Legislature(2015 - 2016)CAPITOL 120
02/24/2015 10:00 AM House FISHERIES
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| Audio | Topic |
|---|---|
| Start | |
| Overview: Commercial Fisheries Entry Commission (cfec) | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON FISHERIES
February 24, 2015
10:03 a.m.
MEMBERS PRESENT
Representative Louise Stutes, Chair
Representative Neal Foster
Representative Bob Herron
Representative Charisse Millett
Representative Jonathan Kreiss-Tomkins
Representative Dan Ortiz
MEMBERS ABSENT
Representative Craig Johnson
OTHER MEMBERS PRESENT
Representative Bryce Edgmon
COMMITTEE CALENDAR
OVERVIEW: COMMERCIAL FISHERIES ENTRY COMMISSION (CFEC)
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
BRUCE TWOMLEY, Chairman/Commissioner
Commercial Fisheries Entry Commission (CFEC)
Juneau, Alaska
POSITION STATEMENT: Provided the overview on behalf of the
Commercial Fisheries Entry Commission (CFEC).
BENJAMIN BROWN, Commissioner
Commercial Fisheries Entry Commission (CFEC)
Juneau, Alaska
POSITION STATEMENT: Participated in the overview of the
Commercial Fisheries Entry Commission (CFEC).
ACTION NARRATIVE
10:03:36 AM
CHAIR LOUISE STUTES called the House Special Committee on
Fisheries meeting to order at 10:03 a.m. Representatives
Stutes, Herron, Millett, and Ortiz were present at the call to
order. Representatives Kreiss-Tomkins and Foster arrived as the
meeting was in progress.
^OVERVIEW: COMMERCIAL FISHERIES ENTRY COMMISSION (CFEC)
OVERVIEW: COMMERCIAL FISHERIES ENTRY COMMISSION (CFEC)
10:04:00 AM
CHAIR STUTES announced that the only order of business would be
an overview from the Commercial Fisheries Entry Commission
(CFEC).
10:04:37 AM
BRUCE TWOMLEY, Chairman/Commissioner, Commercial Fisheries Entry
Commission (CFEC), provided that the Limited Entry Commission
was established in 1972, following a statewide vote that amended
the Constitution of the State of Alaska, Article 8, Section 15.
He paraphrased the amended section, which reads:
No exclusive right or special privilege of fishery
shall be created or authorized in the natural waters
of the State. This section does not restrict the
power of the State to limit entry into any fishery for
purposes of resource conservation, to prevent economic
distress among fishermen and those dependent upon them
for a livelihood and to promote the efficient
development of aquaculture in the State. [Amended
1972]
MR. TWOMLEY stressed that limited entry is confined to these
constitutional purposes and if it extends beyond these
parameters, or operates to ensure the wealth of fisherman and
the value of permits, the result may be an exclusive fishery and
the value of the CFEC will have been breached. Thus, from the
beginning, the commission has walked a constitutional tightrope
in all of the decisions rendered. In 1973, the Alaska State
Legislature enacted Alaska's Limited Entry Act (AS 16.43) for
commercial fisheries. He described the act as extensive,
complicated, and, in one judge's opinion, arcane. The act is an
area of specialty law, only taken up by a few lawyers who
represent fisherman before the court. The initial
implementation of the limited entry occurred from 1975-1980.
The original 19 salmon fisheries were limited simultaneously,
1/1/73, causing thousands of applications to be received at one
time. The first stage of review is to determine an applicant's
dependency on the fishery and apply a point system to issue the
permit; the higher dependency, the more points are scored.
Although this initial review is relatively easy, following the
paper trail of fish tickets, applicants have the right to appeal
a decision following this initial determination. Unlike other
legal offices, the CFEC receives a flood of cases whenever a
fishery is limited, and it is necessary to choose which to take
up at a given time. Interruptions in the process often occur.
For example, Isakson v. Rickey, 550 P.2d 359 (1976) was a class
action law suit that was filed early in the process, after the
commission had set maximums for fisheries and decisions were
being issued. The case resulted in the receipt of 1,327 new
applicants, creating a major slowdown at the agency, and also
causing the fishery to exceed the maximum number. Two other
situations may also result in the established maximum number to
be surpassed: First, the requirement in the Act to permit any
fishermen who, under the point system, can show a significant
hardship would result if denied. Second, a direct order to the
commission to exceed the limit.
10:11:21 AM
MR. TWOMLEY said, when the commission received this flood of
cases, it adopted the policy to first complete the hearings, for
evidentiary purposes, prior to writing decisions. By the early
1980's over five hundred hearings had been held and hundreds of
tapes logged, by five hearing officers. Unfortunately, these
officers did not remain with the commission through the decision
process. The incoming officers were met by an abundance of
evidence tapes, and new information continuing to arrive.
Additionally, the commission began to be effected by Supreme
Court decisions. One principal case was Ostrosky v. State, 667
P.2d 1184 (1983) seeking to strike down free transferability of
limited entry permits. Members of the Supreme Court considered
this case as a possible vehicle to entirely eliminate the
limited entry of fisheries. For that reason, the Supreme Court
held all other limited entry cases in abeyance until a decision
was issued on Ostrosky. The free transferability was upheld,
primarily due to a declaration by the legislature that such
action would allow the permits to be retained by family members
and preserve community access to traditional fisheries. The
decision has been important to the commission, as it continues
to administer the limited entry act. Entire programs have been
supported, by the commission, to assist citizens to benefit from
Ostrosky and ensuring that permits are retained by Alaskans.
Following Ostrosky, the Supreme Court issued 28 decisions in two
years, including significant cases that required additional CFEC
adjudications. Two of these decisions, Byayuk v. Commercial
Fisheries Entry Commission, 684 P.2d 114 (1984), and Cashen v.
Commercial Fisheries Entry Commission, 686 P.2d 1219 (1984) have
impacted all subsequent CFEC decisions. The Byayuk case held
that when the Supreme Court reverses a rule of the commission,
that reversal may be applied retroactively; effectively
reopening previously closed cases. The Cashen case operated on
a similar premise to allow new applications to be filed, long
after the application period ended. Hence, it became apparent
that quantity could not be sacrificed for quality regarding
commission rulings, thus ensuring that CFEC decisions would hold
if brought before the Supreme Court.
10:16:58 AM
MR. TWOMLEY said another class action suit, with wide reaching
effects on the system, was the 1975 Wassillie v. Simon, Nl. 3AN
75-506 Civ. (1988) settlement. The case allowed people to apply
who had been disadvantaged in the initial application process,
primarily rural residents. He pointed out that priority
consideration was given to applicants eligible under Wassillie,
as well as transfer cases when the immediate right to fish was
at stake and hinged on CFEC action; priorities that continue
today. A new applicant, for a permanent permit, is allowed to
fish indefinitely, as long as the application remains active.
The ability to fish, during the application process, may appear
to be a loophole, but the Supreme Court holds it as a windfall,
and it is written into the Act. The commission has an
affirmative, constitutional, duty to limit a fishery when a case
can be demonstrated that limiting entry serves conservation
purposes and prevents economic distress among fishermen. The
commission has, since 1984, been charged with the duty to limit
an additional 35 fisheries, resulting in the receipt of about
4,700 applications. Consequently, he said, the commission is a
moving bus, with some people getting off but always others
getting on, which has been the process since the inception. By
1990 the commission's case load had nearly doubled and become
unmanageable, which resulted in the adoption of a triage
approach for case selection. The choice was made to address the
concerns which, at that time, were under the most pressure: all
of the Prince William Sound fisheries, by virtue of the 1989
Exxon Valdez oil spill; the Cook Inlet salmon drift and set-net
fisheries, because of Board of Fish limits being imposed; and
the Southeast salmon seine and troll fisheries, due to the
effects of the treaty with Canada. During this time, Chignik,
was a successful enough fishery that residents petitioned to
have adjudication delayed. Similarly, the Bristol Bay salmon
drift net fishery was robust and challenged the need for limited
entry under the Kelly case. However, by 1997 it was clear that
farmed salmon companies were competing vigorously for a share of
the world fish market, undermining the cost of wild salmon, and
thus caused a tremendous economic upset and collapse in the
industry. The CFEC reordered the case priorities, turning its
attention to Bristol Bay concerns, being the largest fishery.
10:24:10 AM
MR. TWOMLEY explained that from 1980 through 2015, the CFEC has
faced a number of obstacles. One was the IRS attempting to
seize and force the sale of limited entry permits; contrary to
state law. The Alaska State Legislature declared the permits
exempt from the claim of all predators, and for over 10 years
the commission worked to resist the efforts of the IRS. He
recalled that, in one instance the agents came to the CFEC
office with demands and the commissioner felt personally,
legally threatened. The IRS conducted a massive sale, demanded
that a permit be transferred, the commission refused, and the
result was the Carle (1996) decision. The commission is an
independent agency and, as such, made the decision to resist the
IRS. He stressed that the commission has been able to work in
this way, because of its inherent independent authority, and not
being bound to any political agenda, as held by other state
agencies. The economic collapse of the salmon industry resulted
in consolidation of the fleet in 1998, thus avoiding the buy-
back option.
10:28:52 AM
REPRESENTATIVE MILLETT questioned the buy-back option, and the
paper the commissioner wrote diminishing the effectiveness of
such action.
MR. TWOMLEY explained that he wrote an outline regarding all of
the possibilities, including permit buy-back, to explore the
alternatives and understand the drawbacks of each option.
REPRESENTATIVE MILLETT pointed out that since 1998 buy-backs
have been successful, and opined that this could be a good way
to manage a fishery particular to a region. The Southeast seine
fishermen have self-managed for some time employing the buy-back
system. Federal funding was initially used, and caps were
established for the number of permits allowed for purchase.
Given the six year history on the Southeast seiner fishery, she
asked whether buy-back systems could now be considered feasible.
MR. TWOMLEY agreed, and said the commission supported the
seiners when they sought information to take a vote and enter
into the federal loan obligation. He stressed that the
participation of the fishermen in making the decisions and
setting-up the federal agreement was an important element to the
success of the program.
10:31:12 AM
REPRESENTATIVE MILLETT observed that the Southeast seiner's
success may stimulate other areas where latent permits and
permit stacking is a factor. Regional fishermen could be
provided the opportunity to vote a self-imposed tax in order to
create/maintain a viable fishery. She asked whether the
commission supports that type of management.
MR. TWOMLEY concurred that it is a viable option; however, a
substantial initial investment is required, and the remaining
fishermen do not receive an immediate benefit. State law has
not been established to support the scenario and the federal
government has been the funding source for Southeast seiners.
The Bristol Bay fishermen met recently, November 2014, with the
commission to explore the opportunity. He stressed that the
large amount of initial cash is the major hurdle, and agreed
that once established it can be a good management system.
10:33:09 AM
BENJAMIN BROWN, Commissioner, Commercial Fisheries Entry
Commission (CFEC), added that the commission's research staff is
finalizing a history of the Southeast buy-back, including the
details involved to arrange the federal financing. It will be a
helpful document, he opined, for understanding the complete
process and the role of the CFEC. It will also include the
aspects that effect the various regional fisheries and gear
types, he said, and stressed that the one-size fits all approach
is impossible.
REPRESENTATIVE MILLETT recalled the difficulty, at the time the
Southeast buyback system was established, in obtaining the loan
guarantee, and also working as a member of the legislature to
address the issue. It is an excellent program, she said, and
opined that it doesn't necessarily need to be under the purview
of the CFEC; many of the commercial fisheries have the ability
to implement the system. She acknowledged that the CFEC has
been a good advocate for the fisheries.
MR. TWOMLEY agreed that the CFEC is not integral to establishing
a buy-back system, but the commission assists by sharing
information and transferring the permits; no proprietary
interest is held by the CFEC.
REPRESENTATIVE MILLETT suggested that the primary role of the
CFEC was to provide fish ticket information. The commission, as
an information gathering agency, provided this essential factor
to assure the federal government of the assets behind the loan.
MR. TWOMLEY concurred that the informational facet was one
element, and the other was to advocate for legislative action
that would provide insurance for the buy-back program. The
constitutional amendment requires that a fishery not become
exclusive, and, when regarding a buy-back system, that must be
considered. At the request of the seiners, the commission
assisted in lobbying for appropriate legislation. He provided a
theoretical situation that would result in testing the governing
constitutional amendment, as it applies to permit buy-backs.
REPRESENTATIVE MILLETT recalled limits being placed in statute
to govern permit buy-backs.
MR. TWOMLEY offered that the CFEC holds a letter of intent to
that effect; however, the determination was not made. A
negotiation occurred between the fishermen and the processors to
establish limits, but state statute was not created.
10:39:27 AM
REPRESENTATIVE ORTIZ asked whether the constitutional mandate
restricting a fishery from becoming exclusive is a subjective
decision on the part of the CFEC or a statistically based
decision.
MR. TWOMLEY responded that it involves as little subjectivity as
possible. Three optimum number studies have been undertaken,
and criteria is applied that include the terms of the
constitutional amendment, such as conservation of the fishery,
and the economic distress of the fishermen. An elaborate
economic study is one means to approach the question, which is
what occurred in Bristol Bay where estimates were assumed and a
working model was created to forecast the fishery. Individual
tax returns required review, which can be intrusive. The
legislature assisted by allowing a range to be considered versus
a single number and eventually an optimal range was reached
following two years of data gathering and deliberations.
Certainly, world markets have since evolved and the conclusions
are now out of date. In contrast, a subsequent claim was put
before the CFEC that a fishery was becoming exclusive, and an
optimum number study was again undertaken. Expert testimony
upheld that low numbers were needed to conserve the challenged
fishery, and the commission wrote an optimum number rational
based only on that testimony, which was upheld in court. He
pointed out that this was possible, due to the careful attention
given to the constitutional premises being served. Should
another buy-back arise, he said this type of compact approach
could again be successful, but managers with solid information
will be necessary and conservation concerns need to be covered.
10:45:35 AM
MR. TWOMLEY introduced another interruption from the 1980's,
class action suit Carlson v. Commercial Fisheries Entry
Commission 798 P.2d 1269 (1990). The action was brought by out-
of-state fishermen seeking to strike down the 3:1 permit fee
differential that is charged; a ration held in regulation at the
time and now under statute. The case upheld that the ratio
represented a form of discrimination; however, a formula was
devised to address the question of non-resident versus resident
fees. The class action effected 95,000 individuals, but only
4,700 recovered damages. The remaining 90,000 could have
appealed, save for the effort put in by the commission to
respond to inquiries and deflect a large number of hearings.
The last of the appeals were heard in 2014. He opined on the
volume, complexity, and labor intensive work that is being
handled by the commission today. Considering the point system,
the multitude of fisheries, and the fact intensive
adjudications, he said today's appeals are as complex and
difficult as Carlson.
10:48:47 AM
MR. TWOMLEY said other obstacles that the commission has faced
include budget cuts, which have taken a toll on the agency,
including: elimination of the executive director, salary
freezes, leave without pay, and having 41 fulltime positions
reduced to 28. The commissioners have taken up managing the
office. As an exempt agency, not subject to human resource laws
that govern bargaining units, he said it has been possible for
the commission to unilaterally freeze salaries and take other
cost saving measures. He pointed out that the 30 percent
decrease in positions has required other staff members to absorb
the necessary functions.
10:50:27 AM
REPRESENTATIVE MILLETT asked when the budget cuts occurred.
MR. TWOMLEY answered that cuts were made in the 1980's and early
1990.
REPRESENTATIVE MILLETT inquired how many cases have been
adjudicated since 2013.
MR. TWOMLEY responded that in 2014, 143 adjudications were
handled; none on appeal, at this time.
10:52:06 AM
MR. TWOMLEY said that the 900 cases presented in 1990, have been
appropriately managed and the commission now has a rational,
manageable caseload of 28. The goal is to complete these cases
in 2016; appeals and remands notwithstanding. Transfer cases
remain a top priority and, as included in the committee packet,
the case of Lisa M. Williams for Permanent Transfer of Entry
Permit S04T 65633 to John B. Roehl, CFEC# 14-053-P, provides one
example of how serious and complicated transfers can become;
often as involved as an initial application. He urged the
committee to take time to look at this case in which an elderly
woman nearly lost her life savings in the transaction. It
became necessary for the commission to intervene in order to see
the transfer through to completion when the transferor refused
to cooperate after money had exchanged hands. Thus, he
stressed, transfers cannot be dismissed as minimal
[administrative procedures]; the stakes can be high.
10:54:07 AM
REPRESENTATIVE MILLETT asked how a typical application is
handled and the expected timeline for processing.
MR. TWOMLEY explained that there is first a limitation, followed
by the adaptation of a point system under which the application
is made. Then a paralegal performs a review of the fish ticket
documents to determine sufficiency for support of the claim.
Permits are granted or denied at this point in the process, and
denied claims are allowed to appeal to a hearing officer. To a
follow-up he said denial is based on the application of the
point system that measures criteria based on past participation
and the level of economic dependency. The fish ticket
information provides the historical data to support the
application.
REPRESENTATIVE MILLETT questioned how a new person to the state,
without experience, would gain access to participate in a
fishery.
MR. TWOMLEY answered that, in order to be permit eligible, an
individual would need to have fished with a gear license or
interim use permit before the qualification date for the
fishery. To a follow-up question, he said acting as a deck
hand, without an interim use permit to a fishery, would not be
sufficient. The initial decision to limit a fishery, he
mentioned, is the decision to call out a maximum number. He
said,
... and by law the maximum number has to be the
highest number of units of gear in one of the four
years leading up to the limitation. That's where the
maximum number comes in.
REPRESENTATIVE MILLETT surmised that if criteria is not met and
the application is rejected, an appeal can be made.
MR. TWOMLEY agreed, and said an appeal to a hearing officer
would occur, and a decision is issued based on a thorough
review. As the last level of appeal, the CFEC then receives the
application to consider, prior to a court case being filed.
REPRESENTATIVE MILLETT recalling the 143 cases recently
adjudicated, she confirmed that it represents the number of
cases decided at the hearing officer level.
10:57:46 AM
CHAIR STUTES inquired what the timeframe is for deciding
eligibility.
MR. TWOMLEY answered that a hearing could occur in two days.
For example, an application for a transfer that has been denied
by licensing staff, is top priority for turn-around, as the
immediate right to fish could be at stake. He suggested that
the response time may surpass any other state agency, in an
effort to allow a fisherman access to a fishery. He clarified
that this refers to transfers of permit ownership.
10:59:10 AM
REPRESENTATIVE MILLETT asked for an estimate of the number of
new applications received in a year.
MR. TWOMLEY said, "We're at a point of closing out fisheries,
... so at this point we're not getting new applications." The
applications on hand are being finished, and if a new limitation
were imposed on a fishery, that would generate new applications.
REPRESENTATIVE MILLETT maintained her interest in knowing about
any new applications.
MR. TWOMLEY responded that, in 2014, there were three new
applications for transfer, concluded by the CFEC; cases that
came-up through the system.
CHAIR STUTES restated the question, to ascertain the number of
new permits that were not appeals or transfers.
MR. TWOMLEY said there were none, in 2014, as fisheries are
being closed out and the commission is working to exhaust the
existing caseload.
MR. BROWN elaborated on the complexity of closing out the
existing cases. Two components are being applied in addition to
the past participation and economic dependency criteria, which
are: extraordinary, and unavoidable circumstances. Reviewing
the old hearings and paper records to ascertain these two facets
is primarily what the final cases, under adjudication, are
hinged upon.
11:01:56 AM
CHAIR STUTES asked how many cases were closed out in 2014.
MR. TWOMLEY responded that three were adjudicated in the last
twelve months; 2 in 2014, and 1 in 2015.
REPRESENTATIVE MILLETT concluded that 60 cases remain.
MR. TWOMLEY said the remaining number is 28, and the goal is to
have these final cases finished in 2016. He qualified the goal,
stating that the commission may be faced with appeals, after
these cases are decided.
11:02:56 AM
MR. TWOMLEY said that the commission's other undertakings, along
with adjudication efforts, include the Gowen, Inc., v. F/V
Quality One, 244 F.3d 64 (1st Cir. 2001), case, which holds that
a maritime lien can be applied to take a limited entry permit.
The CFEC has guarded Alaskan permits from being claimed, but it
presents an issue as law allows maritime liens to precede all
other liens. Similarly, two state authorized loan programs are
at issue, which use permits as collateral. A maritime lien
could be applied and defeat the state loan program, he pointed
out, creating the need to lobby for federal legislation to
clarify that limited entry permits are not subject to maritime
liens. In the last year, with only two commissioners available,
the CFEC was not able to pursue this issue as ardently as is
called for, he said.
11:05:13 AM
MR. TWOMLEY called attention to the committee packet handout
titled, "Commercial Fisheries Entry Commission Overview; House
Fisheries Committee; February 24, 2015," page 10 to review the
cost and revenues generated by the CFEC. The agency is
basically supported via receipts from fisherman, which generates
more than is necessary for the agency to operate; indicated by
the bar graph. The excess receipts, are paid into the
fisherman's fund, as well as a percentage paid to the Alaska
Department of Fish & Game to apply to management issues.
Additionally, the commission typically spends below the
appropriation levels, as indicated by the line graph on page 11.
On the theme of savings, he stressed that the ultimate savings
is realized by ensuring that appeals cases can be won in court.
The page 12 bar graph presents the court activity by year. The
commission won 21 of the 23 cases challenged, and the two that
were lost resulted in only partial reversals. The reversal of a
case results in a quick loss of money that could be financially
enormous. He suggested that through the commission's diligence
and expertise, and with a success rate that exceeds 90 percent
over its 20 year history, this is a savings area for the state.
11:08:00 AM
MR. TWOMLEY called attention to the Kuzmin v. State Commercial
Fisheries Entry Commission, No. S-13115. (2009), contained in
the committee packet, and said these two applicants were denied
by the commission, and chose not to appeal. He explained that,
because of a series of somewhat lucky circumstances, and a
legislative policy ruling, the fishery case was dispatched and
the fishery closed in a relatively short time, with little
contest. Although more fisheries will soon be closed out, he
said it is a critical time for the commission. Should a severe,
retroactive, reversal occur at this time, it would present a
worst case scenario to be handled and have negative effects on
the fishermen as well as the state. Any change of structure in
what has been adjudicated, would cause a retroactive reworking
of the previously denied applicants and create a divided
situation. He suggested that the legislature maintain the
status quo until the case load has been exhausted to best avoid
such a situation.
11:12:13 AM
REPRESENTATIVE KREISS-TOMKINS asked for an outline of the role
the CFEC plays outside of the adjudicatory duties.
MR. TWOMLEY said that the commissioners act as administrative
law judges; rule makers adopting regulations; and supervising
managers of the agency. He clarified that four parts exist
under the CFEC: adjudications; licensing; research; and data
processing.
11:14:20 AM
REPRESENTATIVE ORTIZ asked for an explanation of the term
"closing out."
MR. TWOMLEY responded that this applies when a fishery has been
limited, based on the history of a fishery to allow a certain
number of fishermen to participate. Not everyone who applies
can receive a permit, and when the maximum number is attained
the fishery is closed. Transfers can occur but no additional
permits are considered.
11:16:02 AM
CHAIR STUTES thanked the day's participants and announced the
next meeting agenda.
11:17:00 AM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Fisheries meeting was adjourned at 11:17
a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Index Feb 24 26.pdf |
HFSH 2/24/2015 10:00:00 AM |
|
| CFEC PowerPoint.pdf |
HFSH 2/24/2015 10:00:00 AM |
|
| CFEC Annual Report.pdf |
HFSH 2/24/2015 10:00:00 AM |
|
| CFEC Kuzmin final decision.pdf |
HFSH 2/24/2015 10:00:00 AM |