous  comments made were  "quite                                                              
out of line"  with his actual experience. APT's  second concern is                                                              
that  SB 324  would  place  the State  of  Alaska in  a  difficult                                                              
position regarding  the federal Telecom Act of  1996, specifically                                                              
under Section 254(k),  which is entitled, "Subsidy  of Competitive                                                              
Services Prohibited." He read a paragraph from that section:                                                                    
     A telecommunication  carrier may  not use services  that                                                                   
     are  not  competitive  to subsidize  services  that  are                                                                   
     subject   to  competition.   The   commission   [Federal                                                                   
     Communications  Commission] with  respect to  interstate                                                                   
     services,  and the  states, with  respect to  intrastate                                                                   
     services, shall establish any  necessary cause [indisc.]                                                                   
     allocation rules, accounting  safeguards, and guidelines                                                                   
     to ensure  that services included  in the definition  of                                                                   
     universal service  bear no more than a  reasonable share                                                                   
     of  the joint  and  common cost  of  facilities used  to                                                                   
     provide those services.                                                                                                    
MR. GARNER  requested that  the commission thoroughly  investigate                                                              
the Telecommunication  Act of 1996  and compliance with  it. APT's                                                              
application has been made to the  RCA for a certificate to provide                                                              
service   and  APT   believes  that   process  contains   adequate                                                              
SENATOR LEMAN asked  if the City of Ketchikan would  be subject to                                                              
those  same conditions  in  the federal  law,  and "they  couldn't                                                              
cross subsidize or else they would be in violation."                                                                            
MR. GARNER said that is correct.                                                                                                
SENATOR LEMAN  said in the  setting of  rates, they would  have to                                                              
demonstrate that  they are not cross  subsidizing but the  City of                                                              
Ketchikan, as a  utility company, would have to meet  the same law                                                              
and would probably have to make a statement to that effect.                                                                     
MR. GARNER  said they would have  to make that statement.  He said                                                              
to his  understanding,  the RCA can  consider Ketchikan's  request                                                              
that  they not  be required  to be  fully  regulated because  that                                                              
would not be in the public's interest.                                                                                          
SENATOR TORGERSON  asked if APT would  oppose or support  a waiver                                                              
if the City of Ketchikan was to include one.                                                                                    
MR. GARDINER  said APT  would oppose that.  During the  history of                                                              
municipally  owned  telephone  companies   in  Alaska,  there  was                                                              
one-time  substantial  ownership in  Anchorage  and Fairbanks  and                                                              
those communities  got along without that requirement.  He sees no                                                              
reason for special treatment.                                                                                                   
MR. REED STOOPS  informed members that Dana Tindall  was called to                                                              
an RCA hearing so he would ask her to submit written testimony.                                                                 
There  being no  further  testimony,  SENATOR TORGERSON  moved  to                                                              
delete  the word  "company"  on page  2, line  3,  and insert  the                                                              
words, "operating  entity" to make  that language  consistent with                                                              
the rest of the bill [Amendment 1].                                                                                             
There  being  no   objection  to  the  motion,   CHAIRMAN  STEVENS                                                              
announced that Amendment 1 was adopted.                                                                                         
CHAIRMAN DAVIS asked for the will of the committee.                                                                             
SENATOR DAVIS  asked that  the committee  wait for testimony  from                                                              
the individual who was unable to testify today [Ms. Tindall].                                                                   
MR. STOOPS  said he  assumes Ms.  Tindall would  have some  of the                                                              
same  concerns as  the  APT but  since this  is  a relatively  new                                                              
issue, they are still trying to learn from the RCA.                                                                             
CHAIRMAN  STEVENS said  the  bill  could be  moved  to the  Senate                                                              
Judiciary Committee where more public testimony will be taken.                                                                  
SENATOR  TORGERSON   moved  CSSB  324(L&C)  from   committee  with                                                              
individual recommendations and its accompanying fiscal notes.                                                                   
CHAIRMAN  STEVENS announced  that  with no  objection, the  motion                                                              
The committee took up SB 328.                                                                                                   
          SB 328-BIG GAME HUNTERS ACCOMPANIED BY GUIDE                                                                      
MR. BILL  STOLTZE, staff  to Senator Halford,  sponsor of  SB 328,                                                              
explained that  SB 328 was introduced  to close a loophole  in the                                                              
1996 guide bill. That loophole allowed  a nonresident assistant to                                                              
be  exempt from  the  requirements  to obtain  the  services of  a                                                              
registered guide of big game species in Alaska.                                                                                 
SENATOR  RICK  HALFORD  said  this  problem  was  brought  to  his                                                              
attention  by a person  from Elfin  Cove. He  explained that  non-                                                              
residents can  get a guide  license because  a guide license  is a                                                              
commercial license,  which is protected by the  commerce clause of                                                              
the U.S. Constitution. A non-resident  is required to have a guide                                                              
to  hunt sheep,  goat, grizzlies  and brown  bear. The  individual                                                              
from Elfin Cove  ran into two non-resident hunters  hunting on the                                                              
outside  [coast]. Both  hunters had assistant  guide licenses  and                                                              
were  guiding  each  other  for no  compensation.  A  loophole  in                                                              
Alaska's  law allows  a non-resident  to be guided  by a  resident                                                              
relative (within the second degree  of kin), or by a guide, but it                                                              
does  not say the  guide must  be employed  by anyone  or paid  by                                                              
anyone. As  a result, the two  hunters held licenses  as assistant                                                              
guides for  a guide who wasn't  contracting and was  not involved.                                                              
SB  328  requires  the  assistant  guide to  be  operating  for  a                                                              
registered guide. He noted that Senator  Elton also discussed this                                                              
problem  with him. Senator  Halford  maintained that  SB 328  is a                                                              
small fix for a very narrow problem.                                                                                            
MR. ARTHUR ANDRES,  testifying from Fairbanks, stated  support for                                                              
SB 328.                                                                                                                         
There being no  further testimony, SENATOR TORGERSON  moved SB 328                                                              
from   committee   with   individual   recommendations   and   its                                                              
accompanying fiscal note.                                                                                                       
CHAIRMAN  STEVENS announced  that  with no  objection, the  motion                                                              
carried.  He then  announced the  next  meeting would  be held  on                                                              
March 14 and adjourned the meeting at 3:10 p.m.                                                                                 

Document Name Date/Time Subjects