[Senate Report 110-298]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 650
110th Congress                                                   Report
                                 SENATE
 2d Session                                                     110-298

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 NORTH DAKOTA ENABLING ACT AND FIRST MORRILL ACT AMENDMENTS ACT OF 2007

                                _______
                                

                 April 10, 2008.--Ordered to be printed

                                _______
                                

   Mr. Bingaman, from the Committee on Energy and Natural Resources, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 1740]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 1740) to amend the Act of February 22, 
1889, and the Act of July 2, 1862, to provide for the 
management of public land trust funds in the State of North 
Dakota, having considered the same, reports favorably thereon 
without amendment and recommends that the bill do pass.

                                Purpose

    The purpose of S. 1740 is to amend the Act of February 22, 
1889, and the Act of July 2, 1862, to provide for the 
management of public land trust funds in the State of North 
Dakota.

                          Background and Need

    The Federal government has generally provided a series of 
benefits to new States as part of the statehood admission 
process. For example, the North Dakota Statehood Act set aside 
land in every township for the support of schools in the State 
and also provided further land grants to support colleges and 
universities (``the trust funds''). In total, the grant from 
the Federal government to the State of North Dakota was 
approximately 3.2 million acres.
    Since statehood, much of the original grant land has been 
sold. As of 2006, the trust funds consist of the following 
assets:
     714,000 surface acres (leased to ranchers and 
farmers across the state);
     2.5 million mineral acres (leased for oil, gas, 
coal and gravel exploration and development); and
     $807 million of financial assets (invested in a 
diverse portfolio of stocks, bonds, farm loans and other 
instruments).
    Pursuant to the Morrill Act and the North Dakota Statehood 
Act, the State can only spend funds derived from interest and 
income from the trust funds (i.e., surface and mineral rentals, 
loan income, and interest earnings) and may not expend funds 
derived from permanent trust additions (i.e., mineral 
royalties, mineral bonuses, and proceeds of land sales). The 
North Dakota State Land Department, which administers the trust 
funds, contends that this restriction creates unnecessary 
fluctuations in distributions and creates incentives for 
investment decisions that create short term income at the 
expense of long term value.
    As a result, the Land Department proposed an amendment to 
the North Dakota Constitution to eliminate the restriction. The 
amendment was endorsed by the state legislature in 2005 and 
passed as a ballot measure in 2006. In order to take effect, 
the change requires amendments to the North Dakota Statehood 
Act and the Morrill Act.

                          Legislative History

    S. 1740 was introduced by Senator Conrad and Senator Dorgan 
on June 28, 2007. The Subcommittee on Public Lands held a 
hearing on the bill on September 20, 2007 (S. Hrg. 110-216). At 
its business meeting on January 30, 2008, the Committee on 
Energy and Natural Resources ordered S. 1740 favorably reported 
without amendment.

                        Committee Recommendation

    The Committee on Energy and Natural Resources, in open 
business session on January 30, 2008, by a voice vote of a 
quorum present, recommends that the Senate pass S. 1740.

                      Section-by-Section Analysis

    Section 1 provides the short title for the bill.
    Section 2 amends the North Dakota Statehood Act (25 Stat. 
676, chapter 180) by adding a new provision to effectuate the 
changes approved by the State of North Dakota regarding 
distributions from its educational trust funds. Specifically, 
the new provision requires that all proceeds from sales of 
public land be deposited into the trust funds and managed so as 
to preserve the purchasing power of the fund and maintain 
stable distributions to beneficiaries in accordance with North 
Dakota's constitution, as amended by the 2006 ballot measure.
    Section 3 amends the Morrill Act (7 U.S.C. 301 et seq.) by 
adding a new provision to effectuate the changes approved by 
the State of North Dakota regarding distributions from its 
educational trust funds. Specifically, the new provision 
requires that all proceeds from sales of public land be 
deposited into the trust funds and managed so as to preserve 
the purchasing power of the fund and maintain stable 
distributions to beneficiaries in accordance with North 
Dakota's constitution, as amended by the 2006 ballot measure.
    Section 4 states that, effective July 1, 2009, Congress 
consents to the amendments to the Constitution of North Dakota 
proposed by House Concurrent Resolution No. 3037 of the 59th 
Legislature of the State of North Dakota and approved by the 
voters of the State of North Dakota on November 7, 2006.

                   Cost and Budgetary Considerations

    The following estimate of costs of this measure has been 
provided by the Congressional Budget Office:

S. 1740--North Dakota Enabling Act and First Morrill Act Amendments of 
        2007

    S. 1740 would amend provisions of federal law that regulate 
how North Dakota may invest and spend proceeds from the sale 
and management of certain public lands. CBO estimates that 
enacting S. 1740 would have no effect on the federal budget and 
would not affect direct spending or revenues.
    S. 1740 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act. The 
bill would make federal law consistent with an amendment to the 
state's constitution and provide Congressional consent to that 
amendment. The change in federal law and the amendment to the 
state constitution would allow the state to make distributions 
from state-held trust funds based on a rolling valuation of 
assets rather than on current income. Those distributions are 
currently limited by federal law that went into effect when 
North Dakota became a state.
    The CBO staff contact for this estimate is Melissa Merrell. 
The estimate was approved by Theresa Gullo, Deputy Assistant 
Director of the Budget Analysis Division.

                      Regulatory Impact Evaluation

    In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee makes the following 
evaluation of the regulatory impact which would be incurred in 
carrying out S. 1740. The bill is not a regulatory measure in 
the sense of imposing Government-established standards or 
significant economic responsibilities on private individuals 
and businesses.
    No personal information would be collected in administering 
the program. Therefore, there would be no impact on personal 
privacy.
    Little, if any, additional paperwork would result from the 
enactment of S. 1740, as ordered reported.

                   Congressionally Directed Spending

    S. 1740, as reported, does not contain any congressionally 
directed spending items, limited tax benefits, or limited 
tariff benefits as defined in rule XLIV of the Standing Rules 
of the Senate.

                        Executive Communications


   Statement of Michael Nedd, Assistant Director, Mineral, Realty & 
             Resource Protection, Bureau of Land Management

    Mr. Chairman and members of the Subcommittee, thank you for 
the opportunity to testify on S. 1740, the North Dakota 
Enabling Act and First Morrill Act Amendments Act of 2007.
    S. 1740 would amend the Act of February 22, 1889 and the 
Act of July 2, 1862 to provide for changes to the management 
and distribution of North Dakota trust funds into which 
proceeds from the sale of public land are deposited. It also 
includes language providing for Congress's consent to 
amendments to the Constitution of North Dakota proposed by 
House Concurrent Resolution No. 3037 of the 59th Legislature of 
the State of North Dakota and approved by the voters on 
November 7, 2006. This resolution requires permanent trust 
funds to be managed to preserve their purchasing power, to 
provide stable distributions to fund beneficiaries and to 
benefit fund beneficiaries.
    The Office of Legal Counsel of the Department of Justice 
has advised us that Congress may amend State enabling acts. As 
S. 1740 relates to North Dakota's use of its trust funds, the 
Administration has no comments on or objections to the bill.
    Thank you for the opportunity to testify.

                        Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill S. 1740 as ordered reported, are shown as follows 
(existing law proposed to be omitted is enclosed in black 
brackets, new matter is printed in italic, existing law in 
which no change is proposed is shown in roman):

          ACT OF FEBRUARY 22, 1889 (25 STAT. 676, CHAPTER 180)

    CHAP. 180.--An Act to provide for the division of Dakota 
into two States and to enable the people of North Dakota, South 
Dakota, Montana, and Washington to form constitutions and State 
governments and to be admitted into the Union on an equal 
footing with the original States, and to make donations of 
public lands to such States.
    Be it enacted by the Senate and House of Representatives of 
the United States of America in Congress assembled, That the 
inhabitants of all that part of the area of the United States 
now constituting the Territories of Dakota, Montana, and 
Washington, as a present described, may become the States of 
North Dakota, South Dakota, Montana, and Washington, 
respectively, as hereinafter provided.

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SEC. 26. NORTH DAKOTA TRUST FUNDS.

    (a) Disposition.--Notwithstanding section 11, the State of 
North Dakota shall, with respect to any trust fund in which 
proceeds from the sale of public land are deposited under this 
Act (referred to in this section as the `trust fund')--
          (1) deposit all revenues earned by a trust fund into 
        the trust fund;
          (2) deduct the costs of administering a trust fund 
        from each trust fund; and
          (3) manage each trust fund to--
                  (A) preserve the purchasing power of the 
                trust fund; and
                  (B) maintain stable distributions to trust 
                fund beneficiaries.
    (b) Distributions.--Notwithstanding section 11, any 
distributions from trust funds in the State of North Dakota 
shall be made in accordance with section 2 of article IX of the 
Constitution of the State of North Dakota.
    (c) Management of Proceeds.--Notwithstanding section 13, 
the State of North Dakota shall manage the proceeds referred to 
in that section in accordance with subsections (a) and (b).
    (d) Management of Land and Proceeds.--Notwithstanding 
sections 14 and 16, the State of North Dakota shall manage the 
land granted under that section, including any proceeds from 
the land, and make distributions in accordance with subsections 
(a) and (b).

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             ACT OF JULY 2, 1862 (12 STAT. 503, CHAPTER 30)


  AN ACT donating Public Lands to the several States and Territories 
   which may provide Colleges for the Benefit of Agriculture and the 
                             Mechanic Arts

    Be it enacted by the Senate and House of Representatives of 
the United States of America in Congress assembled, That there 
be granted to the several States, for the purposes of 
hereinafter mentioned, an amount of public land, to be 
apportioned to eachState a quantity equal to thirty thousand 
acres for each senator and representative in Congress to which the 
States are respectively entitled by the apportionment under the census 
of eighteen hundred and sixty: Provided, That no mineral lands shall be 
selected or purchased under this Act.

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SEC. 9. LAND GRANTS IN THE STATE OF NORTH DAKOTA.

    (a) Expenses.--Notwithstanding section 3, the State of 
North Dakota shall manage the land granted to the State under 
the first section, including any proceeds from the land, in 
accordance with this section.
    (b) Disposition of Proceeds.--Notwithstanding section 4, 
the State of North Dakota shall, with respect to any trust fund 
in which proceeds from the sale of land under this Act are 
deposited (referred to in this section as the `trust fund')--
          (1) deposit all revenues earned by a trust fund into 
        the trust fund;
          (2) deduct the costs of administering a trust fund 
        from each trust fund; and
          (3) manage each trust fund to--
                  (A) preserve the purchasing power of the 
                trust fund; and
                  (B) maintain stable distributions to trust 
                fund beneficiaries.
    (c) Distributions.--Notwithstanding section 4, any 
distributions from trust funds in the State of North Dakota 
shall be made in accordance with section 2 of article IX of the 
Constitution of the State of North Dakota.
    (d) Management.--Notwithstanding section 5, the State of 
North Dakota shall manage the land granted under the first 
section, including any proceeds from the land, in accordance 
with this section.

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