HOUSE BILL NO. 344 An Act authorizing a land exchange between the Department of Natural Resources and Alaska Hard Rock, Inc.; and providing for an effective date. Co-Chair Mulder MOVED to adopt the work draft, HB 344, 1- GH2071\D, Kurtz, 3/22/00, as the version of the bill before the Committee. There being NO OBJECTION, it was adopted. CAROL CARROLL, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF NATURAL RESOURCES, noted that Mr. Stratton, Director, Division of Parks with the Department was on line and she requested that he present the bill to the Committee. JOHN SHIVELY, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES, explained that the bill would provide legislative approval of a land exchange agreement between the Department of Natural Resources and Alaska Hard Rock, Inc. The purpose of the land exchange would be for the State to acquire private land located within and adjacent to Independence Mine State Historical Park near Hatcher Pass. The land to be acquired would be developed to enhance the interpretive and recreational uses of the park. The land the State is exchanging is also located in the Hatcher pass area and is presently under permit to Alaska Hard Rock, Inc. They are interested in receiving title to the land. Commissioner Shively continued, State law requires legislative approval of land exchanges involving lands of unequal appraised value. In the proposed exchange, the State will receive land appraised at $87 thousand dollars while conveying land appraised at $66,500 thousand dollars. Alaska Hard Rock, Inc. is agreeable to this unequal exchange; they would be receiving a federal tax credit for the difference. He pointed out that by adding the land to the Independence Mine State Historical Park, particularly the underground mine tunnel, would add to the tourism potential of the park. JIM STRATTON, (TESTIFIED VIA TELECONFERENCE), DIRECTOR, DIVISION OF PARKS AND OUTDOOR RECREATION, DEPARTMENT OF NATURAL RESOURCES, added that the Division and Alaska Hard Rock, Inc., had worked cooperatively together to determine an appraisal. He commented that the land they are receiving is service land where they currently have mining structures, storage buildings and other facilities, which they are using for underground operations. CHARLIE BODDY, VICE PRESIDENT OF GOVERNMENTAL RELATIONS, UCIBELLI COAL MINE, noted that after working with the Alaska Railroad over the past few years, it was obvious that they would need legislative approval to extend the lease which they had prior to approval of the transfer act of the Railroad with the federal government. The time of the 55- year lease was decreasing in which it became necessary to secure a 30-year mortgage. All the lending institutions wanted an additional 10 years past the term of the loan. The Alaska Railroad does have the statutory authority to issue a lease for longer than 35 years, however, the caveat is that they would then have the right to terminate that lease at any point if that land is needed by the Alaska Railroad. Mr. Boddy noted that if the lease were not extended, a 20-year mortgage would be too expensive. He reminded members that it is just less than a township with about 500 plus acres developed which started in 1977. The town of Healy and Ucibelli has relocated out into the subdivision. Mr. Boddy stressed that they would like to preserve that community. Representative J. Davies asked if consideration had been given to swapping some land with the Alaska Railroad. Mr. Boddy responded that the Denali Borough has not finished all their municipal selections to date. Co-Chair Therriault noted that the town of Ucibelli and Healy use to be on the tracks. The town was developed so that they could move the operations. He noted that transferring to the federal government language has caused a problem for a new loan. Mr. Boddy pointed out that the master lease was taken from the Railroad. Ucibelli was looking for options to move employees off the mine site and the federal government wanted to help with the safety administration. He reiterated that it is important to have the ability to secure each mine site. Mr. Boddy advised that at that time, there was a shortage of additional space for people to relocate. The other businesses, which were operating in that area, were able to plot the subdivision. The master lease allows to get only the recovering costs incurred for the cost of development of the subdivision. Co-Chair Mulder noted that Ucibelli was leasing land from the Railroad and were exchange leasing the land to these people that have homes there. He asked what the families pay for lease costs for that land. Mr. Boddy replied that in 1977, there was an original rental fee in the amount of $1.2 thousand dollars per acre development fee. Those funds were used for the road and recovering a trunk line from the Valley. The rental for years thereafter was $28.87 per acre per year. That cost was spread over the entire subdivision as if every acre was leased. In 1990 to present, there is a $2 thousand dollar development fee for a lot and the rental amount has increased to $100 dollars per acre per year. Co-Chair Mulder interjected that these people have received "a good deal" on the land. He questioned the long-term intention. Mr. Boddy responded that Ucibelli was in a position to do the development in 1977. However, he pointed out they run a coal mine and "being a landlord" is a function that Ucibelli would like to get rid of. Co-Chair Therriault advised that the Alaska Railroad is interested in facilitating the swap. Mr. Boddy agreed, noting that the legislation presupposes that they will be taking that area back. The Denali Park is the one currently being utilized. Co-Chair Mulder questioned if it was the desire of the Railroad to dispose of the property. Mr. Boddy did not know. (TAPE CHANGE, HFC 00 - 80, Side 2). Co-Chair Mulder pointed out that the Railroad could take advantage of all the improvements made to the land. Representative J. Davies pointed out that the way in which the legislation is structured, the Railroad would not be able to terminate the lease. It would always be a lease and not an ownership situation. Representative J. Davies agreed that a private land arrangement would be the most beneficial to everyone. Ms. Carroll advised that the fiscal note would not change with the committee substitute. Co-Chair Mulder MOVED to report CS HB 344 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CS HB 344 (FIN) was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Natural Resources.