HOUSE RESOURCES STANDING COMMITTEE February 7, 2000 1:15 p.m. MEMBERS PRESENT Representative Bill Hudson, Co-Chair Representative Beverly Masek, Co-Chair Representative John Cowdery, Vice Chair Representative John Harris Representative Ramona Barnes Representative Jim Whitaker Representative Mary Kapsner MEMBERS ABSENT Representative Carl Morgan Representative Reggie Joule COMMITTEE CALENDAR 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 PREVIOUS ACTION BILL: SB 7 SHORT TITLE: INCREASE LAND GRANT TO UNIV. OF ALASKA 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 2/25/99 (S) 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 4/23/99 (S) MINUTE(FIN) 4/24/99 (S) FIN AT 10:00 AM SENATE FINANCE 532 4/24/99 (S) -- MEETING CANCELLED -- 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 ADOPTED Y11 N9 5/03/99 1204 (S) AM NO 2 ADOPTED UNAN CONSENT 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) RES, FIN 5/05/99 1187 (H) CROSS SPONSOR(S): HALCRO 5/12/99 (H) RES AT 1:30 PM CAPITOL 124 5/12/99 (H) HEARD AND HELD 5/12/99 (H) MINUTE(RES) 5/14/99 (H) RES AT 1:00 PM CAPITOL 124 5/14/99 (H) FAILED TO MOVE OUT OF COMMITTEE 5/14/99 (H) MINUTE(RES) 5/18/99 (H) RES AT 1:00 PM CAPITOL 124 5/18/99 (H) MEETING CANCELED 2/07/00 (H) RES AT 1:00 PM CAPITOL 124 WITNESS REGISTER LORALI MEIER, Staff to Representative Beverly Masek Alaska State Legislature Capitol Building, Room 126 Juneau, Alaska 99801 POSITION STATEMENT: As committee aide for the House Resources Standing Committee, briefly explained the changes in the proposed House committee substitute for SB 7 (Version S). JIM POUND, Legislative Aide for Senator Robin Taylor Alaska State Legislature Capitol Building, Room 30 Juneau, Alaska 99801 POSITION STATEMENT: As staff to the prime sponsor of SB 7, provided information and answered questions. DAVE LACEY P.O. Box 81765 Fairbanks, Alaska 99708 POSITION STATEMENT: Testified in opposition to SB 7. BOB LOEFFLER, Director Division of Mining, Land and Water Department of Natural Resources 3601 C Street, Suite 800 Anchorage, Alaska 99503 POSITION STATEMENT: Testified in opposition to SB 7. DICK MYLIUS, Resource Assessment & Development Division of Mining, Land and Water Department of Natural Resources 3601 C Street, Suite 1130 Anchorage, Alaska 99503 POSITION STATEMENT: Provided information regarding SB 7 on behalf of the Division of Mining, Land and Water. SUE SCHRADER, Conservation Advocate Alaska Conservation Voice (ACV) P.O. Box 22151 Juneau, Alaska 99802 POSITION STATEMENT: Provided information regarding SB 7 on behalf of the ACV. KEN TAYLOR, Director Division of Habitat and Restoration Alaska Department of Fish and Game (ADF&G) P.O. Box 25526 Juneau, Alaska 99802 POSITION STATEMENT: Voiced concerns regarding SB 7 on behalf of ADF&G. CLIFF EAMES Alaska Center for the Environment (ACE) 519 West 8th, Number 201 Anchorage, Alaska 99501 POSITION STATEMENT: Voiced concerns regarding SB 7 on behalf of the ACE. DICK BISHOP, Vice President Alaska Outdoor Council (AOC) [address not provided] POSITION STATEMENT: Voiced concerns and testified in support of the proposed House committee substitute for SB 7 (Version S), which appears to address those concerns. WENDY REDMAN, Vice President Statewide University Relations University of Alaska P.O. Box 755200 Fairbanks, Alaska 99775 POSITION STATEMENT: Testified on SB 7 on behalf of the University of Alaska. ACTION NARRATIVE TAPE 00-7, SIDE A Number 0001 CO-CHAIR MASEK called the House Resources Standing Committee meeting to order at 1:15 p.m. Members present at the call to order were Representatives Masek, Hudson, Cowdery, Harris and Whitaker. Representatives Barnes and Kapsner arrived as the meeting was in progress. SB 7 - INCREASE LAND GRANT TO UNIV. OF ALASKA Number 0117 CO-CHAIR MASEK announced that the first order of business 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." CO-CHAIR HUDSON made a motion to adopt proposed HCS CSSB 7(RES), version 1-LS0072\S, Luckhaupt, 2/5/00 (Version S), as a work draft. There being no objection, it was so ordered. Number 0205 LORALI MEIER, Staff to Representative Beverly Masek, Alaska State Legislature, serving as committee aide for the House Resources Standing Committee, explained the changes in Version S. She referred to page 5, line 3, where new language had been added: (2) is located within a municipality that has not received at least 80 percent of its land entitlement under AS 29.65 and is not vacant, unappropriated, unreserved land; in this paragraph, "vacant, unappropriated, unreserved land" has the meaning given in AS 29.65.130; MS. MEIER informed members that it puts the University of Alaska on the same selection level as the municipalities. In current statute, the municipalities can only select vacant, unappropriated, unreserved land (VUU land) within their boundaries, but the University of Alaska is allowed to select any land within the boundaries. She indicated that the Department of Natural Resources (DNR) had said that only seven municipalities, mostly in Western Alaska, have not selected the majority of their land. Therefore, the goal was to make the changes specific to those seven municipalities by setting the requirement that unless the municipalities have at least 80 percent of their land entitlement, the University of Alaska is only allowed to select VUU land within their boundaries. Ms. Meier pointed out that in the case of the Lake & Peninsula Borough, the entitlement is greater than the VUU land available. MS. MEIER next referred to page 6, line 20, where new language had been added: (1) includes land that the commissioner, in consultation with the commissioner of fish and game, determines has demonstrated value to the public as a habitat area that is especially critical to the perpetuation of fish or wildlife; MS. MEIER explained that this basically protects public interest in special lands. The amendment was spurred by the situation in Cape Yakataga when the University of Alaska logged the thin strip of forest between the mountains and the ocean, thus damaging possible habitat between the two. MS. MEIER referred to page 7, line 23, where new language had been added: (E) any easement, right-of-way, or other access claimed, reserved, occupied, or possessed by the state and MS. MEIER explained that this protects public access to the University of Alaska conveyed lands, as does the new language added on page 8, line 31, through page 9, line 5: (m) The commissioner may not convey land under this section unless the commissioner reserves easement, rights-of-way, and other forms of access 1) required under the Constitution of the State of Alaska or other law; and (2) sufficient to ensure all current access, and reasonably foreseeable future access, to adjacent public or private land or water. MS. MEIER referred to page 9, line 6, where new language had been added: Sec. 14.40.366. Management requirements for university  land. (a) The Board of Regents shall, by policy, establish procedures for mineral entry or location and mineral leasing on university land selections made under AS 14.40.365 that are substantially similar to mineral entry, location, and leasing procedures for state land under AS 38.05.185 - 38.05.275. MS. MEIER explained that this means the University of Alaska will have the same mineral management requirements that exist on state land. The final change Ms. Meier explained was on page 13, line 22, through page 14, line 26 [Sections 8-11 were new]: * Sec. 8. AS 41.17.115(b) is amended to read: (b) The commissioner shall adopt regulations for the protection of riparian areas; the regulations may include higher standards of protection for fish and other public resources on land managed by the department or owned by the University of  Alaska than on public land or private land. The regulations may vary by region of the state and must take into consideration reasonable classification of water bodies and the economic feasibility of timber operations. * Sec. 9. AS 41.17.118(a) is amended to read: (a) The riparian standards for state land,  including land owned by the University of Alaska, are as follows: (1) on state forest land managed by the department or owned by the University of Alaska that is located north of the Alaska Range, harvest of timber may not be undertaken within 100 feet immediately adjacent to an anadromous or high value resident fish water body unless the division determines that adequate protection remains for the fish habitat; (2) on state forest land managed by the department or owned by the University of Alaska that is located south of the Alaska Range, (A) harvest of timber may not be undertaken within 100 feet immediately adjacent to an anadromous or high value resident fish water body; (B) between 100 and 300 feet from the water body, timber harvest may occur but shall be consistent with the maintenance of important fish and wildlife habitat. * Sec. 10. AS 41.17.950(11) is amended to read: (11) "other public land" means state land managed by state agencies other than the department or the University of  Alaska and [,] land owned by a municipality [, AND LAND OWNED BY THE UNIVERSITY OF ALASKA]; * Sec. 11. AS 41.17.950(13) is amended to read: (13) "riparian area" means (A) the areas specified in AS 41.17.116(a) on private land in the coastal forest of spruce or hemlock; (B) the areas specified in regulations adopted by the commissioner under AS 41.17.116(b) on private land outside the coastal forest of spruce or hemlock; (C) the area 100 feet from the shore or bank or an anadromous or high value resident fish water body on state land managed by the department or owned by the University  of Alaska and on other public land; MS. MEIER explained that this means the University of Alaska will be subject to riparian management standards that are required on state lands under the Forest Practices Act. Number 0465 REPRESENTATIVE COWDERY noted that in the privatization work done over the interim, one recommendation was for the governor to endow the University of Alaska with 250,000 acres of land and to try to get a federal match. MS. MEIER pointed out that committee packets contain a copy of the federal legislation that is currently in Congress. Number 0635 JIM POUND, Legislative Aide for Senator Robin Taylor, Alaska State Legislature, speaking on behalf of the prime sponsor of SB 7, pointed out that the riparian requirements are a bit redundant since all land in Alaska now falls under the Alaska Forest Act. He explained that the bill has been around for approximately 10 or 15 years and initially goes back to 1915, when the University of Alaska - then called the College of Agriculture and Mining - was established as a land grant college. The land granted to the college became the property of the state under the Alaska Statehood Act, and there was an assumption by Congress that the land would be transferred back to the University of Alaska; however, that still has not been done. MR. POUND emphasized that the purpose of the bill is to give the University of Alaska the land grants that it was promised by the federal government prior to statehood. The copies of the Senate and House bill from the congressional side are identical, he said, and include 250,000 acres from the federal government. He explained that part of that is a cleanup where land that was conveyed to the University of Alaska is now in national parks or national wildlife refuges. It is a show of good faith on behalf of the state for 250,000 acres; that means it is more salable for the Alaska delegation in Washington, D.C., and also the University of Alaska could ultimately end up with 750,000 acres, with 500,000 acres of that coming from the federal government. MR. POUND indicated the money will go into a trust account that will be drawn on primarily as an "interest situation," similar to the permanent fund, but it will be specifically designed for the University of Alaska. Currently, the budget request from the governor for the University of Alaska is $189,301,800. It is hoped that if the University of Alaska has this land available to it - given a fairly conservative estimate of $1,500 per acre at 60 percent of the sale - it should be able to produce $74 million annually. Mr. Pound noted that there are advantages to the municipalities; for example, if a municipality were dealing with land that it doesn't have the ability to develop or sell, or if the land were moved out into development status, it would create a tax base for municipalities that they currently do not have from raw land. Number 0991 REPRESENTATIVE HARRIS wondered what the policy and practices of the University of Alaska are currently with the lands that it has for development or revenue enhancement. MR. POUND responded that at the current time the land that the University of Alaska has available is generating approximately $32 million annually to its revenue source. REPRESENTATIVE HARRIS asked whether the University of Alaska has a projected revenue stream from the 250,000 acres from the state as well as the possible 250,000 or more acres from the federal government. MR. POUND indicated he does not have any firm numbers, because a lot of it has to do with what the land is used for. REPRESENTATIVE HARRIS requested clarification that the University of Alaska does have the option to sell the land. MR. POUND responded, "Yes. As I understand the way the bill is written, they should have the ability to transfer that land to private ownership." Number 1150 REPRESENTATIVE BARNES wondered why the federal bill is in any way tied to an amount of land being made available to the University of Alaska from the state. MR. POUND explained that as he understands it from Congressman Young's office, this bill is a good-faith effort on behalf of the state; there is an assumption in Congress that the land was transferred to the State of Alaska upon statehood, and that the state should be transferring it to the University of Alaska to complete the process. REPRESENTATIVE BARNES pointed out that even if the state transfers the 250,000 acres, there is no guarantee that the federal government will transfer any land. MR. POUND said, "Absolutely. These bills are in Congress and could end up anywhere." Number 1252 DAVE LACEY testified via teleconference from Fairbanks. He stated that he is opposed to SB 7 for the following three reasons: First, land disposals in rural Alaska hurt the residents, because they cause more people to compete for the limited subsistence resources, which damages the rural economy and [adds] more people who will qualify under the ANILCA (Alaska National Interest Lands Conservation Act) laws as rural residents who are available for hunting privileges in case of resource shortages. Second, it will promote rapid exploitation of the state's resources instead of a more value-added type of development that will support the local economies. And third, the land selection process that the University of Alaska has to go through will be cumbersome, expensive and drawn out. He indicated it would be much more efficient to appropriate the money from the general fund. REPRESENTATIVE COWDERY pointed out that the state has quite a bit of land, some acquired through foreclosures. He wondered how Mr. Lacey felt about that land being made available. MR. LACEY replied that he would have to take a closer look at that. He reiterated that his main concern is sticking people in rural areas who will compete for the resources and will want electricity and roads that the state cannot afford. REPRESENTATIVE COWDERY explained that the same thing was said in the homesteading days, and if there had not been services eventually to those areas, there would not be as many communities today, especially in the Railbelt region. Number 1522 BOB LOEFFLER, Director, Division of Mining, Land and Water, Department of Natural Resources, testified via teleconference from Anchorage. Speaking in opposition to SB 7, he testified as follows: This bill, which appropriates state land and subsurface resources and the revenue from them to the University of Alaska, is very similar to bills passed by the legislature in 1995-96 and actually 1959. Each time, those bills have been vetoed, including the 1959 version, which was vetoed by Governor Bill Egan. Therefore, it will come as little surprise to you today that I am in fact testifying in opposition to SB 7. I've got a couple points and would like to take just a few minutes of your time. The first and most important point is that this bill would set the university in competition with the new municipalities that we all hope will be forming in the unorganized portion of Alaska. It also has them in competition with existing municipalities. I'd like to expand on that for a second. While all of us are aware that the state has tremendous acreage, only a very small amount of that land produces revenue. As a result of the Mental Health Trust litigation and settlement process, and the effort to convey municipal entitlement to existing communities for their commercial, residential and industrial uses, we found that there is minimally viable development land: that is, a small portion of our land is useful for development. And since the purpose of SB 7 is to convey those lands to the university for revenue- generation purposes, it only follows that the university will select the most productive lands. ... As many of you know, half of Alaska remains in the unorganized borough. A university entitlement will make it very difficult for future boroughs to receive any development entitlement land. This is a serious issue for the state, [because] a lack of good lands will remove one of the few remaining incentives for municipal incorporation, should they ever be required to incorporate. This bill may ensure that they have no good tax base with which to generate revenues to support themselves. In short, with respect to the unorganized borough, this is an appropriation not from the general fund or not from the state to the university but, in fact, from new boroughs that may, in fact, incorporate to the university. The second half of this is competition with existing municipalities. While the amendment on page 5 goes quite far to eliminate some competition with municipalities, in fact, the university would still get a lot of land that would otherwise go to the existing municipalities. And this is true for two reasons: First, entitlements have a tendency to be an iterative process. They select, things change, we reject, they select new ones. And at the point the university jumps in, they then become ahead in line. Second, we would expect the university to get theirs first since they are funded to get theirs, and municipalities, for the most part, are not. So, I believe that the competition with new municipalities and, secondly, with existing ones, is a serious disadvantage to this bill. The second point is that I believe that this bill will have a significant and adverse impact on development of the state. Let me give you a few examples, and I guess the reasons are twofold. First, the first example I'd like to use is - as we're all proud of - there has been a mining claim boom in this state, and a boom in the mining industry more or less since the settlement of the Mental Health Trust. That, as a fixed and understandable land ownership, is critical for development, and I believe that this would introduce an element of confusion into that. Second, especially in the unorganized boroughs, this would allow the university to select lands basically to make money off of development projects, and let me give you a few examples. As many of you know, the Pogo Mine is in the process of permitting; while we don't know whether or when it would be permitted, the university would have no impediment to selecting the only available access routes. Thus, in fact, Teck Corporation would be negotiating not only with the state but with the university on royalties. [A] second example would be Donlin Creek, should that ever go, and that's on Native land. The only access is from state land, which is, in fact, selectable under this process, so that you could expect, then ... that the mining company would be negotiating with the university. And I believe that this could occur throughout the state. The third is the impact on what I'd call sort of rural issues. ... The bill allows selection of any land in the rural areas except for, in this amendment, those especially critical to the maintenance of fish and wildlife species, and I don't have that wording exactly. But in rural areas throughout the state, there is no impediment to the university's selecting areas for traditional use, subsistence - all of the things used by the local public that, in fact, municipalities were forbidden to select. And so I believe this would exacerbate the sort of rural/Railbelt tensions that unfortunately exist in this state. The fourth problem is its impact on state programs. Assuming that the university would select timber lands and lands for land sales, one would assume that they would select the lands either - with respect to timber - closest to existing access or - with respect to land sales - that are closest to being sold. That would probably have a significant effect to reduce or eliminate the near-term timber and land sale program, although certainly in the long term - these programs - there are other lands to sell. ... I note in subsection (h) on page 7 that there is what appears to be a constitutional confusion, and that is - while I haven't talked to the Department of Law, because this was just pointed out - it appears that the land in this bill is state land in the sense that it includes subsurface resources; but subsection (h) on page 7 appears to exempt university land from many of the requirements of the constitution. As you know, if the land is state land, in fact, the law cannot exempt state land; that is, the legislature cannot exempt state land from constitutional requirements. And two requirements in particular I'd like to point out. The first is sustained yield. While I believe there is some controversy as to whether trust land gained from the federal government is required to be managed according to sustained yield timber harvest, there is no doubt that state land is. The second is land from the federal government doesn't have the same public notice and meaningful public involvement requirements that the constitution imposes on us, but there is no doubt in my mind that this land would have those requirements; thus the university would not - if I'm correct, and I do believe we need to check with the Department of Law - that the university would not be allowed to dispose of this land without complying with the public notice and public involvement requirements the court has found in the constitution. And the last point is, in fact, that I believe this bill is relatively expensive and an unwise use of state money; that is, our conservative estimate that it will cost more than a million dollars per year for at least ten years, while the bill provides that these costs will be borne by the university, they're still state moneys that could best spent operating the university rather than transferring lands from one state agency to another. Furthermore, there [are] some timing implications. The money to transfer the land comes up-front. The revenue comes later, especially in today's budget environment. Paying costs today where the revenues don't come in for many years, a decade or so, could certainly be a problem. So, this bill spends money and reduces the appropriation flexibility for the legislature. I believe that money would be better spent funding the university directly. Madam Chairman, thank you for this opportunity. I'm available if you have any questions. Number 2068 REPRESENTATIVE COWDERY indicated that the state provides lots of services to rural Alaska at the present time. He stated that Mr. Loeffler is making a lot of other assumptions that are not based on facts. He pointed out that some accommodations for the university would allow it to benefit from something rather than state dollars. The state has a lot of other high priorities. He asked what Mr. Loeffler would recommend that the state cut from its budget in order to get the money for the university. MR. LOEFFLER answered that he believes the bill would require money to be spent now. It is a cost, not a revenue, for the near term, because it costs money to transfer land, and any revenue would come in the long term. Number 2198 REPRESENTATIVE WHITAKER stated, "I'm trying to couch this without being overly aggressive. ... Were you instructed to convolute a rationalization for a predisposed position?" MR. LOEFFLER responded, "No, sir." REPRESENTATIVE WHITAKER asked, "You've come to these conclusions logically, based upon the facts, is that correct?" MR. LOEFFLER replied, "I believe so, sir." He indicated that if his logic was not clear, he was willing to elaborate on it. REPRESENTATIVE WHITAKER said, "Your first item of opposition related to the competition for land with unorganized areas. ... How many areas are in the process of currently organizing, that you're aware of?" MR. LOEFFLER replied, "I don't know of any areas before the Local Boundary Commission, although I guess I wouldn't know, but I suspect there are very few. Our concern is really for the long term - we hope that many of them organize." REPRESENTATIVE WHITAKER asked, "And are you manifesting those hopes in any way?" MR. LOEFFLER stated, "No, sir." REPRESENTATIVE WHITAKER continued: That being the case, then one would come to the logical conclusion that if none are organizing and if the administration is not facilitating organization, that, then, if that is the reason for opposing land to the university under its land grant status, that that would, then, be postponed indefinitely. That would seem some what illogical, would you not agree? MR. LOEFFLER replied: There have been a number of mandatory borough bills that have been introduced, and it is certainly feasible that such will be introduced and passed in the future, but I agree ... that the ability to do some of this management is in trust for future municipalities. But it is certainly the legislature's choice if they should decide to give it to the university instead. REPRESENTATIVE WHITAKER continued: Your second logical conclusion was that an adverse impact on development to the state would result and there would be confusion in development. I find that a tremendous leap of logic in that the university has as its mandate to develop these lands. ... Now, how is it that an organization that is mandated with developing lands for their own benefit, and for the benefit of the state, would somehow have an adverse impact on development? Number 2381 MR. LOEFFLER answered: My conclusion stems in two ways. First, it stems from experience with the Mental Health Land Trust. I think there is no doubt that the Mental Health Land Trust has a fiduciary responsibility to develop those lands. That they are, but yet there is no doubt that the Mental Health Land Trust had an impact that we all regret on the development of the state. The second is through development projects that I am personally involved with, an example being ... the Donlin Creek Mine; that is, if there are two land owners involved, or three in this case - the state, the state public domain and the university - the more landowners, the more difficult it is. And those are the source of my comments. REPRESENTATIVE WHITAKER responded: On that particular point, then, would it not be a logical assertion that given one of the two landowners being absolutely motivated to develop those lands, that that might enhance the development, that might serve as a catalyst rather than an [inhibitor]. MR. LOEFFLER explained: Typically, the second landowner acts as a tax. That is, ... while we're certainly working with the Mental Health Trust, ... the source of the Mental Health Trust, it's financial. It costs money, and their motivation may be money, where in some cases ours is jobs. And so that's a slight change, sir. REPRESENTATIVE WHITAKER declared: And certainly I would not argue with specifics, but generally speaking, I think that there is a lack of logic in the assertion that given the advantages of development to the university, ... it would be adverse to development. If I might then continue, Madam Chair, with regard to the assertion that ... an investment, if you will, by the university - in itself, by itself, in itself, that would ... be a result of this bill - is some how adverse to the budget. I find that amazing, when, in fact, at the urging of the administration, the legislature has passed innumerable bills that relate to a future investment. And now you're telling us that that is not a wise course to follow. Again, that's not a question, because I've reached the point that I'm not asking questions anymore. I continue to assert that this is a convoluted rationalization to shore up a predisposed, politically motivated position. Number 2541 REPRESENTATIVE BARNES referred to Article VIII, Section 1, of the Constitution of the State of Alaska, where it reads, "It is the policy of the state to encourage the settlement of its land and the development of its resources by making them available for maximum use consistent with the public interest." She asked what the state is doing at the present time to fulfill that. MR. LOEFFLER replied that almost all of the state programs at DNR are intended specifically toward that end. REPRESENTATIVE BARNES asked Mr. Loeffler to elaborate on what the programs are. Number 2592 MR. LOEFFLER provided a list of programs: land disposal, permitting, mariculture, setnet leases, trapping cabins, oil and gas, minerals, timber harvest, transportation and municipal entitlements. He added that he may have left some out. REPRESENTATIVE BARNES asked Mr. Loeffler to list specific land disposal programs. She also wondered what is being done by DNR to resolve the problems with mariculture. MR. LOEFFLER stated that, with respect to land disposal programs, in fiscal year 2001 they expect to have three new subdivisions, about 100 remote parcels. He explained that they have a lottery program, a subdivision program and a remote recreation program. He indicated, with respect to mariculture, that they have a series of best-interest findings to provide leases for the people who qualify under the mariculture program. He added that they have been working with the Alaska Department of Fish & Game and the applicants over the past year to try to resolve the mariculture problem. REPRESENTATIVE BARNES asked how much land has been disposed of by the state for utilization by its people over the last five years. MR. LOEFFLER indicated that he cannot give that answer off the top of his head, but that it hasn't been that much. He explained that since statehood it has been about 400,000 acres. In the last 20 years, since the advent of modern land disposal programs, it has been around 180,000 to 190,000 acres, not counting the homestead programs and large agricultural disposals. REPRESENTATIVE BARNES wondered if Mr. Loeffler could discuss the land other than that made available for agriculture. DICK MYLIUS, Resource Assessment & Development, Division of Mining, Land and Water, Department of Natural Resources, testified via teleconference from Anchorage. He explained that they have had three land sales in the last four years, which were parcels that were re-offered, having been surveyed and subdivided previously. In total, probably 500 or 600 non-agricultural parcels were sold. He pointed out that the reason they don't have a big land disposal program is simply a function of budget: they have not been funded significantly for land disposal since the late 1980s. REPRESENTATIVE BARNES asserted that the land that has been previously surveyed and identified does not need a huge budget, since it is land that has already been surveyed. She asked how much of that land is currently available to the Division of Mining, Land and Water that can be made available to the public. MR. LOEFFLER explained that he believes they have 5,000 parcels, which encompass approximately 50,000 acres. The three things that need to be done to make that land available are: do title searches within DNR; reappraise the land, because much of it is rural homestead land that has never been appraised and the rest that have been appraised are out of date; and work out a way to do a limited appraisal. This means the land can be put up for somewhere between $12 and $40 per acre. REPRESENTATIVE COWDERY requested that Mr. Loeffler send the committee a written report on what has happened with disposal in the past five years and what the program is for the next five years. MR. LOEFFLER said he would be delighted to that. He emphasized that the land disposal program, to some extent, is driven by budget: even though it makes more than it costs, the Division of Mining, Land and Water or DNR cannot keep that money. The money goes into the general fund. REPRESENTATIVE COWDERY said he doesn't see how DNR can get money except through the appropriation process. MR. LOEFFLER clarified that he wouldn't recommend any, and he apologized if the implication was there. TAPE 00-7, SIDE B Number 2957 SUE SCHRADER, Conservation Advocate, Alaska Conservation Voice (ACV), came forward to testify as follows: Alaska Conservation Voters, formerly Alaska Conservation Voice, is a not-for-profit organization dedicated to protecting Alaska's environment through public education and advocacy. Our 40 member organizations represent over 21,000 registered Alaskan voters. ACV believes investment in our university system is critical for the state's continued economic prosperity and for enabling the state's participation in the developing intellectual and knowledge-based economy that is fueling our country's progress. We support funding that will guarantee a strong university system now and in the future. ACV is pleased to see that the new draft committee substitute of SB 7 addresses several of our concerns with environmental impacts on this legislation, namely, providing for consultation with ADF&G and requiring increased protection of riparian areas. Nevertheless, we continue to believe that SB 7 does not guarantee adequate or reliable funding for the university. Simply put, the university's full attention should be directed towards education, where it has expertise, and not be diverted towards the complex and often contentious arena of land management. We urge you to oppose this legislation and instead seek more effective, viable ways that address the imminent financial needs of the university. We continue to have serious concerns with SB 7, including: It robs Alaskans of more effective opportunities to capitalize on our natural assets, rather than simply liquidating them to finance a specific state function. It is deleterious to local economies. Because the university must seek to maximize revenue, it has rapidly liquidated its existing timber assets and then exported these valuable Alaskan resources, in the round, at significant cost to local economies. During past timber sales such as those at Yakataga, the university has ignored local processing and local-hire opportunities. Because of the university's aggressive development polices, the bill threatens fish and wildlife resources, as well as the subsistence, recreational, and commercial uses that depend on them. It threatens community water sources and local use, expansion and planning. At both the local and regional [levels], university land selections would further complicate confusing land ownership patterns and make sorting out the conflicts a costly and time-consuming process. Even with the language in the new draft committee substitute to ensure access, SB 7 may impact highly valued access rights on selected lands that the university chooses to sell to a third party or develop in such a way as to preclude access. Potentially at risk are the hunting, fishing, skiing, mushing, and innumerable other recreational commercial activities that Alaskans depend upon. Alaskans deserve a strong university for our children, but we urge you to support the university through appropriations, not through land giveaways like SB 7. Number 2776 REPRESENTATIVE BARNES asked whether Ms. Schrader is aware of the state budget deficit. MS. SCHRADER replied, "Yes." REPRESENTATIVE BARNES asked where Ms. Schrader would propose that the state get the money to fund the university. MS. SCHRADER replied that she has followed all of the budget discussions for many years, but she does not have the answers. She pointed out that one possible consideration, with a careful approach, would be to use some of the permanent fund earnings. She indicated that she believes helping to support the university is a valid use of those funds. REPRESENTATIVE BARNES wondered if the ACV will change its mind on RS 2477 rights-of-way, which it has traditionally opposed. MS. SCHRADER replied that ACV probably will not. She explained that there are many aspects to the access issue and RS 2477 is just one of those. She clarified that it does not mean that the ACV members have any less interest in maintaining appropriate access by appropriate means to public land. Number 2666 REPRESENTATIVE BARNES wondered if Ms. Schrader could identify what she means by appropriate access. MS. SCHRADER indicated that it would obviously vary, depending on who is being addressed; it has to be taken on a case-by-case and area-by-area basis. There are certainly public lands that lend themselves well to all types of access, including motorized, and there are other lands where, for a variety of reasons - mainly habitat protection and conflicting uses - it is better to look at a more controlled form of access. REPRESENTATIVE BARNES wondered if ACV would be in support of logging in the state. Number 2611 MS. SCHRADER pointed out that one of the 40 organizations of the ACV is the Southeast Alaska Conservation Council, which has always supported a sustained value-added timber industry in Southeast Alaska. She added that the ACV would certainly be in support of a sustained value-added timber industry in portions of Alaska, although it is difficult when trying to compare the boreal forest around Fairbanks to the temperate rainforest in Southeast. She emphasized that ACV's support would depend upon where the activity was taking place. REPRESENTATIVE BARNES noted that she has never heard from anyone from a conservation organization in support of logging in the state. REPRESENTATIVE COWDERY wondered if Ms. Schrader thought the private sector could do the disposal program without any costs to the state. MS. SCHRADER responded that she doesn't have that information. REPRESENTATIVE COWDERY explained that the Federal Activity Inventory Reform Act (FAIRA) gives a definition of an inherently governmental function, and that function is so intimately related to public interest as to require its performance by government employees. He pointed out that the disposal of land probably would not fit that category. MS. SCHRADER replied that it is something one may want to look into. REPRESENTATIVE COWDERY pointed out that one area the legislature might look at, to find some money, is activities that the state does but which the private sector could do at a cost savings. Number 2388 KEN TAYLOR, Director, Division of Habitat and Restoration, Alaska Department of Fish and Game (ADF&G), indicated he wanted to voice some concern that the department had with the proposed committee substitute (CS) that came to the committee. He noted that the committee seems to have put a lot of effort into addressing some of the points that he was going to make. MR. TAYLOR told members that the department's main concerns have to do with the disposal of land that is in either legislatively designated areas - such as critical habitat areas, refuges or sanctuaries - or other areas that the department has worked through some process to identify - areas that are important for fish and wildlife values or that are important as access points, for people to access those resources. Number 2274 CLIFF EAMES, Alaska Center for the Environment (ACE), testified via teleconference from Anchorage. He indicated that the ACE has consistently opposed proposals to provide additional land for the University of Alaska, in spite of their strong support for the university. They believe that such a transfer would create more conflicts than solutions to problems. He informed the committee that the ACE was heavily involved in the attempts to resolve the Mental Health Land Trust situation, as well as several land exchange attempts that would have transferred public domain land into private or quasi-private ownership; there has been a huge amount of conflict and litigation. MR. EAMES pointed out that some of the ACE's concerns have to do with whether a proposal might be an unconstitutional dedication of funds; even if it is a legal disposal, they question whether it will nevertheless violate the policy behind dedicating funds. They believe that it is wise to devote a substantial part of Alaska's resource base to a single entity and remove the opportunity through the yearly appropriation process to make decisions about what is most important. MR. EAMES also expressed concern about the effect of the public land-use planning process. They believe that in spite of the attempt to ensure access to the land, it would, in fact, eliminate or reduce a variety of existing public uses or the quality of those public uses. It could adversely affect fish and wildlife, although they [ACE] are pleased to see the new provision that should reduce some of the impacts. He added that the disposals and subsequent development would create conflicts for rural residents and would reduce public participation in the management of the land. He noted that they [ACE] would rather see the university funded through general funds, and there might be something that the state could do to build a strong private endowment for the university. He pointed out that many - if not all - conservationists do believe it would be wise to look at an income tax for the state in order to raise sufficient revenues to fund important programs. Number 2073 REPRESENTATIVE BARNES referred to the issue raised by Mr. Eames about the constitutionality of the legislature's ability to transfer lands. She directed his attention to Article VIII, Section 9, in the Constitution of the State of Alaska, where it reads: Subject to the provisions of this section, the legislature may provide for the sale or grant of state lands, or interests therein, and establish sales procedures. All sales or grants shall contain such reservations to the State of all resources as may be required by Congress or the State and shall provide for access to these resources. Reservation of access shall not unnecessarily impair the owners' use, prevent the control of trespass, or preclude compensating for damages; REPRESENTATIVE BARNES said the legislature therefore has the authority to do so. REPRESENTATIVE COWDERY referred to the budget deficit and wondered what Mr. Eames thinks the state should not fund, since the state obviously cannot fund everything. He noted that if there were a state income tax, as Mr. Eames recommended, it would only produce about $260 million per year, yet there is a $600 to $700 million state deficit. MR. EAMES replied that he does not know where the income tax figure came from and would need to explore that further, but they would at least have some additional revenues. He added that there might also be the possibility of using portions of the permanent fund, as Ms. Schrader had pointed out. Number 1896 REPRESENTATIVE COWDERY said it still goes back to the issue of the general fund; the money will still have to be appropriated, and there still is a large deficit. He added that the public had voted on whether to use any of the permanent fund earnings, and they were clear about not wanting to do that. DICK BISHOP, Vice President, Alaska Outdoor Council (AOC), indicated that the AOC has followed this legislation for a number of years. He explained that the AOC supports the concept of enhancing the self-sufficiency of the University of Alaska; they hope that the potential of a significant university land base will contribute to that goal. Their interests and concerns relate to ensuring that the public purposes of state lands, waters and resources are not seriously compromised, and that the following are recognized and accommodated: prime fish and wildlife habitat; public access to lands and waters; and fishing, hunting and trapping. It appears that Version S addresses those concerns, and the AOC supports passage of the bill. Number 1590 WENDY REDMAN, Vice President, Statewide University Relations, University of Alaska, pointed out the four top priorities: to identify and dispose of non-appreciating assets; to actively develop university land consistent with market demands; to increase the pool of developable land; and to acquire additional urban commercial property and land resources with near-term development potential. She noted that a question had come up regarding the annual receipts and what they are generating on the property that they have right now, which about 150,000 acres. She indicated that they currently have a land grant; the endowment is $102 million and last year they generated about $8 million in earnings on those lands. MS. REDMAN referred to Ms. Schrader's comment that the university had liquidated its timber land in Yakataga; Ms. Redman clarified that they have only cut 12 percent of the timber on the Gulf Coast. Next she referred to Mr. Loeffler's comments regarding competition with municipalities; she indicated that they had tried to address that in the bill. She stressed the fact that the governor and the commissioner have total control over what lands are even available to the university to select, and there is no opportunity for appeal by the university. She also referred to Mr. Loeffler's comments on subsurface rights and explained that it has been researched by many lawyers; the university is a pre-statehood agency, which means that university land grant lands are not subject to the same provision. They do, in fact, have subsurface rights on their lands, she noted. MS. REDMAN pointed out that there are no general funds used to manage university lands; all management costs come from the proceeds of the land itself. She referred to Mr. Taylor's comments on legislatively designated areas and pointed out that those are excluded in the bill and have been since the very first bill. She indicated that a couple of issues continue to come up. For instance, the constitutionality question is another issue that has been researched, and it has never been shown that this would be unconstitutional. Rather, it is an effort on the part of the university to try to find some small way to be self- sustainable. She agreed with almost everyone that had testified on the bill that land is not a panacea for the university; they would much prefer to have money. She pointed out that land is a very long-term investment and it will not solve the problems of the university. However, it could provide a small annual stream of revenue. Number 1188 CO-CHAIR MASEK closed public testimony. She offered Amendment 1, which read: Page 4, lines 26-28: Insert "not" after "shall" Replace "unless" for "if" Replace "acts to approve" for "does not disapprove" New sentence to read: A list of selections submitted shall not be considered approved for conveyance to the University of Alaska [if] unless the legislature [does not approve] acts to approve the list during the legislative session during which the list was submitted. [New text underlined and deleted text bracketed] CO-CHAIR MASEK asked whether there were any objections. There being none, Amendment 1 was adopted. REPRESENTATIVE COWDERY asked whether it was the intent of the chair to move the bill. CO-CHAIR MASEK indicated that she would like to hold it until the next meeting. Number 1036 REPRESENTATIVE KAPSNER stated that she is not in favor of seeing the bill leave the committee at this time. She explained, for example, that the Northslope Borough and the Northwest Arctic Slope Borough haven't even selected all of their land. She emphasized that she is not opposed to funding the university system, but she is not sure this is the best way. [SB 7 was held over.] ADJOURNMENT Number 0924 CO-CHAIR MASEK adjourned the House Resources Standing Committee meeting at 2:40 p.m.