Legislature(1997 - 1998)
05/07/1998 04:10 PM Senate RES
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SENATE RESOURCES COMMITTEE
May 7, 1998
4:10 P.M.
MEMBERS PRESENT
Senator Rick Halford, Chairman
Senator Lyda Green, Vice Chairman
Senator Loren Leman
Senator Robin Taylor
Senator John Torgerson
Senator Georgianna Lincoln
MEMBERS ABSENT
Senator Bert Sharp
COMMITTEE CALENDAR
CS FOR HOUSE BILL NO. 284(FIN)
"An Act relating to infestations and diseases of timber."
- PASSED CSHB 284(FIN) FROM COMMITTEE
Fiber Optic Overview Briefing:
Mr. John Burns
World Net Communications
1029 West 3rd Ave.
Anchorage, AK 99501
Mr. Mark Foster, President
ATU Long Distance
301 W. Northern Lights Blvd.
Anchorage, AK 99503
Mr. Jim Rowe, Executive Director
Alaska Telephone Association
201 E 56th Ave.
Anchorage, AK 99518
Ms. Laurie Herman, Director
External Affairs
AT&T Alascom
210 E Bluff Dr.
Anchorage, AK 99501
Mr. Duane Parlow, Manager
Administration
Homer Electric Association
3977 Lake St.
Homer, AK 99603
PREVIOUS SENATE COMMITTEE ACTION
HB 284 - No previous action to consider.
WITNESS REGISTER
Commissioner John Shively
Department of Natural Resources
400 Willoughby Ave.
Juneau, Ak 99801-1724
POSITION STATEMENT: Commented on fiber optics rights-of-way.
MS. MARTY WELBOURN, Chief
Forest Resources
Department of Natural Resources
400 Willoughby
Juneau, AK 99801-1724
POSITION STATEMENT: Opposed HB 284.
Ms. Pam LaBolle, President
State Chamber of Commerce
217 Second Street #201
Juneau, AK 99801
POSITION STATEMENT: Supported HB 284.
WITNESS REGISTER
ACTION NARRATIVE
TAPE 98-40, SIDE A
Number 001
CHAIRMAN HALFORD called the Senate Resources Committee meeting to
order at 4:10 p.m. and announced a briefing on fiber optics.
MR. JOHN BURNS, World Net Communications, said that he wanted to
set aside some misrepresentations. He heard that Mr. Duncan is
concerned that WCI World Net Communications is trying to promote a
50 cent per foot rate and that is not true. All of their interest
has been in an appraisal process or similar process that would be
fair to all parties. Another misconception is that the State has
no choice, but to move ahead because uncertainty is delaying
projects, but projects have been and are being built, for example,
the Alaska Fiber Project, the project to Whittier, and the project
between Whittier and Valdez is done, and they are in progress on
the project to the lower 48 - and there is no urgency to make a
hasty decision about how to do this right. The 1996
Telecommunications Act makes it incumbent upon the states to make
sure there is a fair competitively neutral playing field. All of
those projects accepted the appraisal notion and in the original
Kanas permit, they agreed to an appraisal approach. If they change
the approach now, they are creating a problem they don't need to
and one they will have to go back and correct.
MR. BURNS agreed with Mr. Duncan that this is phone war. GCI has
always carried the competitive banner, but something has happened
in the last year. Unfortunately, additional communications have
come to the State in the form of World Net Communications which
they welcome as long as they maintain the competitively neutral
playing field. In 1996, they committed to the Alaska Fiber Star
project and were fully aware of the Kanas project along the
pipeline and recognized it as a competitive project. They also
found that DNR was intending to use an appraisal process which is
satisfactory with them. Their concern is that, effective in early
March of this year, there is a change and a desire to scrap the
appraisal and institute a single unit cost. They don't feel that
works for either the State or the consumer. They feel the
appraisal is a fairer system and support the idea of having a Task
Force to come up with a uniform process, but see no logic that
current pending permits be issued for five years. It will not take
five years to arrive at a decision of what is appropriate. If
legislation is required, a period of one year to eighteen months
would be sufficient to have a conclusion.
MR. MARK FOSTER, President, ATU Long Distance, said they are a
reseller; buying capacity from facility-based carriers and resell
that capacity to the retail market residential, and business
customers. In that light, they view AT&T, Alaska Fiber Star, GCI,
and Kanas as potential suppliers of capacity. ATU hopes their
potential suppliers compete with one another on price, quality of
service, and reliability, and not on their ability to preserve for
themselves outdated rights-of-way valuations while their
competitors pay a market-based rate. The State basically has three
options to charge them. They can give it away for free or some
token amount, charge an amount representative of the value of the
right-of-way for utility service in a general manner, or charge an
amount representative of the market-based value of the right-of-way
to the fiber optic facilities. He is basically indifferent to any
of those options, so long as they are applied equally to all the
providers of capacity.
The real problem appears to be that some major fiber optic
investments are being charged for rights-of-way based on a market
valuation that in some parts may be relying on value of use while
others appear to be being charged a lower right-of-way rate not
necessarily linked to a market valuation. This is the dilemma they
are facing in this instance. In order to achieve competitive
neutrality, do they let the courts sort it out by doing nothing?
Do they move forward using a historic practice of the $100 per acre
or do they use market valuations as a presumptive market approach?
The problem with moving forward using the $100 per acre historic
practice is that it appears to place the Alaska Fiber Star project
at a competitive disadvantage during the interim period. It
appears that using a market-based valuation appraisal process
during the interim would allow them to buy from their competitors
without them having undue advantage.
Yesterday there was a characterization made that several interests
wanted someone to pay 50 cents a lineal foot and GCI might be
getting a better deal, if you look at the capacity that's being
carried over the right-of-way.
The nondiscrimination provision concerning rights-of-way in the
Telecommunications Act might be applied to all utilities which may
be somewhat misleading in the following sense. Nondiscrimination
provisions are clearly designed to apply to telecommunication
providers. It does not distinguish between what a company might
have historically provided and instead focuses on the fact that
telecommunications services are being provided. Thus he thinks one
could read the provision to basically apply to an electric utility
that is providing fiber optic capacity as its telecommunication
service.
CHAIRMAN HALFORD asked if the State of Alaska is made up of six or
seven entities, and does the federal act require equality across
the entities for competing uses.
MR. MARK FOSTER said he hadn't asked counsel to address that
specific question, but he would get back to him with his response.
CHAIRMAN HALFORD asked him for a distinction between the appraisal
of the value of the use versus the appraisal of the value of land.
MR. FOSTER answered that they have a number of options to pursue.
It's not clear to him that the value of land versus value of use is
the superior one. His concern at this point, is that the policy
that's out there now that's been applied to one of the major
suppliers does not appear to be being applied to all of them. The
goal should be a uniform application of a reasonable process which
he thought should be based on market value.
Number 228
MR. JIM ROWE, Executive Director, Alaska Telephone Association,
said they are deeply concerned with the disparate pricing policies
the State appears to be adopting. Alaska Fiber is paying the State
50 cents a foot annually for its right based upon an appraisal.
However, the Department of Natural Resources has recently proposed
to price an NFS Kanas permit at the rate of six cents a linear
foot. Since Kanas had agreed to pay the State for the right-of-way
based on an appraisal, and since they built their network based on
that understanding, they see no reason for the DNR to now change
the rules. This is not competitively neutral and undoubtedly
violates the Telecom Act of 1996. It will have the effect of
discouraging investment in Alaska. Setting a price of six cents
per linear foot may be too high to encourage development of a
telecommunications infrastructure. They strongly support
appointment of a task force to develop a comprehensive, predictable
and uniformly applied policy for fiber optic development which
should be finalized before the beginning of the next legislative
session and the legislature could act on the recommendations at
that time. The process could be completed in 18 months and he
offered their assistance.
CHAIRMAN HALFORD asked how he felt about an appraisal of the value
of the use versus an appraisal of the value of the land.
MR. ROWE said that neither one is really pertinent as long as it's
comparable for all the parties. They are not asking for 50 cents
per linear foot everywhere in the State. It's probably the
appropriate amount in the Anchorage bowl, but not in the remote
areas of Alaska. He would like to see an infrastructure installed
and encourage other entities to come to our State and invest money.
MS.LAURIE HERMAN, Director, External Affairs, AT&T Alascom, said
that they believe rights-of-way across State lands where fiber
optic cable projects should be granted under existing State
standards. In the event that there are two conflicting State
standards, the standard that would encourage infrastructure
development and competition should prevail.
Number 349
MR. DUANE PARLOW, Manager of Administration, Homer Electric Assoc.,
said he had a prepared statement to read on behalf of Mr. Norman
Story, their General Manager. He said they are currently in their
final stages of building a fiber optic infrastructure between Homer
and the cities of Soldotna and Kenai and have considered the issues
of rights-of-way for fiber optic projects. They allow the State to
continue to use the existing standards and historically used
pricing methods for granting rights-of-way because any change in
policy will create conflicts where none exist today. Fiber
services are intended to directly serve the people of Alaska as are
all other utilities. The increased cost of using State rights-of-
way for one particular type of utility has the effect of placing a
hidden tax on the people of Alaska. A change in policy that would
use a fair market appraisal based on use in determining rights-of-
way would set a precedent for increasing costs of other types of
utilities which would be born by the consumers. A conflict would
be created between a utility utilizing fiber optics for its
internal operations versus use for commercial business. Singling
out fiber optics for special treatment would create conflicts
between the use of fiber optics versus copper lines. The pricing
would suggest the State encourages the use of copper over fiber
optics. By State statute and PUC ruling, within the municipal
boundaries a municipality is limited to charging only a reasonable
administrative fee for the use of public rights-of-way which at
least sets a precedent for the State to follow. The State should
not be able to levy unreasonable and unnecessary charges. Modern
infrastructure development within our State should be encouraged.
Changing to the method using fair market appraisal based on use
will only add cost to Alaskan consumers which are now marginally
justified.
COMMISSIONER JOHN SHIVELY said he didn't know what the law was for
different state entities to charge different prices. That law has
not been tested, but he suspects it will be. They have taken the
position that each entity has to be consistent, itself. They have
also taken the position that if there are six different entities
within the State and each one has a different approach, that still
meets the telecommunications law.
He said consistency within the industry is a very worthy goal and
they should have thought about it earlier, because they can't get
there right now. Part of the MFS right-of-way is along the
Department of Highway right-of-way and they can't appraise it.
There is a one-time administrative fee. The railroad has their
own, DNR has their own. He indicated he didn't have the ability to
charge above the six-cent rate. DNR does not have the flexibility
to value by use. They chose not to do that. No one in the State,
including the railroad, has value based on use. They did a land
appraisal and gave a corridor value because there is extra value to
that corridor. As a result of that figure, they negotiated a deal
and have not done that on general public lands in Alaska. There
was also a comment made yesterday that people didn't have an idea
what DNR was up to and he thought that was true in the Park, but
they are not used to doing rights-of-way in the Park. During the
testimony for going through the Park, the only people who testified
in favor of going through the Park were people from GCI. They
could have easily said no, but they decided to do it, but to treat
it differently than general purpose lands.
SENATOR LEMAN asked if there were ever cases in Alaska of
overlapping jurisdictions within agencies of the State that may
further complicate whatever the answer might be.
COMMISSIONER SHIVELY answered along the highway part of it's our
land, part of it's BLM land, part of it's DOT land. It's adjacent
and that causes a problem with the corridor concept, because you're
not dealing with one land owner.
SENATOR TORGERSON asked if the scope of the reevaluation would be
looking at a separate charge because they are running fiber optics
on the same pole as they have electric.
COMMISSIONER SHIVELY said he has suggested looking at fiber optics
itself, not all utilities. Fiber optics in other parts of the
country has changed quite a bit from what people charge for using
rights-of-way because it is a lucrative business. The Railroad has
an attractive situation, but DNR isn't in the same situation. It's
worth trying to look at whether some State agencies should have a
consistent policy for fiber optics. The Administration has not
said to look at other lines like, sewer, water, and electric.
SENATOR TORGERSON said he just wanted to know if he owned a right-
of-way for a power line, would he be reconsidered if he wants to
hang fiber optic on that right-of-way.
COMMISSIONER SHIVELY answered that he thought it would depend on
how they wrote his permit; and if they felt fiber optics was not
permitted as part of that, they would be a different charge.
CHAIRMAN HALFORD asked what his perception was of where the
legislature was at this point. The reason he wanted to hear this
is that the letter he got said the Legislature was doing nothing,
and therefore, going along with this. There have been numerous
meetings and communications, the most formal being the House
Resolution. His concern was to not be characterized as creating a
legislative position by inaction. He asked the Commissioner what
he was going to do.
COMMISSIONER SHIVELY said it would be his last political act to
predict what the legislature thinks. He intends to issue the
permits as soon as they adjourn to North Star and GCI to do their
underwater cable with a fee of $100 per acre or for what amounts to
about six cents per foot. They had also agreed to put together a
task force of State land-owning entities to look at this to make
recommendations to the legislature next year. They have said the
rates they charge as a result of the leases they will issue will be
for five years. In addition, MFS has agreed they will take the six
cents rather than appraise. There is probably debate about whether
that's a good or bad deal for them. If the whole pipeline is
appraised, he didn't know if it would be at $100 per acre. It
could well be less; and his experience with appraisals along that
whole corridor is that it is less.
CHAIRMAN HALFORD asked if it was six cents under water?
COMMISSIONER SHIVELY said they are all on land. They have agreed
that it's probably not time to do the major kind of change you
would have to make. They have agreed the study is a good idea, and
for the legislature to look at the recommendations next year, but
the issue that has been most debated is whether five years is
appropriate or something less. That is his opinion right now of
where the debate sits.
CHAIRMAN HALFORD said it seems to him that people wouldn't mind if
the time were shorter if they thought it was going to be a full
blown review.
COMMISSIONER SHIVELY said some people believe that and some do not.
HB 284 - TIMBER THREATENED BY PESTS OR DISEASE
CHAIRMAN HALFORD thanked everyone for their testimony and set the
issue aside and announced HB 284 to be up for consideration.
REPRESENTATIVE MARK HODGINS, sponsor, said that HB 284 relates to
diseases of timber and amends AS 41.17.082(d). He said basically
when trees die from the spruce bark beetle it takes about three or
four years and they turn a bright red color. On the Kenai
Peninsula there are several million board feet that have been
impacted and the problem he sees is that there have been too many
task forces that all decide that something should be done. This
bill will give them an incentive to do some things. He showed the
Committee a chart of the infestation that has occurred on the Kenai
Peninsula.
CHAIRMAN HALFORD asked how small the trees were that are being
impacted now.
REPRESENTATIVE HODGINS said it's beginning to impact below six inch
trees and most of them are fairly vigorous still. The larger trees
are not as vigorous and are more severely impacted.
SENATOR LEMAN asked if the Commissioner could require selective
cutting since they have been told that there's a greater chance of
the new growth taking hold with scarification. He supported the
reforestation clause in the bill and hoped the legislature could
fund that.
REPRESENTATIVE HODGINS responded that there is quite a bit of
latitude in this for the Commissioner allowing him to determine an
area to not have any harvest. His first thought was to make this
a selective harvest bill and open it up as much as possible to the
small timber operator, because that's where you get your highest
value from. He said they don't expect to control or stop the
beetle with this legislation. They would like the ability to
remove some of the fire fuel in places like the Miller Reach fire
where there was $45 million spent for suppression and damage done.
He said they face the same thing on the Kenai Peninsula.
SENATOR TORGERSON asked him how it would impact private lands.
REPRESENTATIVE HODGINS explained this bill would encourage some
selective harvest that will be up to the private land owner. Under
the Forest Practices Act, the Commissioner could determine if the
infestation was so severe that he could waive any portion of that
act if he could, except for the portion around salmon streams.
SENATOR TORGERSON said he didn't read it as leaving out private
land owners and municipal land and it says the Commissioner shall
implement salvage measures.
REPRESENTATIVE HODGINS responded that on private land, the State
could not go in and mandate that something happen. They can work
out an agreement with the land owner to make something happen.
There could be the possibility of helping land owners with
reforestation. The same thing with municipalities; they can not
allow the State on their property in which case nothing would
occur.
SENATOR TORGERSON said his concern is that it says if the forest
land owner does not comply with the final order of the
Commissioner, the Commissioner may enter onto the land and
undertake the actions ordered by the land owner and the land owner
is liable for the cost of those actions. Now it's amended to say
that he has to implement the proper salvage measures.
SENATOR LINCOLN asked him to respond to the letter from the
Director of Forestry and one of the fiscal notes for $615,000.
TAPE 98-40, SIDE B
Their concerns were that DNR already has the authority to do
emergency sales and this legislation doesn't help them in that
regard. She was also concerned that the authority to waive the
Forest Practices Act risks water quality and fish habitat
protection, but has little effect on the beetle population.
Another area mentioned was the Spruce Bark Beetle Task Force which
will issue a finalized report on May 8 which will make
recommendations. She said the mayor of the Borough has put
together a task force on the infestation which hasn't been
completed. She thought they were getting ahead of themselves in
making these recommendations.
REPRESENTATIVE HODGINS responded that this Administration does not
want to cut trees and he said this is an infestation on the Kenai
Peninsula and with their salvage timber operations there has not
been an emphasis to cut trees. They will not control the beetle
with this bill. He would like to have the ability to go into areas
that the Commissioner deems important enough to do some salvage and
go forward with that.
SENATOR LINCOLN asked if the reason he put this bill together was
to control the beetle infestation.
REPRESENTATIVE HODGINS answered yes it is, but the reason it will
not control the infestation is because there is so much acreage
that is now impacted, the cost of controlling it would be
approximately $8 million and even that would not completely solve
the problem. There is a tremendous health and safety problem with
dry fuel standing that could become very explosive. This standing
dry fuel, in a wind storm, could knock out a lot of the utilities
that range between Kenai and Homer along the highway. There is a
tremendous need for reforestation, because without it, these
forests are going to become grasslands in several years. The fact
that we have habitat that depends on the forest ecosystem that is
being destroyed is pretty evident. The Spruce Bark Beetle Task
Force hasn't led them to any resolution of the problem.
Number 536
MS. MARTY WELBOURN, Chief, Forest Resources, clarified that the
Department of Natural Resources is continuing to salvage and
reforest infested areas on State lands. For example, on the Kenai
Peninsula alone, they have held 23 salvage sales since 1994. They
have done this despite a lawsuit that opposes salvage operations.
By contrast, the US Forest Service which has a much larger staff
and budget has held only two sales during the same period.
She reaffirmed their opposition to HB 284. The Department of
Natural Resources continues to oppose this bill because it would
not reduce the impacts of major infestations, and will be expensive
to implement. The bill does not provide effective new tools to
address infestation. DNR already has the authority to develop
agreements with land owners to waive reforestation requirements
under the Forest Practices Act and to offer emergency sales and
below cost sales. DNR is already offering salvage sales that don't
fully offset the costs of salvage and reforestation. The proposed
authority to waive other Forest Practices Act requirements risks
water quality and fish habitat protection while having little
effect on beetle population. The Forest Practices Act do not
significantly hamper salvage operations. Finally, the Kenai Spruce
Bark Beetle Task Force, led by Mayor Navarre, has completed its
recommendations for near-term action. The recommendations for long
term action have been drafted and will be finalized tomorrow. The
Task Force has recommended that timber harvest focuses on reducing
risks from wild fires near populated areas, but it does not
recommend other salvage operations. However, little of the land in
the high fire risk areas is State owned. DNR is working to
implement the Task Force recommendations wherever possible. They
feel the current bill does not reflect the Task Force
recommendations. HB 284 would have little or no effect on large
infestations, because it does not address the main factors that
cause insect outbreaks and limits their control. Climatic
conditions play a key role in determining the size of outbreaks and
can not be controled by agency action. Pests such as bark beetles
occur naturally throughout Alaskan forests and their populations
can explode whenever weather conditions are favorable. Wherever
you have white spruce, you have spruce bark beetles in Alaska.
Feasible salvage harvesting is limited by weak markets for low
value timber, by limited funding for timber sales and reforestation
and by multiple use concerns about the impacts of timber harvest
and roads on other resources and activities. HB 284 increases
State costs by requiring the State to develop agreements with
private land owners regardless of their interests. Further, it is
unclear whether Section 1 (d) would require the State or private
land owners to pay for the "necessary salvage measures" on private
lands.
MS. WELBOURN said implementing this bill would be costly since it
applies statewide. In 1997, for example, aerial surveys recorded
17 different types of insects or diseases, each damaged more than
100 acres of forest land in Alaska affecting a total of 2.5 million
acres. The fiscal note submitted by DNR is very conservative. In
1996, the Society of American Foresters invited forest health
experts from British Columbia to view the bark beetle infestations
in Southcentral Alaska. Those experts recommended that the State
spend at least $50 million per year to respond to the infestation.
She asked the Committee not to pass HB 284 and offered to work with
them on ways to implement the Task Force recommendations.
Number 514
MS. PAM LABOLLE, President, State Chamber of Commerce, said this is
one of their priority pieces of legislation. They have passed a
resolution saying they would like an emergency declared by the
State on the spruce bark beetle. In the almost 50 years that the
Tongass has been harvesting trees, they have harvested about
400,000 acres and in nine years, the spruce bark beetle has taken
out 3 million acres (according to her figures).
SENATOR TORGERSON asked Representative Hodgins what his intent was
for already dead stands.
REPRESENTATIVE HODGINS answered that he wanted to remove the fuel
source, and he thought an owner would initiate an action like that
with the Department. He thought the language in the bill would
allow for a better agreement between the private property owner and
the Commissioner. He didn't foresee the Commissioner ever coming
in and condemning someone's trees for a specific reason if they are
on private property.
SENATOR GREEN moved to pass CSHB 284 (FIN) from Committee with
individual recommendations and the accompanying fiscal note. There
were no objections and it was so ordered.
SENATOR HALFORD adjourned the meeting at 5:15 p.m.
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