HOUSE BILL NO. 20 "An Act relating to rights in certain tide and submerged land." Work Draft for HB 20, #9-LS0118\G, dated 2/3/95 was adopted during the 3/3/95 meeting of the House Finance Committee. JILL PARSONS, MAT-SU BOROUGH testified via the teleconference network. She stated that the Mat-Su Borough supports HB 20 without modification. Representative Martin expressed concern with the effect of changing tidelands on municipal boundaries. He referred to a dispute in Gustavus over ownership of newly formed land. RON SWANSON, DIRECTOR, DIVISION OF LANDS, DEPARTMENT OF NATURAL RESOURCES responded to questions by Representative Martin. He explained that only federal land would be available for selection under the Alaska Native Claims Settlement Act. He discussed the status of new land developed as a result of natural forces. He explained that the process of determining ownership of new land due to natural forces is complicated and technical. In response to a question by Representative Therriault, Mr. Swanson clarified that the addition of "shore lands" would capture navigable inland lands in the Fairbanks North Star Borough. He noted that revenue derived from shore lands is 2 minimal. He added that the Department has not emphasized obtaining revenue from shore lands. He observed that an increase in the tourism industry could result in revenue for the state or municipalities derived from shore lands. He stressed that the Department did not anticipate raising revenues from small privately owned and used docks. Representative Brown MOVED to adopt Amendment 1 (Attachment 1). Co-Chair Hanley OBJECTED for purpose of discussion. Representative Brown explained that Amendment 1 would clarify that subsurface interests are reserved to the state. She noted that the sponsor did not object to Amendment 1. There being NO OBJECTION, Amendment 1 was adopted. Representative Brown provided members with Amendment 2 (Attachment 2). She explained that the amendment deletes "or sale" on page 2. line 21. She stressed that the intent is not to allow municipalities to select large amounts of tidelands for resale into private ownership. She acknowledged that submerged lands and tidelands are important for public access. She stressed that the Public Trust Doctrine will be more easily enforced if the lands stay in state or municipal ownership. Municipalities could still lease lands under long term leases. Representative Grussendorf expressed concern that the lack of ownership could prevent private business interests from securing financing. Mr. Swanson observed that the trend in Western states is to only lease tidelands. He assured Representative Grussendorf that long term leases, up to 99 years, take care of the economic concerns of the banks. He emphasized that leases allow the state to respond to Public Trust Doctrine concerns. Most leases run from 20 to 55 years. Representative Mulder noted that municipal ownership of these lands would expand the municipal tax base. He spoke in support of HB 20. Representative Martin questioned if "or sale" should also be deleted in section 1. He spoke in support of placing land in the "hands of the public." Representative Brown explained that section 1 affects a variety of actions and activities by the Department of Natural Resources. Mr. Swanson agreed that the Department would be adversely affected by the deletion of "or sale" in section 1. Representative Grussendorf clarified that a municipality can levy taxes on leases. 3 Representative Brown noted that there is oil and gas potential on much of Alaska's coast. She questioned if it makes sense to allow private ownership of surface rights in areas that the state may need for production facilities or other structures. Representative Brown MOVED to adopt Amendment 2. Representative Martin OBJECTED. A roll call vote was taken on the MOTION. IN FAVOR: Grussendorf, Kelly, Mulder, Therriault, Brown, Hanley OPPOSED: Martin, Kohring Representatives Navarre, Parnell and Foster were absent for the vote. The MOTION PASSED (6-2). Representative Brown provided members with Amendment 3 (Attachment 3). She noted that the amendment would add "and tidelands" on page 2, line 27 after "waters". She stated that the amendment would maintain access to tidelands and clarify that municipalities would assure access to tidelands is provided. Representative Brown MOVED to adopt Amendment 3. There being NO OBJECTION, it was so ordered. Representative Brown provided members with Amendment 4 (Attachment 4). She explained that the amendment addresses how shore fisheries leases would be affected by the transfers. The amendment would take land under lease out of the transfer. She noted that there is no specific classification of "shore fisheries development". She stated that the intent is to not disrupt existing commercial relationships between set-netters and the state and to maintain the status quo in respect to those interests. In response to a question by Co-Chair Hanley, Mr. Swanson clarified that land can be conveyed to a municipality subject to the lease. Leases may also be excluded from the conveyance. If the land is subject to the lease the municipality would have control of the lease and could do what they wish with the land when the lease expires. The Public Trust Doctrine only covers public access. He expressed concern that a broad interpretation would prevent land issuances to a municipality for other uses within the area of the lease. He noted that the intent is to only protect the actual lease site. Representative Brown asked if there are fishermen operating without a lease. 4 TAMARA COOK, DIRECTOR, LEGISLATIVE LEGAL SERVICES, LEGISLATIVE AFFAIRS AGENCY stated that there are people operating set-net sites without leases. She questioned if a narrow interpretation would leave out people who are fishing without a lease or prevent future leases. Representative Mulder noted problems on the Kenai Peninsula in regards to set-net fishers without leases. Mr. Mulder explained that limited entry permits in the state will not change. He noted that it is not mandatory for fishermen to have a lease from the state. He emphasized that the lease protects against other fishermen using the site. Where there is no lease in place, the first net in the water wins. The Department of Fish and Game decides where fishing can take place. Representative Therriault observed that the first net in the water gets the spot only pertains to that fishing season. A lease protects the spot for future years. Mr. Swanson noted that 12,000 to 13,000 thousand set-net fishers have leases out of 2,000 thousand. There are another 300 applications. Only about 300 fishers have not applied for a lease. Members were provided with Amendment 5 by Representative Mulder (Attachment 5.) Amendment 4 states that "land is not subject to a shore fisheries lease," while Amendment 5 states that "land is not classified for shore fisheries development." Mr. Swanson explained that the use of "shore fisheries development" in Amendment 5 would broaden the language. He noted that Amendment 5 could encompass a larger area of land than the lease area. He expressed concern that the surrounding land which is under "shore fisheries development" could be closed to issuances for other uses. Co-Chair Hanley noted that municipal leases could be issued for areas conveyed from the state. Mr. Swanson added that each municipality could run the program differently. Currently, the program is consistent with the Department of Fish and Game and the Department of Natural Resources. The program only pays for itself. Representative Brown pointed out that "shore fisheries development" is not defined in statute. Mr. Swanson spoke in support of Amendment 4. Representative Therriault pointed out that statutes provide that the state only charge the amount needed to cover the administration of the leases. He emphasized that the 5 leases, while they do not drive very much revenue, are "worth big dollars." The leases are for six years. Yearly revenues from the leases amount to $180.0 thousand dollars. Leases are assignable and are generally transferred with the permit. Co-Chair Hanley noted that there are some set-net sites on the Kenai that people would pay $20.0 to $30.0 thousand dollars a year to utilize. In response to a question by Representative Therriault, Mr. Swanson clarified that current lease holders are given preference for renewal. REPRESENTATIVE CARL MOSES, the bill sponsor, questioned if Amendment 4 is necessary. He maintained that set-net leases are not enforceable. He suggested that a set-net lease would not stand in the way of a major dock facility which is needed by the public. He felt that the amendment would complicate the issue. Representative Therriault disagreed that the lease would not be enforceable. Co-Chair Hanley asked if it would be possible to transfer land to a municipality, yet retain state control of shore fisheries leases. Mr. Swanson stated that land can be conveyed to municipalities with the retention of shore fisheries management by the state. He suggested that the land may be conveyed to municipalities subject to state administration of shore fisheries lease under AS 38.05.082. (Tape Change, HFC 95-44, Side 1) Ms. Cook stated that, if the state conveys land to a municipality and retains control of an existing lease, the state's interest in managing the lease remains until the chain of renewal is broken. Mr. Swanson stated that the state could retain the right to issue new leases with the concurrence of the municipality of conveyance. He emphasized that shore fisheries leases are generally utilized during short seasons. Mr. Swanson interpreted the amendment to provide that revenue derived from the lease would go to the state. Co- Chair Hanley noted that the potential revenue is substantial. Representative Moses reiterated that a shore fisheries lease would not stand in the way of a major project. Co-Chair Hanley pointed out that leases constitute development and occupation according to HB 20. A municipality could, for 6 the purpose of acquiring specific set-net sites, utilize the legislation to acquire all the land in their community for the purpose of raising revenues. He stressed that policy issues still need to be debated. Representative Moses pointed out that an exclusive right of fishery cannot be granted. Mr. Swanson observed that shore fisheries leases are enforceable. He emphasized that the lease only gives the right to fish. No property interest is conveyed. Once land is conveyed to the municipality the state cannot issue new leases. He stressed that areas not currently under lease are not competing areas to the high fisheries. Representative Brown spoke in support of Amendment 4. She stressed that the amendment would allow some lands to be transferred while preserving existing shore leases with the state. Representative Brown MOVED to adopt Amendment 4. There being NO OBJECTION, it was so ordered. Representative Mulder WITHDREW Amendment 5. Representative Brown provided members with Amendment 6 (Attachment 6). She noted that the amendment defines what land is open to municipal application. The amendment states that "land is within or immediately adjacent to the boundaries of the municipality." She stressed that a municipality could apply for land that is not even close to the municipality which could lead to the defacto annexation of the area by the municipality. She pointed to an attempt by the Municipality of Juneau to acquire land not adjacent to the municipality for the purpose of annexing a mine site. Discussion ensued in regards to the wording of the amendment. Representative Grussendorf suggested the use of "contiguous." Representative Brown amended her amendment to insert "contiguous" and delete "immediately adjacent". Representative Brown MOVED to adopt Amendment 6. There being NO OBJECTION, it was so ordered. Representative Brown provided members with Amendment 7 (Attachment 7). She explained that the amendment is in response to concerns regarding the potential for oil and gas subsurface interests. Amendment 7 inserts "or required to support a best interest finding". She noted that page 2, lines 23 and 24 states that: "A conveyance under this section may contain only those restrictions required by law, including AS 38.05.127 and (b) of this section." She asserted that the right to develop the subsurface, as necessary, must be protected. She maintained that the legislation is not flexible enough to allow the subsurface lessee to have the right to develop the surface as needed to 7 produce the subsurface oil or minerals. Representative Moses did not feel the amendment was necessary. Mr. Swanson stated that AS 38.05.127 only covers access to and along water bodies. He agreed that the amendment may not be necessary but emphasized that valid state interest concerns would be covered by the amendment. Representative Brown MOVED to adopt Amendment 7. There being NO OBJECTION, it was so ordered. Representative Brown provided members with Amendment 8 (Attachment 8). GERON BRUCE, LEGISLATIVE LIAISON, DEPARTMENT OF FISH AND GAME explained that there are 31 areas that the Legislature has designated as special areas because of their high fish and wildlife, habitat and use values. Most areas were designated upon the urging of the public and are multiple use areas. Uses are contingent upon the protection of the habitat. Areas are jointly managed by the Department of Fish and Game and the Department of Natural Resources. The amendment would ensure that any decision to convey lands from these designated areas is a joint decision by the Department of Fish and Game and the Department of Natural Resources. There are approximately 1.2 million acres of tidelands or submerged lands in designated special use areas. Representative Grussendorf spoke in support of Amendment 7. In response to a question by Representative Kelly, Mr. Swanson clarified that these areas are currently jointly managed. In response to a question by Co-Chair Hanley, Mr. Bruce clarified that there are other statutory designations covered by (b) that are not game refuges, game sanctuaries, or critical habitat areas. In response to a question by Representative Kelly, Mr. Swanson stated that the Department of Fish and Game and the Department of Natural Resources would want to scrutinize the conveyance of designated special use land. Representative Brown MOVED to adopt Amendment 8. Representative Therriault OBJECTED. A roll call vote was taken on the MOTION. IN FAVOR: Brown, Grussendorf OPPOSED: Kelly, Kohring, Therriault, Hanley 8 Representatives Martin, Mulder, Navarre, Parnell and Foster were absent for the vote. The MOTION FAILED (2-4). In response to a question by Representative Therriault, Representative Moses stated that he would prefer that the addition of "shore lands" was handled in another bill. Representative Brown summarized that lands will be conveyed based on a proposed use. She questioned if a municipality is free to change the land use after the conveyance. Mr. Swanson assumed that the conveyance would be fee simple, without any covenants or restrictions outside of the Public Trust Doctrine or best interest finding. Representative Grussendorf noted that municipalities can determine the use of land through lease. Mr. Swanson added that municipalities would also have lease enforcement authority. Representative Brown stated that her concerns were alleviated by the adoption of Amendment 2. Representative Therriault MOVED to report CSHB 20 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. Co-Chair Hanley noted that the Department of Natural Resources' fiscal note was upgraded from $50.0 to $100.0 thousand dollars. NICO BUS, ACTING DIRECTOR, DIVISION OF SUPPORT SERVICES, DEPARTMENT OF NATURAL RESOURCES explained that the fiscal note was updated after realizing the consequences of the legislation. He observed that the Department has $1.0 million dollars in lease revenue. He estimates that approximately 10 percent of the revenue will be lost to municipalities. Representative Brown asked if there would be an increase in workload. Mr. Bus clarified that no new positions will be needed to administer the new authority. He emphasized that staff that formerly handled leases would be available to handle the conveyances. There is a one time $6.0 thousand dollar expense to cover the Land Administration System casetype. There being NO OBJECTION, CSHB 20 (FIN) was adopted with the accompanying fiscal notes. CSHB 20 (FIN) was reported out of Committee with "no recommendation" and with three fiscal impact notes, one by the Department of Fish and Game, two by the Department of Natural Resources (one published date, 2/3/95; and with a zero fiscal note by the Department of Community and Regional 9 Affairs, dated 2/3/95.