Legislature(1999 - 2000)

03/28/2000 02:05 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE                                                                                                         
March 28, 2000                                                                                                                  
2:05 P.M.                                                                                                                       
TAPE HFC 00 - 84, Side 1.                                                                                                       
TAPE HFC 00 - 84, Side 2.                                                                                                       
TAPE HFC 00 - 85, Side 1.                                                                                                       
TAPE HFC 00 - 85, Side 2.                                                                                                       
TAPE HFC 00 - 86, Side 1.                                                                                                       
CALL TO ORDER                                                                                                                   
Co-Chair Therriault called the House Finance Committee                                                                          
meeting to order at 2:05 P.M.                                                                                                   
Co-Chair Therriault   Representative Foster                                                                                     
Co-Chair Mulder    Representative Grussendorf                                                                                   
Representative G. Davis   Representative Moses                                                                                  
Representative Austerman  Representative Phillips                                                                               
Representative J. Davies  Representative Williams                                                                               
Representative Bunde was not present for the meeting.                                                                           
ALSO PRESENT                                                                                                                    
Joanie Waller, Staff, Representative Austerman; Bruce                                                                           
Schactler, United Salmon Association, Kodiak; David Forbush,                                                                    
Ward's Cove Packing Company, Seattle; John Garner, NorQuest                                                                     
Seafoods, Seattle; Brett Fried, Economist, Department of                                                                        
Revenue; Stephanie Madsen, Vice President, Pacific Seafood                                                                      
Processors, Juneau; Scott McAllister, United Salmon                                                                             
Association, Juneau; Steve Okerlund, Chief Operating                                                                            
Officer, Trident Seafoods, Seattle; Jim Eason, ANG LING                                                                         
Sponsor Group, Anchorage; Chris McDowell, Project Manager,                                                                      
Salmon Market Information Service, McDowell Group, Juneau.                                                                      
TESTIFIED VIA TELECONFERENCE                                                                                                    
Nan Thompson, Alaska Regulatory Commission, Anchorage;                                                                          
Jeffrey Bailey, Anchorage; Pat Hardina, Alaska Processing,                                                                      
Kenai; Virginia Adams, Kodiak; Tom Wishcher, Kodiak; Ken                                                                        
Roemihildt, North Pacific Processors, Cordova; Bill Bailey,                                                                     
Copper River Fine Seafoods, Cordova.                                                                                            
HB 18 An Act making a special appropriation from the                                                                            
earnings reserve account to the principal of the                                                                                
permanent fund; and providing for an effective                                                                                  
 HB 18 was HEARD and HELD Committee for further                                                                                 
HB 265 An Act extending the termination date of the                                                                             
Alaska regional economic assistance program; and                                                                                
providing for an effective date.                                                                                                
 HB 265 was POSTPONED for consideration.                                                                                        
HB 290 An Act relating to stranded gas pipeline carriers                                                                        
and to the intrastate regulation by the Regulatory                                                                              
Commission of Alaska of pipelines and pipeline                                                                                  
facilities of stranded gas pipeline carriers.                                                                                   
 CS HB 290 (FIN) was reported out of Committee with                                                                             
"no recommendation" and with a fiscal note by the                                                                               
Department of Community and Regional Affairs dated                                                                              
HB 363 An Act relating to salmon product reports; and                                                                           
providing for an effective date.                                                                                                
CS HB 363 (FIN) was reported out of Committee with                                                                              
"no recommendation" and with a new fiscal note by                                                                               
the Department of Revenue.                                                                                                      
HB 366 An Act relating to the rights of crime victims,                                                                          
the crime of violating a protective order or                                                                                    
injunction, mitigating factors in sentencing for                                                                                
an offense, and the return of certain seized                                                                                    
property to victims; expanding the scope of the                                                                                 
prohibition of compromise based on civil remedy of                                                                              
misdemeanor crimes involving domestic violence;                                                                                 
amending Rules 10, 11, 13, 16, and 17, Alaska                                                                                   
District Court Rules of Civil Procedure and Rule                                                                                
9, Alaska Rules of Administration.                                                                                              
HB 366 was POSTPONDED until March 29, 2000 at 9:00                                                                              
CSSB 269(RLS) am                                                                                                                
An Act relating to legislative powers and                                                                                       
responsibility with respect to collective                                                                                       
bargaining agreements between the state and a                                                                                   
labor or employee organization representing state                                                                               
employees; and providing for an effective date.                                                                                 
CS SB 269 (RLS) am was POSTPONED until March 29,                                                                                
2000 at 9:00 a.m.                                                                                                               
HOUSE BILL NO. 290                                                                                                              
An Act relating to stranded gas pipeline carriers and                                                                           
to the intrastate regulation by the Regulatory                                                                                  
Commission of Alaska of pipelines and pipeline                                                                                  
facilities of stranded gas pipeline carriers.                                                                                   
Co-Chair Therriault spoke to Amendment #1, 1-LS1269\K.1,                                                                        
Chenoweth, 3/23/00.  [Copy on File].  He noted that the                                                                         
amendment addressed the rate setting methodology.  Previous                                                                     
testimony from Alaska Regulatory Commission (RCA) explained                                                                     
the State user position. Co-Chair Therriault did not believe                                                                    
that establishing a tariff rate would endanger the product.                                                                     
Co-Chair Therriault WITHDREW Amendment #2, 1-LS1269\K.2.                                                                        
Co-Chair Therriault MOVED to adopt Amendment #1.                                                                                
Representative Phillips OBJECTED.  She noted that there had                                                                     
been serious discussion regarding the concern in the House                                                                      
Oil and Gas Committee.  Representative J. Davies emphasized                                                                     
that the amendment would place the rate making structure                                                                        
under utilities only.                                                                                                           
JIM EASON, REPRESENTATIVE OF ANS LNG SPONSOR GROUP,                                                                             
ANCHORAGE, stated that there are a number of issues that the                                                                    
Committee should consider.  He suggested to amend the bill                                                                      
would be premature and counter productive.  The issue of a                                                                      
proposed tariff would be best considered when the facts are                                                                     
available.  Under existing law, both the Pipeline Act and                                                                       
the Public Utilities Act give the Regulatory Commission the                                                                     
authority to require what is "reasonable and just".  Mr.                                                                        
Eason argued that the State is three to four years away from                                                                    
having enough information to determine what it will cost.                                                                       
That decision is not critical at this time.  He pointed out                                                                     
that this would be the first time in the State's history                                                                        
that a pipeline project would be required to file a tariff                                                                      
under the Utility Act even though it would be regulated                                                                         
under the Alaska Pipeline Act.  He recommended there be                                                                         
further discussion on the matter.                                                                                               
Co-Chair Therriault asked if the language had been included                                                                     
in the Oil and Gas Committee version of the legislation and                                                                     
the House Resources Committee removed if it was then.  Mr.                                                                      
Eason acknowledged that was correct.                                                                                            
NAN THOMPSON, (TESTIFIED VIA TELECONFERENCE), ALASKA                                                                            
REGULATORY COMMISSION, ANCHORAGE, referenced the memo                                                                           
included in member's packets which outlines the excluded                                                                        
items from the rate:                                                                                                            
? Public relations costs;                                                                                                       
? Lobbying expenses;                                                                                                            
? Charitable contributions;                                                                                                     
? Association dues;                                                                                                             
? Extraordinary management compensation;                                                                                        
? Research and development costs;                                                                                               
? Acquisition adjustments; and                                                                                                  
? Pensions and employee benefits.                                                                                               
She understood that the ANG LNG sponsor group would not want                                                                    
to limit their options in reserving space.  She suggested                                                                       
that the Committee remember the small percentage of the coal                                                                    
product which will go to the user.  The pipeline is being                                                                       
constructed mainly for export.  Only a very small percentage                                                                    
of the product will be used in the State. There also exists                                                                     
a timing question.  The issue is what potential can predict                                                                     
when they could make the decision.  The proposed methodology                                                                    
encourages more in-State use providing a clearer idea of                                                                        
what the costs will be.                                                                                                         
A roll call vote was taken on the motion to adopt Amendment                                                                     
IN FAVOR: Austerman, J. Davies, Grussendorf, Moses,                                                                             
OPPOSED:  Williams, G. Davis, Foster, Phillips                                                                                  
Representative Bunde and Co-Chair Mulder were not present                                                                       
for the vote.                                                                                                                   
The MOTION PASSED (5-4).                                                                                                        
Representative Foster MOVED to report CS HB 290 (FIN) out of                                                                    
Committee with individual recommendations and with the                                                                          
accompanying fiscal notes.  There being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
CS HB 290 (FIN) was reported out of Committee with "no                                                                          
recommendation" and with a fiscal note by Department of                                                                         
Community and Regional Affairs and two zero notes by                                                                            
Department of Natural Resources and Department of Revenue                                                                       
dated 2/21/00.                                                                                                                  
HOUSE BILL NO. 363                                                                                                              
An Act relating to salmon product reports; and                                                                                  
providing for an effective date.                                                                                                
JOANIE WALLER, STAFF, REPRESENTATIVE AUSTERMAN, stated that                                                                     
HB 363 renames the existing Wholesale Price Report (WPR,                                                                        
also referred to as AWPR or WCPR) to become the Alaska                                                                          
Salmon Price Report (ASPR) by updating it to include all                                                                        
salmon products. The report captures the bulk of Alaska's                                                                       
commercial salmon trade information in a timely and accurate                                                                    
Ms. Waller pointed out that currently, AS 43.80.050 requires                                                                    
processors who sell 240,000 pounds or more of thermally                                                                         
processed salmon in a calendar year, to report three times                                                                      
each year, the volume and price of cans sold. She suggested                                                                     
that the ASPR would reflect the changing times in the                                                                           
industry, which has evolved to include all salmon products,                                                                     
thermally processed and fresh, frozen, and roe products.                                                                        
Ms. Waller pointed out that HB 363 would expand the                                                                             
information base for ex-vessel value, production, and                                                                           
wholesale price reporting. In order to track the production                                                                     
of the State's resource, ASPR adds a section that requires                                                                      
processors to report the quantity of each salmon product                                                                        
form and species, by area of production, along with the                                                                         
wholesale prices of product sold.                                                                                               
Ms. Waller emphasized that the tax revenue realized from                                                                        
salmon fishing is generated from the ex-vessel price, which                                                                     
is the price that is paid to the fishermen. Fishery business                                                                    
taxes, raw fish tax, landing tax, Alaska Seafood Marketing                                                                      
Institute (ASMI) tax and aquaculture assessments are all                                                                        
based on the ex-vessel values of salmon products. The ASPR                                                                      
information is important for anyone planning income streams                                                                     
derived from the sale of Alaska's salmon.                                                                                       
Ms. Waller stated that issue has been debated for a long                                                                        
time. In 1984, the Department of Commerce and Economic                                                                          
Development published a report on the possible development                                                                      
of a program to determine wholesale price averages for                                                                          
salmon products.                                                                                                                
Ms. Waller noted that the reasons for presenting the                                                                            
information were two-fold:                                                                                                      
? Accuracy of information available to the State;                                                                               
? The sharing of information between harvesters and                                                                             
Co-Chair Therriault asked if thermally processed salmon was                                                                     
cooked salmon.  Ms. Waller replied it is.                                                                                       
BRUCE SCHACTLER, UNITED SALMON ASSOCIATION, KODIAK, noted                                                                       
that the report was a continuation of efforts of the past                                                                       
three years to bring to light for fishermen the value of the                                                                    
resource.  He stated that they have attempted to keep it at                                                                     
a "level of public trust" to evaluate the resource.  He                                                                         
emphasized that there is inaccurate user information                                                                            
available and that it has been damaging.  The legislation                                                                       
would bring that information into a more accurate place.                                                                        
Mr. Schactler pointed out that the most recent legislation                                                                      
was dated 1998.  The last salmon forum was last year and one                                                                    
of the recommendations was that there should be an increase                                                                     
in reporting and frequency of prices.  The design has come                                                                      
from recommendations from processors and the industry.  The                                                                     
intent was to create a forum which would protect                                                                                
Representative G. Davis asked if the forums would create a                                                                      
report or recommendations.  Mr. Schactler explained that                                                                        
there had been a 1999 Salmon Forum and that the                                                                                 
recommendations from that were that there should be at least                                                                    
one more reporting period within the current database.  At                                                                      
present time, there has been no designing done.                                                                                 
Representative G. Davis commented that there is currently a                                                                     
lot of information available.  He questioned if that                                                                            
information was not adequately representing the product.                                                                        
Mr. Schactler reiterated that the essential information is                                                                      
not out there.  What is needed is a detailed report, and now                                                                    
only is stipulated in regulation, not in statute.                                                                               
Therefore, the Department of Fish and Game is not able to                                                                       
make it available until late summer of the following year.                                                                      
For users of that database, that is too late.  The United                                                                       
Salmon Association is looking for something that is timelier                                                                    
and that would provide more of a moving picture of the                                                                          
Representative Williams asked how the information could be                                                                      
used confidentially and if that would hurt the processors.                                                                      
Mr. Schactler replied that the numbers could not hurt the                                                                       
processors.  He noted that there have been a number of                                                                          
amendments to specifically address confidentiality.                                                                             
Representative Williams asked why the processors chose not                                                                      
to participate.  Mr. Schactler stated that the processors                                                                       
believe that the information is "no ones business" but their                                                                    
own.  They have indicated that the information supplied by                                                                      
the Department of Fish and Game is adequate for the needs of                                                                    
the association.                                                                                                                
Representative Phillips inquired about the salmon in Cook                                                                       
Inlet and how that process worked.  She asked if the                                                                            
fisherman had been paid after the report came out.  Mr.                                                                         
Schactler replied not necessarily.  Some contracts are                                                                          
careful not to place the processors in a position with the                                                                      
buyer when they are not certain what they will be receiving                                                                     
from the fish. Every contract currently used has a portion                                                                      
which provides an advance.  The data base is used at a later                                                                    
date to access the revenue that was received based on the                                                                       
contract and shared at a later date.                                                                                            
Representative Phillips questioned if the legislation was a                                                                     
request for filing three reports a year.  Mr. Schactler                                                                         
replied it was.  At this time the way it works, there is                                                                        
data three to six months after the fish are sold.                                                                               
Representative Phillips noted that the report indicates,                                                                        
"after it was caught", and that time ends August 31st.  At                                                                      
that time, they have thirty days from which to put the                                                                          
report together.  It would take six to eight weeks for the                                                                      
Department of Revenue to consolidate the report.  If the                                                                        
fish were caught in May, the fisherman would not know until                                                                     
sometime in November what the value was.  Mr. Schactler                                                                         
emphasized that the report only deals with fish "sold".                                                                         
Representative Phillips asked if a fisherman could                                                                              
conceivably not receive their money for the fish they                                                                           
caught, six to nine months out.  Mr. Schactler replied that                                                                     
is how it works today.  He added, however, it depends on the                                                                    
agreement the fisherman has with their buyer.  At this time,                                                                    
there is no way to know what your share will be.  That                                                                          
number does not exist.                                                                                                          
Representative Moses inquired if 80% of the data would be                                                                       
adequate.  Mr. Schactler replied that it partially would be.                                                                    
He explained that the canned product makes up 36% of the                                                                        
products by volume. The 20% comes from the more innovative                                                                      
processors.  The last 20% is the "head of the movement".                                                                        
Representative Moses maintained that the legislation would                                                                      
be difficult for small processors in State.  Representative                                                                     
Austerman pointed out that current law indicates a 240                                                                          
thousand-pound limit.  Representative Moses proposed that                                                                       
the number be changed to one million pounds, so to protect                                                                      
the smaller processor.                                                                                                          
JEFFREY BAILEY, (TESTIFIED VIA TELECONFERENCE), COMMERCIAL                                                                      
FISHERMAN & SMALL SEAFOOD PROCESSOR, ANCHORAGE, voiced                                                                          
strong opposition to the proposed legislation.  He believed                                                                     
that the bill would place unusual burdens upon the smaller                                                                      
processors.  He noted that price information is available                                                                       
and that the prices can change in a matter of seconds. It                                                                       
would be very difficult for the small processors to be                                                                          
competing in that arena.  Mr. Bailey reiterated that                                                                            
legislation would be very difficult for these processors and                                                                    
that the bill will result in isolating the two industries                                                                       
from each other.  He believed that it would affect the price                                                                    
for fishermen.                                                                                                                  
Mr. Bailey commented that the action is not coming from the                                                                     
Department of Revenue.  He emphasized that the bill is going                                                                    
in the wrong direction.  There is risk in harvesting fish,                                                                      
and given the world market, dealing with salmon, the risk is                                                                    
even larger.  He invited members to look at the "bigger"                                                                        
picture and find a way of working together in the world                                                                         
Representative Williams asked for suggestions of how to work                                                                    
more closely.  Mr. Bailey responded that profit sharing                                                                         
works directly with the fishermen.  He reiterated the risks                                                                     
that the processors experience.                                                                                                 
(TAPE CHANGE, HFC 00 - 84, Side 2).                                                                                             
Representative Austerman asked if increasing the amount to                                                                      
one million pounds would remove Mr. Bailey's concern in                                                                         
recording requirements.  Mr. Bailey stated that it would.                                                                       
Representative J. Davies inquired if there was information                                                                      
needed for the proposed plan, which is not currently being                                                                      
collected.  Mr. Bailey explained that when tax returns are                                                                      
filed, the processors do not record poundage.  The                                                                              
requirement would stipulate that the number be broken down                                                                      
according to portions, fillets, and pieces.   Consolidating                                                                     
that information would be very time consuming.                                                                                  
Representative G. Davis questioned where that information                                                                       
currently could be found.  Mr. Bailey explained that there                                                                      
are a number of web sites that are listing products for sale                                                                    
and the prices of those products.  He emphasized that this                                                                      
is a world market.  The State of Alaska no longer dominates                                                                     
the market and there are a lot of fish available.  It is a                                                                      
competitive marketplace.                                                                                                        
KEN ROEMIHILDT, (TESTIFIED VIA TELECONFERENCE), NORTH                                                                           
PACIFIC PROCESSORS, CORDOVA, voiced opposition to HB 363,                                                                       
stating that the legislation is unnecessary. He noted that                                                                      
the process could "back-fire" with the prices being lower                                                                       
than currently being paid.  He believed that not knowing                                                                        
prices often encourages higher prices. Mr. Roemihilt                                                                            
remarked that cost can play a part in future price                                                                              
negotiations.  He added that the proposal will be time and                                                                      
work intensive.                                                                                                                 
BILL BAILEY, (TESTIFIED VIA TELECONFERENCE), COPPER RIVER                                                                       
FINE SEAFOODS, CORDOVA, spoke in opposition to HB 363.  He                                                                      
stated that the proposed legislation is not the answer to                                                                       
what the fishermen are looking for.  He emphasized that the                                                                     
processors are not the ones who determine the actual price                                                                      
of fish. Ultimately, that goes back to the buyer.  The                                                                          
legislation will be a "night mare".                                                                                             
PAT HARDINA, (TESTIFIED VIA TELECONFERENCE), COOK INLET,                                                                        
ALASKA PROCESSING, KENAI, spoke to the difficulty that would                                                                    
be entailed in creating the report.  She questioned who                                                                         
would utilize the information, emphasizing that the                                                                             
processors would not be.  Ms. Hardina agreed that contrary                                                                      
to what was heard, the information could backfire on the                                                                        
fishermen.  She believed that research and marketing                                                                            
consultants would analyze and republish the information. She                                                                    
stated that processors would need to be willing to sign the                                                                     
Ms. Hardina did not believe that the fishermen had given a                                                                      
reasonable argument.  She listed that the number of                                                                             
processors that have closed over the past couple of years.                                                                      
If the profits are not reinvested, the industry will die.                                                                       
She stressed that it is not possible to educate every                                                                           
fisherman about price.  The bill will drive another wedge                                                                       
between the fishermen and the processors.  Ms. Hardina                                                                          
questioned at what point does the Legislature have the                                                                          
authority to force operations.                                                                                                  
Representative G. Davis questioned if the one million-pound                                                                     
limit would make a difference.  Ms. Hardina replied that                                                                        
change would not make much of a difference.  To increase the                                                                    
volume to one million pounds would only shift the burden to                                                                     
the larger processors.                                                                                                          
Representative Williams asked what Ms. Hardina would do to                                                                      
close the gap.  Ms. Hardina emphasized that no one will be                                                                      
satisfied unless they are making a lot of money.  The                                                                           
processors acknowledge that a problem exists.  She suggested                                                                    
that the fishermen should use their own organization to read                                                                    
the reports and bring that information back to a mutual                                                                         
source. She reiterated that the information is available on                                                                     
the Internet.                                                                                                                   
Representative Williams asked if her company placed their                                                                       
information on the Internet.  Ms. Hardina replied that they                                                                     
did not.                                                                                                                        
VIRGINA ADAMS, (TESTIFIED VIA TELECONFERENCE), COMMERCIAL                                                                       
FISHERPERSON, KODIAK, spoke in support of the legislation.                                                                      
She noted that it would be well-used information.  She                                                                          
stated that fishermen are in contract with processing                                                                           
companies to assess what they are being paid.  To date,                                                                         
there is nothing to hang that "trust" upon.  Ms. Adams                                                                          
stated that the intent of the legislation would remove the                                                                      
"mystery" and that fishing people would then be sharing in                                                                      
the risk.  At present time, there is no core report but                                                                         
rather a reduced wholesale one.                                                                                                 
TOM WISCHER, (TESTIFIED VIA TELECONFERENCE), COMMERCAIL                                                                         
FISHERMAN, KODIAK, testified in support of the legislation.                                                                     
He acknowledged the "riff" between the fish industry and the                                                                    
processors.  The fishermen are asking to know what they are                                                                     
entitled to, what is produced, and how the cost is                                                                              
determined.  He disagreed that this information is currently                                                                    
available for the fishing industry.                                                                                             
BRETT FRIED, ECONOMIST, DEPARTMENT OF REVENUE, advised that                                                                     
the Department has not taken a position on the collection of                                                                    
the data.  He stated that the Department does not believe                                                                       
that this would be a function of the Department of Revenue                                                                      
because there is no direct link with taxation.  However, Mr.                                                                    
Fried noted that the Department would be requesting one                                                                         
position in order to create the proposed requirements to                                                                        
build a $20 thousand dollar database.                                                                                           
Representative Austerman asked if changing the requirements                                                                     
from 240 thousand pounds to one million pounds would require                                                                    
more of a workload for the Department.  Mr. Fried stated                                                                        
that it would as it would reduce the number of processors                                                                       
reporting and that would decrease costs.                                                                                        
Representative Austerman asked how long the Department had                                                                      
been collecting the data.  Mr. Fried replied that it has                                                                        
been collecting data since at least 1983, and probably                                                                          
before that.                                                                                                                    
STEPHANIE MADSEN, VICE PRESIDENT, PACIFIC SEAFOOD                                                                               
PROCESSORS, JUNEAU, noted that they are opposed to the                                                                          
proposed legislation.  She emphasized that reporting is a                                                                       
large part of the business.                                                                                                     
Ms. Madsen spoke to the current reports required by the                                                                         
Department of Revenue. The proposed legislation would                                                                           
significantly change the required reports from the current                                                                      
four-page report to a twenty-page report.  She noted that                                                                       
the reporting requirements would be increased fourfold.                                                                         
Ms. Madsen noted that they agree with the Department of                                                                         
Revenue regarding the change and level of complexity of the                                                                     
expanded report.  There will be an increased cost to the                                                                        
State and to industry.  Reporting wholesale prices by                                                                           
production area would be very expensive.  The current                                                                           
production is not tied to the wholesale costs and values.                                                                       
HB 363 would also change the availability of "in season"                                                                        
wholesale value by area.  Not only will the fishermen have                                                                      
access to the reports, but also so would the customer.  Ms.                                                                     
Madsen identified consequences of changing the number from                                                                      
240 thousand to one million pounds, which she believed would                                                                    
reduce the number of processors.  If there were less than                                                                       
three processors, the information would not be released. She                                                                    
believed that a problem with confidentiality could result.                                                                      
Ms. Madsen emphasized the complexity of the salmon market                                                                       
situation. She noted the differences among processors and                                                                       
observed that the reporting is the same. She pointed out                                                                        
that supporters of the legislation want to restore the trust                                                                    
of State government, but she stressed that trust cannot be                                                                      
Ms. Madsen reiterated her opposition to the bill. She listed                                                                    
examples of ways in which trust could be established without                                                                    
implementing the legislation.                                                                                                   
(TAPE CHANGE, HFC 00 - 85, Side 1).                                                                                             
Representative Moses clarified that his proposal would be to                                                                    
place a 10 million-pound limit. Ms. Madsen replied that 10                                                                      
million pounds would be worse as it would potentially drop                                                                      
out more processors and then less information would be                                                                          
DAVID FORBUSH, WARD'S COVE PACKING COMPANY, SEATTLE, pointed                                                                    
out that Ward's Cove Packing Company has twelve operating                                                                       
plants in Alaska and would be over the 10 million-pound                                                                         
limit.  He noted that he had developed a plan as to what it                                                                     
would cost the industry to supply the data as recommended in                                                                    
the bill.  He observed that  $4.4 million dollars would be                                                                      
needed for computer support if everyone complies. Mr.                                                                           
Forbush stated that it takes three components to put                                                                            
together a computer system.                                                                                                     
? Start a plant and control the merchandise that                                                                                
comes in;                                                                                                                       
? Create an inventory system; and                                                                                               
? Development of a billing sales system to provide                                                                              
the reports.                                                                                                                    
In order to comply with the proposed legislation, the                                                                           
earliest that Ward's Cove could, would be September 2001,                                                                       
and that would cost approximately $600 thousand dollars for                                                                     
the programs and equipment not including the training. Mr.                                                                      
Forbush pointed out that they have not used the proposed                                                                        
system. The federal government, when legislated changes to                                                                      
the way in which taxes needed to be reported, gave companies                                                                    
three years to make those changes.  Most companies do not                                                                       
have a tracking program to track the product from the plant.                                                                    
Currently, there is a program for fish tickets.                                                                                 
Mr. Forbush recalled the first requirements for reporting of                                                                    
canned product. He emphasized that the report being                                                                             
requested is nothing that the plants will use.  Sellers now                                                                     
go to the buyers to obtain that information.                                                                                    
Representative Foster questioned how the money would be                                                                         
recouped.  Mr. Forbush stated that in the fish business, the                                                                    
price is unknown.  He observed that the consumer sets the                                                                       
price.  He did not think that the price would be passed on                                                                      
to the consumer. Mr. Forbush recalled days when Alaska could                                                                    
dictate the price of the product, however, he noted that he                                                                     
now has to hustle to sell the product.                                                                                          
Representative Austerman questioned if Mr. Forbush computed                                                                     
the average wholesale value when determining the price.  Mr.                                                                    
Forbush explained that they do not use the average wholesale                                                                    
value for any purpose.  They receive a report of the total                                                                      
value of what was sold. He pointed out that there are                                                                           
hundreds of values involved.                                                                                                    
Representative Williams suggested that mistrust was the                                                                         
underlying reason for the legislation. He questioned how                                                                        
that could be addressed with the fishermen.  Mr. Forbush                                                                        
stressed that Ward's Cove, who has been in business since                                                                       
1929, has always been honest and fair with their fisherman.                                                                     
Representative Williams asked what caused the 1997 fish                                                                         
strike in Ketchikan. Mr. Forbush gave a brief history of the                                                                    
strike. He felt that due to competitive pricing, they were                                                                      
required to pay more to meet competition. He maintained                                                                         
Ward's Cove meets the competition and provides a fair market                                                                    
price.  He stressed that the good must be taken with the bad                                                                    
and noted that the market price changes daily.                                                                                  
Representative Foster clarified that the $600 thousand                                                                          
dollar cost would be a one-time cost. Mr. Forbush noted that                                                                    
there would be additional costs for training and                                                                                
modification of the program. He explained that there are at                                                                     
least three different qualities of fresh fish. He maintained                                                                    
that the report would not reflect the quantity of each fish                                                                     
and noted that the costs of canned fish does not change.                                                                        
JOHN GARNER, NORQUEST SEAFOODS, SEATTLE, testified in                                                                           
opposition to the legislation, indicating that NorQuest was                                                                     
a more than 10 million-pound company. He expressed his                                                                          
sympathy to the fishermen's frustration regarding salmon                                                                        
pricing.  Mr. Garner noted concern that the proposed report                                                                     
would not accurately reflect the value or cost of producing                                                                     
the product. He mentioned that they produce 40 different                                                                        
styles of chum style salmon fillets and that each has a                                                                         
significantly different yield. Mr. Garner stressed the                                                                          
difficulty of mirroring canned salmon reporting and noted                                                                       
that products would be combined. Mr. Garner questioned the                                                                      
value of the information. He pointed out that some fish are                                                                     
being freighted with an unknown price.                                                                                          
STEVE OKERLUND, CHIEF OPERATING OFFICIER, TRIDENT SEAFOODS,                                                                     
SEATTLE, noted that Trident Seafoods has plants in Ketchikan                                                                    
and Bristol Bay and that most of the owners of the company                                                                      
have come from a fishing background.  He noted that they are                                                                    
the largest seafood employer in the State of Alaska.  Mr.                                                                       
Okerlund pointed out that with respect to sockeye, farmed                                                                       
salmon has taken the lead in Japan.  It dominates the                                                                           
domestic market. There is no identity in the domestic                                                                           
market.  He mentioned that the market place cannot handle                                                                       
the increased costs and spoke to the complexity that                                                                            
currently exists.                                                                                                               
Mr. Okerlund stressed that this is not a system of costs and                                                                    
that there is not a computer system that could track the                                                                        
varieties.  He spoke to the processor trying to build a                                                                         
market in the domestic field.  He noted that their mission                                                                      
is to make the job of the fisherman easier and provide them                                                                     
the largest gross stock that is available.                                                                                      
Mr. Okerlund reiterated that his mission was to jointly                                                                         
communicate with the fishermen in creating a plan to work                                                                       
together.  The fisherman need to deliver every possible                                                                         
pound of fish they can get in order to make themselves more                                                                     
competitive.  Currently, there exists an open door policy                                                                       
with the fishermen.  Mr. Okerlund reiterated that the                                                                           
processor must be competitive.  He noted that helping the                                                                       
fishermen reduce costs, improve quality, and services to                                                                        
keep them fishing is the goal of the processor.                                                                                 
Mr. Okerlund acknowledged that it is a complex sales system.                                                                    
He pointed out that sales information is available in the                                                                       
papers the following day.  The bill has provided a "wake up                                                                     
call" for the process to better communicate with the                                                                            
fishermen.  He agreed that intent was good.                                                                                     
SCOTT MCALLISTER, UNITED SALMON ASSOCIATION, JUNEAU,                                                                            
explained how value had been derived, however, the missing                                                                      
piece of information is determination of the wholesale                                                                          
value.  He emphasized that none of the processors have                                                                          
shared the wholesale value.  To harvest fish and take the                                                                       
risks associated with that, it is important to know the                                                                         
wholesale value.  He stressed that is the "business end" of                                                                     
the bill.                                                                                                                       
Mr. McAllister maintained that there is another element                                                                         
which is one of trust.  He acknowledged that this is a                                                                          
public resource.  As a harvester, he considered himself to                                                                      
be a gatekeeper of that public trust.  Without information                                                                      
to enter intelligently into a contract, he asked how he                                                                         
could represent his position in this resource.  Mr.                                                                             
McAllister commented that it is essential to be able to                                                                         
provide that information in order to vie for a higher                                                                           
position in the market place.                                                                                                   
Mr. McAllister pointed out that this is not a bill to                                                                           
leverage money out of the market place.  The bill is brought                                                                    
forth to understand the value that the product leaves and to                                                                    
account for that changing value.  He noted that he has made                                                                     
a commitment to this legislation since 1997.                                                                                    
In response to Representative Foster, Mr. McAllister                                                                            
explained the process is complicated.  He gets paid, but                                                                        
does not have any idea of what the relationship the pay is                                                                      
based upon. It would be meaningful to understand the                                                                            
aggregate when assessing the industry and harvesting.                                                                           
(TAPE CHANGE, HFC 00 - 85, Side 2).                                                                                             
CHRIS MCDOWELL, PROJECT MANAGER, MCDOWELL GROUP, JUNEAU,                                                                        
advised that his group had a contract with Alaska Seafood                                                                       
Marketing Institute to conduct an information service.                                                                          
Representative Williams asked what the graph in the packet                                                                      
represented.  Mr. McDowell replied that the graph indicates                                                                     
a fluctuation in price and is included in the fiscal note.                                                                      
The other graph is the Commercial Operators Handling report                                                                     
(COHR) as distributed by the Department of Revenue.  [Copy                                                                      
on File].  Information in the graph was taken from the                                                                          
Department of Fish and Game that had been available in June,                                                                    
Representative Williams asked if the reports would coincide                                                                     
with one another.  Mr. McDowell explained that the advantage                                                                    
of the program is that it provides a month to month report                                                                      
regarding what the market is doing.                                                                                             
Representative G. Davis pointed out that the fluctuations                                                                       
indicate what the processors have been testifying about and                                                                     
that the market price changes too rapidly to keep tabs on                                                                       
it.  Mr. McDowell agreed that it does fluctuate rapidly.                                                                        
Representative Williams questioned why the report had been                                                                      
included in the packet.  Mr. McDowell indicated that the                                                                        
graph illustrates single numbers and a full year's average.                                                                     
Co-Chair Mulder explained Amendment #1, 1-LS1298\I.1,                                                                           
Utermohle, 3/28/00.  [Copy on File].  He advised that the                                                                       
amendment was not controversial, as it would clarify what is                                                                    
in regulation regarding salmon that are not yet caught, and                                                                     
requiring more accurate information.  Co-Chair Mulder MOVED                                                                     
to adopt the Amendment.  Representative J. Davies requested                                                                     
a brief at ease.                                                                                                                
(TAPE CHANGE HFC 00 - 86, Side 1).                                                                                              
There being NO OBJECTION, Amendment #1 was adopted.                                                                             
Representative Moses MOVED a change to Page 1, Line 6,                                                                          
delete "240,000 pounds" and insert "10 million pounds".                                                                         
Representative Austerman OBJECTED.                                                                                              
Representative Austerman stated that even the processors                                                                        
indicated that would narrow it down too much to be                                                                              
productive.  He believed the change would be                                                                                    
Representative Moses testified that the Department of Fish                                                                      
and Game had provided figures that given 10 million pounds,                                                                     
they would still be able to provide 80% of the data.  He                                                                        
foresaw that some of processors at the 1 million-pound level                                                                    
might not have access to a computer                                                                                             
Representative G. Davis noted that he supported the                                                                             
amendment because of detail costs of the legislation.  If                                                                       
the changes are not made, the only ones who could afford to                                                                     
make these changes, will be the larger processors.                                                                              
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: J. Davies, G. Davis, Foster, Grussendorf,                                                                             
OPPOSED: Austerman, Phillips, Williams, Therriault,                                                                             
Representative Bunde was not present for the vote.                                                                              
The MOTION FAILED (5-5).                                                                                                        
Representative Foster MOVED a change to Page 1, Line 6,                                                                         
deleting "240,000 pounds" and inserting "one million                                                                            
pounds".  There being NO OBJECITON, the Amendment was                                                                           
Representative Williams MOVED to report CS HB 363 (FIN) out                                                                     
of Committee with individual recommendations and with the                                                                       
accompanying fiscal note.  There being NO OBJECTION, it was                                                                     
so ordered.                                                                                                                     
CS HB 363 (FIN) was reported out of Committee with a "no                                                                        
recommendation" and with a fiscal note by Department of                                                                         
HOUSE BILL NO. 18                                                                                                               
An Act making a special appropriation from the earnings                                                                         
reserve account to the principal of the permanent fund;                                                                         
and providing for an effective date.                                                                                            
Co-Chair Mulder MOVED to adopt work draft HB 18, 1-LS0163\D,                                                                    
Cramer, 3/20/00. [Copy on File].  There being NO OBJECTION,                                                                     
it was adopted.                                                                                                                 
In response to Representative Foster, Co-Chair Mulder                                                                           
explained that in the original bill, there was approximately                                                                    
$4.1 billion dollars in available funds.  Based upon the                                                                        
testimony from the Permanent Fund Corporation, it was                                                                           
determined that $2.5 million dollars was appropriate and                                                                        
would not put the dividend in jeopardy.                                                                                         
Representative Foster asked if that action would affect the                                                                     
State's ability to tap into that fund to pay future bills.                                                                      
Co-Chair Mulder advised that this would be an earnings                                                                          
reserve and that the Legislature has never spent any money                                                                      
from that account.  He reiterated that there is currently a                                                                     
little more than $4.1 billion dollars in that account.                                                                          
Representative Austerman advised that he did not support                                                                        
this bill in its original form, however, now he does with                                                                       
the changes made.  He did not believe that this would have a                                                                    
negative effect on the Permanent Fund Corporation.                                                                              
Representative J. Davies noted his concern when                                                                                 
contemplating vehicles such as HB 411, which restructures                                                                       
items by taking a percentage of the market value.  He                                                                           
recommended that there should be a large cushion in the                                                                         
earnings reserve for those bad years.  The problem with                                                                         
making a deposit like the one being proposed is that it                                                                         
would minimize the reserve shock absorber.  Representative                                                                      
J. Davies insinuated that the proposed action is premature                                                                      
before having full discussion on HB 411.                                                                                        
Following concerns voiced by Representative Grussendorf, Co-                                                                    
Chair Mulder proposed a conceptual amendment placing the                                                                        
$250 million dollar amount into the title of the bill.  Co-                                                                     
Chair Mulder MOVED the conceptual amendment.  There being NO                                                                    
OBJECTION, it was adopted.                                                                                                      
Representative G. Davis thought that the legislation would                                                                      
limit the programs utilizing the savings account interest                                                                       
for State government.  He stated that he would oppose the                                                                       
bill as he believes in keeping as much in the savings                                                                           
account as possible.                                                                                                            
Representative Moses stated that no more money should be                                                                        
placed into the principle until the fiscal gap is satisfied.                                                                    
Representative Phillips agreed.                                                                                                 
Co-Chair Mulder MOVED to report CS HB 18 (FIN) out of                                                                           
Committee.  Representative Grussendorf OBJECTED.                                                                                
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: Foster, Williams, Austerman, Mulder,                                                                                  
OPPOSED: J. Davies, G. Davis, Grussendorf, Moses,                                                                               
Representative Bunde was not present for the vote.                                                                              
The MOTION FAILED (5-5).                                                                                                        
HB 18 was HELD in Committee for further consideration.                                                                          
The meeting adjourned at 4:50 P.M.                                                                                              
H.F.C. 19 3/28/00                                                                                                               

Document Name Date/Time Subjects