HOUSE RESOURCES STANDING COMMITTEE May 12, 1999 1:40 p.m. MEMBERS PRESENT Representative Scott Ogan, Co-Chair Representative Jerry Sanders, Co-Chair Representative Beverly Masek, Vice Chair Representative John Harris Representative Carl Morgan Representative Ramona Barnes Representative Reggie Joule Representative Mary Kapsner MEMBERS ABSENT Representative Jim Whitaker COMMITTEE CALENDAR CS FOR SENATE BILL NO. 128(FIN) am "An Act moving the termination date of the Board of Storage Tank Assistance to June 30, 1999; relating to the storage tank assistance fund, to financial assistance for owners and operators of underground petroleum storage tank systems, and to discharges from underground petroleum storage tank systems; and providing for an effective date." - HEARD AND HELD CS FOR SENATE BILL NO. 7(FIN) am "An Act relating to the University of Alaska and university land, and authorizing the University of Alaska to select additional state land." - HEARD AND HELD (* First public hearing) PREVIOUS ACTION BILL: SB 128 SHORT TITLE: STORAGE TANK ASSISTANCE FUND SPONSOR(S): FINANCE Jrn-Date Jrn-Page Action 3/31/99 752 (S) READ THE FIRST TIME - REFERRAL(S) 3/31/99 753 (S) RES, FIN 4/07/99 (S) RES AT 3:00 PM BUTROVICH 205 4/07/99 (S) MOVED CS (RES) OUT OF COMMITTEE 4/07/99 (S) MINUTE(RES) 4/09/99 844 (S) RES RPT CS 1DP 3NR NEW TITLE 4/09/99 845 (S) DP: HALFORD; NR: GREEN, PETE KELLY, 4/09/99 845 (S) TAYLOR 4/09/99 845 (S) FISCAL NOTE TO CS (LAW) 4/09/99 845 (S) FISCAL NOTE TO BILL (DEC) 4/12/99 (S) FIN AT 9:00 AM SENATE FINANCE 532 4/12/99 (S) MINUTE(FIN) 4/12/99 875 (S) FISCAL NOTE TO CS (DEC) 4/19/99 (S) FIN AT 9:00 AM SENATE FINANCE 532 4/19/99 (S) HEARD AND HELD 4/27/99 (S) FIN AT 9:00 AM SENATE FINANCE 532 4/27/99 (S) HEARD AND HELD 4/30/99 (S) FIN AT 9:00 AM SENATE FINANCE 532 4/30/99 (S) MOVED CS(FIN) OUT OF COMMITTEE 4/30/99 1184 (S) FIN RPT CS 3DP 4NR NEW TITLE 5/03/99 (S) RLS AT 11:20 AM FAHRENKAMP 203 5/03/99 1202 (S) FIN CS RECEIVED 4/30/99 1184 (S) DP: TORGERSON, PHILLIPS, DONLEY; 4/30/99 1184 (S) NR: GREEN, PETE KELLY, ADAMS, WILKEN 5/04/99 (S) RLS AT 11:30 AM FAHRENKAMP 203 5/04/99 (S) MINUTE(RLS) 5/04/99 1220 (S) FISCAL NOTE (S.FIN/DEC) 5/04/99 1222 (S) RULES TO CALENDAR AND 1 OR 5/4/99 5/04/99 1226 (S) READ THE SECOND TIME 5/04/99 1226 (S) FIN CS ADOPTED UNAN CONSENT 5/04/99 1226 (S) HELD IN SECOND READING TO 5/5 CAL 5/05/99 1255 (S) AM NO 1 ADOPTED UNAN CONSENT 5/05/99 1255 (S) ADVANCED TO THIRD READING UNAN CONSENT 5/05/99 1255 (S) READ THE THIRD TIME CSSB 128(FIN) AM 5/05/99 1256 (S) PASSED Y18 N2 5/05/99 1256 (S) EFFECTIVE DATE(S) SAME AS PASSAGE 5/05/99 1262 (S) TRANSMITTED TO (H) 5/06/99 1193 (H) READ THE FIRST TIME - REFERRAL(S) 5/06/99 1193 (H) RESOURCES, FINANCE 5/12/99 (H) RES AT 1:30 PM CAPITOL 124 BILL: SB 7 SHORT TITLE: INCREASE LAND GRANT TO UNIV. OF ALASKA SPONSOR(S): SENATOR(S) TAYLOR, Kelly Tim, Donley, Wilken, Leman, Pearce, Mackie, Ward; REPRESENTATIVE(S) Halcro Jrn-Date Jrn-Page Action 1/08/99 14 (S) PREFILE RELEASED - 1/8/99 1/19/99 15 (S) READ THE FIRST TIME - REFERRAL(S) 1/19/99 15 (S) RES, FIN 1/25/99 (S) RES AT 3:00 PM BUTROVICH ROOM 205 1/25/99 (S) HEARD AND HELD 1/25/99 (S) MINUTE(RES) 2/01/99 (S) RES AT 3:00 PM BUTROVICH ROOM 205 2/01/99 (S) SCHEDULED BUT NOT HEARD 2/01/99 (S) MINUTE(RES) 2/03/99 (S) RES AT 3:00 PM BUTROVICH ROOM 205 2/03/99 (S) MOVED CS OUT OF COMMITTEE 2/03/99 (S) MINUTE(RES) 2/05/99 165 (S) RES RPT CS 4DP 3NR SAME TITLE 2/05/99 165 (S) DP: MACKIE,TAYLOR, GREEN, PETE KELLY; 2/05/99 165 (S) NR: HALFORD, PARNELL, LINCOLN 2/05/99 165 (S) FN TO SB (DNR), FNS TO SB & CS (UA, F&G) 2/05/99 165 (S) FN TO CS (DNR) 2/25/99 (S) FIN AT 9:00 AM SENATE FINANCE 532 3/04/99 (S) FIN AT 8:00 AM SENATE FINANCE 532 3/04/99 (S) HEARD AND HELD 3/04/99 (S) MINUTE(FIN) 4/23/99 (S) FIN AT 8:00 AM SENATE FINANCE 532 4/23/99 (S) MOVED CS(FIN) OUT OF COMMITTEE 4/24/99 (S) FIN AT 10:00 AM SENATE FINANCE 532 4/26/99 (S) RLS AT 12:00 PM FAHRENKAMP 203 4/26/99 (S) MINUTE(RLS) 4/26/99 (S) MINUTE(RLS) 4/26/99 1085 (S) FIN RPT CS 5DP 2NR SAME TITLE 4/26/99 1086 (S) DP: TORGERSON, WILKEN, LEMAN, DONLEY, 4/26/99 1086 (S) PETE KELLY; NR: PHILLIPS, ADAMS 4/26/99 1086 (S) PREVIOUS FNS (DNR, UA, F&G) 5/03/99 1202 (S) RULES TO CALENDAR AND 1 OR 5/3/99 5/03/99 1203 (S) READ THE SECOND TIME 5/03/99 1203 (S) FIN CS ADOPTED UNAN CONSENT 5/03/99 1203 (S) AM NO 1 OFFERED BY TAYLOR 5/03/99 1203 (S) AM NO 1 ADOPTED Y11 N9 5/03/99 1204 (S) AM NO 2 OFFERED BY TAYLOR 5/03/99 1204 (S) AM NO 2 ADOPTED UNAN CONSENT 5/03/99 1204 (S) AM NO 3 OFFERED BY TAYLOR 5/03/99 1204 (S) AM NO 3 ADOPTED UNAN CONSENT 5/03/99 1205 (S) ADVANCED TO THIRD READING UNAN CONSENT 5/03/99 1205 (S) READ THE THIRD TIME CSSB 7(FIN) AM 5/03/99 1205 (S) COSPONSOR(S): PEARCE, MACKIE, WARD 5/03/99 1206 (S) PASSED Y15 N5 5/03/99 1206 (S) ELLIS NOTICE OF RECONSIDERATION 5/04/99 1239 (S) RECONSIDERATION NOT TAKEN UP 5/04/99 1239 (S) TRANSMITTED TO (H) 5/05/99 1175 (H) READ THE FIRST TIME - REFERRAL(S) 5/05/99 1175 (H) RESOURCES, FINANCE 5/05/99 1187 (H) CROSS SPONSOR(S): HALCRO 5/12/99 (H) RES AT 1:30 PM CAPITOL 124 WITNESS REGISTER DARWIN PETERSON, Legislative Administrative Assistant and Senate Finance Committee Aide to Senator John Torgerson Alaska State Legislature Capitol Building, Room 516 Juneau, Alaska 99801 Telephone: (907) 465-2138 POSITION STATEMENT: Presented CSSB 128(FIN) am on behalf of Senator Torgerson, Co-Chairman, Senate Finance Committee (sponsor). JOHN BARNETT, Executive Director Board of Storage Tank Assistance P.O. Box 240651 Douglas, Alaska 99824 Telephone: (907) 364-2848 POSITION STATEMENT: Testified that CSSB 128(FIN) am is a big improvement over original version but still has problems. JOHN COOK Sterling Tesoro P.O. Box 49 Sterling, Alaska 99672 Telephone: (907) 262-9028 POSITION STATEMENT: Testified on SB 128. GARY WEBER Wasilla Chevron P.O. Box 871216 Wasilla, Alaska 99687 Telephone: (907) 376-5900 POSITION STATEMENT: Testified that CSSB 128 (FIN) am is basically a good bill but suggested three amendments to address major problems. ANNETTE KREITZER, Legislative Assistant to Senator Loren Leman Alaska State Legislature Capitol Building, Room 115 Juneau, Alaska 99801 Telephone: (907) 465-5149 POSITION STATEMENT: Answered questions about CSSB 128(FIN) am. MEL KROGSENG, Legislative Assistant to Senator Robin Taylor Alaska State Legislature Capitol Building, Room 30 Juneau, Alaska 99801 Telephone: (907) 465-3873 POSITION STATEMENT: Testified on behalf of sponsor of SB 7. KEVIN TRITT 3408 Lois Drive Anchorage, Alaska 99517 Telephone: (907) 277-4265 POSITION STATEMENT: Testified in opposition to SB 7. JOHN EASTON Bristol Bay Coastal Resource Service Area P.O. Box 798 Dillingham, Alaska 99576 Telephone: (907) 842-2667 POSITION STATEMENT: Testified on behalf of board in opposition to SB 7. RUSSELL NELSON, Land Manager Choggiung Limited P.O. Box 330 Dillingham, Alaska 99576 Telephone: (907) 842-5218 POSITION STATEMENT: Testified on SB 7; expressed concerns. TOM ARMOUR, Manager City and Borough of Yakutat P.O. Box 160 Yakutat, Alaska 99689 Telephone: (907) 784-3323 POSITION STATEMENT: Testified on SB 7; commended CSSB 7(FIN) am as an improvement but proposed amendments. ROSS COEN P.O. Box 82718 Fairbanks, Alaska 99708 Telephone: (907) 479-6946 POSITION STATEMENT: Testified in opposition to SB 7, requesting funding of university through appropriations. CHOW TAYLOR Alaska Municipal League (AML) 217 Second Street (Winter) Juneau, Alaska 99801 Telephone: (907) 586-1325 POSITION STATEMENT: Testified that the AML doesn't oppose SB 7 but has some concerns. ACTION NARRATIVE TAPE 99-33, SIDE A Number 0001 CO-CHAIR SCOTT OGAN called the House Resources Standing Committee meeting to order at 1:40 p.m. Members present at the call to order were Representatives Ogan, Sanders, Masek, Harris, Morgan, Barnes, Joule and Kapsner. Representative Whitaker was excused. SB 128 - STORAGE TANK ASSISTANCE FUND CO-CHAIR OGAN announced that the first item of business would be CS for Senate Bill No. 128(FIN) am, "An Act moving the termination date of the Board of Storage Tank Assistance to June 30, 1999; relating to the storage tank assistance fund, to financial assistance for owners and operators of underground petroleum storage tank systems, and to discharges from underground petroleum storage tank systems; and providing for an effective date." Number 0125 DARWIN PETERSON, Legislative Administrative Assistant and Senate Finance Committee Aide to Senator John Torgerson, Alaska State Legislature, came forward on behalf of Senator Torgerson, who co-chairs the Senate Finance Committee. Mr. Peterson explained that SB 128 was introduced by the Senate Finance Committee in an effort to restructure some of the programs in the Board of Storage Tank Assistance. He presented the Sectional Analysis for CSSB 128(FIN) am, provided in packets, as follows: Section 1 ... puts the Board of Storage Tank Assistance in its "wind-down" year beginning June 30, 1999. Section 2 of the bill removes a reference to the tank tightness and site assessment incentive program repealed in Section 14 of the bill, and adds a reference to the tank cleanup loan program enacted in Section 10. Section 3 adds a reference to the tank cleanup loan program. Section 4 amends the storage tank assistance fund section in Title 46 by adding two statements about potential appropriations of money in the storage tank assistance fund. This section also clarifies that a pending application is not considered to be an encumbrance of the fund. Section 5 deletes a reference to the repealed tank tightness and site assessment incentive program; adds a reference to the newly enacted tank cleanup loan program. Sections 6-9 convert the loan program for cleanup relating to underground petroleum storage tank systems to a grant program for tanks whose owners have $1 million or less in tangible net worth. Section 9 contains limitations on total grants and loans. Grants may not exceed $250,000, and a combination of grants and loans may not exceed $500,000. Section 10 establishes a new tank cleanup loan program. Section 11 limits grants for upgrading and closure of underground petroleum storage tanks to those whose owner has a tangible net worth of $250,000 or less. This adds the same limitations on total grants and loans established in Section 9. Section 12 defines "tangible net worth" as the total value of tangible assets minus liabilities associated with bringing underground petroleum storage tanks into compliance with state and federal laws. Section 13 adds a reference to the newly enacted tank cleanup loan program. Section 14 repeals the program currently under AS 46.03.415, the tank tightness and site assessment program, and repeals references to that program. It also repeals a reimbursement program established in 1990. Section 15 specifies that limitations on grants, loans, and total financial assistance enacted by this Act apply to money received on or after July 1, 1999. Sections 16-17 [allow] the board's regulations process to begin immediately and [make] the change in the termination date of the board effective immediately. Section 18 makes most of the bill take effect on July 1, 1999. Number 0409 REPRESENTATIVE MASEK asked what the changes are between the old program and that proposed under the bill. MR. PETERSON deferred to John Barnett. Number 0495 JOHN BARNETT, Executive Director, Board of Storage Tank Assistance, explained that the board provides oversight to the department, which actually administers this program. The board is composed of industry members, including owners of large and small tanks, contractors, insurance representatives and consultants. Mr. Barnett commended Mr. Peterson and Senator Torgerson for their efforts, stating that CSSB 128(FIN) am is a big improvement over the first version introduced into the Senate Finance Committee. MR. BARNETT addressed Representative Masek's question about how the bill affects the original program. In 1988, the federal government set out national requirements for underground petroleum storage tank owners. In addition to a federal mandate that owners upgrade tanks to Environmental Protection Agency (EPA) requirements, owners had to demonstrate financial responsibility, either by having insurance against leaks or contamination, or by being "self-insurable." However, many owners were unable to obtain insurance because they had contaminated sites. Furthermore, the leaking tanks that caused the contamination prevented these properties from being sold. MR. BARNETT recounted that at the time, rather than offering assistance, the EPA was undertaking "big stick" enforcement, levying fines of $10,000 per day, per tank, for every violation. Some people couldn't pay these huge fines. In many cases, the state took over cleanup of these sites, and sometimes legal costs exceeded the cost of the cleanup. Therefore, in 1990 the state legislature determined that a relief program was needed to provide owners both technical and financial assistance. The initial intent was to provide grants to every registered tank owner who paid a registration fee to the state; they didn't want it to be based on financial need, which would be too complex and would require too much information. Number 0748 MR. BARNETT noted that the program started about nine years ago. Over 1,500 applications came in for assistance, and they've worked down that list. Currently, there are 158 upgrade and closure applications on file, for which they provide grants of up to 60 percent of the cost, to a maximum of $60,000, combined, for upgrade and closure. In practice, that represents 20 to 25 percent of the overall cost to upgrade tanks. The balance of the expense for upgrades comes from the Small Business Administration, bank loans and other sources. MR. BARNETT next addressed cleanups. He believes there are 220 cleanup applications on file. The cleanup program covers 90 percent of their cost up to $1 million per facility; the tank owner is required to pay 10 percent of those costs, up to a maximum of $25,000. Therefore, the maximum cleanup assistance a person can obtain from the state is $975,000 in grants and $25,000 in loans. MR. BARNETT explained that all applications were ranked by a system established by the board, placing a priority on sites with the greatest threat to public health. Also, the smaller businesses were placed at the top of the list. At the bottom of the list, which they've reached now, are large companies that have waited nine years to receive funds; that was the intent, to make those larger businesses wait until the smaller owners were covered. This really shows true in the upgrade and closure list, Mr. Barnett noted. For the cleanup list, however, well over half of those still awaiting funding are what he considers small businesses. They have no alternative for cleanup financing. They cannot go to conventional banking institutions because of site contamination. In addition, there is also a liability issue: Banks won't provide financing to clean up a contaminated site, because if there is a default, the bank ends up assuming the liability. That was also why the original program was not a fairly comprehensive loan program. MR. BARNETT commented that the current bill, a combined minimized grant program and expanded loan program, is actually a very good concept. The board sees problems, however. First, people have waited nine years for financing, and now, in the final year of the upgrade and closure program, they are being told, "We were just kidding." Second, for sites for which owners would be trying to obtain a cleanup loan, owners may not have sufficient collateral to actually obtain that loan from the state. For any loans that are defaulted on, or which the state will have to assume, the state also assumes liability and will therefore have to pay cleanup costs. Subsequently, the state would end up having to do that cleanup. Number 1031 MR. BARNETT called attention to page 8, Section 12. He pointed out that the definition of "tangible net worth" doesn't allow tank owners to deduct normal liabilities. Whereas a definition of "net worth" in generalized accounting procedures is "assets minus liabilities," this definition only allows tank owners to subtract liabilities associated with the cleanup. A typical facility in Alaska, even a small one, might easily have $1.5 million in assets, however, including the tanks, pumps, service bays and inventory. In many cases, a business might be a contractor or small rental car agency, for example, and assets will exceed $1 million. MR. BARNETT cited an example where cleanup has been ongoing for years. There, only $60,000 remains in cleanup costs; that is all that could be subtracted from their assets under this bill. Another scenario might be a road house on a large, homesteaded acreage, with perhaps a small lodge and a gas pump; total assets may easily exceed $1.5 million or $2 million. However, the only deduction would be the cleanup cost, perhaps $50,000 to $250,000, and, therefore, that owner wouldn't qualify. Mr. Barnett proposed that the solution is to make the "tangible net worth" definition consistent with generally accepted accounting principles by including language about subtracting liabilities. Number 1167 MR. BARNETT pointed out that in the past, municipalities, school districts and villages were also eligible for financial assistance through this program; under this bill, they couldn't obtain loans. Mr. Barnett noted that as the board's only employee, he has a partial conflict of interest. He then explained that the board - both now and under the bill - can write and adopt regulations for financial assistance. After those are adopted and put into practice, the board mediates disputes and addresses appeals by tank owners who disagree with decisions of the Department of Environmental Conservation (DEC). The board has sufficient authority to overturn decisions of the DEC, which they have done throughout the last nine years. Furthermore, the board mediates cleanup plan disputes between owners and the DEC, so that those cases don't have to go to court. MR. BARNETT discussed problems with sunsetting the board a year early. If this bill went into effect July 1, 1999, all work, including ongoing cleanups, would cease. The balance of the construction season would be used to draft the new program, loan language and loan regulations; it would be late fall or early winter before regulations could be adopted. Furthermore, it would be mid-May of 2000 before the program could be implemented in the field, during the construction season. The first loan applications, receipts and actual eligible costs that would be reviewed by the DEC wouldn't occur until mid-summer of 2000, in the middle of the construction season. Therefore, the first disputes would not occur on these new regulations until August or September of 2000, after the board had already departed. To prevent current activities from stopping right now, in the middle of the construction season, the board desires a "phase end" transition date or effective date either in the winter or as late as July 1, 2000. Number 1402 REPRESENTATIVE KAPSNER asked if Mr. Barnett was saying that a village or municipality couldn't get a loan if there was a leak. MR. BARNETT affirmed that, restating that under the existing program, municipalities are eligible for financial assistance. A large number are on the waiting list for funds. Under the bill, however, because eligibility is defined as a net worth of $1 million, the board doesn't believe that any municipalities or villages will qualify. Number 1439 REPRESENTATIVE KAPSNER expressed her understanding that a bank wouldn't give a village or municipality a loan, in most cases. MR. BARNETT indicated that is why this whole program exists. It isn't a problem for an upgrade, to get new tanks to meet EPA standards, for example. However, banks won't finance cleanups, because if the owner defaults, then the bank would own contaminated property. The state didn't want to start assuming properties, either. Mr. Barnett noted that owners are liable under strict liability laws. REPRESENTATIVE KAPSNER inquired what a community would do if no help could be received from the state but the community couldn't receive a loan. MR. BARNETT replied that the community would have to utilize its own resources to cover the cleanup. He noted that for many villages in the Interior, the problem is above-ground tanks, some of which a program in place addresses. REPRESENTATIVE OGAN mentioned federal money available for "Superfund cleanup." He asked if this is the only program. Number 1550 MR. BARNETT clarified that this is the only assistance program. This program is funded through the prevention account of the Oil and Hazardous Substance Response Fund. Any money spent out of those funds to which Representative Ogan is referring, such as the "Superfund" and the federal Leaking Underground Storage Tank Trust Fund, also known as the federal LUST Trust Fund, must be cost-recovered. Mr. Barnett noted that those funds have - as does the state's response fund - a cost recovery clause. He informed the committee that the last underground tank situation was at Cooks(ph) Tesoro in Sterling. In that case, the state stepped in with response funds, and the state was mandated by law to cost-recover those funds. The state spent $300,000 to clean up, and that bill was passed to the owner. If the owner can't pay, a lien is placed against the property and penalties begin to be assigned. MR. BARNETT noted that the federal LUST Trust Fund does the same: the owner receives the bill. However, that program doesn't cut corners. Mr. Barnett pointed out that the state's program is audited in detail, which he indicated keeps the costs down. Cleanup costs have decreased dramatically in the first two years of the program; many new types of remediation have been utilized and have decreased the overall costs considerably. Mr. Barnett felt that if the federal government takes over these cleanups, the cost will increase and owners will not be able to pay back those bills. REPRESENTATIVE KAPSNER asked if the funding for this comes out of the oil spill money. MR. BARNETT stated that the funds do not come from the oil spill settlement. He explained that there is a five-cent surcharge per barrel collected from the flow through on the pipeline. Two cents of the five cents goes to the response fund, which has a $50 million cap. When the response fund reaches $50 million, the two cents is not collected. He noted that three cents of the five cents goes to the prevention account, which is used to cover the expenses of the DEC's Division of Spill Prevention and Response. It covers a lot of emergency operations within Alaska, he said. Many agencies and organizations utilize funds in the prevention account. REPRESENTATIVE KAPSNER asked if the sponsor wants to take that money and appropriate it elsewhere. MR. PETERSON pointed out that Annette Kreitzer, staff to Senator Leman, was present. Senator Leman's office, which dealt with the subcommittee budget for the DEC, had worked closely with Senator Torgerson on the financing aspects of SB 128. In response to Representative Kapsner's question regarding municipalities and municipal assistance for underground petroleum storage tanks, Mr. Peterson referred to page 2, Section 4, the bold language; he said it provides the legislature authority to appropriate money to municipalities that are in dire need of assistance. Therefore, that can be done on a case-by-case basis. Number 1870 MR. BARNETT, in response to a query by Representative Joule, corrected an earlier statement. He clarified that there is language that allows municipalities and political subdivisions to obtain funding; there is an existing program for which a municipality can apply. He noted that those applications are on file, and municipalities that have applied are on a waiting list for assistance. Although municipalities on the list would be taken off, they could request funds directly from the legislature. REPRESENTATIVE JOULE asked what recourse is available, both currently and under the bill, for communities that are not incorporated. Number 1951 MR. BARNETT said he didn't know of any currently on the list. He pointed out that the list is closed; however, such municipalities would have been able to apply if they had a corporate designation or a community organization. Churches have applied and are on the waiting list, for example. If the municipality was previously on the list, that municipality might qualify. Under this language, however, Mr. Barnett said he wasn't sure. He offered to research that and provide the committee with the information. REPRESENTATIVE KAPSNER asked whether a co-op under a council-led village could apply. MR. BARNETT indicated that would be correct if the co-op had already applied. He emphasized that the application period is closed; the deadline was in 1994. This applies to a finite list, and no new applications can come through this program, either currently or under this legislation. He reiterated that municipalities could request funds directly from the legislature. REPRESENTATIVE JOULE asked if there was ever a problem with the structure of this program or audit problems regarding how the program was run. MR. BARNETT replied that there were never any paramount concerns. However, there was always concern that it was state money being invested in these municipalities, and that every dime should be accounted for. The funding should go towards specific costs related to the intent of the original program, he noted. Therefore, there was a strict auditing of all expenses. Number 2118 REPRESENTATIVE JOULE inquired if there had been any misuse of funds. MR. BARNETT answered that there is no problem related to misuse of state funds, and the last audit of the program was "very, very good." Rather, it is more of a philosophical problem as to who gets those funds. Some very large companies certainly could pay for this cleanup themselves, and in fact, in many cases have paid for it; there is a strong desire not to pay them, even though the companies have paid registration fees and the money has been promised. However, the board believes the threshold in SB 128 should be higher. Possibly more information should be gathered, as well, to determine whom this bill will impact; the number is arbitrary now, and they don't know how many people would fall under that threshold or not qualify. Number 2210 REPRESENTATIVE BARNES suggested that everyone who applied prior to 1994 had a clear understanding that one legislature cannot bind another, and that this program was subject to change at any time. She asked if Mr. Barnett agrees. MR. BARNETT said he does agree. Number 2239 REPRESENTATIVE JOULE mentioned Mr. Barnett's testimony that if this went away at the end of the fiscal year, nothing would get done until there were regulations. He indicated a belief that if the program continued to the scheduled sunset date in 2000, they could move in that direction. MR. BARNETT specified that the upgrade and closure program, which involves 158 people, could be completed in one year. In contrast, the cleanup program, with more than 220 facilities on the list, is one of the biggest concerns. It is very expensive and will take many years to resolve. Cleanup takes four to five years, at a minimum, to complete; it must be done in stages, doing work, waiting for results and then going on to the next stage. There is definitely a need to address the program, especially in the long term. He stated his understanding that the Senate had been concerned about having this go on forever, and therefore had set controls on it. Number 2327 REPRESENTATIVE HARRIS read from item 6) of a document distributed by the Board of Storage Tank Assistance, titled, "Impact of SB 128," which stated: "Small 'Mom & Pops' and road houses with large acreage and prime locations will not qualify for cleanup assistance under this definition of net worth." Representative Harris said it seems that most of those small operations would be valued at less than $1 million. MR. BARNETT disagreed. He pointed out that if someone has a significant amount of acreage in Alaska, especially at a prime location, the property value will be high. He had used the example of a road house because it might also have a lodge, small cafe, small gas station and service bays, he said. In looking at that, and from the few conversations he had with tank owners out there, $1 million in assets is not a lot of money. Most of those owners had $1.5 million to $2 million or more in assets. However, their net worth, under the generally accepted accounting procedures, was much lower, after subtracting mortgages, inventory and operating costs. For some, their net worth was a negative number. That is why the board wants to include liabilities in the definition of net worth, to make it consistent with the banking industry and everyone else. Number 2453 CO-CHAIR OGAN asked if members had questions of Steven Daugherty of the Department of Law or Jim Hayden of the Department of Environmental Conservation (DEC); there were none. He also noted that former state Senator Jay Kerttula had been in attendance. Number 2513 JOHN COOK, Sterling Tesoro, testified via teleconference from Kenai, noting that he has a family and has lived here almost all his life. Mr. Cook indicated he'd put almost all his money into a service station that was approved by the state, after going through their regulations and laying it out professionally with Tesoro, who had loaned the tank dispenser to put him into business. To get started, he also had a $100,000 Alaska veterans' loan from the state. However, the state had no regulations then regarding spills. For example, people would rinse out a gas can and throw it on the ground, for which someone could go to jail today. MR. COOK expressed concern on behalf of "mom and pop" operations that if the board is terminated, the "big boys" will run all the stations and take over. He told members, "In 1985, they deserted like rats in the ship because they knew this pollution law was coming up. They gave their stations away to individuals that went broke. And some committed suicide. We've had heartbreaks and divorces, all because somebody's trying to save a buck down there in Juneau." Mr. Cook requested protection. He suggested getting rid of the DEC and hiring professionals who will ask what they can do to help, rather than trying to destroy the owners. MR. COOK recounted how he'd had an argument with the DEC, who came to his station with the state troopers like the Gestapo, he said, while he was away in Ohio picking up a new truck for his septic business. "These guys tore me out completely," he stated. "I had nothing. They took the dispensers that didn't belong to me; they belonged to Tesoro. They left the tanks in the ground. They used 470 funds and say, 'You've got to pay it back at 10 percent interest' - $321,000, and the professional engineer standing there said they could have done it for $85,000? Then the DEC had that dirt removed and put up on the back of my RV [recreational vehicle] park, and ... completely destroyed my RV park." MR. COOK reported that 25 people who work for him during a year are affected by this "mom and pop" store into which he has put his life savings. He indicated the state has wasted over $2 million in attorney fees trying to put him under, spending $325,000 for a cleanup, even though Quality Asphalt (ph) wanted to buy it for $39,000. Emphasizing the waste, Mr. Cook proposed that the DEC be investigated. "The Division of Investments should be handling that money, and professional-type people," he added. "An agricultural engineer took care of my cleanup; he was the head man. These guys were not qualified." MR. COOK concluded that without the board, he wouldn't be here today. He still faces $331,000, however, and he didn't even own the tanks. The state is into it for over $3 million, he said, "from negligence and using the powers of their office to get even with an individual." He suggested those are the kinds of investigations that need to made. Mr. Cook commended the board and John Barnett, in particular. He reiterated concerns about large companies taking over if the board is sunsetted, warning that it will cause gas prices to rise. Number 2807 CO-CHAIR OGAN expressed appreciation for the testimony, suggesting it is a vivid example of why the legislature needs to thoughtfully consider these issues. Number 2846 GARY WEBER, Wasilla Chevron, testified via teleconference from the Mat-Su Legislative Information Office (LIO), saying he can relate to Mr. Cook's testimony. In his own case, Mr. Weber said, Senators Leman and Torgerson have opened up a Pandora's box by introducing this bill. Although he believes the bill is basically good, three major problems will either cause headaches for tank owners or put them under. MR. WEBER reported that he has been going through this since 1991. As of last month, he'd received $484,000 in state grants and spent $368,000 of his personal money, totally draining his private resources. For every $1.30 spent by the state, he has spent $1. He came into 1999 expecting to spend no more than another $40,000, the cost of his final risk assessment; if that had showed that the facility was cleaned up within tolerance, it would result in a "no further action" letter from the DEC, the final step. MR. WEBER recalled that prior to HB 225 and the tank assistance program, fund and board, tank owners were treated like criminals. TAPE 99-33, SIDE B [Numbers run backwards because of tape machine] MR. WEBER said John Cook had been treated like a criminal in Sterling, as well. However, with HB 225, the board established gave tank owners a buffer against the DEC, which has toned down tremendously in the last nine years. Number 2837 MR. WEBER returned to the three problems in SB 128. First, the board is already scheduled to sunset next year, and he doesn't know why it must be put forward a year. He believes the big companies will drag it out; although this bill will eliminate that problem, the other tank owners need the board. Second, the "net worth" definition will cut him out. In that case, the DEC or, more likely, the EPA - because 15 positions have been cut from the DEC - will take over Mr. Weber's station, incurring expenses far beyond what it would cost a private engineer to do the job, and then turning to Mr. Weber for the bill, which he cannot pay. He would also have to tell his own engineer to stop working because he couldn't pay. Third is the effective date. MR. WEBER proposed that establishing the bill's effective date as July 1, 2000, would enable all these problems to be resolved; transitions would be smooth, and nobody would be hurt. He noted that tank owners' pleas to the Senate had fallen on deaf ears. However, with the three areas corrected, those who had spent all this money wouldn't be abandoned and reneged upon, right when they're about the finish up the programs. Number 2707 CO-CHAIR OGAN asked if Mr. Weber had his suggestions in writing. MR. WEBER replied that he'd faxed to members what he'd sent to Senator Green a couple of weeks ago, including an article from the March issue of the Alaska News Monthly. However, he had not submitted this day's testimony in writing. Mr. Weber emphasized the human impact, saying he'd lost his own family, as others had; he also knows of people who've had heart attacks and nervous breakdowns, and he knows of at least one suicide. He has suffered from depression the past nine years, he said, and has been scared. He again expressed concern about losing the board's help. Number 2601 REPRESENTATIVE KAPSNER commended Mr. Weber for his tenacity. She asked if he recommends that the definition of "net worth" be changed to conform to generally accepted accounting principles, or if he means for it to apply to both the owner and operator. MR. WEBER replied that in 40 years in the petroleum business, and having an accounting background, "net worth" has always been "assets less liabilities," the generally accepted accounting definition. He expounded on his own situation. If the estimated cost of cleanup were subtracted from his assets of $1,400,000, he probably wouldn't come under this program. His business has a negative net worth of $15,000, and his personal net worth is $950,000, including the value of his business; however, if the value of his business is subtracted, which he can't sell for a "red nickel" right now, he has zero net worth. Although he just spent $35,000, he couldn't get a bank loan and therefore leased the equipment for five years. If he asked the bank for $50,000 desperately needed to upgrade with an additional 600-amp electrical service, he can't get the money, although his system is overtaxed and transformers are almost ready to blow. "I can't go out and borrow another $50,000-100,000 to finish this cleanup," he added. MR. WEBER noted that the money he has received comes from the nickel a barrel from the pipeline, which is for the specific purpose of cleaning up petroleum contamination. He told members he hasn't spilled a drop of gas at his station, and when he upgraded, there wasn't a single leak, which he documented with pictures of every joint, pipe and connection. However, a plume over the fill stem, where his suppliers had overfilled his tanks for years, is the pollution he is cleaning up. He emphasized the importance of changing the definition of "net worth" to conform with the generally accepted accounting definition. Number 2363 REPRESENTATIVE HARRIS asked for clarification about what the three amendments would be. Number 2353 MR. WEBER specified that the first amendment would let the board sunset at its normal date, scheduled for next year, allowing two years of board service. He noted that following the sunset date, the board would have one year to finish its business; if it sunsets June 30, 1999, they couldn't possibly finish everything that needs to be done. Second would be changing the definition of "net worth." And third, he proposes an effective date of July 1, 2000. Mr. Weber informed the committee that it took three or four years to set up the program, with numerous meetings, statewide travel and talking to many people, and it has worked well. He concluded, "I'm not saying that this bill is not timely, but ... those three things have to be fixed in order for us to make the last nine years effective, and not just ruin it and have us all walk down the road talking to ourselves." Number 2259 CO-CHAIR OGAN pointed out that the title states that this Act moves the termination date to June 30, 1999. A title change requires a two-thirds' vote of the House, he said, which can be difficult to get. Co-Chair Ogan said he would figure out what was required. Noting that it will affect people, he said he'd hold the bill over and recess to the call of the chair. Number 2200 REPRESENTATIVE KAPSNER expressed a desire to hear from the sponsors' representatives regarding the possibility of a title change. Number 2177 MR. PETERSON explained that the definition of "tangible net worth" was established in the Senate Finance Committee and agreed to by the full Senate. It isn't the generally accepted accounting procedure; rather, it is "tangible assets minus liabilities associated with the contamination." The intent was to decrease the size of the grant list; people with more than $1 million in tangible net worth minus liabilities associated with the contamination would not be eligible for a grant. Mr. Peterson said the Senate Finance Committee thinks that is a fair cap. That limit has to be set somewhere, and that is what was decided by the Senate. Number 2122 CO-CHAIR OGAN noted that the termination date is June 30, 1999, only a short while. He asked Mr. Peterson to state what the termination date was prior to this bill. MR. PETERSON answered that on page 1, lines 8 and 9, the original language was "June 30, 2000". He pointed out that there is a one-year wind-down period for the board, during which it can continue its work. Also, if the legislature believes this new legislation has hindered the storage tank owners a great deal, it can be revisited in the next session, and the board can be extended then. Number 2063 CO-CHAIR OGAN asked whether Mr. Peterson believes it is fair to people like Mr. Weber to suddenly move the date up a year. Number 2024 ANNETTE KREITZER, Legislative Assistant to Senator Loren Leman, Alaska State Legislature, came forward, noting that it had been Senator Leman's amendment. She stated: "The intent of the amendment to put the board on notice and in its wind-down year with the '99 date is to keep everybody focused on this program. Senator Leman supports the Board of Storage Tank Assistance, understands very clearly how helpful they have been to the owners and operators of the storage tanks. What he has pledged to do is - if, in fact, the board still needs to operate beyond the year 2000 - to sponsor that legislation and then reintroduce it in January. The board will be six months into its wind-down year when the legislature meets again." As to fairness, Ms. Kreitzer said, she hadn't asked Senator Leman that and couldn't represent his position on it. Number 1961 REPRESENTATIVE JOULE expressed his understanding that the Senate is happy with the definition of "tangible net worth," even though it isn't consistent with standard accounting practices. He noted that the board seems to have been a buffer from what sounds like the heavy hand of the state, especially for small operators, yet the small operators appear most heavily impacted by this legislation. MS. KREITZER concurred, stating that Senator Leman's intent is to keep people focused. She believes there is broad support for the Board of Storage Tank Assistance, she added, and broad knowledge as to how they act as a buffer regarding the DEC. REPRESENTATIVE JOULE asked if there is a reason to think they haven't been focused. MS. KREITZER indicated she was talking not only about the board's focus, but also about the focus of everyone else concerned with the board, to ensure that the DEC treats people differently from here on out. "It's just one minor way of keeping it before the legislature," she added. REPRESENTATIVE JOULE pointed out that for being a "minor way," it is giving people a lot of heartburn. Number 1750 CO-CHAIR SANDERS said he doesn't see how doing away with the board will help control the DEC. MS. KREITZER replied, "We haven't done away with the board. This is a one-year wind-down period. The legislature meets again in January." Number 1678 REPRESENTATIVE HARRIS questioned how this isn't terminating the board, when the title states that the board is terminating on June 30, 1999. If this passes, the board will be terminated this year. MS. KREITZER replied that the termination date will be June 30, 1999, but before that date, the legislature has the opportunity to reconsider whether it wants to extend the board again. Number 1631 REPRESENTATIVE BARNES noted that many boards come up for reconsideration under a sunset clause. This board would sunset prior to the time that the legislature comes back in session, however, and would have to be reauthorized after the sunset date. She then recounted how she was on the House Finance Committee when this issue first came before the legislature. The original concept was to add money to every gallon of gasoline to pay for this, she said, but then they decided to soak the oil companies for it, with the nickel-a-barrel surcharge. She contended then, as she does now, that some of the profit from selling gasoline should have gone into taking care of the storage tanks and so forth. Number 1430 MR. COOK spoke again, saying the "little guy" doesn't make a profit anymore. He said the oil companies control prices, as they supply the gas and are in direct competition with the small owners. "The answer I got from them was to sell more cookies," he added. REPRESENTATIVE BARNES said it is beyond her why people would stay in business if they didn't make a profit. CO-CHAIR OGAN commented that sometimes things change from the time one gets into business, including government regulations. What was once an acceptable practice regarding oil could result in a jail sentence now. Although rules have changed for the good, some people have been caught in the transition or, in Mr. Weber's case, the problem was caused by the guys who filled up his tank. Co-Chair Ogan concluded the hearing on SB 128, noting that it would be held over. Number 1268 CO-CHAIR OGAN called an at-ease at 3:01 p.m. and turned the gavel over to Co-Chair Sanders. CO-CHAIR SANDERS called the meeting back to order at 3:03 p.m. SB 7 - INCREASE LAND GRANT TO UNIV. OF ALASKA CO-CHAIR SANDERS announced that the final order of business before the committee would be CS for Senate Bill No. 7(FIN) am, "An Act relating to the University of Alaska and university land, and authorizing the University of Alaska to select additional state land." Acknowledging the shortage of time, Co-Chair Sanders said he would take as much testimony as possible in the remaining time and then recess to the call of the chair. Number 1198 MEL KROGSENG, Legislative Assistant to Senator Robin Taylor, Alaska State Legislature, noted that although CSSB 7(FIN) am is similar to previous legislation on this subject, it is a new bill. Amendments from various committees were tacked onto last year's bill, which resulted in conflicting and confusing sections. That bill, cleaned up by Legislative Legal and Research Services, is before the committee currently. MS. KROGSENG explained that CSSB 7(FIN) am provides the university with 250,000 acres of state land. The university was created as a land grant college by the federal government. It was created as an agricultural and mining school. Although promised vast amounts of land by the federal government, the university only received 111,000 acres. The remaining entitlement was extinguished at statehood when the state was given some 103 million acres of land. There are many restriction regarding which lands can and cannot be selected. She noted that the committee should have a sectional analysis of CSSB 7(FIN) am. Number 1079 MS. KROGSENG continued with highlights of the bill. She informed the committee that lands not available for selection are the following: land reserved for the public domain; land included in a five-year proposed oil and gas leasing program; leased land or land for which a lease is pending for other purposes; land subject to an oil, gas, or coal lease or coal prospecting permit; land subject to a mining claim, prospecting site, upland mining lease, or mining leasehold location; land necessary to carry out the purposes of an inter-agency land management agreement; and land subject to conveyance under a land exchange or settlement agreement. Land selected by a municipality is not an option. Furthermore, land that a commissioner may believe will be selected by a municipality can be withheld by the commissioner for three years. MS. KROGSENG noted that CSSB 7(FIN) am includes the new provision allowing the municipalities the first right of refusal. She pointed out that the following land also may not be conveyed: land subject to an oil and gas exploration license, and land which the commissioner believes may be part of an oil and gas exploration lease. Any land conveyed is subject to a possessory interest. Furthermore, the Department of Natural Resources (DNR) shall provide public notice of intent to convey the land. She informed the committee that the university shall pay all survey and transfer associated costs, except the recording of the title transfer. MS. KROGSENG pointed out some transfer conditions. Coal, ores, minerals, fissionable material, geothermal resources, and fossils transfer when the title to the land transfers. Oil and gas resources, however, only transfer for land selected after the effective date of the Act, and then only five years after the effective date. Therefore, if the state develops or sells an oil lease and gets revenue from the oil lease prior to selection by the university, the state will continue to get that money in perpetuity, even if the oil is discovered three years after the effective date of the Act. The university would only receive oil and gas revenues for oil discovered five years or later than the effective date of the Act. That was of concern in the prior legislation, Ms. Krogseng noted. The current legislation also increases the size of the acreage that the university must select to 640 acres or more, unless the commissioner believes it to be in the best interest of the state for the university to select a smaller parcel. Number 0834 MS. KROGSENG reiterated that oil and gas revenues go to the state for five years after the effective date of the Act even if the land is conveyed. "Well actually, the oil and gas continue on," she then stated. "All other revenues transfer to the university fund conveyance as title. So, if they were a mining or a grazing lease, ... that lease revenue would transfer to the university fund conveyance." She pointed out that the bill includes a provision for the Board of Regents to give up 20 percent of the revenue derived from the resource sales in the area closest to a campus, provided the local municipality provides a match. Without that match, the Board of Regents would not be required to provide that revenue to the campus. MS. KROGSENG directed the committee to page 9, lines 27-30, which attempts to address the concern regarding continued use by the public of the land to be conveyed. She noted that an issue had arisen today regarding the potential access, if the land was later sold to a third party. Land placed on the list must come before the legislature for approval similar to the Local Boundary Commission's land. The legislature has the ability to eliminate proposed land from the list or to approve the land with certain access conditions. MS. KROGSENG expressed her belief that CSSB 7(FIN) am meets the requirements of legislation introduced by U.S. Senator Murkowski, which would provide Alaska with 250,000 acres with no strings attached, as well as an additional 250,000 acres if the state matches with an additional 250,000 acres. This would go far in making the University of Alaska a truly land-based college, she said. The University of Alaska is second-to-last in the amount of land it currently has. She mentioned a map and an overlay which the committee reviewed during the meeting. Number 0502 REPRESENTATIVE JOULE asked if CSSB 7(FIN) am discusses the types of lands the university would select. For example, would some land classifications be off-limits? MS. KROGSENG said there is a list of lands unavailable for selection, but that list is not done by classification; the commissioner provides a list of available lands. The bill does specify the lands that may not be selected. REPRESENTATIVE JOULE inquired how that selection compares with the pending selections of municipalities. MS. KROGSENG replied that the municipalities, under current law, are more restricted; the lands available for selection under this legislation are more far-reaching. She noted that she had discussed that issue with the Alaska Municipal League (AML), but it could not be addressed in this legislation due to the single-subject title rule. REPRESENTATIVE JOULE suggested that the university would be bumped ahead, in terms of the types of classifications to which they have access. MS. KROGSENG said yes; according to her understanding of the legislation, certain lands that the university could select would not be available to a municipality. Number 0294 REPRESENTATIVE JOULE asked if the AML is supportive of this legislation. MS. KROGSENG replied, "What we did in the legislation was ... if the university selects land within municipal boundaries and that municipality has a remaining entitlement, then the municipality has the first right of refusal." She did not have a letter of support from the AML, she said, but doesn't believe they oppose the legislation. Number 0222 REPRESENTATIVE BARNES requested that Ms. Krogseng provide the committee with the use of the acreage presently held by the university. MS. KROGSENG agreed to that, but noted that Ms. Redman was present and may have that information. CO-CHAIR SANDERS requested that Ms. Krogseng also provide the committee with the income stream coming from that land, at present. MS. KROGSENG agreed to that, as well. CO-CHAIR SANDERS asked if the university would pay start-up expenses from the income generated from the land or from general fund monies. MS. KROGSENG expressed her understanding that income from the land which the university currently manages is placed in the land trust. The interest from the land trust pays start-up expenses. CO-CHAIR SANDERS inquired as to the provisions regarding the state's oil rights. MS. KROGSENG explained that if oil was found within five years of the effective date of this Act, the revenue stays with the state in perpetuity. If oil is found after five years of the effective date of this Act, the revenue stream goes to the university. CO-CHAIR SANDERS said he found that to be counterproductive, if the goal is to support the university. He added, "We're going to give them some land, as long it doesn't make much money. If it makes a little money, they can have it. But if it makes very much money, we want it." MS. KROGSENG said she believes that provision was placed in the legislation some time ago. TAPE 99-34, SIDE A Number 0001 MS. KROGSENG commented that there was some concern regarding speculation and taking the state's revenue streams. She understood that there have been many compromises over the years, in attempting to develop a program and a document that works for the university as well as the state. CO-CHAIR SANDERS said he understood Ms. Krogseng to say that the university could sell the land. MS. KROGSENG said that is correct. She further explained that the university would have to go through the public process, as does the DNR. She requested that Ms. Redman come forward to answer some of these questions. Number 0196 WENDY REDMAN, Vice President, Statewide University of Alaska System, commented that she "really loved" this bill six years ago, but she "likes" this bill now. Ms. Redman said that the university, as a land grant university, has a long history and tradition of managing land. Other than the DNR, the university is the only state agency set up to manage land. She believes that the university's record illustrates the phenomenal job it has done managing its 100,000 acres. MS. REDMAN informed the committee that although the university was originally allotted 350,000 acres from the federal government, it only received 100,000 acres. At statehood, the original lands had not been surveyed and so were given up. Those lands were managed by the state and mingled with other state lands for the good of all Alaskans, which was the intent. In the first 30 years of state management, those lands generated $590,000 total. The university sued the state to have management of those lands returned to the university. By the time the university won that suit, however, the university's original lands were not available because the land had been given away. Therefore, the university received lands of similar value. MS. REDMAN pointed out that in the ten years that the university has had active management of the lands, it has generated $32 million from the 100,000 acres. She said the university is an aggressive land manager, which she acknowledged did cause some problems. For example, the university has engaged in timber cutting, which caused some difficulties. Number 0452 MS. REDMAN reported that the university believes it is in the state's interest and its own interest to generate new revenue for the state. She pointed out that when land is put into the university, it generates revenue that wouldn't otherwise be available to the state or to the university to use; that is the idea of getting these lands into development, which she believes the university can do more effectively than the state can. Ms. Redman clarified that she was not speaking negatively about the DNR, which has done a great job with oil and gas because it has the resources and staff to do it. However, outside of oil and gas, the DNR has not had the staff to get land out into the private sector. MS. REDMAN informed the committee that she would provide copies of the recent land management report that lists all of the university's properties and the activity, pending and ongoing, on those properties, as well as the financial statements from the land grant trust fund. [Before the end of the meeting, members received copies of a lengthy document titled, "Statewide Office of Land Management Annual Report," dated February 1999.] She echoed Ms. Krogseng's comment that this legislation encompasses many compromises. MS. REDMAN addressed Co-Chair Sanders' question regarding oil and gas. Under CSSB 7(FIN) am, it would be very difficult to determine how to obtain any oil and gas lands. There has been some support from the oil and gas industry for some joint projects; for those, it is easier for that industry to be involved with the university, rather than the state. There has been some opposition to this from various groups, however, such as the environmental community, hunters and fishermen, who are concerned with limited access to the lands acquired by the university. This legislation attempts to address that concern with language indicating the continuance of the customary utilization and access to the land, to the maximum extent the university could. Also, prior to transfer of land into third-party hands, such entry would be allowed on university land. Beyond that, however, the university cannot make any commitments regarding use. MS. REDMAN emphasized that she would prefer a bill with specific acres designated. In conclusion, she pointed out that this legislation will not solve any financial problems for the university. Land development takes much time, and potential income is in the future. Therefore, no immediate or short-term financial problems of the university would be solved. Number 0829 REPRESENTATIVE BARNES inquired as to the location of the university's land that was logged. MS. REDMAN replied that the logging is occurring in the Yakataga region, Cape Suckling. Furthermore, the university had land in Southeast Alaska, in the Ketchikan region, that was logged. She also recalled some land on Afognak Island that is part of the original settlement with the state. REPRESENTATIVE BARNES asked about Ms. Redman's statement that if the university developed lands, it would be well into the future before the university could derive any income from it. MS. REDMAN reiterated that land development is a long-term process; therefore, it will not solve financial problems next year or the following year. Money generated from land development is placed into the natural resources trust fund, which was established by the legislature. The university only utilizes the earnings of the fund, minus inflation-proofing, in order that an income stream is generated. Ms. Redman informed the committee that the operating budget is $160 million a year. REPRESENTATIVE BARNES emphasized that state land cannot be disposed of to anyone for a quick solution. MS. REDMAN clarified, regarding a previous question from Representative Joule, that the state cannot transfer any public domain land to the university. This is because the university is not public domain land. Therefore, any lands already legislatively designated as park land cannot be transferred to the university. CO-CHAIR SANDERS, in the interest of time, asked that testifiers limit testimony to three minutes. Number 1137 KEVIN TRITT testified via teleconference from Anchorage, voicing opposition to SB 7 as it currently stands. He has followed the university land grant as legislation, and as a student, he said, for a few years. Some practices implemented by the university as land managers, particularly in the Cape Yakataga region, have caused him to oppose this bill. The university wasn't put into the best of situations with Cape Yakataga, as they were given the timber rights only, he noted. This bill doesn't adequately appease his concerns that the university may select further timber lands. He agrees with Wendy Redman that it would be better to have a bill which specifies the exact lands to be given to the university. MR. TRITT mentioned that a number of Southeast Alaska communities have opposed the university's land grant because of its practices at Cape Yakataga. He offered a copy of a documentary film prepared by university students from the Environmental Education Club, who felt that the university's procedures at Cape Yakataga aren't sound ecological management practices and don't represent the type of university that they wish to attend. Number 1304 CO-CHAIR SANDERS accepted Mr. Tritt's offer of the tape, asking him to send it through the Anchorage LIO. Number 1344 JOHN EASTON, Bristol Bay Coastal Resource Service Area (Bristol Bay CRSA), testified via teleconference from Dillingham, specifying that he was speaking on behalf of their elected board, which represents 11 communities. They oppose SB 7. Although strong supporters of the university system, they believe indiscriminately giving public land to the university in a period of declining revenues is not the answer. Rather, a more reliable way to fund the university is needed, now and in the future. MR. EASTON informed the committee that the majority of land within his coastal district is owned by the state and managed by the DNR. Two major adopted land use plans are in effect: the Bristol Bay Area Plan and the Nushagak/Mulchatna Rivers Recreational Management Plan. These plans, representing years of hard work, provide an outline for resource developers on state land and allow the coastal district involvement in the public planning process. However, SB 7 doesn't account for future uses of these lands, and it will eliminate guidelines for how the university manages these lands. Mr. Easton cautioned that there are highly valued public resources at risk here. He asked the committee to not support this bill but to reevaluate other options to fund the university. Number 1465 RUSSELL NELSON, Land Manager, Choggiung Limited (village corporation), testified via teleconference from Dillingham. He expressed strong concerns about SB 7 and potential land selection in the Nushagak/Mulchatna drainage. Choggiung Limited is a major land owner along the Nushagak River; their lands, surrounded by state lands, are managed under the guidelines of the Nushagak/Mulchatna Recreation Management Plan. This bill creates the potential for developing lands in the Nushagak/Mulchatna area, removing those lands from the public planning process. CO-CHAIR SANDERS called upon Jane Angvik, Director, Division of Land, DNR, who reserved her comments for a later time. Number 1550 TOM ARMOUR, Manager, City and Borough of Yakutat, testified via teleconference, specifying that he was speaking as a professional municipal manager, not reiterating the assembly's position. He indicated the City and Borough of Yakutat supports the concept of first rights for, and protection of, a priority for municipal lands selections. This first right of refusal, as it is now, is much appreciated, and he believes this bill version is far better than what they've dealt with in the past. MR. ARMOUR recommended a simple amendment stating that "municipal land selections shall receive first priority in selections, adjudications and/or conflicts." Second, on page 8, lines 27 and 28, he suggested adding that the university wouldn't be able to proceed with selections under this bill until January 1, 2000. This simple protective device recognizes the proliferation of borough annexations and creations either underway or being considered, in view of other declining state assistance. Finally, Mr. Armour reiterated a suggestion of March 4 that some portion of the income stream to the nearest university branch instead go to the nearest municipal government. Noting that many selections take place in areas lacking university branches, he said these selections remove local revenue generation possibilities. He believes that would also benefit newly forming local governments. Mr. Armour concluded by commending the current version. Number 1780 ROSS COEN came forward on his own behalf, informing members that he'd just graduated from the University of Alaska Fairbanks. He spoke in opposition to SB 7; although the university requires adequate funding, he believes this is little more than a short-sighted land giveaway. He reported that a now-retired philosophy professor at the university, Dr. Walter Benish (ph), still teaches classes on a volunteer basis because otherwise the philosophy department would fold. Revenue from SB 7 won't come in for at least ten years, and Dr. Benish cannot teach on a volunteer basis until money starts coming in. This bill doesn't solve the university's funding problems, he concluded, imploring the committee to instead fund the university through the regular appropriations process. Number 1865 CHOW TAYLOR, Alaska Municipal League (AML), came forward, specifying that the AML doesn't oppose the bill but has some concerns. She expressed appreciation for inclusion of the first right of refusal but also voiced concern that it only applies to the VUU [vacant, unappropriated, unreserved] lands that municipalities are entitled to select under Title 29. The AML doesn't believes that other lands which the university would be eligible to take under Title 14 would be subject to objections by the municipalities, which aren't able to select those lands. Many municipalities are trying to complete their land conveyances, and the state currently owes municipalities more than 600,000 acres. MS. TAYLOR restated that under current law, municipalities are only entitled to select vacant, unappropriated, unreserved lands. If some of those selections are denied by the state, they would have the opportunity to ask the state to reclassify some of those lands, so that they might select them at a later date. If the university, in the meantime, can come in and select lands other than VUU lands, those would be taken out of consideration for municipalities. MS. TAYLOR informed the committee of some suggestions by the AML: 1) that the university not be allowed to select lands within municipalities until their land selections are completed, or 2) that the university be limited to selecting VUU lands within municipal boundaries, or 3) that municipalities be allowed to select all classifications of lands within their boundaries, as would be the university. CO-CHAIR SANDERS requested that Ms. Taylor provide those suggestions in writing, to which she agreed. Number 1992 MS. KROGSENG emphasized that first, Senator Taylor doesn't believe this is an immediate solution for the university's financial woes. However, if they don't start working on a long-range fiscal plan for the university, they will be in the same situation in five, ten, fifteen or twenty years. This bill isn't trying to address the immediate financial needs of the university. Second, regarding municipal entitlements, it is her understanding that 90-some percent of the lands due to municipalities have already been selected, although they have yet to be conveyed. Once selected, lands are totally off the table. Number 2065 CO-CHAIR SANDERS recessed the House Resources Standing Committee meeting at 3:47 p.m., to the call of the chair. [A new meeting was subsequently called for May 7, 1999, at which time CSSB 7(FIN) am was heard again.]