ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
March 18, 2016
1:01 p.m.
MEMBERS PRESENT
Representative Benjamin Nageak, Co-Chair
Representative David Talerico, Co-Chair
Representative Bob Herron
Representative Craig Johnson
Representative Kurt Olson
Representative Paul Seaton
Representative Andy Josephson
Representative Geran Tarr
Representative Mike Chenault (alternate)
MEMBERS ABSENT
Representative Mike Hawker, Vice Chair
COMMITTEE CALENDAR
HOUSE BILL NO. 216
"An Act relating to obstruction or interference with a person's
free passage on or use of navigable water; and amending the
definition of 'navigable water' under the Alaska Land Act."
- MOVED CSHB 216(RES) OUT OF COMMITTEE
HOUSE BILL NO. 274
"An Act relating to extensions of certain state land leases;
relating to the exchange of state land; and relating to the
definition of 'state land.'"
- HEARD & HELD
HOUSE BILL NO. 247
"An Act relating to confidential information status and public
record status of information in the possession of the Department
of Revenue; relating to interest applicable to delinquent tax;
relating to disclosure of oil and gas production tax credit
information; relating to refunds for the gas storage facility
tax credit, the liquefied natural gas storage facility tax
credit, and the qualified in-state oil refinery infrastructure
expenditures tax credit; relating to the minimum tax for certain
oil and gas production; relating to the minimum tax calculation
for monthly installment payments of estimated tax; relating to
interest on monthly installment payments of estimated tax;
relating to limitations for the application of tax credits;
relating to oil and gas production tax credits for certain
losses and expenditures; relating to limitations for
nontransferable oil and gas production tax credits based on oil
production and the alternative tax credit for oil and gas
exploration; relating to purchase of tax credit certificates
from the oil and gas tax credit fund; relating to a minimum for
gross value at the point of production; relating to lease
expenditures and tax credits for municipal entities; adding a
definition for "qualified capital expenditure"; adding a
definition for "outstanding liability to the state"; repealing
oil and gas exploration incentive credits; repealing the
limitation on the application of credits against tax liability
for lease expenditures incurred before January 1, 2011;
repealing provisions related to the monthly installment payments
for estimated tax for oil and gas produced before January 1,
2014; repealing the oil and gas production tax credit for
qualified capital expenditures and certain well expenditures;
repealing the calculation for certain lease expenditures
applicable before January 1, 2011; making conforming amendments;
and providing for an effective date."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 216
SHORT TITLE: NAVIGABLE WATER; INTERFERENCE, DEFINITION
SPONSOR(s): REPRESENTATIVE(s) TALERICO
01/19/16 (H) PREFILE RELEASED 1/8/16
01/19/16 (H) READ THE FIRST TIME - REFERRALS
01/19/16 (H) RES
03/16/16 (H) RES AT 1:00 PM BARNES 124
03/16/16 (H) Heard & Held
03/16/16 (H) MINUTE(RES)
03/18/16 (H) RES AT 1:00 PM BARNES 124
BILL: HB 274
SHORT TITLE: STATE LAND; EXCHANGES; LEASE EXTENSIONS
SPONSOR(s): REPRESENTATIVE(s) MUNOZ
01/22/16 (H) READ THE FIRST TIME - REFERRALS
01/22/16 (H) RES
02/08/16 (H) RES AT 1:00 PM BARNES 124
02/08/16 (H) -- MEETING CANCELED --
03/18/16 (H) RES AT 1:00 PM BARNES 124
WITNESS REGISTER
JOSHUA BANKS, Staff
Representative David Talerico
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: On behalf of Representative Talerico,
sponsor, provided answers to questions previously raised about
HB 216.
CRYSTAL KOENEMAN, Staff
Representative Cathy Munoz
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: On behalf of Representative Munoz, sponsor,
introduced HB 274.
WYN MENEFEE, Deputy Director
Alaska Mental Health Trust Land Office
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: Answered questions regarding HB 274.
DOUG ISAACSON, General Manager
Minto Development Corporation
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 274.
BART GARBER, President, CEO
Toghotthole Corporation
Nenana, Alaska
POSITION STATEMENT: Testified in support of HB 274.
ACTION NARRATIVE
1:01:04 PM
CO-CHAIR DAVID TALERICO called the House Resources Standing
Committee meeting to order at 1:01 p.m. Representatives Olson,
Johnson, Josephson, Tarr, Herron, Chenault (alternate), Nageak,
and Talerico were present at the call to order. Representative
Seaton arrived as the meeting was in progress.
HB 216-NAVIGABLE WATER; INTERFERENCE, DEFINITION
1:02:00 PM
CO-CHAIR TALERICO announced that the first order of business is
HOUSE BILL NO. 216, "An Act relating to obstruction or
interference with a person's free passage on or use of navigable
water; and amending the definition of 'navigable water' under
the Alaska Land Act."
[Before the committee was the proposed committee substitute (CS)
for HB 216, Version 29-LS0995\E, Bullard, 3/14/16, adopted as
the working document on 3/16/16.]
1:02:33 PM
JOSHUA BANKS, Staff, Representative David Talerico, Alaska State
Legislature, discussed the sponsor's 3/18/16 memorandum,
included in the committee packet, that details the questions
raised by members during the committee's 3/16/16 meeting. He
addressed the concern raised by Representative Seaton and
Representative Herron about whether there would be restrictions
to prevent possible harm from all-terrain vehicles (ATVs)
operating along and through anadromous streams. He said the
sponsor confirmed with the Alaska Department of Fish & Game
(ADF&G) and the Alaska Department of Natural Resources (DNR)
that the statutes currently in place would provide some
restrictions on what activities could be conducted in or around
navigable waters. He relayed that ADF&G notified the sponsor of
AS 16.05.871, which requires a person to obtain a permit to
conduct certain activities around anadromous waters and is in
place to ensure adequate protection of ADF&G resources. Mr.
Banks elaborated that AS 16.05.896 allows for a misdemeanor
offense to be issued to anyone doing material damage to salmon
spawning grounds or disrupting salmon migration. He further
explained that there are a number of statutes DNR could use to
restrict or manage the use of waters through regulation,
including determining which uses are incompatible within certain
areas. Drawing attention to Section 1 on page 1 of Version E,
he pointed out that AS 38.05.128(a) gives permission to a state
agency to obstruct the free passage of navigable waters if it is
authorized by law or permit issued by a federal or state agency.
So, he continued, a department could stop an activity causing
harm to sensitive areas if there is an authorization in the law.
MR. BANKS next addressed the concern raised by Representative
Josephson regarding whether the 1824 U.S. Supreme Court case
Gibbons v. Ogden [may cause a problem for the state's definition
of navigable water]. Mr. Banks explained that this case dealt
primarily with interstate commerce and did not deal with
navigability unless it was closely associated with interstate
commerce.
MR. BANKS lastly addressed the concern raised by several
testifiers regarding the deletion of the language "but not
limited to". He reported the deletion is being done due to a
legal preference that Legislative Legal and Research Services
has started moving toward. He explained that using the single
word "including" has the same legal meaning as "including but
not limited to", and gets the point across using less words.
1:07:35 PM
REPRESENTATIVE JOSEPHSON moved to adopt Conceptual Amendment 1,
which read:
Page 1, line 8, following "law";
Insert "or regulation,"
CO-CHAIR TALERICO objected for purposes of discussion.
REPRESENTATIVE JOHNSON requested a copy of the amendment prior
to discussion.
1:08:41 PM
The committee took a brief at-ease.
1:10:55 PM
REPRESENTATIVE JOSEPHSON explained why he is offering Conceptual
Amendment 1. He said he was advised by an attorney who is a
water rights expert that the definition in Version E could be
restrictive. He noted the Constitution of the State of Alaska,
Article VIII, Section 14, Access to Navigable Waters, states,
"Free access to the navigable or public waters of the State, as
defined by the legislature, shall not be denied any citizen of
the United States or resident of the State, except that the
legislature may by general law regulate and limit such access
for other beneficial uses or public purposes." He further noted
that Title 5 contains a huge number of ADF&G regulations, many
created by the Alaska Board of Game. In further research he
found the 3/2/01 decision for the case, Interior Alaska Airboat
Association Inc. v. State of Alaska, Board of Game, which
concerned regulations in the Nenana region and the Noatak River
and whether, for example, on a navigable waterway the Alaska
Board of Game could say an airboat or an aircraft cannot be used
in certain locations. The Supreme Court of Alaska ruled that
the Alaska Board of Game can do that, he related. He said he
wants the record to reflect that it is not necessarily a free-
for-all across Alaska's navigable waters and so he is offering
this amendment.
1:13:16 PM
REPRESENTATIVE JOHNSON brought attention to Version E, page 2,
lines [1-2], which state, "authorized by the commissioner after
reasonable public notice." He held that this is regulation and
therefore adding "or regulation" is unnecessary.
CO-CHAIR TALERICO said the legislature as a body defines the law
of the state, which engages the departments to actually create
regulations. So, since law is covered in the bill, his question
is whether it would be redundant to add "or regulation". He
opined that regulations are born via the laws provided by the
legislature.
REPRESENTATIVE SEATON offered his understanding that "law"
includes both law and regulations of the state; it is not simply
by statute, law is a broader term.
REPRESENTATIVE TARR allowed it may be accurate that the proposed
language is unnecessary, but said HB 216 would be made more
clear by including "or regulation". She suggested taking a
brief at ease in order to solicit the opinion of Legislative
Legal and Research Services.
CO-CHAIR TALERICO said he personally does not have a lot of
heartburn about adding the amendment, even though he is unsure
how necessary it is.
REPRESENTATIVE HERRON said he views the amendment as a "belt and
suspenders" amendment and agreed the amendment is redundant.
CO-CHAIR NAGEAK concurred.
1:16:40 PM
CO-CHAIR TALERICO removed his objection. There being no further
objection, Conceptual Amendment 1 was adopted.
1:17:07 PM
REPRESENTATIVE TARR offered her appreciation for the answers to
the questions, particularly the issue of sensitive areas and
protection of anadromous streams. She addressed previous
testifiers who may be listening saying that although the
definition is becoming broader, committee members care about the
state's salmon and want to avoid any unintended consequences,
while [protecting the use of] motorized vehicles.
CO-CHAIR TALERICO offered his appreciation for the questions
raised by the committee members, saying it is the committee's
responsibility to vet the bills and pursue answers.
REPRESENTATIVE SEATON referenced the definition that people have
basically unlimited access to waters of the state. He shared
his hope that the addition of methods, such as all-terrain
vehicles, snow machines, and so forth, will be further
investigated by the sponsor to ensure that adding "in any
season" is not expanding access of citizens upon private
property. He posited it would be good to clarify that expanding
the definition and what can be used will not result in invading
private property by statute that allows people access.
1:20:05 PM
CO-CHAIR NAGEAK moved to report the proposed committee
substitute (CS), Version 29-LS0995\E, Bullard, 3/14/16, as
amended, with attached fiscal notes and individual
recommendations. There being no objection, CSHB 216(RES) was
reported from the House Resources Standing Committee.
1:20:42 PM
The committee took an at-ease from 1:20 p.m. to 1:23 p.m.
HB 274-STATE LAND; EXCHANGES; LEASE EXTENSIONS
1:23:30 PM
CO-CHAIR TALERICO announced that the next order of business is
HOUSE BILL NO. 274, "An Act relating to extensions of certain
state land leases; relating to the exchange of state land; and
relating to the definition of 'state land.'"
1:23:47 PM
CRYSTAL KOENEMAN, Staff, Representative Cathy Munoz, Alaska
State Legislature, introduced HB 274 on behalf of Representative
Munoz, sponsor. She said the sponsor introduced HB 274 after
being approached with the issue by a Juneau non-profit that had
worked with the Department of Natural Resources (DNR) on trying
to complete a land exchange. She said the sponsor researched
statutes and talked with DNR about what was hindering the land
exchange. Through research, the sponsor realized the issue
stemmed well beyond just this local non-profit in that it is an
issue for non-profits across the state, including land exchanges
involving Native corporations, the Alaska Mental Health Trust
Authority (AMHTA), and federal land exchanges. The sponsor
found inefficiencies within Title 38.50 in the way statutes
govern land exchanges. Title 38.50 land exchanges are written
differently than the municipal land exchanges. State land
exchanges call for the value of the land that is being appraised
to be "exactly equal to" when talking about the surveying of
land. Municipal land exchanges call for it to be "approximately
equal to", which allows for consideration of other factors, such
as public interest and access to the land, something that Title
38.50 does not allow for and is a major hurdle.
MS. KOENEMAN pointed out that the other issue is that appraisals
under 38.50 are only good for one year. She explained that with
the public comment period, the application, and the survey work,
most land exchanges take at least a year and are very difficult
to complete within one year. Therefore, HB 274 would remove
that one-year limitation and let the final paperwork be
completed to conclude those land exchanges that are close to
being completed.
1:27:32 PM
MS. KOENEMAN provided a sectional analysis of HB 274. She said
Section 1 deals with the coordination with other state agencies
and would remove a reference that is being repealed. Section 2
[would add two new subsections that] deal with the extension of
certain land leases if it is in the best interest of the state.
Section 3 would, through new paragraph (7), apply existing
notice standards to state land exchanges. Section 4 would
provide clarifying language regarding the definition of shore
land and tideland; it is technical cleanup from Legislative
Legal and Research Services. Section 5 would add two new
provisions, one being that the land exchange must be in the best
interest of the state and the other being that AS 38.05.945
applies for providing public notice. Section 6 would provide
that land exchanges be approximately equal in value and would
require legislative approval of exchanges greater than $5
million; this mirrors the municipal lands exchange statutes.
Section 7 would remove the "equal value" provision that was
changed to "approximately equal to" in Section 6. Section 8
would remove existing limitations and would provide that the
conveyances must be authorized by the Constitution of the State
of Alaska and federal laws. Section 9 would provide for the
continuation of revenue accrual until state land is conveyed
unless jurisdiction from other state agencies is waived.
1:30:00 PM
MS. KOENEMAN continued the sectional analysis, explaining that
Section 10 would change the hearing requirements on land valued
at more than $5 million. The hearing requirement would be
changed from three public hearings to one public meeting prior
to it being submitted to the legislature for review.
REPRESENTATIVE HERRON expressed his concern with Section 10. He
asked why reduce the number from three hearings to one [meeting]
for land that is valued over $5 million.
MS. KOENEMAN replied that the way the Department of Natural
Resources (DNR) conducts its public hearings is a much higher
bar than is its public meetings. She qualified the sponsor does
not want to limit public participation and wants to ensure that
all the issues are vetted, but said the sponsor also understands
the need for the timeline of getting land exchanges taken care
of. Additionally, with the additional oversight of the
legislature, the sponsor feels comfortable that the legislature
will do its due diligence on these land exchanges. Multiple
public meetings and legislative hearings could be held regarding
these land exchanges and therefore the sponsor feels the public
would be well served and there would be no diminishment.
REPRESENTATIVE HERRON observed in the bill that the status quo
language is for "at least three public hearings" and the
proposed language is "at least one public meeting". He inquired
as to the difference between a hearing and a public meeting.
MS. KOENEMAN responded that the commissioner must attend the
public hearings and recorders must be there and [minutes]
transcribed. Hearings are a much higher bar than having, say, a
town hall [meeting], where there is more of a free-form
discussion.
REPRESENTATIVE HERRON commented that land exchanges should not
be easy, and that is the reason for his concern.
1:33:43 PM
REPRESENTATIVE JOSEPHSON surmised that if it is not a hearing
then the legislature would not be privy to what was said at the
hearing, given that for a public meeting the legislature would
probably read a press account of it.
MS. KOENEMAN understood the legislature would still be privy to
much of the information that was presented at a [meeting].
1:34:38 PM
REPRESENTATIVE SEATON stated his concern regarding Section 10,
noting there is a proposal for an area on the Kasilof River for
which there are three public hearings - one each in Wasilla,
Anchorage, and Kasilof. He posited that the public opinion
coming out of a meeting in Kasilof will absolutely be totally
different than what will come out from the other two locations.
This is because it relates to dip netting and people from the
population centers have a definitely different attitude to that
than the property owners who live around that area and who have
the impact of that. Therefore, he is concerned about going from
three public hearings to one public meeting. He requested he be
provided with the definition of public hearing versus public
meeting, saying that normally [legislators] get the notice of
public hearings but not necessarily public meetings.
MS. KOENEMAN answered that the proposed language states DNR
shall hold "at least" one public meeting, it would not limit DNR
to only one [for exchanges having value of more than $5
million]. It would allow for if there is public outcry or
interested parties to request more than one meeting. She said
public meetings do still go through the public notice
requirement and so notice is sent out to all interested parties,
ensuring that every affected party does have the ability to
comment. This is in addition to the public notice provisions
that are contained in statute, so there would already have been
the chance to submit comments through the public notice. The
department would have a chance and opportunity to review those
public comments and determine where the issues are and which
communities would be greatly affected.
1:37:20 PM
MS. KOENEMAN resumed the sectional analysis, noting Section 11
would provide conforming language regarding the legislative
review for changes made in Section 6 and Section 13. Section 12
would provide additional clarifying language for the definition
of shore land and tideland for another section of statute.
Section 13 would repeal several statutes.
MS. KOENEMAN reviewed the statutes that would be repealed under
Section 13: AS 38.50.020, which deals with the value of
properties exchanged, would be repealed because Section 6 of the
bill which would change the language from "exactly equal to" to
"approximately equal"; AS 38.50.040, which deals with the land
subject to exchange, would be repealed because the state does
not have the legal authority to violate a covenant or a
restriction on a title that prevents the disposal or land
exchange, therefore Legislative Legal and Research Services
determined this statute does not seem to hold any functional
value; AS 38.50.080(b), which deals with the prohibition against
alienation of selection rights, would be repealed because the
state has already selected its lands under the Alaska Statehood
Act and has no further ability to select lands.
1:39:12 PM
REPRESENTATIVE CHENAULT offered his belief that Alaska has not
yet selected all of its lands, so there are still lands that are
available.
CO-CHAIR NAGEAK agreed with Representative Chenault.
MS. KOENEMAN replied that that was the information provided to
her and she will follow up in this regard.
REPRESENTATIVE CHENAULT requested that DNR provide the committee
with clarification.
1:39:38 PM
MS. KOENEMAN continued her review of the statutes that would be
repealed under Section 13: AS 38.50.090, which deals with
coordination with other state agencies, would be replaced with
AS 38.05.035(e) which requires that a summary be provided of
agency and public comments that have been obtained as a result
of contacts with other agencies and other efforts taken by the
department through public comment; AS 38.50.100, which deals
with the finding requirements as to alternatives, would be
replaced with AS 38.05.035(e) which requires a written
determination that the exchanges will serve the best interests
of the state; AS 38.50.110, which is the notice of proposed
exchanges, would be replaced with the requirements of AS
38.05.945 which is the standard for most other disposals,
including oil and gas leases, land sales, material sales, and
other leases; AS 38.50.120(b), which is the public hearings
statute, would be replaced by Section 10 of the bill; and AS
38.50.130, which is the report on proposed exchanges, would be
repealed because it is duplicative of existing requirements for
publications of the best interest finding and would add costs
and complexities to the exchange process. The best interest
decision would still lay out the considerations used in
determining the value of the property, the value of the
exchange, and what the benefits are of the exchange.
1:41:36 PM
REPRESENTATIVE JOSEPHSON noted that under AS 38.50.080(b) the
state may not alienate land selected under the Statehood Act of
1958. He said he has not seen a map showing what Alaska has
received as of January 3, 1959. He inquired whether there is
some reason why lawmakers eons ago said that that is sacred land
and is not to be exchanged, whereas land the state has accepted
since then has been exchanged, albeit very slowly.
MS. KOENEMAN deferred to DNR for an answer.
CO-CHAIR TALERICO requested DNR to address the land selection
question and also the public hearing versus meeting question.
1:42:39 PM
WYN MENEFEE, Deputy Director, Alaska Mental Health Trust Land
Office, Department of Natural Resources (DNR), first addressed
the state's selection rights, explaining that at statehood
Alaska had 105 million acres to select, with certain coming
through grants and certain needing to be selected. The state
had a time period in which to select lands and the selections
have already occurred. Of the remaining selections that the
state has, the state is currently figuring out which ones to
relinquish and which ones to close, but the state does not have
the ability to select more. At the time [AS 38.50.080(b)) was
created the state likely had the ability to select lands, so
that is the reason why currently it is not needed. The state
does have the ability to change what is its priority in
selection and close out of selection, but the state does not
have the ability to select more land.
1:44:01 PM
MR. MENEFEE then addressed the difference between meetings and
hearings. He said DNR's interpretation of hearings is that a
court transcriber must be there to type out every word said and
then the department pays someone to process and publish the
hearing minutes. This is a very lengthy procedure for DNR to do
because it does not normally do that. Normally, the department
disposes of oil and gas leases, mineral rights, land sales, all
under AS 38.05.035(e) decisions. The department uses public
meetings to reach out and gather input from the public, then
documents the type of input received at the meetings but does
not use a system of transcribing someone on the record. The
department has found meetings to be much more beneficial because
meetings allows for a dialogue. People can give their ideas,
ask questions, and discuss solutions with department staff,
rather than a person being constrained to two or three minutes
and that's it. That is why the department prefers to have
meetings instead of hearings.
1:46:53 PM
MR. MENEFEE clarified that AS 38.05.945 is DNR's public notice
requirements and AS 38.05.035(e) is DNR's decision process. The
combination of those two statutes, he explained, requires the
department to reach out to potentially affected parties the best
way the department sees fit to reach the potentially affected
parties. It could be that the department determines six public
meetings are needed to do that or only one is needed. If it is
under the $5 million value threshold it would give the
department the decision making authority to determine how much
notice is needed or how many meetings to do and even whether a
meeting is even needed. For example, something very small in a
subdivision may not really need a public meeting. It will have
a public notice because the department always has a public
notice and will always post it on the internet and probably in
the local newspaper. But the need to go through multiple
meetings is not always essential. However, he continued, if an
exchange is over the $5 million value threshold, the department
would need to bring that to the legislature, and the legislature
could hold as many hearings as it likes in order to approve the
land exchange. The department cannot do over $5 million or an
unequal land exchange without getting legislative approval and
therefore even more hearings occur. The requirement for the
three hearings in current law is only for if it is over $5
million, so it seems even repetitive. The department would do
public meetings and such as necessary up to that point, but once
the department finally determined it to be a good exchange and
ready for the legislative approval, the legislature could hold
as many hearings on that as it likes.
1:47:40 PM
REPRESENTATIVE SEATON presumed that written public comment to
public hearings is on the record. He asked how written public
comment to public meetings is acquired and whether it is
verbatim as written by the person or is summarized as someone
commenting in the positive or negative.
MR. MENEFEE answered that when DNR does an AS 38.05.035(e)
decision it oftentimes does a summary of comments received
because sometimes there can be one comment and sometimes a
thousand, but the public record is still there that documents
it. The department tells people that in order to be heard DNR
wants comment to be put in writing to preclude the department
from mistakenly putting words in someone's mouth. At any public
meeting, DNR has forms for writing down comments on the spot or
for mailing in, and DNR is willing to help the person write it.
That is in the public record and available for anyone to see
when doing decisions. However, in the actual decision document,
DNR oftentimes summarizes.
1:49:27 PM
REPRESENTATIVE SEATON, regarding three [hearings] versus one
[meeting] for land exchanges valued over $5 million, said his
concern with an exchange coming before the legislature that has
had only one public meeting is that 50 people will call in
asking legislators to make a decision on something that was not
as amply vetted in the local area as it should have been, given
that legislative hearings are not in the local area. He
requested Mr. Menefee to address his concern and asked whether
DNR would have three meetings if the value is over $5 million.
MR. MENEFEE replied that if the value is over $5 million it is
likely either a broader land base or a very valuable location,
such as downtown. If it is that type of value it likely would
be more than one [meeting]. If it is an accumulation of several
different land parcels located in different communities, DNR
would likely have public meetings in each of those communities.
It would be unlikely, although he cannot guarantee it, that
something would get to the legislature under the requirement of
unequal value or of over $5 million with only one meeting. In
either of those cases there would probably be more than one
public meeting because DNR does not want to bring something to
the legislature that is not vetted. The department wants to
know what the problems and concerns are. That is not to say
that people will not ask for additional hearings with the
legislature, but DNR would like to have that vetted, so if it is
going to take more meetings DNR would hold more meetings.
1:51:59 PM
REPRESENTATIVE JOSEPHSON remarked that severing of the surface
from the mineral estate as proposed under Section 8 seems like a
major shift. He inquired what the goal is here and how it would
be known that the state had not exchanged something that had
valuable minerals or oil and gas under it.
MR. MENEFEE responded that current law talks about trying to not
do mineral estates separately. By law, the federal government
is the only group to which state land mineral rights can be
disposed. The proposal says it can only be done according to
state constitution and law, therefore it could not be segregated
and given to "Joe" because it is not permissible by law. But it
would allow the separation. So, for instance, when dealing with
the federal government there may be reasons the state would only
want to do a mineral estate in certain cases. Even under an
exchange, he explained, the state keeps the rights to the oil
and gas and such because of the statutes. The state is going to
evaluate that because it does not want to give away a valuable
resource. Normally, exchanges are going to occur with fee
simple, which is both the mineral estate and the land estate all
together. Typically in an exchange, both the surface and the
subsurface come into the state and only the surface estate is
given back out.
1:54:24 PM
REPRESENTATIVE SEATON drew attention to page 4, Section 9, of
the bill and requested an explanation of the language "and
revenue" on lines 24-25.
MR. MENEFEE answered by posing a scenario in which the state is
selling gravel off of a site, is going through a land exchange
process, and is in a preliminary exchange agreement but gravel
is still being extracted there. The other entity that the state
is exchanging with does not get any of the revenues off of the
gravel extraction that continues until the actual exchange is
complete. This is because the state does not want the other
entity to say, "Well this exchange took 10 years and I demand
all the revenue that came off during that time." The state has
not given that land to the other entity until the exchange is
done and therefore the idea is to be expeditious about going
through an exchange but not wanting the other entity to be
accruing any sort of right on the other side. It is wanted to
keep that to the state so the state keeps the benefit of any
revenues coming off that land until the exchange is done.
REPRESENTATIVE SEATON asked whether there are any repealers that
the department is uncomfortable with or that expand further than
is needed.
MR. MENEFEE replied that DNR is comfortable with the way the
bill is written. In regard to the repealers, he said some are
pieces of language being moved from one part to another, some
are recommendations by Legislative Legal and Research Services
for what it should be, and some are just for efficiencies.
Therefore, DNR is very comfortable with where it stands.
1:56:38 PM
REPRESENTATIVE JOSEPHSON noted that "best interest" is used in
the bill. He asked whether this could result in more litigation
that would hold up the exchange, given there is a whole body of
law on what that means and that it is a term of art.
MR. MENEFEE responded that, except for this, almost every
disposal by DNR is done through the AS 38.05.035 decision
process, which says the department has to decide it is in the
best interest of the state. Absolutely that can be challenged,
he said. Every decision DNR does can be appealed by somebody
and eventually taken to court. If DNR did not do its due
diligence, evaluate correctly, or do everything required under
AS 38.05.035, it could be challenged. The department can be
challenged whether it has done a good job or a bad job. The
department gets taken to court all the time. He allowed it is a
term of art, but pointed out that that is what the legislature
set up for DNR to do for all of the disposals. The department's
large oil and gas leases and land sale program are all done
through that same decision process - the same appealable process
is there, same best interest determination.
1:58:32 PM
CO-CHAIR TALERICO understood that under the Statehood Act any
mineral rights surrendered by the state would go back to the
federal government.
MR. MENEFEE answered yes.
CO-CHAIR TALERICO presumed it would be the feeling of everyone
listening that that would never happen, that the state would
never give those up.
MR. MENEFEE replied correct, except if it was going back to the
federal government. An allowance is there and exchanges to the
federal government are possible in the future. For example, the
Alaska Mental Health Trust Land Office is working an exchange
with the federal government, however mineral rights were not
really the issue there. In the future it could be a possibility
that the state could exchange mineral rights back to the federal
government and that is the only place that that works.
CO-CHAIR TALERICO surmised that some of the land selected by the
state has not yet been adjudicated. He assumed the state must
work with the U.S. Bureau of Land Management (BLM) to do the
adjudication for the state to acquire the rest of its acreage.
MR. MENEFEE responded that the selections have already occurred
and the state has over-selected. In that over-selection the
state must work with BLM to fine-tune what the state is going to
get in the end. It is somewhat like a chess game - Native
corporations get first dibs on selections and from what remains
the state will adjust its priorities and will get the remaining
selections. So, it is still under adjudication and is still a
process ongoing.
2:00:27 PM
REPRESENTATIVE JOSEPHSON asked how many of the exchanges involve
the federal government. He further requested Mr. Menefee to
elaborate on the federal exchange that is currently going on.
MR. MENEFEE answered he can only think of two that have in any
way been going on right now. One is Izembek National Wildlife
Refuge, which has been going on for quite some time with many
perils with the exchange. Under AS 38.50 there is not an
exchange going on presently. There are many different ways to
do exchanges. An exchange with the federal government can be
done administratively or as a congressionally mandated exchange.
An administrative exchange is more like what is being done with
the Alaska Mental Health Trust Land Office, where the office is
working with the U.S. Forest Service in Southeast Alaska to do
an exchange for approximately 18,000 acres of trust land for
about 20,000 acres of U.S. Forest Service land. There are many
parcels and it is a fairly large and lengthy process. Right now
an agreement has been entered into to initiate with the federal
government. There is a National Environmental Policy Act of
1969 (NEPA) process that needs to occur, an environmental impact
statement (EIS), and this must be done before doing the AS 38.50
land exchange on the state side. So, it is just in the first
stages of a real robust process on the federal side and then it
must be married up. The way AS 38.50 currently stands
especially wreaks havoc with this appraisal problem of only
being good for one year. For example, the Falls Creek exchange
took at least 12 years to get through because of trying to match
up the state and federal processes.
2:03:36 PM
REPRESENTATIVE HERRON commented that in regard to the Izembek
trade there is a lot of bitter resentment with the way the
federal government has treated that trade. The EIS process took
four years to do with many Alaskans and other parties interested
in a successful conclusion to that trade. In his opinion, he
continued, the EIS was corrupted at the highest levels of the
U.S. Department of the Interior at the last minute. He asked
when the Izembek trade agreement is going to expire.
MR. MENEFEE responded that DNR will have to get back to the
committee with an answer.
2:04:42 PM
REPRESENTATIVE TARR related that a criticism she has heard with
the whole land exchange process is the great length of time that
it can take and that costs may be exceeded through the process
relative to the value of the property. She inquired whether the
cleanup proposed in HB 274 will help expedite the process, if
that is an accurate criticism.
MR. MENEFEE replied that the criticism is accurate in the sense
that DNR has had numerous failed exchanges and exchanges that
never got off the ground because of process. Under AS 38.50,
the way the timing works it is extremely difficult to get an
exchange through - many years in the making, many repeated
steps, lots of cost for both the state and the entity proposing
to exchange with the state. It is not good for anyone because
much money and staff time is wasted that way. The intention of
HB 274 is to make it more consistent with how DNR does normal
disposals and what is really trying to be done is get efficiency
so exchanges can actually get done. Numerous people and
entities, such as Native corporations, have come to DNR wanting
to do an exchange and explaining why it is in the state's best
interest. But oftentimes DNR has said that it probably cannot
be done because of the law as it stands. That is not a good
answer because it might actually be in the state's interest.
When it is in the state's interest, DNR wants to be able to
actually complete an exchange.
MS. KOENEMAN added that the land exchange example she used at
the start of her testimony was in regard to the Point Bridget
trailhead and the Echo Ranch Bible Camp, a land exchange process
that started in the early 2000s. She said the bible camp has
dumped tens of thousands of dollars over and over, year after
year, trying to get this exchange. It has been a frustrating
ordeal for the camp because it is a nonprofit and should be
using those funds for other purposes instead of exchanges. The
hope is that there will be additional public entities that will
not have to expend those same funds and that it will be more
cost advantageous for them.
2:07:35 PM
CO-CHAIR TALERICO opened public testimony on HB 274.
2:08:35 PM
The committee took a brief at-ease due to technical difficulties
at the Fairbanks Legislative Information Office.
2:09:05 PM
DOUG ISAACSON, General Manager, Minto Development Corporation,
stated his corporation's support for HB 274. He noted that
Minto Development Corporation is a subsidiary of Seth-De-Ya-Ah
Corporation and Minto is a federally recognized village under
the Alaska Native Claims Settlement Act (ANCSA). He offered his
appreciation for the earlier testimony and explanations by Mr.
Menefee, noting that a Native corporation looking at economic
development for its village, work for shareholders, and the
ability to create value for the greater community at large, the
corporation is discouraged from pursuing any land exchanges due
to the process. He related his experience with a land exchange
while he was mayor of North Pole. North Pole was looking at
expanding its wastewater treatment center and the exchange
process became too cumbersome to pursue.
MR. ISAACSON noted that HB 274 was immediately received well by
his board. He drew the committee's attention to two letters,
one from the Minto Development Corporation and one from the
Seth-De-Ya-Ah Corporation. If the bill is passed, he said, the
corporation is looking at pursuing some ventures that would open
up some economic opportunities. It is reasonable to reduce the
number of public meetings. It does not say there will not be
public meetings, but in the municipal process for land issues
there is outreach to those who are immediately affected by
exchanges. Having three mandated public hearings does not make
sense when something is being done in an area that is not going
to have a lot of affect. The proposal is a much more reasonable
way of pursuing it and would allow the corporation to appraise
the property, go through the best interest findings, and get a
determination in a much more timely way.
2:13:04 PM
BART GARBER, President, CEO, Toghotthole Corporation, stated his
corporation is a village corporation in Nenana. He offered the
corporation's support for HB 274. He said he echoes Minto
Development Corporation's testimony and added that Nenana
potentially has a more extreme case. By the time Toghotthole
got around to selecting lands, the vast majority of lands in its
area had already been selected by the state and by the city.
So, Toghotthole's lands are primarily distant, many of them are
split up along the road system or farther out on some of the
river systems. There have already been times when Toghotthole
needed or had opportunity to exchange and it was easier when the
city and the village had to make a land exchange. The parties
were more similar, the parcels were smaller, and the interests
were more in line. There are now increasing amounts of
development in the area, but the corporation's parcels are still
all spread out, and it is getting into more and more areas where
the state has lands. It is not large parcels that are being
talked about, but potentially small parcels that are loggerheads
for access issues and other things. He related that this last
year he had to make arrangements for the lease of a very small
state parcel between Toghotthole's property and some mental
health property that Toghotthole had to get to. That worked out
okay, but it might have been easier and in the long term it may
be easier, to get an exchange. However, given the current
process, there is a very good chance of not going through it
simply because of the time deadlines and the length of the
transaction. Toghotthole Corporation supports HB 274 and would
like to see the number of hearings potentially diminished or at
least sped up. In most situations where the principle parties
are in agreement, it would be in the best interests of both
parties if the process does not get in way.
2:15:56 PM
CO-CHAIR TALERICO closed public testimony on HB 274 after
ascertaining no one else wished to testify.
2:16:06 PM
REPRESENTATIVE SEATON stated his concern that budget constraints
and future administrative contraction might result in saving
expenses by having a single hearing for exchanges valued at over
$5 million and then shoving that off to the legislature. He
said he would like, at the appropriate time, to go from one
public meeting to three public meetings because meetings are
simpler and easier than hearings and three meetings would ensure
that budgetary problems do not shift from the administration to
the legislature. He recounted that he has been through timber
sales or exchanges that were very contentious by the time they
came before the legislature and some of that was because things
had not been worked out in public meetings. He urged the
committee to stay at three meetings and not go down to one
meeting for exchanges valued at $5 million.
2:17:34 PM
CO-CHAIR TALERICO held over HB 274 and requested that proposed
amendments be submitted to the co-chairs' offices.
2:18:30 PM
CO-CHAIR NAGEAK explained the procedures that will be followed
for the committee's meetings on 3/19/16 and the week of 3/21/16.
2:21:03 PM
ADJOURNMENT
The House Resources Standing Committee meeting was recessed at
2:21 p.m., to be continued at 1:00 p.m. on March 19, 2016.