SENATE CS FOR CS FOR HOUSE BILL NO. 319(RES) "An Act relating to the disposal of state land by lottery; relating to the reservation of rights by the state in land contracts and deeds; relating to the disposal, including sale or lease, of remote recreational cabin sites; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Wilken stated that this bill would establish a public nomination lottery process through which remote cabin sites could be sold. He noted that the bill's sponsor, Representative Hugh Fate, has voiced concern in regard to some changes made in the Senate Resources committee substitute, SCS CS HB 319(RES), Version 23-LS0477\B, that is before the Committee. He stated that, in addition to fiscal notes #4 and #5 that pertain to Version "B," Members' packets include fiscal notes #2 and #3 that would apply were a forthcoming amendment adopted. He remarked that this is a "controversial" bill. REPRESENTATIVE HUGH FATE, the bill's sponsor, stated that this bill evolved from "a simple concept" of developing a method through which people could select State land, have it surveyed and privately appraised at their own expense or appraised by the State under a reimbursement arrangement, and subsequently be granted fee simple title. Continuing, he noted that while the concept was simple, the details of the process became complex, and that it has taken four years to reach this point. Representative Fate characterized the bill as a land acquisition bill that has no intent of furthering subsurface mineral development issues such as those that have recently occurred in the Matanuska Susitna (Mat-Su) Borough as he recalled, at one point, the bill contained language that would have allowed the Commissioner of the Department of Natural Resources to withdraw from consideration land with high mineral content, including gas and oil. He declared that the regulations associated with this land selection legislation are "very strict." Representative Fate reiterated "that the very core of the legislation" is to provide individuals the ability to nominate a piece of State land that he or she wishes to purchase. He clarified that, at any point in the process, the Commissioner could withdraw the land from consideration. Representative Fate reminded the Committee that currently the only method through which individuals could acquire State land is through a lottery or auction process. He shared that approximately 40-percent of State land that is available through the lottery method is acquired and that the remaining land selections, as well as those acquired but repossessed by the State due to lack of payment, are disposed of over-the-counter. He argued "that very seldom is an individual able to" acquire land of their choosing under the current land disposal methods. This, he declared, is the reason this legislation is being brought forward. He stated that were this legislation enacted, it "would be a very popular program." He shared that the House bill, CS HB 319(FIN) am, Version 23-LS0477\X.A, that was transmitted to the Senate for consideration would have required general funds to support start-up expenses in the first few years, but that, beginning with the fourth year, the program would have generated money for the State. He also noted that Version "X.A" would require the creation of eight new positions. Representative Fate informed the Committee that the Version "B" committee substitute would require lower start-up costs, would not require an increase in personnel, and would, like Version "X.A," generate funds for the State. However, he communicated that he does not support Version "B" as it changes the concept of the legislation and would probably "meld" the program into a lottery program, which, he declared "would be disheartening" as it would not allow people to select land. Co-Chair Wilken asked for further information regarding how the bill's language was changed in Version "B," specifically language in Section 4, subsection (f) on page three, beginning on line 24. (f) A resident may nominate a parcel for disposal under this section. The commissioner shall review the nomination and may (1) offer the nominated parcel for sale; (2) offer additional parcels within the surrounding area for sale; or (3) find that the parcel or area is not appropriate for disposal. JIM POUND, Staff to Representative Fate, expounded that Section 4, subsection (f) of Version "B" would allow the Department of Natural Resources to convert the program into a lottery. Continuing, he noted that as in Version "W.A", an individual could nominate a specific parcel; however, contrary to Version "W.A", once the Commissioner approved the land for nomination, the person who nominated the land would, rather than being able to pursuing purchasing that land, would be placed on equal footing with any other person who might become interested in that parcel of land. Mr. Pound voiced that many Alaskans would be interested in acquiring land through the land nomination program and that, were an individual to seek out and nominate a specific parcel, there would be the "assumption that they have a prerogative to that parcel." He warned that the language proposed in the Version "B" committee substitute could be costly to the State as were someone to nominate a parcel and not be awarded it, they could argue that they have an assumption of prerogative. Co-Chair Wilken understood therefore, that the language in this section is the difference between the House bill Version "W.A," and the Senate Resources bill, Version "B". Senator Dyson observed that the language in Section 4, subsection (f) of Version "B" continues the original goal of the legislation, as, he contended, it would allow a person to select land which the Commissioner could nominate for sale. Mr. Pound affirmed; however, he explained that while both versions of the bill would allow a person to nominate a parcel of land, Version "B" differs from Version "W.A" in that, under Version "B", once the selected land is approved for nomination by the Commissioner, the Department has indicated that the land would be disposed of via a lottery or auction process rather than selling it to an individual. Senator Dyson understood therefore, that the Department "would absolutely ignore this clear direction from the Statute." Mr. Pound responded that the Department "will interpret it in a way that they wish to interpret it, which so far, it has been indicated to us that their interpretation is that they can put it into their existing program which is a lottery or auction." Senator Dyson surmised therefore, that the problem lies with the Department's interpretation of the language in Version "B" rather than with the language. Mr. Pound replied that, during the bill's progression through the House, "a negotiated agreement" between the sponsor and the Division of Mining, Land and Water in the Department of Natural Resources had been reached regarding such things as the size of nominated parcels; the timeframe allowed for the survey and appraisal; buffer zone requirements; and the provisions providing the Commissioner the authority to make the determination regarding the land selection. He declared that the language in Section 4, subsection (f) of the Senate Resources committee substitute "has nothing to do with what was agreed to between this office and the Division. This was decided by a third member of the Division who, to my knowledge, at been advised to stay out of the process and decided to, when he came to Senate Resources, to get involved." Representative Fate, responding to Senator Dyson's comment, stated that the Senate Resources Committee's adoption of the amendment that added Section 4, subsection (f) to the bill appeared to be "innocuous" in that it changed the application fee for a nomination from $100 to $25. He stated that upon questioning, it was explained that the fee was lowered because applicants have less chance of having their name drawn in a lottery process. Upon further investigation, he explained, it was discovered "that there was the assumption" within the Department that this program "would be melded into the present lottery program." He exclaimed that he "was really startled" that the addition of this amendment opened up the lottery interpretation by the Department, "and that was what they were going to do in fact." He reiterated that this direction was not the intent of the legislation. Co-Chair Wilken asked the Department of Natural Resources to explain their interpretation of Section 4, subsection (f). NANCY WELCH, Special Assistant, Office of the Commissioner, Department of Natural Resources, testified via teleconference from an offnet site in Anchorage, to explain that the amendment adopted by the Senate Resources Committee addressed the Department's on- going position of being "fundamentally opposed" to the right of an individual to nominate a parcel and then "perfect that into a sale through whatever means." Version "B" she continued, would allow the Department to accept land nominations that would then be melded into the Department's current land disposal lottery program. The cost of disposing land through the lottery program would be substantially less than the land nomination program outlined in the House bill, Version "W.A" as it would require fewer personnel to operate. She reiterated, however, that the Version "B" proposal would not entail "individual processing." Co-Chair Wilken asked the Administration's position regarding the Version "B" committee substitute. Ms. Welch responded that the Administration supports the Version "B" committee substitute. Co-Chair Wilken asked whether the Department had developed a position on the House bill, Version "X.A." Ms. Welch responded that, while no official position had been developed regarding the House version of the bill, attempts were undertaken to move away from individual processing. She stated that the Department agreed to accept such issues as parcel sizes, buffer zones, and appraisal/survey language "against our better judgment," because the bill's sponsor had agreed to language allowing the Commissioner, at his discretion, the right to remove nominated parcels from consideration. Senator Dyson questioned the reason for the Department not being supportive of the individual Alaskan land selection process, provided all criteria is met; particularly since the State "has such vast State holdings." Ms. Welch replied that the Department is fundamentally opposed to the individual selection process as its position is that State "land should be offered to all Alaskans equally." She stated that the Department questions allowing a person to nominate land and to be given the first right to purchase it. She noted that this was the aspect opposed by the Senate Resources Committee as they questioned providing someone the first right to land that perhaps other people were also interested in or objected to being privatized, as it might, for example, be someone else's favorite hunting ground. Senator Dyson, recalling that discussion, noted that "the flip side" to the Department's position is that someone might, after months of exploring perhaps by air or by foot, locate a remote piece of land that others had not demonstrated an interest in or had not utilized, go through the lengthy process of determining whether the land is acceptable for nomination, and then be told that all their efforts were for naught as the Department would allow that parcel of land to be disposed of via a lottery in which numerous people could participate. Ms. Welch responded that, in the Department's experience, the vast majority of people who apply for staking authorization are able to receive that authorization; however, she noted that when people realize the difficulty of reaching and developing property, the staking rates drop. She acknowledged that while some parcels might draw no other interest and would, thereby, allow the applicant to stake the land, it would be unfair to allow one individual to have the advantage to a very popular parcel. Amendment #1: This amendment would delete the words "in regulation" in Section 4, subsection (d) (1) in Version "X.A" on page three, line 14. This section currently reads as follows. (1) prepare a schedule of land offerings under this section and identify the parcels for disposal each year; the land offering may not include mineral land selected by the state or land identified by the department as having a high mineral potential; the department's identification of land having a high mineral potential shall be based on standards adopted by the department in regulation and shall include consideration of a geophysical survey or geological evaluation, if any, that was conducted within 15 calendar years before the year for which the schedule is prepared: In addition, this amendment would delete Section 4, subsection (f) in Version "X.A" and replace it with the following language: (f) A resident may nominate a parcel for disposal under this section. The commissioner shall review the nomination and, if the nomination is accepted, will advertise the parcel for sale or lease. The commissioner shall accept bids for the parcel during a period not to exceed 45 days. At the end of the period for accepting bids, the resident nominating the parcel shall have the first right of refusal to purchase the land or apply for a lease under (b) of this section. After receiving a nomination under this subsection, the commissioner may provide for the sale or lease of additional parcels within the surrounding area or may find that the nominated parcel or area is not appropriate for disposal. Co-Chair Wilken moved for the adoption of Amendment #1 and objected for discussion. SENATOR SCOTT OGAN, Chair of the Senate Resources Committee, testified in opposition to the amendment. He stated that in his experience, individuals would "cherry pick some of the best land;" specifically popular hunting or fishing spots. While he agreed with the bill's sponsor that more State land should be made available to its citizens, he stated that "this amendment is bad public policy" and that the compromised bill was good in that it allowed for a nomination process. Furthermore, he opined that the Senate Resources bill was good in that it would allow the Commissioner, at his discretion, to make available additional land around a nominated parcel. This, he attested would provide for good land management. This amendment, he declared, would require the Department to provide "a best interest finding for each individual parcel," thereby tying "up a lot of staff time." Therefore, he declared that allowing the Department to issue a best interest finding on a whole area would better serve the State. He exampled that, in this scenario, the Department could take into consideration the fact that an area had historically been utilized by a lot of people for hunting and fishing camps as opposed to limiting the review to an individual parcel within that area. Senator Ogan stated that this issue "should be done right" and that the Senate Resources version of the bill strikes a good balance. Co-Chair Wilken understood, therefore, that Senator Ogan, rather than objecting "to the land being claimed and owned", objects "to the manner through which this" would be done. Continuing, he voiced the understanding that the Senate Resources version of the bill would treat the land disposal as a lottery. Senator Ogan disagreed. He stated that the Resources version of the bill specifies, in the aforementioned subsection (f), that this land nomination disposal program would be separate from the lottery program. Co-Chair Wilken understood, however, that the Department of Natural Resources would interpret that section of the Senate Resources language, to provide them the authority to establish the program as a lottery. Representative Fate reiterated that this is his understanding of the Department's interpretation of that section and that the testimony from Ms. Welch upheld that position. Ms. Welch responded that subsection "f" would provide the Department the required authorization to process the land nomination through the Department's lottery program. Co-Chair Wilken clarified, therefore, that while the Senate Resources Committee version of the bill would continue to support the land nomination process, it would allow the Department to conduct a lottery process as opposed to the House version of the bill that would allow land to be nominated and claimed. Senator Ogan concurred. Co-Chair Wilken summarized that the method through which the land is disposed of is the issue. Senator Dyson stated that it appears that the Department is putting "their own spin" on the interpretation of the Senate Resources bill language, and is "very close to the edge of defying what the Legislature, as the policy body, is saying." He declared this to be of "great concern". Co-Chair Wilken understood Senator Dyson's comments to be that the language in Section 4, subsection (f) "doesn't say what we're hearing" from the Department of Natural Resources. Senator Dyson affirmed. Co-Chair Wilken stated that he shares that concern. Senator B. Stevens recalled that, over time, the State has identified certain regions of the State as areas in which people could survey and stake a parcel of land and then negotiate a purchase agreement with the State. Continuing, he asked whether the Department would specify a region of the State to which this legislation would apply or whether this land selection proposal would apply to any State land holding. Representative Fate responded that, while the Department has the authority to select areas for land disposal for such things as lotteries or auctions, there are not parameters currently in place that would allow people to go out and select parcels of land in areas that have not been identified. Senator B. Stevens asked how the proposed program compares to the State's Homesteading program through which people go out and stake land in designated areas. Representative Fate stated that this program would allow a person to identify, stake, and nominate a piece of land for a cabin as opposed to the Homestead program that identified areas in which people were allowed to live and develop a piece of land for a certain amount of time and then petition for title to it. He stated that the Senate Resources committee substitute would additionally allow the State to select an area surrounding a nominated parcel and allow it to become available through either their existing lottery/auction program or through the proposed program. He characterized the proposed legislation as being "another tool in the toolbox" in that it would provide the Department, in addition to its lottery/auction program, another means through which people could acquire land. Senator B. Stevens asked for confirmation that the Department would have the final determination as to whether or not a parcel of land could be nominated. Representative Fate affirmed that the Department would have the ability to withdraw a parcel of land from being nominated based on best interest findings. Senator Olson asked Senator Ogan whether he is comfortable with the decision-making opportunity provided to the Department by Amendment #1. Senator Olson responded that he "is not always comfortable with bureaucratic decisions;" however, he stated that there are good professional people in the Department of Natural Resources. Continuing, he voiced being uncomfortable with the amendment's language that would provide an individual with the right of first refusal to purchase or buy the land. He pondered how the process would work. Senator Olson voiced concern that Department of Natural Resources staffing changes, over time, might be an issue. In addition, he asked whether Native corporations have presented a position regarding this legislation. Representative Fate responded that comment time has been provided during the hearing process. For further clarification, he noted that encumbered lands would not be included in this program. Senator Dyson requested that the Department provide "language that would close the loophole by which they have slipped out of the intentions of both" the sponsor's and the Resource versions of the bill. Co-Chair Wilken concurred. Co-Chair Wilken moved to withdraw Amendment #1. There being no objection, Amendment #1 was WITHDRAWN from consideration. Representative Fate reiterated that the concern with the legislation lies with the Department's intent to change the proposal into a lottery system. Co-Chair Wilken asked the sponsor to work with the Department and others to further clarify the bill. Co-Chair Wilken ordered the bill HELD in Committee for further consideration. [NOTE: This bill was re-addressed later in the meeting.] SENATE CS FOR CS FOR HOUSE BILL NO. 319(RES) "An Act relating to the disposal of state land by lottery; relating to the reservation of rights by the state in land contracts and deeds; relating to the disposal, including sale or lease, of remote recreational cabin sites; and providing for an effective date." [NOTE: This bill was heard earlier in the meeting.] JIM POUND, Staff to Representative Bud Fate, stated that, following the morning hearing on the bill, discussions ensued between the sponsor and Commissioner Tom Irwin of the Department of Natural Resources. As a result, he continued, language was developed that one: meets the sponsor's intent for the bill; and two: has the approval of the Department. [NOTE: Amendment #2 was not offered for consideration.] Amendment #3: This amendment amends language in Section 4, subsection (f), on page three, beginning on line 24 to read as follows: (f) a resident may nominate a parcel or area for disposal under this section, and, if the resident has not leased or purchased land under this section during the three-year period preceding the date of nomination, may apply for a right to stake the nominated parcel with the intent to lease under (b) of this section. The commissioner shall review the nomination and may (1) offer {THE NOMINATED] the right to stake a parcel for lease through a sealed-bid or outcry auction and subsequently purchase the parcel for fair market value; (2) offer the parcel and additional parcels within the surrounding area for sale in a simultaneous filing period in the manner provided for lottery parcels by AS 38.05.057; [OR] (3) offer already surveyed and platted parcels for sale at a sealed-bid or outcry auction as provided under AS 38.05.055; or (4) find that the parcel or area is not appropriate for disposal. Co-Chair Wilken moved to adopt Amendment #3 and objected for explanation. Mr. Pound explained that this amendment addresses several sponsor and Department of Natural Resources concerns including: the process pertaining to how an individual nominating a parcel would be recognized in the process; the length of time required between an individual's ability to stake additional parcels; clarification of the staking language pertaining to the leasing/purchasing provision; and language providing the Commissioner of the Department of Natural Resources the ability to offer for disposal land surrounding a nominated parcel or to deny a nominated parcel for disposal. Co-Chair Wilken asked for further clarification regarding how a person would nominate land. Mr. Pound responded that a person would locate a parcel of land and file for the right to stake that particular parcel with the Department of Natural Resources. Co-Chair Wilken understood that this would entail a written request for the right to stake the land. In other words, he continued, the individual is requesting the right to lease and eventually purchase that parcel of land. Mr. Pound responded that the request would entitle someone to a five-year lease with a five-year renewal option. He noted that "at any time you have a lease, you have the right to purchase." Co-Chair Wilken asked the sequence of events that would occur after the land has been staked; specifically whether a sealed bid or outcry auction would occur. Mr. Pound stated that, were another individual to express interest in a parcel of land to which a right to stake has been filed, a bidding process would be implemented. Co-Chair Wilken asked how public notification regarding the staking request would occur. Mr. Pound explained that a public notice process would be implemented. Co-Chair Wilken asked for confirmation that, were more than one person interested in a parcel of land, the Commissioner would determine whether a sealed bid or outcry auction would occur. Mr. Pound affirmed. Co-Chair Wilken understood that the land's purchase price would be based on fair market value. Mr. Pound concurred. Senator Bunde asked regarding language pertaining to someone being able to stake a parcel of land every three years; specifically whether this would entail relinquishing a parcel of land previously received through this program. Mr. Pound responded that another parcel of land, in addition to previously received parcels, could be staked at three-year intervals. Senator Bunde opined that "there is a limited amount" of desirable land available for remote cabin sites. Continuing, he voiced concern that the provision allowing individuals to acquire numerous parcels of land could result in "land barons." Co-Chair Wilken asked whether Senator Bunde wished to propose an amendment to address this concern. Senator Bunde responded that two options exist to address this concern: one being that were a person to desire to stake another parcel of land any previous land they had acquired in this manner must be relinquished; or two, a longer timeframe between land nominations could be required. He reiterated his concern that, even though the State has vast land holdings, suitable land with such things as a water source and accessibility is limited and that one individual might" tie that up." Senator Bunde suggested that the timeframe between nominations be increased to between six and ten years. Senator Dyson opined that, over time, the people who receive these lands would probably develop and perhaps sell their land to others. He voiced that this would be beneficial, as it would open up more sites to others. Furthermore, he stated that the expenses involved with surveying and developing land might be a deterrent to the land baron issue. Therefore, he commented that he does not share Senator Bunde's concern "that this would be abused." Senator Bunde stated that this legislation could also lead to frustration in that someone might desire to access a particular valley and find it staked or that the person who staked the valley might be upset to have another person trespassing on their land. Amendment-to-Amendment #3: This amendment proposes to change language in subsection (f) in that the length of time required before an individual could stake another parcel of land be increased from three-years to five-years. Senator Bunde moved to adopt the Amendment-to-Amendment #3. Co-Chair Wilken objected for discussion. Senator Olson agreed that the amount of desirable land with suitable water and other amenities is limited. He also supported Senator Bunde's concern regarding the potential for a "land baron" scenario. Senator B. Stevens voiced the understanding that a person would be responsible for staking the land and having it surveyed, before purchasing it. Mr. Pound concurred. Senator B. Stevens commented, "that the value of the land is only intrinsic to the person who wants to go pay and go out there and stake it and survey it." He stated that the market value of the land is probably less than the cost of the survey. Therefore, he voiced being opposed to the amendment-to-Amendment #3, as he opined that the amount of State land that is available now and not bought is indicative of the fact that not a lot of people would be clambering to pursue this land acquisition proposal. Co-Chair Green inquired as to whether other State land disbursement programs have look-back provisions or limiting factors. NANCY WELCH, Special Assistant, Office of the Commissioner, Department of Natural Resources testified via teleconference from an offnet site in Anchorage and informed the Committee that the Homestead program has a minimum five-year limiting provision. She clarified that this legislation's three-year timeframe specification applies to the nomination process rather than to the acquisition. Co-Chair Green clarified that the three-year time limitation refers to the right to stake rather than the purchase. Ms. Welch specified that the three-year time frame would apply to an individual's "right to nominate a parcel and if they actually not required one in three years then they can apply for a right to stake the nominated parcel." Therefore, she summarized, "it only applies to the provision of applying for a right to stake the nominated parcel; it doesn't apply if the person just wanted to participate in any land sale program other than this special provision for staking a special parcel." Representative Fate voiced no objection to the amendment to Amendment #3, as he recounted this provision had, at one time, specified a five-year timeframe. He stated that the reason for reducing the timeframe to three years was to allow more land to be sold. A roll call was taken on the motion. IN FAVOR: Senator Olson, Senator Bunde, and Co-Chair Wilken OPPOSED: Senator Dyson, Senator B. Stevens, and Co-Chair Green ABSENT: Senator Hoffman The motion FAILED (3-3-1) The Amendment-to-Amendment #3 FAILED to be adopted. Amendment #3 was again before the Committee. Mr. Pound reiterated that Amendment #3 would allow the Commissioner of the Department of Natural Resources to offer additional parcels surrounding a nominated parcel. He also noted that were an individual to nominate a parcel and then decide not to stake it, the amendment would allow the Commissioner to offer that parcel for disposal through other land disposal programs. In addition, he noted that were already surveyed and platted lands not purchased, this amendment would allow those lands to be made available through a sealed bid or outcry auction. Co-Chair Wilken removed his objection to Amendment #3. There being no further objection, Amendment #3 was ADOPTED. Conceptual Amendment #4: This amendment specifies that the provisions of this legislation would terminate in ten years. Co-Chair Wilken moved to adopt Amendment #4. He stated that due to the fact that this bill is "plowing new ground" and has encountered some controversy, it would be advantageous to review the outcome of the bill at a later time. Representative Fate stated that a ten-year time frame would be acceptable. He noted that, as reflected in the accompanying fiscal note, the State would not begin to realize the benefits of the legislation for at least five years. There being no objection, Amendment #4 was ADOPTED. Co-Chair Wilken asked whether the adopted amendments would alter the bill's fiscal notes. Mr. Pound stated that the fiscal note that accompanied the Senate Resources version of the bill would not be affected by the changes. Senator Bunde moved to report the bill, as amended, from Committee with individual recommendations and accompanying fiscal notes. There being no objection, SCS CS HB 319(FIN) was REPORTED from Committee with zero fiscal note #4, dated May 8, 2004 from the Division of Oil & Gas, Department of Natural Resources and $69,000 fiscal note #5, dated May 8, 2004 from the Division of Mining, Land and Water, Department of Natural Resources.