Legislature(1993 - 1994)

02/09/1994 08:15 AM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
  CHAIRMAN WILLIAMS told committee members there is a draft                    
  Resources Committee Substitute (CS) in their folders.  The                   
  CS was drafted to correct a technical error in the original                  
  bill; page 2, line 12, in the whereas clause that states the                 
  amount of money the Alaska seafood processing industry has                   
  invested in shoreside processing plants.  He said in the                     
  original bill, the dollar amount was listed as one million                   
  dollars, but it should have read one billion dollars.                        
  Number 022                                                                   
  REPRESENTATIVE CARL MOSES, PRIME SPONSOR, HJR 50, said he                    
  introduced the resolution to address a potential problem for                 
  shore-based processors and the granting of Individual                        
  Fishing Quotas (IFQs) to individual fish harvesters.  He                     
  stressed if consideration is not given to shore-based                        
  processors, zero fish will be going to shore.                                
  REPRESENTATIVE ELDON MULDER referring to page 1, line 13,                    
  "WHEREAS the IFQ system would greatly reduce the volume of                   
  groundfish and crab sold to shore-based processors;" asked                   
  Representative Moses what basis he was using when saying the                 
  volume will definitely be reduced.                                           
  REPRESENTATIVE MOSES responded that conceivably all fish                     
  could be transferred to a mother ship off shore.                             
  Number 046                                                                   
  REPRESENTATIVE CON BUNDE inquired if there are tax                           
  considerations which encourage offshore processors not to                    
  come to shore.                                                               
  REPRESENTATIVE MOSES answered that was correct as many ports                 
  have a sales tax.                                                            
  REPRESENTATIVE BILL HUDSON said in reviewing page 2, it                      
  states the dollar value paid to fish harvesters is $1.4                      
  billion.  He felt the figure quoted was high and asked if it                 
  included salmon, groundfish and all types of crab, etc.                      
  REPRESENTATIVE MOSES replied that was correct.                               
  REPRESENTATIVE HUDSON asked what percentage of that figure                   
  is nonresident.                                                              
  REPRESENTATIVE MOSES said he did not know, but guessed that                  
  the majority was nonresident.  He stated the figure was                      
  taken from a resolution passed by the city of Unalaska.                      
  REPRESENTATIVE PAT CARNEY commented CSHJR 50(RES) contains                   
  many numbers and he hoped they are accurate.                                 
  Number 077                                                                   
  MANAGEMENT COUNCIL, said the council is considering a                        
  comprehensive rationalization of the groundfish and crab                     
  fishers off the coast of Alaska and IFQs or Individual                       
  Transferable Quotas (ITQs).  From research completed by                      
  several entities it was indicated that if an ITQ system is                   
  granted only to harvesters and factory trawlers, the shore-                  
  based industry in Alaska will go into a death spiral,                        
  lasting 5-7 years before they go bankrupt.  He said that                     
  statement has been reviewed by the scientific and                            
  statistical committee of the council and other economists                    
  and has been verified.                                                       
  MR. LAUBER stressed there are many reasons for the situation                 
  including the fact that the factory trawl fleet and the                      
  mother ship operation offshore operate at a lower price.                     
  They are not burdened by the regulations which the shore-                    
  based industry face.  For example, if there are four people                  
  working at a shore-based plant, according to the laws of the                 
  state of Alaska, 240 square feet has to be provided for                      
  sleeping accommodations whereas aboard ship, only 64 square                  
  feet of floor space has to be provided.                                      
  MR. LAUBER pointed out that an ITQ is like a share of stock;                 
  it is owned, it can be transferred and it can be used as                     
  collateral.  If a person has an IFQ share for one million                    
  pounds of fish, a loan for 70 percent of the value of the                    
  share can be secured and used to purchase more quota shares.                 
  He said the real threat is from the factory trawl fleet.                     
  MR. LAUBER mentioned the figures used in CSHJR 50(RES) were                  
  prepared by Pacific Associates, a research group, and he                     
  thought all of the numbers are official government numbers                   
  received from various agencies.  He stressed in the state's                  
  traditional salmon and halibut fishing, the majority of                      
  fishermen are Alaskans.  However, in the offshore fisheries,                 
  all of the factory trawlers are based outside of Alaska with                 
  crews also from outside the state.  He noted the shore-based                 
  plants are all located in the state, paying local and state                  
  taxes.  When the Magnuson Act was passed in 1976, it was                     
  hoped there would be benefits to the United States and to                    
  the state of Alaska and to this point, there have been.                      
  MR. LAUBER stressed if the ITQ system, which only grants                     
  quota shares to harvesters, factory ships and factory                        
  trawlers is used, there is a dangerous risk that the                         
  economists are correct and within a few years, there will be                 
  no shore-based processing plants for groundfish and crab.                    
  He expressed support of CSHJR 50(RES).                                       
  Number 198                                                                   
  REPRESENTATIVE HUDSON asked if there should be language in                   
  one of the WHEREAS clauses relating to ITQs.                                 
  MR. LAUBER responded it is not necessary, since the council                  
  uses the terms IFQs and ITQs interchangeably and both are                    
  REPRESENTATIVE MULDER recalling the $1.4 billion going to                    
  out of state interests, asked if there are any steps the                     
  legislature can take to reverse the problem.                                 
  MR. LAUBER responded there are many things which can be                      
  done, none of which could immediately change the situation.                  
  It is a matter of capital.  There have been companies in                     
  Alaska, owned by Alaskans, who as they grew larger, found                    
  there was a need to compete which resulted in a need to move                 
  their corporate offices out of Alaska.  He gave several                      
  examples of companies and their situations.                                  
  MR. LAUBER told members what is important to remember is                     
  that those Alaskan-owned companies have an investment in                     
  Alaska, not where they may have their corporate offices.                     
  They are located in the state, they pay taxes here, they buy                 
  locally, and have a commitment in the state.  He said often                  
  there is a hostile attitude regarding the regulatory process                 
  in the state and gave examples of situations and large fines                 
  being assessed.  He felt that attitude often makes it                        
  difficult for these companies to invest, expand or add                       
  added-value facilities.                                                      
  Number 327                                                                   
  REPRESENTATIVE MULDER asked Mr. Lauber if he had seen the                    
  20/20 program on television showing problems with the                        
  seafood industry and if so, questioned if there are ways to                  
  insure the quality of the product.                                           
  MR. LAUBER stressed a television show like the 20/20 program                 
  does horrible damage to the seafood industry.  He said up                    
  until recently, the state was putting money into the Alaska                  
  Seafood Marketing Institute (ASMI) and currently, the                        
  industry is putting a substantial amount of money into the                   
  ASMI program.  He noted that most of the television program                  
  centered on the problem of what happens to the product after                 
  it leaves the fishing vessel and the processing plant.  The                  
  program focused on fish markets, consumer markets or the                     
  distribution point of seafood.                                               
  MR. LAUBER stated the standards which Alaska are held to are                 
  far higher than any other state but once the product leaves                  
  the state, it can be misused and there is not much the state                 
  can do about it.                                                             
  REPRESENTATIVE HUDSON mentioned he was distressed that the                   
  program used Alaska posters, when in reality the subject                     
  matter was not directly related to the product coming from                   
  the state.  He felt there needs to be a continued, expanded                  
  effort by ASMI to educate consumers and institutions on how                  
  to handle and use seafood as well as how to maintain the                     
  quality of the product.                                                      
  REPRESENTATIVE HUDSON asked if the study that Mr. Lauber                     
  referred to earlier which provided the figures in CSHJR
  50(RES) is available.                                                        
  MR. LAUBER said it is available probably through                             
  Representative Moses' office.  He stressed the seafood                       
  industry is interdependent.  The companies who operate in                    
  Alaska have a broad range of species and product forms which                 
  they purchase and sell.  What happens to companies in the                    
  salmon market affects their general business health.                         
  Therefore, it is true that ITQs on groundfish and crab might                 
  not directly impact the salmon or halibut industry but it                    
  does affect other industries.                                                
  REPRESENTATIVE HUDSON said there is some precedence, as a                    
  percentage of the allocation was previously granted to                       
  onshore processors.                                                          
  MR. LAUBER replied that was correct and noted they are                       
  currently operating under the inshore/offshore allocation                    
  and will do so through 1995.  The allocation includes:                       
  fishermen delivering to inshore operations receive 35                        
  percent; the offshore sector gets 75 percent; and 7 1/2                      
  percent goes to the community development quota (CDQ)                        
  program.  He noted that in the Gulf of Alaska, the onshore                   
  allocation is 100 percent.                                                   
  REPRESENTATIVE HUDSON asked Mr. Lauber if he envisioned an                   
  expansion of the CDQ program.                                                
  MR. LAUBER responded the only eligible communities in the                    
  current CDQ program on pollock are within 50 miles of the                    
  coast of the Bering Sea.  There are a number of communities                  
  that the state did not find eligible such as Dutch Harbor                    
  and Unalaska.                                                                
  Number 498                                                                   
  REPRESENTATIVE CARNEY made a motion to ADOPT the draft                       
  committee substitute for HJR 50 as CSHJR 50(RES).                            
  CHAIRMAN WILLIAMS asked if there were any objections.                        
  Hearing none, CSHJR 50(RES) was ADOPTED.                                     
  OLE HARDER, KODIAK, said he has been involved in Alaska                      
  fisheries since 1948 including all types of fish and                         
  canneries.  He felt the resources and the fishing business                   
  are in the worst condition ever.  He stressed a high                         
  percentage of the salmon industry will go broke this year.                   
  Unless $20-25 million is devoted to saving the second                        
  biggest industry in the state, it will go broke.  Mr. Harder                 
  emphasized this will be an even worse year for the industry.                 
  He favors additional taxes to save the industry.                             
  REPRESENTATIVE CARNEY asked if additional money is                           
  allocated, what it will be used for.                                         
  MR. HARDER responded additional efforts other than ASMI are                  
  needed.  He stressed there is a need for high line                           
  REPRESENTATIVE HUDSON wondered if Mr. Harder meant that the                  
  $25 million a year will expand the domestic market.                          
  MR. HARDER said that is correct.                                             
  Number 605                                                                   
  REPRESENTATIVE BUNDE made a motion to MOVE CSHJR 50(RES) out                 
  of committee with INDIVIDUAL RECOMMENDATIONS.                                
  CHAIRMAN WILLIAMS asked if there were any objections.                        
  Hearing none, the motion PASSED.                                             
  (CHAIRMAN WILLIAMS noted for the record that REPRESENTATIVE                  
  GREEN had joined the committee at 8:22 a.m.)                                 
  TAPE 94-11, SIDE B                                                           
  Number 000                                                                   

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