Legislature(2015 - 2016)BARNES 124
03/04/2015 01:00 PM House RESOURCES
|Overview(s): Biomass Overview|
|Confirmation Hearing(s): Alaska Oil and Gas Conservation Commission|
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 87-TIMBER SALES 1:55:37 PM CO-CHAIR TALERICO announced that the next order of business is HOUSE BILL NO. 87, "An Act relating to the sale of timber on state land; and providing for an effective date." 1:55:44 PM CO-CHAIR NAGEAK moved to adopt proposed committee substitute (CS) for HB 87, labeled 29-GH1022\W, Bullard, 2/26/15, as the working document. REPRESENTATIVE SEATON objected for discussion purposes. 1:56:24 PM CHRIS MAISCH, Director of Forestry, Division of Forestry, Department of Natural Resources, said there was discussion regarding [Version A, Sec. 1, AS 38.05.110(c)], page 1, lines 4- 6, regarding "best interest," which read: (c) If a sale of timber may be offered under multiple provisions of AS 38.05.110-38.05.123, the commissioner shall determine under which of the applicable provisions to offer the timber consistent with the best interest of the state. MR. MAISCH referred to a 2/17/15, memo directed to Senator Cathy Giessel from Thomas Lenhart, Senior Assistant Attorney General, of which Mr. Maisch would paraphrase. He advised that [small "b"] "best interest" is interpreted by law as a general statement such as it would be in his best interest to prepare when speaking to the committee, as opposed to a capital "B" Best interest which is a best interest finding by law. Subsequent to speaking with knowledgeable people, Version W was prepared wherein the last part of the sentence on line 6 is deleted ["consistent with the best interest of the state."]. He then referred to [Version A, Sec. 2, AS 38.05.118(a), page 1] lines [8-9], which read: (a) Notwithstanding AS 38.05.115 and 38.05.120, and upon a finding that the sale is in the best interest of the state ... MR. MAISCH noted that the above reference is where there should be a finding required under the state's best interest finding process. He noted that it is the capital "B" Best interest which is well defined in statute and law and has an important part of all of the decision making the state does regarding its natural resources. He opined that the CS fixes potential confusion identified earlier. 1:58:41 PM REPRESENTATIVE SEATON withdrew his objection. There being no further objection, Version W was before the committee. 1:59:04 PM MR. MAISCH pointed out that the two previous witnesses from the City of Tok have used the AS 38.05.118 sale authority, and stressed that by dropping the section he is proposing will make this authority applicable statewide. Currently, due to the three criteria, only certain parts of the state can participate in a timber sale offered under this authority. He noted that the authority will still be available for the Division of Forestry to use and it will not minimize its ability to perform an AS 38.05.118 timber sale statewide if HB 87 passes. He reminded the committee members that the problem in Southeast Alaska is that the section currently requires an excess allowable cut, and in Southeast Alaska after the next two years there will no longer be the excess allowable cut. He noted that is the way the Division of Forestry is able to direct some of the logs off state sales to local manufacturing and mills in Southeast Alaska, as opposed to being purchased under AS 38.05.120 authority as a log that would go export which receives no additional manufacturing in the state. He opined that it is one of the goals of this particular change to allow the Division of Forestry to continue to choose the negotiated sale option when it is in the best interest of the state, which will be addressed in the best interest finding. 2:00:40 PM REPRESENTATIVE SEATON surmised that with the passage of HB 87 the "get over the hump" of only allowing that if there is excess cut available, then the Division of Forestry would be able to offer a negotiated sale with additional value added throughout the state. MR. MAISCH replied that Representative Seaton is correct as it would make it a statewide tool. He reiterated that the earlier part of the bill clarifies the authority the commissioner already has to choose the appropriate timber sale authority to be used when the state offers timber in the State of Alaska. He noted that the majority of the sales offered statewide are performed as AS 38.05.120 sales which are competitive sales either through sealed bid, or outcry. He offered that where it is in the state's best interest to use one of the other authorities, it will do that. 2:01:45 PM REPRESENTATIVE JOSEPHSON noted that he read most of the U.S. Supreme Court Decision South-Central Timber Development v. Wunnicke, 104 S.Ct. 2237 (1984), and asked how the Division of Forestry dealt with the holding which said that essentially the Congress had not expressly said that this kind of sale could occur without a competitive process as it violated negative or dormant commerce. MR. MAISCH responded that there is some clarity in the regulations on that which does allow the Division of Forestry to consider additional things before it offers this timber for sale, 11 AAC 71.055(b) lists criteria the Division of Forestry can consider as part of the process, which read: (b) In determining whether a negotiated sale under this section is in the best interests of the state, the commissioner will consider (1) the local manufacturer's (A) financial backing and capability; (B) experience in the proposed undertaking; and (C) ability to meet bonding or insurance requirements; and (2) any other factors the commissioner determines to be in the best interests of the state. MR. MAISCH stated that if there is interest the Division of Forestry will put together a Request for Proposals (RFP) to give potential negotiators the opportunity to present the best case for how they would use the raw material. He said they may review the number of job created, type of manufacturing accomplished with the use of the state wood, and the financial ability of the proposer to actually complete what they are proposing to do. Essentially, he noted the Division of Forestry performs due diligence as part of the RFP process and it can make the process fairly simple, or complex. Historically, he advised the process has been kept fairly simple because a lot of process is not necessary in most cases. He opined that it is addressed in the best interest finding which gives the Division of Forestry the ability to choose the best applicant to negotiate with for the rest of the terms of the contract. 2:03:59 PM REPRESENTATIVE JOSEPHSON surmised it was sort of a negotiated sale light, or a modified negotiated sale to keep a (small "c") competitive element to it. MR. MAISCH answered that basically the RFP is the competitive piece Representative Josephson referenced in the earlier U.S. Supreme Court case to not run afoul of the ruling that they made ... that would be interpreted as the competitive part of the process. 2:04:38 PM CO-CHAIR TALERICO opened public testimony. 2:05:17 PM KIRK DAHLSTROM, Stockholder and General Manager, Viking Lumber Company, said Viking Lumber bought a bankrupt sawmill in Klawock, Alaska 21 years ago and it has operated steadily since that time. The Forest Service provided approximately 98 percent of Viking Lumber's timber supply for the first 10 years of operation. Subsequently, he noted, the Forest Service became unpredictable and the Alaska Department of Natural Resources (DNR) has come through over and over again the past 10 years supplying timber when Viking Lumber was in dire need. He opined that Viking Lumber has only negotiated one or two sales as most have been through the RFP process. On two occasions Viking Lumber has had temporary restraining orders imposed by a federal judge on Forest Service timber sales and the state came through with negotiated sales and kept Viking Lumber operating through that period. He remarked that Viking Lumber has approximately 22 million feet of logs per year, with annual sales of approximately $17 million, and the only money that leaves the state is the stumpage for the Forest Service. He offered that with the contractors that build the roads, log and cut the timber, and load barge and ships, the company employs approximately 140 people year-round. He described Viking Lumber as the largest supplier of piano stock out of Sitka Spruce in the world which means if Viking Lumber goes out of business there will be no grand or baby grand pianos. He further described the company as the largest supplier of dimension red cedar lumber in the United States, which might seem funny because only approximately 8 million feet a year is cut. Most red cedar mills do not cut dimension, as they cut siding or boards. He explained that the company also cuts a high grade hemlock product as all of the hemlock goes into the manufacture of vertical grain doors, and window stock, as almost no lumber Viking Lumber cuts goes into the construction of homes as it goes into finish, decks, gazebos, and pianos. He stated he supports HB 87, because it works to keep the company alive and believes it will in the future. 2:08:46 PM REPRESENTATIVE JOSEPHSON referred to Mr. Dahlstrom's statement regarding federal stumpage, but this is all state land and he requested clarification. MR. DAHLSTROM answered that of the $17 million per year in revenue involving a Forest Service sale, the stumpage they pay on that goes into the general fund of the federal government, and state timber goes to the state. 2:09:24 PM DAVE STANCLIFF, Tok Chamber of Commerce, City of Tok, said many years ago an issue of state authority came before the House Resources Standing Committee. In the 1980s, there were massive land trades going on and the commissioner at the time asked that sideboards be put on the land trades. He stated that the commissioner believed the state was losing value in the land trades but the statutes were so wide open that there was no way to get a better handle on it. There is a statute that for land trades exceeding values of $500,000 or more, legislative approval was required. He explained that the government is made up of checks and balances, and HB 87 transfers a much wider authority to the Division of Forestry and a commissioner who the committee may trust today, but this bill goes beyond all administrations. He offered that there is no check or balance by the legislative branch for this trust factor that is before the committee. He opined that government works when one branch or the other might get slightly out of balance, there is another branch that can bring it back into balance. He related that his concern is the broad based authority of a state resource without checks and balances in place. He urged the committee to reach out and get more of the timber users in the state involved as his understanding is that this bill was introduced before any of those people were involved in the deliberative process. He highlighted that this is a monumental change of authority and the committee should take it seriously. 2:11:51 PM REPRESENTATIVE JOSEPHSON asked, in terms of state residents that could be dissenters, doesn't this enhance the value of an industry and create a tendency to keep logs in Alaska rather than sending them to Asia. MR. STANCLIFF answered that the aforementioned advantages are there, but he argued that there are always things beyond the immediate and not necessarily on the surface. Perhaps in Southeast Alaska, he pointed out, this would be a good solution, but in the Tok area if a warehouser were to negotiate a sale under conditions that may or may not seem fair it could wipe a business like Mr. Young off the map. He related that the provision put into statute years ago was so exceptions could be made for small and medium size business and the sideboards would still be there for larger users. He urged the committee not to rush and take some time. Although, he said, in the end everyone may comfortable and move ahead, but it is a big decision and the users affected should have more involvement. 2:13:32 PM REPRESENTATIVE TARR surmised that Mr. Stancliff does not have a suggestion for remedying the situation, other than the committee engaging affected parties more before moving forward. She asked whether he could suggest examples of the checks and balances necessary. MR. STANCLIFF advised that there are many examples of branches of government, especially the legislative branch, having those types of ability. He suggested that rather than the legislature approving every sale, which could become cumbersome and political, give the legislature the ability to veto or by two- thirds majority vote veto. He offered that it can be set up in any manner including public interest wherein everyone is happy. Although, in the cases he cited years ago where there was a concern by the commissioner over what was happening ... concern enough to ask the legislature for help. He opined that "we" need to be careful. 2:15:19 PM JOE YOUNG, Young's Timber, Inc., offered concern that he learned of this bill approximately two weeks ago and he wondered about the "new" transparency of this administration. He expressed concern regarding repeal of AS 38.05.118(c) clause as without it his business would not be in existence. He stated that to repeal the clause after it has been a good tool especially in rural Alaska ... he cannot agree. Another concern is that HB 87 adds more confusion to the patch work of forestry laws. He offered concern for someone working in the industry attempting to figure out all the laws. A person can go to the Division of Forestry who advises that their interpretation is "this," but the person reads something as "that," is a concern. He questioned the rush to get the bill pass so fast, not advising anyone regarding the repeal of AS 38.05.118(c), and the confusion of all of the laws together is discouraging to him. 2:17:41 PM REPRESENTATIVE JOSEPHSON offered his understanding that the language here, with the tweak just made, was taken from the Susitna Forest bill of which was vetted over the last two years. He asked Mr. Young whether he was aware of that bill. MR. YOUNG replied that he knew "they" were trying to establish a state forest in the Susitna Valley, but that's all he thought it was for. REPRESENTATIVE JOSEPHSON referred to AS 38.05.118(c) and posited that the removal of (c) would be good for Mr. Young as he would no longer have to prove up that Tok has a bad economy, or that Mr. Young had underutilized timber, or underutilize allowable cut. Now, he remarked, the commissioner through the director can more easily make a negotiated sale. MR. YOUNG opined that AS 38.95.118(c) is in place and he believes the bill gives the commissioner or the director too much power. He questioned a situation where he wanted to do a negotiated timber sale and the commissioner decides it is not in the best interest of the state. He asked what recourse he would have after that determination. He described AS 38.05.118(c) as checks and balances because if a person makes a request to the Division of Forestry, of which he has made many requests and sometimes not received a response, that law is there for Mr. Young's protection and he does not want to see it go away. REPRESENTATIVE JOSEPHSON referred to Mr. Young's comment that he has not always received responses to his requests from the Division of Forestry, as opposed to Mr. Stancliff praising the forester as being a great employee bringing pieces together. MR. YOUNG clarified that upper management, within the Division of Forestry, did not reply to his requests. 2:20:05 PM REPRESENTATIVE JOHNSON requested that Mr. Maisch respond to the prior statements. MR. MAISCH responded that the three clauses there right now do not compel the Division of Forestry to actually use this authority. Currently, the commissioner and Division of Forestry determines what timber sale authority it will use through the best interest finding process. He expressed that the Division of Forestry does not want to be "the referee between two parties and who really gets to negotiate a timber sale," which is why it generally uses its AS 38.05.120 authority. For example, he offered, when the AP&T project (building a power facility using wood) was first enumerated for Tok, the Division of Forestry started an AS 38.05.118 negotiated sale process. As it published the preliminary best interest finding, which is open to public and agency comment, it became apparent there was competitive interest by another party that was equally as well qualified to potentially negotiate a sale with the Division of Forestry. He explained that rather than continue with a final best interest finding, the Division backed up and decided it would offer this sale as an AS 38.05.120 competitive bid sale so the most appropriate parties could bid on this resource. He described that as a situation where the Division of Forestry started down one path and found that it would not work as well as anticipated, so went back and did it differently. He noted that a best interest finding has a formal administrative appeal process as well as a civil appeal process so there are checks and balances in place to protect parties that have commented on the preliminary bid, including parties that may not have been chosen to negotiate with. Another example, he offered, is in Fairbanks where the Division is performing an AS 38.05.123 sale for the pellet mill, which is another form of negotiated sales under the Division's timber sale authority - that's the high value added negotiated sale authority. He explained that within the briefing paper is a summary of five different authorities the Division of Forestry has to negotiate wood. He noted that it was the same issue there in that a local saw mill was concerned about not being able to receive the supply of wood it needed if the Division of Forestry performed a long-term contract with the pellet mill. Again, he offered, the Division of Forestry modified, after the preliminary best interest finding (BIF) process, the final BIF process and took those comments into consideration. He explained that the Division of Forestry then structured the proposed sale differently by withholding any high quality White Spruce saw logs from the AS 38.05.123 contract and offered those competitively. 2:24:02 PM SHELLY WRIGHT, Executive Director, Southeast Conference, said the Southeast Conference is the economic development organization for Southeast Alaska, and it supports HB 87. She noted that Southeast Alaska does not quite the success stories that Tok has, as it is not doing well in the timber department. The State of Alaska Timber Sale Program is important to Southeast Alaska, and as previously stated, without state timber 140 people on Prince of Wales Island would be out of a job. She offered that Viking Lumber is hanging on only through the assistance of private land owners and the State of Alaska Timber Sales. The federal government has not been able or willing to provide timber to Southeast Alaska for quite some time and the federal government owns or manages most of the land in Southeast Alaska. She remarked that this legislation will give the state Timber Program more flexibility to determine how timber is sold and what it is used for. Relaxing the requirements for offering 25-year sales statewide provides a guarantee for investments in the industry and stability for the work force. Allowing the DNR commissioner and the [Division of Forestry] the flexibility to determine which applicable sale method is best is not only good for the buyer, it also gives the state the advantage of receiving the best return on the timber. Under the Forest Land Use Plan it is imperative the best use of timber is used across the state. She explained that biomass energy processors, wood product manufacturers, and international trades are all important economic drivers for the industry and state. This legislation will increase the option for the industry and allow the state an even better partner with interested private investors. As is known, growth in private investment and resilient communities are the only things that will save the state in this time of a shrinking budget and uncertainty, she stated. She offered that the Southeast Conference previously sent a letter of support for this legislation. 2:27:06 PM CHELSEA GOUCHER, Executive Director, Greater Ketchikan Chamber of Commerce, said the Greater Ketchikan Chamber of Commerce supports HB 87 in that it has worked hard to promote economic diversities, regional growth, a climate good for business, a life style that attracts year round residents, and a stable productive work force. The existence of a timber industry supports each aspect of this mission unequivocally and for this reason the Greater Ketchikan Chamber of Commerce encourages the passage of HB 87. She stated that now, more than ever, is interest in Biomass energy and a demand for wood fibers that indicates the State of Alaska should take a proactive stance in providing timber and access to forest products for this and other burgeoning value added industries. Additionally, she pointed out, what remains of the traditional timber industry in regions like Southern Southeast Alaska is more dependent than ever on the State of Alaska and continues to face nearly insurmountable obstacles from the federal government. The timber offered in negotiated state sales help sustain jobs in industry across the state, particularly both in Ketchikan and Prince of Wales Island. Currently, she stated, no opportunity to better the lives of individuals living in Alaska should be overlooked. It is inarguable that this bill offers real opportunities for Alaskans everywhere. She requested the committee note the support of the Greater Ketchikan Chamber of Commerce and of Ketchikan's business community for HB 87, and the potential it possesses to positively impact the lives and livelihoods of Alaskans. 2:29:11 PM REBECCA KNIGHT expressed that she just received a copy of the proposed committee substitute and has had little opportunity to review it so will offer her prepared testimony. House Bill 87 should be rejected in its entirety as it would suspend the same yield requirement for large timber sales on state forests. She said she questions whether private sector landholders like Weyerhaeuser and Georgia Pacific, and their professional foresters would undertake an unsustainable business practice as proposed by this bill. She offered that it is a poster child for squandering public resources to the detriment of future generations. This bill will allow long-term 25-year contracts for timber to be negotiated without advertisement or competitive bid which is a questionable business practice. She remarked that given proposed huge state government budget cuts recently approved by the House Finance Committee it would not be prudent to support such contracts when there is no assurance that the funds to administer those contracts would be available down the road. She said it could leave the state at risk of contract cancelation and associated compensation costs. MS. KNIGHT stated that the bill give primacy of the state's public lands to logging above all other resources, above fish, wildlife, subsistence needs, recreation, and scenic quality. She related that her commercial fishing family depends on quality fish habitat, however, this habitat will not even receive the minimal protections out on federal lands. She described 100 foot no cut buffers as the norm on most federal streams, yet streams on state lands will only receive 66 foot buffers. She stated that these buffers are routinely granted exemptions particularly when there is large timber in the stream-side area. She expressed this is exactly the habitat that provides shade and stream stability to the state's valuable fishery sources. She highlighted that she is unconvinced that essential fish habitat is adequately protected under these circumstances and that she is also miffed at the rush to push this bill through committee with little consideration for other uses. She opined that state timber in Southeast Alaska will be exported in the round providing few jobs to the very industry that this bill is supposedly intended to prop up. She described it as another subsidy with no real payback. The bill would require a finding that the sale is in the best interest of the state, however, these findings are made by DNR which, she described, as the timber extraction arm of state government. She posited that the Alaska Forest Practices Act is weak and in serious need of overhaul, and that these findings are heavily biased toward logging. She expressed that the kind of forest resources important to most people are fish, wildlife, and the opportunity for subsistence which only receives cursory considerations from DNR. She asked that the committee consult with expert Alaska Department of Fish & Game, Fish and Wildlife biologists that are free of restrictions of DNR's one voice timber promotion policy. 2:33:08 PM ERIN McLARNON, Executive Director, Working Forest Group, said she is a Board of Forestry member and an executive director of the Working Forest Group. She advised she is testifying in support of HB 87 that will enable the commissioner of DNR to better respond to the economic and geographic realities of the forest product industry. She stated that who would have guessed that a primary demand for state timber would be for biomass energy purposes. The bill will allow DNR to offer negotiated timber sale for up to 25-years, which is crucial to medium to large biomass energy projects to get off the ground. The bill also offers DNR the flexibility to determine which applicable sale method is in the best interests of the state for each timber sale. She described it as a win-win not only for the State of Alaska, but also its fiber users. 2:34:15 PM MIKE SALLEE said he is a commercial harvest diver and has owned and operated a small Volkswagen engine powered mobile dimensioned saw mill close to 35 years. He noted that there are a couple dozen of these mills in Ketchikan, over 300 in Southeast, and over 400 statewide. He said he primarily mills salvage timber that has been carried to salt water by wind storms or landslides. Secondarily, he has milled neighbors logs cleared from their shoreline home sites, milled 10,000 board foot free use timber, and once purchased several thousand feet of logs at the local U.S. Forest Service yard auction. Occasionally people will tow logs that he mills in exchange for some of the lumber from those logs. He stated he does not cut live trees by himself to feed his mill. He offered that he mills less than 100,000 board feet annually and has produced framing lumber, decking, cedar siding, yellow cedar for bentwood boxes, totems, paddles, house timbers and wooden boat timbers. His concern with HB 87 is that it creates 25-year contracts and that sales tailored to large scale operations will result in local merchantable wood going away. He pointed out that he just saw this bill yesterday for the first time and hasn't had a good chance to digest it, but a lot of wood is going away, especially the yellow cedar that is declining due to allegedly climate change that results in the loss of snow cover that prevents freezing of the yellow cedar shallow roots. He noted it appears there is a partnership between the timber industry and the state forest manager and that partnership does not appear to address climate change and the need to keep carbon stored in forests in Southeast Alaska. In addition, he pointed out that large scale operations tend to target the most valuable timber and little of it remains in a local borough for processing. He offered that he does not know if HB 87 applies to Mental Health Trust lands and the University of Alaska timber lands but has been sorely disappointed with the amount of merchantable trees cut down and left in the woods on Mental Health Trust lands helicopter sales. He conveyed that they've also left a lot of slash and tops which it is a mess in a lot of areas that they've logged. He expressed that much of the Mental Health Trust land timber was exported. He offered his apprehensive of more discretion being given to a politically appointed commissioner. He noted it has been interesting to him how the state can malign the U. S. Forest Service while saying nothing about private Native Corporations shipping vast value out of the state with little impetus to help the rest of the timber industry. He mentioned that the concept of a working forest also means it has ecosystem services that the forest performs other than just working for people. He expressed that the ecosystem services is an important part of the picture. 2:38:03 PM DAVID BEEBE, City of Kupreanof, said he is representing the City of Kupreanof. He commented that while Governor Bill Walker cites his authority under the Alaska State Constitution, Article III, Section 18, the Governor's bill is fundamentally at odds with the Alaska State Constitution, Article VIII, Section 4, which read: Fish, forests, wildlife, grasslands, and all other replenishable resources belonging to the State shall be utilized, developed, and maintained on the sustained yield principle, subject to preferences among beneficial users. MR. BEEBE commented that sustained yield of these fish and wildlife resources requires that ecosystem services function without significant impairment. The State of Alaska has long known that significant impairment of Southeast forest habitats, structure, function, and composition, precludes the sustainable yield of Sitka Black Tailed Deer and other wildlife. He advised that emergency closures and significant restrictions on deer hunting presently exist in a 20-mile or more radius surrounding the City of Kupreanof. He stated that the Department of Fish & Game (ADF&G) published a statistical summary of the season's deer hunter harvest in all of Southeast communities in 1961. In terms of hunter's success, Petersburg ranked the highest of all communities of Southeast with a hunter success rate of 97 percent, which is an average of 3.5 deer per hunter. Yet, in 2012, 147 hunters on Mitkof Island required 565 deer hunter days to harvest 22 deer. He noted that the restrictions on Mitkof Island have just been imposed on Lindenberg Peninsula, where the City of Kupreanof is located. He stated that the area is the hunting destination of last resort with regard to weather protected access to deer. He highlighted that there is glaring evidence that the state's failure to abide by the sustained yield principle invoked in the Alaska State Constitution [is apparent]. He recommended that everyone consider the oath of office taken to defend the Alaska State Constitution and, he asked the committee members to uphold the oath they took by voting no on moving HB 87 out of committee. 2:41:04 PM CO-CHAIR TALERICO closed public testimony. 2:41:07 PM REPRESENTATIVE JOSEPHSON referred to a prior statement that the AS 38.05.118 bill could be used as a backdoor way to ship timber in the round. MR. MAISCH advised that he did hear that statement but it is not a correct assertion. REPRESENTATIVE JOSEPHSON asked why that statement was incorrect. MR. MAISCH responded that the Division of Forestry goes through the best interest finding process to negotiate the sale with the purpose of trying to keep state timber processed and mills in Alaska. He referred to the previously mentioned U.S. Supreme Court case where the state tried to restrict round log export and explained that this is the authority crafted after that case was lost to enable Alaska to have an ability to actually keep logs on shore in Alaska to be processed. 2:42:26 PM CO-CHAIR TALERICO held over HB 87.