Providing coverage of Alaska and northern Canada's oil and gas industry
July 2019

Vol. 24, No.30 Week of July 28, 2019

Grant land not conveyed; UA income suffers from failure to receive land

Steve Sutherlin

Petroleum News

Oil and gas income from land trust holdings helps the University of Alaska system run, but only provides what essentially is a trace fuel additive. Out of $221 million derived from the university’s land trust holdings from fiscal 1987 through 2018, only $1.7 million was classified as oil and gas income, according to an April 25 presentation to Commonwealth North, by University of Alaska President Jim Johnsen.

Minerals and mining accounted for $3.5 million in income over the same period. Timber sales added $14.8 million, while real estate (sales, leases and easements) was the largest category at $168 million.

At $16.5 million, the largest ever single income event for the land trust was the sale of the Diplomacy Building in FY 2013.

The University’s land trust currently has three oil and gas leases in the Ninilchik unit on the Kenai Peninsula, Petroleum News was told July 24 by Robbie Graham, associate vice president of public affairs. One of the three leases is currently producing, providing $88,968 of income in FY 2018 for the school’s land grant fund.

“We have a land grant endowment of course, and we would love to over time build that,” Johnsen said. “That way we’re not going to be as dependent on the state for our revenue.”

But the land grant fund today provides only a sliver of the university’s total budget. In recent years, the largest source of the octane that powers the system has been unrestricted general fund appropriations from the Legislature.

In FY 2017, for instance, the contribution of land grant fund earnings to university programs was $5.8 million, versus legislative appropriations of $325 million toward a $755.7 million total budget.

The University of Alaska Foundation Trustees manage the fund under standard endowment accounting practices with 4.5% of the trailing five year average available for expenditure annually.

Under Board of Regents policy, fund earnings support the UA Scholars Program to offer $12,000 scholarships to the top 10% of graduates from Alaska high schools each year, along with other initiatives and the day-to-day operations of UA Land Management.

Land grant university

Land income to the university would be more significant if the university had actually received the land it was granted over the years, Johnsen said.

“We’re the land grant college without any land,” he said.

The University of Alaska originated as a land grant college; it began as the Territorial Agricultural College and School of Mines.

In 1915, federal legislation granted land to the Territory of Alaska to support the Territorial Agricultural College and School of Mines, along with each Section 33 - 640 acres per section - located in each township of the Tanana Valley, according to the university. But the rate of land surveying was dismal, which delayed the transfer of the lands for the school.

In 1929, federal legislation granted another 100,000 acres.

“That 100,000 acres in 1929 really was the heart of our land grant,” Johnsen said.

The school had just 110,000 acres to its name when the Alaska Statehood Act resulted in the repeal of the 1915 federal land grant legislation. The state of Alaska received over 104 million acres at statehood - more than any other state, but the university received a smaller land grant for higher education than any other state except for Delaware. The 360,000-acre deficit in university land conveyances exists to this day.

“We were due roughly about 500,000 acres at statehood,” Johnsen said. “We’ve accumulated over the years another 40,000 acres - purchases, donations, and et cetera, so we’ve got a total of about 150,000 now.”

Today the university has trust land designated for investment purposes which includes approximately 125,000 acres owned in fee simple, 12,000 acres of surface rights, 14,000 acres of subsurface rights and 62,000 acres of timber harvesting rights, according to its land office. An additional 2,000 acres of land donations and purchases are also managed as investment lands.

Development activities include residential subdivisions, recreational and commercial parcels, timber sales, gravel extraction sales, land and building acquisitions and sales, residential and commercial leases, mineral leases, oil and gas leases, property easements, and permits, the university said.

Filling the void

The state has attempted to resolve the university’s land deficit over the years since statehood, but those efforts have been frustrated, Johnsen said.

In 1959 a bill reserving 1 million acres passed both houses of the state Legislature, but it was vetoed by Gov. Bill Egan, he said.

From the 1950s to the 1980s, the land issues in the state were complicated by Native land claim issues.

In 2000, the state Legislature passed a bill and overrode a gubernatorial veto to grant the university 260,000 acres.

2005 legislation identified specific lands for transfer to UA, and “those lands started being conveyed from the DNR to the university,” Johnsen said.

But a 2007 legal challenge by the Southeast Alaska Conservation Council argued that the land transfer violated the state constitution’s anti-dedication of funds clause. In 2009 the Alaska Supreme Court agreed and struck down the 2000 and 2005 legislation, saying that the state can’t make a land grant to UA that “would operate in a manner similar to the way that the university’s federal land grant has operated since before statehood.”

In 2010, the university started transferring land back to the state.

Going forward, the university is eyeing possible solutions to the land deficit, Johnsen said, noting that the state is entitled to an additional 5 million-acre conveyance of federal lands from which a university land selection might be made.

“We are working hard, and in partnership with the state,” he said.

Johnson said that in a work session he noticed a clause in the state constitution, an exception to the prohibition on dedication of funds - “except when required by the federal government for state participation in federal programs.”

“We are working now on a structured federal program that would meet the Alaska Constitution’s test; at the same time it would not result in a net increase in the amount of land from the federal government to the state, nor would it involve a direct state land transfer to the university.

Johnsen said the university is strong; it faces challenges just like the state does, but it will succeed.


Petroleum News - Phone: 1-907 522-9469
[email protected] --- https://www.petroleumnews.com ---

Copyright Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA)Š1999-2019 All rights reserved. The content of this article and website may not be copied, replaced, distributed, published, displayed or transferred in any form or by any means except with the prior written permission of Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA). Copyright infringement is a violation of federal law.