Legislature(1997 - 1998)
05/07/1997 03:50 PM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE RESOURCES COMMITTEE May 7, 1997 3:50 P.M. MEMBERS PRESENT Senator Rick Halford, Chairman Senator Lyda Green, Vice Chairman Senator Loren Leman Senator Bert Sharp Senator Robin Taylor Senator Georgianna Lincoln Senator John Torgerson MEMBERS ABSENT All members present COMMITTEE CALENDAR Confirmation hearing: Oil and Gas Conservation Commission Robert N. Christenson - appointee HOUSE JOINT RESOLUTION NO. 35 Encouraging federal legislation to improve federal fiscal terms for a trans-Alaska gas pipeline. - MOVED HJR 35 OUT OF COMMITTEE CS FOR HOUSE BILL NO. 141(RES) am "An Act relating to a vessel permit moratorium for the Alaska weathervane scallop fishery; relating to management of the scallop fisheries; and providing for an effective date." - MOVED SCSCSHB 141(RES) OUT OF COMMITTEE CS FOR HOUSE BILL NO. 109(FIN) "An Act relating to the management and disposal of state land and resources; relating to certain remote parcel and homestead entry land purchase contracts and patents; and providing for an effective date." - HEARD AND HELD PREVIOUS SENATE COMMITTEE ACTION HJR 35 - No previous action to be considered. HB 141 - No previous action to be considered. HB 109 - No previous action to be considered. WITNESS REGISTER Representative Mark Hodgins State Capitol Bldg. Juneau AK 99801 POSITION STATEMENT: Sponsor of HJR 35. Mr. Paul Fuhs Yukon Pacific Corporation 10652 Porter Lane Juneau AK 99801 POSITION STATEMENT: Supported HJR 35. Mr. Earl Krygier Extended Jurisdiction Program Manager Department of Fish and Game P.O. Box 25526 Juneau AK 99802-5526 POSITION STATEMENT: Commented on HB 141. Mr. Brett Huber, Staff Senate Resources Committee State Capitol Bldg. Juneau AK 99801 POSITION STATEMENT: Commented on HB 109. Ms. Sarah Fisher, Staff Representative Gene Therriault State Capitol Bldg. Juneau AK 99801 POSITION STATEMENT: Commented on HB 109. Mr. David Rogers Tenass Pass Shellfish Co. 211 4th Street, Ste 108 Juneau AK 99801 POSITION STATEMENT: Commented on HB 109. Ms. Jane Angvik, Director Division of Land Department of Natural Resources 3601 C Street Anchorage AK 99503-5947 POSITION STATEMENT: Commented on HB 109. Commissioner John Shively Department of Natural Resources 400 Willoughby Ave. Juneau AK 99801-1724 POSITION STATEMENT: Commented on HB 109. ACTION NARRATIVE TAPE 97-32, SIDE A Number 001 CHAIRMAN HALFORD called the Senate Resources Committee meeting to order at 3:50 p.m. and said the first order of business would be the confirmation hearing for the Oil and Gas Conservation Commission. MR. ROBERT CHRISTENSON, appointee, reviewed his resume for the committee. He said he was in the oil and gas business for the last 20 years and has been working on projects on the North Slope and Cook Inlet since 1978. He said he was interested in bringing to this position strength in dealing with oil companies. He noted that he had allegiance to none of them and had never worked for any of them. He also didn't know the Governor, even though he appointed him. He had three conversations with him in his lifetime. He said he was chronologically disadvantaged and was not looking for this as a springboard to the Presidency and thought he could be independent in his judgements regarding issues of the Commission which are to conserve and uphold the State hydrocarbon resources. SENATOR GREEN said she thought that the Commission was understaffed and thought it was important that the commissioners who are quasi- judicial, have adequate backup. SENATOR TORGERSON moved to send the standard letter to the full legislature. HJR 35 ENCOURAGE FED TAX CHANGE FOR GAS PIPELINE CHAIRMAN HALFORD announced HJR 35 to be up for consideration. REPRESENTATIVE MARK HODGINS, sponsor, said he represented the House Special Committee on Oil and Gas. He said HJR 35 encourages federal legislation to improve federal fiscal terms for the trans Alaska gas pipeline project. The project now is in the range of $12 - $15 million and if the project is to go forward, they need to come up with strategies which lessen those costs. This resolution asks our delegation to introduce enabling legislation to reduce some of the federal take on this project. Their portion, based on $3.50 cost of gas, is about $26 billion. This project is based on Dr. Pedro Van Muir's report and it seems reasonable at this point to continue on with it. CHAIRMAN LEMAN asked if he could comment on an article on gas to liquids. REPRESENTATIVE HODGINS said that if they were to go to the gas to liquids, there appears to be about a 30% - 40% loss of gas. There are 35 trillion cubic feet of gas on the North Slope and they would be losing a lot of gas. He didn't think technology was in place to make it economically viable. Dr. Van Muir said the cost differential would be twice as expensive as BTUs for crude oil. It needs to be down to 1.25 to make it competitive with natural gas that they do have. REPRESENTATIVE HODGINS said he thought it was important to stay the course with the present project, but if things come up that would enhance another project, they should look at it also. He noted that the State's take with the same scenario would be about $12 - $13 billion out of a total project revenue of $150 billion. The federal government gets the biggest stake out of the trans Alaska gas line. CHAIRMAN LEMAN asked if the Van Muir report had undergone sufficient peer review for him to believe it's a credible document. REPRESENTATIVE HODGINS replied that it gives them a good place to start. Number 225 SENATOR SHARP said he was on the Task Force over the last year and this new technology was discussed at length and it was brought up by one of the major oil companies. Experts told them at that time the technology is in its infancy. REPRESENTATIVE HODGINS said that Exxon has a $100 million project at Katar doing this very thing. Part of the technology involved is being in a very temperate area; the North Slope would come under that maybe two days per year. Number 261 MR. PAUL FUHS , Yukon Pacific Corporation, supported HJR 35. He pointed out that the combined State and federal take of the project is about 40% of the economic rents, a huge burden on any project, which is why it's legitimate to look at some tax breaks. In some cases, he said, if you reduce the federal taxes, you increase the State take, because the federal taxes are written off before the State calculates its State revenue. MR. FUHS said that Idaho National Energy Labs did a big report in conjunction with Lockheed Martin on gas to liquid and they said if you give a $5 - $6 a barrel premium to the middle distillate gas to liquids, there are a lot of paraffins formed which is why you need a temperate climate. He said the market wants LNG; Japan, Taiwan, and Korea have all based their electrical generation and domestic distribution of home heating and cooking fuels based on LNG. He said Hitler developed the LNG technology in World War II when he couldn't get fuel and now the price has come down somewhat. The time to use gas to liquids is when the pipeline gets down to $300,000 barrels per day when it will not be economic. A small gas to liquids gas plant at that time (around 2009 - 2016) could extend the life of the pipeline significantly. The study shows that if you don't do that at the time, you spend a billion barrels of oil in the ground. It's economic at a field level, but the pipeline is shut down because the flow-through is too small. Number 314 SENATOR LINCOLN asked since it's a resolution could it be written in a way that would expand where they are sending it, like the Energy Council. REPRESENTATIVE HODGINS responded that he could probably get a concurrence from the House if they made a change, but he thought it was important to get it off and it would go to our congressional delegation who would know who else to pass it to. SENATOR LEMAN said they could mention something like that in a transmittal letter. SENATOR LEMAN moved to pass HJR 35 from committee with individual recommendations and $0 fiscal note. There were no objections and it was so ordered. HB 141 SCALLOP FISHERY/ VESSEL MORATORIUM CHAIRMAN HALFORD announced HB 141 to be up for consideration. MS. AMY DOUGHERTY, Aide to Representative Austerman, sponsor of HB 141, read the sponsor statement. She said it implements a moratorium within the State waters off Alaska. Without it, it is probable that there would be an increase in effort on the scallop stocks, as well as the associated marine habitat, and create an unmanageable fishery. She had reviewed the committee's amendments which she found acceptable. SENATOR SHARP asked if this was establishing sort of a limited entry situation. CHAIRMAN HALFORD replied yes and no; the moratorium is a kind of starting point. He said two amendments deal with how the system works and who gets in under the moratorium. The third one deals with at least instructing the Commission to look at a way to avoid transfer of permits and permit values. SENATOR LINCOLN said she would like to hear how the amendments are incorporated into the bill because they make substantial changes. MR. DALE ANDERSON, Limited Entry Commission, said that the Commission found that the findings listed in this bill provide grounds to implement a moratorium and they are ready to administer it, if the legislature signs it into law. MR. EARL KRYGIER, Extended Jurisdiction Program Manager, said he basically deals with the federal issues that interact with the State fisheries. He explained that the scallop fishery started in 1967 when a number (17) of boats came in from the east coast and they fished them up and down. He said that scallop fisheries are very susceptible to overfishing. We don't have a very large harvest in Alaska and the average harvest has been around a million pounds of shucked meat. On the east coast it's about 30 million pounds annually. We have also had problems with some of the beds being depressed. Back in 1990 when we started to get a new influx of fishermen interested in the fishery, they became concerned when they saw the same thing starting to occur. They put together a management plan that was done by the Board of Fisheries that was very restrictive. Instead of having a statewide registration, they broke it up into nine separate areas. The beds don't move around and you can separate the main beds into separate management units for a sustainable harvest, MR. KRYGIER said. That was fine until a Mr. Big, a vessel from the east coast, decided to go out and fish in federal waters only and didn't sign up for his State registration that year. They had always been able to manage the fisheries because any vessel that had signed a State registration has to abide by their regulations when they fish in federal waters. In federal waters there aren't any regulations. Mr. Big was fishing in federal waters without any limits and the State went to the Council and had them shut down. To do that they had to make a federal fishery management plan which closed all federal waters for 18 months. So the rest of the vessels who weren't participating in the unregulated fishery were basically out of business for that time. The federal government tried to figure out how to return this back to the State for management and put in place an interim plan which adopted all the State regulations. The State calls all the shots, but it is very cumbersome and they are trying to get a final solution which would turn the fishery back to the State. CHAIRMAN HALFORD said he was actually concerned about the bottom and asked how the dredges worked. MR. KRYGIER explained that they have a metal ring bag with four inch diameter rings which basically allows it to sort out the undersized scallops and allows them to remain on the beds and grow. They pull them back and forth across the beds. Various beds have sandy bottoms and there is very low interaction with anything; almost no bycatch. They have observers on all of the vessels in federal waters. CHAIRMAN HALFORD asked what kept the bottom fish from going into the same dredge. MR. KRYGIER said they trawl at a very slow rate. There are some problems with crab and they manage these areas by the crab bycatch rate, setting very conservative rates annually that they can take, less than half a percent. CHAIRMAN HALFORD asked if the bycatch came up or did it just get killed and stay on the bottom. MR. KRYGIER said most of it comes up and there's a very high survival rate on the halibut. The rates on the other flat fish is quite small, also. CHAIRMAN HALFORD asked if ADF&G was certain that this type of fishery is not doing any damage to other species. MR. KRYGIER replied that he did research at Oregon State University as an oceanographer and he felt that they had to be very concerned about the impacts on the habitat. Most all areas are excluded from dredging. SENATOR TAYLOR asked if he was familiar with a type of trawl developed by a Mr. Kirkness. MR. KRYGIER replied that he was. SENATOR TAYLOR said that it didn't have the bycatch problem, but he can't use it because it doesn't comply with existing regulations. MR. KRYGIER responded that they had offered the gentleman a number of experimental permits to prove up his gear. SENATOR TAYLOR said the problem he had was that the cost of proving up involved the observer and some of the rest of it and he didn't have the funds. CHAIRMAN HALFORD asked if would be able to do it at all if they passed the moratorium. SENATOR TAYLOR replied no. MR. KRYGIER said they have tried to work with him for a number of years and offered lots of opportunities and have been unsuccessful. Number 522 SENATOR LINCOLN asked who pays for the observers on all the vessels. MR. KRYGIER replied that the vessels on the outside coast pay for all the observer coverage which is about $6,000 per month for a full time observer. In area H, Cook Inlet, the department does not require full-time coverage. Staff volunteers its own time to go out and act as observers. SENATOR LINCOLN asked if that meant that state workers take time off from their jobs to observe. MR. KRYGIER said that he understands in the Cook Inlet area some of it has been on State time and some of it has been on weekends. The outside waters are managed by the Board of Fisheries so that the observer coverage is paid by the catcher processors. They do their work at sea so observers are needed to get biological data. Number 559 SENATOR TAYLOR asked why the Korean Hair Crab was being deleted. MR. ANDERSON explained that this bill mirrors the moratorium on Korean Hair Crab that was passed and they are deleting "Korean Hair Crab" and inserting "a fishery" which would include both. He said that these are the only two fisheries that have vessel permitting. TAPE 97-32, SIDE B MR. KRYGIER said the department has a fairly good understanding of the commercially healthy beds from data gathered from a number of fisheries over the years. SENATOR LEMAN asked how large the scallop vessels are. MR. KRYGIER replied that there are two vessels at 63 feet and two vessels at 79 feet and probably none of those vessels would go into the Bering Sea where the beds are way off shore. It was both a summer and winter fishery, but now they are making the opening on July 1 through October or November. CHAIRMAN HALFORD asked what the feds do if they don't pass this bill. MR. KRYGIER replied that the Council is scheduled to take up scallops again at their September meeting and they will try to set up delegating the authority for the whole fishery back to the State. The second thing they had on the agenda was whether or not to move along with the license program. CHAIRMAN HALFORD asked what he thought of the amendments. MR. KRYGIER said they would have no problem managing the fishery with those amendments. SENATOR TORGERSON moved amendment #1. SENATOR LINCOLN objected fo discussion. MR. BRETT HUBER, Staff to the Senate Resources Committee, said that amendment #1 allows the vessels that qualify in the Area H waters of Cook Inlet to also be permitted for the statewide waters. There are seven boats that qualify, two of which are Alaska vessels, five of which are not. Four vessels qualify in the Cook Inlet area, all of which are Alaskan vessels. This would allow those 11 boats to fish in the statewide waters. SENATOR LINCOLN said they have to have at least 1,000 pounds for '95 and '96 and at least four 1,000 pounds between '84 and '96 and asked if they would all meet that standard. MR. ANDERSON said yes, SENATOR LINCOLN withdrew her objection to amendment #1 and it was adopted. SENATOR TORGERSON moved to adopt amendment #2. MR. HUBER explaine that the bill currently drafted deals with a vessel permit and the only way you can change a vessel you are using in the permit is if the vessel is damaged or sunk. This amendment offers the opportunity for someone to change a vessel to use in the fishery, but it would still preclude the vessel being any longer than the vessel they qualified with or having more horse power. CHAIRMAN HALFORD noted there were no objections to amendment # 2 and it was adopted. SENATOR TORGERSON moved to adopt amendment # 3. SENATOR LINCOLN asked for an explanation. MR. HUBER said it asks the commission in cooperation with the department to determine whether there's an alternative form of limited entry that would concentrate on non- transferable permits. CHAIRMAN HALFORD noted there were no objections and amendment # 3 was adopted. CHAIRMAN HALFORD noted that amendment # 2 limited the ability of the small boats, where most Alaskans are, to upgrade in size. They wanted to limit the horse power to impact the size dredge they could handle and asked if that was consistent with the goal of maximizing Alaskan participation. MR. ANDERSON responded that one of the goals of the limited entry commission is to restrict an existing problem so that it doesn't get any worse. MR. HUBER pointed out that adoption of the amendment didn't do that, but the text of the bill already had that limitation of horse power and size. MR. KRYGIER said the moratorium on the east coast had a larger effect on the upgrading of the bigger boats and kept them from having more ability to power their gear. CHAIRMAN HALFORD said he didn't want the small boats to be limited from being safe or economic. He was concerned with the four small Alaskan boats. MR. ANDERSON said he thought they would have to define what a small boat is. He said this legislation is a moratorium and authorizes the commission to do the study. This won't be the format it will be forever. They need to establish a constant to work with. MR. KRYGIER said that Mr. Kirkson could petition the Board of Fisheries to look into his development and they would be in a position to not shut off his future opportunities. SENATOR TORGERSON moved to pass SCSCSHB 141(RES) from committee with individual recommendations and the accompanying fiscal note. There were no objections and it was so ordered. HB 109 MANAGEMENT OF STATE LAND AND RESOURCES CHAIRMAN HALFORD announced HB 109 to be up for consideration. SARAH FISHER, Staff to Representative Gene Therriault, said HB 109 is intended to clarify certain Title 38 statutes. There are no changes to the shore fisheries leases. They have also pulled out mining sections which are dealt with in HB 46. CHAIRMAN HALFORD said he would like to go through the bill by sections. MR. DAVID ROGERS, MS. JANE ANGVIK, Director, Division o Land, and Commissioner of Natural Resources JOHN SHIVELY joined the committee. CHAIRMAN HALFORD briefly reviewed section 1 - 5. He said it abolishes the land bank and adds "identified and classified under adopted regional land use plans." MS. ANGVIK explained under laws passed over the last decade regional land use plans are used to identify lands that would be available and offered for private ownership. More than 2 million acres have been conveyed and classified through this process. Therefore, it is their conclusion that the land bank is now obsolete, because the methodology for disposal of land is through the land use plans. CHAIRMAN HALFORD asked if regional land use plans are adopted in any place that anyone would want to dispose of land. He did not want to add another requirement that was another barrier to disposing of land. MS. ANGVIK explained that there are land use plans in a majority of the State, but there is not one in Kodiak or in the southwest portion of the State. They could do a site specific disposal in Kodiak without a land use plan. She said they can lease land and permit land and they can do site specific plans for a wide variety of purposes, but she didn't know for sure if they could sell it. Number 250 SENATOR TORGERSON asked if the Kenai has a comprehensive land use plan they have been messing with for the last 12 years. MS. ANGVIK and it would be finished by Christmas. SENATOR TORGERSON asked if there would be a nomination process to amend that. MS. ANGVIK replied that all land use plans can be amended and there have been land disposals by the State on the Kenai Peninsula, notwithstanding the fact that the area wide plan has not yet been fully adopted. CHAIRMAN HALFORD noted that section 6 is repealed and reenacted to read the commissioner "may" annually submit an appropriation request. The old one said the commissioner "shall." MS. ANGVIK said the intent of this provision is to have land disposals being regarded as the other resource disposal programs of DNR so it would be included in the annual budgets as opposed to a separate category that is required under existing statute. It requires land disposals the same as they do gravel sale disposals or forest or oil and gas disposals. This would not require a separate request of the legislature for the appropriation to do so. CHAIRMAN HALFORD asked if this administration had ever submitted an appropriation request for land disposal to the governor with the budget. MS. ANGVIK said she didn't think so. CHAIRMAN HALFORD asked why they would change a law they ignored anyway. MS. ANGVIK replied that the intention is two-fold and the first is it's mandatory that they do this every year and she thinks that it is quite correct that they do not. The second is that should there be a request for a disposal of land that they actually provide the full costs associated with that disposal including the survey and appraisal of the lands. MS. ANGVIK said that currently the land disposal program consists of disposals through municipal governments under municipal conveyance programs as well as disposals to individuals under preference rights. The last general disposal occurred in the fa of 1996 and they still have some over-the-counter parcels as a result of that offering. CHAIRMAN HALFORD said his question about section 7 was the deletion on line 12 of the term "staking and lease." In the old first remote parcel program, and then homestead program, the methodology that was used in areas that didn't have surveyed subdivision was that the entrant had to stake it, lease it until he paid for the survey, get the survey, and then purchase the land for fair market value. He thought by deleting "staking and lease" they were deleting that program essentially. MS. ANGVIK replied in 1988 the law was changed eliminating staking as a legal description requirement because it became obsolete in the year the homesteading law was changed to require the department to do cadastral surveys before offering the parcels (instead of making the homesteader survey it five years later). CHAIRMAN HALFORD asked what happened to the follower of the remote parcel program and if there was any program where the entrant chooses the location, surveys it within the cadastral survey, pays for the survey and the land. SENATOR GREEN asked if there was anything in section 7 which affects what they did in the agriculture land disposals. MS. ANGVIK replied no and said that the land disposals are significantly smaller than the agriculture parcels. An aliquot park disposal would really leave the owner unclear on where they were on the ground. CHAIRMAN HALFORD said that section 8 didn't do any harm. The committee reviewed section 9 which skipped to section 29 where MS. ANGVIK explained they are trying to create a new remote recreational cabin site leasing program and take away the old public use cabin facilities. MR. ROGERS added they are replacing the old remote cabin permit with a remote recreation lease. Regarding section 10, MS. ANGVIK said the assessment program was designed to have municipal governments tell us what they were going to do with the land and how much they had disposed of. There was a grant program, that no longer exists, that was associated with this to help them get their selections. Since they didn't have the grant program anymore, they didn't see a reason to have this language. CHAIRMAN HALFORD asked why they even have this section in the law since it was part of a package that was designed to encourage municipalities to dispose of land in Juneau and in places where they couldn't get land out because the only decent land was already owned by the municipalities and not by the State. The program was a total failure and never worked. TAPE 97-33, SIDE A CHAIRMAN HALFORD said he was flagging section 12 and said he liked section 13, page 5, line 16 and changing "may" to "should." MS. ANGVIK said her understanding is that the entire remote parcel program was repealed in 1983 and this bill is designed to pick up the pieces that were left over. CHAIRMAN HALFORD said the remote parcel program was combined with the homestead program in 1983, but there was still a staking and location program unless it was changed later. MS. ANGVIK commented that people are staking the parcels they are purchasing right now. They have 90 days to stake it from the time they say they are going to buy it. She thought that was the homesite program. MS. FISHER said she thought the staking provisions were taken out because people were going in and staking over survey lines that were already there and it was, therefore, redundant. She didn't know if there was a program of random staking. MS. ANGVIK said she would get that information for the committee. MR. ROGERS referenced the sectional analysis that says the remote parcel program was repealed in 1983, effective 1984, but the program would be alive until it leaves the year 2016 to accommodate the 20-year purchasing contracts. CHAIRMAN HALFORD said he was involved at the time and they moved the remote parcel program into the homesteading program where you could do basically the same things. The remote parcel program was purchase and the homestead program was sweat equity. They were both 40 acre parcels in large areas that were laid out by the State. The only difference was the method of payment, so the provisions of the remote parcel program carried forward however long that homestead program stayed. The homestead program was always confused with homestead method of payment on a whole bunch or other things that DNR was doing. He didn't know what was left. MS. ANGVIK said she would get that information for the committee. She explained currently they have land sales in public information offices in Anchorage, Fairbanks, and Juneau. These are the places where state-wide offerings were staffed the last time they had one and she thought section 15 was a reflection of that fact. CHAIRMAN HALFORD noted that section 16 required the bidder to be present and came from the same interests that wanted as much local preference as they could get in the way the sales came out. MS. ANGVIK said she understood that requirement to be ruled unconstitutional in a case called "Chambers" which allowed agents to represent bidders who didn't have to be there. CHAIRMAN HALFORD announced an at ease from 5:38 p.m. - 5:40 p.m. Number 282 CHAIRMAN HALFORD said he agreed with the first deletion in section 17 regarding the commissioner consulting with the assessor of a municipality before determining the purchase price because other provisions require an appraisal, and the second deletion he thought referred to the Chambers case again. He said the legislature had tried to make it very difficult for people who weren't there to get land. Number 339 MS. ANGVIK explained regarding section 18 that the State had a hard time determining interest on contracts when allowing people to borrow money. The methodology that was selected was from a federal land bank farm credit district. What replaces that is whatever the current prevailing rate is plus four points, because they don't do credit checks. MR. ROGERS pointed out that the State could choose to extend contracts up to 20 years, but had discretion in that area. MS. ANGVIK explained that section 21 corrects a 1984 error which was restoring the original intent of the veteran's preference auction law. It clarifies that although the law does not apply to a lottery or homesite programs, a veteran's preference auction must be held before restrictive residential lots could be sold. She said the last time they had a sale it was by sealed bid. You apply the veteran's preference after seeing the price. CHAIRMAN HALFORD asked if the veteran's preference was supported by this administration. MS. ANGVIK said she would have to find out. CHAIRMAN HALFORD said a veteran's preference used to be a cash discount rather than a preference among the eventual winners. MS. ANGVIK said that section 22 updates the agricultural preference right law and defines the term "adjacent" instead of "approximate vicinity" which was removed from Title 38 in 1984. CHAIRMAN HALFORD said he agreed with that one and that section 23 was a reference to that section. MS. ANGVIK said section 24 allows upland owners to obtain a noncompetitive shoreland lease and treats shoreland leases the same as tideland and submerged land. CHAIRMAN HALFORD said that section 25 was fine. MR. ROGERS said that section 26 directly affects him as he is part owner of shellfish business on an aquatic farm site. It allows them to convert their permits to leases. People in the industry wanted more certainty like leases versus permits, longer terms, etc. MS. ANGVIK explained that currently there is a three year permit that can evolve into a lease, but it also changes one of the provisions of law that was struck down by the Supreme Court recently of setting up planning districts. They couldn't provide for a permit unless they had assessed the cumulative affects of mariculture activity on the adjacent properties and they had to do all that before they could even issue a permit. Section 26 takes that requirement away and says they can do leases and they are not required to do that kind of planning, but can do their regular plan that they use in development of the leases. MS. FISHER inserted that changing permits to leases has always been the intent of the bill. Number 432 CHAIRMAN HALFORD asked if anyone opposed this section. There were no indications of any. MS. ANGVIK said that section 27 restores surface lease sites after leases terminate. This applies mostly to the North Slope oil development. It also protects the State against liability of high clean up costs by indicating that the owner of the lease has to be responsible for cleaning up the sites. It provides that in the case of residential leases, if a lease is terminated, that the individual can get an appraisal of the improvements that have occurred there. If they exceed $10,000 the State would return that investment. CHAIRMAN HALFORD asked if "residential" was taken out in the last version and asked the reason. MS. FISHER said that was a recommendation of the department. MS. ANGVIK explained that current law says that the ability to be able to recover investments applies to all uses and this would restrict it to just being able to recover expenses for residential uses. The intention of the department is that a commercial user was usually able to amortize the cost of their investment over the life of the lease, whereas a homesteader is not intending to amortize the cost of his home over the same period of time. CHAIRMAN HALFORD announced a recess at 6:00 p.m. and called the meeting back to order at 6:48 p.m. CHAIRMAN HALFORD asked if the reason for this was because the State wanted to change the use and terminate the lease from the State side. MS. ANGVIK replied that it would be because the time has run out or the individual has not fulfilled their requirements under the terms of the lease. CHAIRMAN HALFORD wanted to be sure this wasn't a special provision that dealt with a State's interest in conversion of use in which case he thought the State should pay someone for their investments. MS. ANGVIK said that Senator Taylor did not agree with this proposal last year because he thought that any investment should be compensated. SENATOR TAYLOR asked her to explain how this section works. MS. ANGVIK explained that if a homesteader had a lease and was unable to prove up or purchase it, the land would return to the State who would then have an appraiser assess the value of the improvements on the land. If the improvements exceeded $10,000, when the State made that lease available to someone else, any increase over that $10,000 would be returned to the lessee. She thought the most problematic issues the State has faced in this area is with oil leases. SENATOR GREEN asked if the time periods were very firm because of a lease ending in January and it's an underground tank. MS. ANGVIK said if you are a lease holder, you know years in advance when your lease ends, so you would know in advance if it were going to expire, if you were going to renegotiate it, or if there was a problem with the tank. TAPE 97-33, SIDE B COMMISSIONER SHIVELY said the way it's written the commissioner can extend the time any amount he wants to. He thought the reason the tanks were in there is if they stay there any length of time, the State would start to assume the liability for any clean up problems. MS. FISHER said that section 28 is a conforming amendment needed due to repeal of the bonding requirement for the director of the Division of Lands. COMMISSIONER SHIVELY said he thought all major offices of the State are bonded under a general bond. MS. ANGVIK said regarding section 29, there is a remote cabin permit program which exists only in statute because it has never been implemented. The intent is for the land to be used to build a structure, if you could get a lease which would give you an interest in holding of the land and is program is designed to do that in remote areas of the State. The program has never been implemented because a structure is not a temporary use of the land. This allows people to have renewable five-year leases for cabins in remote sites. At any time during a total of 10 years the lessee could purchase the site after getting it appraised and surveyed, just as in the former open-to-entry and remote parcel programs. Number 552 SENATOR TORGERSON asked what law the squatters at Caribou Hills were under. MS. ANGVIK responded that the Caribou Hills area is in public ownership because there have been no transfers of land to individuals there. So they are all trespassing. CHAIRMAN HALFORD suggested deleting, "if the land is classified for that purpose under the procedures required by AS 38.05.300 and 38.05.945." He said if you have something that's going to work and then you find a land plan against it, at least it doesn't mandate that it be done. He did not want to build barriers that they couldn't cross when the department says there isn't money for the land use plan effort. MS. ANGVIK inserted that she had found the answer to another matter regarding section 3 that they cannot dispose of an interest of land by disposal if it hasn't had an area land use plan that has been approved. The reason for that is that in 1987 the State of Alaska lost a Supreme Court challenge on the question of whether or not we had to have area land use plans in order to dispose of lands (Chase). At that time the land use planning laws were adopted and as a result of those laws and the Supreme Court interpretation, they are required to do area land use planning before they can dispose of lands. If you don't want to do that, you have to go back to the land use planning section of Title 38 and change that. CHAIRMAN HALFORD didn't want to prohibit the plans, but wanted to avoid the mandate of the plans because there are areas where there isn't a lot of interest but they could be offered for sale. MS. ANGVIK emphasized there was a loophole which allows them to hold an auction without a land use plan. SENATOR TORGERSON said there were provisions in the Kenai plan that weren't liked, so they didn't have a plan. He favored the nomination process and land banks. CHAIRMAN HALFORD noted that this repeals all that. He reminisced that the land bank actually worked for a while in the '80s. He thought the positive pressure was relieved and the negative pressure was growing from municipalities that had to provide roads to places that were disposed of. CHAIRMAN HALFORD said section 29 was workable, but he didn't agree with the classification program. In this case the State does all that the purchaser pays for: the survey, appraisal and platting. The benefit is that the State choose surveyors that do it all the same so it would be consistent. The disadvantage is if you say the purchaser has to pay that out of pocket, you find that more people don't do it. They just get their lease and build their cabin and then lose their interest. Most rural surveys cost about $5,000, he said. CHAIRMAN HALFORD said that he agreed with language allowing the lessee to purchase the remote recreational cabin site by having it appraised in a manner acceptable to the department, but he had a problem with the reimbursement on line 29, page 13. COMMISSIONER SHIVELY explained that the difference anticipated under the sale provision (a) is that the department would get to it in their time and then charge people, but in (b) if during that period people wanted to do it themselves and did it in an acceptable manner, they could pay for it directly. CHAIRMAN HALFORD said he liked that. Number 400 SENATOR TAYLOR said he was concerned with fair market value and asked at what time that is established. CHAIRMAN HALFORD explained in previous programs it refereed to fair market value at the time of entry. MS. ANGVIK said it is common for appraisers to do a comparable of any specified year. CHAIRMAN HALFORD asked what the lease fee was. He asked if the lease fee represents a reasonable economic rent for a lease hold use. He also thought it was legitimate to appraise at the time of entry. SENATOR TAYLOR said he thought it was appropriate that the land be paid for at a fair market value at the time of entry. SENATOR GREEN pointed out that fair market value for the site including work done was inconsistent with "at any time." CHAIRMAN HALFORD said that needed to be fixed. Number 370 MS. ANGVIK said that section 30 allows the State to be able to provide non-profit corporations and tax-exempt organizations State lands for public purposes. Right now they are restricted to garbage dumps and cemeteries. This will allow them to convey lands to for subdivision parcels that were originally set aside as open lands. She said there are many governmentally unorganized areas of the State where homeowners associations are capable of being stewards of those resources. CHAIRMAN HALFORD asked how that worked. MS. ANGVIK said that an organization applies to be able to have a piece of land, for instance a picnic area, and they would be able to convey it to them. SENATOR TAYLOR said he would like to see another phrase used to instead of "public facility" that would expand the application. MS. FISHER said this section says the commissioner needs to ensure by regulation or deed restriction that the conveyances serve a public purpose and are in the public interest. CHAIRMAN HALFORD said he thought it had to be tax-exempt first in reference to page 14, line 27 - that it modifies all the categories and added that that is limiting. Number 298 CHAIRMAN HALFORD said section 31 was fine. MS. ANGVIK said section 32 was requested by the Department of Law and clarifies that the division may allow livestock grazing, commercial berry picking or mushroom harvesting, and similar minimal-value consumptive uses by issuing permits. She said that section 33 and 34 goes along with the aquatic farming proposed amendments. It would relieve them of the responsibility of mandatory public hearings on each of those leases and it is the only lease on which a mandatory public hearing is required. MS. ANGVIK said section 36 gives them the opportunity to increase an annual rental of $100 for the permit holders of a lottery until they prove up instead of having a one-time charge. MS. ANGVIK inserted here that she got more information in reference to earlier questions. She said they started in the '60s with simple auctions. In '68 it was changed to the open entry program where they would go out and stake their parcel, generally between 5 and 20 acres, and come back, tell the department and it was theirs. If you wanted, you could have it immediately surveyed and after 10 years it was yours. In 1979 that was changed to the remote parcel program - the difference being that the acreage went from 5 - 20 to 40 acres. The process is the same. In 1983 it was changed to the homestead program which still exists today. This initially was to go out and stake it personally and it was subject to borough platting authorities. After the boroughs decided that homesteader staking was incompatible with land use plans associated with boroughs, they required a survey. For two years the survey was required of the homesteader and then the State started doing it conveying by aliquot parts. This is when the disposal program was changed from just going out there to the State actually laying out exterior boundaries in subdivisions. CHAIRMAN HALFORD asked if the homestead program still existed outside of municipalities. MS. ANGVIK replied yes. Now people stake, but they stake inside a lot that the State has subdivided. She has been told that staking is still a requirement of law, but it is stupid because they don't need to do it. In 1988 the homesteading law was changed saying no survey was required, but the boroughs said if they don't do the survey, the State must. And that is how they got into disposing of land in those subdivisions. CHAIRMAN HALFORD asked what the requirements were for homesteads outside of organized municipalities. MS. ANGVIK replied that you could stake and if you surveyed it, it was yours in two years for free. If you built a house within three years and lived on that site for 27 months, it was yours for free. If you didn't do that, you could build the house and after five years you could buy it at fair market value. These are the steps today. The one big change in the bill tonight is they are getting rid of the building the house part of the homestead because it is extraordinarily expensive for them to check if the houses were built. SENATOR TAYLOR asked if there were lands still out there. MS. ANGVIK replied yes, but it still needs to be staked and it's within a subdivided parcel that the State subdivided and surveyed. CHAIRMAN HALFORD said that was never the intention of the remote parcel program or the homestead program that followed it. At one point there was a requirement in statute that you couldn't stake within a quarter mile of any other property. It was designed so that people would not gather in groups and demand services. MS. ANGVIK said that the lottery system exists today, as well as an auction and they have small homesites which are five acres. If you build a house and live in it, you get the land for free or you can simply buy it. MS. ANGVIK reviewed in 1995 they held a sale of 424 parcels all over the State. Two hundred and thirty nine were sold. The rest of them are still being sold over the counter today. Homestead applications were given to 16,000 people; they received 4,100 applications back and the most popular homesteads were at the end of Petersville Road near Denali and Jack Bay near Valdez. SENATOR TAYLOR said that he wanted land to be made available for disposal, and that it be accurately surveyed, and be accessible by other State lands. COMMISSIONER SHIVELY said he was to get a recommendation within the next few weeks about the next disposal. CHAIRMAN HALFORD asked what was generated in the '95 sale. MS. ANGVIK said there were two answers. One is the five percent the State got and the contracts. However, the State sold most of the contracts in order to generate $25 million to put into the Mental Health settlement. TAPE 97-34, SIDE A MS. ANGVIK said they have not created a new land offering in this State for many years and this appraisal issue was one of the reasons. Every single parcel had to be appraised with the actual cost being $340,000 for three people doing it full time. They actually brought in $22,000. So right now it's actually a break even perspective with respect to the actual cash layout it took them to do the sale. One of their concerns is that land disposals be done right like in the best areas, where there's the highest demand, and figure out what the State should do to prepare for it and decide if they need to subdivide additional land. All of those things are costly. CHAIRMAN HALFORD commented that the highest priority people had at their State land disposal in an early analysis was good t.v. reception. SENATOR TAYLOR asked what their current inventory was. COMMISSIONER SHIVELY replied it was about 5,000 surveyed lots. A lot of the land that people wanted has been selected by or conveyed to municipalities. MS. ANGVIK said one million of the best acres went to the Mental Health Trust, the next million went to the University, and the next best land went to the municipalities. Number 134 CHAIRMAN HALFORD said he didn't agree with section 37 saying that homesite entry permits be offered at lottery. MS. ANGVIK responded that lottery procedures was formerly a statutory requirement, but a 1984 amendment left the connection between the lottery and the homesite unclear. This provision says the department is required to adopt regulations to do this. CHAIRMAN HALFORD said the original reason for this was there were few homesite parcels, which was Oral Freeman's argument, and that's where they started the stuff about the lottery being in the community and you have to be present. This all came out of southeast Alaska's lack of available land. He's not sure that offering all the homesite parcels by lottery makes sense. CHAIRMAN HALFORD asked if those were paid for at fair market value and what were the other variables. MS. ANGVIK said in the lottery program you have the appraised value and that's the price you pay. This auction says if there is more than one, everyone needs a fighting chance. COMMISSIONER SHIVELY said, in response to a comment from Senator Taylor, that there is a problem in being a public land State in talking about homesites, oil leases, etc.. It's a lot different than an individual owning it. Some of it is loaded on by ourselves and a good part of it gets put on by the judicial system. CHAIRMAN HALFORD said sections 38 - 42 all deal with the homestead program which still exists with staking and location and he didn't think they should do that. He would rather fix it than abolish it. This turns it into a pre-subdivided program. All the references take out staking and it was never intend to apply to subdivided parcels. There is no reason subdivided parcels can't be offered under homestead provisions, but to repeal the other provisions for opening other areas to homestead staking is a mistake. MS. ANGVIK reiterated that the big thing in this section is that it removes the requirement to build the house. CHAIRMAN HALFORD said that was fine. She responded that the homestead program is still alive and well; it does repeal all the remnants of the other ones that are no longer in operation. CHAIRMAN HALFORD said he knows the homestead program is still operational, but there are no areas open to it. Number 278 MS. ANGVIK said it seemed the lynch pin in this is the survey and if there's a way to require people to get the land surveyed, then maybe they can go out there. She had been told by someone in the Division of Land that what complicated it was in '88 the law was amended to not require a survey. CHAIRMAN HALFORD asked how they could buy it without a survey. MS. ANGVIK said they would buy aliquot parts. CHAIRMAN HALFORD said that was a legal description and it takes a surveyor to find an aliquot part on the ground. MS. FISHER said that the repealer a lot of people are interested in is 38.09.050 (d) and (e) on page 19, line 29, removing the restrictions on selling or subdividing land after it has been conveyed to a homesteader. Right now there is a 10 year restriction on being able to subdivide. CHAIRMAN HALFORD said the reason for that was to help people get land and not create little communities demanding services and to avoid speculation. There's also a restriction on alienation. MS. ANGVIK said because of the 10-year prohibition the value of the land is reduced by 50% right now. If this is repealed, the flip side is a revenue stream to the State. It increases the value to fair market value. CHAIRMAN HALFORD said the restrictions applied to only the homestead and the remote parcel program. MS. ANGVIK said the repealer takes care of both of them. CHAIRMAN HALFORD said the remote parcel alienation and subdivision restrictions were part of a compromise that, in his opinion, got more land available because it dealt with the fear that some people were opposed to any disposal in their areas and opposed to creating any new communities. Number 419 MS. ANGVIK said section 45 authorizes railroad, highway, and utility line rights-of-way within Chugach State Park necessitated by the Seward Highway relocation project at Bird Point between Anchorage and Girdwood. CHAIRMAN HALFORD said section 46 was fine and asked if anyone objected to changing the time before this takes place from 90 to 120 days. No one objected. MS. ANGVIK explained that section 47 adds a savings clause protecting homesite entry permits (and subsequent patents) granted by lottery after July 6, 1984 which was the effective date of an amendment that dropped a reference to the lottery statute, leaving no statutory guidance on how to issue homesite entry permits. MS. ANGVIK said section 48 specifies the interest rate of prime plus four for new contracts. CHAIRMAN HALFORD said that they entered into a lease agreement that went into a purchase agreement based on a statutory interest rate that was in effect at the time they made entry. And this is saying the new contract they are going to get is different than the one that started the process when they made their entry. He thought entry was a commitment to contract even though it wasn't the initial contract. COMMISSIONER SHIVELY explained that a statutory rate was based on a floating rate. MS. FISHER added that the reason this section was put in was so that people wouldn't come in to renegotiate their contracts to a lower rate which would cost DNR too much. MS. FISHER said section 50, the retroactive section, was put in because of navigability claims. MS. ANGVIK said that the first part lifts the six-year statute of limitations. So section 50 says we get to go back to the beginning with respect to the federal government on navigability. Number 500 CHAIRMAN HALFORD said they would go through section by section for a quick review of the changes. He said that sections 1 and 2 are fine. Section 3 is amended to say "must include, but are not limited to." MS. ANGVIK commented that their attorney said if they use those words they are in the middle of the Chase case all over again. The issue of whether or not you have to use land use plans for disposals was decided by the Supreme Court. CHAIRMAN HALFORD responded that then you have to change the enabling legislation and asked what that would take. MS. ANGVIK replied that would take the planning section which is 38.04.065. MS. FISHER suggested saying "disposals may include" or leave the drafter the ability to determine the best way to deal with it. Discussion of the Chase case ensued. COMMISSIONER SHIVELY said he didn't know why DNR couldn't be exempted from the planning requirement for certain disposals. CHAIRMAN HALFORD said section 4 and 5 were fine. Section 6 on line 30 changed "may" to "shall." TAPE 97-34, SIDE B Section 7 is deleted. MS. FISHER asked if the committee wanted all the staking sections removed. CHAIRMAN HALFORD indicated yes. MS. ANGVIK asked if he wanted to stake subdivided lands. CHAIRMAN HALFORD said he wanted that to only apply to subdivided lands and not change anything else. CHAIRMAN HALFORD said sections 8 and 9 were fine. Repeal section 10, all of 38.04.021, and section 11. Section 12 was deleted. Section 13 was o.k. Number 498 CHAIRMAN HALFORD said to delete section 14. Sections 15, 16, 17, 18, and 19 were fine. SENATOR LEMAN said he didn't agree with the interest rates in section 20 and asked if they could use prime plus 2. CHAIRMAN HALFORD said that was too cheap. SENATOR LEMAN asked what the market rate was. COMMISSIONER SHIVELY responded that it's impossible to finance raw land at a bank. So he didn't think these interest rates were out of line, at all. They decided on prime plus 3 percent instead of 4 percent. MS. ANGVIK reminded them that there were no credit checks. MS. ANGVIK said there was no veteran's program today and that is because the way the statute is written there is no way to give preference. Language in section 21 says if we're going to have a preference for veterans, we would have to hold a sale to which only veterans could come and allows them to do that. She explained that the reason it does that is that in 1984 the law did not apply to the lottery, homesite or homestead programs. This allows that to occur at an auction. There was no objection to section 21. Sections 22, 23, 24, 25 and 26 were fine. In section 27 CHAIRMAN HALFORD said he would move below-ground tanks into the longer category or at least to 60 days because that's existing law. There was no objection to that. CHAIRMAN HALFORD said that section 28 was fine. He suggested deleting, "if the land is classified for that purpose under the procedures required by 38.05.300 and 38.05.945." in section 29. SENATOR TAYLOR said they should take out "dispersed populations." COMMISSIONER SHIVELY added that dispersed populations is slightly redundant because they say remote recreational cabin sites, etc. CHAIRMAN HALFORD said to delete the rest of the sentence after "sites" on page 13, line 26. SENATOR TAYLOR said that "at time of entry" needs to be added on to "fair market value" on page 13, line 29 and page 14, line 8 (section 29). There were no objections. Sections 30, 31, 32, 33, 34, 35, 36 and 37 were fine. MS. ANGVIK said she did not think they wanted to let the staking issue be involved in section 38. This section says they can get land by lottery. CHAIRMAN HALFORD said the guts of this amendment is to delete the old Oral Freeman language that you've got to do it close to home. CHAIRMAN HALFORD said section 39 was deleted. MS. ANGVIK aske they could still charge the fee on page 18, lines 11 and 12. CHAIRMAN HALFORD said they would go from $5 to $10, not $20, but they are restoring (4) and (5). Number 247 CHAIRMAN HALFORD said he was inclined to delete section 40 because it is in conflict with the staking. MS. ANGVIK said the big thing was the houses on page 19, paragraph (3). It was decided to delete that paragraph. CHAIRMAN HALFORD asked if there was any requirement to live on the land. MS. ANGVIK replied that you could do option 1 which is live on the land, pay for the survey and platting, and.... CHAIRMAN HALFORD said he was uncomfortable with that because he thought they would be eliminating the old program. MR. ROGERS said this related to the broader question of kind of fixing this program to cover his concerns. CHAIRMAN HALFORD said the only thing he agreed to in section 40 is elimination of the habitable dwelling requirement - none of the additions and none of the other deletions because he thought they were in conflict with all the other existing statutes. There were no objections to that. Section 41 was fine. MS. ANGVIK added that nothing prevents them from residing in a temporary dwelling. CHAIRMAN HALFORD emphasized they didn't care what they lived in anymore. CHAIRMAN HALFORD asked what section 42 does. MS. ANGVIK answered that it was a new section that affects remote parcel programs. This section would prohibit the department from imposing conditions on new remote parcel purchase contracts. This is a repealer they were talking about. CHAIRMAN HALFORD said the 38.09. sections needed to be reviewed because he didn't want the entire homestead program to be repealed. MS. ANGVIK replied that 38.09.050 were just done - where the people don't have the restriction of not being able to subdivide the land. 38.09.050 (d) and (e) say they can subdivide and sell it. CHAIRMAN HALFORD noted that they had five repealers, plus the three on mariculture. MR. ROGERS asked about the other repealers. MS. FISHER explained that 38.08.090 is unnecessary because of 43. It is a disclaimer of intent to provide services. MR. ROGERS asked about the 38.04 repealers. MS. FISHER said those all go with the land disposal bank. MS. ANGVIK added that 38.05.057 repeals the down payments at land lotteries. She didn't know why that was in there. She said that 38.05.079 eliminated the remote cabin permit program. CHAIRMAN HALFORD said that could go because they replaced it. Section 45 was fine. Section 46 was aquatic farming. MS. ANGVIK said she would like to add a couple of words to say that there are people who have applied for renewal and have been approved, but they haven't received their permit yet on the day the Supreme Court ruled. And this saves them. The other people who had applied for a new one are approved, but on the day the court ruled, they didn't have a piece of paper that said they were. CHAIRMAN HALFORD said section 47 was fine. Section 48 was changed to prime plus 3 percent. MS. ANGVIK said that section 49 allows the department to adopt regulations in advance of the bill's effective date, but doesn't take effect until July 1. CHAIRMAN HALFORD said that section 50 was a 30-year retroactive clause. SENATOR TAYLOR said that sets a new record for reach. MS. ANGVIK said it was constitutionally allowable. CHAIRMAN HALFORD asked if there was a question on the other part of the permitees. MS. FISHER said she talked to the legislative drafter, Mr. Luckhaupt, and he still needed to talk to the AG's office because they are trying to give permit holders preference in order to get the lease under the bill, but there's the problem with when you grant a final decision, how do you give them a permit that no longer exists. Number 49 CHAIRMAN HALFORD asked about the fiscal note. MS. ANGVIK said it was a positive $93,000. CHAIRMAN HALFORD said there was a change in allowing the increase from $5 to $10, not $20. MS. ANGVIK said she didn't think that was calculated in the fiscal note, anyhow. SENATOR LEMAN moved to adopt a CS incorporating the amendments referenced so far. There were no objections and it was so ordered. CHAIRMAN HALFORD adjourned the meeting at 9:15 p.m.