Legislature(2003 - 2004)

02/21/2003 08:33 AM FSH

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
              HOUSE SPECIAL COMMITTEE ON FISHERIES                                                                            
                       February 21, 2003                                                                                        
                           8:33 a.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Paul Seaton, Chair                                                                                               
Representative Peggy Wilson, Vice Chair                                                                                         
Representative Cheryll Heinze                                                                                                   
Representative Pete Kott                                                                                                        
Representative Ethan Berkowitz                                                                                                  
Representative David Guttenberg                                                                                                 
MEMBERS ABSENT                                                                                                                
Representative Ralph Samuels                                                                                                    
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 22                                                                                                               
"An Act relating to commercial fishing permit brokers; and                                                                      
providing for an effective date."                                                                                               
     - HEARD AND HELD                                                                                                           
HOUSE BILL NO. 89                                                                                                               
"An Act relating to standards for chilling and delivery of                                                                      
commercially caught salmon; and providing for an effective                                                                      
     - HEARD AND HELD                                                                                                           
PREVIOUS ACTION                                                                                                               
BILL: HB 22                                                                                                                     
SHORT TITLE:COMMERCIAL FISHING PERMIT BROKERS                                                                                   
SPONSOR(S): REPRESENTATIVE(S)WEYHRAUCH                                                                                          
Jrn-Date   Jrn-Page                     Action                                                                                  
01/21/03     0037       (H)        PREFILE RELEASED (1/10/03)                                                                   
01/21/03     0037       (H)        READ THE FIRST TIME -                                                                        
01/21/03     0037       (H)        FSH, RES, FIN                                                                                
02/21/03                (H)        FSH AT 8:30 AM CAPITOL 124                                                                   
BILL: HB 89                                                                                                                   
SHORT TITLE:FISH HANDLING AND DELIVERY STANDARDS                                                                                
SPONSOR(S): REPRESENTATIVE(S)STEVENS                                                                                            
Jrn-Date   Jrn-Page                     Action                                                                                  
02/10/03     0169       (H)        READ THE FIRST TIME -                                                                        
02/10/03     0169       (H)        FSH, RES                                                                                     
02/10/03     0169       (H)        REFERRED TO FISHERIES                                                                        
02/12/03     0203       (H)        COSPONSOR(S): WOLF                                                                           
02/21/03                (H)        FSH AT 8:30 AM CAPITOL 124                                                                   
WITNESS REGISTER                                                                                                              
REPRESENTATIVE BRUCE WEYHRAUCH                                                                                                  
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Provided sponsor statement for HB 22.                                                                      
JOHN MITCHELL, Owner                                                                                                            
Alaska Permit Services                                                                                                          
Bellingham, Washington                                                                                                          
POSITION STATEMENT:  Testified on HB 22, expressing concerns                                                                    
regarding bonding and reciprocity issues.                                                                                       
BRUCE TOLLACK, Co-Owner                                                                                                         
Tidewater Brokerege, Inc.                                                                                                       
Petersburg, Alaska                                                                                                              
POSITION STATEMENT:  Testified on HB 22, expressing concerns                                                                    
regarding residency and the amount of the bond.                                                                                 
STUART RICKEY, Owner and Operator                                                                                               
Rickey & Associates                                                                                                             
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 22.                                                                             
CHRIS GARCIA                                                                                                                    
Cook Inlet Fishermen's Fund                                                                                                     
Kenai, Alaska                                                                                                                   
POSITION STATEMENT:  Testified on HB 22, suggesting the use of                                                                  
either an escrow or a trust account; testified in strong                                                                        
opposition to HB 89.                                                                                                            
MARY McDOWELL, Commissioner                                                                                                     
Commercial Fisheries Entry Commission (CFEC)                                                                                    
Alaska Department of Fish & Game (ADF&G)                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified on HB 22, providing information                                                                  
and answering questions.                                                                                                        
KAREN (TAFFY) WELLS                                                                                                             
Licensing Project Leader                                                                                                        
Commercial Fisheries Entry Commission (CFEC)                                                                                    
Alaska Department of Fish & Game (ADF&G)                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Testified on HB 22 and answered questions                                                                   
pertaining to delays in the permitting process.                                                                                 
RICK URION, Director                                                                                                            
Division of Occupational Licensing (DOL)                                                                                        
Department of Community & Economic Development (DCED)                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Testified on HB 22, suggesting the use of                                                                   
either an escrow or trust account.                                                                                              
SENATOR GARY STEVENS                                                                                                            
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Provided sponsor statement for HB 89.                                                                      
CHERYLL SUTTON, Staff                                                                                                           
to the Joint Legislative Salmon Industry Task Force                                                                             
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified on HB 89, stating that the bill,                                                                 
in its current form, is not ready to be enacted as legislation.                                                                 
CHRISTINE RYAN, Acting Director                                                                                                 
Division of Environmental Health                                                                                                
Department of Environmental Conservation (DEC)                                                                                  
POSITION STATEMENT:  Testified on HB 89 and questioned the                                                                      
implementation of enforcement mechanisms.                                                                                       
JAMES SHULWALTER, Commercial Fisherman                                                                                          
Soldotna, Alaska                                                                                                                
POSITION STATEMENT:  Testified in strong opposition to HB 89.                                                                   
LAURA FLEMING                                                                                                                   
Public Relations Director                                                                                                       
Alaska Seafood Marketing Institute (ASMI)                                                                                       
Department of Community and Economic Development (DCED)                                                                         
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Provided information pertaining to HB 89.                                                                   
GREG FISK, Office of Fisheries Development                                                                                      
Fisheries Development Specialist                                                                                                
Division of Community & Business                                                                                                
Department of Community & Economic Development (DCED)                                                                           
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:     Testified  on  HB   89,  suggesting  the                                                               
importance of working towards the goal of mandatory chilling.                                                                   
ACTION NARRATIVE                                                                                                              
TAPE 03-9, SIDE A                                                                                                             
Number 0001                                                                                                                     
CHAIR  PAUL   SEATON  called  the  House   Special  Committee  on                                                             
Fisheries meeting to order at  8:33 a.m.  Representatives Seaton,                                                               
Wilson, Heinze, Kott, and Guttenberg  were present at the call to                                                               
order.   Representative Berkowitz arrived  as the meeting  was in                                                               
progress.   Also present were Representatives  Weyhrauch and Gary                                                               
HB  22-COMMERCIAL FISHING PERMIT BROKERS                                                                                      
CHAIR SEATON announced that the  first order of business would be                                                               
HOUSE BILL NO. 22, "An  Act relating to commercial fishing permit                                                               
brokers; and providing for an effective date."                                                                                  
Number 0089                                                                                                                     
REPRESENTATIVE   BRUCE  WEYHRAUCH,   Alaska  State   Legislature,                                                               
sponsor of  HB 22, began his  testimony by asking that  no action                                                               
be taken  on the bill  at this time  but that today's  meeting be                                                               
used to introduce and bring  issues to the committee's attention.                                                               
He stated  that the  bill was  introduced in  order to  address a                                                               
problem that occurred in Homer in  which a boat broker had stolen                                                               
money.   He  explained  the broker's  role,  saying that  fishing                                                               
quotas are  obtained from the  National Marine  Fisheries Service                                                               
and that the  quota is in the  form of a certificate  that can be                                                               
sold to another  fisherman.  A broker is used  to facilitate that                                                               
REPRESENTATIVE WEYHRAUCH  told the  committee that the  broker in                                                               
the  Homer  area  took  money  from fishermen,  put  it  into  an                                                               
account, and  used it  for personal reasons.   The  fisherman who                                                               
wanted  to  sell   the  quota  didn't  get  the   money  for  his                                                               
transaction because  the broker was  using the money for  her own                                                               
purposes.   She was caught,  found guilty  of theft, and  sent to                                                               
prison;  however,  in the  meantime,  fishermen  were "out  their                                                               
money."    The original  intent  of  the  bill  was to  use  some                                                               
mechanism  such  as  having  brokers  post a  bond,  so  that  if                                                               
fishermen were  wronged by a  broker, at  least a portion  of the                                                               
money could be recovered through the use of the bond.                                                                           
Number 0428                                                                                                                     
REPRESENTATIVE WEYHRAUCH  cautioned that the committee  should be                                                               
aware  that brokers  are  used in  roughly 40  to  55 percent  of                                                               
federal fish certificate  transfers, so it is  a fairly important                                                               
industry.  He said he was  unsure and didn't have the information                                                               
as to how  often brokers were used to facilitate  the transfer of                                                               
state permits  such as  limited entry  permits.   He said  it was                                                               
important for  the committee to  realize that almost  all brokers                                                               
operate  ethically and  honestly, and  that this  bill is  not an                                                               
indictment  of  the broker  industry.    Many brokers  use  trust                                                               
accounts, in  which money from  the person buying the  share goes                                                               
into a trust account, and  the money is thereby treated properly.                                                               
He reiterated  that this bill  is designed to address  one severe                                                               
problem that harmed fishermen in the Homer area.                                                                                
Number 0548                                                                                                                     
REPRESENTATIVE WEYHRAUCH  continued that  when he  talked further                                                               
with brokers  in the  Juneau area,  the Division  of Occupational                                                               
Licensing, and the Commercial  Fisheries Entry Commission (CFEC),                                                               
issues  affecting brokers  and agencies  became apparent,  and he                                                               
said he  is interested in simplifying  the bill so that  it won't                                                               
be unnecessarily  burdensome to  those involved in  the brokering                                                               
business.  He  reiterated that although HB 22  doesn't address an                                                               
industry-wide  problem, the  focus on  a specific  broker may  be                                                               
helpful  in  shedding light  on  a  weakness within  the  system,                                                               
indicating  that perhaps  this should  be addressed  as a  public                                                               
policy matter.                                                                                                                  
Number 0600                                                                                                                     
JOHN MITCHELL,  Owner, Alaska Permit Services,  testified that he                                                               
has been involved with the  brokerage business of Alaskan limited                                                               
entry permits for over 20 years,  and said that he fully supports                                                               
the principal concept of the  bill, although he remains concerned                                                               
that important  aspects including bonding and  reciprocity issues                                                               
be addressed properly.   He said that this is  a very complicated                                                               
business  that takes  place in  an area  with cultural  concerns,                                                               
distribution issues,  and language challenges.   Events transpire                                                               
over a  calendar year  that contains  sensitive deadlines  and in                                                               
which the documentation  must meet the high  standards of various                                                               
government agencies of  authority, he said.   Mr. Mitchell stated                                                               
that fiduciary  duties must  be maintained  at all  times, saying                                                               
that his role is subject  to a demanding standard of performance,                                                               
as required by law.                                                                                                             
CHAIR  SEATON asked  for  an  explanation of  what  was meant  by                                                               
"language issues."                                                                                                              
MR. MITCHELL  responded that  in dealing  with permits,  one also                                                               
deals  with  a  varied  public,  inclusive  of  Native  Alaskans,                                                               
Italians, and people of different ethnic and cultural origins.                                                                  
CHAIR SEATON  asked if Mr.  Mitchell dealt with both  federal and                                                               
state permitting.                                                                                                               
MR. MITCHELL replied that he only dealt with state permitting.                                                                  
Number 0783                                                                                                                     
REPRESENTATIVE GUTTENBERG asked if  brokers were usually involved                                                               
with  both state  and federal  permitting or  if they  more often                                                               
addressed one type of permitting or the other.                                                                                  
MR.  MITCHELL responded  that the  majority  of brokers  combined                                                               
state and federal permitting services.                                                                                          
Number 0829                                                                                                                     
BRUCE  TOLLACK, Co-Owner,  Tidewater Brokerage,  Inc., began  his                                                               
testimony  by commenting  that the  letter  by Bill  De Vries  of                                                               
Alaska Boats &  Permits, Inc., included in  the committee packet,                                                               
was well written.   He said that after the  incident had occurred                                                               
in Homer, he had gone to  an insurance agent, assuming that there                                                               
would be a problem of lack of  trust in the industry, but did not                                                               
find that to be  a problem.  He told the  committee that he would                                                               
have difficulty  providing the equity  necessary to post  a bond,                                                               
and pointed out  that established real estate agents  only have a                                                               
$10,000 bond.   He wondered,  if HB  22 became regulation,  if it                                                               
would be  applicable to all  brokers, resident  and non-resident,                                                               
or if  it would only apply  to the four brokers  who were Alaskan                                                               
residents.    He also  mentioned  that  while this  pertained  to                                                               
permit brokers, not  to individual fishery quota  (IFQ) or vessel                                                               
brokers, in  reality, most brokers  "do a little  of everything."                                                               
He  reiterated  that  his  two  main  issues  were:  fairness  in                                                               
comparison  with other  industries, and  the issue  of residency.                                                               
He said he doesn't really have  a solution to the problem of what                                                               
to do when "somebody goes astray"  and added that posting a bond,                                                               
as has  been suggested,  may be prohibitive  to some  brokers who                                                               
want to remain in business.                                                                                                     
CHAIR SEATON  said the committee  is looking into  the difference                                                               
between  a bond  and utilizing  a  trust account,  and asked  for                                                               
MR. TOLLACK  replied that  he had absolutely  no problem  using a                                                               
trust account,  and considered it  to be the only  proper method,                                                               
adding  that  it  would  be  very unethical  to  use  a  personal                                                               
account.   He  offered that  he has  a trust  account with  Wells                                                               
Fargo  and  has had  that  account  since  the beginning  of  his                                                               
business, which was eight years ago.                                                                                            
Number 1130                                                                                                                     
STUART  RICKEY,   Owner  and   Operator,  Rickey   &  Associates,                                                               
testified that he  had been in business since 1977  and said that                                                               
his business  involves brokering  quota shares  and permits.   He                                                               
said  he supports  HB 22  and hopes  to work  with Representative                                                               
Weyhrauch to further address the scope of the bill.                                                                             
Number 1180                                                                                                                     
REPRESENTATIVE WILSON  asked for  his input regarding  the amount                                                               
of money involved with bonding.                                                                                                 
MR. RICKEY  replied that  the amount was  workable, but  was high                                                               
compared with others in the  brokerage industry.  He wondered why                                                               
the  bond was  10 times  the  amount of  that for  a real  estate                                                               
CHAIR SEATON  asked how Mr.  Rickey felt about a  requirement for                                                               
the use  of a trust account  rather than putting that  money in a                                                               
personal account.                                                                                                               
MR. RICKEY replied that he, in fact, had a trust account.                                                                       
Number 1264                                                                                                                     
CHRIS GARCIA, Cook Inlet Fishermen's  Fund, testified that he had                                                               
mixed feelings  about HB 22.   He said that  in light of  how the                                                               
cost  of bonding  can  hurt small  businesses,  the $50,000  bond                                                               
doesn't  come  close  to  covering  the  costs  of  most  of  the                                                               
transactions that  usually take place.   He said that  the Senate                                                               
version of this bill was asking  for a $100,000 bond, and that in                                                               
his opinion he believed that either  an escrow or a trust account                                                               
would  be the  smartest way  to handle  the situation  because of                                                               
protecting both the buyer and the  seller.  He explained that the                                                               
bonds could  become very  prohibitive and that  even if  a person                                                               
went out of  business, that bond would need to  be maintained for                                                               
a certain amount of time.                                                                                                       
Number 1375                                                                                                                     
MARY   McDOWELL,   Commissioner,   Commercial   Fisheries   Entry                                                               
Commission  (CFEC), Alaska  Department  of Fish  & Game  (ADF&G),                                                               
testified that  in the 30  years that  limited entry has  been in                                                               
effect in Alaska,  this was the first incident that  they know of                                                               
in which  people had lost  such money, and said  that "certainly,                                                               
one time  is too many."   She wondered whether HB  22 should also                                                               
cover  vessel brokering,  since  most brokers  are involved  with                                                               
vessels  as well  as  with  permits and  quota  shares, with  the                                                               
vessel often being  the most valuable piece in the  package.  She                                                               
suggested  that the  $50,000  bond  was a  very  high amount  for                                                               
smaller brokers, and that it might  be wiser to go with demanding                                                               
that anyone  in the  brokering business in  the state  use escrow                                                               
agents or  trust accounts so  that the money wasn't  available to                                                               
one's personal account.                                                                                                         
Number 1518                                                                                                                     
MS. McDOWELL  told the  committee that CFEC  has a  regulation in                                                               
place  that  allows  for  the  conducting  of  hearings  and  the                                                               
suspension  of a  broker's ability  to  do business  if there  is                                                               
misconduct.  She  noted that these actions prevent  such a person                                                               
from doing transactions, but does not recoup anyone's money.                                                                    
CHAIR  SEATON  asked  about delays  involved  in  the  permitting                                                               
process  in  which  the money  resides  in  an  interest-bearing,                                                               
personal  account for  quite a  while.   Utilization  of a  trust                                                               
account  might get  rid of  this propensity  for the  delaying of                                                               
transactions,  he  said.    He  asked  if  there  had  been  many                                                               
complaints regarding delays.                                                                                                    
Number 1639                                                                                                                     
KAREN  (TAFFY)   WELLS,  Licensing  Project   Leader,  Commercial                                                               
Fisheries Entry  Commission (CFEC),  Alaska Department of  Fish &                                                               
Game  (ADF&G), said  that a  broker could  submit a  transfer and                                                               
there could  be a  delay of  60 days while  the notice  of intent                                                               
becomes effective.   Or, she said, a delay could  result if there                                                               
was a problem with obtaining the necessary information.                                                                         
MS. McDOWELL suggested that it  would be useful to further define                                                               
the term "broker" to clarify exactly  who would be covered by the                                                               
provisions within  the bill.   She said  it would also  be useful                                                               
for the broker  to be required to sign  something indicating that                                                               
he/she  understands the  statutes and  regulations governing  the                                                               
transfer of permits and IFQs.                                                                                                   
CHAIR SEATON asked  if it was within Ms.  McDowell's authority to                                                               
implement her suggestion.                                                                                                       
MS.  McDOWELL responded  that if  it were  made mandatory  that a                                                               
person  had this  "extra layer  of requirements,"  then it  would                                                               
probably be useful to have statutory direction.                                                                                 
Number 1814                                                                                                                     
REPRESENTATIVE  KOTT referred  to a  testifier's earlier  comment                                                               
regarding   fair  treatment   of  in-state   versus  out-of-state                                                               
brokers, and asked how this is currently being handled.                                                                         
MS.  McDOWELL responded  that business  is  currently being  done                                                               
with approximately  one dozen brokers,  some handling just  a few                                                               
transactions a  year, and some being  major firms.  She  said she                                                               
thought that  roughly half  were in  state, although  the out-of-                                                               
state  firms  tend  to  be  the  bigger  firms.    She  said  her                                                               
understanding   was  that   whatever   requirements  were   being                                                               
considered  in  this bill  would  be  requirements pertaining  to                                                               
conducting business  in Alaska,  regardless of the  broker's home                                                               
base.  She  stated, "We can't discriminate against  who is acting                                                               
as  a  broker,  just  like   we  can't  discriminate,  under  the                                                               
constitution, against who is buying or selling a permit."                                                                       
REPRESENTATIVE  KOTT  asked if  there  was  a requirement  for  a                                                               
broker's physical presence to be in Alaska.                                                                                     
MS.  McDOWELL  responded  that  this  was  a  paper  transaction,                                                               
requiring  a  notarized  signature.   She  said  that  often  the                                                               
transactions were between Alaskans,  although they may be handled                                                               
by a brokerage located in Seattle.                                                                                              
REPRESENTATIVE  WILSON asked  if any  people who  do business  in                                                               
Alaska, even  if they live in  Seattle, would have to  "go by our                                                               
MS. McDOWELL confirmed that she understood this to be so.                                                                       
Number 1992                                                                                                                     
RICK URION,  Director, Division of Occupational  Licensing (DOL),                                                               
Department of Community &  Economic Development (DCED), suggested                                                               
that the bill is currently fairly  cumbersome and that there is a                                                               
simpler solution, at least for  the buying and selling of limited                                                               
entry permits, whereas transferring of  the federal IFQs might be                                                               
more  difficult.   He  said  he didn't  want  to  "pass off  this                                                               
responsibility to  Mary McDowell,"  but that  it would  be fairly                                                               
simple to  require that all sales  and permits go into  either an                                                               
escrow or  trust account.  He  said the division would  work with                                                               
the sponsor and the Department of  Law to come up with a solution                                                               
that could more readily be adopted.                                                                                             
CHAIR  SEATON  asked  if  the  bill includes  a  broad  range  of                                                               
permits, including IFQs.                                                                                                        
Number 2050                                                                                                                     
REPRESENTATIVE WEYHRAUCH responded that  the bill was intended to                                                               
be broadly  applied; if  someone is doing  business in  the state                                                               
and is  representing people who are  fishing in Alaska, and  if a                                                               
substantial amount of  that business involves the  use of federal                                                               
fishing, then  that person would  be subject to  the restrictions                                                               
and provisions  contained in the bill.   He pointed out  that the                                                               
broker from the Homer area who  stole the money was involved with                                                               
taking money relating to federal fishing permits.                                                                               
CHAIR  SEATON  clarified  that  the  bill's  intent  didn't  just                                                               
pertain to Alaska-issued permits, but covered other permits too.                                                                
REPRESENTATIVE WEYHRAUCH  agreed, saying  this was similar  to an                                                               
out-of-state  corporation's needing  to register  in Alaska.   He                                                               
agreed that  it might be  worthwhile to explore CFEC's  and DOL's                                                               
comments regarding a required statement  to indicate that brokers                                                               
understand Alaska's laws and regulations.                                                                                       
REPRESENTATIVE WILSON commented that  using a trust account might                                                               
be a "simple thing to do" and that  it would be wise to make sure                                                               
that this gets done.                                                                                                            
CHAIR  SEATON ascertained  that there  was no  further testimony.                                                               
He then announced that HB 22 would be held over.                                                                                
HB  89-FISH HANDLING AND DELIVERY STANDARDS                                                                                   
CHAIR SEATON announced  that the next order of  business would be                                                               
HOUSE BILL  NO. 89,  "An Act relating  to standards  for chilling                                                               
and delivery of commercially caught  salmon; and providing for an                                                               
effective date."  [The bill  was sponsored by then-Representative                                                               
Gary Stevens, who'd been appointed as Senator on February 19.]                                                                  
Number 2215                                                                                                                     
SENATOR GARY  STEVENS, Alaska State Legislature,  speaking as the                                                               
sponsor  of  HB 89,  introduced  the  bill by  acknowledging  the                                                               
problems  the salmon  industry is  facing because  of competition                                                               
from  farmed  salmon.   He  said,  to  that  end, last  year  the                                                               
legislature  established the  Joint  Legislative Salmon  Industry                                                               
Task  Force ("Task  Force"), and  as the  appointed chair  of the                                                               
quality subcommittee, he  has listened to people  from around the                                                               
state - experts as well as  people involved in the industry - and                                                               
it has  become clear that  if there were  one single thing  to be                                                               
done that  could improve the quality  of the salmon, it  would be                                                               
chilling the salmon  as soon after they were  caught as possible.                                                               
He  said  that  fish  farms  chill fish  more  readily  and  more                                                               
conveniently than is currently being done with wild salmon.                                                                     
Number 2337                                                                                                                     
SENATOR GARY  STEVENS continued that many  improvements have been                                                               
made to  the handling of fish  but there are still  problems that                                                               
can  lead to  damaged, bruised,  or gaping  fish.   He explicitly                                                               
told  the committee  "not all  the answers  are here"  in HB  89,                                                               
emphasizing that  there are a  lot of difficulties  involved with                                                               
mandatory chilling.   He  referred to  the cost  and difficulties                                                               
accompanying  the installation  of refrigeration  equipment.   He                                                               
reiterated that the  main problems include the  cost of mandatory                                                               
chilling and the  issue of "staging."  In  addition, he mentioned                                                               
other  problems such  as the  possibility  that perhaps  products                                                               
like canned salmon don't need to be chilled.                                                                                    
SENATOR GARY  STEVENS told the committee  that fishermen wondered                                                               
whether going to this great  expense of chilling their fish would                                                               
result in  receiving more  money for the  fish.   He acknowledged                                                               
that  HB 89  addresses  enormous problems  and  that it  involves                                                               
adding additional costs to the processing  of fish at a time when                                                               
the industry is  in crisis, the markets are in  jeopardy, and the                                                               
prices  are low.    He  concluded by  saying  that  in the  final                                                               
analysis,  in  order to  be  competitive  with farmed  fish,  the                                                               
product must  be the highest  quality product it can  possibly be                                                               
in order that the markets can be retrieved.                                                                                     
Number 2517                                                                                                                     
REPRESENTATIVE  WILSON  asked  for  a  definition  of  "staging."                                                               
SENATOR  GARY STEVENS  replied that  as "we  move westward"  this                                                               
process may  have to  take place  over a period  of years,  or in                                                               
stages.   To mandate that  every delivered fish must  be chilled,                                                               
as of  today, would cause  enormous problems.   Although chilling                                                               
could  probably be  done in  Southeast Alaska  and in  Kodiak, in                                                               
Western Alaska there is less  equipment, less infrastructure, and                                                               
less access to ice.  Staging  means recognizing that it's best to                                                               
accomplish the goal in stages.                                                                                                  
Number 2589                                                                                                                     
REPRESENTATIVE HEINZE asked if there  is currently a standard for                                                               
mandatory chilling.                                                                                                             
SENATOR GARY STEVENS  replied that there is not  such a mandatory                                                               
standard; however,  many processors require chilling  in order to                                                               
accept the fish.   Standards have been established,  but there is                                                               
not a mandatory requirement.                                                                                                    
REPRESENTATIVE  HEINZE  referred  to  a video  that  was  watched                                                               
several  weeks ago  that showed  salmon being  placed into  fresh                                                               
water  and  then  delivered  directly   to  the  processor;  this                                                               
resulted in  the grading going  up, perhaps  by 80 percent.   She                                                               
asked  what the  link  was  between the  icing  of  fish and  the                                                               
resultant grading of fish.                                                                                                      
Number 2633                                                                                                                     
SENATOR GARY  STEVENS replied  that this was  the video  from the                                                               
Chignik  Cooperative [meeting  of  1/31/03],  and confirmed  that                                                               
from what  he had  seen, the  quality of  the product  was higher                                                               
this year than  it has been in  years past.  He  said the Chignik                                                               
Cooperative was  able to deliver  the fish more quickly  and also                                                               
to deliver  it alive; it  would be problematic to  implement this                                                               
procedure  throughout Alaska,  although it  was possible  in that                                                               
particular location.                                                                                                            
REPRESENTATIVE HEINZE  asked about the correlation  between using                                                               
more ice and having a higher grade of fish.                                                                                     
SENATOR GARY STEVENS confirmed that  to a certain extent, there's                                                               
a direct correlation between chilling  and the quality of the end                                                               
product, although "you wouldn't want to go too far," he added.                                                                  
CHAIR  SEATON  informed the  committee  that  there had  been  an                                                               
increase  in  quality   in  fish,  not  only   from  the  Chignik                                                               
Cooperative, but  also from the  common-property fishery  in that                                                               
area.  He  suggested that this was related to  the short duration                                                               
of the fishery, resulting in  the fish being delivered in smaller                                                               
batches.     He  pointed  out   that  there  were  a   number  of                                                               
complicating factors contributing to the equation's end result.                                                                 
Number 2743                                                                                                                     
REPRESENTATIVE  GUTTENBERG referred  to the  goal of  producing a                                                               
higher quality  product and asked,  "Why doesn't the  market take                                                               
care of this?"                                                                                                                  
SENATOR GARY STEVENS  replied that in many places  the market has                                                               
requirements and  will not buy  fish unless it has  been chilled;                                                               
it's  a  standard that  many  processors  have established.    He                                                               
referred   to  a   meeting  in   Seattle  with   quality  control                                                               
representatives  from  different  processors  who  expressed  the                                                               
ensuing  difficulty   that  would   be  involved  in   saying  to                                                               
fishermen, "If  you don't chill your  fish, we won't buy  it, and                                                               
you'll have  to go elsewhere."   The obvious difficulty  would be                                                               
that those  fishermen might  then take their  business to  a more                                                               
available processor.                                                                                                            
REPRESENTATIVE GUTTENBERG  asked what assurances  fishermen might                                                               
have  that  increased quality  would  result  in an  increase  in                                                               
SENATOR GARY  STEVENS replied that  this question hit upon  a key                                                               
issue and that  there were no assurances.  But,  he cautioned, if                                                               
care wasn't  taken to  ensure that  Alaskan fish  were of  a high                                                               
quality, there  would be no  assurance of a market  continuing in                                                               
the future.                                                                                                                     
Number 2865                                                                                                                     
CHAIR SEATON commented  that one issue was whether  the result of                                                               
making additional efforts would result  not in more money, but in                                                               
less  money.   He said  that if  a product  form, such  as canned                                                               
fish, was such that the canner  could not retrieve any more money                                                               
for the  product that  he is selling,  then icing,  chilling, and                                                               
special handling  would result in just  bearing additional costs.                                                               
He  said that  in working  with product  forms such  as filleted,                                                               
fresh, or frozen  fish, [people have found  that] chilling offers                                                               
a qualitative difference at the wholesale end.                                                                                  
SENATOR GARY  STEVENS said  there are  both short-  and long-term                                                               
issues to be  addressed, that is, looking at  this year's fishing                                                               
season versus  looking ahead to  years down  the road.   He noted                                                               
that the high  quality standards are now being set  by the farmed                                                               
fish and  asked, "What is going  to happen to our  industry if we                                                               
are not competitive with farmed fish?"                                                                                          
REPRESENTATIVE WILSON  commented that  the Alaskan  product won't                                                               
be bought unless it matches  the farmed fish product, saying that                                                               
although  it's not  necessarily  a win-win  situation right  now,                                                               
down the road it will become so.                                                                                                
TAPE 03-9, SIDE B                                                                                                             
Number 2956                                                                                                                     
CHAIR SEATON  offered that  he was  not sure  about this  idea of                                                               
competing  with  farmed  salmon  because  consumers  buy  Alaskan                                                               
salmon for  reasons such  as the  flavor or  because the  fish is                                                               
wild and  not inoculated.   He reiterated  that farmed  fish have                                                               
changed the  market, but  this doesn't mean  that Alaskan  red or                                                               
silver  salmon fillets  should necessarily  be sold  at the  same                                                               
price that Costco is selling farmed fish.                                                                                       
SENATOR GARY  STEVENS offered that  what he meant  by "competing"                                                               
was not to be interpreted as  competing at the same price, but as                                                               
competing  in  the  marketplace.    He said  he  thought  it  was                                                               
important to  recapture a share  of the market that's  been lost.                                                               
He pointed out  that the Alaskan salmon are in  the best possible                                                               
condition and  freely arrive  on our  shores, whereas  fish farms                                                               
have to  breed, raise, feed,  and contain the fish  until they're                                                               
ready to  be processed.   He  said that  there are  many positive                                                               
aspects and  qualities to wild  Alaskan salmon, such as  the high                                                               
content of omega-3s [omega-3  fatty acids], being environmentally                                                               
friendly, and not being drugged in order to be disease-free.                                                                    
REPRESENTATIVE  HEINZE   agreed  that  the  niche   would  entail                                                               
marketing  the  salmon as  wild  salmon  and also  educating  the                                                               
public as  to the antibiotics  and other aspects involved  in the                                                               
processing of farmed fish.   She said that this marketing effort,                                                               
combined with  producing a higher-grade  salmon, would be  a two-                                                               
pronged effort that would afford Alaska an even better shot.                                                                    
Number 2793                                                                                                                     
SENATOR  GARY STEVENS  agreed and  said that  there's a  need for                                                               
awareness  of what's  occurring in  the farmed  fish market.   He                                                               
said that today in Juneau,  at Costco, there are beautiful farmed                                                               
fish fillets, individually  frozen in bags, that just  need to be                                                               
thawed and  cooked.  He said  the market has changed  in the last                                                               
10 years  and that, hopefully, people  will pay more money  for a                                                               
quality wild fish.                                                                                                              
REPRESENTATIVE  WILSON said  she agreed  100 percent,  mentioning                                                               
that society  wants convenient and  quick products, but  will pay                                                               
more for a  quality product if it's desired;  she emphasized that                                                               
it was important for the quality of the product to remain high.                                                                 
SENATOR GARY  STEVENS said the  quality subcommittee of  the Task                                                               
Force thought  this issue to  be enormously important  and wanted                                                               
to bring  it forward  to the legislature  to discuss  and address                                                               
Number 2627                                                                                                                     
CHAIR  SEATON questioned  what  enforcement  mechanism was  being                                                               
envisioned by  the Task  Force to  ensure that  quality standards                                                               
would be met.                                                                                                                   
SENATOR GARY  STEVENS replied  that he didn't  have an  answer to                                                               
that question.                                                                                                                  
CHAIR SEATON  said that  the two  options for  mandatory chilling                                                               
that he could envision would be  to either penalize the person by                                                               
price  or by  preventing  participation; he  said  he didn't  see                                                               
either of  these options  as being within  the structure  of what                                                               
the legislature would be inclined to do.                                                                                        
SENATOR GARY STEVENS  confirmed this as a  conundrum, saying that                                                               
the  Task   Force  hopes  that  the   legislature  could  provide                                                               
assistance regarding enforcement, should  the decision be made to                                                               
pass the bill.                                                                                                                  
Number 2467                                                                                                                     
CHERYLL SUTTON,  Staff to the  Joint Legislative  Salmon Industry                                                               
Task Force,  Alaska State Legislature, introduced  Phelan Straube                                                               
as the staff  person assigned to the Quality  Subcommittee of the                                                               
Task Force.  She reiterated  that there is clear recognition that                                                               
the bill, in  its current form, should not be  adopted because of                                                               
issues  that still  need to  be solved.   She  reported that  the                                                               
processing  sector  had  similarly questioned  the  logistics  of                                                               
enforcement and  that at this point  in time the subject  has not                                                               
been  adequately  addressed.    She   said  that  there  is  some                                                               
confusion relative to mixing [U.S.  Food and Drug Administration]                                                               
Hazard  Analysis and  Critical  Control  Point (HACCP)  planning-                                                               
process standards  with chilling  standards, explaining  that the                                                               
HACCP program is a safety-based  program within the Department of                                                               
Environmental Conservation  (DEC) and  is not designed  for these                                                               
issues; it is  a marketing tool in that people  ask, "Do you have                                                               
a HACCP  program in place?"   And, of course, now,  everyone does                                                               
have one in place.                                                                                                              
Number 2290                                                                                                                     
CHRISTINE  RYAN,  Acting   Director,  Division  of  Environmental                                                               
Health, Department of Environmental  Conservation (DEC), said the                                                               
division oversees seafood processing  and food safety inspections                                                               
for  the state.    She  said the  division  has similar  concerns                                                               
regarding how  enforcement mechanisms  would be encouraged.   She                                                               
pointed out that  the division's focus was on  matters of safety,                                                               
whereas the  issues of quality  were more often addressed  by the                                                               
Alaska Seafood  Marketing Institute  (ASMI).  She  explained that                                                               
the division's only mechanism of  enforcement would be to issue a                                                               
ticket or  a fine  and that  at this  time, the  division doesn't                                                               
interact with  fishing boats in any  way, but does work  with the                                                               
processors.  She questioned the  standard for prompt delivery and                                                               
wondered  how  setting  this standard  for  promptness  might  be                                                               
CHAIR SEATON asked if the  division interacted with direct market                                                               
MS. RYAN confirmed that this was the case.                                                                                      
Number 2141                                                                                                                     
JAMES  SHULWALTER, Commercial  Fisherman, testified  that he  has                                                               
been involved with  fishing for his entire life and  is now semi-                                                               
retired and  draws social  security.   He strongly  expressed his                                                               
opinion that  this issue of  getting the  best quality of  fish -                                                               
and  therefore the  best  price  - should  be  determined by  the                                                               
processors  and the  fishermen rather  than the  Task Force.   He                                                               
testified in  opposition to HB  89, repeating that it  wasn't the                                                               
job of  the Task Force  to make regulations that  would interfere                                                               
with private business.                                                                                                          
Number 2047                                                                                                                     
CHRIS GARCIA,  Cook Inlet Fishermen's  Fund, testified  in strong                                                               
opposition  to HB  89.   He  said the  state doesn't  need a  new                                                               
department to enforce  a law that doesn't need to  be enforced in                                                               
the  first  place, and  that  it  would  be  very costly  to  all                                                               
involved.   He  said  that if  this  issue were  left  up to  the                                                               
industry,  it would  be taken  care  of, pointing  out that  some                                                               
areas in the state already require  chilling.  He stated that the                                                               
industry  is  already  "crippled"  and  doesn't  need  additional                                                               
restrictions.  He added that even  with regard to the offering of                                                               
loans,  the  paying  back  of   those  loans  would  add  another                                                               
unnecessary burden for  fishermen.  He emphasized  that this bill                                                               
would help  to kill the  industry and that  the best thing  to do                                                               
with HB  89 is  to "kill  this before it  becomes a  monster" and                                                               
before a bigger  bureaucracy and budget are created.   He said to                                                               
accomplish mandatory chilling, some of  the vessels would need to                                                               
be replaced because necessary modifications  would cost more than                                                               
the worth of  the vessel.  He said that  the farmed-fish industry                                                               
would  die  on its  own  if  it  wasn't  being supported  by  the                                                               
CHAIR  SEATON repeated  that the  intent was  not to  move HB  89                                                               
out of committee at this time.                                                                                                  
[Elise Hsieh  of the  Department of Law  was available  to answer                                                               
Number 1782                                                                                                                     
LAURA   FLEMING,  Public   Relations  Director,   Alaska  Seafood                                                               
Marketing Institute  (ASMI), Department  of Community  & Economic                                                               
Development (DCED), told  the committee that last  year the board                                                               
met, looked at the results of  quality surveys - surveys that had                                                               
been conducted every five years for  the past fifteen years or so                                                               
-  and acknowledged  that voluntary  education  efforts were  not                                                               
working.  She  testified that the quality of the  product was not                                                               
improving  fast  enough  to remain  competitive  with  the  world                                                               
market.   A  Quality Symposium  was established,  and after  this                                                               
issue was  addressed last spring,  a list of  recommendations was                                                               
forwarded  to the  ASMI board  that was  then reviewed  this past                                                               
September.   She  said that  those  quality recommendations  were                                                               
adopted  and  could  be  found  in the  committee  packet.    She                                                               
explained  that ASMI  is  a marketing  agency,  not a  regulatory                                                               
agency, but  has recognized that  something further must  be done                                                               
and suggests that all of the standards be adopted.                                                                              
MS.  FLEMING   continued  that  the   Task  Force   reviewed  the                                                               
recommendations  and  then selected  one  item  to move  forward,                                                               
which was  "chilling."   She encouraged  the committee  to review                                                               
ASMI's  "Quality Recommendations"  in the  committee packet,  and                                                               
she distributed  pictures of  fish that  demonstrated gaping  - a                                                               
separation  of  the  tissue  -   which  is  a  common  occurrence                                                               
resulting from fish  not being properly chilled.   In conclusion,                                                               
Ms. Fleming said that 25 years  ago when she moved to Juneau, the                                                               
produce at  the market  was not  of the  same quality  as today's                                                               
produce, and  that similarly,  today's consumers  do not  need to                                                               
buy fish of a lesser quality for a premium price.                                                                               
Number 1488                                                                                                                     
REPRESENTATIVE  BERKOWITZ  said  that  although  this  was  being                                                               
considered solely  as an  Alaskan problem,  Alaskan salmon  are a                                                               
large percentage  of the entire  American salmon production.   He                                                               
said  it  seems that  the  federal  government should  bear  some                                                               
responsibility in  assisting Alaska in transitioning  to a higher                                                               
quality product and  asked if there were  any initiatives through                                                               
which  the federal  government might  be  in a  position to  help                                                               
Alaskan fishermen to  upgrade the quality of  the product, either                                                               
through loans or otherwise.                                                                                                     
MS. FLEMING responded that she  believes that the majority of the                                                               
federal government's  focus is  on food safety  rather than  on a                                                               
quality product.   However, she said she believed  that there are                                                               
funds that could  potentially be directed to this  effort - funds                                                               
that pertain to the disastrous salmon market conditions.                                                                        
REPRESENTATIVE BERKOWITZ stated that  this wasn't just an Alaskan                                                               
problem, but was  an American problem as well, and  that if there                                                               
was any  way to  encourage the federal  government's involvement,                                                               
that should  be done because  this was too  big of a  problem for                                                               
"us to fix by ourselves."                                                                                                       
Number 1464                                                                                                                     
REPRESENTATIVE WILSON expressed her  concern that the offering of                                                               
additional  loans  to  fishermen   may  not  be  helpful  because                                                               
currently, there  are fisherman who  are struggling just  to stay                                                               
current  on   their  present  loans,   and  that   offering  them                                                               
additional loans might only be contributing to their struggle.                                                                  
Number 1404                                                                                                                     
GREG FISK, Fisheries Development  Specialist, Office of Fisheries                                                               
Development,  Division  of  Community and  Business  Development,                                                               
Department of Community &  Economic Development (DCED), commended                                                               
Senator  Gary Stevens  for encapsulating  the need  for elevating                                                               
the  quality of  Alaskan fish  as  well as  for highlighting  the                                                               
problems   involved  with   implementation.     In  response   to                                                               
Representative Heinze's previous question  as to whether there is                                                               
a direct  link between chilling  and quality, he said  that there                                                               
is actually a  quantifiable link.  He referred to  Bristol Bay as                                                               
the state's  largest sockeye  fishery and  said that  without any                                                               
real  changes happening  in the  handling of  fish over  the past                                                               
decade,  the  grading of  "number  one"  fish  has slid  from  an                                                               
average  of  above 70  percent  to  the  mid-30 percentile.    He                                                               
explained  that there  has not  been  any actual  changes in  the                                                               
fish,  but rather,  this is  a  market response,  based on  world                                                               
standards.  He mentioned John  Lowrance, a Bristol Bay processor,                                                               
who only  uses chilled  fish and  has a  grading of  "number one"                                                               
fish that are in the mid-70s.                                                                                                   
Number 1257                                                                                                                     
MR.  FISK  continued that  beyond  the  scope of  enforcement,  a                                                               
chilling mandate could assist with  setting a focus and achieving                                                               
a goal  of producing a  higher quality  fish.  He  referenced the                                                               
codfish industry in the eastern  United States in which fish used                                                               
to be unloaded with pews, or  sticks, that were inserted into the                                                               
fish  in order  to  throw them  aboard.   For  years, there  were                                                               
attempts to  eliminate this practice by  voluntary standards, but                                                               
that didn't  work because "habits  are hard  to break."   He said                                                               
that now,  since it's against  the law, nobody pews  fish anymore                                                               
and the quality of the fish has  gone up.  He said that setting a                                                               
standard for  chilling sets  a goal that  can be  worked towards.                                                               
He acknowledged  that this  is a national  problem and  said that                                                               
currently,  monies are  available,  principally through  agencies                                                               
like  the Economic  Development  Administration (EDA).   He  said                                                               
that  identification of  this as  a major  problem could  help to                                                               
provide the  necessary clout to  be used  in working with  EDA to                                                               
focus their funding on solving this problem.                                                                                    
REPRESENTATIVE BERKOWITZ  expressed his concern that  the overall                                                               
problem lands disproportionately in different  parts of the state                                                               
and also according to the differing fisheries.                                                                                  
MR. FISK responded that cost is  a big issue and that fortunately                                                               
there is no need to go to  RSW [refrigerated sea water].  He said                                                               
that the  cost in  areas such  as Bristol  Bay for  small gillnet                                                               
vessels for a  modern system ranges from $17,000 to  $30,000.  He                                                               
mentioned the slush-bag system,  an interesting solution that had                                                               
been developed  in Homer that has  been tried in Bristol  Bay and                                                               
seems to  work very  well, noting that  vessels can  be converted                                                               
for  as  little as  $2,000  per  boat.    He said  the  Community                                                               
Development Quota  (CDQ) Program in  Bristol Bay is  working hard                                                               
on this  and is trying  to convert the  local boats so  that they                                                               
won't be  left behind if a  mandate like this is  put into place.                                                               
He  referred to  ASMI's survey  which relates  progress that  has                                                               
been made in chilling,  and referenced the Arctic-Yukon-Kuskokwim                                                               
Region (AYK), saying  that progress in this area  was due largely                                                               
to  the outfitting  of  skiffs, small  vessels,  and even  setnet                                                               
sites with bag  systems that allowed for the use  of ice - adding                                                               
that this process could be done relatively inexpensively.                                                                       
Number 1027                                                                                                                     
CHAIR  SEATON asked  whether there  were further  questions.   He                                                               
then  said the  bill  would be  held over  and  the record  would                                                               
remain  open if  people  wanted to  submit  anything in  writing.                                                               
[HB 89 was held over.]                                                                                                          
There being no  further business before the  committee, the House                                                               
Special  Committee   on  Fisheries   meeting  was   adjourned  at                                                               
9:50 a.m.                                                                                                                       

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