02/18/2004 08:32 AM House FSH
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= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON FISHERIES
February 18, 2004
8:32 a.m.
MEMBERS PRESENT
Representative Paul Seaton, Chair
Representative Peggy Wilson, Vice Chair
Representative Dan Ogg
Representative Ralph Samuels
Representative Les Gara
Representative David Guttenberg
MEMBERS ABSENT
Representative Cheryll Heinze
COMMITTEE CALENDAR
HOUSE BILL NO. 444
"An Act relating to direct marketing fisheries businesses, to
the fisheries business tax, and to liability for payment of
taxes and assessments on the sale or transfer of fishery
resources; and providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 415
"An Act authorizing a commercial fisherman to fish in each
fishery for which the commercial fisherman holds a commercial
fishing entry permit; relating to the power of the Alaska
Commercial Fisheries Entry Commission and the Board of Fisheries
to limit the number of fisheries in which a person may hold an
entry permit and operate gear during a fishing season or a year;
and providing for an effective date."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 444
SHORT TITLE: DIRECT MARKETING FISHERIES BUSINESS
SPONSOR(S): REPRESENTATIVE(S) WILSON
02/09/04 (H) READ THE FIRST TIME - REFERRALS
02/09/04 (H) FSH, RES, FIN
02/18/04 (H) FSH AT 8:30 AM CAPITOL 124
BILL: HB 415
SHORT TITLE: FISHING IN MORE THAN ONE FISHERY
SPONSOR(S): REPRESENTATIVE(S) WILLIAMS BY REQUEST
01/29/04 (H) READ THE FIRST TIME - REFERRALS
01/29/04 (H) FSH, RES
02/16/04 (H) FSH AT 9:00 AM CAPITOL 124
02/16/04 (H) Heard & Held
02/16/04 (H) MINUTE(FSH)
02/18/04 (H) FSH AT 8:30 AM CAPITOL 124
WITNESS REGISTER
IAN FISK, Staff
to Senator Bert Stedman
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Explained details of HB 444 as staff to
Senator Stedman, sponsor of the companion bill.
KATHY HANSEN, Executive Director
Southeast Alaska Fishermen's Alliance (SEAFA)
Juneau, Alaska
POSITION STATEMENT: Spoke in full support of HB 444.
CARL MEYER, Chief of Appeals
Tax Division
Department of Revenue (DOR)
Juneau, Alaska
POSITION STATEMENT: Answered questions pertaining to HB 444.
SUSAN M. SHIRLEY, Chief of Information Services
Division of Commercial Fisheries
Alaska Department of Fish & Game (ADF&G)
Juneau, Alaska
POSITION STATEMENT: Related the understanding that HB 444
doesn't affect reporting regulations for ADF&G.
DALE KELLEY, Executive Director
Alaska Trollers Association (ATA)
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 444.
WESLEY J. HUMBYRD
Homer, Alaska
POSITION STATEMENT: Testified in support of HB 415; told of the
difficulties for a single person without family members who
wants to fish in multiple areas.
DOUG MECUM, Director
Division of Commercial Fisheries
Alaska Department of Fish and Game (ADF&G)
Juneau, Alaska
POSITION STATEMENT: Testified on HB 415 and answered questions.
MARK MUNRO
Homer, Alaska
POSITION STATEMENT: Testified in opposition to HB 415.
MAC MEINERS
Juneau, Alaska
POSITION STATEMENT: Testified on HB 415, citing positive
aspects but saying he wants the determination to be in the
board's hands.
GERALD McCUNE, Lobbyist
for United Fishermen of Alaska (UFA)
Cordova, Alaska
POSITION STATEMENT: Testified in support of HB 415.
BRUCE C. TWOMLEY, Chairman/Commissioner
Commercial Fisheries Entry Commission
Alaska Department of Fish & Game
Juneau, Alaska
POSITION STATEMENT: Answered questions pertaining to HB 415.
ACTION NARRATIVE
TAPE 04-9, SIDE A
Number 0001
[Due to technical difficulties, the first half minute wasn't
tape recorded, but was reconstructed from the committee
secretary's log notes.]
CHAIR PAUL SEATON called the House Special Committee on
Fisheries meeting to order at 8:32 a.m. Representatives Seaton,
Ogg, Samuels, and Guttenberg were present at the call to order;
Representative Wilson arrived soon thereafter. Representative
Gara arrived as the meeting was in progress.
[Tape recording begins here.]
HB 444-DIRECT MARKETING FISHERIES BUSINESS
[Contains discussion of SB 286, the companion bill]
CHAIR SEATON announced that the first order of business would be
HOUSE BILL NO. 444, "An Act relating to direct marketing
fisheries businesses, to the fisheries business tax, and to
liability for payment of taxes and assessments on the sale or
transfer of fishery resources; and providing for an effective
date."
Number 0116
REPRESENTATIVE WILSON, sponsor, explained that HB 444,
recommended by the Joint Legislative Salmon Industry Task Force
("Task Force"), would provide fairness and a more level playing
field while encouraging value-added [products]; it relates to
the sector of the commercial fishing industry known as direct
marketing fisheries businesses.
REPRESENTATIVE WILSON reported that this [tax] originated in
1913 when the Territory of Alaska decided to gain revenue from
the fishing industry; the oldest tax in Alaska, it is levied on
the processing companies: 3 percent on shore-based processors
and 5 percent on floating fisheries businesses, which are
primarily large, mobile processing facilities that are assessed
at a higher rate to compensate for the fact that they don't
operate a shore-based plant. Although these fishing businesses
fit the mold in 1913, they don't anymore.
REPRESENTATIVE WILSON noted that this bill is a product of years
of negotiating among the industry, the government, and those who
are concerned; the desire is to not jeopardize that agreement.
Saying the Task Force endorsed the bill unanimously, she asked
Ian Fisk [staff to the sponsor of the Senate companion bill,
SB 286] to explain further.
Number 0350
IAN FISK, Staff to Senator Bert Stedman, Alaska State
Legislature, began by saying this relates primarily to the
fisheries business tax, although there are other taxes that
direct marketing businesses and other fisheries businesses must
pay. Specifying that this changes the tax rate for direct
marketers from 5 percent to 3 percent in order to level the
playing field, he said it seems appropriate that a direct
marketing business - which is primarily an Alaskan vessel - not
be treated the same as a large, mobile, floating processor.
MR. FISK explained that second, and perhaps most important, the
bill changes the point of taxation. If fishermen directly
market under the current tax structure, the tax is on "a second
wholesale or retail price that they sell that fish for."
Currently, for king salmon sold at the dock for $5 a pound, for
example, they'd pay 5 percent, a disincentive for "adding value
to that resource," when the desire is to encourage further
development of that sector of the industry.
MR. FISK noted that third, the bill rectifies the tax due dates
for direct marketers. Currently, those fishing for salmon are
required to pay the enhancement tax, which is basically to cover
the cost of hatcheries; they pay that monthly, and pay their
salmon marketing tax monthly as well. This bill sets all the
tax due dates to April 1, which is friendlier to small
businesses so they don't have to do accounting while fishing.
Number 0554
MR. FISK addressed two important sideboards agreed to by the
Task Force. First, this bill relates to vessels 65 feet or less
in length, which conforms to the existing Department of
Environmental Conservation (DEC) permit for direct marketing
vessels. He pointed out that DEC is involved for food-safety
reasons, and said [65 feet] is where (DEC) drew the line years
ago. Second, it only applies to what is caught by the licensee
and sold by that same individual.
MR. FISK turned attention to fiscal impacts, saying the
Department of Revenue (DOR) estimates this will end up being
revenue-neutral to the state. He mentioned that businesses like
catcher/processors have been taxed at the higher rates, and said
there is some other confusion in the overall tax picture for
direct marketers, but indicated DOR feels that anytime a tax
structure is clarified, it results in better compliance.
Number 0661
MR. FISK said this bill closes a tax loophole for a sector of
direct marketers called catcher/sellers. Referring to a one-
page handout of definitions, he explained that a catcher/seller
is a direct marketer who sells unprocessed fish or other fishery
resources. Closing this loophole will result in more [tax]
income from that sector of the fleet, he predicted.
MR. FISK concluded by saying this bill will result in a "clearer
picture for the industry to deal with, which is good in the long
run"; will do away with the current disincentive related to
value-added products; and will apply primarily to Alaskan small-
business fishermen. Agreeing that it had gone through a long
process involving compromise and had gone through the Task
Force, he added, "The sponsor and cosponsor of the bill are
mainly concerned that we don't have any changes that are to such
an extent that they jeopardize ... the agreement that we've
reached at this point."
Number 0761
CHAIR SEATON referred to page 1 [line 8], where it changes from
"frozen" to "processed". He asked about ramifications,
specifically, any requirement to reclassify the vessels under
the U.S. Coast Guard as processing vessels, instead of fishing
vessels.
MR. FISK said he didn't know. Noting that Section 1 clarifies
the liability for the tax, he added that the exclusion was set
up so one sector of the direct marketing portion of the fishing
industry could freeze fish on board - for example, a freezer
salmon troller - and then not be liable for the tax because the
fish are sold to a licensed processor. Existing law, by
contrast, says the person who first processes the resource is
liable. He elaborated:
This extends that exclusion so that if a ... small
vessel is doing processing on board and then selling
it to a licensed fishery business, i.e., a processor,
then this clarifies that the processor is liable. And
so Section 3 is kind of related to this as well, and
... it's all about clarifying who's supposed to pay
the tax. And that's part of the bill that [the
Department of] Revenue was ... set on so that they
could get better compliance and better clarity in the
whole tax structure.
CHAIR SEATON emphasized the need to look at [how the U.S. Coast
Guard regulations would apply] and whether reclassification of
the vessel would be required.
MR. FISK said he was fairly sure it wouldn't be required, but
offered to find out before the next hearing.
Number 0975
REPRESENTATIVE GUTTENBERG referred to the sectional analysis and
Section 4, page 3. He asked what the breaking point of 65 feet
for vessel length represents.
MR. FISK answered that DEC, whose involvement with direct
marketing is a food-safety concern, has a license geared toward
the group that is the subject here. He remarked:
They made a cutoff at 65 feet. ... I don't know
exactly the origins of that, but I do know that what
we intended to do with this bill was not throw another
monkey wrench in that and require further change with
them. I think the comfort level of some people in the
industry is higher with this bill if you limit it to
the smaller vessels. If you don't draw the line
clearly enough, ... you could get into a situation
where there are catcher/processing vessels that are
really of a different scale than the vessels that
we're talking about here. And so the line kind of had
to be drawn somewhere.
Number 1061
MR. FISK, in response to Chair Seaton, explained that the
exclusion [in Section 3] doesn't affect tax revenue to the
state. It defines the processor, rather than a freezer-troller
who sells to an onshore licensed fishery business, for example,
as the one who will pay the tax. In Section 3, "frozen" is
deleted and "processed" is added so that for other onboard
processing, if the product is then sold to a processor, the tax
liability is clarified [as being the responsibility of] the
processor. He suggested this clarification makes it easier for
everyone.
Number 1243
KATHY HANSEN, Executive Director, Southeast Alaska Fishermen's
Alliance (SEAFA), informed the committee that she was on the
working group for this legislation and worked on this issue for
several years before that; she agreed it's been a long process
involving compromise on many sides. Stating full support for
the legislation, she acknowledged there might be a few technical
wording changes, but cautioned that major changes would cause
"large segments of support" to fall away. Although some direct
marketers don't qualify under this legislation, she remarked,
"They understand. They know why. I've talked to several of
them. It's just that you cannot make every scenario fit every
situation. And so what we did is, we tried to cover the
greatest number of people in the legislation."
MS. HANSEN addressed adding ["processed"] instead of "frozen" by
saying, "It does not bring in the Coast Guard. It's actually
not Coast Guard regulations; it's the 'fishing safety
initiatives' of 1996." She then said many processors around the
state want to buy "headed" product from fishermen, just that one
additional step, which brings in less waste to the facilities
and so forth. However, under current law each fisherman had to
be liable for his/her own taxes; the processor couldn't take on
that responsibility. She explained:
What we've actually done is, we've gone a step farther
in this legislation, and we've flat made it the
processor's responsibility if they buy this product
that's processed. That was not the original thought
as we were going into it, but it's what ended up
occurring, and there's good reasons for it.
Number 1397
CHAIR SEATON referred to Section 3, the processing tax, and the
".017 exclusion" from the fisheries business tax. He said other
wording throughout the bill is such that the person who
possesses the fish at the time is liable for the salmon
enhancement tax, dive fishery tax, and so forth. He requested
confirmation that the language in the rest of the bill "means
that the processor who buys - the other licensed fishery
business that buys - from the direct marketer will be
responsible for collecting the salmon enhancement tax, the
marketing tax, a dive fishery tax - all those other
assessments."
MS. HANSEN answered in the affirmative.
Number 1489
CHAIR SEATON asked: If the product is sold to another licensed
fishery business, who is responsible for the reporting?
MS. HANSEN answered that the COAR report [Commercial Operators
Annual Report] would be done by the processor, and the direct
marketer would still have to fill out a portion of it. Either
could be responsible for writing the fish ticket. This statute
only deals with Department of Revenue (DOR) statutes, she noted,
and doesn't get into "fish and game deals." She explained,
"Currently, right now, for these different various sectors,
sometimes the catcher/processor writes the fish ticket;
sometimes it's rewritten at the processor when it's resold, and
the previous one written by the catcher/processor is voided."
Number 1544
CHAIR SEATON offered his understanding that the Alaska
Department of Fish & Game (ADF&G) doesn't see any problems with
fish tracking as it relates to this legislation.
MS. HANSEN stated her belief that [ADF&G} is supportive of this
legislation. "All their issues have been addressed," she added.
Number 1570
REPRESENTATIVE GUTTENBERG inquired about those who are outside
the definitions of the bill.
MS. HANSEN said one who comes to mind is a shrimper who does
"frozen-at-sea shrimp" on a 72-foot vessel and will operate
under the regulations under which he has operated for the last
five or ten years. As to the numbers, she said it's a handful,
to her belief. She reiterated that the effort was to try to
bring in the greatest number possible, but there were a few for
whom it just didn't fit "unless you made the language so broad-
open that it was totally open to abuse."
CHAIR SEATON surmised there might be a 75-foot troller, for
example, that wouldn't fit the definition, but that expanding it
would also expand it for Bering Sea vessels and so forth.
REPRESENTATIVE WILSON requested confirmation that the [Tax]
Division doesn't believe it will lose revenue either way.
Number 1669
CARL MEYER, Chief of Appeals, Tax Division, Department of
Revenue (DOR), referred to the fiscal note and said it was hard
to answer, since there wasn't sufficient information. He added:
Overall, I think the opinion is that, because of the
extra compliance that will be achieved and the fact
that with ... the salmon enhancement tax and some of
the smaller taxes that ... are going uncollected
because the buyer is required to collect that tax --
and when you have buyers that aren't licensed
fisheries businesses, they don't really know about
that requirement, so they don't, under current law,
really collect that tax. With this legislation, that
will change and the direct marketer will collect the
tax - or the commercial fisherman.
REPRESENTATIVE WILSON asked whether, when she herself has bought
fish or shrimp from someone, she was supposed to have kept track
of the tax.
MR. MEYER answered, "Technically, yes."
Number 1780
CHAIR SEATON referred to page 3, beginning at line 15, "or by
means of custom processing services obtained by the licensee."
He asked whether it's tight enough, in that a floating processor
who now pays 5 percent could operate under this scenario and pay
3 percent. Noting that it doesn't specify "shoreside custom
processor", and saying he doesn't think it should, Chair Seaton
said fishermen should have the opportunity to sell their fish,
but if it's a question, there might be a need to specify that a
floating custom processor pays 5 percent.
MR. MEYER expressed hope that the statute itself is tight
enough. He said the direct marketer has to be an individual,
and will have that product custom-processed. Whether it is a
floating or shore-based operation, he said hopefully it will be
self-regulating enough that there won't be abuse in the form of
people "crossing over" who otherwise wouldn't qualify for the
direct marketing license.
CHAIR SEATON explained that the product could be sold to a
floating processor without the community support that comes from
having shoreside processors, and yet the tax would be 3 percent.
He again asked whether it's tight enough or should be looked at.
MR. MEYER answered that when the product is custom-processed,
the direct marketer will have to retain ownership; it will come
back to the direct marketer in order to be sold.
Number 1941
CHAIR SEATON observed, however, that nothing in the legislation
says "you cannot later sell your direct-market product to a
licensed fishery business who happens to be the same business
that you had custom-process fish for you."
MR. MEYER said he'd have to think about it.
CHAIR SEATON clarified that he isn't objecting to the bill, but
is trying to see if there are problems, including whether
there's a need to tighten the language so a floating custom
processor pays at the 5 percent rate, to eliminate any loophole.
MR. MEYER responded:
In your example, if I was a licensed fisheries
business and the sale was being made to me, ...
presumably I would be, at that point, responsible for
collecting the tax, because we have expanded, in ...
Section 1, the definitions of what the fisherman can
legally do to qualify for the exclusion. So the
fisherman in that case, I think, would qualify for the
fisherman's exclusion, and then it would transfer the
tax liability onto me to collect it.
CHAIR SEATON said the exclusion is there, but also the 3 percent
tax rate for a licensed fishery business.
MR. MEYER replied, "In that situation, if the fisherman does not
have liability for the tax and I'm a floater and I obtain that
product, ... I'm going to pay a tax of 5 percent." In further
response, he said, "I'm not going to say there might not be an
instance, but I don't think that it should arise."
CHAIR SEATON said he hoped not, expressed appreciation, and
indicated the question would be asked of others as well, to make
sure all the bases were covered.
Number 2128
SUSAN M. SHIRLEY, Chief of Information Services, Division of
Commercial Fisheries, Alaska Department of Fish & Game, related
the understanding that this bill in no way affects existing
reporting regulations for ADF&G, including fish-ticket reports
as well as the COAR reports.
Number 2203
DALE KELLEY, Executive Director, Alaska Trollers Association
(ATA), testified as follows:
The Alaska Trollers Association supports HB 444 and
views it as an important piece of legislation for
fishermen who are currently direct-marketing their
products, as well as those who may turn to this option
due to poor price, loss of markets, or simply because
they want to try their hand at marketing their own
line of select products.
HB 444 appears to be a complicated bill, but its
essence is simple. This bill establishes a reasonable
tax rate and payment timeframe for small business. It
clarifies who is liable for that tax and under what
circumstances, and it defines the product form that
the tax is levied on. Important features of the bill
are sideboards which have been put in place to ensure
that this action doesn't disadvantage our shoreside
processors or compromise food safety.
This bill is nearly a decade in the making and
represents a tightly woven compromise ... between
fishermen, processors, and the three agencies. Key to
its success is passing the bill intact. Picking at
any of its threads could cause it to unravel in your
hands.
That said, there are a couple of technical amendments
that might further clarify the bill now and into the
future, such as adding the word "unprocessed" to the
section dealing with the product to be taxed. The
bill does not accommodate each and every direct
marketer's desires, but it does ... address the needs
of most of them. In addition, it should streamline
the agencies' workload, hopefully at a cost savings to
the state over time.
Number 2270
MS. KELLEY noted that she'd submitted additional testimony for
the record. Addressing the earlier question of freezing versus
processing, she said:
Depending on what method of processing the boat is
undertaking, they may have to be a catcher/processor
and have additional licensing anyway. For instance,
freezer-trollers are processing vessels. And that's
where this whole exclusion thing came into play. And
... there are also ones that have to file additional
fish tickets, as do some of our freezer-shrimpers.
But freezer-trollers are processing vessels by their
very nature, and they have additional licensing that
some direct ... marketers may not have. ...
So it doesn't get any processing boat out from under
DEC requirements for food wholesomeness and safety.
But it will allow, as Kathy [Hansen] pointed out, some
processors to buy headed product and do with it what
they may, and provides the protection to the state
that the tax liability is covered.
Number 2338
CHAIR SEATON asked where in the bill Ms. Kelley believes
"unprocessed" should be included.
MS. KELLEY indicated Mr. Fisk had just referred her to
Section 5. Noting that a fisheries business tax is a processing
tax but is paid on the value of raw fish, she said direct
marketers have been penalized for adding value by having to pay
a higher tax, whereas processors pay tax on the raw-fish form.
Highlighting confusion over the years, she said what prompted
the effort to establish something for direct marketers is that a
[DOR] regulation had been changed, muddying the waters as to the
point at which that product is taxed.
MS. KELLEY noted that a gentleman who testified [on SB 286 in
the Senate Labor and Commerce Standing Committee] had mentioned
perhaps adding ["unprocessed"], which she said could make some
sense. Suggesting some clarifying amendments might be good over
time, she said although DOR representatives have been working
closely on this, for example, who knows what the next [hiring
round] will bring.
Number 2449
CHAIR SEATON suggested clarification will probably be needed
from the Tax Division; for example, Chuck [Harlamert of the Tax
Division] had indicated previously that the tax would be 3
percent, but on the value sold to "the other ... licensed
fishery business." Chair Seaton expressed the desire to have it
"get it to raw-fish value." He then asked whether the
suggestion was to put ["unprocessed"] under Section 5.
MS. KELLEY said it could be gone over if other issues are being
analyzed, but expressed concern about messing something else up.
She reiterated that the bill has been worked on for years among
a number of parties, and that any substantive changes could
cause [the agreement] to fall apart, which would be a big loss
for direct marketers.
CHAIR SEATON expressed hope that the Tax Division would contact
the committee about the current projection and where it would be
with the addition of that [language].
MS. KELLEY expressed appreciation for DOR's work over the past
couple of years.
Number 2599
MS. HANSEN responded to the suggestion of adding the word
"unprocessed" as follows:
If those of us that have been looking at this and
talking about it understand it correctly - and I've
just kind of checked with Department of Revenue; I
have e-mails into Department of Revenue, but [Chuck
Harlamert has] been unavailable - what it does is, for
the direct marketer that is actually going all the way
to market with his product, it makes it very clear
that what we're talking about is ... the tax goes down
onto a raw product.
For those individuals ... selling to the licensed
fishery business, their tax is going to be taken on
what they're paid for by that processor; there's no
ifs, ands, or buts about it. ... In some cases, a guy
that's selling to the shoreside processor his
processed product ... might pay a little bit more than
somebody who goes to ... the trouble of marketing -
... all the way to the end consumer - their product.
CHAIR SEATON asked that Ms. Hansen confer with the committee to
ensure that the correct placement is being considered for
"unprocessed" in order to not affect "the end use."
Number 2667
CHAIR SEATON asked whether anyone else wished to testify. He
then closed public testimony.
CHAIR SEATON drew attention to page 3, lines 13-16. He
suggested there is good clarification in allowing direct
marketing vessels to expand their options, since currently they
must process on their own vessel only what they've caught on
their own vessel. This [new wording] allows processing at a
shoreside facility or obtaining custom-processing services. He
pointed out, however, that while this works well for some
localities close to town, many places such as the outer Kenai
Peninsula have no shoreside facility nearby.
CHAIR SEATON therefore asked members to consider adding [to the
portion at lines 13-16] the language on lines 9-10 that says a
vessel doesn't exceed 65 feet in overall length and is owned or
leased by the commercial fisherman; thus someone could utilize
another vessel or a small barge. He explained that people may
be constrained if putting product into boxes, for example, and
this would give those without access to a shore-based facility
the same ability to utilize this direct-marketing legislation
and have "a little more facility."
Number 2808
REPRESENTATIVE WILSON surmised, then, that a fisherman could
bring alongside another boat that he or she owns.
CHAIR SEATON clarified, "Owns or leases." Again referring to
the wording on lines 9-10, he said it would be the same
definition. Shore could be too far away to do processing, for
example, and this increases options for direct marketers, just
as options are increased for those who fish close to town and to
shore-based facilities; this also makes [the bill] applicable to
more areas of the state.
REPRESENTATIVE WILSON asked who would pay the tax.
CHAIR SEATON said it would be the [original] direct market
vessel. The second boat or facility wouldn't be a licensed
fishery business; if it were, it would be a different situation.
He suggested, for example, a fisherman might have a 38-foot boat
and a barge or second boat anchored up on which to process the
product; this would allow the fisherman to do what the bill
allows for people close to town who can use a shore-based
facility. The [second boat or barge] would have to be [65 feet
or less]; the fisherman would still have to be direct marketing,
and would still have to maintain the product just as if using a
shore-based facility.
Number 2948
REPRESENTATIVE WILSON asked whether there would be extra steps,
other than transporting the fish.
CHAIR SEATON said no, it would be no different from the use of a
shore-based facility and would have no extra advantage. The
difference is that line 15 says it must be a shore-based
facility, but that means a fisherman must be tied to and close
to such a facility.
[Not on tape, but reconstructed from the committee secretary's
log notes, was Representative Ogg's question as to whether that
isn't covered already under custom processing.]
TAPE 04-9, SIDE B
Number 2975
CHAIR SEATON said custom processing involves another licensed
fishery business that someone contracts with to process fish; a
person can maintain ownership of the fish and have [the custom
processor] do the processing. By contrast, this [proposed
change] allows people to process their own fish, as is done with
a shore-based facility. He said that's why it says "shore-based
facility or by means of custom processing", and it gives a dual
ability so someone doesn't need a separate license.
REPRESENTATIVE OGG highlighted testimony about freezer-trollers
and their need for a processing license. He asked about needing
a different license for the processing part on a second boat
[for other fishermen]. He again suggested it would be covered
under custom processing. He noted that it would be two
different vessels.
CHAIR SEATON agreed, but said there is a difference between
being licensed to process and being a separate business that one
is selling to, contracting services with, and so forth. He
pointed out that DEC, ADF&G, and [DOR] all have different
definitions of processing and different licenses. He specified
that this suggestion is to give individual fishermen the easiest
option to conduct operations on their own boats, using for the
processing a small barge or another boat that is leased or owned
outright.
Number 2836
REPRESENTATIVE OGG asked: Why limit it to 65 feet?
CHAIR SEATON answered that the whole idea of the "direct
marketing compromise" is to restrict it to boats [65 feet or
less in overall length]. Saying there is no intention of
expanding that to floating processors, for example, he added,
"That would be where you'd have a floating processor that would
be covered under ... the custom-process side."
REPRESENTATIVE OGG pointed out that fishermen could avail
themselves of a floating custom-processing vessel that came in
and was bigger than 65 feet. He again asked why this should
limit fishermen to just 65 feet, since [the processing vessel]
wouldn't be the boat utilized to catch the fish.
REPRESENTATIVE WILSON surmised that it's part of the compromise
worked out. She asked whether those close to shore would use
their own barges, for instance; how it would all fit in; and
whether it was okay or would make a difference.
Number 2750
CHAIR SEATON said he thinks it gives fishermen options. He
offered his belief that it's always easier, if close to port, to
use a shoreside facility rather than do things offshore. But
shoreside facilities aren't scattered evenly across the state.
He asked Ms. Hansen how this works in relation to the compromise
on the 65-foot length.
MS. HANSEN replied that she'd first heard of this proposed
language this morning and thus hadn't figured out how it would
fit in and whether it would affect all the different parties
that had worked on this. She continued:
I do know that, in listening to the discussion that's
occurred so far, there are two things that immediately
occur to me that need to be checked into. One is the
Coast Guard question that you'd asked about earlier.
And I guess my discussion earlier didn't go all the
way into it. Where you have problems with those Coast
Guard regulations or the fishing ... safety initiative
Act is, when you take a vessel that's a harvester and
turn it into a processor, you have to have it
reclassified.
So a vessel where you're doing the harvesting on, even
if they're doing processing, they don't go into that
whole new routine. But if you have a vessel that's
sitting there alongside that is doing only processing,
you might very well bump into those. It's something
that would need to be checked into.
And then the second one is, I would have a question of
Department of Labor [& Workforce Development]. To go
back, in about, I believe, ... 1998, Department of
Labor started contacting all of the Southeast
gillnetters that processed on board their boat. And
they were telling us that we needed to pay our
crewmembers by processing-employee standard salaries,
W-2s, overtime, and the whole [works]. And ... we got
it solved within a short time period, but it was ...
definitely a lot of work to convince them that ...
that crewmember that was processing on that harvesting
boat was still a crewmember, was still being paid by
crew shares, and that everything was legitimate and
they were not a processing employee.
Again, if you step over onto another boat that didn't
do the harvesting, do you cross that line? I don't
know. But the thought does come to my mind, as a
question.
Number 2614
CHAIR SEATON surmised that the same concern with regard to the
Department of Labor [& Workforce Development] would arise for
crewmembers who use a shore-based facility and are no longer
aboard the vessel.
MS. HANSEN replied, "You might. ... Most people that use shore-
based facilities pay for the services through a processor that
already operates. There are very few individuals that use their
own shoreside facilities. Most of them do their boxing and
everything on board the boat."
Number 2588
CHAIR SEATON mentioned cod that fishermen have boxed on board in
Homer because they couldn't use a boxing facility, and said it's
a great thing to be able to use the shoreside facility.
Thanking participants, he noted that some questions required
investigation before the next hearing. [HB 444 was held over.]
HB 415-FISHING IN MORE THAN ONE FISHERY
Number 2515
CHAIR SEATON announced that the final order of business would be
HOUSE BILL NO. 415, "An Act authorizing a commercial fisherman
to fish in each fishery for which the commercial fisherman holds
a commercial fishing entry permit; relating to the power of the
Alaska Commercial Fisheries Entry Commission and the Board of
Fisheries to limit the number of fisheries in which a person may
hold an entry permit and operate gear during a fishing season or
a year; and providing for an effective date." [It was clarified
that the proposed committee substitute (CS), Version H, had been
adopted at the previous meeting.]
CHAIR SEATON turned to public testimony.
Number 2470
WESLEY J. HUMBYRD, Homer, informed members that he has been a
commercial fisherman since 1966, mostly for salmon, and wants to
see this bill pass. As a single person, he said, he feels
discriminated against because those with family members can take
one member who holds a permit on board in each area. He
reported that he'd talked to the Commercial Fisheries Entry
Commission (CFEC) four years ago about trying to straighten this
out, but had been told to go to the board, which then said it
didn't feel it had the right to make such a decision. Thus he
said this bill would open it up for people like himself who have
no family members.
CHAIR SEATON asked who at the Board of Fisheries had told
Mr. Humbyrd that the board didn't have authority to change these
regulations.
MR. HUMBYRD said he didn't remember.
Number 2304
DOUG MECUM, Director, Division of Commercial Fisheries, Alaska
Department of Fish and Game (ADF&G), referred to the original
version of HB 415 and indicated ADF&G had made suggestions to
the sponsor's staff relating to nonsalmon fisheries. He noted
that the Board of Fisheries has adopted a number of restrictions
including those for "superexclusive vessel" and "superexclusive
use areas," mainly in the groundfish, herring, and shellfish
fisheries around the state. Subsequently, he said, to address
those concerns, this bill was limited to salmon net fisheries,
which solves many potential problems. However, some issues
remain.
MR. MECUM noted that the bill talks about an entry permit. He
said a question was raised in talking with the Department of Law
as to whether the bill applies only to fishing in limited-entry
fisheries, because it refers only to entry permits and not to
interim-use permits. Thus a question is whether a court would
interpret "entry permit" to include interim-use permits.
Calling this a technical question, he pointed out that many of
the potential concerns in this regard are limited because [the
bill] currently applies just to salmon fisheries, which are to
his knowledge all under limited entry currently.
Number 2231
MR. MECUM highlighted a technical question relating to the term
"gear" in the bill: it possibly could include vessels unless
otherwise specified. Hence he suggested it might be helpful to
clarify that the bill isn't intended to limit the authority of
either CFEC or the board to limit vessel use in multiple
fisheries, or at least to address that issue.
MR. MECUM turned to another issue. He said the board has for at
least one salmon fishery in Alaska, the one under the Chignik
cooperative management plan, adopted 5 AAC 15.359, a regulation
that says a CFEC permit holder who participates in the annual
cooperative fishery in Chignik may not participate in any other
commercial salmon net registration area as either a permit
holder or crewmember from June 1 through August 31, and also
that if someone holds a salmon net gear permit for more than one
commercial salmon net registration area, that person must
designate the Chignik area as a single area for salmon net
fishing for that year. He pointed out that someone fishing in
the cooperative in Chignik doesn't necessarily use a vessel, and
there were concerns that people might operate vessels in other
fisheries. He said the bill obviously raises a question about
the board's authority to deal with those types of issues.
Number 2127
MR. MECUM, in response to Representative Ogg, specified that the
bill in its current form raises a question of whether the board
could adopt a regulation like the one it already adopted for the
Chignik fishery, as a sideboard, to limit people from fishing in
other fisheries.
REPRESENTATIVE OGG asked whether the board has authority now to
adopt language like this in regulation.
MR. MECUM answered affirmatively, saying that's his
understanding. A regulation basically stipulates that someone
can only fish in one salmon net registration [area] in a year.
He agreed that people can own multiple permits, can't fish them
themselves, and may transfer a second permit to a relative who
then fishes on board a second vessel. Saying the board has
authority to make these kinds of limitations, and referring to
the previous testifier, he added, "Maybe I should go through the
statutes and clarify that, to make sure, but I'm not sure the
advice he was given is correct."
Number 1993
REPRESENTATIVE OGG requested a history of proposals put before
the Board of Fisheries that deal with this issue.
MR. MECUM relayed his understanding that this issue has come up
many times in the past "and they've been reluctant or unwilling
to ... change that."
Number 1958
CHAIR SEATON referred to page 2 of Version H, where it says
"operate gear". He asked whether that is the language in
question that might allow boats to be used in any fishery.
MR. MECUM said that's correct. He affirmed that he had
Version H, pointed out that this just raises a question, and
noted that comments from the Department of Law had been
forwarded to the sponsor's staff. Mr. Mecum indicated
legislative counsel had offered the belief that it doesn't
create a problem, in which case he said it would be fine.
Number 1900
CHAIR SEATON acknowledged that the next question might need to
be addressed by the board's legal counsel, but asked whether it
is Mr. Mecum's opinion that the board has authority to "lift
these" for specific areas, like it does for exclusive,
superexclusive, or nonexclusive areas. He cited the examples of
Kodiak, Cook Inlet, and Prince William Sound [fisheries in which
a person wants to participate in a year] and asked whether the
board could consider and adopt a regulation to say, for the
management of the fisheries and allocation reasons, that it
could allow permit holders to fish within those three areas in a
year. He pointed out that if it were statutory, it would be
done statewide.
MR. MECUM suggested perhaps Bruce Twomley [of CFEC] would be a
good person to ask. He said it's his understanding that the
board could do that, and that CFEC basically follows the board's
lead in terms of its regulations.
CHAIR SEATON noted that Mr. Twomley would testify a bit later.
Number 1780
REPRESENTATIVE OGG asked whether there'd been any particular
rationale when the Board of Fisheries rejected this proposal
previously.
MR. MECUM replied that when such issues are presented, permit
holders in one fishery or another express concern about other
people coming into their fisheries and about allocation. He
pointed out that things have changed to where perhaps 20 to 50
percent of permits are actually fished sometimes; thus people
are asking whether this concept of a superexclusive salmon
fishery is appropriate anymore. He surmised that's why some
people are pushing this legislation forward.
Number 1690
MARK MUNRO, Homer, noted that he and his wife fish in Bristol
Bay. Stating opposition to the bill, he said this is an
allocation issue; the result will be taking resources from local
areas such as Naknek and Dillingham, where there is much lower
overhead and people will fish regardless of the economics. He
said he doesn't believe it's right to allow an elite group of
fishermen to hit the peaks of every fishery, and he believes
it's against the intent of limited entry to diversify the
resource and allow local communities to benefit. He disagreed
with what he characterized as a trend of giving the resource to
an "owner group." He concluded, "You shouldn't even be talking
about this, is ... my opinion."
Number 1612
MAC MEINERS, Juneau, spoke on his own behalf, noting that he
holds both a Kodiak seine permit and a Southeast gillnet permit.
Saying he'd like to see some guidance from the legislature in
making some decision or helping the board through the process,
he told members:
I'd like to see it happen. I think it would stimulate
permit prices. I think it would help the individual
fisherman. Though it'd be hard to make the right
choice at all times, to hit the peaks, I still think
it would make it a lot easier for us to generate
revenue when there is hardly a fishery in the state -
salmon fishery - where you can generate enough money
for the year.
MR. MEINERS mentioned the need for an opportunity to harvest
these fish, but emphasized the importance of markets with regard
to whether someone can "roam the coast." Noting that halibut
boats go from Bristol Bay all the way to Dixon Entrance, he
suggested a little more latitude would be a lot more beneficial.
CHAIR SEATON pointed out that this bill gives no guidance to the
board; rather, it takes authority away from the board.
MR. MEINERS clarified, "I'd like to see it in the board's hands
to make the decision."
Number 1454
GERALD McCUNE, Lobbyist for United Fishermen of Alaska (UFA),
spoke in support of the bill, noting that he'd received a lot of
calls about it from all over the state. He agreed this issue
has been before the board several times, but suggested those
weren't opportune times to talk about it, since the fisheries
were more solid. He reported that UFA had decided, since the
issue was before the Joint Legislative Salmon Industry Task
Force ("Task Force") and a lot of people were urging that this
happen, to bring it before the policymakers in the legislature
to hear the issue out, rather than take it to the board.
MR. McCUNE said a lot of people hold two or three permits, but
dual permits can only be fished inside an administrative area; a
fisherman cannot run back and forth between fisheries in
different areas. Saying people who own more than one permit
think they are being discriminated against and should be able to
fish all their permits, he remarked, "There's 50 guys ... in
Copper River that have Bristol Bay permits in their wife's name
or their daughter or their son's name; they go there anyway. So
the theory of running around, hitting every peak, ... I don't
think that's going to be really a clear option now."
MR. McCUNE pointed out the key role of markets, as [Mr. Meiners]
had discussed; noted that this doesn't include vessels, just
permits; and predicted that the people who'd take advantage of
it first are those who have permits currently in the name of a
spouse or child and would transfer those to their own name.
Beside the need to buy a different vessel, he suggested it would
cost perhaps $60,000 for a new permit, harbor fees, and gear,
especially for someone who hadn't made the investment already.
MR. McCUNE, noting that the [salmon] fisheries are all limited,
highlighted the diversification this could provide. He
questioned the ability of people to hit all the peaks if there
aren't markets, and cited the seine fishery in Bristol Bay as an
example. If it's limited to just a couple of areas, he
suggested, it would discriminate against those who own permits
in other areas. "A lot of people think it's time that ... we
take a clear look at this and let people fish their permits that
they do own," he concluded.
Number 1180
CHAIR SEATON asked, if this is limited by markets, whether Mr.
McCune sees the ability for so-called highline fishermen from
one area to displace local fisherman in another area. For
example, if a processor has a really good fleet that supplies
fish from both Prince William Sound and Southeast Alaska, would
they be able to "leverage out" some of the local fishermen?
MR. McCUNE replied that he wouldn't think so. He said there are
only so many permits anyway, and people choose to fish those
permits. For example, he said, the Copper River is "maxed out"
on permits, and all but nine were fished last year, though that
is an exceptional fishery. He mentioned several processors by
name, saying they are spread out in the state anyway "and have
their own fishermen for those different areas." He added that a
lot of fishermen who fish for NorQuest [Seafoods, Inc.] in the
Copper River also fish in Bristol Bay.
CHAIR SEATON requested that Mr. McCune return when the bill is
brought up again. Noting that time was limited, he called upon
Mr. Twomley to address questions.
Number 1029
BRUCE C. TWOMLEY, Chairman/Commissioner, Commercial Fisheries
Entry Commission, Alaska Department of Fish & Game, also offered
to return at the next hearing. Referring to the question of
whether the board has authority to selectively lift this
requirement of choosing an individual fishery to fish each
season, Mr. Twomley said he thinks there is some authority found
in the 1990 Hebert case. He elaborated:
The board really has a lot of authority when it comes
to establishing exclusive area and superexclusive area
registration. And I know that I'm told that in
practice they recently did that in one of the herring
fisheries. There were local individuals from Goodnews
Bay who came to the board and asked the board to lift
their superexclusive area status so they could bring
more people and buyers into the fishery. And I'm told
the board did that in the last session.
In contrast - and this was also a fairly recent
development - inside Bristol Bay itself, where you've
got a series of subdistricts where people register and
then can't quickly move from one to another, ... they
have to register and there's a waiting period before
they can move - local people in the subdistrict of
Togiak wanted superexclusive subdistrict area
registration so they wouldn't get invaded by others in
the Bristol Bay fishery. And they got that from the
board. ...
And so the board ... has done both in recent times.
They've established one superexclusive area among ...
subdistricts that are not superexclusive, ... and they
have also lifted one superexclusive area among Western
Alaska herring fisheries, which are, for the most
part, superexclusive areas. So, at least from
practice and from the Hebert case, I would think that
they could.
Number 0941
CHAIR SEATON thanked participants. [HB 415 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Fisheries meeting was adjourned at
9:58 a.m.
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