Legislature(2013 - 2014)BELTZ 105 (TSBldg)
04/01/2014 03:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB214 | |
| HB204 | |
| HB141 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 214 | TELECONFERENCED | |
| + | HB 204 | TELECONFERENCED | |
| + | HB 141 | TELECONFERENCED | |
HB 204-SALMON & HERRING PRODUCT DEV'T TAX CREDIT
3:44:02 PM
CHAIR DUNLEAVY reconvened the meeting and announced the
consideration of HB 204."An Act relating to a product
development tax credit for certain salmon and herring products;
and providing for an effective date." He noted that this was the
first hearing. [CSSSHB 204(FIN) was before the committee.]
3:44:20 PM
ASTRID ROSE, Staff, Representative Alan Austerman, introduced HB
204 on behalf of the sponsor. She spoke to the following sponsor
statement: [Original punctuation provided.]
The Alaska Salmon Product Development Tax Credit has
been in place since 2003 and is widely credited as a
major factor of the increase in commercial value of
Alaska salmon. The ASDTC is currently scheduled to
sunset on December 31st, 2015.
There have been positive trends since this bill was
enacted in 2003. We have seen increased product
diversity, increased state revenues from the fisheries
business tax and increased permit prices.
The current tax credit applies to investment in new
property that meets a requirement for creating a value
added salmon product. House Bill 204 extends the
ability of industry to use this credit until 2020 and
expands the credit for herring value-added processing.
Herring is an established fishery in Alaska and is a
prime candidate to start utilizing more fully. If we
expand out of the roe fishery and into the food
fishery, there are significant economic development
opportunities that will be developed. Up until now,
the herring fishery has been an underutilized fishery
where only about 10 percent of the fish is utilized
and 90 percent has very little value.
Another impending burden to industry is the
Environmental Protection Agency's efforts to force
industry to eliminate seafood discharges containing
solids into near shore waters. Many salmon processing
facilities in Alaska currently grind and pump
discharge. HB 204 would incentivize investment in
equipment that would reduce the waste stream from
salmon and herring processing thereby alleviating the
pressure to comply with these burdensome mandates.
Currently, statute only allows investment in pop-top
cans. HB 204 also provides industry the necessary
flexibility to respond to changing market demands for
can sizes. This bill responds to this limitation by
expanding the credit to any new equipment to herring
and also to produce can sizes other than 14.75 ounces
or 7.5 ounces.
The continued growth of the Alaska seafood market is
vital to increased revenues from our fisheries. House
Bill 204 will further encourage in-state processing
and expand market opportunities to processors. The
extension of the tax credit will continue to spur
economic development opportunities and create quality
Alaska products.
MS. ROSE noted that the packets contain a document that tells
what the Environmental Protection Agency (EPA) is proposing for
processing facilities to comply with the discharge requirements,
letters of support, information on the expenditures and credits
taken for the last three years, and a sheet showing what
equipment is allowed under the salmon product development tax
credit.
3:48:06 PM
MS. ROSE reviewed the major changes in statute.
· The term herring is added in all sections of the bill.
· On page 3, "qualified investment" includes new parts
necessary for or costs associated with converting a canned
salmon line to produce can sizes other than the 14.75 ounce
and 7.5 ounce cans. It also adds freezing, scaling,
grinding meat and bone separation to what already qualifies
for the tax credit.
· On page 4, lines 11-12, say that equipment used to
transport salmon or herring byproduct that is discarded as
waste and unsalable product would now be a qualified
investment.
3:49:57 PM
SENATOR ELLIS directed attention to the list of disqualified
equipment for the tax credit and asked for a definition of "dud
detector."
MS. ROSE deferred the question to the Department of Revenue.
3:51:06 PM
MICHAEL KAZMAC, Tax Auditor, Tax Division, Department of Revenue
(DOR), explained that a dud detector is a device that detects a
defective vacuum seal on a finished can of salmon.
3:51:55 PM
VINCE O'SHEA, Vice President, Pacific Seafood Processors
Association (PSPA), Juneau, Alaska, stated that he was speaking
on behalf of the PSPA members that collectively operates about
18 salmon processing plants in Alaska. He summarized that HB 204
allows processers to take a credit against the fishery business
tax they pay on fish they buy to offset purchases of new
equipment that would add value to products they're making. In
the past the credit has gone to things like fillet machines, ice
makers, and centrifuges to convert fish oil into a product that
could be made into fish capsules. The intention is to expand the
product line from cans to items that generate a greater return.
He noted that he submitted written testimony and it points out
that extending the tax credit for five years would give
stability to the industry and would allow it to take advantage
of new technology and new markets.
3:54:32 PM
JOE PLESHA, Chief Legal Officer, Trident Seafoods, Seattle,
Washington, testified in support of HB 204. He advised that
Alaska is the only state that allows seafood waste to be ground
and discarded, and that may not be allowed once the EPA
concludes the review of its effluent limitation guidelines. The
general belief is that most of the communities in Alaska will
have to screen their waste and then handle it in some manner.
The most obvious use of the waste is to produce some sort of
product and HB 204 is a step in that direction.
3:56:03 PM
MARK PALMER, President and CEO, Ocean Beauty Seafood, Inc.,
Seattle, Washington, testified in support of HB 204. He
discussed the history of the legislation and explained that HB
204 encourages market diversification beyond just two product
forms, which will help right size the markets. He also discussed
the value of extending the development tax credit and expanding
it to herring. To date it has stimulated investment in the
industry and brought revenue to the state.
SENATOR MICCICHE said he supports the bill because of all the
Europeans he's seen adding finishing value to Alaska salmon. He
asked for assurance that this tax credit will be used to employ
more Alaskans in the finishing of Alaskan seafood.
MR. PALMER described the current European market for boneless
sockeye salmon fillets and the expectation that there would be a
market for frozen chum this year both of which have created jobs
in Alaska. He added that there were also opportunities for
machinist positions to operate and maintain this very
sophisticated machinery.
SENATOR MICCICHE asked about the current herring market and if
there was demand for gourmet human food.
MR. PALMER said Ocean Beauty produced a small amount of canned
herring fillets last year and expects to produce more this year.
The target market is food aid programs and the product has been
well received. Ocean Beauty also produces and sells a large
volume of pickled herring and they have customers that are
interested in test marketing that product with Alaska herring on
the label.
SENATOR MICCICHE asked if packaging is limited or wide open.
MR. PALMER replied the packaging options are wide open but the
bill does allow the tax credit to apply to smaller can sizes,
which will help the industry because that's what consumers want.
4:05:28 PM
SENATOR MICCICHE asked if there are options for other markets
like fish meal, animal food, and organic fertilizer.
MR. PALMER said they do oil recovery at the Excursion Inlet
facility that's used for supplements for pet food, but the
refining isn't sophisticated enough for human consumption. He
suggested Mr. Plesha describe Trident's markets.
MR. PLESHA explained that Trident is encapsulating salmon oil
for human consumption, they produce a liquid fertilizer, and
they produce fish meal which is increasingly used as a protein
source.
SENATOR MICCICHE repeated a joke from Clem Tillion and expressed
hope that the bill would help develop some of the products in
this state that for years have largely gone to waste.
4:08:50 PM
ANNA KIM, Chief of Revenue Operations, Tax Division, Department
of Revenue (DOR), introduced herself and offered to answer
questions.
JOE JACOBSON, Director, Division of Economic Development,
Department of Commerce, Community and Economic Development
(DCCED), introduced himself.
4:09:28 PM
At Ease
4:12:29 PM
CHAIR DUNLEAVY reconvened the meeting and invited Mr. Jacobson
to give a presentation.
MR. JACOBSON delivered a PowerPoint in support of HB 204. He
reminded the committee that while Alaska is a huge seafood
state, it only produces only one-third of the global wild salmon
supply. He said that the only way to increase value to Alaska
fishermen is by increasing the value of the product. Recently
there have been strong runs, but production won't always be this
high so investing in value-added products is very important for
the state. He noted that his prior job was international
director with the Alaska Seafood Marketing Institute.
He discussed that a key benefit of the product development tax
credit is product diversity. Just as it's not wise to be
dependent on any one market, it's likewise not wise to be
dependent on any one product form. When the industry was
exclusively headed and gutted and canned salmon, the commodity
was much more susceptible to the whims of the market. By
increasing value in the product and having different products
for different markets worldwide, the Alaskan fisherman is
generally benefitted.
Focusing on underutilized species like herring and the waste
byproduct provides a huge opportunity for the state to take what
may be a problem for the industry and use it to generate
revenue. For canned salmon there's incentive for new production
with smaller size cans.
MR. JACOBSON displayed a graph to illustrate that the price of
canned salmon prices since 2005 has doubled. With few
exceptions, the predominant can sizes are 7.5 ounces and 14.75
ounces, but consumers want smaller sizes. The number of herring
permits has dropped precipitously in recent years so anything
that can be done to stimulate the herring fisheries, especially
in Western Alaska, would be very beneficial. This could be
through food aid or innovation that could generate another
consumer product.
4:16:32 PM
CHAIR DUNLEAVY asked if the issue with herring is that the roe
is going to Japan.
MR. JACOBSON said the market in Japan has softened. Although
it's a traditional product, the younger generations aren't
consuming the same quantities and aren't willing to pay the
prices they used to. Speaking generally, he said that a lot of
production is geared predominantly for roe and those prices have
dropped such that they don't support harvesting the fish just
for roe.
CHAIR DUNLEAVY asked if that was why the number of permit
holders was dropping.
MR. JACOBSON answered yes.
SENATOR MICCICHE asked what the favored gear type is for food-
quality products.
MR. JACOBSON said he wasn't sure.
He continued the presentation explaining that the largest
challenge with the EPA is that non-remote seafood processing
centers will be required to go to a zero discharge on any waste
products. This means they'll need to screen and transfuse the
product into a saleable good or collect the waste and barge it
to an offload site. The costs are dependent on location, but it
could be $0.20 per pound or more and that would come out of the
fisherman's pocket. The waste byproduct opportunities include
fish meal, fish oil, and protein isolates.
He emphasized that key marketing, investing in quality, and the
diversification of products has been a key element of increasing
the value of the industry to the state. Whether it's permit
holders or crew, the participation in Alaska fisheries has
increased significantly in recent years. The difference between
what it costs the state and the revenue generated from the
fisheries business tax clearly demonstrates that there is a good
return on investment.
4:21:23 PM
CHAIR DUNLEAVY held HB 204 in committee for further
consideration. Public testimony was open.