HB 371-STATE LAND AND MATERIALS  1:06:11 PM CHAIR P. WILSON announced that the first order of business would be HOUSE BILL NO. 371, "An Act providing for the Department of Transportation and Public Facilities to hold the surface estate of certain state land; relating to the transfer of certain state land and materials from the Department of Natural Resources to the Department of Transportation and Public Facilities for the construction or maintenance of the state highway system, state airports, and state public buildings and facilities; relating to the lease or sale of certain marine or harbor facilities; relating to the lease or disposal by the Department of Transportation and Public Facilities of rights-of-way, property interests, or improvements that are no longer required; relating to the grant of certain easements over submerged state land to the federal government; relating to the transfer of certain maintenance stations on the James Dalton Highway to the Department of Transportation and Public Facilities; relating to the conveyance of land for right-of-way purposes from the Alaska Railroad Corporation to the Department of Transportation and Public Facilities; and providing for an effective date." 1:06:56 PM REPRESENTATIVE ISAACSON moved to adopt a proposed committee substitute (CS) for HB 371, labeled 28-LS1545\N, Bullock, 3/10/14 as the working document. There being no objection, Version N was before the committee. 1:07:21 PM REBECCA ROONEY, Staff, Representative Peggy Wilson, Alaska State Legislature, on behalf of the House Transportation Committee, Representative P. Wilson, Chair, explained the changes in the proposed CS, Version N. She reported that a companion bill is in the other body and the changes in Version N were made to conform to the other bill. She related that the title was shortened and she characterized the changes as being technical or cosmetic changes. MS. ROONEY described HB 371 as a collaborative effort between the Department of Transportation & Public Facilities (DOT&PF) and the Department of Natural Resources (DNR). The purpose was to reduce ambiguity and streamline the rights-of-way processes between the two departments. This bill represents a "no cost solution" that will save time and resources for transportation projects. Additionally, it will reduce contracting requirements between DOT&PF and DNR when accessing road materials for transportation projects. She noted a reciprocal removal of the 55-year limit on U.S. Forest Service (USFS) transportation easements and DNR's log transfer priority easements. Finally, under the bill, DNR would transfer two DNR sites to DOT&PF for use as maintenance stations and airstrips to accommodate recent resource development. She identified the sites as Franklin Bluffs and Happy Valley on the Dalton Highway. CHAIR P. WILSON reiterated that this bill is an agreement between the two aforementioned departments to streamline the process when a right-of-way exchange is necessary. 1:10:18 PM JOHN BENNETT, Right-of-Way Chief, Northern Region, Department of Transportation & Public Facilities (DOT&PF), stated that HB 371 will change the relationship between the DOT&PF & the DNR with respect to the acquisition, management, and disposal of lands necessary for airports, highways, and public facilities. He pointed out that 30 percent of the land in Alaska is owned by the state and managed by DNR. Thus, the DOT&PF's interaction with DNR for lands and materials is extensive. The bill sections repeat language for each of the DOT&PF's three areas of authority. 1:11:21 PM MR. BENNETT said the bill clarifies that DOT&PF has the primary authority to manage the surface estates for the highway rights- of-way, airport properties and public facilities. That primary authority relates to existing rights-of-way and existing lands. First, this bill would help clarify the management authorities and roles of each department. Second, the bill would provide uniform language across all of the authorities for the disposal of land interests that the DOT&PF has deemed excess to its needs. This combination would work to solve some issues that adjoining landowners have when encroaching into the rights-of- way. Under the bill, the DOT&PF would have the unilateral authority to dispose of lands, which can help solve these landowner issues. Third, this bill would set up a new process for transferring land and land interests from the DNR managed public domain into the DOT&PF. Essentially, this bill was modeled after a federal process the department uses with the Federal Highways Administration (FHWA) to assist the DOT&PF in appropriating land from the Bureau of Land Management (BLM) and the U.S. Forest Service. For example, when the department determines it needs right-of-way properties, the affected parties can go to the agency and tell them they have four months to comment or the FHWA will appropriate it directly. He pointed out the FHWA will actually issue the deed to the state. This bill would set up a similar process that will streamline the process of acquiring DNR managed lands. Furthermore, the DOT&PF would like to streamline and create a new process for acquiring sand and gravel materials for its projects. Under the current process one state [department] contracts with [another] state [department]. The DOT&PF enters into a material sales contract with Department of Natural Resources (DNR) that includes payment for materials. Typically these contracts have a limited term and a limited quantity of material. However, the authorizations often lapse and the department must request additional authorization to expand the quantity or the term. This process has created an administrative burden for both agencies especially since the state is requesting state-owned materials to construct state-owned infrastructure. The process under the bill would result in a more efficient process. 1:14:24 PM MR. BENNETT identified additional provisions that relieve the Alaska Railroad Corporation (ARRC) from the necessity to obtain legislative approval when the DOT&PF requires fee title from the ARRC. Currently, the DOT&PF can negotiate and appraise property just as it would with any private owner, but the ARRC must subsequently seek legislative approval. This requirement for additional legislative approval can add one to two years to the project delivery process, which the department believes results in unintended consequences. Additionally, one provision of HB 371 would transfer the Happy Valley and Franklin Bluffs Trans- Alaska Pipeline System (TAPS) campsites from the DNR to DOT&PF. Mr. Bennett pointed out that the DOT&PF applied for these properties twenty years ago. Although these camps provide an efficient delivery of maintenance services, additional resource development along the corridor and the potential for a natural gas line makes it important for DOT&PF to acquire these sites now. However, these camp transfers have been hampered by competing municipal entitlement selections by the North Slope Borough (NSB). He deferred to the Department of Law (DOL) to discuss the issues related to these reciprocal easements. 1:15:58 PM SEAN LYNCH, Assistant Attorney General, Transportation Section, Department of Law (DOL), stated that the Congress granted easements across the Tongass National Forest connecting towns in Southeast Alaska in exchange for the state granting the U.S. Forest Service easements across the state's submerged lands for log transfer facilities, access to USFS cabins, and recreational facilities. The easements were prepared and exchanged between the state and the federal government but because of the Department of Natural Resources (DNR)'s regulations the state easements to the federal government are limited to 55 years. In the reciprocal exchange, the USFS has limited the states' road and utility easements to the same 55 years. Section 16 [of HB 371] would allow the DNR's commissioner in a best interest finding to remove the 55-year limitation. Further, the USFS has assured the state that it will give an equal term of years, which would allow the extension of the state's easements across USFS lands. 1:17:54 PM REPRESENTATIVE ISAACSON recalled that Section 16 was disputed by municipal governments. He asked whether the department has resolved the municipal disputes. MR. BENNETT answered yes; he is correct that competing interests exist. The department applied for this authority 20 years ago, based on the assertion that the existing state land was more appropriately used for public purposes rather than to be allocated under the municipal entitlement program. He estimated between one-third and one-half of the land selected will still be available after the department has "carved out" lands needed to enclose airstrips, material sites, and the existing building plants. He related this is based on a review of a graphic representation of the lands previously selected by the North Slope Borough (NSB). One reason this matter has not progressed is due to the competing interests. He maintained the DOT&PF believes the public's interest and use of this property is greater and more significant than municipal interests. 1:19:42 PM REPRESENTATIVE ISAACSON said he understood that this could be construed as another method of obtaining municipal revenue sharing since the Dalton Highway serves a statewide interest, although one municipality obtains an extra advantage. For example, it would be similar to the City of North Pole claiming some facilities along the Richardson Highway to tax or gain revenue from the activities. He asked whether this is part of the consideration and to identify any disadvantages. 1:20:33 PM MR. BENNETT agreed the North Slope Borough's intent is revenue generation. These sites would be very sought after since they were selected as TAPS sites for a good reason. He suggested the NSB would seek to select and receive title to these sites and lease them back to the state on an as-needed basis. However, the DOT&PF seeks to avoid these situations since it maintains that retaining the properties is in the public's best interest. 1:21:18 PM REPRESENTATIVE ISAACSON asked whether the provisions in Section 16 will resolve the issue. MR. BENNETT answered this language will declare that this property has been transferred to DOT&PF and is not immediately available for municipal entitlements. However, he envisioned that over time the use of the sites will no longer be necessary and the sites might be available for NSB selection or conveyance at a later date. 1:22:09 PM REPRESENTATIVE KREISS-TOMKINS commented that this bill was read across the floor yesterday so he has not yet had an opportunity to review this somewhat complex bill. He hoped the committee will have more opportunity to ask questions beyond today. CHAIR P. WILSON acknowledged that HB 371 is a simple yet complicated bill that will allow land transfers between the two departments. In further response to a question, she acknowledged the committee member's request for additional time. 1:23:29 PM REPRESENTATIVE JOHNSON recalled some railroad acts allow the ability to transfer rights-of-way lands back to the adjacent landowners. He remarked he is never opposed to transferring lands to private landowners. He asked whether the land should be transferred to private landowners instead of to the state. MR. BENNETT answered that [Section 16] is narrowly tailored to only relate to the relationship between the ARRC and the DOT&PF to allow the department to obtain fee title on certain railroad lands. He understood the rights-of-way being re-conveyed to adjoining landowners. However, he did not believe this is the situation being addressed today. This provision relates solely to properties the railroad owns or intends to own. 1:24:42 PM REPRESENTATIVE JOHNSON remarked that at some point the railroad must not want the land or they wouldn't be interested in transferring it. MR. BENNETT answered that it is not a question with respect to the railroad wanting to dispose of land but rather that the DOT&PF requires the ARRC's land for an airport or highway project. He clarified that the department identifies the need, appraises, and negotiates the land transfer, but the ARRC does not volunteer to sell it to the DOT&PF until that point. REPRESENTATIVE JOHNSON suggested the ARRC is not in great financial shape right now so it may be in the ARRC's interest to lease the land instead of transferring it by a fee simple process. MR. BENNETT acknowledged the point, but the DOT&PF tends to avoid leases since the term of the lease will end, yet the public funds for a new project may not be in place yet. This is the reason the DOT&PF seeks to purchase permanent right-of-way or land interests, whether it is through easements or fees. This provides the basis for future knowledge of when funds are needed. 1:26:15 PM REPRESENTATIVE JOHNSON suggested that either the ARRC will seek funds or else the DOT&PF will seek more funds to lease lands from the ARRC. He was unsure whether it would be best for the legislature to [appropriate funds to] the ARRC or the DOT&PF. He questioned whether the DOT&PF has more opportunities to obtain federal funds. He said he has questions on the best way to ensure the future of the ARRC and the DOT&PF. 1:27:09 PM CHAIR P. WILSON asked for further clarification that this isn't a special case since this is the process DOT&PF uses with respect to right-of-way acquisitions. MR. BENNETT answered that the best public policy for acquisition, maintenance, and operations of public projects is to avoid recurring costs, which having a permanent interest in the rights-of-way accomplishes. He related his understanding that the ARRC supports this language. 1:28:13 PM CHAIR P. WILSON related her understanding that under the bill the DOT&PF would purchase land from the ARRC. MR. BENNETT agreed. He summarized that this provision would advance project delivery by not requiring legislative approval of the land transfer [between the ARRC and the DOT&PF]. 1:28:53 PM REPRESENTATIVE ISAACSON understood this would expedite projects in order to develop the state, but the bill does not extend rail lines or reconvey properties. For example, under the bill, if the state decided to build the railroad to Delta Junction or some other location the legislature would authorize the DOT&PF to negotiate the land needed for right-of-way acquisition. This could help speed up projects if the legislature has approved the right-of-way acquisition in advance. MR. BENNETT related an example in which the DOT&PF need to acquire substantial property on the Illinois Street project in Fairbanks. Since the rights-of-way acquisition required legislative approval it took one or two additional years to secure legislative permission. Although the DOT&PF can appraise property, and negotiate prices, the railroad cannot execute deeds for fee simple title without legislative approval. 1:30:26 PM REPRESENTATIVE ISAACSON understood that the bill would help contain development costs and this bill also represents one of the best ways to save the railroad money. MR. BENNETT acknowledged that one of the benefits would be to advance projects. 1:30:53 PM REPRESENTATIVE ISAACSON asked whether the bill might create unintended consequences and for any downsides. MR. BENNETT answered that he considered this provision of the bill to be the most benign. He offered his belief that this is essentially an unintended consequence of the enabling statutes for the railroad. He felt certain the legislature couldn't have intended to delay projects between one state-owned entity and the DOT&PF. CHAIR P. WILSON remarked that the projects in question have already received legislative approval, but the way the ARRC's statutes were written requires the railroad [or DOT&PF] must seek additional legislative approval. MR. BENNETT agreed, noting typically these projects are major capital improvement projects. 1:32:17 PM REPRESENTATIVE GATTIS remarked that this bill affects state property and does not relate to the state acquiring private property. MR. BENNETT agreed. He said the portions that relate to the transfer of properties from DNR's public domain to the DOT&PF would be considered transfer of "state property" to "state property." The railroad was established as a state-owned corporation so it is treated a little differently. REPRESENTATIVE GATTIS asked for further clarification that this is not affecting individual property rights. MR. BENNETT agreed it does not affect individual property rights. 1:33:19 PM REPRESENTATIVE JOHNSON recalled that at the time the railroad was transferred, the legislature wanted control over the transfer of any railroad land. He surmised this body still has an unwillingness to give up control. He remarked that "nothing is simple" with respect to the railroad. CHAIR P. WILSON reminded members that this bill relates specifically to the DOT&PF and not with any private entity. MR. BENNETT agreed. 1:35:00 PM ED FOGELS, Deputy Commissioner, Department of Natural Resources (DNR), stated that DNR has worked with DOT&PF for many months on the bill and DNR does not have any issues with the bill. The fundamental concept embodied in HB 371 is similar to the DNR's efforts to improve its permitting processes and to eliminate duplicative bureaucracy and unnecessary processes. He asked why the state should have to contract with itself for materials if the DOT&PF needs to use materials within the right-of-way for its road projects. Under the bill, the DNR would still manage the subsurface rights and lands within the right-of-way for other uses while prioritizing by keeping DOT&PF's needs at the top. He suggested that HB 371 is one mechanism to eliminate repetitive work for both agencies. 1:36:11 PM CHAIR P. WILSON asked whether HB 371 will save the state money. MR. FOGELS answered yes. 1:36:20 PM REPRESENTATIVE GATTIS remarked that time is money and she understood this bill will save time. MR. FOGELS answered yes; that HB 371 will save staff time. 1:36:45 PM CHAIR P. WILSON asked for an estimate of the average staff time that will be saved. MR. FOGELS answered that the time savings is difficult to quantify. However, the DNR spends significant energy and time within the department to adjudicate material sales relating to roads or highway projects. He estimated that several staff spends most of their time on these issues which could be used to reduce the DNR's backlog somewhere else. 1:37:53 PM CHAIR P. WILSON asked whether this staff could work on permitting in some other area. MR. FOGELS agreed. 1:37:59 PM REPRESENTATIVE JOHNSON asked whether the materials would primarily be gravel. MR. FOGELS answered that the materials would be gravel, rock, and sand. 1:38:18 PM REPRESENTATIVE JOHNSON asked whether private companies primarily hold these leases. MR. FOGELS answered that DNR has material sales contracts for materials sites with multiple contracts between the private sector and DOT&PF on some sites. He agreed the department would need to sort this out but new sites would be under the DOT&PF and the DNR would work with the DOT&PF on any preexisting contracts. 1:39:04 PM REPRESENTATIVE JOHNSON emphasized that he'd like to avoid the situation with a private company bidding on a state job but the state has a "sweetheart deal" for the materials. He suggested it has been proven that the private sector projects cost less than the state to accomplish. He summarized that he would like to avoid the state taking away private jobs due to a "sweetheart deal" on material costs. MR. FOGELS said DNR views it that third party contractors will work on the projects regardless. This bill would only eliminate the DNR component from the chain. The DOT&PF would administer third-party contracts to perform road construction and use materials. 1:40:29 PM REPRESENTATIVE JOHNSON maintained his goal to ensure that this bill doesn't establish a DOT&PF bureaucracy that can overcharge a private contractor for materials so the contractor doesn't have any chance to win the bid. He would further like to ensure that everyone is on equal footing. Currently, the private sector performs quite adequately so he doesn't want to sacrifice private industry jobs, he said. MR. FOGELS offered to review the materials process with DOT&PF and report back to the committee. 1:42:32 PM REPRESENTATIVE KREISS-TOMKINS referred to Sections 2, 4, and 10, specifically in Section 4, lines 15-17 of the bill, which allows the department the ability to dispose of land. He asked whether that means the DOT&PF will receive revenue for the land sale. MR. FOGELS answered that Section 4 refers to DOT&PF's statutes. He related that DNR has mechanisms for land sales, including a land disposal income fund. He was unsure of the DOT&PF's mechanisms, but speculated that the funds may go to back to the general fund. 1:43:47 PM REPRESENTATIVE KREISS-TOMKINS said he is interested in an established protocol to ensure that DOT&PF will not need to set up a process that DNR already does well. MR. FOGELS answered that DNR's authority is for land sales to the public. This provision relates to little remnants of land leftover from projects such as highway realignment, such as a sliver of right-of-way land is not used. Currently, DOT&PF can't dispose of the aforementioned sliver of land so the land reverts back to DNR who must then dispose of it. The current process adds unnecessary time and bureaucracy. It's clear that this bill would eliminate the bureaucracy and allow the DOT&PF to directly handle the remnants, he said. 1:45:00 PM REPRESENTATIVE FEIGE referred to Section 4 of HB 371 and asked whether any implied priority exists. He read paragraph (1), which read, in part, "transfer the land, property interests, or improvements to the Department of Natural Resources, if requested by the commissioner of natural resources; or ...." He asked whether this language implies that DNR would have the first right of refusal or if DOT&PF can dispose of the land as it sees fit without any priority. MR. FOGELS answered that the intent is for the DNR's commissioner to agree to take the land back before the land is transferred. The DNR wants to be part of the decision to ensure the department agrees to the land transfer. 1:46:14 PM CHAIR P. WILSON pointed out this language is also in Section 2, 4, and 10. MR. FOGELS agreed. 1:46:23 PM REPRESENTATIVE FEIGE suggested that an instance may arise in which the DNR might want the land, but the DOT&PF may decide to sell it to someone else. He asked whether this section should be structured with a clear priority to allow DNR the first right of refusal on land transfers. 1:46:52 PM CHAIR P. WILSON read subsection (b) [, which read, in part, "... shall notify the commissioner of natural resources" on any transfer of land or disposal of land so she envisioned the commissioner would know in advance. MR. FOGELS agreed, but the provision also requires the DNR to "request" the land. REPRESENTATIVE FEIGE questioned whether the DNR automatically would receive any requested land or if it is still up to DOT&PF. He asked whether the first right of refusal language should be stronger. MR. FOGELS deferred to the bill drafter or the Department of Law to respond. 1:47:53 PM REPRESENTATIVE FEIGE asked whether the DNR would want the first right of refusal. MR. FOGELS answered that he did not think it would be an issue. Again, the lands in question are lands used for transportation purposes and typically the remaining land would entail small remnants. He envisioned that the department would offer to sell the land to an adjacent landowner. 1:48:39 PM CHAIR P. WILSON related an instance in which the DOT&PF straightened a road and removed a curve, which left a sliver of land it didn't need for the road project. She didn't imagine anyone would want the piece, but she recalled the land was given to the borough. She read subsection (b), in part, "If the department determines that land, property interests, or improvements are no longer necessary, the department shall notify the commissioner of natural resources of the determination and may ...." At that point the department may transfer or dispose of the land yet the DOT&PF must still notify the DNR, she said. 1:50:00 PM REPRESENTATIVE JOHNSON acknowledged the bill's intention is to give the DNR first right of refusal, but he pointed out some instances in which condemnation has occurred. Under the bill, land that had been condemned would revert to the DOT&PF instead of to the original property owner. MR. FOGELS thought that it would be best to have the Department of Law present. Still, as he reads subsection (b), it requires the DOT&PF to notify the commissioner of natural resources of the determination and the department may transfer the land to DNR or dispose of the land by sale, lease, vacation, or exchange. Therefore, the DOT&PF has the choice, he said. REPRESENTATIVE JOHNSON suggested that if the department condemned the land, the DOT&PF should not have any choice if the land is not used. Instead, he maintained that in those instances the land should be offered to the private party. 1:51:50 PM REPRESENTATIVE FEIGE interpreted Section 1 to give the department the choice. The language requires the DNR to request the land if the department wants it, but it is up to the DOT&PF. REPRESENTATIVE JOHNSON disagreed. Regardless of the interpretation, if land is condemned and not used the commissioner should not have a choice to decide. Instead, the private owner should have the choice to buy the land back, he said. 1:52:41 PM CHAIR P. WILSON suggested there are circumstances in which land is condemned since the private party did not want to pay the taxes. Thus, instances occur in which the party no longer wishes to continue to make payments [and doesn't want the land.] 1:53:05 PM REPRESENTATIVE JOHNSON agreed. However, an agreed buyout represents different situation than a condemnation procedure. He maintained that the private party should have the first right of refusal and not a commissioner. CHAIR P. WILSON agreed. She offered her belief that the department probably already has rules it follows but it's important to find out. 1:54:11 PM REPRESENTATIVE FEIGE referred again to [Section 4] paragraph (1) [on page 3, lines 12-14], which indicates the DOT&PF may transfer the land, but the department cannot arbitrarily do so since the DNR must first request the land. Paragraph (2) would allow for the disposal of the land. He maintained his question on whether DNR should have an automatic preference and if the language implies a preference. For example, if DNR requests the land, should the land automatically be transferred or is it still up to the DOT&PF commissioner to decide. [HB 371 was held over.]