Legislature(2011 - 2012)BELTZ 105 (TSBldg)

02/15/2011 01:30 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Bills Previously Heard/Scheduled TELECONFERENCED
Heard & Held
Moved SB 38 Out of Committee
Moved CSSB 67(L&C) Out of Committee
        SB  67-LOAN FUNDS:CHARTERS/MARICULTURE/MICROLOAN                                                                    
1:36:35 PM                                                                                                                    
CHAIR EGAN  announced SB 67 to  be up for consideration  and that                                                               
it was requested by the Governor.                                                                                               
DANA  OWEN,  staff  to  Senator  Egan,  presented  CSSB  67(L&C),                                                               
labeled  26-GS1728\M. He  said  there were  a  lot of  conforming                                                               
drafting changes,  because bills from the  governor are generally                                                               
drafted by the Department of  Law which uses a slightly different                                                               
drafting manual  than legislative  drafters. The  substance isn't                                                               
different, but some  of the language is. He  said the substantive                                                               
changes  start with  the  title  on page  1,  and explained  that                                                               
because  the microloan  provisions  were passed  in another  bill                                                               
those provisions  were deleted  from this bill.  On page  1, line                                                               
13, "grant" was  added to the list; that also  happens on page 5,                                                               
line 13.                                                                                                                        
On  page 7,  the department  asked  to include  language about  a                                                               
vessel "determined to  be integral to the operation  of the farm"                                                               
that  makes these  loans available  for purchasing  a boat  for a                                                               
mariculture site.  Using these loans  for boats  was specifically                                                               
prohibited  before.  The  microloan provisions  were  deleted  in                                                               
addition to transitional language.                                                                                              
1:39:59 PM                                                                                                                    
SENATOR  PASKVAN moved  to adopt  the committee  substitute (CS),                                                               
version M. There were no objections and it was so ordered.                                                                      
SEAN RUDDY,  member, Kachemak Shellfish  Growers Co-op,  and Vice                                                               
President Alaska  Shellfish Growers Association,  Anchorage, said                                                               
he is  an oyster farmer in  Halibut Cove in Kachemak  Bay. He has                                                               
been an oyster farmer for eight years  and he said it takes a lot                                                               
of cash  to get  up and  rolling. If he  didn't have  some family                                                               
backing,  he would  have had  to give  up by  now. It  takes many                                                               
years to  turn a product;  you get a  portion of your  product in                                                               
two years  and you don't get  any profit for those  years. A boat                                                               
is a  significant portion  of his investment  aside from  all the                                                               
other operating costs  of equipment and fees and he  was happy to                                                               
see that  included. He  said getting  turned down  for a  loan is                                                               
almost a  formality and just  a waste of  the bank's time;  so he                                                               
was disappointed to see that language.                                                                                          
MR. RUDDY  said oyster farming  is a "great green  industry." You                                                               
don't put  any feed in  the water; you  just put the  oysters in,                                                               
keep them clean, and keep moving  them around. So, there is a lot                                                               
of work to  do. But it's renewable and they  can conceivably keep                                                               
doing it for many years.                                                                                                        
SENATOR  PASKVAN asked  how long  before he  had sufficient  cash                                                               
inflow to meet the annual outflow.                                                                                              
MR. RUDDY  replied he is still  paying a crew because  he has had                                                               
to take other  jobs to get the capital he  needs to operate. This                                                               
will be the  summer that he will  take over more of  the work. He                                                               
originally started with plan of  doing it all himself, but needed                                                               
to have money to keep the operation going.                                                                                      
SENATOR  PASKVAN  asked  what  he   thought  about  the  six-year                                                               
provision before paying back the loan.                                                                                          
MR. RUDDY responded  that his operation was on year  eight and he                                                               
was "still  just squeaking by," but  he saw how it  could be done                                                               
in six  years if everything  was lined up properly.  He explained                                                               
you only get  a percentage of your first crop  back in two years.                                                               
It takes  a while to  build up a  farm to  the point where  it is                                                               
constantly  producing. For  the first  three years  or so  he had                                                               
problems getting seed, but now  there are more in-state nurseries                                                               
and more seed is available.                                                                                                     
SENATOR PASKVAN said he applauded his optimism.                                                                                 
1:45:48 PM                                                                                                                    
CHAIR EGAN  asked how  long it  takes an  oyster to  mature under                                                               
ideal conditions so he is making a profit.                                                                                      
MR.  RUDDY  answered under  ideal  conditions,  you might  get  a                                                               
quarter of the oysters back in  two years, but all the oysters in                                                               
the  same crop  might take  different times  to mature.  It might                                                               
take as many as four or five years for some to mature.                                                                          
1:47:26 PM                                                                                                                    
PAUL FUHS, Pac  Alaska, Anchorage, supported SB 67.  He said this                                                               
company has  about 35  acres of  state land  under lease  for the                                                               
purpose of geoduck farming.{ This  is a new industry that started                                                               
seven or  eight years ago  when they  just weren't sure  it would                                                               
work. So  considering a  bill like this  earlier might  have been                                                               
MR.  FUHS displayed  some of  the first  harvest in  the form  of                                                               
frozen product explaining they were  farmed geoducks that are six                                                               
or seven  years old. So,  the term of the  loan in the  bill fits                                                               
the biology  of this animal.  He said they planted  about 250,000                                                               
seeds so far, but to get up  to the level similar to what British                                                               
Columbia or Washington State was  doing, they would need to plant                                                               
a half million to one million animals per year.                                                                                 
He described the economic potential  of this industry saying they                                                               
are not  just talking about  the farm itself, but  involve people                                                               
in the community  at many levels like buying the  seed in Seward,                                                               
flying it down  to Ketchikan, hiring a local diver  and a boat to                                                               
go out and plant them, hiring  divers to harvest them, and buying                                                               
fuel. They also  use the local fish processing plant  in the off-                                                               
season, so that keeps those  workers working over the winter when                                                               
salmon isn't being  processed. That makes it a  little easier for                                                               
those companies  to manage their  processing crew and  helps them                                                               
hold  on to  their  workers.  Then the  product  gets  put on  an                                                               
airplane and  it gets shipped to  Anchorage where it gets  put on                                                               
the international flights to Japan and China, the main markets.                                                                 
MR. FUHS said  he appreciated the Governor and  the Department of                                                               
Commerce for  bringing this bill  forward and this  committee for                                                               
hearing it. They support this bill  in its current form and would                                                               
use the  provisions to  help them purchase  more seed  and expand                                                               
the farms.  There are additional  expenses on the front  end; for                                                               
instance they  are paying about  $10,000 a  year to the  state in                                                               
lease fees  and of course,  there is  no revenue from  that until                                                               
further  down the  road. So,  a  program like  this would  really                                                               
help.  Once the  business  is up  and running,  it  would not  be                                                               
CHAIR EGAN asked if there is more acreage available for farming.                                                                
MR. FUHS  answered yes; there  is quite a  bit. You have  to look                                                               
for the right substrate conditions. It  has to be soft enough for                                                               
the animals  to dig in and  they siphon 85-90 gallons  of water a                                                               
day. The area needs good water  flow. Southeast has a lot of good                                                               
areas and  to meet the  best interest  findings, one has  to show                                                               
the farm is  not interfering with the commercial  dive fishery or                                                               
with any other users.                                                                                                           
SENATOR PASKVAN asked why the wrapping was from Cabela's.                                                                       
MR. FUHS  explained that was  just the bag  they used to  get the                                                               
frozen product  to Juneau  and the  animals are  normally shipped                                                               
SENATOR  GIESSEL  asked  if  these  geoducks  are  indigenous  to                                                               
MR. FUHS  answered yes; no other  species is allowed in.  So they                                                               
take the brood stock, harvest them  and send them to the hatchery                                                               
in Seward.  The hatchery  in Seward warms  the water  causing the                                                               
stock to spawn.  It raises them to a certain  size and sends them                                                               
down to Pac  Alaska. Alaska is too cold for  oysters to reproduce                                                               
here, he explained, and that is why importing spat is allowed.                                                                  
1:54:01 PM                                                                                                                    
SENATOR GIESSEL asked if there  is an Alaskan market for geoducks                                                               
or is it all exported.                                                                                                          
MR. FUHS replied  there is a small Alaskan market.  It is used in                                                               
sushi and is called "mirugai." Some people make a stew.                                                                         
WANETTA  AYERS,  Director,   Division  of  Economic  Development,                                                               
Department  of  Commerce,   Community  and  Economic  Development                                                               
(DCCED), offered to answer questions  regarding SB 67. There were                                                               
no questions.                                                                                                                   
1:56:09 PM                                                                                                                    
SENATOR PASKVAN  moved to  report CSSB  67(L&C), version  M, from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
note(s). There were no objections and it was so ordered.                                                                        

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