Legislature(2001 - 2002)
03/20/2002 03:35 PM Senate RES
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 329-ALLOW CDQ GROUPS TO HOLD ENTRY PERMITS
CHAIRMAN JOHN TORGERSON called the Senate Resources Committee
meeting to order at 3:35 p.m. Senators Wilken, Stevens, Elton and
Chairman Torgerson were present. Chairman Torgerson said the
committee would have a quorum until 4:00 so it wouldn't be able
to move any bills today. He announced SB 329 to be up for
consideration.
MS. KELLY HUBER, staff to Senator Halford, sponsor of SB 329,
explained:
SB 329 provides an additional tool to the community
development quota groups by allowing them to hold
limited entry permits. Broadening the limited entry
permitting process creates a mechanism that will allow
the CDQ groups to protect their own region and get
permits into smaller communities within their
geographic bounds. It's an effort to bring new jobs and
wages that will strengthen the economic well-being in
communities of Western Alaska. Should this bill become
law, limited entry permits would be held by
individuals, CDQ groups, CFAB and other state loan
programs. The sponsor recognizes that this is the first
step in the process and welcomes public comment that
will be before you today and encourages changes that
will strengthen the bill and at the same time prevent
unintended consequences.
MR. BRUCE TWOMLEY, Chairman, Commercial Fisheries Entry
Commission (CFEC), stated support for getting permits into the
hands of the local rural residents, but was against the bill in
its current form. He stated, "I want to say that there's the
means to meet those goals under state law right now."
He explained that under the existing state commercial loan
program, a special loan program was created some years ago by
Nels Anderson for rural residents. It allows CDQ groups to
partner in the process to help get more permits into the hands of
local people. CDQ groups can actually promote local people for
the loans and partner with the Division of Investments. He noted:
The reason we feel compelled to speak against the bill
basically comes down to two points. First, I think
there are some serious legal issues raised by the bill.
The bill would authorize CDQ organizations to hold
limited entry permits. Well, CDQs are entities that are
confined to certain limited geographic areas in rural
Alaska. They're also composed entirely of Alaska Native
villages certified by the Secretary of Interior. This
is a very limited category of holders of limited entry
permits. It's very restrictive. I think you can
contrast it with the category that formerly governed
the subsistence preference in Alaska. Under our state
constitution, a rural preference for subsistence was
struck down. Now, that's a very broad largely open
category. The category being put forward in this bill
is much more restrictive in terms of area and in terms
of the composition of the groups that can hold limited
entry permits. The basic question I would want to raise
is how would you defend this new category under the
state constitution? I'm not sure that can be done.
The second question I want to raise is: why open the
holding of limited entry permits to entities at all?
The major step this bill takes would be to authorize an
entity, a corporation, to hold limited entry permits.
Going back to the time limited entry was created, one
of the fundamental purposes of the Act was to make sure
that limited fishing privileges could be held only by
real live individual fishermen. The notion was that
there was some history of exploitation of Alaskan
fishermen by corporations and other entities. The idea
was to help insulate Alaskan fishermen from that by
giving them total control of their fishing privileges
so that they could conduct their own affairs, conduct
their own businesses, have some bargaining power in the
process. I would submit that in the future as we face
various dislocations for the industry trying to adjust
to a changing world market that preserving that
individual place for Alaskans in the fishery remains
important; even though there may be any number of
creative ideas where people could get together with
CDQs. CDQs could help open up new markets. I think that
the individual fishermen need to remain in control of
their fishing rights so that they have some bargaining
power in the process so they can preserve a place in
the process and not simply become an employee of a
corporation. I think that issue remains important
today…
CHAIRMAN TORGERSON asked if other loans are available to people.
MR. TWOMLEY reviewed his list. The State Commercial Fishing Loan
Program has money available in the Division of Investments, which
has a special category to loan money to rural residents for
limited entry permits. He stated:
There has been an upper limit on the amount of money
that was available for those loans and today, with
depressed permit prices, permits for the first time are
within reach of this loan program. It's called the Type
B Loan Program. Now, that's coupled with an opportunity
for CDQ organizations to literally be a partner with
the Division of Investments. All CDQ organizations need
to do is deposit some money into an account where it
can sit and collect interest and have that money
available as loan guarantees. From there they can work
together with the Division of Investments where
Division of Investments does all the administrative
work, handles the money, all of the detail work and the
opportunity for the local CDQ organization is to pick
good candidates for the loans - people they know can
succeed as fishermen. It's a much better prospect than
having someone in Juneau pick an applicant for a
loan…They can also pick people to stand in line to step
in and assume the loan in the event that there's a
failure of the original loan. It's an opportunity; it's
there right now and it doesn't require changing the
law.
CHAIRMAN TORGERSON asked if his technical concerns are small in
nature.
MR. TWOMLEY replied a couple of them are small. Language on page
1, line 6 to 10, would authorize CDQ organizations to hold
interim use permits and he assumed those were in open fisheries
as opposed to limited entry fisheries. That language doesn't make
sense since CDQ organizations can participate in open-to-entry
fisheries now. They simply have to employ a captain and a captain
can buy an interim use permit to participate in those fisheries.
He remarked:
The only way this would make sense is if CDQs under the
bill would be in a position to compete with individual
fishermen for limited entry permits if the fishery goes
to limited. That may be the purpose of the bill because
at a later point in the bill, page 7, lines 11 -13, the
wording suggests that the CDQ itself could qualify for
a limited entry permit on initial issuance by the state
just as individual fishermen can now. That was an issue
that concerned me…
One has to contemplate that limited entry only survives
under the state constitution if it satisfies the two
specified constitutional purposes, one of them being
conservation of the fishery, the other one preventing
economic distress among fishermen. If you can't satisfy
those two provisions, the limited entry system will be
struck down and I can't see from the bill that it meets
either of those standards.
3:47 p.m.
SENATOR STEVENS asked why the sponsor statement says that CFAB
and state loan programs would become eligible under this bill.
MS. HUBER responded, "The sponsor is just letting you know that
the CDQ groups would be among the list that could hold, if the
bill passed, limited entry permits."
SENATOR STEVENS said that CFAB cannot hold a limited entry permit
right now.
MR. TWOMLEY added that is true, but it has a security interest.
SENATOR STEVENS asked if he was saying that nothing right now
prevents a CDQ group from having secured interest on a loan.
MR. TWOMLEY replied they have the opportunity to piggyback on top
of the State Division of Investments Program now. They can do it
with CFAB, too.
SENATOR STEVENS said, in that case, the CDQ group is the
guarantor of the individual.
MR. TWOMLEY said that is correct. That helps make the money go
further and, in this case, it's in a program where no down
payment is required. Basically, the loan program does all the
grunt work.
SENATOR STEVENS asked what the security would be for the CDQ
group.
MR. TWOMLEY answered that the permit, itself, will be security.
The Division of Investments and CFAB are authorized to actually
foreclose on a permit. He stated, "Under the scheme, they
wouldn't necessarily have to do that because there could be
another local person standing in line ready to assume the loan
under this program. They wouldn't necessarily lose the permit
from the local area.
SENATOR STEVENS asked how many limited entry permits exist for
the salmon fishery now.
MR. TWOMLEY replied that altogether there's about 14,000 permits.
Alaskans hold about 78% (11,000) of the permits overall. Rural
residents hold more than half of the permits held by Alaskans.
SENATOR STEVENS asked if he had a breakdown by region.
MR. TWOMLEY replied that it varies from fishery to fishery. In
the lower Yukon, Norton Sound, and lower Kuskokwim, the
percentage of Alaskans holding permits varies between 98 - 99%.
Most of them are held by local people. In Bristol Bay, 72% of the
setnet permits are held by Alaskans and more than half of those
are held by local Alaskans. In the driftnet fishery a little more
than 49% are Alaskans, which is roughly the historic percentage
of Alaskan/not Alaskan participation in the fishery. More than
half of the permits held by Alaskans are held by local Alaskans.
It's in excess of 450 drift permits.
He said they tried to encourage people to establish a local
permit brokerage to help them get limited entry permits. They
have been working with the CDQ and their representative, Robin
Samuelson, has told him that they are exploring the kind of
program he has suggested could be productive in the Bay.
3:53 p.m.
MR. STEVE WHITE, Assistant Attorney General, agreed with Mr.
Twomley's comments, especially regarding the constitutional
issues. He explained:
We have a constitutional problem because CDQ groups
have to be certified and one of the criteria is that
they have to be certified as a Native village under
ANCSA. The federal government is permitted under its
constitutional scheme to give preference based upon
Native issues, but the state constitution does not
allow us to do that unless we meet really strict
standards under our equal protection and our uniform
application clauses. Essentially, our courts would say,
'What is the purpose for this type of scheme and if the
purpose is to return permits [indisc.], is there
another way to do that without establishing essentially
a racial classification or preference?' Mr. Twomley has
already said there are other ways to accomplish that.
So, I think this would be very vulnerable under our
state constitution.
Also, I think it could be challenged under the federal
constitution, because it would be giving not only a
preference to racial classification, but to Alaska
residents versus nonresidents who also commercial fish.
Then we get back to the whole privileges and immunities
clause problem that we're dealing with in the Carlson
case. We are actually vulnerable there, because not
only do the CDQ groups have to be Native village
certified, they have to be local residents - that is
Alaskans. So Alaskans would be given preference in this
scheme versus nonresidents. And even though I like that
idea, the federal constitution has problems with it.
SENATOR ELTON said his memory of the limited entry debate in the
early '70s is that the privilege of limited entry was to be
accorded to real people and not to corporations. That was based
on the state's previous experience and the concerns many people
in the state had about processors accumulating permits.
MR. WHITE said he wasn't sure of the constitutional history of
the amendment that allowed limited entry, but he knew a lot of
the impetus behind it was to get the fishing industry away from
being owned by the processors, particularly the ones in Seattle
who had accumulated a lot of power through owning the
opportunities to fish and sharecropping them out to the
fishermen.
SENATOR ELTON said he asked because this legislation is so
narrowly drafted only one kind of an entity would be allowed to
accumulate the permits from a very discreet region of the state.
He asked if that would be a problem.
MR. WHITE replied that he thought the language was general enough
to pass that particular constitutional test. He thought the other
constitutional problems were a lot more severe.
MR. JEFF BUSH, Deputy Commissioner, Department of Community and
Economic Development (DCED), said he is also a member of the
state's CDQ team. He stated:
In contrast to Bruce Twomley's position, our agency at
least is supportive of the philosophy behind this
particular piece of legislation, but we share some of
the same concerns in terms of the legal issues and
truly believe that those need to be addressed…
Excluding the legal concerns or assuming they could be
dealt with, our department at least is supportive of
the concept of assisting CDQ groups, at least in terms
of if the overriding philosophy or purpose of this
legislation as we understand it is to essentially
assist western Alaskan communities in retaining permits
in the regions and allowing fishermen in those
particular communities to have more opportunity than
they would otherwise to utilize those permits, maybe
we're only arguing here or disagreeing on how you
accomplish that.
MR. BUSH said he recognized the legal concerns and would oppose
anything that would open up the limited entry program to larger
entities or other entities like fish processors.
SENATOR ELTON said that CDQ groups are processors in a sense.
MR. BUSH responded that CDQ groups are in all cases nonprofit
corporations. Their members are the communities that they
represent specifically, they have to actually select their board
from the communities and as part of their businesses they do
processing.
CHAIRMAN TORGERSON questioned how much of a problem this is if
99% of the permits are already owned by local rural residents. He
asked if that was his experience in dealing with CDQ groups.
MR. BUSH replied that in some of the regions that is true, but in
the Bristol Bay area it's not true; it's more like 50/50. That is
where the loss of permits from Alaska is occurring.
SENATOR STEVENS asked if this bill passes, whether each CDQ group
could own a permit in each limited entry fishery.
MR. TWOMLEY said he thought that was a correct reading of the
bill.
SENATOR STEVENS noted that he thought there were about 26 limited
entry fisheries.
MR. TWOMLEY said he thought it was intended that the CDQ group
could hold more permits than one.
SENATOR STEVENS asked if the CDQ entity could only hold one
permit, would he still oppose the bill.
MR. TWOMLEY said he was concerned about that as well as the broad
opportunities for an entity to hold limited entry permits. He
explained:
There are some limited exceptions now for cost recovery
permits and educational permits in the Act, but there
is this basic bias in the Act from the beginning for, I
think, sound reasons that fishing privileges ought to
be restricted to real live individual fishermen and not
go to entities. I'm kind of worried about opening the
door and the additional pressures that might create for
more entities to move in and hold limited entry
permits. Even if it's confined to CDQ holding limited
entry permits, even though CDQs are one of the best
things that has ever happened to Western Alaska, if
CDQs can hold limited entry permits. It does interpose
a corporation between a fisherman and the fisherman's
rights. That fisherman becomes an employee of the
corporation as opposed to somebody who can make his or
her own decisions about prosecuting a fishery. I would
be concerned about that.
CHAIRMAN TORGERSON asked if there was any cap they could put in
this bill to make him feel more comfortable, like saying a CDQ
couldn't own more than 10% of the permits available in the area,
if the legal issues were resolved.
MR. TWOMLEY replied that he was concerned about the principle.
SENATOR STEVENS theorized that a CDQ group is given special
recognition in federal law and has benefits of certain state
laws, but it's not recognized in the limited entry commission. He
asked Mr. Bush if CDQ groups can only invest in entities that
harvest fish.
MR. BUSH said that is correct right now, but that provision is
under review by the North Pacific Fisheries Management Council,
which might possibly allow a small percentage of in-region
general economic development investments instead of just
fisheries.
MR. JERRY MCCUNE, United Fishermen of Alaska (UFA), said that UFA
doesn't want to see any entity hold a permit, whether it's a CDQ
group or anything else. He said other processors in the state
would love to own permits. He said when the limited entry law was
drafted, it was pretty smart to keep permits in individual's
names so those permits would stay in Alaska. The biggest
opportunity that Bristol Bay has now is to start buying those
permits back, like Mr. Twomley said.
MR. ROBERT HEYANO, Bristol Bay Economic Development Council,
supported the concept of SB 329 and shared Commissioner Twomley's
concerns, but the Council feels the content of the bill is worth
pursuing.
MR. OLIVER HOLM, Kodiak, opposed SB 329. He thought there were
other methods to get permits into local ownership in Bristol Bay.
He was concerned about the legal issues and keeping permits in
the hands of individuals.
MR. ALAN PARKS, Homer fisherman, shared a lot of the concerns
expressed about SB 329, including consolidation into entities
that would ultimately control communities and independent
fishermen. He commented, "The protection of independent fishing
families is very important to the social structure and fabric of
our communities and our lives as fishermen…"
MR. MALCOLM MILNE, Homer fisherman, opposed SB 329 for all
reasons already stated, especially those by Mr. Twomley.
MR. MAKO HAGGERTY, retired fisherman, said he would like to fish
again sometime, but bills like this make fishing for him in the
future look pretty dim. He surmised, "It seems to me like the
first step in turning fishing into an agribusiness and that, of
course, eliminates the individual fisherman, which is what I am,
was, and will be."
MR. YAKOV REUTOV, Homer fisherman, opposed SB 329 for all the
reasons stated.
CHAIRMAN TORGERSON said they would set the bill aside for further
work.
| Document Name | Date/Time | Subjects |
|---|