HOUSE RESOURCES STANDING COMMITTEE January 27, 1993 8:00 a.m. MEMBERS PRESENT Representative Bill Williams, Chairman Representative Bill Hudson, Vice-Chairman Representative Con Bunde Representative Pat Carney Representative John Davies Representative Joe Green Representative Jeannette James Representative Eldon Mulder MEMBERS ABSENT Representative David Finkelstein OTHER LEGISLATORS PRESENT Representative Tom Brice Representative Kay Brown Representative Ron Larson Representative Harley Olberg Representative Brian Porter Representative Gene Therriault Representative Cynthia Toohey Representative Al Vezey Representative Ed Willis COMMITTEE CALENDAR Overview of Mental Health Lands Trust Settlement WITNESS REGISTER Charles E. Cole, Attorney General Department of Law P.O. Box 110300 Juneau, AK 99811-0300 (907) 465-3600 Position Statement: Gave the State's position on the Mental Health Lands Issue Ron Swanson, Director Division of Land Department of Natural Resources P.O. Box 107005 Anchorage, AK 99510-7005 (907) 762-2692 Position Statement: Explained lands affected by settlement Representative Kay Brown State Capitol, Room 517 Juneau, Alaska 99801-1182 (907) 465-4998 Position Statement: Questioned whether pending settlement included oil and gas leases Bruce Phelps, Project Manager Mental Health Lands Department of Natural Resources P.O. Box 107005 Anchorage, AK 99510-7005 (907) 762-2692 Position Statement: Gave an overview of the settlement agreement Representative Cynthia Toohey State Capitol, Room 104 Juneau, Alaska 99801-1182 (907) 465-4919 Position Statement: Inquired about mineral development potential Tom Koester, Attorney 229 4th Street Juneau, AK 99801 (907) 463-3242 Position Statement: Testified on legal aspects of settlement Representative Ron Larson State Capitol, Room 502 Juneau, Alaska 99801-1182 (907) 465-3878 Position Statement: Supported the solution presently before the courts ACTION NARRATIVE TAPE 93-8, SIDE A Number 000 The House State Affairs Committee was called to order by Chairman Bill Williams at 8:03 a.m. Members present at the call to order were Representatives Williams, Bunde, Carney, Davies, Green, James, and Mulder. Members absent at the call to order were Representatives Hudson and Finkelstein. CHAIRMAN WILLIAMS announced the meeting was being teleconferenced to Anchorage and Kodiak. He said the Department of Natural Resources (DNR) and the Department of Law would present a brief history and current status of the Mental Health Lands Trust Settlement. He stated that a bill had been introduced in the Senate, but there would be no bill before the committee. After the meeting, the committee would discuss any action it wanted to take on this issue, he said, and asked that questions be held until after the presentation. He directed members to their folders for information on the Mental Health Lands Trust Settlement. (Chairman Williams noted for the record that Representative Hudson joined the Committee at 8:10 a.m.) Number 078 CHARLES COLE, ATTORNEY GENERAL, STATE OF ALASKA, said he would like to give a history of the Mental Health Lands dispute and present some views regarding Chapter 66, how it was working and its problems. He said his testimony would be followed by Bruce Phelps and Ron Swanson from the DNR on the implementation of Chapter 66 and problems faced. MR. COLE referred members to a legal opinion on the Weiss case (State v. Weiss, 706 P.2d 681 (Alaska 1985)), a copy of which was in members' folders. He said the case provided a good basic summary of the history of the Mental Health Lands issue. (Chairman Williams noted for the record that the committee had been joined by Representative Eldon Mulder and Representative Kay Brown.) MR. COLE continued his testimony by citing federal legislation. In 1956, Congress enacted the Alaska Mental Health Enabling Act, as a mechanism to enable the territory of Alaska to deal with mental health problems. Prior to that, Alaska's mental health program was unsatisfactory. The Enabling Act was a mechanism to make Alaska's mental health program consistent with mental health programs throughout the rest of the country. Mr. Cole said Congress granted the Territory of Alaska one million acres of land in the territory, along with the proceeds of the disposition of those lands, and any income derived from the land. MR. COLE directed members' attention to maps showing where those one million acres were located. Number 137 RON SWANSON, DIRECTOR, DIVISION OF LAND, DNR, showed the lands concentrated around major city areas. MR. COLE said that under the terms of the Enabling Act the state could not establish a separate account for the proceeds of income received from those lands. A record of trust land income was kept until 1973, he said, and a board was set up to oversee the management of those lands. Expenditures greatly exceeded the income from the lands, Mr. Cole reported. Demands for lands from municipal and private parties in the late 1970's resulted in the passage of Chapters 181 and 182, Session Laws of Alaska 1978. Those chapters redesignated all Alaska mental health lands as general grant lands. The acts provided for the trust to be compensated by the payment of 1.5% of all state land revenues to a permanent trust fund. MR. COLE explained the problem of this action was that Chapter 182 was subject to a legislative appropriation and the legislature did not make any appropriations. In ensuing years, Mr. Cole said there had been many transactions in respect to the general grant lands. MR.COLE summarized what had happened to those lands over the years: 1) conveyed to third parties by way of sale or other transfer, approximately 50,000 acres comprised of roughly 3,162 separate parcels; 2) conveyed to municipalities, 84,000 acres, consisting of 888 parcels; 3) conveyed to Native Corporations under land settlements, 36,000 acres; 4) conveyed to the University of Alaska, 3,000 acres; 5) condemnation actions, 5,000 acres; 6) leases to third parties, approximately 90,000 acres; 7) small sales, about 2,000 acres; 8) mining claims, 60,000 acres; 9) legislatively designated areas, 113,000 acres in state forests and 245,000 acres in parks and wildlife refuges; 10) miscellaneous inter-agency land management agreements, about 4,500 acres; and 11) a large tract of 315,000 remained in state ownership and was unencumbered. NUMBER 300 MR. SWANSON showed the committee areas on the map indicating state-owned lands, legislatively-designated lands, encumbered lands, and state forests. MR. COLE asked Mr. Swanson to point out the legislatively- designated areas that were part of the original trust lands. MR. SWANSON also pointed out lands with no encumbrances. Number 310 (Chairman Williams noted for the record that Representative Hudson had joined the meeting.) MR. COLE described for the committee the facts surrounding the 1978 litigation designating the mental health lands as general grant lands. He said that in November 1982, there was a suit filed by a class of plaintiffs alleging the state had breached its trust obligations under the 1956 Alaska Mental Health Lands Enabling Act. He said there was too much detail to go into before the committee, and promised to furnish a ten-page handout describing that suit. MR. COLE referred to the court opinion on the Weiss case, page 684, where the Supreme Court said, "It follows from our conclusion that the redesignated legislation is invalid; that the trust must be reconstituted to match as nearly as possible the holdings which comprised the trust when the 1978 law became effective." The opinion continued to say that the case was remanded so requisite findings could be made. The opinion said lands must be returned to their former trust status. In the case of lands which had been exchanged, properties involving identified mental health lands would also be included in the trust. For former mental health lands that had been sold, the trust must be reimbursed for the fair market value at the time of sale, he said. Number 385 MR. COLE described the system established to calculate the total amount owed, including a set-off granted for mental health expenditures during the same time period. In the event the expenditures exceeded the value of the lands sold, the state need not furnish cash as a part of the reconstitution. Mr. Cole said the goal of the court was to restore the trust to its position just prior to the conveyance effected by the redesignated legislation. MR. COLE equated the court's decision with a directive to "put Humpty Dumpty back together again." He then described some of the problems faced by the state as a result of the court decision. Referring to information in committee members' folders, he summarized the state's obligations. The state would have to return to the trust the 3,162 parcels of land comprising 50,000 acres that had been sold to third parties. Mr. Cole said that as he read the opinion, the state would have to take back the land from the people who own and occupy the parcels. Number 400 MR. COLE said the 888 parcels conveyed to municipalities would also have to be taken back and put into the trust, as well as the acres leased to third parties, legislatively- designated areas (state forests, parks and wildlife refuges). Mr. Cole said there were also other problems resulting from the Weiss decision. He directed the members' attention to page 684, the last paragraph, which says the trust must be reimbursed for the fair market value at the time of sale for former mental health lands that had been sold since the date of the conveyance. Mr. Cole said there was considerable dispute among the parties over what was meant by the term "sale." MR. COLE identified areas of the court decision's language that were vaguely defined and how the interpretations led to disputes over how to implement the court decision. He said the court did not give the state guidance in how to proceed. Number 478 MR. COLE referred again to Chapter 66, and pointed out that the set-off of mental health expenditures would be asserted in another round of negotiations. Approximately one billion dollars was at stake, he said. Referring to Chapter 48, Session Laws of Alaska 1987, Mr. Cole said that legislation provided for a four-step settlement. Under that settlement, the first step would be for the Commissioner of the DNR to value the original one million acre land grant, effective as of September, 1987. MR. COLE added that in step two, the original lands would be exchanged for lands within legislatively-designated areas of equal value, which would then comprise the reconstituted Mental Health Lands Trust corpus. Third, the state would then rent the reconstituted corpus for eight percent of its fair market value annually, adjusted after every five years. And fourth, pending the conclusion of the valuation and exchange process, the state would pay five percent of unrestricted general fund revenues as a transitional measure. MR. COLE said that process had been underway, but stalled when no agreement could be reached on the value of the lands. The DNR's Commissioner proposed procedures that produced a value of $574 million. The commission set up under Chapter 48 came up with a value of $2.243 billion. The Commissioner then declared an impasse and said the legislature would need to look at the issue. MR. COLE reported that the 1990 Legislature tried to resolve the impasse by enacting an alternative resolution mechanism not predicated on the valuation of the lands. In Chapter 210, Alaska Session Laws 1990, all lands that were in legislatively-designated areas as of September 1987, were exchanged for the original Mental Health lands not in legislatively-designated areas. The state would then rent those lands from the trust for six percent of the unrestricted general fund revenues, plus all incidental revenues received from those lands. MR. COLE said following that legislative action, there was another round of litigation. He referred again to Chapter 66, and said the injunctions arising from the litigation effectively froze any transactions. The state gave up its claim for the expenditure set-off, Mr. Cole said, which was a massive concession. Number 532 MR. COLE continued to address Chapter 66, and said the next major point was to reconstitute the trust by putting back into the trust the unencumbered state lands, approximately 315,000 acres. Then the original trust lands would be replaced as nearly as practical with lands of comparable character and value. This plan, Mr. Cole said was intended to cause as little disruption as possible to comply with the Weiss decision. Number 571 MR. COLE reported that a Mental Health Authority had been set up, and that six percent of general revenues would phase down over a period of years. He acknowledged a recognized desire that the lands generate income. Mr. Cole cited objections by environmental interests who opposed income- generating land use. Those parties, he said, would rather see the trust reconstituted by the payment of money. Number 610 MR. COLE also made reference to the interests of the oil companies, including Marathon, who had concerns over the so- called hypothecated lands. The plaintiffs in the settlement negotiations said the state never lived up to its obligations with respect to the Mental Health Lands, and the plaintiffs requested security for the performance of the state's obligations under Chapter 66. MR. COLE questioned the need for security when there was legislation directing the DNR's Commissioner to perform the required acts, and also provisions for the courts to order that the obligations be met. Those arguments, Mr. Cole said, did not prevail. As a concession, the state agreed to give some lands as security for the performance of the state's obligations. Those were the "mortgaged," or hypothecated lands. MR. COLE told the committee there was no way those lands would be foreclosed as security because the DNR was under statutory obligation and court order to perform its duties. He then referred to ongoing litigation in Fairbanks and lengthy negotiations that resulted in a settlement agreement. The agreement was presented to the court in Fairbanks, and was now under advisement. Number 667 MR. COLE said that in his opinion Chapter 66 was working in spite of being embroiled in litigation. He discussed the alternatives available, which included: 1) compliance with the mandate in the Weiss decision, (the administration's position); and, 2) putting back into the trust the land that could easily be put back (315,000 acres plus legislatively- designated lands) with the balance compensated in money. He clarified that Chapter 66 did not do away with the legislature's power to make annual appropriations for the mental health lands program. He called Chapter 66 a "mechanism" to deal with the trust lands problem. TAPE 93-8, SIDE B Number 000 MR. COLE defined the third alternative as dedication of a certain percentage of general revenues to the mental health programs. He believed it could be done, but he thought it was a poor settlement for the problems created by the Weiss litigation. Six percent, he said, was too much. At present that percent of unrestricted state revenues was about $143 million. If state revenues increased, up to $200 million or more could be required to be spent on the mental health programs. It would be more appropriate, he said, to have the legislature retain the power to deal with the mental health program as it saw fit. MR. COLE referred to potential constitutional problems with dedicated funding, as well as potential conflicts with moving state funding out of other programs to meet the six percent spending amount for mental health programs. With that, he concluded his presentation. NUMBER 075 CHAIRMAN WILLIAMS noted for the record that the committee had been joined by Representative Vezey. He then announced the committee would spend the remaining hour hearing from Mr. Swanson and Representative Larson, as well as taking questions regarding the Mental Health Lands settlement. Number 080 REPRESENTATIVE BILL HUDSON asked Mr. Cole the status of funding. MR. COLE responded that Chapter 210 remained the current state of the law, and appropriations were being made under that guideline. The process of reconstituting the trust under Chapter 66 had been going on and should be completed in the near future. Number 100 REPRESENTATIVE PAT CARNEY asked the Attorney General to expound on the status of the hypothecated lands. MR. COLE responded that Mr. Swanson would address that issue in greater detail during his presentation. Number 113 REPRESENTATIVE JOE GREEN asked about the process that determined the value of the lands, whether funds in excess of what was needed by the mental health programs would come back into the general fund. He also asked about restrictions on potential land users. MR. COLE answered that encumbrance of the land would have the effect of restricting its use. He said the rule of reason would demand that no unnecessary problems be created for innocent parties, who had been referred to as the "moms and pops." As part of the settlement, Mr. Cole said, the state agreed with the plaintiffs' lawyers that the court could release the injunction, and the court rejected that request. He said the state would petition for review of that order with the Supreme Court. Number 202 REPRESENTATIVE ELDON MULDER asked whether the legislature could take any action right now to release the hypothecated lands. MR. COLE doubted whether there was any such action. He said that would have to be negotiated with the plaintiffs' lawyers. REPRESENTATIVE MULDER then inquired if any sort of finality had been provided for in Chapter 66. MR. COLE acknowledged Chapter 66 provided for finality, but could not say when. The courts control that factor, he said. December 1, 1994 was one date mentioned in the interim time-line, he added. Number 235 REPRESENTATIVE JEANNETTE JAMES expressed concern with the six percent revenue stream and appropriation of the funds for other programs. She asked Mr. Cole to confirm whether it was correct that the legislature reserved the right to appropriate the six percent to mental health issues and also on other issues. MR. COLE confirmed that under Chapter 66, this was the case. Number 269 REPRESENTATIVE JOHN DAVIES had two questions for the Attorney General. First, he asked for a review of exactly who were the parties to the settlement agreement, and whether the parties could back out of the agreement. His second question was whether 6(i) of the statehood act would be a factor in the court's findings on the settlement. MR. COLE responded that Tom Koester would answer those questions. He said 6(i) had been the subject of extensive arguments before the court recently. Regarding the parties' ability to back out, Mr. Cole said he thought not, although he said Mr. Jesse's clients had backed out but had signed the agreement. Number 287 REPRESENTATIVE CON BUNDE asked for more information about the obstructionist role of the environmental community and the legislature's role in that. He then referred to the six percent revenue stream and asked Mr. Cole the number of clients served by the state's mental health programs, and how much of the allocated funds were spent per person. Number 303 MR. COLE responded that Mr. Koester would have more detail, but in regards to the environmental community, he said their intent was to litigate the settlement to the point that the legislature would change its mind and provide a different settlement. Number 311 REPRESENTATIVE KAY BROWN asked Mr. Cole if the settlement pending before the court included oil and gas leases, and if so, what was the income generated from those leases. MR. COLE responded in the negative. He added the state was opposed to including such land in the settlement. Number 337 MR. SWANSON again addressed the committee. He introduced Bruce Phelps, the project manager for the DNR, who worked on the Mental Health Lands Settlement. He commented that the DNR was working on the implementation of Chapter 66. He said the DNR was well on its way to meeting the deadline of December 1, 1994 to complete the reconstitution. He anticipated the DNR would be able to come back to the legislature next May and report that the land reconstitution was completed and ready for conveyance. MR. SWANSON referred to essential elements of the reconstitution. In particular, he mentioned the comparable character of lands. He reiterated that lands selected for the reconstitution should match as nearly as possible those in the original lands' trust. He pointed out on the map the lands that were in the hypothecated category. He said those lands could be developed as long as the land value was not diminished. MR. SWANSON said there were about six million acres on that list and he offered the figure of approximately 500,000 acres of the hypothecated lands that would actually be selected by the Mental Health settlement. Contrary to perception, he explained, that land was not locked up. He then asked Mr. Phelps to explain the implementation of Chapter 66. MR. BRUCE PHELPS, PROJECT MANAGER, DIVISION OF LANDS, DNR, delivered a brief overview of the settlement agreement, Chapter 66, and the project itself. Since October, 1991, he said, a lot of work had been done. He referred to a project overview manual before the members. This document, he said, laid out the framework for the rules and procedures for meeting the trust reconstitution goal. Chapter 66, he explained, established a Mental Health Trust authority. It attempted to recreate the original mental health lands trust as much as possible, and to include as many of the original acres. He said about 335,000 acres of the original trust lands were conveyable. MR. PHELPS defined a certain portion of the original trust lands that could not be conveyed because of third party interests that the state no longer owned or controlled. He said that portion included 665,000 acres of original trust lands. That portion had to be replaced from other state lands, according to Chapter 66's guidelines for identifying comparable lands. The primary criteria, he said, were comparable characteristics, equal fair market value, and overall public interest. He told the committee there was also a project manager working with the DNR for the plaintiffs. He said there was good integration between the two staffs. Number 439 MR. PHELPS led the committee through the parts of the project. First, what the project was in relation to Chapter 66; second, what had been accomplished so far; and third, what remained to be done in the immediate time frame. The first aspect was to try to regain as much land as possible, which was accomplished through the title review process. This process, he said, identified original trust lands that were conveyable, original trust lands that were not conveyable back to the state, and original trust lands that might go back to the trust. It also identified and prepared, he said, conveyance documents. MR. PHELPS described the second component, of comparable characteristics analysis. The attributes of resources in both the original trust and possible replacement lands were studied. Attributes reviewed included income potential, development potential, location, and access. He said these attributes were spelled out in Chapter 66. Land was divided into resource units in terms of surface features such as forests, gravel, etc. In terms of subsurface resources, three classifications were used: oil and gas, coal, and minerals. The parties have agreed on the classification of resource attributes, Mr. Phelps said. Number 484 MR. PHELPS told the committee what role the parties were playing in attribute identification, with the state doing large parts of the surface analysis, and the plaintiffs doing the evaluation related to minerals. The results would go into a jointly accessible database. The process allowed for fast evaluation of lands in the selection, he added. Number 500 MR. PHELPS addressed the third component, which was the value analysis. Both the non-conveyable original trust lands and the replacement lands would be evaluated, in order to assure equal fair market value in the exchanges. He advised 665,000 acres of the original trust lands were involved, as well as 550,000 acres of replacement lands. The parties were dividing the land for valuation into resource components. A series of independent panels was doing the surface valuations around three parts of the state: Southcentral, the Interior, and Southeast, he said. MR. PHELPS described how the commercial forest lands were being valuated, using independent contractors who developed the estimations of value based upon industry practice. Subsurface values were determined by a value model being developed by the DNR and the plaintiffs. Results of the value analyses would go into the database, along with the attributes, he advised. Number 520 MR. PHELPS said a major component was identification of replacement lands. Both the state and the plaintiffs could nominate the lands, both surface and subsurface. Presently, he said, the plaintiffs had nominated approximately 555,000 acres of replacement land. About 40,000 acres of that land, he said, were associated with commercial forestry, 200,000 were associated with minerals and coal, and 310,000 were associated with land and minerals. The DNR was reviewing the nominations, and on the basis of that review they might oppose some and nominate additional land, he stated. Number 540 MR. PHELPS said the next step was to make matches between the original trust lands and the nominated replacement lands based on the attributes and value comparison data. The exchange process was complex, but the software being used should make it go quickly. Finally, he reported, a public review process would occur in regional meetings set for June, 1993, and July, 1994. The reason for those dates was that in the first review, the results of the first tentative land exchange process would be evaluated. A refinement process would follow that first review, with adjustments made in the land exchange based on recommendations made during public review. In June, 1994, a second review process would allow final consideration of the exchange, still allowing time for changes based on recommendations. Number 560 MR. PHELPS delivered an overview of what had been accomplished thus far in the process by the DNR, which included: identification of original trust lands; categorization of those lands into non-conveyable and conveyable lands, and property that might be conveyable; performance of title review of all lands nominated by the plaintiffs; completion of comparable characteristics analysis for all non-conveyable original trust lands; and, identification of comparable characteristics of forestry tracts and mineralized areas. MR. PHELPS said what remained to be done was identification of the attributes of the replacement lands, in terms of the surface characteristics. Contracts had been initiated to complete this last component, he told the committee. The due date was April 2, 1993. In terms of the evaluation analyses, he said it was set up on a contractual approach in three regional panels who would go through a mass appraisal process. The request for proposals have been initiated on this phase, and the due date was the end of April of this year, he added. MR. PHELPS next addressed the land exchange component, and said a database had been established, and the data was available to the public and parties of the settlement. The lands have been mapped also. In the next six months, he said, there was still much to be accomplished. This included identification of encumbrances on conveyable original trust lands. The settlement agreement provided for a valuation process to compensate for the diminishment of value by the encumbrance. Additionally, they would begin to develop the patent documents on the original trust lands, he advised. Number 600 MR. PHELPS reported that the contractual work on the comparable characteristics evaluations would be completed around April, 1993. The valuation analyses contract for forest tracts was underway now and should be completed by April 2, or April 15. The land evaluations of the surface involving the mass appraisal process of 500,000 acres should be complete by the end of April. Evaluations of the mineralized areas including coal, would also be done by April. The title work necessary to identify original trust lands and replacement lands and the description of all the attribute features, the valuation of all the resource units, would lead to the pairing of the replacement lands with the original trust lands. Then the lands to be conveyed would be known. They would be tentative land exchanges, he explained, and added that a finalized exchange could not take place until after the public review process. Number 630 MR. PHELPS explained that the state would be in a position to accomplish the majority of the generalized work in Chapter 66 by April or May of this year. More detailed work would be completed in terms of title documents and conveyance evaluations after that time. He then referred to a project outline with a time-line for each of the components he described, and concluded his statements by saying he believed the state and plaintiffs were making rapid progress. Number 654 CHAIRMAN WILLIAMS noted Representative Gene Therriault had joined the meeting. REPRESENTATIVE CYNTHIA TOOHEY asked how a parcel like the Winter Creek/Glacier Creek area that was designated for ski resort development would fall into the settlement, in terms of mineral development potential. MR. PHELPS advised the Winter Creek/Glacier Creek area would be addressed in terms of comparable characteristics, looking at the attributes of the land, and comparing it to the original trust lands that were non-conveyable to see if it was comparable. Number 668 MR. SWANSON also responded to the question, referring to municipalities that had large amounts of original mental health lands within their boundaries, including Ketchikan and Anchorage. He said the DNR was working with those municipalities to see if some of the original mental health lands could be freed up. Glacier/Winter Creek was included in those discussions, he said. Number 673 REPRESENTATIVE DAVIES returned to his previous question on 6(i) lands, asking if 6(i) provisions would be violated. Number 680 TOM KOESTER, a former assistant attorney general who represented the state in this case in 1982 and was currently on contract with the state, responded to the question regarding section 6(i). He said the question had been submitted to the court for a decision. The legal issues raised by the environmental interveners in the case were the subject of summary judgment motions filed with the court. The issue was under advisement. In the event the court ruled a conveyance of the mineral estate to the trust authority, the settlement agreement provided that would violate 6(i) and the parties had 60 days to reach an accommodation of some kind. If they failed to do so, the settlement agreement would be terminated. MR. KOESTER said the state had tried to set out a procedure whereby the parties would have an opportunity to solve problems. TAPE 93-9, SIDE A Number 000 MR. KOESTER briefly summarized the potential problem with section 6(i). That section of the Statehood Act required that mineral rights could be leased but not conveyed from the state to another party. The question now was whether the conveyance of lands from the state to the mental health lands trust was a violation of that requirement. He said conveyance documents would include a restriction saying the conveyances were subject to the restrictions of section 6(i) of the Statehood Act. He said the attorney general's office believed there was no 6(i) problem, but he acknowledged that others might have a contrary opinion and the court would ultimately resolve the issue. Number 042 REPRESENTATIVE DAVIES asked if the 60-day window for resolution of problems would defeat the settlement. MR. KOESTER responded that it would depend on whether the parties could come up with an alternative valuation methodology and an alternative structure to the settlement that did not involve the conveyance of mineral estates. He said it was the opinion of the attorney general's office that 6(i) would not be a problem. Number 070 REPRESENTATIVE BUNDE asked Mr. Koester to characterize the attitude of the plaintiffs toward seeking a speedy resolution. MR. PHELPS answered that the plaintiffs had been very cooperative and had worked quickly for solutions. Both parties, he said, have worked to minimize conflicts. Number 105 REPRESENTATIVE JAMES referred to the December, 1994 deadline, and the penalties if the deadline was not met, such as the foreclosure of hypothecated lands. She also remarked on the effective dates of Chapter 66, and the process for appeals. Number 129 MR. PHELPS said he could respond to the issue of the project itself, and said the vast majority of that work would be done in the next six months. This would include the conveyance of title which could be done by that date, he added. Number 145 MR. KOESTER answered Representative James' question regarding the legal appeals process. He said the state had no control over the amount of time the courts took in making their decision. He added the court system could be speedy when it wanted to. He referred to cases like the reapportionment case which was settled in a matter of months. When there was a pressing deadline, he said, the court would try to honor it. Number 165 REPRESENTATIVE GREEN asked if the land comparison was based on the unimproved value of the original trust lands. MR. PHELPS answered in the affirmative. REPRESENTATIVE GREEN then asked about subsurface mineral rights, like coal, and whether the subsurface mineral rights would be preserved by the state. MR. PHELPS answered that in terms of coal, the majority of coal resources were in conveyable original trust lands. He mentioned other areas that were inside Legislatively Designated Areas (LDA), which would have to go through valuation analysis. Data on determining the value of land with coal deposits was readily available, he said. Number 200 REPRESENTATIVE GREEN was concerned that the mineral rights would be reserved by the state. MR. PHELPS clarified that in LDA lands, the mineral rights would be reserved. REPRESENTATIVE GREEN asked about the speculation value of similar properties. Number 220 MR. PHELPS responded that those situations presented some difficulty so the valuation model included probability as a large part of the model. He said there was a strong weighing of probability. REPRESENTATIVE GREEN asked whether valuations were being made on lands that had not been patented to the state, or lands that were clouded because of over-selection by a Native corporation. MR. PHELPS answered that in terms of title review, the state was making valuations. They had also recommended that to the plaintiffs where there was a problem with conveyance, he added. Number 233 REPRESENTATIVE RON LARSON distributed handouts to the committee, one of which he said would help to answer Representative James' questions. He referred specifically to the Congressional Record from May 25, 1956. Regarding the granting of lands to the State of Alaska, it said: "The purpose of the grant is to afford revenue to the territory for support of its mental health programs. If such revenues are in excess of the program, they may be used as a public trust for the public purposes." REPRESENTATIVE LARSON said he would make himself available to the committee in addressing this issue. The six percent revenue stream issue, he said, had been addressed two years ago at the end of the legislative session. He spoke of his increased involvement in the issue. The priority was to meet the congressional mandate, and also to meet the instructions of the supreme court, he said, and believed the solution before the courts was the best solution to date, and that it would save time to let it run its course. Number 318 REPRESENTATIVE DAVIES asked that the committee hear from other parties to the settlement, such as the plaintiffs and interveners. Number 334 CHAIRMAN WILLIAMS said the committee would have an overview hearing during which those parties could air their views. He announced that at the committee's next meeting, it would consider three executive orders. ADJOURNMENT There being no further business to come before the committee, Chairman Williams adjourned the meeting at 9:55 a.m.