SB 85-FOREST LAND USE PLANS; TIMBER SALES  3:33:44 PM CHAIR REVAK announced the consideration of SENATE BILL NO. 85 "An Act relating to forest land use plans; relating to forest land use plan appeals; relating to negotiated timber sales; and providing for an effective date." 3:34:28 PM SENATOR VON IMHOF joined the meeting. 3:34:41 PM BRENT GOODRUM, Deputy Commissioner, Department of Natural Resources, Anchorage, Alaska, introduced SB 85 as follows: This bill seeks to modernize our timber sales process. The proposed modifications to these statutes will help grow predictability and jobs in Alaska's timber industry, an industry that has longed for more flexible negotiated timber sales necessary to meet the current needs of their intended markets. The benefits of enacting SB 85 will result in more efficient land use planning and more predictable timber harvests. Importantly, SB 85 is a zero fiscal note. Presenting SB 85 this afternoon will be Director Helge Eng, Alaska's new State Forester. Director Eng has 42 years of experience practicing forestry and fire protection in the western United States, British Columbia, and Scandinavia. Director Eng worked for the California Department of Forestry and Fire Protection for thirty years in a variety of capacities within both forestry and fire protection assignments. He retired from Cal Fire as Deputy Director for Forestry and was then appointed as the director of Alaska Division of Forestry (DOF) after Chris Maisch retired in early December 2021. Director Eng is very excited about the opportunity to lead the Division of Forestry during a critical time as our landscape faces new challenges from increasing wildfire threats and tree mortality from spruce beetle infestation. 3:36:35 PM HELGE ENG, State Forester and Director of Forestry, Department of Natural Resources, Anchorage, Alaska, provided testimony on SB 85. He indicated that this bill is comprised of two major categories: 1) The benefits of contractual certainty on forest land use plans; and 2) A more efficient and flexible timber sale process to assist the timber industry. MR. ENG presented a slideshow entitled "Forest Land Use Plans, Negotiated Timber Sales.Slide 2, Contents: I. SE Alaska timber industry is struggling to survive II. How to protect timber jobs? 1. Change negotiated timber sale statutes to allow local industry to sell all the timber it harvests, as export if needed. 2. Provide contractual certainty: stable and predictable supply of timber once a timber sale has been purchased. MR. ENG stated contractual certainty is accomplished by implementing Forest Use Land Plans that are not appealable. III. Sectional Analysis 3:38:20 PM MR. ENG advanced to slide 3, The Timber Industry in Alaska is Struggling to Survive: A dwindling supply of timber from the US Forest Service has gutted the timber industry in Southeast Alaska. MR. ENG stated that the U.S. Forest Service actively seeks to repeal the exemption for the Tongass National Forest roadless rule. This has resulted in the shutdown of old growth timber sales from the Tongass National Forest. It was a blow to the timber industry in Southeast Alaska which has grown dependent on a reliable Tongass timber supply. He said that, in response to the decline, the governor introduced this bill to streamline the timber sale process, make it more flexible, and more efficient. The governor also increased the amount of purchasable state timber available to timber operators. SE Alaska supports only 325 timber industry jobs today, compared to 4,000 jobs in the 1990s. Now, even those jobs are in danger. MR. ENG noted that the Southeast Alaska timber industry job situation is a somber statistic; the jobs are in danger. The hope is that SB 85 will help support the industry. Amending statutes to support the local industry in Southeast Alaska will protect existing jobs. MR. ENG advanced to slide 4, How Can We provide and Protect Jobs: Step 1. Change negotiated timber sale statutes to allow local industry to sell all the timber it harvests, as export if needed. Currently, negotiated timber sales must be sold for local manufacture, not export. • A changing timber supply (more young growth) means that some sizes of timber are not marketable in Alaska. • Demand for certain species (e.g., hemlock) is only overseas or in the Pacific Northwest. MR. ENG continued with Timber Sale Types: Negotiated & Competitive, slide 5: • Negotiated sales allow DOF to choose a timber purchaser not only based on price, but also on the number of local jobs the sale provides. • Local SE Alaskan operators are not able to outbid larger out-of-state companies for competitive sales. Without a consistent timber supply, local industry and jobs will erode further. MR. ENG noted that multiple bidders generally result in competitive timber sales where the highest bidder is selected. The competitive bid process often has a negative effect on the local industry. 3:41:49 PM SENATOR KAWASAKI asked whether the bill is only pertinent to Southeast Alaska, or if it applies to forests statewide. MR. ENG answered the bill applies to forests statewide. MR. ENG continued with slide 6, How Can We Provide and Protect Jobs: Step 2. Once a timber sale has been purchased, provide a stable and predictable supply of timber to the operator by providing contractual certainty. MR. ENG explained that once a timber sale has been purchased, it is critical the operator have a stable and predictable timber supply. He added that a Forest Land Use Plan (FLUP) appeal can be ruinous to a logging company which typically does not have the capital to wait for an appeal to be resolved. He elaborated on this point in slide 7, Stable Timber Supply: An appeal can halt harvesting, which can be disastrous to a logging company. SB 85 ensures that once the decision has been made to sell the timber, no further administrative appeals can occur. Input would still be gathered from public and agencies. MR. ENG pointed out that the appeal option is eliminated once the decision has been made to sell the timber, however, the public input process remains intact. He said that public input on FLUPs, commonly results in the modification of harvest units, such as setbacks for the visual consideration of nearby residential areas. DOF endeavors to complete timber sales with community support and acceptance, and in most cases, will act on and implement public requests prior to the appeals stage. 3:44:26 PM SENATOR VON IMHOF referred to slide 3 and quoted, "A dwindling supply of timber from the US Forest Service has gutted the timber industry in Southeast Alaska.She asked for further explanation about state land and the reference to federal land. MR. ENG responded that SB 85 pertains to state land, not federal land. The reference to the U.S. Forest Service timber supply was to set the stage, to describe why the local timber industry is in trouble. SENATOR VON IMHOF asked how many acres of state land are available for timber harvesting. MR. ENG responded that he will get back to the committee with the exact number. 3:45:30 PM CHAIR REVAK requested the data be sent to the Senate Resources Office for distribution to the committee. SENATOR VON IMHOF requested a map. MR. ENG responded, absolutely. 3:45:45 PM SENATOR MICCICHE qualified the following two questions, stating he is pro-timber and supports the timber industry. He asked if timber sale sites will occur in remote areas, so that the potential for negative community impact is alleviated. If not, in the absence of an appeal process, how will issues be resolved. MR. ENG directed attention to slides 8 and 9 to answer the question. He said that there are five steps to complete a timber sale. This bill restructures the timber sale process, so that appeals may occur in three of the five steps. He highlighted that SB 85 proposes step five, Forest Land Use Plans, be unappealable. Mr. Eng reviewed slide 8, Steps in a Timber Sale: Public and agency comment gathered at each step. 1. Area Plans* 2. State Forest Plans* 3. Five-Year Schedule of Timber Sales 4. Best Interest Finding* • Timber may be sold after adopted. 5. Forest Land Use Plans* • Not all Forest Land Use Plans must be issued before timber is offered for sale. • For large sales, prepare Forest Land Use Plans in phases, as access is developed. *Subject to appeal. 3:47:27 PM MR. ENG continued with slide 9, Best Interest Finding vs Forest Land Use Plan: Best Interest Finding Forest Land Use Plan Decisional document: On the ground Implementation: -Should we sell this timber? -How will the sold timber be harvested? MR. ENG explained that the majority of input and public opinion occurs during the Best Interest Finding; the focus is whether or not timber should be sold. MR. ENG explained that Forest Land Use Plans are used to engineer road layouts, culvert sizes, and other development/plans requiring engineering calculations, which arguably, do not require public input. MR. ENG explained that SB 85 proposes the appeal process occur prior to the Forest Land Use Plan step of a timber sale to ensure the operator contractual certainty. He added that the elimination of appeals in the final step also avoids redundancy; rehashing appeals resolved in earlier steps. He emphasized that plenty of public opportunity will be available for public input and appeal in the first four steps. MR. ENG reiterated that appeals are not common on state lands. The department takes pride in the resolution of public concerns before the appeal stage. He referenced Senator Micciche's previous question and said that visual quality concerns, in a majority of cases, are resolved with additional buffers. 3:50:00 PM MR. ENG continued with slides 10 and 11, Safeguards on Timber Harvests: Timber harvests must adhere to the Alaska Forest Resources and Practices Act (FRPA, AS 41.17), which: • protects fish habitat and water quality, and • ensures prompt reforestation. • DOF enforces FRPA through inspections, directives, stop work orders, and civil fines. • On state-administered sales, the operator is held to the timber sale contract. Every contract includes a bond. MR. ENG stated that every operator must put down a performance bond which acts as a guarantee that legal requirements are satisfied. • If DOF, the landowner, or a member of the public sees a problem, DOF can issue a notice of violation, and if necessary, shut down the timber operation until the problem is remedied. 3:51:27 PM SENATOR STEVENS commented that he appreciates FRPA requires the protection of fish habitat. He said that cutting timber to the edge of rivers and streams will destroy a fishing industry. He asked how DOF will manage timber harvests, so that the fishing industry and timber industry are both healthy. MR. ENG answered that the Alaska Forest Resources and Practices Act have the most rigorous rules and regulations on the West Coast, including hydrology and riparian protection. FRPA has rigorous buffer zones around all streams and operations are restricted in those zones. The sustained yield mandate also protects against overharvesting, limiting harvests to the amount grown to ensure forests will regenerate after harvest. Young forests will grow back, protecting soil and water quality against erosion. The Act and rules focus on protection of water courses in riparian areas. SENATOR STEVENS requested assurance that it is possible to have both a healthy timber industry as well as a healthy fishing industry. MR. ENG responded that absolutely, it is possible. 3:53:55 PM SENATOR VON IMHOF asked whether there are post-harvest replant requirements, and if so, what species must be planted. MR. ENG answered that reforestation is required. The Act requires harvested land be restocked with a natural species mix. In Southeast Alaska, trees regrow quite readily, so it may not be necessary to replant. MR. ENG advanced to slide 12, SB 85 Focuses Appeals at the Best Interest Finding Stage, Before Timber is Sold: • Provides stable and predictable supply of timber once sold • No interruptions of harvest at a subsequent Forest Land Use Plan stage • Includes specific criteria the DNR commissioner must consider when deciding whether to offer a negotiated timber sale • Costs nothing: Zero fiscal note 3:54:55 PM SENATOR VON IMHOF commented on slide 12, "Costs nothing: Zero fiscal note. She said that sometimes zero fiscal notes generate revenue and asked whether this bill will generate revenue for the state. MR. ENG answered the bill allows the timber industry to be nimbler and more effective in implementing timber sales. He expressed his belief that this bill would have a quantifiable revenue impact, but it is unknown at this point. SENATOR VON IMHOF asked whether a per log tax, even if it is just pennies, makes sense to generate revenue. She suggested a tax similar to the fish tax. MR. ENG said that he needed to ponder the question before he had an opinion about whether it would be viable. 3:56:29 PM SENATOR MICCICHE asked how the timber sale process works to generate state revenue for timber sales purchased by the acre. MR. ENG answered that every timber sale on state land provides revenue to the state. He explained that timber sales are either competitive, which means they are advertised and awarded to the highest responsible bidder, or they are negotiated. In either case, it is a transaction which allows the purchaser to harvest timber in exchange for money. SENATOR MICCICHE interpreted the answer to mean the bill's streamlined sales process, coupled with an expanded FLUP exemption, is expected to attract a greater number of bidders and sales. He noted that this bill increases the amount of harvestable acreage eligible for the FLUP exemption from 10 to 20 acres. He agreed that until the bill is enacted, the amount of revenue expected to be generated is difficult to quantify. MR. ENG answered yes, it is hard to quantify. He recalled slide 3 which described a beleaguered timber industry. He ruminated on the difficulty to quantify the risk of bankruptcy, the loss of revenue and jobs versus the ability for a company to carry-on and keep going. He stated that SB 85 is expected to have a positive effect on the timber industry. 3:59:47 PM SENATOR KAWASAKI dove tailed off a previous question which pertained to reforestation requirements. He referred to slide 8, "Steps in a Timber Sale" and asked in what step of the timber sale process is reforestation required. MR. ENG answered that the reforestation requirements occur after the Forest Land Use Plan and after the completion of the timber harvest. SENATOR KAWASAKI stated a major part of this bill addresses the appeals process. It seems important that the public be made aware of reforestation policies up front before a timber harvest begins. He asked would it not be better to know about reforestation requirements before the Forest Land Use Plan goes into effect. MR. ENG answered absolutely the public has a right to know. The Act requires adequate reforestation be achieved at a certain point in time after harvest, if not, DOF has authority to require it. At some point you have to approve a timber sale, then reforestation, by necessity, takes place after the timber is harvested. 4:02:18 PM CHRISTOPHER ORMAN, Assistant Attorney General, Alaska Department of Law, Juneau, Alaska, invited testimony on SB 85. He described a few differences between the Best Interest Finding and the Forest Land Use Plan. He said that the Best Interest Finding is a decisional document that determines whether or not timber is sold; built into it are compliance and standard requirements pursuant to the harvest of timber; and the Best Interest Finding is appealable. In contrast, the Forest Land Use Plan is an operational document; it decides how the timber will be harvested; and it is not appealable. 4:03:47 PM SENATOR KAWASAKI said that answer clarified the reforestation question. SENATOR KAWASAKI followed-up with a Forest Land Use Plan site prep question and asked whether the public has access to the engineering particulars prior to the construction of roads, bridges, culverts, etc... He asked if engineering documents are available for public review at any point during one of these three appealable steps: Area Plan, State Forest Plan or Best Interest Findings. MR. ENG answered yes. He said that it is a useful distinction to differentiate between the two planning documents, but it is also an oversimplification to narrowly categorize the Best Interest Finding as the "whether to harvest step and the Forest Land Use Plan as the how to harvest" step. MR. ENG referred back to the five steps in a timber sale. He said that how to harvest" is embedded in each step of the sale, ranging from the Area Plans to the State Forest Plans to the Five-Year Schedule and the Best Interest Finding. 4:05:45 PM SENATOR KIEHL stated that the missing key, which creates uncertainty about this bill, is a lack of Best Interest Finding and Forest Land Use Plan data. He reflected on past experience to illustrate the point. A constituent with a long driveway, may initially be fine with the construction of an uphill bypass road. However, if a 36" culvert ends up right above their home, the constituent might be deeply concerned and want to comment. This concern parallels Senator Steven earlier comments related to fish habitat hazards. SENATOR KIEHL asked which details contained in the Best Interest Finding and Forest Land Use Plan might rouse public comment. MR. ENG stated the Best Interest Finding is focused on the general consequences of an areawide timber sale. The question associated with the Best Interest Finding is whether or not to put acreage up for sale. However, the transition between a Best Interest Finding and a Forest Land Use Plan is gradational. In the gray area, a Forest Land Use Plan is more than an engineering document. MR. ENG gave an example to illustrate the point. Environmental and other factors were considered in a watershed where three or four timber sales occurred in the last few years. Once the public had commented on the wisdom of a timber sale in that watershed, consideration was given to the appropriate view-shed buffers and options for mitigating ecological concerns. Then, DOF's attention focuses on engineering calculations like road location and appropriate size culverts to handle 100-year storms. These calculations are not subject to appeal, because the public previously had the opportunity to appeal. MR. ENG emphasized that it is unusual to receive an appeal on a timber sale. In a timber sale near Thorne Bay, viewshed buffers were installed to address and mitigate public concerns, which resulted in public satisfaction. 4:09:21 PM CHAIR REVAK asked whether each step in the timber sale process, must be approved before the sale is advanced to the next step. MR. ENG answered not necessarily. He said that in a lot of cases the Best Interest Finding and the Forest Land Use Plan occur simultaneously. On large sales, the FLUP materializes after the BIF. MR. ENG expounded on large sales. A large sale BIF applies to the entire timber sale. FLUPS occur after the purchase and harvest units are developed sequentially as needed. Roads are built to harvest the first units and are used to leverage subsequent forest land use plans and harvest units. He said that it would be too time consuming and expensive to develop large sale FLUPS on all harvest units at one time. The purchaser would have to wait too long. 4:10:49 PM SENATOR MICCICHE switched gears to speak on behalf of the timber operator. He stepped back to slide 8, Steps in a Timber Sale, Forest Land Use Plans: Not all Forest Land Use Plans must be issued before timber is offered for sale. SENATOR MICCICHE stated that it is essential operators be able to estimate operation costs prior to submitting a bid. He hypothesized that it might cost $30,000 for a 20-acre parcel, only to discover after the sale, that the cost to reforest is $15,000. He expressed concern that this seems out of order and asked for clarification on the process. MR. ENG explained this statement means that some Forest Land Use Plans can be developed over time. He said that the bid on the sale is done with a high degree of certainty. For example, the reforestation requirements are already known, and an experienced operator will know the estimated cost to reforest. Forest Land Use Plans serve both the purchaser and DOF well in terms of flexibility and implementation. MR. ENG asked whether the committee would like to proceed with the sectional analysis. CHAIR REVAK responded that an abbreviated overview is sufficient. 4:13:34 PM SENATOR STEVENS asked how it came to be that the state prohibited timber exports. MR. ENG answered that the prohibition on exports is a fairly common requirement. It protects the domestic timber industry, encouraging local jobs, domestic processing facilities and value-added products, as opposed to exports which result in only one sale. He said that the question of whether to use domestic sales or export sales is a notorious financial question; SB 85 proposes both. Historically, the overwhelming majority of DOF sales have been domestic, competitive sales. However, SB 85 proposes the state take advantage of market signals and respond to the constant change of supply and demand factors. SENATOR STEVENS asked how this bill ensures both local and export timber sales or if it may deny locals access to a timber supply. MR. ENG answered that this bill is intended to supply both the export and domestic markets. SENATOR STEVENS asked whether the Department of Natural Resources has the authority to ensure a balance, so that a sufficient supply of timber is available locally. MR. ENG answered yes. The commissioner has the authority to decide the particulars of a timber sale. He noted that Section 2 of the bill contains specific criteria the commissioner uses to make timber sale decisions. 4:17:24 PM SENATOR VON IMHOF expanded on the idea of in-state versus out- of-state timber sales. She asked whether the commissioner has the latitude to choose a lower in-state bid over a higher out- of-state bid. MR. ENG answered yes. SENATOR VON IMHOF stated that the nationwide shortage of timber products coupled with lumber price increases have resulted in both housing shortages and affordable housing in Alaska. She surmised that this bill could revitalize the timber industry. She envisioned, "Grow Alaska,self-sufficiency in the production of timber and lumber. Alaskan grown, harvested, and processed timber could potentially alleviate housing pressures in Alaska. MR. ENG said that highlights an excellent point that the forest industry has grappled with for the last 50 years. Supply and demand change rapidly. He explained that supply and demand can be influenced from anything like a glut of blown-down trees from a southeastern state's windstorm to Canadian lumber tariffs which can shift the market equation. He said that the timber market is fluid and is not a fixed target. That being said, the division wants to incentivize the domestic industry, especially in Southeast Alaska. While it is important to incentivize new investments, it is also important to maintain and keep afloat existing timber enterprises. CHAIR REVAK commented that Senator von Imhof's "Alaskan Grown point was well taken. 4:22:10 PM CHAIR REVAK commented that one of the main stipulations of SB 85 is contractual certainty. He asked what the expected effects of this bill are whether it passes or fails. MR. ENG answered that the outcome of this bill is largely unknown. It was proposed to resolve an appeals problem, which occurs after the purchase of a timber sale when the operator is primed and ready to roll. He explained that an appeal which occurs after a purchase, can stop a small to medium-sized timber company in its tracks; it can put a company out of business. CHAIR REVAK asked whether the current system of appeals is used frivolously as a tool against the process to prevent timber sales. MR. ENG responded that the public has a right to comment on timber sales. The five-step process illustrates that the process could be nimbler and more efficient. Not every timber sale needs five levels of public go-around and comments. CHAIR REVAK summarized his understanding of the previous statement. MR. ENG clarified that the five-step process includes the Forest Land Use Plan. CHAIR REVAK set SB 85 aside. SB 85-FOREST LAND USE PLANS; TIMBER SALES  4:41:40 PM CHAIR REVAK returned attention to SB 85 and opened public testimony. 4:42:12 PM KARI NORE, Project Manager, Resource Development Council for Alaska, Anchorage, Alaska, testified in support of SB 85 and the Council submitted written comments. Ms. Nore offered the following testimony: The Resource Development Council for Alaska (RDC) is a statewide trade association comprised of individuals and companies from Alaska's fishing, forestry, mining, oil and gas, and tourism industries. RDC's membership includes Alaska Native corporations, local communities, organized labor, and industry support firms. RDC's purpose is to encourage a strong, diversified private sector in Alaska and expand the states economic base through the responsible development of our natural resources. Senate Bill 85 offers small volume timber sales with greater operator efficiency. It allows the ability to negotiate sales with any use of timber resources. Senate Bill 85 allows the State to conduct timber sales more efficiently, without compromising required environmental review, public comment and process requirements, by eliminating the ability to appeal a Forest Land Use Plan (FLUP). RDC supports Senate Bill 85 which creates greater efficiency when it comes to responsible development of our natural resources. 4:43:45 PM TESSA AXELSON, Executive Director, Alaska Forest Association, Ketchikan, Alaska, testified in support of SB 85. She said that the Alaska Forest Association (AFA) is the forest product trade association that represents an array of members with an interest in the forest products industry in Alaska. Membership in AFA includes, but is not limited to, timber operators, contractors, equipment suppliers, fuel distributors, tribal organizations, forest product vendors, sawmills and other affiliated industry associations and private citizens. MS. AXELSON stated that less than four percent of land in Alaska is privately owned which leaves the timber industry and the forest products industry heavily reliant on other landowners, primarily, the state of Alaska and the federal government Department of Agriculture/Forest Service (USDA/USFS). Most important to the industry is a reliable, predictable timber supply. She said that limitations on sales as a result of decisions and policies by federal landowners, USDA/USFS; Secretary Vilsack July 2021 announcement to substantially reduce old growth harvest and transition to young growth; USFS Tongass 2016 Land Management Plan statements; prevailing market conditions that were discussed earlier, necessitate state legislation that streamlines agency processes and ensures efficient forestry planning. MS. AXELSON gave three reasons the AFA supports SB 85: First, the bill enables DOF to negotiate sales with any use of timber resources. Second, the bill does away with inefficiencies in the appeals process that have existed with Forest Land Use Plans while simultaneously ensuring that required public environmental review and public comment processes are not compromised. Third, the bill provides the state the ability to offer small timber sales with greater efficiency. MS. AXELSON said that these changes holistically help to ensure the struggling industry is able to operate efficiently and is able to support community jobs. Above all, it will help to ensure small business operators have the supply that allows them to continue to operate in various markets. 4:47:17 PM ED MARTIN JR., representing self, Kenai, Alaska, testified in support of SB 85. He stated that since the 1990s the state has struggled with the Spruce bark beetle, not to mention the shut down of the Tongass National Forest when many people lost timber industry jobs. He recommended the state prioritize reforestation after forest fires. He recommended that the timber industry get going in Alaska; this bill will help. 4:50:22 PM CHAIR REVAK closed public testimony on SB 85. 4:50:45 PM SENATOR STEVENS jumped back to HB 79. See final comment after Mr. Martin's public testimony. 4:51:40 PM CHAIR REVAK held SB 85 in committee.