Legislature(2017 - 2018)BUTROVICH 205

02/20/2017 03:30 PM RESOURCES

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03:31:01 PM Start
03:31:33 PM Overview: University of Alaska Land Grant Status
04:13:57 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overview of the University of Alaska Land Grant TELECONFERENCED
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                       February 20, 2017                                                                                        
                           3:31 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Cathy Giessel, Chair                                                                                                    
Senator John Coghill, Vice Chair                                                                                                
Senator Shelley Hughes                                                                                                          
Senator Kevin Meyer                                                                                                             
Senator Bill Wielechowski                                                                                                       
MEMBERS ABSENT                                                                                                                
Senator Natasha von Imhof                                                                                                       
Senator Bert Stedman                                                                                                            
COMMITTEE CALENDAR                                                                                                            
OVERVIEW: UNIVERSITY OF ALASKA LAND GRANT STATUS                                                                                
     - HEARD                                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record                                                                                                    
WITNESS REGISTER                                                                                                              
JIM JOHNSEN, President                                                                                                          
University of Alaska Anchorage (UAA)                                                                                            
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided overview of the University of                                                                   
Alaska's (UA) land grant status.                                                                                                
ANDY HARRINGTON, Associate General Counsel                                                                                      
University of Alaska Fairbanks (UAF)                                                                                            
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Commented on UA's land grant status.                                                                     
KIT DUKE, Director                                                                                                              
Facilities and Maintenance                                                                                                      
University of Alaska Anchorage (UAA)                                                                                            
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Commented on UA's land grant status.                                                                      
ACTION NARRATIVE                                                                                                              
3:31:01 PM                                                                                                                    
CHAIR  CATHY   GIESSEL  called  the  Senate   Resources  Standing                                                             
Committee meeting  to order at 3:31  p.m. Present at the  call to                                                               
order  were  Senators  Coghill, Wielechowski,  Meyer,  and  Chair                                                               
^Overview: University of Alaska Land Grant Status                                                                               
        Overview: University of Alaska Land Grant Status                                                                    
3:31:33 PM                                                                                                                    
CHAIR  GIESSEL announced  that the  committee would  take up  one                                                               
item  today,  the overview  of  the  land  grant status  for  the                                                               
University of Alaska (UA). The  Resources Committee is interested                                                               
in this subject,  because it concerns the issue  of possession of                                                               
lands through grants, and Alaska  received land grants because of                                                               
the Statehood Act to Alaska  Native Regional Corporations through                                                               
the Alaska Native Claims Settlement  Act (ANCSA), and through the                                                               
Alaska  National Interest  Lands Conservation  Act (ANILCA).  Who                                                               
has possession of  the land and what they are  allowed to do with                                                               
it has  significant implications.  In these  fiscally challenging                                                               
times, it's  important to constantly  ask the question  about how                                                               
our key government services function and how they are funded.                                                                   
CHAIR GIESSEL  said she  often hears  from constituents  that the                                                               
University should simply  sell their land and then  they could be                                                               
completely  funded.  However, the  University  of  Alaska is  the                                                               
state's  land   grant  university,   and  like  our   state,  the                                                               
University needs  to leverage  the value of  its land  to promote                                                               
essential services  and educational opportunities. If  that's not                                                               
happening, they should know why.                                                                                                
She  said this  committee has  had well-rounded  exposure to  the                                                               
University  of Alaska.  Senator  Hughes, chair  of the  Education                                                               
Committee,  has had  President Johnsen  before that  committee to                                                               
talk about  the University,  and the  Finance Committee  heard an                                                               
overview of their  budget just last week. So, today  she hoped to                                                               
get further  insight into the  land grant opportunities  that the                                                               
University has. She welcomed President Johnson to the table.                                                                    
3:33:26 PM                                                                                                                    
JIM JOHNSEN, President, University  of Alaska, Anchorage, Alaska,                                                               
said he  appreciated this opportunity  to shed some light  on one                                                               
reason  why  the  University  has   historically  relied  on  the                                                               
legislature so heavily for funding,  which is because of the land                                                               
grant deficit. Second, he wanted  to educate and discuss with the                                                               
legislature and  get their views  of his approach  going forward.                                                               
He had experts on line to address questions.                                                                                    
3:34:13 PM                                                                                                                    
SENATOR HUGHES joined the committee.                                                                                            
3:34:21 PM                                                                                                                    
MR. JOHNSEN said he would walk through four steps:                                                                              
1. Provide land grant deficit history.                                                                                          
2. Share current thinking on a solution.                                                                                        
3. Review existing holdings                                                                                                     
4. Provide  a primer on  the UAA  Land Trust balance,  the entity                                                               
into which these lands would go,  and how it is used now, because                                                               
that may  foreshadow how increased  proceeds could be  used going                                                               
3:35:03 PM                                                                                                                    
MR.  JOHNSEN said  that  only Delaware  received  a smaller  land                                                               
grant than the University of Alaska,  and Hawaii got cash in lieu                                                               
of a  land grant, but some  states are so small  that their names                                                               
can't be  written on a  map, like Rhode Island,  Connecticut, and                                                               
Massachusetts. Those states all  got grants larger than Alaska's.                                                               
It makes no sense.                                                                                                              
He  said that  Alaska received  .11 percent  of the  state's land                                                               
grant at  statehood; it amounted to  approximately 110,000 acres,                                                               
but that  increased to close  to 500,000 acres under  the various                                                               
federal acts. So the current deficit is about 360,000 acres.                                                                    
3:36:18 PM                                                                                                                    
MR. JOHNSEN  said in 1862,  President Lincoln passed  the Morrill                                                               
Act that created  land grant universities all  across the country                                                               
for work force development and to develop the frontier.                                                                         
3:36:56 PM                                                                                                                    
In  1915, Territorial  Delegate  James Wickersham  got a  statute                                                               
through  Congress to  provide some  land  for what  was then  the                                                               
Alaska Agricultural College and School of Mines.                                                                                
3:37:37 PM                                                                                                                    
In 1929, the Sutherland Land  Grant Statute granted an additional                                                               
100,000 acres of  land to the Territory for the  exclusive use of                                                               
the Alaska Agricultural College and  School of Mines. In 1935, it                                                               
became the University of Alaska.                                                                                                
3:37:49 PM                                                                                                                    
An  early version  of the  statehood  bill set  aside 10  million                                                               
acres for the  University of Alaska. But the  final Statehood Act                                                               
was a whole lot different:  it repealed the Wickersham land grant                                                               
of 1915 and  removed Alaska's eligibility for  Morrill Act lands,                                                               
all the while giving a substantial  grant of 103 million acres to                                                               
the  state. The  University got  nothing. Congress's  expectation                                                               
was that  the University's  land grant would  be included  in the                                                               
state's land  grant. In other  words, the state would  just turn,                                                               
pivot, and grant it some land and everybody would be good.                                                                      
MR.  JOHNSEN said  one  of the  first acts  of  the first  Alaska                                                               
Legislature in 1959 was to  grant the University 1 million acres.                                                               
That  was vetoed  by Governor  Egan. Additional  land bills  have                                                               
been  passed by  Congress over  the years,  but full  transfer of                                                               
those  lands are  still in  many cases  to be  finished, and  the                                                               
University's land grant, despite  those various attempts, remains                                                               
3:39:16 PM                                                                                                                    
CHAIR  GIESSEL  asked why  Governor  Egan  vetoed the  1  million                                                               
ANDY  HARRINGTON,   Associate  General  Counsel,   University  of                                                               
Alaska,  Fairbanks,  Alaska,  answered  that  Governor  Egan  was                                                               
concerned about the anti-dedication clause in the Constitution.                                                                 
MR.  JOHNSON  said  between  1997 and  2005  several  bills  were                                                               
introduced in  an attempt to  address the deficit, but  none were                                                               
successful. However,  significant progress was made  in 2000 when                                                               
the  State  Legislature  authorized   the  University  to  select                                                               
260,000  acres of  land,  but that  got  vetoed. The  legislature                                                               
overrode  that veto,  and  then  the issue  went  to the  Supreme                                                               
Court, the  question being  whether a conveyance  of land  was or                                                               
was not an  appropriation for purposes of an  override. The court                                                               
ruled it was not, but the dedication issue was unresolved.                                                                      
The University went  to work selecting lands  and identified them                                                               
in HB 130. That went back to  the Supreme Court and the state was                                                               
found   to   have  violated   the   dedication   clause  of   the                                                               
Constitution,  so the  University  started handing  land back  to                                                               
3:42:07 PM                                                                                                                    
Is there a solution? Mr. Johnson said they believe there is.                                                                    
He  said  the  deficit  is now  approximately  360,000  acres.  A                                                               
permanent  land  endowment  would  be  very  beneficial  for  the                                                               
University  in years  to come.  It would  allow it  over time  to                                                               
moderate the  reliance it has  on the general fund.  Many Alaskan                                                               
heroes   have  attempted   to  remedy   the   deficit,  but   the                                                               
Constitution is  pretty clear  in the  Supreme Court's  mind. And                                                               
the federal  government is  supportive in  general, but  has said                                                               
"we gave  you the  land." Everyone wants  the University  to have                                                               
more land, but the question is who is going to pay for it.                                                                      
3:43:22 PM                                                                                                                    
MR. JOHNSEN  said the  Constitution's anti-dedication  clause has                                                               
an  exception that  says: "Except  when required  by the  federal                                                               
government for state participation  in federal programs." So, now                                                               
the University  is in  preliminary discussions  with the  DNR and                                                               
the congressional delegation on  federal legislation to establish                                                               
precisely that program.                                                                                                         
3:44:05 PM                                                                                                                    
CHAIR GIESSEL said the state  participates in the federal student                                                               
loan program and asked if that  is the kind of federal program he                                                               
is talking about.                                                                                                               
MR. HARRINGTON answered that the  federal student loan program is                                                               
one of many  different types of programs  that have federal/state                                                               
cooperation, but the concept they  are marketing with the federal                                                               
congressional delegation now  follows the voluntary state/federal                                                               
cooperative  model  that  basically  sets  up  a  permanent  land                                                               
endowment to consist of a mix  of state and federal lands. If the                                                               
state doesn't  want to put any  lands into this program,  then it                                                               
doesn't   participate,  and   the  federal   government  has   no                                                               
obligation to hand over any lands  either. The mix of lands would                                                               
then constitute the UA permanent land endowment.                                                                                
SENATOR HUGHES  asked if the  program could  be set up  through a                                                               
regulatory framework or would it take an act of congress.                                                                       
MR. HARRINGTON  answered it  would take an  act of  congress, and                                                               
they   are   cautiously   optimistic    that   in   its   current                                                               
configuration, congress might be receptive.                                                                                     
3:47:37 PM                                                                                                                    
SENATOR WIELECHOWSKI asked if the  congress passed an act and the                                                               
state  set up  its own  program, would  the legislature  still be                                                               
required   to  make   the  appropriation   or  would   the  funds                                                               
automatically transfer into the University's Trust Fund.                                                                        
MR. HARRINGTON answered  that the lands would be in  the hands of                                                               
the UA  Board of  Regents who would  develop income  and revenues                                                               
from   those  lands,   and  those   would   not  require   annual                                                               
appropriation from the legislature. The  thought is that the land                                                               
endowment wouldn't ever get to  the point of completely replacing                                                               
the general fund contribution. So,  the University would still be                                                               
subject to the discretion of the legislature for some revenues.                                                                 
3:49:35 PM                                                                                                                    
SENATOR WIELECHOWSKI asked if he  was aware of any dedicated fund                                                               
issues that the state would have in doing that.                                                                                 
MR. HARRINGTON  answered that  he couldn't  pretend comprehensive                                                               
knowledge of  dedicated funds. The  Supreme Court said  there are                                                               
three  exceptions:   one  is  the  Permanent   Fund,  another  is                                                               
dedicated funds  that existed  at the  time the  Constitution was                                                               
ratified,  and  the  third  is  any  dedications  when  they  are                                                               
required  by the  federal government  for state  participation in                                                               
federal programs.  He didn't know  how many situations  like that                                                               
fit into one  of those three exemptions aside  from the Permanent                                                               
3:51:15 PM                                                                                                                    
SENATOR WIELECHOWSKI said  the Fish and Game  Fund, the cigarette                                                               
tax  fund,  and  the  highway fund  require  further  legislative                                                               
appropriation, and  the only  one that has  a direct  transfer is                                                               
the  Permanent  Fund,  which  the state  is  arguing  before  the                                                               
Supreme  Court right  now  in a  case he  is  involved with.  The                                                               
ruling in  that case could  have a big  impact on the  ability to                                                               
get money transferred directly to the University.                                                                               
MR. HARRINGTON said he agreed.                                                                                                  
3:52:10 PM                                                                                                                    
MR.  JOHNSEN said  it would  be  helpful to  review current  land                                                               
holdings  and  how they  are  utilized.  They have  approximately                                                               
151,000  acres  of land,  most  of  it  acquired under  the  1929                                                               
Sutherland Act,  from other  parties and  local state  or federal                                                               
governments. For example,  a couple of community  campuses are on                                                               
lands donated  by those communities  to further the  interests of                                                               
vocational and technical education.                                                                                             
He said  the University  has a  statewide land  management office                                                               
that  is responsible  for  managing,  developing, acquiring,  and                                                               
disposing of the University's real  property, and since 1987 they                                                               
have  generated  over $200  million  from  them. That  income  is                                                               
deposited into the University's  Land Grant Endowment Trust Fund,                                                               
a permanent  endowment. It generates  earnings that are  used for                                                               
various educational purposes  and research, particularly purposes                                                               
related   to  natural   resources:   fisheries  research,   ocean                                                               
sciences,  biology,  and  agriculture. Perhaps  the  single  most                                                               
important  purpose for  the last  18 years  has been  the use  of                                                               
these funds to pay for the  Alaska scholars program that awards a                                                               
$12,000 tuition  scholarship to  the top  10 percent  of Alaska's                                                               
high school  graduates if they  attend the University  of Alaska.                                                               
Since  the  formation  of  the  Alaska  Scholars  Program,  3,882                                                               
Alaskans have graduated benefiting from this program.                                                                           
MR. JOHNSEN said their intent is  to deposit these lands into the                                                               
endowment  and  to use  the  generated  revenues for  educational                                                               
3:54:23 PM                                                                                                                    
CHAIR GIESSEL asked about the National Park Service.                                                                            
MR. JOHNSEN responded  that the university has  about 30 National                                                               
Park  Service in-holdings  around the  state. A  slide summarized                                                               
the uses of  the 150,000 acres; 12,000 acres  have an educational                                                               
purpose: their campuses  are on those lands.  That leaves 138,000                                                               
acres for investment  purposes. He provided a  description of how                                                               
those lands  are allocated and  said they simply haven't  had the                                                               
opportunity  to really  assess the  commercial monetary  value of                                                               
the  96,000  remaining acres.  Their  land  holdings now  include                                                               
timber  development, park  inholdings, and  current subdivisions,                                                               
material sales  (gravel and the  like), and about 2,000  acres of                                                               
potential oil and gas development.                                                                                              
SENATOR GIESSEL asked what kind  of access challenges he has with                                                               
the National Park Service.                                                                                                      
MR.  JOHNSEN responded  that he  couldn't say  specifically where                                                               
the  access issues  are,  but they  do  have serious  challenges,                                                               
which  constrains   the  monetary   value  of   those  particular                                                               
3:56:34 PM                                                                                                                    
KIT  DUKE, Director,  Facilities and  Maintenance, University  of                                                               
Alaska Anchorage (UAA), Anchorage,  Alaska, said those properties                                                               
are  in  the  Wrangell  Saint  Elias  National  Park  around  the                                                               
McCarthy area, and some are in  Southeast and the Chugach. All of                                                               
them  have  access  challenges.   They  are  called  in-holdings,                                                               
because there is no way to  get to those parcels other than maybe                                                               
float  down a  river  or fly.  She  said they  had  been able  to                                                               
monetize a couple of parcels recently:  one as a sale to the Park                                                               
Service and one as  a trade for land that was  in the Seward area                                                               
and accessible by road.                                                                                                         
3:57:41 PM                                                                                                                    
MR.   JOHNSEN  said   he  would   provide   maps  and   follow-up                                                               
information, so  they can see  precisely where the  land holdings                                                               
are  located.  Other parcels  are  near  White Mountain  east  of                                                               
Fairbanks, and near the Gulf of Alaska.                                                                                         
SENATOR MEYER said it looks like  the bulk of their acreage is on                                                               
the Gulf of Alaska.                                                                                                             
3:59:17 PM                                                                                                                    
SENATOR WIELECHOWSKI said  he was curious about the  HB 130 lands                                                               
that the University selected.                                                                                                   
MR. JOHNSEN said he would be happy to include that as well.                                                                     
SENATOR COGHILL  said he was  interested in knowing who  bore the                                                               
cost of all the selections.                                                                                                     
MR. JOHNSEN said he would find that out also.                                                                                   
SENATOR MEYER said  slide 11 indicated 17,000  acres of potential                                                               
timber  development and  asked if  he is  aggressively trying  to                                                               
develop it.                                                                                                                     
MR. JOHNSEN  replied that they  have absolutely  harvested timber                                                               
and  have an  active timber  harvest program;  Ms. Duke  could go                                                               
through the details. He added  that timber provides a substantial                                                               
amount of revenue.                                                                                                              
SENATOR MEYER  said he also wanted  to know more about  where the                                                               
potential oil and gas development is located.                                                                                   
MS. DUKE responded  that they are working closely  with the DNR's                                                               
Division of Forestry  and the Mental Health Trust  Land Office to                                                               
do coordinated  offerings of  sales. They  have completed  two in                                                               
the  last two  years  bringing in  about $1  million.  So, it  is                                                               
possible to  be in  the timber business,  again, although  not at                                                               
the Icy Bay scale. They are  trying to do it well by coordinating                                                               
with local  communities and using  local people in jobs.  The two                                                               
sales have  been well-received. The University  could potentially                                                               
make  tens  of  millions  of  dollars  from  the  land  currently                                                               
identified. It could  be as much as $100-150 million  if they get                                                               
some additional  lands jointly identified  by the state  and USFS                                                               
to come to  the University if the program for  additional land is                                                               
4:03:04 PM                                                                                                                    
As to the potential for  oil and gas development, University land                                                               
is  not on  the  North  Slope, but  royalties  are received  from                                                               
developments on the Kenai and the Cook Inlet.                                                                                   
SENATOR MEYER asked where the out-of-state land came from.                                                                      
MS. DUKE replied  those lands were donations.  The University has                                                               
not purchased any out-of-state holdings.                                                                                        
SENATOR MEYER asked how much and how often land is donated.                                                                     
MS. DUKE answered in the last  five years they have gotten one or                                                               
two donations a year. They  are usually not significant acreages.                                                               
For instance,  one is the  Rasmussen House in Anchorage  that was                                                               
donated two years ago.                                                                                                          
4:04:40 PM                                                                                                                    
SENATOR WIELECHOWSKI  asked when  the University  owns subsurface                                                               
rights for oil  and gas does it get the  royalties instead of the                                                               
state and  does the  University negotiate  directly with  the oil                                                               
companies or is that done by the state.                                                                                         
MS.  DUKE answered  when the  University owns  the subsurface  it                                                               
receives  the  revenues  from  whatever  is  below  the  surface,                                                               
whether minerals, or gravel, or oil and gas.                                                                                    
SENATOR WIELECHOWSKI  asked if  that money  goes directly  to the                                                               
University or if it is appropriated by the legislature.                                                                         
4:05:52 PM                                                                                                                    
MR. JOHNSEN  answered that it  gets deposited into the  trust and                                                               
it is not appropriated by  the legislature. Like other endowments                                                               
and trusts,  the balance of the  trust has grown over  the years,                                                               
but  it took  a hit  in  the market  crash  due to  its cash  and                                                               
equities investments.  He emphasized  that the earnings  from the                                                               
trust are used for university purposes.                                                                                         
4:06:53 PM                                                                                                                    
Slide 14 indicated  five years of trust balances; in  FY16 it had                                                               
$138 million. He  said the University is trying  to diversity and                                                               
reduce its reliance on the legislature for funds.                                                                               
SENATOR COGHILL said  they would watch with interest  how he will                                                               
approach  the federal  government,  but it  sounds  like at  this                                                               
point he expects  the federal program would allow  state lands to                                                               
be conveyed  over under  some federal authority.  He asked  if he                                                               
anticipated some federal land being added to the state land.                                                                    
MR. JOHNSEN said he hoped so.                                                                                                   
SENATOR WIELECHOWSKI  asked if  that is how  they get  around the                                                               
dedicated  funds  clause now:  because  the  land was  designated                                                               
prior to enactment of the Alaska Constitution.                                                                                  
MR. JOHNSEN  answered that he  wouldn't use "get around,"  but in                                                               
as much as it's a legal  question, he would ask Mr. Harrington to                                                               
MR. HARRINGTON  answered the  Alaska Supreme  Court noted  in the                                                               
SEACC  opinion   that  what  the  Alaska   Legislature  tried  to                                                               
accomplish in  2002/2005 was  analogous to  how the  federal land                                                               
grants had  worked during  territorial days  when the  money from                                                               
the federal  land grants was  used for the University.  It didn't                                                               
explicitly  state what  the system  meant with  the exception  of                                                               
funds that  were already  in place at  the time  the Constitution                                                               
was ratified.  That was not  the question before them;  the court                                                               
was  trying  to  decide  whether the  new  2000/2005  legislation                                                               
complied with  the anti-dedication  clause and  said it  did not.                                                               
It's fair  to say the  pre-statehood federal land grants  did not                                                               
violate  the  current constitution  and  most  logically that  is                                                               
because they were already in place at the time of statehood.                                                                    
SENATOR WIELECHOWSKI  asked who  decides how funds  are disbursed                                                               
from the UA Land Trust balance.                                                                                                 
MR. JOHNSEN  answered the  Board of  Regents makes  that decision                                                               
upon a recommendation from himself.                                                                                             
SENATOR COGHILL asked  if he was going to look  at the lands that                                                               
were already outlined in bulk by the 2000/2005 legislation.                                                                     
MR. JOHNSEN replied that they  certainly would look there, and at                                                               
other lands  to the extent they  have learned more about  oil and                                                               
gas  opportunities  and  where  sustainable  energy  sources  are                                                               
located. He noted  that the UAF has the Alaska  Center for Energy                                                               
and  Power  and   they  have  done  an   "impressive  census"  of                                                               
alternative energy resources across the state.                                                                                  
SENATOR COGHILL  said the only  reason he brought those  lands up                                                               
is because they were "compromise  selections" that went through a                                                               
pretty  rigorous process  and  he sees  no  sense in  reinventing                                                               
that. He was also a  little conflicted because the University has                                                               
about 12,000 agricultural acres outside  of his home town that he                                                               
guessed had some potential gas  and transportation corridors, and                                                               
between the  University, the state,  and Doyon, he wanted  to see                                                               
something happen out there.                                                                                                     
CHAIR GIESSEL found no further questions and thanked Mr. Johnson                                                                
and his team.                                                                                                                   
4:13:57 PM                                                                                                                    
CHAIR GIESSEL adjourned the Senate Resources Committee meeting                                                                  
at 4:13 p.m.                                                                                                                    

Document Name Date/Time Subjects
SRES- Univ Alaska Lands Presentation-2-20-17.pdf SRES 2/20/2017 3:30:00 PM
SRES-List-Unviversity Land Grants by State-2-201-17.pdf SRES 2/20/2017 3:30:00 PM
SRES-Responses to Comm Member Questions.pdf SRES 2/20/2017 3:30:00 PM