SENATE RESOURCES COMMITTEE March 23, 1998 3:37 P.M. MEMBERS PRESENT Senator Rick Halford, Chairman Senator Lyda Green, Vice Chairman Senator Bert Sharp Senator Robin Taylor Senator John Torgerson Senator Georgianna Lincoln MEMBERS ABSENT SENATOR LOREN LEMAN COMMITTEE CALENDAR SENATE BILL NO. 341 "An Act relating to agricultural land; and providing for an effective date." - PASSED SB 341 FROM COMMITTEE SENATE BILL NO. 262 "An Act relating to regulation of hunting and trapping and to the definition of sustained yield.'" - PASSED CSSB 341(RES) FROM COMMITTEE CS FOR SENATE BILL NO. 281(CRA) "An Act relating to general grant land entitlements for the City and Borough of Yakutat; and providing for an effective date." - HEARD AND HELD PREVIOUS SENATE COMMITTEE ACTION SB 341 - No previous action to record. SB 262 - No previous action to record. SB 281 - See Community & Regional Affairs minutes dated 2/23/98. See Resource Committee minutes dated 3/20/98. WITNESS REGISTER Ms. Janey Wineinger, Staff Senator Lyda Green State Capitol Bldg. Juneau, AK 99811-1182 POSITION STATEMENT: Commented on SB 341 for sponsor. Ms. Mel Krogseng, Staff Senator Robin Taylor State Capitol Bldg. Juneau, AK 99811-1182 POSITION STATEMENT: Commented on SB 262 for sponsor. Mr. Geron Bruce, Special Assistant Department of Fish and Game P.O. Box 25526 Juneau, AK 99802-5526 POSITION STATEMENT: Opposed SB 262. Mr. Tom Armour, Manager City and Borough of Yakutat P.O. Box 160 Yakutat, AK 99689 POSITION STATEMENT: Supported SB 281. Mr. Paul Fuhs City and Borough of Yakutat 10652 Porter Lane Juneau, AK 99801 POSITION STATEMENT: Supported SB 281. Mr. Dick Mylius Division of Land Department of Natural Resources 3601 C Street, Ste. 1122 Anchorage, AK 99503-5947 POSITION STATEMENT: Commented on SB 281. Mr. Steve Planchon, Executive Director Mental Health Trust Land Office Department of Natural Resources 3601 C Street Anchorage, AK 99503-5935 POSITION STATEMENT: Supported SB 281. ACTION NARRATIVE TAPE 98-21, SIDE A Number 001 SB 341 - AGRICULTURAL LAND BILL FIX CHAIRMAN HALFORD called the Senate Resources Committee meeting to order at 3:37 p.m. and announced SB 341 to be up for consideration. MS. JANEY WINEINGER, Aide to Senator Green, sponsor, said SB 341 attempts to correct a small glitch that was created in SB 109, Section 14(b) which listed tracts 1 -19 at Pt. Mackenzie and 21 - 30. This bill attempts to remove 30, ending it at 29. Tract 30 was assigned to the Borough through the Municipal Entitlement Act. At this time, the Borough retains the development rights and the State retains the agriculture rights. The key is what's fee simple. The Revolving Loan fund later acquired the agriculture rights in Tract 30 by foreclosure of its lien when the farmer had secured the agriculture rights. Tract 30 is the only parcel designated that has a split title. The Mat-Su Borough requested this with concurrence from the State. She said no one opposes this bill. SENATOR TAYLOR moved to pass SB 341 from Committee with individual recommendations with the accompanying fiscal note. There were no objections and it was so ordered. SB 262 - MANAGEMENT OF HUNTING CHAIRMAN HALFORD announced SB 262 to be up for consideration. SENATOR TAYLOR said this is a reaction to the closure by the Board of 236 square miles to Alaskan hunters. It basically restricts the Department from curtailing traditional access for hunting and trapping unless the specific needs of access is causing biological harm to a game population in the area where the restriction is to apply. MS. MEL KROGSENG, Staff to Senator Taylor, said the amendment was drafted to allow the Board of Game to maintain those controlled use areas in existence now that they feel are necessary. Some of them have indicated that these areas may be only for a short period of time and may not be necessary to be maintained over time. This would allow the Board to grandfather them if they need to be continued and eliminate them if they don't need to be continued. There were references in the original bill to fish and the bill doesn't really deal with fish, just game; so fish were deleted. It was also intended that generalized motor vehicles be included, so that is in the amendment. The term "conservation" was changed to "management." The bill still states that if the Department wishes to create new controlled use areas, it must be for biological reasons. SENATOR TAYLOR moved to adopt the amendment to SB 262. There were no objections and it was so ordered. SENATOR TAYLOR moved to pass CSSB 262(RES) from Committee with individual recommendations. SENATOR LINCOLN objected saying she would first like to hear from the Department. MR. GERON BRUCE, Department of Fish and Game, said the amendments would not essentially affect the main testimony of the Department on the original bill which is that controlled use areas are designed not for biological purposes, but for allocative purposes under the Board's authority to provide preferences among beneficial uses. That is what this tool is being used for. With the exception of a few areas, they have been well received by the public. SENATOR SHARP asked if current areas would be grandfathered in. SENATOR TAYLOR answered, "Yes." SENATOR TORGERSON asked if they are taking out all reference to fish except in the sustained yield definition and asked if that's the intent. MS. KROGSENG said they intentionally left the reference to fish for sustained yield, because this definition is under general definitions, not referring to just this section of the bill. There were no further objections and the bill moved from Committee with individual recommendations. SB 28 - UNINCORP. COMMUNITY MATCHING GRANTS CHAIRMAN HALFORD announced SB 281 to be up for consideration. SENATOR MACKIE said he represents the City of Yakutat and SB 281 was introduced to complete the formation of the Yakutat Borough and the land entitlements that the State grants to support local government. Initially, the land entitlement for the new borough by the formula of 10 percent of "vacant, unappropriated, and unreserved" (VUU) State lands was a mere 138 acres. The City and Borough of Yakutat subsequently petitioned the Local Boundary Commission to reclaim much of the area on its Northern border. In a reversal of its earlier decision, the Local Boundary Commission approved the annexation which contains a substantial amount of State "VUU" lands. It is estimated that if the annexed areas had been included for the original borough formation, the municipal land entitlement would amount to 33,000 acres. It has been a long established policy for the State to assist the formation and operation of the local governments with generous grants of State land. SB 281 corrects the defects in the borough formation process that resulted in such a small land entitlement for the City and Borough of Yakutat by increasing its entitlement to 21,500 acres. At this point, the Community and Regional Affairs Committee, which he chairs, reduced the amount from 30,000 acres. The bill also gives additional authority to the Director of the Division of Lands in the Department of Natural Resources to condition and restrict any of the municipality's selections made under this increased grant. The City and Borough of Yakutat has been extremely accommodating in terms of working with all the agencies, the State, the University of Alaska, DNR, DCRA, and the Mental Health Trust to try to come up with a bill that would be non-controversial. Number 227 SENATOR TAYLOR said the backup material indicates this legislation addresses another matter, because it says, "much of the State land in the area has been reclassified under the Yakutaga Area Plan, it will be necessary for DNR to relocate and reclassify acreage available for conveyance to the Borough." He asked why they didn't convey to Yakutat a contiguous portion of land, in essence, surrounding their community. SENATOR MACKIE said he would like another person who is more familiar with the issue to answer that. He knew there were a number of concerns from the University in terms of their ability to have development on University lands. SENATOR TAYLOR asked if these lands didn't include University lands. SENATOR MACKIE responded that Mr. Armour would answer that a little later. CHAIRMAN HALFORD asked what the population of the Yakutat Borough was. SENATOR MACKIE replied 850 people. SENATOR TAYLOR asked if they had any plans to convey this land to private owners or would it be held by the community. MR. TOM ARMOUR, Manager, City and Borough of Yakutat, said the people of Yakutat have been fighting to form a borough for six years. This bill granting their municipal entitlement is a final step in the legislative process and he asked for their support of it. They have worked closely with all the affected parties for the past five months including Chugach Corporation, University, DNR, ADF&G, and the Mental Health Trust. As part of their negotiations, they reduced their entitlement from 30,000 to 21,500 acres and have agreed to work out habitat conditions with ADF&G so they can obtain title to lands with critical habitat issues. As a result, all of the parties are in support of this bill with the exception of the Mental Health Trust who wants veto power over a 40-acre parcel currently used as a log sort yard, which they couldn't accept. They offered the Mental Health Trust the same deal as the University, which doesn't charge for using the property during the term of their current State land lease, and an offer to delay nominating that parcel until they are finished with their round of logging (approximately eight years). DNR will have the final decision and they may well keep that property for itself. SENATOR TAYLOR said he was concerned with what some of the land classifications were and asked to see them on a map. MR. ARMOUR said he didn't have it with him, but it would be readily available. MR. PAUL FUHS, City of Yakutat, said this land is highly classified and managed. There were a lot of lawsuits that were filed against the University for their logging. Mental Health was involved. It is part of an out-of-court settlement. If you change around the classifications, then all the bets are off and the lawsuits are back on. These were very delicate negotiations and they weren't able to identify 30,000 acres in the municipality that wouldn't have triggered so many changes in land classification that would have upset the whole apple cart. That's why they agreed to 21,500 acres. A lot of the land is directly contiguous to Yakutat; the other land is around the industrial area where the University and Mental Health are doing their logging which is a potential future port site. He explained that some lands are classified in a way that a municipality would never get them, like wildlife refuges. The ones that are classified as habitat, forestry, or industrial use areas are those areas that are available for selection. Most municipalities do not know which parcels they would go after; they would just go after a straight 10 percent. This area is so highly classified and managed, that they know exactly which parcels they can and can't go after. That's how they zeroed in on the 21,500 without upsetting all the other land classifications in the area. SENATOR TAYLOR said it seems to him that there is an appropriation of State lands that's taking place through the classification purpose, especially when that classification is used in a court settlement. It seems like a couple of parties got together, not elected by anyone, and decided to settle a case. They are being precluded in the Legislature from conveying it to the Borough and they are precluded from doing any other management technique on that property other than that which has been decided by the litigation. It seems like they are going at this backwards. The Legislature appropriates the resources and wealth of this State, not the Cleary case. Number 310 SENATOR MACKIE explained that all the City of Yakutat has is 138 acres. Everyone involved with this bill wanted to come up with a bill that wasn't controversial and tried to identify lands that would be noncontroversial and made sense for them to nominate. All this bill does is allow up to that amount to happen. It would allow the City and Borough of Yakutat to nominate certain parcels of land within that entitlement and DNR would have to approve the nomination and once that happened the City and Borough would have to pay for the survey and the conveyance. There would be no fiscal impact to the State. CHAIRMAN HALFORD asked what the basis was for the original 138 acres. MR. FUHS explained that it was 10 percent of the vacant unappropriated land and the reason there wasn't much land is because it was almost all federal and native corporation land around the municipality. There was very little State land around the original borough boundaries. In the annexed area, there's a lot of State land which now allows Yakutat to seek its entitlement. SENATOR MACKIE said the annexation has occurred since that original allotment. CHAIRMAN HALFORD asked how many people lived in the annexed area. MR. ARMOUR explained that the small amount of permanent non-logging residents at the logging camps fluctuates with the market. One of the camps has 35 people. He knows of only six permanent people. SENATOR MACKIE said the reason the 33,000 acres was the original amount is because if the area that has recently been annexed was included in the original formation, they would have been entitled to 33,000 acres under the formula all the other municipalities were allowed land under. Because of all the different land classifications and habitat area, it was reduced by one third to 21,500. CHAIRMAN HALFORD countered that those allocations were based on that particular snap-shot in time. If they ended up with 21,000 acres for a population of 850 people, they would have far more acreage in a governmental entity that's pretty far away. The Mat- Su Borough has become so big and so diverse, that it has paralyzed itself by its own diversity. Its extremities do not want what its core does want and it won't pay for what its core wants. They continuously argue back and forth. SENATOR MACKIE asked what would be the purpose of having a borough without land entitlement that actually made sense. There are so many things within the Yakutat boundaries that are not going to be allowed for land development as it is... MR. FUHS responded they went through this with Chugach Corporation that also has logging in the area; and they have a differential mill rate. Yakutat does not want to extend services to people who don't want them. There is a satellite school for the logging camp area with a minimal mill rate. SENATOR SHARP asked how recent annexing makes more land available closer to Yakutat. MR. FUHS replied that 1,300 acres of the land is right around Yakutat. Ten percent of 1,380 acres is 138 acres - the original entitlement. With this legislation, they can go back and get the 1,300 acres that's right around Yakutat. Under the original entitlement they couldn't even get that. SENATOR SHARP asked where the Denali Borough was, referring to some materials in his packet. MR. FUHS responded it was on a list of boroughs that required legislative approval for property, that had done an annexation or some change. Otherwise it would automatically be under the formula. CHAIRMAN HALFORD asked if other boroughs have a land entitlement. MR. FUHS answered yes, but they got it under the automatic borough formation that did not require legislative approval. SENATOR TAYLOR said he is concerned that the people of Yakutat can afford to pay for the surveying and other things. He thought they should have the 33,000 acres closest to Yakutat. SENATOR GREEN asked for an explanation of the log sort yard. MR. ARMOUR explained that there are two operations going on in the annexed area right now. Some of it is on Mental Health Trust land; some is on University land. The log sort yard is on the west side of the Icy Bay area where the various contractors bring their logs for shipping. The sort yard is under a State lease or use permit of some sort. SENATOR GREEN asked if it was specifically for logs. MR. ARMOUR answered that he didn't think the permit or lease was specifically for a sort yard; he thought it was to the contractor. SENATOR TORGERSON asked when they approve a selection that would otherwise be disapproved, are they referring to land that would be disapproved because it doesn't meet the qualification of vacant, unappropriated, or unreserved. MR. FUHS replied that they are areas that, unless there were some conditions placed on it in terms of protecting the habitat, the ADF&G would object completely to the property being turned over to the municipality. There are some areas that the municipality is very interested in that they are willing to accept those conditions on, because they are, in fact, critical spawning habitat areas and Yakutat is a fishing dependent community. They don't have a problem with those provisions. SENATOR TORGERSON asked if the Department couldn't turn down a land selection based upon whether it meets the criteria of not being vacant, unappropriated, or unreserved, what is their basis for turning it down. MR. FUHS replied that their basis is that they would say unless they can have those provisions in there, the municipality might decide to do something else with it and put it to a use the Department would consider to be in conflict with the habitat values. SENATOR TORGERSON said, "That's B.S." that there are buffer zones. MR. FUHS said one of the things they agreed to was the Forest Practices Act. SENATOR TORGERSON said he didn't think ADF&G had any authority to say they couldn't select certain lands. MR. FUHS said, while they identify strongly with his statements and Senator Taylor's, the fact is that this area is the political equivalent to West Beirut. They are trying to navigate through it so the municipality can get its lands without taking the whole thing apart. SENATOR TORGERSON said he wanted to insert that ADF&G may not withhold approval, since they don't really have approval of it anyway. Number 544 MR. DICK MYLIUS, Division of Land, said there is only about 8,000 acres in the City and Borough of Yakutat that are classified into vacant, unappropriated, and unreserved. Most of that is mountain tops with the exception of 2,000 acres around the town that is settlement land. Most of the land is not classified so that they could get it. CHAIRMAN HALFORD asked if that meant that under existing law, now that they have a larger pool of vacant, unappropriated, unreserved land, they could go back and get 10 percent of that 8,000 acres. MR. MYLIUS answered that the law doesn't allow for any increase in entitlement through annexation. On an existing formula, they get no additional entitlement. If they were to add this land to the Borough today, their entitlement would be reduced to 10 percent of the 8,700 acres. The 30,000 acres came from language before the Yakataga area plan, which set aside most of the land as a forestry or wildlife designation, both of which are not normally conveyable. CHAIRMAN HALFORD said the existing system does not allow any adjustment based on annexation. So if you annex an area that's twice as large to serve, you don't increase your entitlement at all. MR. MYLIUS answered that was correct; AS29.65 deals with municipal entitlements grants to new municipalities. SENATOR MAKCIE said that is why they need that amount of entitlement in order to get through the formula. He said the other boroughs on the list are in the same kind of situation needing legislative approval. Otherwise it would automatic. CHAIRMAN HALFORD said he thought Senator Mackie's number was high, but their current number is very low. Ten percent of 8,000 acres and the 1,300 currently in the Yakutat area don't bother him. However, getting a huge annexation that was definitely a political issue and then adding a large entitlement to a very small population base is different. There are other areas that might feel like they in proportion didn't do as well. SENATOR MACKIE said the legislature had an opportunity to deny the annexation, which they didn't do. Some at this table have encouraged areas to incorporate into boroughs and that has been done, but if the legislature doesn't give them the land to be able to manage and utilize as a municipality, what purpose is it to throw a line around it and say they only have 138 acres to deal with everything? He questioned why that would be too much to ask and the financial reality that they would ever nominate most of that land, let alone survey and pay for it, is fairly slim to begin with. The reason for the large number is to take advantage of the formula the way it's structured to get to the core area that is adjacent to Yakutat that they would have immediate use for. It has to have that entitlement to get to that particular area. They estimated it would cost $20 million to survey that land which would never happen in our lifetimes. SENATOR MACKIE said he did not want to invite criticism over land that in reality wasn't going to be able to be used for anything other than what it's classified as. He didn't know of anyone who was opposed to this because of all the work that was done to address everyone's concerns. He thought this was a good example of how to get consensus on something and he was concerned with arbitrarily reducing the amount without having some thought and justification. SENATOR TORGERSON asked when DNR adopts area use plans, is all the land considered to be vacant, unappropriated, or unreserved or is it identified in the plan. MR. MYLIUS answered the plan determines whether it's vacant, unappropriated, or unreserved or not. If it's classified into settlement, public recreation, or agriculture, it's considered vacant, unappropriated, or unreserved and, therefore, available both to calculate the entitlement or to be conveyable to the borough. If it's classified forestry, wildlife habitat, minerals, oil and gas, or a few other lesser classifications, it's not conveyable. Number 578 SENATOR TORGERSON asked if the language saying the director determines what stipulations, conditions, or covenants would be what is already existing on that land. MR. MYLIUS answered it would likely be stipulations that were in the area plan like specific set-backs or buffers, like the timber ADF&G wanted along the shoreline for moose and bears. If that stipulation wasn't in there, they would oppose conveying that particular tract to the borough. SENATOR TORGERSON asked if their intent was that the stipulations, conditions, and covenants would be the same that are in the area plan and they wouldn't be more stringent. MR. MYLIUS answered that they would definitely not be more stringent. SENATOR TORGERSON asked if there would be new ones. MR. MYLIUS answered not unless the City and Borough would want them. Division of Land would not propose any. SENATOR TORGERSON said that helped a little. He asked how many acres they are trying for. MR. FUHS said it would take a few years, like any municipality, to pay for the surveying, but this says Yakutat would get up to 21,500 acres. His guess is that the maximum they could get is 20,000 acres. Mr. Mylius thought the same. SENATOR TORGERSON noted that the land has to be nominated before October 1, 1999, but the conveyance isn't done until the surveying is done and asked if that was correct. MR. FUHS said that is correct and part of what they are looking at is that the Municipality wants to make some revenue from these properties to help pay for schools. Yakutat is up against the 35 percent cap right now. It's well managed and doing its part to pull its own weight and he hoped they would consider that. SENATOR TAYLOR said it seems the VUU lands would not include timbered lands under this classification. He asked if the lands they are getting are timbered. MR. FUHS replied that it would be a reclassification of lands primarily identified as habitat now, with some conditions on it. Yakutat's potential uses for that would be recreational or commercial lodges. Part of the negotiations with the University was a hut-to-hut trail system, hiking, and some recreation cabins, and tourist development. SENATOR TAYLOR asked if they were not getting any of the timber lands in that area. MR. FUHS said that was correct, all of those were taken by the University, Mental Health, and Kedgwick Corp. There are no timbered lands involved here. TAPE 98-21, SIDE B MR. STEVE PLANCHON, Executive Director, Alaska Mental Health Trust Office, said the Trust Authority supports this bill. However, they have one concern with the stated intention of the borough to select a specific tract on the West Icy Cape that is critical, and will continue to be critical, to the on-going operations of trust lands immediately adjacent to the tract. The tract is general State land and the Trust Authority had selected it, but was told in no uncertain terms that that land would stay in general state ownership because of the statewide interest that the tracts served. Both the University and Mental Health Trust depend upon this tract and its current status to enable them to get supplies onto shore and to get timber off of the shore. It is the only place you can do that. They generate over 50 percent of Trust natural resource revenues off of this land - from a five year timber contract they have in place and another timber contract after that. They have an excellent working relationship with the DNR and so does the University. Their concern is that Borough ownership might unnecessarily complicate the ongoing operations there because of the relatively small area available for connecting operations and having new parties coming in who might have different objectives for long term management that might not be compatible with timber resource management. However, that's not the case of their current relationship with the Borough with whom they have an excellent working relationship. The Trust was also ready to select lands, under terms of the settlement, in and around the City of Yakutat, but when they found that the City and Borough of Yakutat was intending to find lands for the good purposes of local government, they took those lands out of their selection pool, believing strongly in having a good relationship with local government. He recommended an agreement between the Mental Health Trust, the University of Alaska, and the Borough that would essentially allow for the selection of this tract to be made and then be put in a pending status, because there may be a good reason for local government to own those lands. They just don't know what that reason is today and don't know what the outcome of that would be. Unfortunately, the Borough considered that to be veto power on the part of the University or the Trust. At this time, they seek the legislature's advice. SENATOR TORGERSON asked if that tract was pending now. MR. PLANCHON explained that the selection is still pending, but basically DNR has said it's not in the best interests of the State to allow the Trust to take title to that parcel at this time. SENATOR TORGERSON said he couldn't see why they were afraid of the City and Borough getting this parcel other than a fee they might charge for logs. MR. PLANCHON said that was a concern. Because the Trust and University purposes are statewide interests, DNR does not charge fees to cross the land or use it. If a local government takes property ownership of the parcel, they could charge fees (which they have been told would be reasonable) or they could dispose of the land to a private party. They are concerned about those uncertainties. He is trying to look out for the Trust's interest. SENATOR TORGERSON asked if this is one of the pieces that would have a covenant stipulation on it if it was transferred to the Borough. MR. FUHS said it is industrial; there are no fish and game concerns on this property. Number 470 CHAIRMAN HALFORD asked if this was the only place to get ashore. SENATOR TORGERSON asked if Mr. Planchon understood that the State would convey the land to the City and Borough of Yakutat. MR. PLANCHON replied that he thought they would decide it would stay in State ownership. SENATOR MACKIE said this tract was good commercial land that is the kind of land a municipality ought to be able to nominate. MR. JIM BRENAN, Attorney, City and Borough of Yakutat, responded that Yakutat has assured the Mental Health Trust and University that their existing right-of-way permit, which runs for 25 years, would not be disrupted by operation of law under the Municipal Entitlements Act. All Yakutat is seeking is the opportunity to nominate this land for conveyance at which point it would be up to the State to decide. In response to Senator Torgerson's question about what authority DNR has here, they have the authority to make a best interest determination whether or not to award a conveyance. Their authority to withhold a conveyance has been upheld by the Alaska Supreme Court. Yakutat is not seeking conveyance of the land underlying the current University of Alaska harvest. The question has been raised about the per capita award and he said the Lincoln Peninsula Borough was awarded 125,000 acres through a statute just like this in the 1994 legislative session which works out to more per capita. The Denali Borough was awarded 49,700 acres under the standard 10 percent VUU entitlement. He thought what could occur with the sort yard a decade or two down the line can be resolved by DNR at that time when it rules on Yakutat's conveyance requests. The University harvest will be done in 18 years; the Mental Health Trust current harvest will be done in 10. What the situation is 10 years from now can best be evaluated by the agency at that time. All they want now is legislative authorization to pursue conveyance of lands. CHAIRMAN HALFORD thanked everyone for the testimony and adjourned the meeting at 4:45 p.m.