Legislature(1993 - 1994)
03/16/1994 08:30 AM House FSH
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON FISHERIES
March 16, 1994
8:30 a.m.
MEMBERS PRESENT
Representative Carl E. Moses, Chair
Representative Cliff Davidson
Representative Harley Olberg, Vice Chair
MEMBERS ABSENT
Representative Gail Phillips
Representative Irene Nicholia
OTHER LEGISLATORS PRESENT
Representative Ben Grussendorf
COMMITTEE CALENDAR
HJR 61: Relating to the Western Alaska Community
Development Quota Program and the North Pacific
Fishery Management Council Comprehensive
Rationalization Program.
DOCUMENT OVERVIEW PRESENTATION: Pacific Seafood Processors
Association "The Economic Impact of the Shoreside Processing
Industry Upon Alaska During 1992."
WITNESS REGISTER
RICK LAUBER
Pacific Seafood Processors Association
321 Highland Drive
Juneau, Alaska 99801
POSITION STATEMENT: Gave a presentation relating to, "The
Economic Impact of the Shoreside
Processing Industry Upon Alaska
During 1992."
LARRY COTTER
Pacific Associates
116 Gold Street
Juneau, Alaska 99801
POSITION STATEMENT: Gave a presentation relating to, "The
Economic Impact of the Shoreside
Processing Industry Upon Alaska
During 1992."
PREVIOUS ACTION
BILL: HJR 61
SHORT TITLE: COMMUNITY DEVELOPMENT FISHING QUOTAS
TASK FORCE
JRN-DATE JRN-PG ACTION
03/09/94 2682 (H) READ THE FIRST TIME/REFERRAL(S)
03/09/94 2682 (H) FSH, RESOURCES
03/16/94 (H) FSH AT 08:30 AM CAPITOL 17
ACTION NARRATIVE
TAPE 94-14, SIDE A
Number 001
CHAIRMAN CARL MOSES called the House Special Committee on
Fisheries meeting to order at 8:38 a.m. He noted members in
attendance.
HJR 61 - COMMUNITY DEVELOPMENT FISHING QUOTAS
CHAIRMAN MOSES announced that the committee would be hearing
HJR 61, "Relating to the Western Alaska Community
Development Quota Program and the North Pacific Fishery
Management Council Comprehensive Rationalization Program."
He informed the committee that HJR 61 was introduced by
House Rules by request of the House Economic Task Force. It
addresses the allocation of groundfish and crab to the
Community Development Quota Groups by the North Pacific
Management Council (NPMC). He noted there is a sponsor
statement in the committee packets. (A copy is on file).
Number 048
There being no testimony, REPRESENTATIVE CLIFF DAVIDSON
moved and asked unanimous consent that HJR 61 be passed out
of the House Special Committee on Fisheries with individual
recommendations. Hearing no objection, the motion carried.
Number 068
CHAIRMAN MOSES announced the next order of business would be
a presentation by Rick Lauber of the Pacific Seafood
Processors Association (PSPA) relating to, "The Economic
Impact of the Shoreside Processing Industry Upon Alaska
During 1992."
RICK LAUBER, Pacific Seafood Processors Association, came
before the committee members. He introduced Larry Cotter of
Pacific Associates and explained they did most of the work
on the preparation of the document the committee members had
before them.
MR. LAUBER explained that several years ago there was a
tremendous battle regarding the allocation of
seafood/groundfish to fishermen who fish for plants located
onshore versus the factory trawl fleet that operates
offshore of Alaska. Mr. Lauber said that resulted in an
allocation of pollack in the Bering Sea to the shoreside
portion of the industry of 35 percent of the pollack
resource. In the Gulf of Alaska, it was substantially
higher.
MR. LAUBER explained the North Pacific Fishery Management
Council (NPFMC) is currently studying what is termed
"comprehensive rationalization." The council is looking at
several potential options, mainly a license limitation
system relating to vessel licensing, similar to the current
Alaska Salmon Limited Entry Program. The council is also
looking at an individual transferable quota system.
MR. LAUBER said the Pacific seafood processors felt the
potential impacts of an Individual Transferrable Quota (ITQ)
on Alaska and on the shoreside processing and fishing
component of that industry would be significant. He said
his organization thought they needed to know, and needed to
be able to tell people what was at risk as far as the down
side of an ITQ system. Mr. Lauber noted that they
anticipated there would be significant impacts. He
explained that Dr. Scott Matlich of the University of
Washington State did a study and was the author of a concept
called "Two Pie System." If it was implemented it would
grant quota shares. There would be a "Catcher Pie System"
which would be of equal size. The people with processor
shares would have to go buy product harvested by people
owning catcher shares. Mr. Lauber said that Dr. Matlich
testified before the council that if this didn't take place,
the shoreside industry and the fishermen fishing for the
shoreside industry would be significantly impacted and the
industry would go into a death spiral that would last
between five and seven years before the total collapse of
the shoreside industry. Most of the product would go
offshore.
MR. LAUBER said it became evident that a lot of information
was solely in the possession of the processors because they
are the ones that are aware of exactly how much money they
spend on purchases of supplies, payroll, benefits, etc. He
said his organization asked Capitol Associates and Pacific
Associates to help with the document before the committee
members entitled "The Economic Impact of the Shoreside
Processing Industry Upon Alaska During 1992." He explained
the document is in no way an effort to compare the seafood
industry with any other industry or component in the state.
It is solely a study of the shoreside processing sector.
He explained in 1992, the shoreside portion of the industry
purchased 2.26 billion pounds of fish for which they paid
approximately $1 billion to the harvesters of that fish.
During that year, the average employment was 11,233
employees in the shoreside portion of the industry. Salary
and benefits totaled $371 million. He pointed out the
figure doesn't include the fishing vessels, vessel owners,
captains, or crew wages. It is only the shoreside portion
of the industry. Mr. Lauber said the total economic impact
of all factors on the state of Alaska was almost $4 billion
for 1992.
MR. LAUBER explained that the shoreside portion of the
industry paid approximately $57 million in state and local
raw fish taxes. In some areas of the state, that impact is
more significant than others. He noted that 80 percent of
the Aleutian East Borough's revenue comes from fish taxes
generated by the shoreside industry.
Number 250
MR. LAUBER explained that several years ago, there was a
tremendous battle of what is called inshore/offshore
allocation. It became evident that the factory trawl fleet
had the capability of harvesting up to three times the
amount of fish available. They were preempting the
fishermen or delivering to shoreside plants. They were
gobbling up the resource at such a rate that it was evident
that there wasn't going to be any fish available and the
impacts to the coastal communities and fishermen who
delivered to processors was going to be significant. The
NPFMC adopted an inshore allocation of 35 percent that was
approved by the secretary of Commerce.
MR. LAUBER referred to 1991 when the pollack allocation
wasn't in place for the Bering Sea and said the shore plants
received 681 million pounds. In 1992, when the allocation
was in place, the shore plants received 996 million pounds.
In the Gulf of Alaska, for 1991 the shore plants received
128 million pounds of pacific cod. In 1992, that figure
jumped to 166 million. The impacts of regulation is
significant on the industry as far as inshore fisheries and
as far as budgets for the Department of Fish and Game and
Department of Environmental Conservation, etc. Mr. Lauber
said we must keep in mind that we need seafood sanitation
inspection in order to put a good product on the market. He
said we also need rational reasonable management of our
fisheries inshore as well as offshore.
Number 296
MR. LAUBER referred to a speech that was given by the
president of the American Factory Trawlers Association to
the Unalaska/Dutch Harbor Chamber of Commerce and said he
announced the factory trawlers had a significant impact on
that area because they had spent $62 million. Mr. Lauber
said he suspects that a vast majority of that $62 million
was for fuel for their vessels. He explained that the
shoreside industry in that same area spent $384 million and
the fuel wasn't counted in that amount.
MR. LAUBER pointed out the council has included an option in
vessel licensing and in any type of an ITQ program that
would continue the CDQ (Community Development Quota)
Program. In the CDQ Program, the decision as to which
partners the groups would select is made by the individual
CDQ groups with oversight by the Governor's Office and state
agencies. Mr. Lauber said two of the major processors that
are members of PSPA are CDQ partners. He said the mix and
match of product is such that they try to put the product in
a form where they get the most value. At this time, because
the most value of the product is that which is being
produced by the shoreside processors, much of the CDQ
impacts of some of the CDQ groups is going onshore. He said
they would like to have more product come on shore and in
the future, maybe that will be the case.
Number 351
REPRESENTATIVE DAVIDSON asked if the group that owns the CDQ
could designate that a portion, or whatever percentage they
wish, would come ashore.
MR. LAUBER said he would assume that if the CDQ groups
wanted to do so, they could do it by the selection of who
their CDQ partners are or they could set a policy. He noted
it would probably be with the oversight and approval of the
governor. Mr. Lauber said he believes that a majority of
the CDQ groups found that they got the best offer from
people operating off shore. There were at least two that
opted for a combination.
Number 372
LARRY COTTER, Pacific Associates, was next to address the
committee. He informed committee members that a lengthy
questionnaire was developed which was distributed to all the
members of PSPA. He said there was an excellent response.
A variety of questions were asked relating to the species
they harvested by quarter, by plant, by area, number of
employees employed by month, amount of payroll, number of
employees they flew to and from various locations, amount of
money spent on transportation, amount of money spent on
consumables, services, utilities, etc. Mr. Cotter explained
that they then contacted the Department of Fish and Game,
Commercial Fishery Entry Commission, and the National Marine
Fisheries Service and obtained harvest and processing
information. He noted the Department of Fish and Game does
not have adequate personnel to be able to handle the data
they receive. Mr. Cotter explained they then went to the
Department of Labor and obtained employment and earnings
information by region. It was interesting that each
department seems to have a different definition as to
regions. He said they looked at the direct expenditures and
realized there was more to the impact of the industry then
what is spent directly.
MR. COTTER said his organization had to try and identify an
appropriate multiplier to accurately describe the real
financial impact upon the communities in the regions. There
has been little work done in Alaska on developing a
multiplier to describe the impact to the seafood industry.
Mr. Cotter said there was a study done a few years ago where
it stated that for every dollar spent, an additional
seventy-three cents was generated in the seafood industry.
He said they contacted a variety of economists and in some
places in the lower forty-eight they ascribed multipliers of
up to $5 for every $1 spent. Mr. Cotter said what Pacific
Associates chose to use in Alaska was for every $1 spent an
additional $1.50 is generated. He noted that is probably a
conservative figure.
MR. COTTER explained that in 1992 in the region encompassing
Kodiak, the Alaska Peninsula, the Aleutians, the Bering Sea,
and Bristol Bay, 56 percent of the total jobs available were
seafood processing jobs, 20 percent were other private
sector jobs, and the remaining were distributed between
federal and local government. He pointed out that those
numbers do not include employment on harvesting vessels. He
noted crew and skipper jobs aren't counted by the Department
of Labor as part of the state employment numbers in the fish
industry.
MR. COTTER referred to inshore/offshore and said there was a
significant increase in the amount of pollack processed
onshore in the Gulf of Alaska during 1993 compared to 1991.
He explained that the Alaska Peninsula showed a substantial
increase in the amount of economic activity in 1992. A lot
of that is directly related to inshore/offshore because
there was pollack processing activity at Sand Point and
Chignik when there hasn't been in the preceding years.
Mr. Cotter said in 1991, Southeast Alaska had the second
largest economic impact in the state, second to the Bering
Sea - Aleutian Islands. In 1992, Southeast Alaska fell to
third place but still maintained about the same level of
activity. He noted there are a lot of species being
harvested in Southeast Alaska.
MR. COTTER referred to Prince William Sound and said in 1991
pink salmon dominated. In 1992, herring was the largest
harvest. He noted if it wasn't good for sockeye prices in
1992, Prince William Sound would have suffered an incredible
disaster.
Number 531
CHAIRMAN MOSES said he would like to volunteer Mr. Cotter to
talk to the Anchorage Chamber of Commerce, Fairbanks Chamber
of Commerce and the Dutch Harbor/Unalaska Chamber of
Commerce. He said there are a lot of people in Unalaska who
don't realize what the shore-based operations mean. There
is a certain segment that supports the offshore facilities.
MR. LAUBER said he thinks the shore-based facilities are
old, familiar and are taken for granted. He said a few
years ago we thought we had the control over salmon prices,
etc. With the infusion of farm raised salmon and the access
to Russia's salmon, it is obviously having a significant
impact. That portion of the industry is substantially
stressed and fishermen are going broke. He discussed
testimony given by economists, the Scientific and
Statistical Committee of the North Pacific Management
Council relating to the ITQ Program.
CHAIRMAN MOSES referred to the Aleutians East Borough and
said he thinks they have been very modest in their taxing
powers.
REPRESENTATIVE DAVIDSON referred to the information before
him and said it sounds like coastal Alaska is in serious
trouble. He asked if the reality of the situation is that
whoever gets the product to the consumer in the best quality
and at the cheapest price, that is where the future is. He
said if that is true, does it mean that the operations on
shoreside Alaska can't compete because the factory trawlers
are producing a quality product and are getting it to the
consumer cheaper than what we can from coastal Alaska.
MR. LAUBER said if one was to assume what Representative
Davidson said is correct, the answer would be "yes," but
that is not correct. The shore-based operations can compete
and can turn out a quality product. He said he isn't going
to say that some of the shore-based industry is not impacted
and they may well be losing money but the only bankruptcies
and failures in that segment of the industry has been in the
factory trawler operation. Mr. Lauber said a substantial
percentage of factory trawlers are being propped up by
Christiana Bank. The bank is holding their papers and there
are not any payments being made on their loans except
interest payments. The collapse in that industry would be
substantial.
MR. LAUBER explained that a disadvantage of the shore-based
industry is that they are tied to the shore and the
operational areas of their fishing vessels.
Number 582
REPRESENTATIVE DAVIDSON asked what the legislature can do to
ensure the long term viability of the shore-based industry.
MR. LAUBER said to support the concept of the long term
viability of the industry in Alaska. He said there is the
feeling that if we go to an ITQ system, it should be given
to the factory trawlers and the catcher boats. The shore
industries would then take care of themselves. Mr. Lauber
explained that one problem is that if they are freely
transferrable, the factory trawlers will buy out the quota
of the catcher boats and transfer it to their vessels. He
said there are a lot of options, but if we don't do the
right thing we will loose the industry.
Number 623
MR. COTTER explained his organization represents a CDQ
group, APITKA. Their partner is Trident Seafoods and
Starbound which is a factory trawler. He said as they went
through the process in selecting a partner, they received a
lot of RFP responses. It became obvious that the shoreside
industry was at a clear disadvantage in bidding for CDQs, as
the shoreside plants have to pay their fishermen to catch
the fish and the factory trawl industry does not.
MR. COTTER referred to Mr. Lauber's discussion about the
Bank of Christiana and said the Government of Norway owns 98
percent of the bank.
TAPE 94-14, SIDE B
Number 001
There was general discussion regarding the report before the
committee members.
MR. LAUBER explained that the report doesn't attempt to make
a case beyond what is contained in it. He said they are
trying to indicate the economic impact of the shore-based
processing on the state of Alaska. The implications that
one could read into that would depend on where you're coming
from. He said the report is to inform the committee of the
impacts of what may happen.
There was discussion regarding the contents of the Executive
Summary, graphs, economic impacts by region, etc.
Number 120
CHAIRMAN MOSES said we are at a point where the fishermen
and processors are going to have to get together and work on
some common goals.
REPRESENTATIVE DAVIDSON said there should be something given
to each legislator, every week in writing, that gives people
"cause for pause" to think about the future of the state.
He said the first thing he would like to see is exactly how
much money does the shoreside seafood processing industry
impact the economy of Anchorage in a week. Representative
Davidson said he would like to know how many PSPA members
are involved in offshore operations. CHAIRMAN MOSES said he
doesn't know of any.
CHAIRMAN MOSES thanked Mr. Cotter and Mr. Lauber for coming
before the committee.
Number 184
There being no further business to come before the House
Special Committee on Fisheries, Chairman Moses adjourned the
meeting at 9:35 a.m.
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