Legislature(2017 - 2018)GRUENBERG 120

02/16/2017 10:00 AM House FISHERIES

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10:07:27 AM Start
10:07:49 AM Presentation: Commercial Fisheries Entry Commission (cfec)
10:58:13 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: Limited Entry Permit Cap by CFEC TELECONFERENCED
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
              HOUSE SPECIAL COMMITTEE ON FISHERIES                                                                            
                       February 16, 2017                                                                                        
                           10:07 a.m.                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Louise Stutes, Chair                                                                                             
Representative Zach Fansler                                                                                                     
Representative Jonathan Kreiss-Tomkins                                                                                          
Representative Geran Tarr                                                                                                       
Representative Mike Chenault                                                                                                    
Representative David Eastman                                                                                                    
MEMBERS ABSENT                                                                                                                
Representative Mark Neuman                                                                                                      
OTHER LEGISLATIVE MEMBERS PRESENT                                                                                             
Representative Dan Ortiz                                                                                                        
COMMITTEE CALENDAR                                                                                                            
PRESENTATION: COMMERCIAL FISHERIES ENTRY COMMISSION (CFEC)                                                                      
     - HEARD                                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record                                                                                                    
WITNESS REGISTER                                                                                                              
BEN BROWN, Commissioner                                                                                                         
Commercial Fisheries Entry Commission (CFEC)                                                                                    
Alaska Department of Fish & Game (ADF&G)                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Provided an opening statement and responded                                                              
to questions, during the Commercial Fisheries Entry Commission                                                                  
(CFEC) overview.                                                                                                                
CRAIG FARRINGTON, Acting Project Leader                                                                                         
Research and Planning                                                                                                           
Commercial Fisheries Entry Commission (CFEC)                                                                                    
Alaska Department of Fish & Game (ADF&G)                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Provided  the  Commercial Fisheries  Entry                                                             
Commission (CFEC) overview.                                                                                                     
ACTION NARRATIVE                                                                                                              
10:07:27 AM                                                                                                                   
CHAIR  LOUISE  STUTES  called  the  House  Special  Committee  on                                                             
Fisheries  meeting  to  order  at  10:07  a.m.    Representatives                                                               
Stutes, Tarr, Eastman,  and Chenault were present at  the call to                                                               
order.   Representatives  Fansler and  Kreiss-Tomkins arrived  as                                                               
the meeting was in progress.                                                                                                    
^PRESENTATION: Commercial Fisheries Entry Commission (CFEC)                                                                     
   PRESENTATION: Commercial Fisheries Entry Commission (CFEC)                                                               
10:07:49 AM                                                                                                                   
CHAIR STUTES announced  that the only order of  business would be                                                               
a  presentation  by  the Commercial  Fisheries  Entry  Commission                                                               
10:08:24 AM                                                                                                                   
BEN  BROWN, Commissioner,  directed  attention  to the  committee                                                               
packet and the  CFEC memorandum to Chair  Stutes office, 2/15/17,                                                               
which  synopsizes  the  brief history  of  the  $3,000  statutory                                                               
permit  fee, established  by the  24th Alaska  State Legislature,                                                               
2005.   At that  time it  was a $300.00  ceiling in  the statute,                                                               
which was not  generating enough revenue to ensure  that CFEC was                                                               
a self-sustaining  agency, expected  to be entirely  supported by                                                               
designated funds  generated by program receipts.   Currently, the                                                               
agency  generates funds  in excess  of operational  requirements,                                                               
and  the trend  is to  continue  bringing in  more revenue  while                                                               
minimizing expenses.  He noted  that an additional memorandum was                                                               
also  provided,   which  contains  further  information   on  the                                                               
entities/individuals  that  would  be  affected  if  the  cap  is                                                               
10:12:13 AM                                                                                                                   
CRAIG FARRINGTON,  Acting Project Leader, Research  and Planning,                                                               
Commercial  Fisheries Entry  Commission  (CFEC),  began the  CFEC                                                               
The committee took a brief at-ease at 10:14.                                                                                    
10:14:55 AM                                                                                                                   
MR. FARRINGTON  directed attention  to the committee  packet, and                                                               
the   handout  labeled,   "Alaska   Commercial  Fisheries   Entry                                                               
Commission," [the  home page of  the commission's  website], page                                                               
2, and  pointed out the list  of over 300 permit  types available                                                               
for fishermen  to access.   The permits are organized  by species                                                               
of  fish or  shellfish, further  demarcated  by the  area of  the                                                               
state, gear type, and finally by  the size of the fishing vessel.                                                               
He  said permits  are issued  to persons,  not vessels,  thus the                                                               
skipper is the holder of the permit.                                                                                            
10:17:00 AM                                                                                                                   
CHAIR  STUTES confirmed  that it  must be  the skipper,  not just                                                               
anyone on the boat, who holds the permit.                                                                                       
MR. FARRINGTON concurred,  and said crew members  are required to                                                               
be licensed.                                                                                                                    
CHAIR STUTES  stated her  understanding that  anyone on  the boat                                                               
could hold the permit card; not necessarily the skipper.                                                                        
COMMISSIONER   BROWN   interjected   that  it's   a   matter   of                                                               
nomenclature,  and whomever  holds  and presents  the permit  for                                                               
landing purposes is legally, considered the skipper.                                                                            
10:18:09 AM                                                                                                                   
MR.  FARRINGTON  described  the  two  broad  categories  of  CFEC                                                               
permits.  Category  one:  The limited entry permits  apply to the                                                               
80 fisheries deemed necessary for  limited participation, such as                                                               
the Bristol  Bay salmon drift  fishery.  The limits  CFEC imposes                                                               
are designed  to improve conditions for  a fishery.  Access  to a                                                               
fishery is  handled via a  one-time, point ranking  system, based                                                               
on   a  fisherman's   ability  to   demonstrate  their   historic                                                               
participation  and economic  dependence.   The number  of permits                                                               
granted  will be  less than  the number  of fisherman  previously                                                               
engaged  in  a   given  fishery,  with  the   intent  to  provide                                                               
opportunity to those who ranked high and eliminate others.                                                                      
CHAIR  STUTES  asked whether,  once  limited,  a fishery  remains                                                               
limited indefinitely.                                                                                                           
MR. FARRINGTON responded, yes.                                                                                                  
10:19:48 AM                                                                                                                   
MR.  FARRINGTON  characterized  category two:    The  interim-use                                                               
permits  are   for  open-access   fisheries,  not   limited,  and                                                               
available to all  comers on an annual basis, such  as the halibut                                                               
fishery for  longline vessels  that are  less than  60 feet.   He                                                               
pointed out that  the majority of permits issued  are for limited                                                               
entry fisheries conducted in state waters.                                                                                      
10:20:36 AM                                                                                                                   
COMMISSIONER BROWN  interjected that although the  CFEC considers                                                               
halibut  to be  an open  access fishery,  the federal  government                                                               
requires an  Interim Use Permit  (IUP), as per  the International                                                               
Pacific Halibut Commission (IPHC) treaty.                                                                                       
10:21:19 AM                                                                                                                   
MR.  FARRINGTON said  that,  of the  total  CFEC permits  issued,                                                               
interim-use  permits represent  a minority,  including those  for                                                               
federal  water fisheries;  occurring  outside of  the three  mile                                                               
limit.   The  latest reportable  data, 2015,  shows that  limited                                                               
entry  permits  garnered  $480 million,  and  interim-use  permit                                                               
sales brought in $1.34 billion.                                                                                                 
10:22:41 AM                                                                                                                   
MR.   FARRINGTON  provided   a  pie   chart  to   illustrate  the                                                               
distribution  of  the 1,729  estimated  permits  for issuance  in                                                               
2017, showing that  the most popular limited entry  permit is for                                                               
participation  in  the  Bristol  Bay  salmon  drift  fishery  and                                                               
representing  about 10  percent  of the  total.   The  previously                                                               
described halibut permit is the  most popular interim-use permit,                                                               
also 10  percent of the total.   A small percentage  of the total                                                               
permits are  distributed to the  15 permit types that  are capped                                                               
by a fee  ceiling of $3,000.  He said  permit fees are calculated                                                               
on four tenths of one percent  of the market value of the limited                                                               
entry permit, or  the same fraction of the  average earnings made                                                               
with  the permit.    The  exception are  the  15 capped  permits,                                                               
comprised of five groupings which  include:  King crab, fin fish;                                                               
miscellaneous  fin fish,  tanner crab,  and weathervane  scallop.                                                               
He reiterated that permits are for  persons and not vessels.  The                                                               
commonality for the 15 capped fishery  types is the high value of                                                               
the  permit, due  in part  to the  high value  of the  bounty for                                                               
crab,  and  the  sheer  volume for  the  miscellaneous  fin  fish                                                               
10:27:06 AM                                                                                                                   
MR. FARRINGTON defined  ex-vessel value as the  dockside value of                                                               
the catch,  and provided  a pie chart  illustrating the  share of                                                               
the  $1.82 billion  ex-vessel earnings  garnered by  permit type:                                                               
$105 million for  the Bristol Bay drift permits,  $88 million for                                                               
halibut, and  $1.03 billion  by the  five capped  ceiling groups.                                                               
He said  CFEC expects to  issue approximately 485 of  the permits                                                               
capped by  the fee ceiling for  the 2017 season, and  pointed out                                                               
that these permits carry a  fee of $3,000, which represents about                                                               
one tenth of one percent of a captain's earnings.                                                                               
10:29:18 AM                                                                                                                   
MR. FARRINGTON  reported that  the majority  of the  CFEC permits                                                               
are issued to  Alaskan residents; approximately 76  percent.  The                                                               
ceiling capped  permits are primarily  held by  non-residents; 83                                                               
percent versus 17 percent.   Given the current fee ceiling, there                                                               
is an  estimated $2.2  million, which  could have  been collected                                                               
for 2017,  considered foregone  revenue to the  state.   Thus, if                                                               
the foregone revenue  were to be collected only  10 percent would                                                               
come from Alaska residents.                                                                                                     
10:30:14 AM                                                                                                                   
CHAIR STUTES noted that the  CFEC formula is complex and removing                                                               
the  $3,000 cap  will have  effects that  need to  be understood.                                                               
She  asked specifically  about any  impacts on  vessels under  60                                                               
10:30:54 AM                                                                                                                   
COMMISSIONER BROWN  explained that limited entry  and interim-use                                                               
permits are issued to individual  skippers; however, the skippers                                                               
may not benefit  from the full ex-vessel value.   Individuals may                                                               
purchase  an interim-use  permit for  use on  a vessel  that they                                                               
own, or  they may also  use the same permit  to fish on  a vessel                                                               
owned by someone  else.  Only one permit is  necessary to fish in                                                               
a given  fishery.  Thus,  someone who owns  a 58 foot  vessel may                                                               
purchase a  permit for use on  that vessel.  However,  they could                                                               
also purchase an  interim-use permit for the 125  foot and larger                                                               
vessel category and act as a  relief skipper on a larger boat for                                                               
a quota  entity or  on a  corporate vessel out  of Seattle.   The                                                               
anomaly occurs  due to CFEC not  being able to fully  account for                                                               
the  landing  data.    He said  although  the  information  known                                                               
includes the  IUP holder,  the vessels they  fished, and  the ex-                                                               
vessel values  of each vessel, what  is not known is  whether the                                                               
individual paid  the IUP fee  and what percentage of  the landing                                                               
revenues  is retained  by that  individual.   Thus, earnings  for                                                               
individuals are  averaged with the  longer vessel class,  but not                                                               
with the  under 60 foot  vessel class,  and the result  creates a                                                               
distortion  of the  statistics  related to  the  IUP renewal,  or                                                               
purchase,  fees.   A  concern  exists for  removing  the cap,  as                                                               
fishermen  purchasing  IUP's who  don't  fully  benefit from  the                                                               
revenue earned, will pay a  significantly larger interim-use fee.                                                               
He said:                                                                                                                        
     If  strictly  rational,  economical  behavior  were  to                                                                    
     result, from  lifting the fee cap,  an individual would                                                                    
     only  buy an  IUP for  the length  of vessel  that that                                                                    
     individual  owned  and was  planning  to  fish on,  and                                                                    
     wouldn't  have the  option of  being a  free agent  and                                                                    
     being a relief skipper on a much larger boat.                                                                              
CHAIR  STUTES surmised  that  there is  no  disincentive for  the                                                               
owner/operator of  a 58  foot vessel to  not purchase  the $3,000                                                               
permit; the  same license fee  paid by  vessels in excess  of 125                                                               
COMMISSIONER BROWN concurred, and  offered the analogy of someone                                                               
purchasing firepower.  He said:                                                                                                 
     You can either  have a handgun, a .22, a  shotgun, or a                                                                    
     cannon.   Right now, someone  who only needs  a handgun                                                                    
     can pay  the same amount  and get a cannon,  because of                                                                    
     the $3,000  fee cap.   And then that individual  can go                                                                    
     out ... to the range with  his or her handgun when they                                                                    
     want, ... but  also has the option to go  and fire that                                                                    
     cannon off and catch a whole bunch more fish.                                                                              
COMMISSIONER  BROWN  explained that  the  CFEC  doesn't know  who                                                               
keeps  the revenues  garnered from  the larger  vessel, in  these                                                               
situations,  and it  would be  helpful for  the agency  to gather                                                               
specific data  on the interim-use permit  practices, to determine                                                               
if  the fees  are fair  and  reasonable.   Evaluating the  vessel                                                               
length categorizations  in relation to  fees prior to  removal of                                                               
the cap, would  help to avoid shocking the system  and the fleet.                                                               
He concurred  that there  is no  disincentive for  not purchasing                                                               
the interim-use permit, because of the cap.                                                                                     
CHAIR STUTES surmised:                                                                                                          
     If we just took the cap  off, people that are buying up                                                                    
     on their licenses now  could conceivably decrease their                                                                    
      expense by buying the appropriate license under the                                                                       
      current categorization, and the 350 footers going to                                                                      
     get nailed.                                                                                                                
COMMISSIONER BROWN explained  that there is a  three year process                                                               
of averaging the  gross earnings, and if the  cap were eliminated                                                               
today, the  effects would not  be immediately apparent.   He said                                                               
CFEC  strongly recommends  that any  change be  aligned with  the                                                               
calendar year versus the fiscal year.   Thus, if in January 2018,                                                               
the fee cap  were removed, fishermen would need  to make personal                                                               
determinations regarding what permit  to purchase.  By purchasing                                                               
the permit  for the under  60 foot  vessel, the earnings  for the                                                               
season  would no  longer be  averaged in  with the  larger vessel                                                               
category.   Over  a three  year period  the market  would correct                                                               
itself, he predicted.                                                                                                           
10:37:52 AM                                                                                                                   
CHAIR STUTES  pondered whether, in  the anticipation  of removing                                                               
the  cap,  it  would  be  fair and  reasonable  to  have  minimal                                                               
increments of an  increase to the current cap, over  a three year                                                               
period  possibly.   At the  end of  the three  year period  a new                                                               
categorization could be introduced that  would reflect a fair and                                                               
equitable system.                                                                                                               
COMMISSIONER  BROWN responded  that  the means  for altering  the                                                               
situation  represents  a policy  call  for  the legislature,  and                                                               
offered that  the $3,000 cap  was established through a  phase in                                                               
process.   He  acknowledged that  any change  is difficult  but a                                                               
compromise may be struck with the appropriate approach.                                                                         
10:39:28 AM                                                                                                                   
REPRESENTATIVE FANSLER  expressed concern  for barriers  faced by                                                               
new fishermen trying  to enter the industry.  He  asked about the                                                               
constitutionality  for allowing  a  lower fee/license  percentage                                                               
for  first  time  fishermen  as an  incentive  to  encourage  new                                                               
COMMISSIONER BROWN said  the equal protection law,  of the Alaska                                                               
constitution is strictly  upheld, and no provision  exists in the                                                               
limited  entry act  to  allow  those types  of  incentives.   The                                                               
renewal fees  for open-access  fisheries could be  set at  a more                                                               
approachable level, he suggested.   The CFEC makes no attempts to                                                               
manipulate   prices   of   permits  being   transferred   between                                                               
fishermen,  although oversight  of the  transfer is  held by  the                                                               
agency.    The  CFEC  continues  to  work  with  legislators  and                                                               
regional committees  to enhance  the ability of  Alaskans seeking                                                               
to  join the  fleet, he  noted.   Many approaches  can, and  are,                                                               
being  considered legislatively,  to address  the greying  of the                                                               
fleet;  however, inclusion  of  an  age discriminatory  exception                                                               
would be challenged under the equal protection clause.                                                                          
10:42:47 AM                                                                                                                   
REPRESENTATIVE  CHENAULT  directed  attention  to  the  committee                                                               
handout, page 6,  to note that 485 permits fall  under the capped                                                               
fee ceiling,  which should garner  about $1.455 million  in fees.                                                               
He  said the  capped permits  earned fishermen  $1.03 billion  in                                                               
2015,  and asked  what  the  projection is  for  the vessel  take                                                               
versus the  income to  the state,  mentioning that  it represents                                                               
the use of a state resource.                                                                                                    
COMMISSIONER BROWN responded that  the figures are gross earnings                                                               
and  the  CFEC has  no  means  to  determine  how the  funds  are                                                               
disbursed.    Further  data  would  be  helpful  and  the  permit                                                               
application  could be  changed to  include  questions that  would                                                               
track disbursal of the earnings.                                                                                                
REPRESENTATIVE  CHENAULT expressed  an interest  in knowing  what                                                               
the fishing  industry pays to  the state;  the net receipts.   He                                                               
said  it  is  important  to  not  damage  the  fishing  industry;                                                               
however, there needs to be  assurance that the state is receiving                                                               
a fair share of the profits garnered from the resource.                                                                         
CHAIR  STUTES added  that figures  are available  and offered  to                                                               
provide further information to members.                                                                                         
COMMISSIONER BROWN  responded that  the CFEC  fees are  not above                                                               
scrutiny,  but  more  information  should be  gathered  prior  to                                                               
removal of the fee cap.                                                                                                         
10:48:24 AM                                                                                                                   
REPRESENTATIVE KREISS-TOMKINS asked about  the home ports for the                                                               
vessels that  participate in the  fisheries under the  capped fee                                                               
permits;  the vessels  that constitute  the majority  of the  ex-                                                               
vessel value of the Alaskan catch.                                                                                              
COMMISSIONER BROWN  said the permits  are not vessel  based, but,                                                               
when the  catch is  landed, CFEC is  able to  collect information                                                               
for who  holds the permit, the  name of the vessel,  and the home                                                               
port  can then  be  ascertained.   Although  that information  is                                                               
available, it doesn't  answer the question of where  the money is                                                               
going,   he  pointed   out,  and   offered  to   provide  further                                                               
information.   He  directed attention  to the  committee handout,                                                               
final  page,  and  the   resident,  non-resident  comparison  for                                                               
removing the fee  cap.  He noted that the  485 permits, estimated                                                               
for issuance in 2017, will  be held by Alaska residents, although                                                               
83  do not  list  an  Alaskan address.    Not  having an  Alaskan                                                               
address  doesn't  mean  that  the  skipper  doesn't  work  for  a                                                               
community  quota entity.   Thus,  a large  share of  the earnings                                                               
that  a Seattle  based person  realizes may  end up  in a  CQE in                                                               
Western Alaska.   He agreed  that more questions should  be asked                                                               
to get  a better  understanding of how  the fishery  revenues are                                                               
being disbursed.                                                                                                                
10:51:06 AM                                                                                                                   
REPRESENTATIVE TARR  asked if a  legislative action is  needed to                                                               
empower  the CFEC  to alter  the  permit application  information                                                               
that is being collected.                                                                                                        
COMMISSIONER  BROWN  said  the  statutory  authorization  already                                                               
exists,  and  the  2017 interim-use  permits  have  already  been                                                               
issued by  CFEC.   The questions  can be  inserted into  the 2018                                                               
permit applications, he suggested.                                                                                              
10:52:29 AM                                                                                                                   
REPRESENTATIVE TARR  questioned the  time-line involved  and when                                                               
the new  data analysis  would be available  for reporting  to the                                                               
COMMISSIONER BROWN  said the 2018  application would  be targeted                                                               
for revision and  in 2019 the report could be  provided.  Phasing                                                               
in  a  change  in the  fee  cap  could  also  begin in  2018,  he                                                               
10:54:08 AM                                                                                                                   
REPRESENTATIVE EASTMAN noted  that the greying of the  fleet is a                                                               
continuing concern  that requires  a response, and  asked whether                                                               
CFEC has considered an approach.                                                                                                
COMMISSIONER BROWN  said solving the  greying of the  fleet issue                                                               
can  best  be  approached  by encouraging  young  people  to  see                                                               
fishing as  a great industry  to enter  into.  The  state fishing                                                               
loan  program  a  valuable  means to  bolster  the  industry,  he                                                               
stressed, and  pointed out  that only two  loan programs  can use                                                               
CFEC  permits  as collateral.    The  CFEC dialogs  with  fishing                                                               
organizations to approach young people and discuss fishing as a                                                                 
career opportunity and the United Fishermen's Association (UFA)                                                                 
is certainly active in the effort.                                                                                              
10:58:13 AM                                                                                                                   
CHAIR STUTES thanked the presenters and announced the next                                                                      
There being no further business before the committee, the House                                                                 
Special Committee on Fisheries meeting was adjourned at 10:58                                                                   

Document Name Date/Time Subjects
CFEC Permit Fee Cap H FSH 2 16.pdf HFSH 2/16/2017 10:00:00 AM
House Fisheries CFEC Cap
CFEC Memo Statutory Fee Ceiling Feb 2017.pdf HFSH 2/16/2017 10:00:00 AM
House Fisheries CFEC Cap
CFEC Memo Maximum Fee Aug 2016.pdf HFSH 2/16/2017 10:00:00 AM
House Fisheries CFEC Cap