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09/20/99 Board of Land Comm MinutesMINUTES REGULAR MEETING OF BOARD OF LAND COMMISSIONERS September 20, 1999, at 9:00 a.m. Lee Metcalf Building, DEQ Conference Room PRESENT: Governor Racicot, Attorney General Joe Mazurek, State Auditor Mark O'Keefe, Secretary of State Mike Cooney, and Superintendent of Public Instruction Nancy Keenan Mr. O'Keefe moved approval of the minutes from the August 16, 1999, Land Board meeting. Seconded by Mr. Mazurek. Motion carried unanimously. BUSINESS CONSIDERED: 999-1 APPROVAL OF SEPTEMBER 8.1999. OIL AND GAS LEASE SALE Jeff Hagener, DNRC, said the Department's quarterly oil and gas lease sale was held on September 8, 1999, with a total of 174 tracts offered. Total revenue brought in from the bonus bids was $873,987.00 for 68,313 acres. The average bid was $12.79, high bid was $125 per acre for a tract in Big Horn County. The Director recommends approval of the September 8, 1999, oil and gas lease sale. Mr. Cooney asked if there were any environmentally sensitive areas in this particular sale? Monte Mason, DNRC, said there were three. The first was tract #1 in Big Horn County located on the 1071h Meridian and with the adjustment of the boundary it is now partially within the Crow Reservation. The Crow Tribal representatives were contacted andthe Department received no adverse comments formally, but received an informal phone call from their cultural person expressing concern that the state or prospective bidder/developer would properly take care of cultural resources, thus the cultural stipulation was placed upon that tract in addition to the sensitive area stipulation. The second, tract #32, is in Custer County and has a corner -to -corner joining to the Custer National Forest. Per Land Board directive the Department has the sensitive area stipulation on that although it did not receive any comments from the Custer National Forest. The third, tract #85, is in Hill County within the Wild Horse Lake depression area. The BLM manages those lands for wetland and wildlife values so the sensitive area stipulation was placed on that. Mr. Cooney noted there was some competitive bidding involving coalbed methane prospecting and asked if the Department had had much interest in coalbed methane prospecting in the past or is this something new and what can be expected for the future? Mr. Mason replied there is higher competitive interest than in the past. There has been interest in it in the last four sales which has been building, but he assumes it would stay at this level as far as competitive bids. Over the last four sales including this one the state has taken in nearly a million dollars in coalbed methane prospects. Mr. Cooney said it is his understanding that coalbed methane prospecting is probably going to increase in interest. And his concern now is the fact that once it is discovered coalbed methane prospecting entails a tremendous use of water. He said he would be interested in what sort of action the Department may or may not be contemplating with this fairly new interest, especially the impact it may have on water in the area. Minutes September 20, 1999 Page 2 Mr. Mason said it is correct that water is the issue on coalbed methane, the other impacts are relatively minor. It is an issue with the Board of Oil and Gas and with the Department's Water Resources Division who are currently working on what kind of review needs to be done. There is private, federal, and tribal land that is also dealing with the same issue. Motion was made by Mr. Cooney to approve the September 8, 1999, oil and gas lease sale. Seconded by Mr. Mazurek. Motion carried unanimously. 999-2 SECTION 36 NEIGHBORHOOD PLAN Mr. Hagener said this is a new issue dealing with a section of state land north of Kalispell where these tracts are seeing a Iot of surrounding development pressure and requests to sell the land. The Department is taking a different look at this section because of its history with the Continental Divide Subdivision out of Billings. There, under the Board's direction, the Department went forth with a major plan for a subdivision with the intent to sell numerous lots. That process moved forward and wasn't necessarily in concert with city -county zoning or planning. It was very difficult and the Department has now finally sold most of those tracts after it went back and made more effort to work with the local community. In Kalispell the Department is trying to work within city -county planning and the master plan. There have been four public hearings and numerous other discussions and opportunities for comment. A portion of the SE corner of the section was developed a few years ago and is now a ballfield complex which will be in use next spring. There will be a Highway 93 bypass put in around Kalispell which will actually come back to Highway 93 through this section. The new bypass will essentially follow the corridor where there is already a major BPA power line crossing the section. Therefore, the Department is trying to look at what is the best use of this parcel in the future realizing there is high value if it were to be full scale development. By going through the plan process it has received approval from the city -county planning board, the Flathead County Commission, and from the Kalispell City Council at three different meetings with votes largely in favor of the process. If the Board approves, the Department's intent is to enter into a Memorandum of Understanding (MOU) between the Land Board, the county, and the city. That MOU will basically confine the state to the zoning ordinances and development of the MOU in concert with the neighborhood plan. There is some question whether the state is exempt from those provisions and wouldn't have to go to that full level of zoning and restriction. From past history the Department has learned the best way is to work with the local community. Assuming the Board does approve, the next step would be to move ahead with the zoning ordinance with the city -county planning board and then execute the MOU. The Department is requesting the Board's approval to proceed with the adoption of the local zoning ordinance and the development of the MOU with Flathead County and the City of Kalispell. Clive Roqney, DNRC, said the ballfield complex was the first major development on this tract which is immediately north of the City of Kalispell. The Department entered into a 40-year lease agreement for roughly 1/4 of the section. The trust is now earning approximately $40,000 per year for that use. The remainder of this section with a couple minor exceptions is currently a wheat field leased by Clinton Grosswiler, and is separated into two leases producing about $7500 per year. After development of the commercial lease lots it is anticipated that the state will earn as much per lease for commercially developed lots than it currently does from agricultural leasing of the whole section. With the BPA powerlines severing the section and the proposed Kalispell bypass route which will again physically sever the section, the Department feels agriculture in the future is not going to be the predominate use on this land. In order to plan what types of use would be appropriate, the Department has undertaken a process to subject state land to all of the normal processes that a private developer would go through. The Department wants the development effort to be done in a manner endorsed by both the city and county Minutes September 20, 1999 Page 3 governments and the people of Flathead County. The Department has gone through the first step in the planning process with the city -county planning office who voted 7-2 in favor of this development. One of the dissenting voters viewed that the Department was unnecessarily binding the trust to the zoning ordinance and instead should.go forward with full scale commercial development without consideration to zoning. The Department has decided not to do that for some of the reasons alluded to regarding the continental divide subdivision. The Department then went to the county commission and presented the neighborhood plan, a plan which was developed after four meetings in which all of the interested parties that surround the state section had opportunity to comment. Taking the comments into consideration, the potential land uses have been restricted from what could possibly be to something less. The state is still servicing the trust by making these parcels publicly acceptable in their use in the valley and hopefully diminishing any problems in developing the leases. Finally, the Department went to the city council and received its endorsement 7-2, one individual had concern that state land is not taxable and there might be an impact to city coffers from subsidizing state land development. Mr. Rooney reminded the Board that when this property is developed the city has within its power to either annex the state land or not. It is anticipated part of that annexation agreement is going to be the requirement that the state pay all of the fees associated with development that a private developer would, and it is quite willing to do so. Today the Department is asking for approval to go to the last step with the city and county government, go back to the city -county planning board and establish this neighborhood plan and translate it into a zoning ordinance which will then become binding on state land use. It would then come back to this Board with an MOU between the Board, the City of Kalispell, and Flathead County in which the state would be bound to the zoning ordinance and to procedures for the future development of the tract. This process is in addition to what is required under MEPA. MEPA requirements will be completed first as a umbrella document to the entire plan and then specific to any state action. The Department believes it has fully complied with the requirements of law and has gone over and above in the development of this parcel. Keeping in mind that both this current Board and previous ones have put an emphasis on leasing rather than the sale of land, the Department developed a neighborhood plan with the intent to lease those parcels rather than sell. From past experience in the development of the continental divide subdivision, the sale of state land is a cumbersome process so it has been tailored towards a lease use end rather than a sale use end which is why there is more commercial than residential. Mayre Flowers, Director of Citizens for a Better Flathead, outlined concerns her organization has raised about this process. She said they participated in both the neighborhood meetings bringing comments before the city council and the Flathead County Commissioners. In a letter in June to Mr. Clinch the Citizens asked that this neighborhood plan proposal be brought before the Board to give them the opportunity to present from a citizen perspective some concerns about the plan. She said the Citizens will support contentions that this Board should act today to cease any further action in this development until it develops rules to ensure that the procedures related to the actions of the DNRC are clearly defined and timely, ensuring that the proposed state actions leading to the conversion of state trust lands to commercial uses does not undermine local control or create detrimental economic impacts. Secondly it needs to review and make specific recommendations on an integrated role and appropriate timing within which key review functions should be triggered, including the MEPA, the Montana Subdivision and Platting Act, and this MOU which to date the Citizens haven't seen. Finally the Board needs to clarify under MCA §77-1-601, which states this action must also benefit the economy of the local community. She said this is not the typical proposal that an average developer would bring before local decision makers. Local control is a central issue of importance. Votes to approve this neighborhood plan by the city council, the planning board, the county commissioners should not be seen as unqualified support. The kind of build out being anticipated is going to require additional fire and police resources, a development of this nature needs to be on city sewer and water services and obviously the city is going to have to be Minutes September 20, 1999 Page 4 involved. She said the Board has an obligation to direct this agency to provide the community much more economic data than it has to date to really understand the impacts of what is being proposed. A 1981 Attorney General Opinion, volume 39, opinion #14, holds that state lands are subject to subdivision review under MCA §76-3-101. To trigger MEPA on a lease -by -lease basis is biasing this process and is not following the intent of MEPA. Given the precedent DNRC's proposal would set for communities across the state the economic review should be extensive and subject to review. In closing she feels it is important to stop at this stage to do more depthful research. Ms. Flowers read two letters, one from Bill Goodman of the Kalispell Downtown Business Association and the other from Dale Luhman, Country Estates Homeowner's Association Board. Both letters expressed concern that DNRC did not take into account the economic impact on local economy, that DNRC is exempt from the planning process because it is a state agency, and the proposal does not comply with the draft Kalispell City -County master plan. Mr. Luhman's letter also stated that at the meetings the Department indicated the Board would not allow them to consider trading or selling the land. Brace Hayden, Citizens for a Better Flathead, discussed why the Citizens believe a comprehensive' analysis of the proposed changes needs to occur in accordance with MEPA. He said their issue is with the absence of rigorous review of the impacts of such development, including the analysis of possible alternatives to the proposed neighborhood plan. To date, the DNRC analyses has focused solely on how this school section could be developed in a comprehensive manner and how the development plans could be meshed with local planning jurisdictions in the Flathead Valley. None of the broader issues mentioned in MEPA and the Model MEPA Rules have yet been analyzed by DNRC and none made available for public review and comment. The Citizens believe an analysis needs to be made of what the impact of the neighborhood plan will be on local businesses and the businesses in downtown Kalispell and also how the development would impact traffic flow. Citizens encourages DNRC to slow down, take a step back, gather necessary data, and prepare an EA or an EIS on this section. Mr. Cooney said Mr. Luhman's letter stated it was indicated to him that the Board would not be interested in even discussing a swap or a trade. Is that correct? Ms. Flowers said they were told in the neighborhood meetings the Board had directed that would not be something considered. The question was raised was there any way to look at this for more intensive residential and they were told that the swap or sale wasn't feasible, people wouldn't be willing to lease homes. Anne Hedges, MEIC, said in this state one of the most pressing issues for its citizens is growth and growth management and how those issues are addressed. Looking at the DNRC neighborhood plan it states in the introduction "other Montana codes essentially exempt state properties from being subject to most zoning and subdivision provisions." She said she takes issue with the idea that the law exempts these parcels from subdivision review entirely, but when this is put into the introduction it sends a message to the community that the state doesn't have to listen. She said this Board should direct DNRC from this day forward when it does develop properties to comply with local zoning. And the Board should direct them to comply with the subdivision law for both commercial and residential development. This state would benefit greatly from the Board directing the Department to initiate rulemaking on how it is going to go forward and develop these types of parcels in the future. She recommended the Board act very cautiously on this because it is a precedent -setting issue. Mr. Rooney responded to the issue about exchange saying this had been brought up during the community meetings on whether the state would be willing to exchange the parcel with the caveat that the future developer use it for residential purposes. That would mean in order to effectuate the restriction to Minutes September 20, 1999 Page 5 residential use the Department would have to place a covenant within the deed that it would then exchange to this party which would devalue the trust land asset which in the Department's view is illegal. So the Department said no it will not advise the Board to exchange this property with a covenant that reduces the value prior to exchange. He also takes issue with the statement that the Department hasn't participated with the local community and said more accurately the persons opposing the Department's proposed plan simply haven't gotten the result from the local community government they wanted and thus are looking to the Board to stand in place of their local elected officials and make a different decision. Governor Racicot asked why is the statement made that on one hand the state is not obliged to go through the local planning process but intends to anyway? What was the point of that? Mr. Rooney said it developed over the course of the proposal. He explained there is a specific statute beirfg referenced that explicitly exempts state use of land from the normal process a private developer would go though. In this case the county attorney reviewed this law and said the state doesn't have *to go through this process at all, and even if it did what would bind it to the zoning agreed to. The Department decided to acknowledge this statute does exist but will go forward with this proposal as if it did not. The Department then came to an agreement with the county and the city that the manner in which to make it perfectly clear that that was its intention was to bind itself to the local zoning ordinances and develop an MOU that would be a binding contractual obligation upon state government to adhere to local land use decision making. Governor Racicot asked if the Department was saying that all of the issues brought up by Ms. Flowers, Mr. Hayden, and Ms. Hedges will be the object of discussion and public hearings concerning the precipitation of an MOU between the Department and the local governments? Is it within the Department's contemplation that it will be going through subdivision review, going through and complying with all zoning ordinances? And the anticipation is it will be in conformity with the master plan the local governments have in place? And finally that all of those things will be the object of an MOU which will be the object of public hearings at the local level and then back before this Board before being finally culminated? Mr. Rooney responded yes to all questions. The issues have been the subject of local public meetings, will be the subject of future public meetings, and will be subject to the Board's decision making authority. Governor Racicot asked when the MOU is articulated it will again be presented at the local level, and then it will come back here to this Board for final approval? Mr. Roomy replied yes. He said in fact the MOU will be presented again to the local officials for adoption and voting. Governor Racicot asked if it was in the minds of the Department that in fact this is precedent setting in some respects, and that the agreements reached in this particular case obviously will have some import for the future as well? Mr. Rooney replied yes. Governor Racicot said if that is the contemplation of the Department as to the protocol it will follow, the only difference is whether or not it is doing this voluntarily pursuant to an MOU or whether or not the state stops and begins an administrative rule process. He asked if the Department had any objection to Minutes September 20, 1999 Page 6 proceeding with the understanding that with these particular issues it always proceeds in conformity with a master plan, with subdivision requirements, and with zoning requirements? Mr. Rooney said for all commercial .uses of state land the Department would be amenable to that. However, there are public uses of land where it should retain the exemption that currently exists. Governor Racicot said by commercial, you mean anything that is going to be developed to provide either commercial facilities or housing. Mr. Rooney said correct. He said the exception perhaps is this bypass route. Governor Racicot said so in essence nothing has been decided yet that is irreversible and everything is going to be decided as a result of the preparation of this MOU which will be the object of public hearings botli at the local level and here. Mr. Rooney replied correct. Ms. Flowers said if the state had not come forth and essentially said it has the right to do this regardless, the process that has gone forward to date with the revision of the master plan would not have occurred. She said the City of Kalispell had a plan that did not designate this as commercial but because it felt if it didn't approve it would be looking at a piece by piece development of this land. Decision makers said it's better to have some plan than piecemeal development. Governor Racicot asked if the Department intends to have full scale MEPA analysis of the entire development not just on the lease by lease basis before it proceeds. Mr. Rooney said it is the Department's intention to do MEPA analysis on the entirety of the project which will be conducted before the MOU is signed. He said the plan is to go forward with the intention that this is the plan for the section and analyze those impacts. Governor Racicot said the Citizens are saying that because the state let the local governments know it doesn't have to comply with the zoning/subdivision laws, it created a certain amount of pressure upon local government to act in the way it did. He said because the state is not going to proceed without an MOU, local government has the authority and prerogative not to enter into the MOU. He added the fact is the state is not going forward without MEPA analysis, subdivision review, adherence to local zoning ordinances, conformity with the master plan, and without an MOU. So it seems all of the issues the Citizens have presented are going to be vindicated. Ms. Flowers respectfully disagreed saying the MOU should have been the very first step put on the table but it has not been drafted, there is no language, there is no consideration of what is in it. One of the key elements in that MOU should be the city does not have to amend its master plan to accommodate this. Governor Racicot said there are two contracting parties, the state which has an obligation to secure revenue not without deference being paid to environmental concerns or other issues, and the other contracting parties, the local governments which represent the local citizens. In order to get to the point to where both sides can proceed, they have to agree, and the bottom line is the local governments don't have to agree to the MOU. What the Department is asking today is to allow them to go forward with drafting a MOU that encompasses all of the things talked about today and presenting it to the local Minutes September 20, 1999 Page 7 governments to determine whether or not they will agree. Their leverage and the local citizens control is to either agree or not agree to the MOU. Ms. Flowers said just last week the Department submitted a request for extraterritorial zoning of this entire parcel which will come before the city planning board next month, and until this MOU is put on the table they shouldn't perceive any commitment. Governor Racicot said that is good.advice. The MOU will lay out a broad outline of how to go about investing in these particular issues. If there isn't agreement on the broad outline of the MOU between the local government and the Department then it doesn't appear the state will be able to proceed. Ms. Flowers said the Board is recommending that a MOU be drafted but until that is drafted and agreed upon the Department should withdraw its request for extraterritorial zoning. The other important issue is that this Board has the ability to direct the Department to do a much more detailed economic analysis. Governor Racicot said the Board clearly has authority over the Department. But frankly, the economic determinations that are going to be made should be part of the normal process. Number one, why would the state make an investment in something that is not going to produce an economic return, that's one of the Board's primary concerns. Number two, in fitting in with the community quite obviously the Board doesn't want to be in a position where it is going to irreversibly compromise virtually every interest it is trying complement. So it is inherent that that analysis has to be part of the process. Ms. Flowers said she would like clarification on the economic analysis the Department intends to do Governor Racicot explained until such time as there is a draft MOU there is no specific language. The Department initiated some efforts where all the specific details are unknown so why doesn't the Department draft this memorandum and see whether or not the local government and this Board ultimately will agree to it. And that may include economic analysis that is specifically defined, and if it is not then obviously at the local level and at this Board the concerned public can make that point. Does that sound acceptable? Ms. Flowers replied okay. Governor Racicot said the motion is to direct the Department to proceed with the preparation and drafting of a MOU that lays out a broad framework to address the issues of a master plan, zoning, subdivision review, MEPA, and the simultaneous suspension of any further movement forward until such time as that MOU has been approved by the local governments through a public hearing process and this Board. Seconded by Mr. O'Keefe. Motion carried unanimously. Ms. Keenan addressing the perception there was pressure on the local governments to agree asked historically why didn't the state have to agree with the local zoning, planning, and MEPA business? Although it was stated the Department will comply, nonetheless, why that law is there? She said she was looking for historical background on that and the exceptions the Department spoke to. Governor Racicot said Nancy's question is timely and very important and ought to be the object of a informational presentation to this Board either before or at the same time it considers this MOU. He said rather than trying to speculate about it this morning, his request would be to proceed with that homework