Land Board Hearing Recap - February 20, 2024

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Land Board Hearing Recap

Tuesday, February 20, 2024

The Superintendent of Public Instruction was absent, all others were present
Review the Final Agenda
Download the Meeting Materials

Department Report

Safety Award Presented
- Shannon McCormick was honored with the IDL Safety Award for her exceptional commitment to safety. Leading a crucial team of timber scalers, Shannon's proactive approach and swift response to safety concerns stood out. Her efforts have significantly influenced the department's safety culture, recognized by her colleagues' nominations. This award underscores the organization's dedication to prioritizing safety in all operations, as emphasized by the governor and other board members present.
Timber
- Attachment: Trust Land – Timber Sales
- In January, the department sold five endowment timber sales at auction, with four having competitive bidding, while six endowments sales did not sell.
- The net sale value of January's sales was 8% higher than the appraised values, totaling $3.4 million for 19.2 million board feet, averaging $177 per 1000 board feet.
- Cedar sales faced price drops, affecting sales that did not go through. Other species also experienced declines, though less pronounced.
- Factors like high diesel prices and fewer operators contributed to reduced log prices in the Payette Lakes and Southwest areas.
- February's auction offers approximately 24.7 million board feet valued at over $4 million.
- Currently, there are 152 active contracts covering 509 million board feet, valued at over $153 million, with average prices surpassing the three-year average.
- Timber harvest receipts for the fiscal year so far amount to $53.8 million, with $6 million in January and a projected $9.9 million in February.
- 72% of the FY24 sales plan volume is sold or in process, exceeding the target of 328 million board feet.
- Timber harvest receipts and volume are tracking close to or above the three-year average.
- Lumber prices remain slightly above pre-pandemic levels, while industry costs like labor and fuel are up, influencing stumpage prices.
- Despite market challenges, the department continues to sell volume at favorable prices.
Leases & Permits
- Attachment: Trust Land – Leases and Permits
- In January, the Trust Lands Division issued 21 instruments and granted three easements, including those for Kootenai Electric Cooperative (power line), Avista Corporation (gas pipeline), and Spectrum Pacific West LLC (communications line).
- Non-timber revenue remains ahead of projections by the end of January, leading in various categories.
- Revenue in the communication site category exceeded projections due to the inclusion of leases formerly categorized as military communication sites.
- The residential category is ahead of projections because of higher-than-estimated recent appraisals.
- Mineral lease revenue is also ahead of projections, notably due to a $550,000 premium bid for a sand and gravel lease.
- Leasing income is currently ahead of the three-year average, with fiscal year-end revenue targets expected to be met or exceeded.
- Royalties for the fiscal year are ahead of the three-year average, totaling $1.5 million, with 82% coming from sand and gravel operations, directly contributing to the permanent fund.

Legislative Summary
- Attachment: Status Update - Legislative Summary
- IDL pending rules: Non-fee rules approved by House and Senate Germane committees; two of three fee rules approved, with one deferred to the Chair.
- Budget: Recent budget setting included approval of natural resources maintenance appropriation and passage of line items and replacement items by committee.
- Legislation Monitoring:
  - House Bill 434: Likely to be held in committee due to ongoing work on a commercial leasing policy by the Land Board.
  - House Bill 507: Requires a bond for delaying timber cutting or removal, being monitored.
  - Senate Bill 1243: Addresses treatment of grazing leases from land exchanges, under close scrutiny.
  - Senate Bill 1279: Modifies existing law regarding pre-Lake Protection Acts encroachments.
  - Senate Bill 1292: Concerns legal representation for the Department of Lands.
  - Senate Bill 1342: Proposes extension of grazing leases to 40 years without county hearing for leases beyond 20 years.
Resource Protection and Assistance Report
- Attachment: Status Update - Resource Protection and Assistance Report
- Navigable Waterways Program:
  - Processed 159 permits, lowest start since 2019.
  - Held public and contested case hearings, with most permits approved.
  - Moved riverbed leasing rules to pending status, cleared by committees.
  - Exceeded $432,000 in revenue, fund surpasses $2 million.
  - Anticipate fund transfer at fiscal year end.
- Regulatory Minerals Program:
  - Moved two rules to pending status, awaiting committee action.
  - Reviewed Preliminary Final Supplemental EIS prepared for Perpetua Resources' Stibnite Gold Project; reviewed Integra's DeLamar Mine expansion related documents with other agencies.
  - Preparing for rulemaking on mine land reclamation.
  - Administering 1584 mine sites and 28 dredging placer permits.
- Abandoned Mines Program:
  - IDL's income surpassed $160,000, highest in nine years.
  - A list of projects from July - Dec 2023 was provided.

Endowment Fund Investment Board

Attachments:
December saw strong market performance due to Fed's softer tone on inflation and potential rate cuts.
January had modest equity market growth, with a 0.1% increase in portfolio, totaling a 5% gain fiscal year to date.
Early February saw additional gains, with the fund up 6.9%.
US employment report in January showed positive signals, with 353,000 non-farm payroll jobs added and steady unemployment at 3.7%.
Broad-based improvement seen across industries, particularly in manufacturing.
Big tech earnings remained strong, pushing S&P 500 to new highs.
Questions:
- How often do we update the values of real estate assets?
  - Answer: Real estate asset values are updated quarterly, with updates available through Q4.

Consent Agenda

Approved 4-0

Forest Legacy Program–Baldy Easement

Attachment: Forest Legacy Program–Baldy Easement
Forest Legacy Program funded by competitive US Forest Service grants.
IDL secured grants for the Baldy Track project in 2020 and 2021, funded by offshore drilling royalties.
25% non-federal match required, met by landowner's donation of easement value.
Program allows private landowners to preserve forest land for timber production, ensuring a stable supply for industry and protecting natural resources.
Conserves forested lands to safeguard water quality, wildlife habitat, and scenic views, while expanding recreational opportunities.
Baldy Track is part of the Moyie River Corridor FLP project, second property to close with others expected to follow.
Located near Kootenai River, contributing to timber production and wildlife habitat.
Proposed conservation easement by Manulife Investment Management Timberland and Agricultural Inc on behalf of Hancock Timberland X.
Project has broad support from public and private entities, including Boundary County Commissioners.
No known opposition to the easement, with substantial conservation and economic benefits for Idaho and Boundary County.

Results of December 22, 2023 Commercial Recreation Lease Live Auction

Attachment: Results of December 22, 2023 Commercial Recreation Lease Live Auction
Auction held for commercial recreation lease M 100018, authorizing a Marina resort on Priest Lake.
High bid of $4000 from Rocky Point Marina Corporation.
Lease rate for 2024 set at $40,000 with annual 3% escalator.
Lessee to pay 5% of yearly gross receipts over the lease term.
Submerged land lease involves an additional $250 per year plus 3.75% of gross receipts from mortgage activities.
Department completed auction process without observing fraud or collusion.
Recommendation to award lease to Rocky Point Marina Corporation.

Questions:
- How many renewals are built into the five-year lease term?
  - Answer: No renewals are built into the lease; future development options will be reviewed in the next few years.
- Does the $4000 premium bid relate to the lease longevity?
  - Answer: Yes, the bid reflects potential future development opportunities.
- Clarification on revenue streams beyond the base fee?
  - Answer: Base fee for 2024 is $40,000 with additional 5% of yearly gross receipts and 3.75% from submerged land lease. Rough estimates suggest annual revenue around $50,000.

Regular Agenda

Approval of Swamp Witch Timber Sale with Clearcut Harvest Unit(s)

Attachment: Approval of Swamp Witch Timber Sale with Clearcut Harvest Unit(s)
Approved 4-0

Timber sale with clear cut harvest unit exceeding 100 acres.
Located approximately 7.5 miles southeast of Elk River, ID.
Clear cut unit comprises three units totaling 130.38 acres.
Over-mature grand fir with high mortality rate necessitates harvest.
Sale prepared to meet Forest Practices Act and Forest Asset Management Plan.

Negotiated Rulemaking for IDAPA 20.03.02, Rules Governing Mined Land Reclamation

Attachment: Negotiated Rulemaking for IDAPA 20.03.02
Approved: 4-0
Department seeks authorization to initiate negotiated rulemaking.
Rules governed by Idaho Mine Land Reclamation Act, Title 47, Chapter 15.
Rules establish requirements for notification, application, operation, and reclamation for mined lands.
Also cover application and closure requirements for ore processing by sanitation facilities.
Financial insurance requirements established for mining and sanitation facilities.
Scheduled for comprehensive review in 2025 to simplify rules for clarity and ease of use.
Proposed negotiation start in spring 2024 to finish by summer 2025.
Anticipated reduction in regulatory burden through word count and restrictive words.

Negotiated Rulemaking for IDAPA 20.03.04, Rules for the Regulation of Beds, Waters, and Airspace Over Navigable Lakes in the State of Idaho

Attachment: Negotiated Rulemaking for IDAPA 20.03.04
Approved 4 - 0
Rules regulate encroachments on navigable lakes in Idaho.
Managed under Title 58 Chapters One and 13, and IDAPA 20/03/04.
Protects navigable lakes by setting standards for encroachments.
Ensures protection of property, navigation, fish and wildlife habitat, recreation, and water quality.
Encroachments include docks, marinas, piers, buoys, boat ramps, and other structures.
Rulemaking conducted under Zero Based Regulation Executive Order.
Scheduled for comprehensive review in 2025, anticipating high public participation.
Negotiations to start in spring to finish by summer to reduce regulatory burden.
Proposed timeline for rulemaking process provided in attachment one.

Information Agenda

History of Endowment Reform

Attachment: History of Endowment Reform

Background and Problem Identification:
- Bob Maynard, retired Chief Investment Officer from Persi, involved in endowment reform with previous experience in Alaska Permanent Fund reform efforts.
- Endowment fund reform initiated in 1992 due to outdated structure.
- Land swap evaluation highlighted flaws in endowment fund structure.
- Problems included separate administration of land and financial assets, and artificial flow of funds.
- Land sales automatically dumped into endowment fund, restricting flexibility.
- Timber sales directed into endowment fund, affecting timber harvest timing and investment strategy.
Reform Efforts:
- Reform aimed to provide more flexibility and modernize trust management.
- Set up an oversight board for entire trust to set strategic and distribution policies.
- Changes implemented between 1995-2000, including restructuring of fund flow.
- Land sales now go into land bank before decision to reinvest or move to financial assets.
- Introduction of earnings reserve fund for long-term risk mitigation and investment flexibility.
- Endowment fund now allowed to invest in stocks and commercial real estate.
2015 Issue and Forward-Looking Considerations:
- Example of 2015 issue: Controversy over purchase of local commercial property.
- Allocation issue and fiduciary duty considerations highlighted.
Current structure overview provided by Chris Anton.
- Considerations for future improvements and challenges:
  - Maintaining balance between land and financial assets.
  - Evaluating investment opportunities and flexibility.
  - Ensuring prudent management and fiduciary duty adherence.
  - Addressing potential issues with land bank and land asset retention.
  - Assessing benefits of land ownership versus financial returns.
  - Exploring options for strategic land management in changing Idaho landscape.
Additional Notes:
- Importance of evaluating land investments for long-term benefits beyond financial returns.
- Challenges and opportunities associated with land ownership and management discussed.
- Need for ongoing strategic discussions and evaluation of land and financial asset allocation.

Executive Session

None

Adjournment

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