HB 181-MINING LICENSE REVENUE; REVENUE SHARING  9:48:08 AM CO-CHAIR LEDOUX announced that the final order of business would be HOUSE BILL NO. 181, "An Act relating to the accounting for money received by the state from the mining license tax, mining lease payments, and royalties from mining on state tide and submerged land seaward of a municipality, and the availability of that money for appropriation to certain boroughs and municipalities outside of a borough." [Before the committee was CSHB 181, Version 28-LS0649\U, Bullock, 3/25/13, adopted on April 9, 2013.] 9:48:59 AM REPRESENTATIVE FOSTER, speaking as the sponsor of HB 181, began by thanking the committee for visiting Nome this interim to observe firsthand what is occurring with mining and the gateway to the Arctic. He then provided the following testimony: In 2011 the Department of Natural Resources conducted an offshore mineral lease sale off the coast of Nome. The sale prompted a spike in demand for docking at the Nome harbor and it was space the harbor doesn't have and can't afford to build. In the year after the mineral lease sale, dockings went from 271 to 436. While the state received revenue from this, there was no framework to help the city with the new infrastructure that was needed and so ... this bill would help to provide that framework. 9:50:39 AM PAUL LABOLLE, Staff, Representative Foster, Alaska State Legislature, added that Nome finds itself in the unique situation of having mining operations on municipal land that would normally be subject to property tax. However, since the land is out at sea, the city can't avail itself of that option and HB 181 provides another angle from which to address the matter. He then informed the committee of the drafting error on page 2, line 20, where the term "gross" needs to be replaced with "net". 9:52:52 AM CO-CHAIR NAGEAK moved that the committee adopt Amendment 1, as follows: Page 2, line 20; Delete "gross" Insert "net" There being no objection, Amendment 1 was adopted. 9:53:17 AM MR. LABOLLE then explained that the Department of Natural Resources (DNR) pointed out that Section 1 of Version U refers to "AS 38.05.135", which is the leasing, royalty, and net profits share payments and interest. However, the authority used for the lease sales in Nome was based on AS 38.05.250, which is the prospecting, permits, and leases on tidelands and submerged lands. Therefore, those references need to be changed. REPRESENTATIVE FOSTER characterized the change in statutory references as housekeeping. 9:55:29 AM CO-CHAIR NAGEAK moved that the committee adopt Amendment 2, as follows: Page 1, lines 6 and 9 Delete "38.05.135" Insert "38.05.250" Page 1, line 10 Delete "38.05.160 and "38.05.142" 9:56:45 AM REPRESENTATIVE DRUMMOND pointed out that on page 1, line 10, there is no reference to "38.05.142". MR. LABOLLE acknowledged the mistake and stated that the deletion should be to "38.05.181". 9:58:19 AM CO-CHAIR NAGEAK withdrew his motion. 9:58:25 AM BRENT GOODRUM, Director, Division of Mining, Land and Water, Department of Natural Resources, confirmed that with the correction to Amendment 2 to refer to "38.05.181" Amendment 2 would be correct. 9:58:45 AM CO-CHAIR NAGEAK moved that the committee adopt Amendment 2 [with handwritten changes], as follows: Page 1, lines 6 and 9 Delete "38.05.135" Insert "38.05.250" Page 1, line 10 Delete ""38.05.160" and "38.05.181" There being no objection, Amendment 2 was adopted. 9:59:15 AM CO-CHAIR LEDOUX opened public testimony. 9:59:59 AM JOY BAKER, Port Project Manager, City of Nome, read Mayor Denise Michaels' letter in support of HB 181 as follows: With the recent sustained high prices for precious metal and the State of Alaska DNR sponsored lease sale, Nome has experienced an influx of offshore and placer miners. These miners have provided an economic boost to local merchants and the local economy, but at that same time has adversely impacted some of the city's services to the community. Even though the City of Nome normally funds services with (indisc.) of revenue sources like property or sales tax, revenues to cover the cost of an additionally $60,000 annually for staffing associated with the seasonal influx of miners is not sufficient. In addition, the City of Nome has expended $302,000 for the growth of our port facility and to expand facilities to support the gold dredging fleet. Similar effects are experienced in other communities from the seasonal nature of the fishing industry on coastal communities. A potential solution to a portion of the revenue shortfall may be possible with the reallocation of the State of Alaska mining license tax. This tax applies to all mining operations regardless of land status, size, or location. Presently, there is no uniform mechanism to allocate portions of the revenue back into the communities impacted by the resource development. Such a revenue sharing model is effective in the Alaska fishing industry and a similar program has been successful in revenue sharing from the oil and gas industry in the Gulf of Mexico. Sharing portions of state revenue from mining developments with local communities in a predictable fashion will reduce the need for local governments to impose their own targeted taxes on the industry and allow local communities to provide services to all entities in the community. 10:02:48 AM MS. BAKER then provided her own comments relating that the demand for the offshore dredging fleet increases each season. The aforementioned increases costs of labor, management of overcrowding, and design and study engineering to accommodate the increased vessel space demands. During the 2013 season, there were two vessel fires that required volunteer fire response. One of the vessels was located 50 feet away from the shore, which limited the shore-side response and highlighted the need for a vessel with firefighting capabilities. She characterized the management of this growing fleet as challenging to the City of Nome. Ms. Baker related her support for HB 181. 10:03:59 AM CO-CHAIR LEDOUX, upon determining no one else wished to testify, closed public testimony. 10:04:11 AM REPRESENTATIVE FOSTER reiterated that currently 50 percent of the funds from the mining tax revenue goes to the permanent fund and that will continue under HB 181. However, under HB 181 up to half of the other 50 percent that goes to the general fund would be allocated to impacted communities at the discretion of the legislature. Although the legislature can already do the aforementioned, this legislation would correlate the impacts of the state's leasing activities for offshore mining to cities' resources. 10:05:19 AM CO-CHAIR NAGEAK moved to report CSHB 181, Version 28-LS0649\U, Bullock, 3/25/13, as amended, out of committee with individual recommendations and the accompanying fiscal note. There being no objection, CSHB 181(CRA) was reported from the House Community and Regional Affairs Standing Committee.