SENATE RESOURCES COMMITTEE April 13, 1994 4:15 P.M. MEMBERS PRESENT Senator Mike Miller, Chairman Senator Loren Leman, Vice Chairman Senator Steve Frank Senator Drue Pearce Senator Dave Donley Senator Fred Zharoff MEMBERS ABSENT Senator Al Adams COMMITTEE CALENDAR SENATE BILL NO. 371 "An Act providing for exploration incentive credits for activities involving locatable and leasable minerals and coal deposits on certain land in the state; and providing for an effective date." SENATE BILL NO. 374 "An Act extending the period of regulation of material sites used for timber operations under the Forest Practices Act and extending a corresponding exemption from provisions regulating mining reclamation; and providing for an effective date." HOUSE BILL NO. 462 "An Act repealing certain provisions of the laws, other than those in the Alaska Land Act, relating to recording requirements, labor and improvement requirements, and size requirements for mining claims and providing for the suspension or waiver of state annual mining labor requirements when the federal government has suspended or waived federal annual mining labor requirements administratively or by statute; and providing for an effective date." PREVIOUS ACTION SB 371 - No previous action to record. SB 374 - No previous action to record. HB 462 - No previous action to record. WITNESS REGISTER Gerry Gallagher, Director Division of Mining Department of Natural Resources P.O. Box 107016 Anchorage, Ak. 99510-7016 POSITION STATEMENT: Commented on SB 371 and supported SB 374 and HB 462. David Rogers, Esq. Producers Council Juneau, Ak. 99801 POSITION STATEMENT: Commented on SB 371. David Stone, President Producers Council 3100 Channel Dr. Juneau, Ak. 99801 POSITION STATEMENT: Supported SB 371. Steve Borrel, Executive Director Alaska Miners Association 501 W. Northern Lights, #203 Anchorage, Ak. 99503 POSITION STATEMENT: Supported SB 371. Mary Nordale, President Alaska Miners Association 501 W. Northern Lights, #203 Anchorage, Ak. 99503 POSITION STATEMENT: Supported SB 371. Representative Gene Therriault State Capitol Juneau, Ak. 99801-1182 POSITION STATEMENT: Sponsor of HB 462 ACTION NARRATIVE TAPE 94-35, SIDE A Number 001 CHAIRMAN MILLER called the Resources Committee meeting to order at 4:15 p.m. and announced SB 371 (MINERAL EXPLORATION INCENTIVE CREDITS) to be up for consideration. GERRY GALLAGHER, Director, Division of Mining, said they have a problem with granting exploration incentive credits to the industry which is strictly a fiscal concern. There is not much money coming in and they are very concerned with opening the back door on the general fund with anything that would lessen it. He said that mental health and school trust lands needed to be exempted specifically so the Department doesn't end up in litigation. This could be fixed on page 1, line 8 after the word "grant" insert ",unless otherwise provided by law," so the Department could identify these lands and exempt not all of the credit, but the royalty portion of the credit. He explained they had to make some projections about the number of new mines that would happen in the next 15 years to come up with the fiscal note. SENATOR FRANK asked if he considered any taxes and royalties that might accrue because of the credit. MR. GALLAGHER said that was not considered, but he didn't know how to put it in a fiscal note. He believed the fiscal notes were realistic in terms of royalties and where they were going to go. SENATOR MILLER asked Mr. Gallagher to testify on SB 374 (MATERIAL SITES FOR TIMBER OPERATIONS). Number 111 MR. GALLAGHER explained that the Mine Reclamation Act and the Forest Practices Act both require the reclamation of material gravel sites. If one agency is doing the same thing as another, cooperative agreements are used. When the DNR put the Mine Reclamation regulations out to notice, they relied on the Forest Practices Act, because they were more rigorous so they didn't have to double permit. He said they couldn't complete the regulations for the Mining Reclamation Act because the regulations for the Forest Practices Act got hung up in some controversy and difficulties. The regulations on mining reclamation now need to defer back to the Forest Practices Act regulations which are in place. This bill simply gives them 6 months to finish doing that. If they don't do this, the forest operators will have to get two permits for the same gravel pit. It is not a good use of our time or theirs and it doesn't change the regulatory requirements. Number 155 SENATOR MILLER thanked Mr. Gallagher and announced SB 371 to be up p for consideration again. DAVID ROGERS, Counsel for the Producers Council, said the primary element of the bill authorizes exploration incentive credits which can be used by qualified applicants to offset tax and royalty obligations. It applies to coal and leasable and locatable mineral exploration activities. The activities which qualify for credits include geophysical and geochemical surveys, drilling exploration holes, aerial photography, and other exploratory work. The earned credits can be applied against general corporate income taxes, mining license taxes, and royalties. Qualified exploration activities must be documented. The maximum credit available is equal to 60% of direct labor costs for Alaska residents and 50% of other eligible costs as defined in the bill. SENATOR LEMAN noted that this should be checked with SB 151 to see if it is consistent with the credits. DAVID STONE, President, Council of Alaska Producers, supported SB 371. He said throughout the world, countries are actively courting mining companies by offering economic incentives and other inducements and it has been particularly successful in Chile and Mexico where privatization and tax incentives have revitalized their mining industries. At the same time obstacles in the lower 48 are forcing many companies to look elsewhere. SB 371 is one of the things we should do to draw more industry attention to Alaska and compete in the increasing competitive global market place. STEVE BORREL, Executive Director, Alaska Miners Association, supported SB 371. It would allow credit for a percentage of certain specified direct expenditures that are made during the early exploration stage. The credit cannot be taken until the project actually begins to be an operating mine. The credits can be transferred which is important for a future sale of the mine. He concluded by saying that SB 371 will send a positive message to the international mining industry that Alaska is improving the investment climate and is working to encourage mineral development. SENATOR MILLER said they would hold SB 371 for a quorum and announced HB 462 (MINING REQUIREMENTS:RECORDING/LABOR/SIZE) to be up for consideration. Number 350 REPRESENTATIVE GENE THERRIAULT, sponsor of HB 462, said it clears up inconsistencies that exist between our Title 27, dealing with mining on federal land, and federal regulations. GERRY GALLAGHER, DNR, supported HB 462. It makes necessary changes in state law to conform with federal law. It would eliminate some confusion. MARY NORDALE, President, Alaska Miners Association, supported HB 462. She recommended they consider a repeal of AS 27.10.120, because it is archaic and relates to staking of claims by a person holding a power of attorney. It is a practice that has worn out the need at this time. SENATOR MILLER said they would work on this issue and announced SB 374 (MATERIAL SITES FOR TIMBER OPERATIONS) to be up for consideration. He announced a recess from 4:44 p.m. - 4:49 p.m. SENATOR ZHAROFF moved to pass SB 374 from committee with individual recommendations. There were no objections and it was so ordered. SENATOR MILLER announced SB 371 to be up for consideration. He said there was a proposed amendment on line 8, page 1 after the word "grant" to add "unless otherwise provided by law." SENATOR LEMAN moved the amendment. There were no objections and it was so ordered. SENATOR LEMAN moved to pass SB 371 from committee with individual recommendations. There were no objections and it was so ordered. SENATOR MILLER adjourned the meeting at 4:50 p.m.