Legislature(2003 - 2004)
04/23/2003 01:05 PM House RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
April 23, 2003
1:05 p.m.
MEMBERS PRESENT
Representative Hugh Fate, Chair
Representative Beverly Masek, Vice Chair
Representative Carl Gatto
Representative Cheryll Heinze
Representative Bob Lynn
Representative Carl Morgan
Representative Kelly Wolf
Representative David Guttenberg
Representative Beth Kerttula
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CS FOR SENATE JOINT RESOLUTION NO. 12(RES)
Supporting the halibut by-catch utilization project of the
Alaska Food Coalition.
- MOVED HCS CSSJR 12(FSH) OUT OF COMMITTEE
HOUSE BILL NO. 105
"An Act relating to loans to satisfy past due federal tax
obligations of commercial fishermen and to the commercial
fishing loan program."
- MOVED HB 105 OUT OF COMMITTEE
HOUSE BILL NO. 191
"An Act relating to the Alaska coastal management program and to
policies and procedures for consistency reviews and the
rendering of consistency determinations under that program;
relating to the functions of coastal resource service areas;
creating an Alaska Coastal Program Evaluation Council;
eliminating the Alaska Coastal Policy Council; annulling certain
regulations relating to the Alaska coastal management program;
relating to actions based on private nuisance; relating to
zoning within a third class borough covered by the Alaska
coastal management program; and providing for effective dates."
- HEARD AND HELD
PREVIOUS ACTION
BILL: SJR 12
SHORT TITLE:SUPPORTING HALIBUT BY-CATCH PROJECT
SPONSOR(S): SENATOR(S) STEVENS G
Jrn-Date Jrn-Page Action
03/13/03 0491 (S) READ THE FIRST TIME -
REFERRALS
03/13/03 0491 (S) RES
04/02/03 (S) RES AT 3:30 PM BUTROVICH 205
04/02/03 (S) Moved CSSJR 12(RES) Out of
Committee
MINUTE(RES)
04/04/03 0691 (S) RES RPT CS 6DP SAME TITLE
04/04/03 0691 (S) DP: OGAN, SEEKINS, STEVENS B,
04/04/03 0691 (S) WAGONER, LINCOLN, ELTON
04/04/03 0691 (S) FN1: ZERO(DFG)
04/07/03 0732 (S) RULES TO CALENDAR 4/7/2003
04/07/03 0732 (S) READ THE SECOND TIME
04/07/03 0732 (S) RES CS ADOPTED UNAN CONSENT
04/07/03 0732 (S) ADVANCED TO THIRD READING
UNAN CONSENT
04/07/03 0732 (S) READ THE THIRD TIME CSSJR
12(RES)
04/07/03 0732 (S) COSPONSOR(S): ELLIS, ELTON,
DAVIS,
04/07/03 0732 (S) LINCOLN, OLSON, HOFFMAN,
THERRIAULT,
04/07/03 0732 (S) COWDERY
04/07/03 0733 (S) PASSED Y17 N- E3
04/07/03 0733 (S) TRANSMITTED TO (H)
04/07/03 0733 (S) VERSION: CSSJR 12(RES)
04/08/03 0836 (H) READ THE FIRST TIME -
REFERRALS
04/08/03 0836 (H) RES
04/08/03 0860 (H) CROSS SPONSOR(S): LYNN
04/09/03 0900 (H) FSH REFERRAL ADDED BEFORE RES
04/16/03 (H) FSH AT 9:00 AM CAPITOL 124
04/16/03 (H) Moved HCS CSSJR 12(FSH) Out
of Committee
MINUTE(FSH)
04/16/03 (H) RES AT 1:00 PM CAPITOL 124
04/16/03 (H) Scheduled But Not Heard
04/17/03 1024 (H) FSH RPT HCS(FSH) 5DP
04/17/03 1024 (H) DP: HEINZE, OGG, GUTTENBERG,
WILSON,
04/17/03 1024 (H) SEATON
04/17/03 1024 (H) FN1: ZERO(DFG)
04/17/03 1024 (H) REFERRED TO RESOURCES
04/23/03 (H) RES AT 1:00 PM CAPITOL 124
BILL: HB 105
SHORT TITLE:COMMERCIAL FISHING LOANS
SPONSOR(S): REPRESENTATIVE(S)STEVENS
Jrn-Date Jrn-Page Action
02/14/03 0215 (H) READ THE FIRST TIME -
REFERRALS
02/14/03 0215 (H) FSH, RES, FIN
03/12/03 (H) FSH AT 8:30 AM CAPITOL 124
03/12/03 (H) Moved Out of Committee
MINUTE(FSH)
03/12/03 0509 (H) FSH RPT 3DP 3NR
03/12/03 0509 (H) DP: KOTT, WILSON, SEATON;
03/12/03 0509 (H) NR: BERKOWITZ, SAMUELS,
GUTTENBERG
03/12/03 0510 (H) FN1: (CED)
03/12/03 0510 (H) REFERRED TO RESOURCES
04/23/03 (H) RES AT 1:00 PM CAPITOL 124
03/26/03 0638 (H) FSH RPT 2DP 2DNP 1NR 2AM
03/26/03 0638 (H) DP: HEINZE, WILSON; DNP:
GUTTENBERG,
03/26/03 0638 (H) BERKOWITZ; NR: SAMUELS; AM:
OGG, SEATON
03/26/03 0639 (H) FN1: ZERO(DFG)
03/26/03 0639 (H) FN2: ZERO(DEC)
03/26/03 0639 (H) FN3: (DNR)
03/26/03 0639 (H) REFERRED TO RESOURCES
03/26/03 (H) RES AT 1:00 PM CAPITOL 124
03/26/03 (H) -- Meeting Canceled --
03/28/03 (H) RES AT 1:00 PM CAPITOL 124
03/28/03 (H) <Bill Hearing Postponed>
04/11/03 (H) RES AT 1:00 PM CAPITOL 124
04/11/03 (H) <Bill Hearing Postponed>
04/16/03 (H) RES AT 1:00 PM CAPITOL 124
04/16/03 (H) Heard & Held
MINUTE(RES)
04/23/03 (H) RES AT 1:00 PM CAPITOL 124
BILL: HB 191
SHORT TITLE:COASTAL MANAGEMENT PROGRAMS
SPONSOR(S): RLS BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
03/12/03 0513 (H) READ THE FIRST TIME -
REFERRALS
03/12/03 0513 (H) FSH, RES, JUD, FIN
03/12/03 0513 (H) FN1: ZERO(DFG)
03/12/03 0513 (H) FN2: ZERO(DEC)
03/12/03 0513 (H) FN3: (DNR)
03/12/03 0513 (H) GOVERNOR'S TRANSMITTAL LETTER
03/17/03 (H) FSH AT 8:30 AM CAPITOL 124
03/17/03 (H) Heard & Held
03/17/03 (H) MINUTE(FSH)
03/18/03 (H) RES AT 12:30 PM CAPITOL 124
03/18/03 (H) <Pending Referral> -- Meeting
Canceled --
03/26/03 0638 (H) FSH RPT 2DP 2DNP 1NR 2AM
03/26/03 0638 (H) DP: HEINZE, WILSON; DNP:
GUTTENBERG,
03/26/03 0638 (H) BERKOWITZ; NR: SAMUELS; AM:
OGG,
03/26/03 0638 (H) SEATON
03/26/03 0639 (H) FN1: ZERO(DFG)
03/26/03 0639 (H) FN2: ZERO(DEC)
03/26/03 0639 (H) FN3: (DNR)
03/26/03 (H) FSH AT 8:30 AM CAPITOL 124
03/26/03 (H) Moved Out of Committee
03/26/03 (H) RES AT 1:00 PM CAPITOL 124
03/26/03 (H) -- Meeting Canceled --
03/26/03 (H) MINUTE(FSH)
03/28/03 (H) RES AT 1:00 PM CAPITOL 124
03/28/03 (H) <Bill Hearing Postponed>
04/11/03 (H) RES AT 1:00 PM CAPITOL 124
04/11/03 (H) <Bill Hearing Postponed>
04/16/03 (H) RES AT 1:00 PM CAPITOL 124
WITNESS REGISTER
SENATOR GARY STEVENS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as sponsor of SJR 12 and HB 105.
JOSEPH LANHAM
Petersburg, Alaska
POSITION STATEMENT: Expressed concerns about HB 105.
CHERYL SUTTON, Staff
to the Joint Legislative Salmon Industry Task Force
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions on HB 105.
GREG WINEGAR, Director
Division of Investments
Department of Community & Economic Development (DCED)
Juneau, Alaska
POSITION STATEMENT: Answered questions on HB 105.
REPRESENTATIVE PAUL SEATON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As chair of the House Special Committee on
Fisheries, explained discussion in that committee during hearing
on HB 105; asked questions relating to HB 191 and requested
examples of local enforceable policies that meet the criteria
under Section 14.
BRUCE TWOMLEY, Chairman/Commissioner
Commercial Fisheries Entry Commission
Alaska Department of Fish & Game (ADF&G)
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 105.
GERALD McCUNE, Lobbyist
for United Fishermen of Alaska (UFA)
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 105.
MARTY RUTHERFORD, Consultant
to the Administration
and to the Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: During hearing on HB 191, explained changes
in the new proposed committee substitute (CS) dated 4/22/2003.
DANA OLSON
Wasilla, Alaska
POSITION STATEMENT: During hearing on HB 191, discussed
concerns; asked that members look at the issue in its entirety.
MIKE MILLIGAN
Kodiak, Alaska
POSITION STATEMENT: Testified on HB 191; asked that the role of
local government not be circumvented.
BOB SHAVELSON, Executive Director
Cook Inlet Keeper
Homer, Alaska
POSITION STATEMENT: Expressed concerns relating to HB 191.
BRECK TOSTEVIN, Assistant Attorney General
Environmental Section
Civil Division (Anchorage)
Department of Law
Anchorage, Alaska
POSITION STATEMENT: Responded to concerns expressed about
HB 191 and answered questions.
JACK CUSHING, Mayor
City of Homer
Homer, Alaska
POSITION STATEMENT: Testified on HB 191.
LISA VON BARGEN
Community & Economic Development
City of Valdez
Valdez, Alaska
POSITION STATEMENT: Testified on HB 191, suggesting
clarification in Section 39 of the new proposed CS.
NANCY HILLSTRAND
Pioneer Alaskan Fisheries
Homer, Alaska
POSITION STATEMENT: Testified in opposition to HB 191.
MARV SMITH, Coastal Zone Coordinator
Lake & Peninsula Borough
King Salmon, Alaska
POSITION STATEMENT: Testified on HB 191, noting concerns that
remain and suggesting changes.
JOHN OSCAR, Program Director
Ceñaliulriit Coastal Resource Service Area Board
Mekoryuk, Alaska
POSITION STATEMENT: Expressed concerns about Section 29 of
HB 191, in particular.
DANIEL BEVINGTON, Coastal District Coordinator
Kenai Peninsula Borough
Soldotna, Alaska
POSITION STATEMENT: Expressed concerns about HB 191.
ACTION NARRATIVE
TAPE 03-33, SIDE A
Number 0001
CHAIR HUGH FATE called the House Resources Standing Committee
meeting to order at 1:05 p.m. Representatives Fate, Masek,
Gatto, Heinze, Lynn, Morgan, Wolf, and Kerttula were present at
the call to order. Representative Guttenberg arrived as the
meeting was in progress.
SJR 12-SUPPORTING HALIBUT BY-CATCH PROJECT
CHAIR FATE announced that the first order of business would be
CS FOR SENATE JOINT RESOLUTION NO. 12(RES), Supporting the
halibut by-catch utilization project of the Alaska Food
Coalition. [Before the committee was HCS CSSJR 12(FSH).]
Number 0226
CHAIR FATE asked whether anyone else wished to testify. He then
closed public testimony.
The committee took an at-ease from 1:09 p.m. to 1:11 p.m.
[There were two motions to move wrong versions of the bill,
which were then withdrawn.]
Number 0424
REPRESENTATIVE MASEK moved to report HCS CSSJR 12(FSH) out of
committee with individual recommendations and the accompanying
fiscal notes, and asked for unanimous consent.
Number 0459
REPRESENTATIVE GATTO objected. He asked the sponsor to speak to
the changes.
Number 0490
SENATOR GARY STEVENS, Alaska State Legislature, sponsor, turned
attention to page 2, lines 6-8, reporting that there was a
change in the [House Special Committee on Fisheries] to make it
absolutely clear that this is a specific permit called a
prohibited species donation permit and is authorized by the
National Marine Fisheries Service (NMFS). The purpose of the
permit is to authorize the use of halibut catch from vessels
with observers. The intention is to make it absolutely clear
that no fish would be used from vessels that don't have federal
observers aboard to ensure that no one has "played fast and
loose" with keeping certain halibut. He noted he was glad the
change was made to clarify the intention.
Number 0565
REPRESENTATIVE GATTO withdrew his objection.
Number 0574
CHAIR FATE asked if there was any further objection. There
being no objection, HCS CSSJR 12(FSH) was reported from the
House Resources Standing Committee.
HB 105-COMMERCIAL FISHING LOANS
Number 0591
CHAIR FATE announced that the next order of business would be
HOUSE BILL NO. 105, "An Act relating to loans to satisfy past
due federal tax obligations of commercial fishermen and to the
commercial fishing loan program."
[The bill was sponsored by then-Representative Gary Stevens.
However, the written sponsor statement was prepared by the Joint
Legislative Salmon Industry Task Force, on which then-
Representative Gary Stevens served as vice chair and Senator Ben
Stevens served as chair.]
Number 0726
JOSEPH LANHAM testified on his own behalf, informing members
that he had four concerns. First, if this is constructed so
that the permit cannot be seized, in most cases it will just
delay the inevitable. The only reason a person needs to pay
taxes is because of making profits; if the person made money,
then the taxes should have come out of those profits first and
then been saved [until the tax was paid]. Thus he suggested it
was the person's choice to get into that situation, in many
cases, because the person had misallocated his or her funds.
Mr. Lanham added:
This being said, there is no policy in the bill that
says that the state loan officers for the Division of
Investments have to show any kind of debt-service
ratios that show that the fishermen can pay the
estimated taxes for next year, as well as the new,
current portion of long-term debt.
Number 0808
MR. LANHAM addressed his second concern, what the loan-loss
reserve is. He explained:
It says that the program was highly used, but does not
say how much these loans cost the fund in
delinquencies or cost the fund in constant deferrals.
And where are ... some of these loans that were booked
back then, when the program was highly used, still
receiving deferrals and still only receiving interest
payments? I may be wrong, but I have heard from
several fishermen that they receive deferrals from the
state constantly.
MR. LANHAM noted that his third concern relates to the waiver of
the 0.5 percent loan fee: he disagrees with it because the
Division of Investments competes with commercial banks; lowering
the fee will make companies that lend to the commercial fishing
industry less competitive with the program. Although the
original intent of the [state] program wasn't to compete with
banks, he said the state has become the lender of first choice,
instead of the lender of last resort. The state can refinance
up to $300,000, which has resulted in the loss of profitable
customers who never have missed a payment or been late with
their payments, but who now are in jeopardy of doing so. He
explained:
They do this by subverting the requirement to have a
"decline letter" from the bank and having the customer
qualify for bank financing through the bank by
refinancing it back to the state. And the state loan
officers instruct fishermen to come to the bank to set
interim or "bridge" financing. What this is, is the
customer actually comes in, qualifies for conventional
financing, and does not need the state. But the
state, under the [refinancing] program, pays off a
good-performing loan and then takes it over from us
and uses us, in a way, to get around the $100,000
limit.
This is a deceptive practice because it just disguises
the fact that they are initiating loans over $100,000,
which is ... the new money limit that they have. The
state loan officers will go as far as to send
commitment letters to the borrower assuring them that
if they qualify for bank financing, they will
refinance and do the deal.
Number 0946
MR. LANHAM addressed his fourth concern: the only entities that
can foreclose on permits are the Internal Revenue Service (IRS),
the State of Alaska, or the state's authorized financing
companies such as the Commercial Fishing and Agriculture Bank
(CFAB) or the Division of Investments. By contrast, banks are
prohibited by the state from financing limited entry permits.
He continued:
The phrase in HB 105 that talks about stopping
creditors is really ... referring to the IRS, the
state, and CFAB. The state and CFAB can make their
own decision whether or not to foreclose on the permit
in the interest of the state, as they are in the
interest of the fisherman in the first place, and if
it is good for the fishing community. If the IRS
forecloses on the permit, their only interest is to
turn it into cash to pay a tax bill. To do that, it
would have to be resold, ... and the only people that
would buy a limited entry permit are fishermen who
would fish it. So ... if the permits are to be
foreclosed on and then sold, there wouldn't [be] the
dire consequences referenced in the bill, because the
permits would be fished.
CHAIR FATE requested that Mr. Lanham stay on teleconference.
Number 1058
SENATOR GARY STEVENS, Alaska State Legislature, sponsor,
explained that HB 105 stemmed from the Joint Legislative Salmon
Industry Task Force, appointed by the House and Senate the
previous year, which met during the summer and fall of 2002.
Out of that task force came half a dozen bills that are moving
through the legislature. The intent is to help the salmon
industry, which is in crisis, face enormous problems including
competition from farmed salmon and low prices. He said a lot of
fishermen are in jeopardy of going out of business.
SENATOR GARY STEVENS brought up concerns voiced by Mr. Lanham.
With regard to foreclosure, he said it isn't in the state's best
interest for fishermen to go out of business and lose their
permits, among other things. Hence the purpose of HB 105 is to
try to forestall that and help fishermen with federal taxes when
they are in a position of jeopardy. Noting that the state had
this program from 1995-1997 and 2001-2003, he said it was widely
used and very successful. With respect to delinquency, Senator
Stevens said he didn't have those figures and suggested the
Division of Investments could respond. He added that the 0.5
percent waiver is to help fishermen even more. He urged members
to give serious consideration to the legislation. In response
to a question from Representative Guttenberg, he said it isn't
inevitable that all of these fishermen who are having trouble
paying their taxes will go out of business and lose their
permits; he cited the previous two time periods during which the
program existed as evidence of that.
Number 1364
REPRESENTATIVE MASEK referred to the fiscal note analysis
[prepared by Greg Winegar of the Division of Investments,
Department of Community and Economic Development (DCED)], which
read [original punctuation provided]:
This legislation allows Alaska harvesters to refinance
existing Commercial Fishing Revolving Loan Fund
(CFRLF) loans. Current law requires the Division to
charge a one-half percent fee to refinance. Section 1
of HB 105 removes the one-half percent refinancing fee
and that will result in a reduction of income to the
CFRLF. Interest rates are currently at record lows
and as a result, the Division anticipates that the
majority of borrowers eligible to refinance will do so
prior to the effective date of this legislation. We
expect approximately 180 refinancing applications in
FY 04 and then approximately 80 applications per year
thereafter. This will result in a reduction to the
fund in FY 04 of $30,150 and a reduction of $13,400
each year thereafter through FY 09. These reductions
were calculated as follows:
180 loans x $33,500 (average loan size) = $6,030,000 x
.005 = $30,150
80 loans x $33,500 = $2,680,000 x .005 = $13,400
These calculations are based on interest rates
remaining relatively flat or increasing gradually
through FY 09.
REPRESENTATIVE MASEK asked why language was put in the bill to
remove that [0.5 percent].
Number 1397
SENATOR GARY STEVENS replied that at this point he doesn't think
it's necessary [to include the 0.5 percent]. He said the
program has been successful in the past, and that this is just a
further encouragement to fishermen to use this program and to
make it less expensive.
REPRESENTATIVE MASEK responded that she is really troubled by
the legislation because many Alaskans have to pay federal taxes
and are delinquent on them, and yet the state doesn't help them
out. Calling it self-serving in this time of a state fiscal
crisis, she said she isn't happy to see that Section 1 of the
bill removes the 0.5 percent. Representative Masek questioned
the long-term viability of fishing for many people as a way to
earn a living, and remarked that when Canada had trouble with
its fishing industry, it looked at helping fishermen get
training in other occupations.
Number 1513
REPRESENTATIVE HEINZE recalled hearing this bill in the House
Special Committee on Fisheries and said she supports it. She
asked whether the IRS has seized limited entry permits in the
past.
SENATOR GARY STEVENS deferred to Cheryl Sutton, who'd been
working on this bill [as staff to the Joint Legislative Salmon
Industry Task Force, which Senator Ben Stevens chairs].
Number 1540
CHERYL SUTTON, Staff to the Joint Legislative Salmon Industry
Task Force, responded:
No. Thus far, we have been successful in not having
the IRS seize any permits, largely due to the fact
that Bruce Twomley with CFEC [Commercial Fisheries
Entry Commission] has been very successful in this
area. And a large portion of this bill has to deal
with that subject. We are trying to protect the
state's interests in this, and clearly it's in the
state's interest not to lose permits.
MS. SUTTON, in response to Representative Masek's earlier
question, said the task force had recommended removing the 0.5
percent refinancing fee just as an additional help for people
who want to refinance their loans and take advantage of lower
interest rates. She pointed out that this is a self-
perpetuating revolving loan fund. It's the borrowers who are
putting money back into the fund, and the last general fund (GF)
appropriation was in fiscal year 1985 (FY 85).
Number 1653
REPRESENTATIVE GATTO asked whether the 0.5 percent forgiveness
would be absorbed easily by the fund. He suggested it is in the
state's best interest to prevent defaults with the IRS, and that
part of the loan capital therefore is being invested [under the
bill] in trying to avoid that. He asked, when the IRS comes to
collect from a person who is out of money, whether it can take
the person's permit.
MS. SUTTON suggested Mr. Twomley of CFEC could address that.
She added, "Our whole objective is not to allow the IRS to seize
a state asset, which is the limited entry permit." She
clarified that the 0.5 percent refinancing fee has nothing to do
with "the IRS loans." She also pointed out that people who are
most at risk are those with no other "economy" apart from
commercial fishing, mostly those in Western Alaska. She added,
"I'm sorry that they're not on line to testify to this bill
today, because we heard immense testimony through the task
force." She emphasized that this is a state loan program that
is only for state residents, and that the interest is in keeping
these permits in rural areas where there is no other economy.
She suggested it serves a dual purpose in that regard.
Number 1812
REPRESENTATIVE MASEK referred to page 3, lines 7-12 [sub-
subparagraphs (ii) and (iii)], which relate to lack of training,
lack of employment opportunities in the area of residence, lack
of other occupational opportunities besides commercial fishing,
and economic dependence or a traditional way of life. Referring
to passage of the Alaska Native Claims Settlement Act (ANCSA) as
well as federal funding through the Bureau of Indian Affairs
(BIA), she said there is a lot of federal and state money
invested through nonprofit and for-profit organizations that
have the ability to help folks who live out in these areas. She
recalled growing up as an Alaska Native in a village of fewer
than 100 people, relying on fishing. Now, however, her father's
fishing permit is useless. She said:
They do have other funding to retrain him, but the
only jobs that are available are basically federal or
state or municipal, or through tribal entities. So I
just kind of take that into ... strong consideration,
because I don't think that's a very fair statement to
put into this bill here, because there are other
opportunities available. It's just up to the
individual person on ... if they want to [further]
their training in other areas.
REPRESENTATIVE MASEK asked why this language was added in the
bill.
Number 1933
SENATOR GARY STEVENS replied that he could speak for the six
coastal villages on Kodiak Island that depend heavily on the
salmon industry and traditionally have fished for salmon for
years. He agreed that if fishing disappears, other programs can
help, but said they're all "social programs, giveaway programs"
to provide people with food and so forth. Speaking for
fishermen he knows on Kodiak Island and in Old Harbor,
specifically, he said they don't want those giveaway programs,
but want to compete and want help to keep participating in a
fishing industry they know well and have performed well in for
years. He suggested Representative Masek's comments play into
what he is saying.
REPRESENTATIVE MASEK stated her preference for removing lines 7-
12 from [page 3 of] the bill, but left it to the committee's
discretion.
Number 2032
REPRESENTATIVE MORGAN responded that he tends to agree with
lines 7-12 because he sees no difference in the timber industry
in Southeast Alaska. He asked, when that collapsed, who stepped
in to provide training and jobs. Noting that he represents a
lot of villages in Bush Alaska, he voiced his belief that it is
a fiduciary responsibility of the state and federal governments
to deal with social issues. He said he sees nowhere that the
state or federal government asks a private company to take over
the social problems. Private companies exist to make a profit,
he observed, whereas the state and federal governments are there
to help socially, as much as they can, whether through education
or food stamps or welfare.
REPRESENTATIVE MORGAN agreed with Senator Gary Stevens about
handouts, saying there is nothing better than working and
receiving a paycheck to make a person feel good and independent.
He offered his belief that training should exist, although he
suggested looking into what kind of training it should be later.
Number 2138
CHAIR FATE related his understanding that HB 105 allows people
to borrow money from the revolving loan fund in order to pay for
their income tax. He posed a situation in which an individual
files for a late tax return, which takes close to nine months;
then the individual enters into litigation over the tax and that
exceeds the date specified [when the delay was granted]. He
asked if there are any remedies or allowance [for such a
situation].
SENATOR GARY STEVENS deferred to the representative from the
Division of Investments.
Number 2260
CHAIR FATE asked how prudent businesspeople allow themselves to
get behind to that extent. He asked, "How can they not pay
their taxes and save the money out, because paying taxes implies
that they've made a net income that's $30,000, which is the
limit here, which we'll say ... is close to a net profit of
about $100,000."
SENATOR GARY STEVENS turned attention to factors beyond the
control of commercial fishermen, such as the market and the
production of farmed fish. The current situation is probably
the worst situation commercial fishermen have found themselves
in the last 50 years, he said. Due to the costs, even a good
fishermen who does everything correctly can be in [debt] at the
end of the season.
CHAIR FATE suggested that if the season was bad, the fishermen
wouldn't have much income tax to pay, especially when writing
off expenses [for boats and equipment]. An income tax is
predicated on one's net income. He remarked that whether the
fishermen is using cash accounting or accrual accounting would
make a difference.
Number 2406
GREG WINEGAR, Director, Division of Investments, Department of
Community & Economic Development (DCED), responded. In regard
to the two-year requirement, Mr. Winegar said he believes Chair
Fate is referring to the eligibility section. The two-year
requirement essentially relates to residency. As far as what
taxes can be covered, the division can go back several years if
necessary.
CHAIR FATE asked if most fishermen operate on a cash basis or an
accrual basis.
MR. WINEGAR answered that both are used - and for some, neither,
which is part of the problem. Mr. Winegar said that much of it
is an education problem. Since this program was introduced in
1995, the division has done what it can to educate people about
necessary recordkeeping. For instance, the division created the
volunteer tax and loan program; the division, in cooperation
with the University of Alaska and the IRS, goes to areas and
helps people prepare tax returns at no expense. Over the years
there has been quite a change, and the situation is much better
now, which is in part due to this cooperative effort. This
legislation would provide another tool. He added that this
would apply to about 15-20 loans a year and thus wouldn't be a
costly program. This loan fund has done well, he added.
MR. WINEGAR informed the committee that currently this program
has a fairly high delinquency rate of about 43 percent.
However, 79 loans have actually been paid in full. The program
began with a total of 307 loans that have been made over the
life of the program; most of the loans were made in the first
two to three years of the program, when there was a substantial
noncompliance problem. In the last three fiscal years, 20 loans
have been made. Therefore, he characterized it as a small tool.
A total of $5 million in payments has been obtained, in
comparison with $6.4 million that was loaned. Mr. Winegar noted
that the division will work with borrowers who have
difficulties.
CHAIR FATE asked if those [loans] are collateralized with assets
other than the limited entry permit.
MR. WINEGAR replied yes, in some cases. In most cases, the
permit is the primary collateral for the loan.
Number 2619
REPRESENTATIVE GATTO directed attention to page 3 and pointed
out that in order to satisfy the loan, either sub-subparagraph
(i), (ii), or (iii) is required. He said he sees it from the
point of view of a loan's being refused because satisfying one
of the three would make it easy for an individual not to satisfy
any of the sub-subparagraphs. For instance, sub-subparagraph
(i) says, "has had a crewmember or commercial fishing license
under AS 16.05.480".
MR. WINEGAR clarified that a lot of individuals qualify under
[sub-subparagraph (i)] because in order to qualify, someone must
have a limited entry permit that is in jeopardy of being taken
by the IRS.
REPRESENTATIVE GATTO suggested it would be difficult to satisfy
sub-subparagraph (ii), and thus one would default to sub-
subparagraph (iii). He said, "For me, it seems like for some
people who might purposely not want to give a loan to for some
reason, you could find somewhere ... in all of these three
things where they might not qualify." However, he said he
understood that almost everyone would qualify under sub-
subparagraph (i).
MR. WINEGAR agreed for this particular part of the program. He
explained that sub-subparagraphs (ii)-(iii) come from language
already in the statute for [subparagraph (B)] loans, which was
put in place in the early to mid-1980s. He related his
understanding that the legislature at the time felt that in
order to qualify for this program, someone would need to have
some sort of commercial fishing experience or the other
specified conditions.
Number 2754
REPRESENTATIVE WOLF referred to the high delinquency rate and
recalled hearing about a loss of over $1 million. He called
this proposal a handout.
MR. WINEGAR responded that he wouldn't say $1 million has been
lost because the [division] is working with those individuals,
although these are collateralized loans and some of the money
could be lost. With regard to the 0.5 percent fee, it relates
to the refinancing program. In the last couple of years the
rates have dropped dramatically, and thus the majority of the
portfolio has already refinanced.
MR. WINEGAR noted that during [Joint Legislative Salmon Industry
Task Force] hearings a number of testifiers [requested] that
they not have to pay the 0.5 percent to refinance. However,
there would be some impact to the fund; because the rates have
decreased so far, most people have already financed. If the
rates drop further, the fiscal note could be adjusted. The
fiscal note is something on the order of $30,000 in the first
year and $13,000 for the next couple of years. There will be an
impact, he said, although he didn't believe it would affect the
financial integrity of this particular loan fund.
Number 2854
REPRESENTATIVE WOLF pointed out that every time the interest
rates decrease, people refinance, and that includes a loan
origination fee. Representative Wolf said he has a problem when
the legislature is cutting programs and that this is already
capable of being done by CFAB. In 1987, when the economy hit
bottom, the state didn't come in and bail out the contractors.
Although Representative Wolf said he had no problems helping out
industry in the state, he said he finds this 0.5 percent
problematic.
MR. WINEGAR said he wouldn't argue with Representative Wolf on
the 0.5 percent, as it's a relatively small fee. He noted that
the process has been streamlined as best as possible, but there
are costs associated with a refinance.
REPRESENTATIVE WOLF said it all adds up.
Number 2963
REPRESENTATIVE GUTTENBERG inquired as to the impact of the 0.5
percent reduction on the revolving loan fund.
MR. WINEGAR answered that the division forecast that the impact
would be about $30,200 in 2004 and $13,400 each year thereafter.
This is really a factor of what interest rates do, he said.
TAPE 03-33, SIDE B
MR. WINEGAR continued by saying if the rates don't decline
further, it won't be substantial. If the federal government
cuts the rate again and the rates drop, then the fiscal note
would increase to some extent because there would be a larger
group seeking refinancing. Therefore, it's related to what the
market rates do.
Number 2965
REPRESENTATIVE MORGAN inquired as to the impact to the state if
these permits are lost to the IRS.
MR. WINEGAR answered with his belief that it would be a fairly
substantial impact. With this program and through working with
the IRS, the intent has been to avoid [the IRS taking the
state's permits].
Number 2920
REPRESENTATIVE PAUL SEATON, Alaska State Legislature, informed
the committee that in the House Special Committee on Fisheries,
which he chairs, it was discovered that [fishermen] have filed
tax returns and have made arrangements with the IRS. He
explained that some people in rural Alaska didn't realize that
the IRS existed and had accumulated IRS debt without maintaining
receipts to write off expenses. Therefore, this population is
being aided by this program. With regard to the 0.5 percent, he
said this program places no cost on the state general fund (GF).
REPRESENTATIVE SEATON reported that the task force had related
to [the House Special Committee on Fisheries] that one of the
few ways fishermen could be helped is through refinancing of
loans at the lower interest rates and not being charge 0.5
percent of the whole loan fee as an upfront fee. Therefore, [a
fisherman's] ongoing expenses could be lowered at this time when
the salmon prices are so low.
REPRESENTATIVE GATTO asked whether any of this IRS obligation is
allowed to be a result of some nonfishing obligation such as
child support or whether it's restricted to IRS debt as a result
of fishing.
Number 2796
MR. WINEGAR answered that this particular language is restricted
to IRS obligations. He noted that in the original legislation
in 1995 a provision allowed this to be used for child support as
well, which created a lot of concern. Therefore, the relating
language was removed in one of the first hearings on the
original legislation.
REPRESENTATIVE GATTO asked, "Is it obligations that are limited
to a debt as a result of fishing deficiencies or losing years,
or can it be any debt?"
MR. WINEGAR answered that technically he believes it can be any
debt, although he didn't recall any that fell into that
category.
CHAIR FATE said that's a good question because of the two-year
timeframe. He related his understanding that the revolving loan
fund was initially funded with GF funds.
MR. WINEGAR replied yes. He explained that when the fund was
created in 1972, approximately $60 million went into the fund.
About $74 million has gone out of the fund since fiscal year
1985, when the last appropriation was made.
CHAIR FATE asked if CFAB also lends money for the same type of
indebtedness.
MR. WINEGAR explained that CFAB is a bit different because it's
a cooperative. Although the programs do overlap to a small
extent, basically those qualifying for a CFAB loan don't qualify
with the division.
CHAIR FATE surmised, then, that there is no competition between
CFAB and the state.
Number 2654
MR. WINEGAR reiterated that there are a couple of areas in which
the two program overlap. One is in the refinancing arena.
Under current statute, the division has the ability to refinance
existing vessel and gear loans. However, the division doesn't
encourage someone to take out bank loans and immediately come to
the division. In fact, the division is going to implement
regulations to make it clear that someone would have to have a
loan on the books for at least a year before being allowed to
refinance. There is also overlap with regard to
[subparagraph (A)] permit loans. By law, only two entities can
take a permit as collateral: CFAB and the state program.
However, there is language that specifies that the loans are
intended for those who don't have other sources of financing.
Number 2569
BRUCE TWOMLEY, Chairman/Commissioner, Commercial Fisheries Entry
Commission (CFEC), Alaska Department of Fish & Game (ADF&G),
recalled that fewer than 10 years ago there was an IRS official
in Anchorage who'd attended a meeting of the Alaska Association
of Village Council Presidents; afterward, the official had
remarked that the IRS is trying to collect taxes from people who
don't even know the IRS exists. He said those in rural villages
who don't know of their tax obligations and don't file tax
returns can end up having enormous tax debts because of the
penalties. In these cases, IRS officials thought these
individuals were evading taxes and thus went after limited entry
permits in some of those cases. The IRS has seized a number of
limited entry permits and forced the sale of those limited entry
permits. Often, this has resulted in these permits' being taken
out of villages and sold at bargain prices to people out of
state. However, for one reason or another, those permits
haven't actually transferred because the permits go through the
[CFEC], and often there is a basis under state law to deny the
transfer, which results in [CFEC's] negotiating with the IRS and
resisting the forced sale of the limited entry permits.
MR. TWOMLEY explained that the commission has resisted the
forced sale of the limited entry permits because it is
protecting state law in the matter; state law declares that
limited entry permits are privileges not subject to the claims
of creditors. The aforementioned is the case for two important
reasons, he said. First and foremost, the legislature wants
control over this privilege so that it can be changed. The
other reason this is a privilege is to keep [Alaskan fishermen]
in the water, especially those in rural areas who may depend on
fisheries as their only source of cash income.
MR. TWOMLEY emphasized his belief that it would be devastating
to a number of communities to lose these particular privileges.
With regard to compliance rates, Mr. Twomley indicated he'd
recently reviewed statistics which illustrate that fishermen
aren't less compliant than other small independent businessmen.
The limited entry system and permits make fishermen especially
vulnerable to tax enforcement. Therefore, the loan program has
helped in that it allows the [commission] to intervene and
negotiate with the IRS and help those facing enormous claims.
MR. TWOMLEY noted that the state has also made it easy for the
IRS to go after the earnings from the limited entry permits.
Since this program has been in place, the IRS has realized that
its patience can pay off and that fishermen and their families
can retain the benefits of the local fisheries, he said, which
is why [CFEC] supports HB 105.
Number 2282
REPRESENTATIVE LYNN expressed shock that some people in the U.S.
don't know that the IRS exists. He said he hoped something
would be done to contact [the state's] educational system as a
method of informing Alaskans that the IRS exists. In the
meantime, he asked if anything is being done to educate people
about the IRS.
MR. TWOMLEY pointed out that since [CFEC] has become aware of
the problem, a number of forces such as the university, the
Alaska Business Development Center, and the state loan program
have brought a lot of resources to this matter. The situation
has greatly improved. Mr. Twomley related that this situation
isn't totally unique to Alaska. As a result of this work, he
has been appointed to a national taxpayer advocacy panel from
which he has learned that there are other groups of individuals
who are equally unaware of the IRS tax obligations. The IRS
joined the educational effort. Mr. Twomley said that a lot of
resources have gone into education and a great deal of progress
has been made and continues to be made. The situation that
existed in 1995 doesn't continue now.
REPRESENTATIVE LYNN clarified that he blames the system that
allows this lack of knowledge about the IRS.
Number 2150
REPRESENTATIVE GATTO made the following analogy. He pointed out
that he uses an office provided by the government. If he were
to be kicked out and the IRS said he owed a lot of money, the
IRS couldn't take his office and rent it out, because the office
belongs to the state. Similarly, the limited entry permit
belongs to the state. Therefore, he questioned how the IRS
could take a permit to use something and sell it.
MR. TWOMLEY said Representative Gatto has put forth the state's
theory. This permit is a privilege, and it's critically
important to the state that it remains that way, because it's a
means of enforcing conservation laws, among other things.
However, he acknowledged that [the permit] generates property
rights.
REPRESENTATIVE GATTO inquired as to the resolution.
MR. TWOMLEY answered that currently there is an agreement to
disagree. He emphasized that there are discussions.
Number 2020
GERALD McCUNE, Lobbyist for United Fishermen of Alaska (UFA),
testified in support of HB 105. He informed the committee that
UFA has worked with fishermen, and advocates that people pay and
file taxes on time. Mr. McCune emphasized that UFA's interest
in the tax loan obligation program is the desire to keep the IRS
from taking these permits. For example, a permit was seized in
Yakutat two days before Christmas; there was an attempt to sell
the permit for $5,000, although it was worth $15,000.
MR. McCUNE pointed out that other assets can be obtained to
satisfy tax payments, such as a paid-off boat. The IRS seized a
boat in Cordova to pay for an individual's taxes, but since the
permit wasn't taken, the individual could continue to fish. Mr.
McCune likened permits to a carpenter's tools. He agreed with
earlier testimony that the education process has come a long
way. Mr. McCune added that fishing this year, in certain
arenas, isn't looking too bad. He related his belief that in
the next two to three years there is a good chance that the
industry will be turned around so that people can make a decent
wage and many of these difficulties will be eliminated.
Number 1835
REPRESENTATIVE GUTTENBERG acknowledged that the season would be
one factor [when people don't pay their taxes]. However, he
suggested that there are other liabilities that prevent people
from being able to pay their taxes.
MR. McCUNE reiterated that this problem has come a long way
since 10 years ago. He acknowledged that there are a few
problems because of low [fish] runs and low prices at the same
time.
REPRESENTATIVE GUTTENBERG pointed out that a good season doesn't
necessarily mean that someone will make a profit or even [have
money to] pay taxes.
MR. McCUNE said people need to be responsible. He clarified
that he wasn't advocating bailing out fishermen or anyone else
who doesn't pay taxes. He reiterated that his main interest is
to keep the IRS out of the state program. He noted that the
program has been used less each year; he surmised that more
education is happening and more people are aware of taxes.
Still, it's the loan program's job to review an individual's
portfolio [to determine the risk], he said.
Number 1675
REPRESENTATIVE MORGAN asked about start-up costs. He noted that
like farmers, fishermen must have the necessary equipment in
order to make a profit.
MR. McCUNE answered, depending upon the fishery, that someone
can spend from $2,000 to $10,000 to gear up. If the fish don't
return, the person will still owe some kind of tax such as self-
employment tax at some point.
CHAIR FATE closed public testimony.
Number 1604
REPRESENTATIVE KERTTULA moved [to report HB 105 out of committee
with individual recommendations and the accompanying fiscal
notes]. There being no objection, HB 105 was reported from the
House Resources Standing Committee.
The committee took an at-ease from 2:20 p.m. to 2:25 p.m.
HB 191-COASTAL MANAGEMENT PROGRAMS
Number 1565
CHAIR FATE announced that the final order of business would be
HOUSE BILL NO. 191, "An Act relating to the Alaska coastal
management program and to policies and procedures for
consistency reviews and the rendering of consistency
determinations under that program; relating to the functions of
coastal resource service areas; creating an Alaska Coastal
Program Evaluation Council; eliminating the Alaska Coastal
Policy Council; annulling certain regulations relating to the
Alaska coastal management program; relating to actions based on
private nuisance; relating to zoning within a third class
borough covered by the Alaska coastal management program; and
providing for effective dates." [The bill was sponsored by the
House Rules Standing Committee by request of the governor.]
CHAIR FATE indicated the committee aide was obtaining copies of
a new proposed committee substitute (CS) labeled 03-0069
bil2.doc, 4/22/2003, 1:30 pm., which he said tries to meet some
of the problems articulated by committee members, the Alaska Oil
and Gas Association (AOGA), and the governor's staff. He asked
Marty Rutherford to explain the changes that resulted from this
cooperative effort.
Number 1475
MARTY RUTHERFORD, Consultant to the Administration and to the
Department of Natural Resources (DNR), informed the committee
that the Senate Resources Standing Committee would be
considering the companion bill that afternoon. She noted that
available to answer questions were Breck Tostevin of the
Department of Law; Patrick Galvin, currently with DNR's Division
of Oil & Gas, but formerly the director of the Division of
Governmental Coordination (DGC), which used to house the Alaska
Coastal Management Program (ACMP); and Randy Bates, the newly
appointed coastal program coordinator in the ACMP.
The committee took an at-ease from 2:28 p.m. to 2:29 p.m.
Number 1324
MS. RUTHERFORD drew attention to a one-page synopsis dated
April 21, 2003, which she said is generic in nature and little
different from the one members saw the previous week; an updated
timeline dated April 21, 2003, which reflects changes in the new
proposed CS; an updated chart that compares the new proposed CS
with the existing coastal management program; an updated
sectional analysis [dated April 23, 2003]; and one sheet that
discusses changes between last week's proposed CS [dated
4/12/2003] and the new one [dated 4/22/2003].
Number 1240
MS. RUTHERFORD highlighted changes in the new proposed CS. She
told members:
Section 3 adds the word "maintenance" of an improved
district plan as eligible for funding assistance.
This change was requested by the Alaska Municipal
League and the coastal districts. ...
Section 11 includes very specific statutory references
to what was intended as DEC's [the Department of
Environmental Conservation's] air, land, and water
quality requirements. This change was requested by
Doug Mertz on behalf of the Prince William Sound RCAC
[Regional Citizens' Advisory Council]; they were
indicating they were concerned about the broadness of
the air, land, and water quality references.
Section 12, which is also on page 8, extends the
required renewal period of district plans from five to
ten years. Also, this change was requested by the
Alaska Municipal League and the ... coastal districts.
Section 13, which is on ... page 9, removes the
addition of the term "unduly" in the type of
restrictions a district plan can impose on a use of
state concern. This was requested by Chairman Fate,
and I believe Representative [Seaton] had some
concerns about that word as well, earlier.
Section 14, which is on page 10: there are several
changes to this section. It amends AS 46.40.070,
which sets up the requirement for department review
and approval of district plans. It ... changes the
introduction from "The department may approve", which
is a discretionary action, [for] a district plan
meeting the requirements of (a)(1) and (2), to "The
department shall approve" a district plan if the
commissioner ... finds that it meets the requirements.
This change was requested by the Alaska Municipal
League and the coastal districts.
It also removes ... (a)(2)(B) as duplicative. I think
several members on the committee requested that
change, and we heard it also from the Alaska Municipal
League and the coastal districts. It changes
"geographic area within the coastal zone" in (a)(2)(D)
to "a defined portion of a district's coastal zone".
And it changes "identified" - and this change is in
[(a)(2)(C)(i)] - ... to "demonstrated" as sensitive to
development. ...
Number 0981
MS. RUTHERFORD continued with changes in the new proposed CS:
[Section 14 also] deletes the phrase "or contemplated"
from (a)(2)(C)(ii) as redundant. We heard the concern
about that from various parties as well. Also in
Section 14, ... line 28, ... (a)(2)(C)(iii), it adds
"local" [before] "usage" to clarify that a matter of
local concern must, among other requirements, involve
local usage or scientific evidence. This change was
requested by ... Chairman Fate.
There is one error on your sheet. The next reference
to Section 19 should say Section 20. ... Section 20 is
on page 12. It changes "interested parties" to
"affected parties" in [the] list of persons from whom
DNR requests consistency review comments. This change
was requested by Chairman Fate.
In Section 21, which is on page 13, it revises the
lead-ins to (1)(A) and (B) and revised (B), to reflect
the listing of statutes instead of the simple term
"air, land, and water quality" in AS 46.40.040(b).
And, again, the intent is to ensure that the
definition of "air, land, and water quality" is quite
specific.
Number 0810
MS. RUTHERFORD continued with changes:
Section 22 amends new subsection (k), which is on page
13, governing the scope of a consistency review to add
"that are located". The administration thought that
there was ... lack of clarity there, so we added those
words [ourselves]. New subsection (m), ... page 14,
adds the requirement that DNR establish in regulation
the state resource agency permits and federal permits
that trigger a consistency review. It also adds new
subsections (n) and (o), which [establish] a 90-day
deadline for completing consistency reviews. And it
adds a new ... subsection (p), ... which expressly
states that a final consistency determination may not
be held up by a DEC or other permit excluded under
AS 46.40.096(g).
Section 43, ... on page 21, adds a definition of
"project" from 6 AAC 50, which are newly promulgated
regulations dealing with consistency reviews, so it's
consistent with the current regulations.
Section 46(b), which is on page 22, ... adds
clarifying language that the ... former [Alaska]
Coastal Policy Council's regulations implementing the
coastal management program remain in effect until DNR
adopts new regulations or they are annulled under
Section 45, whichever occurs first. This was done in
order to provide [assurance] that Representative
Kerttula and her office requested.
And Section 47, which is on page 23, is a transitional
provision requiring revised ... district coastal
management plans; [it] now gives all coastal districts
one year after DNR adopts new regulations for the
statewide standards or until July 1, 2005, whichever
is later, to submit revised district plans. And,
again, this was requested by the Alaska Municipal
League, the coastal districts, and Chairman Fate.
Number 0565
CHAIR FATE reopened public testimony. He announced his
intention to move the bill from committee at the next hearing.
Number 0464
DANA OLSON testified that she lives in the Matanuska-Susitna
coastal district. She indicated she'd asked the Legislative
Information Office (LIO) to fax an article titled "Chicago
Biosphere Reserve Considered by Steering Committee," dated April
2, 2003, from the Paragon Foundation's The Powerhouse, reprinted
with permission of the Property Rights Foundation of America.
She told members this legislation fails to consider that the
U.S. Man and [Biosphere] Program under the U.S. Department of
State reviews and approves nominations for the U.S. before
forwarding them to the UNESCO [United Nations Educational,
Scientific and Cultural Organization] headquarters in Paris for
formal consideration; it also fails to consider that curtailing
the existing political processes in Alaska will result in having
no access for submitting nominations for this.
MS. OLSON said this establishes "criteria of urban interface";
she cited the lawsuit over the Miller's Reach fire as an example
of intergovernmental agreements and policy relating to that
interface issue. Suggesting members need to address that, she
explained, "This 1970 Act does give us legal standing to go in
and create nominations, whether or not you feel that you can
curtail our political process or not." She said AS 46.03.040 is
the requirement for an environmental plan that never has been
implemented. She added, "Negotiated rule making does not
provide for nominations. And it's anticipated that I will
probably make recommendations for nominations. And it may
impact your rule making, your permitting, while that process is
ongoing."
Number 0179
MS. OLSON observed that people often think only wilderness can
be put under such a designation, but she said that isn't true.
She told members:
Where there's been no consideration whatsoever on
shallow gas, natural gas, impacts to the local
communities, I asked ... my local coastal district,
the Mat-Su Borough, to provide me, under a Freedom of
Information Act, the impact of that type of activity,
and they've not yet provided it to me. And, two, I've
asked that the Mat-Su Borough also respond when I made
a request for a permit standard that would allow a
citizen group to determine whether or not the notice
requirement that is required under the Alaska
constitution is being met, and that be a permanent
part of ... their administrative process or their
coastal district program, and they have not yet
responded on that.
MS. OLSON concluded by saying she didn't feel this issue had
been looked at in its entirety, and asked that members do so.
Number 0040
MIKE MILLIGAN told members his comments would be of a general
nature. He noted that he'd served on the borough assembly in
Kodiak.
TAPE 03-34, SIDE A
Number 0001
MR. MILLIGAN recalled that through working with coastal zone
management, [the assembly] was able to craft a solution that
enabled them to express how they wanted to see oil-related
development occur in the borough. He said:
From that, we were able to set various parameters, not
the least of which was how we wanted to tax oil. We
were able to work with industry, and our ... borough
mayor at the time eventually got on the outer
continental shelf council and became a chairman for
Arctic Power. So I think ... there seems to be a
predilection that there is some development that's not
occurring because of regulations. My view is that
development occurs when the regulations are good and
adhered to.
I see no advantage for resource development in
decreasing the power of local governments to
participate in this process. If you were to look at
an area that's overregulated, ... that would be
Europe. And if you go look at Europe right now, you
look at the environmental regulations, particularly in
regards to timber, and you will see a much higher
level of regulation. We are not timbering right now
because of markets. If you go to Fairbanks, you go to
Anchorage, and even probably Juneau - certainly here
in Kodiak, you can go to Spenard's, you can go to Home
Depot - you can buy European forest products in those
stores right here in Alaska. You can't buy Alaskan
products. And it's not because of regulations; it's
because of markets.
If you want this resource development to occur, then
you need to look at ways to develop those resources,
ways that are happening through the [Alaska Science
and Technology Foundation]. Do not circumvent ... the
role of local government; ... I strongly encourage you
to keep local government involved in this matrix.
Number 0248
BOB SHAVELSON, Executive Director, Cook Inlet Keeper, who'd
testified at the previous hearing, added that the timeline
provided in the materials circulated by the administration
doesn't appear to provide any conditions for an environmental
impact statement (EIS), which likely would be required under the
National Environmental Policy Act (NEPA) for such sweeping
changes to the state's program. He said this implicates not
only the zero fiscal note attached to this legislation, but also
the timeline for implementation.
MR. SHAVELSON noted that his organization has more than 500
members throughout Southcentral Alaska. He expressed concern
that the bill will deal a significant blow to local communities
that seek to have some type of local oversight with regard to
local-resource decisions. Section 14 of the bill will make it
virtually impossible for a local coastal district to have in
place an enforceable policy that doesn't conflict with state
criteria or law; thus it will disenfranchise those local
communities from regulating their resources.
MR. SHAVELSON expressed hope that in order to truly get an
understanding of the effects of this legislation, committee
members will ask the administration to come forward with a dozen
or so examples of enforceable policies, based on specific facts
and related to coastal districts, that would "sustain through
the very convoluted and legalistic criteria that's laid out in
Section 14."
Number 0438
BRECK TOSTEVIN, Assistant Attorney General, Environmental
Section, Civil Division (Anchorage), Department of Law,
responded to Mr. Shavelson with regard to the necessity for an
EIS. He stated:
It's our understanding on this legislation that that
would not be required, that ... these changes would be
done incrementally as routine plan changes. They
would be reviewed by ... the federal NOAA [National
Oceanic and Atmospheric Administration] agency, OCRM
[Office of Ocean and Coastal Resource Management], and
that it would not require that kind of delay.
MS. RUTHERFORD added:
I would note that in the third year after the
Department of Natural Resources does the promulgation
of new statewide standards and the following year,
during which the local plans are updated, ... there is
a third year identified for working the OCRM process
as well. And we will be proceeding incrementally on
those sort of mundane changes that are already laid
out and effective immediately, with OCRM, during that
time as well.
Number 0534
REPRESENTATIVE KERTTULA asked whether OCRM has stated that it
will be a routine plan change and that there won't be anything
more onerous required for the state.
MR. TOSTEVIN replied:
We've had discussions with OCRM. They ... can't, at
this point, ... guarantee that ... it's a routine plan
change or a minor amendment. But they're not
indicating that this is the kind of, quote, new
program - a wholesale revision - that would be
triggered under the prior version. So ... I think
that the [word] that we're getting from them is that
this is going to be much more of [an] amendment of the
current program or routine plan change, as opposed to
a wholesale reapproval of a new plan.
REPRESENTATIVE KERTTULA asked, however, whether OCRM in fact
won't be able to give that kind of guarantee until it sees what
the legislature does with this. She said she'd barely made it
through [the new proposed CS], and surmised that it had only
reached Washington, D.C., the previous night.
MS. RUTHERFORD responded:
That is correct. ... We really don't know. And,
frankly, what my expectation is, is that ... since
we're not changing the structure of the program - that
fundamentally the districts will continue and ... the
basic shape of the program will continue - that ...
that will be routine program changes. ... But I do
think that as the department and the districts begin
to rewrite the standards, ... there will be a more
substantive review by OCRM. ... And whether that ends
up being routine or not will be determined by the
federal OCRM. But we have built in time to address
that as well, as part of the process.
Number 0703
REPRESENTATIVE PAUL SEATON, Alaska State Legislature, referred
to Section 14 and said he is hard-pressed to figure out whether
any local enforceable policies can be written. He also
expressed concern that local ordinances that are adopted won't
be able to be enforced. He said it seems there will be [major]
structural impacts upon the coastal zone.
MR. TOSTEVIN suggested looking at the big picture as far as the
ordinances and said:
This legislation does not affect the powers of
municipalities to enact zoning ... within their own
boundaries. They have that right now, the zoning
authority. There's actually a savings clause in the
CS that says this doesn't affect ... the zoning power
of Title 29, municipalities or boroughs. ...
With respect to the coastal program, what the coastal
program does is allow municipalities or boroughs ...
and [Coastal Resource Service Areas (CRSAs)], coastal
districts, to enact ... enforceable policies to apply
to the state where they wouldn't ordinarily apply, ...
and also to the federal government where they wouldn't
ordinarily apply. So the legislation ... is requiring
that to impose those additional enforceable policies
that meet ... those tests in ... Section 14.
Number 0860
REPRESENTATIVE SEATON asked whether it's the case, however, that
the requirements in Section 14 preclude almost any local
enforceable policies. He requested that the administration come
forward before the next hearing with perhaps six local
enforceable policies from any coastal district that would meet
the criteria in the bill.
MS. RUTHERFORD replied:
We'll be glad to do that. And I know that there have
been other districts that have suggested that ... one
of the most helpful exercises ... might be for
Department of Natural Resources to identify problem
enforceable policies within ... the various district
plans. And I think that that might be a useful ...
exercise, and I think that the department's looking
seriously at that. We'll be glad to develop some
examples.
I might note, though, ... it's a matter of
perspective. ... I still get a lot of comments from a
lot of the development community that they are
concerned about how broad this is. ... The language
here, in their opinion, is too broad. And literally
they've said that it's large enough to drive a truck
through, whereas the districts are saying it's smaller
than a breadbox and nothing can be approved through
it.
The reality is that I think ... it is in balance. I
think that it does limit a duplication of existing
standards ... and it does require ... that the
drafting of the new enforceable policies be done with
an eye towards more prescriptive and more precise --
and be more substantiated. But I think it certainly
does allow for them, and we'll try to show that to
you.
Number 1002
JACK CUSHING, Mayor, City of Homer, informed members that he has
been on the Alaska Coastal Policy Council representing lower
Cook Inlet since about 1996. A civil engineer, he said he'd
worked on the Alyeska pipeline and the Northwest Alaskan
pipeline during the planning phases. He told members:
I'm afraid what's happening here is you're opening up
a bigger can of worms than what you might be solving.
I think that the program ... was up and going and
smooth after years of work on it, and I think by the
time you get thing rewritten, you're going to find
that you've ... opened up a whole lot of new doors and
it's going to be ready almost for immediate
modification just about the time it takes to get this
to where we are right now.
I think we're going to possibly be jeopardizing
funding during this interim time, just in the manner
we're talking about. If nothing else, the elimination
of the Alaska Coastal Policy Council: that was
perceived by the people of the state as an
intermediary board to go to, during the petition
process, that had elected citizens on it as well as
the administrative folks. And I think a lot of people
held off going into court just because they felt,
well, ... if they had a chance to go by these nine
elected officials and they heard what the comments
were, they got their input, that ... they could live
with the determination that was made.
When I looked at the number of projects that actually
got stopped, that got turned down, ... it's
pathetically few. And the few that did get input at
the coastal policy council level, I think, came out
better for it.
Number 1155
LISA VON BARGEN, Community & Economic Development, City of
Valdez, thanked [Ms. Rutherford] and others at DNR for
considering comments in reworking the proposed CS. However, she
expressed concern with Section 39, page 19, subsection (2)(C),
"home rule and first class cities of the unorganized borough or
within boroughs that do not exercise planning and zoning
authority". She suggested it is vague as to whether that means
"home rule and first class cities that do not or do exercise
planning and zoning authority". Thus she asked that after the
words "unorganized borough" there be a comma added and that it
then read: "or within home rule and first class cities within
boroughs that do not exercise planning and zoning authority".
She thanked participants for their hard work.
[Chair Fate called upon Lawrence Widmark and June Kegnan, who'd
signed up to testify at the Sitka LIO, but there was no
response.]
Number 1287
NANCY HILLSTRAND, Pioneer Alaskan Fisheries, spoke in opposition
to HB 191. She told members:
I think that it's time that we stopped being afraid of
regulations that give us some structure in planning.
We're in business. We've been a corporation for 40
years here in Alaska. And the structure and delays
and all the different stopgaps that allow us to run as
a business have saved us from making extremely costly
mistakes.
And HB 191 takes the crucial oversight of local
communities out of the democratic process. And I just
wonder why this administration is afraid of a healthy
tension of democracy. It just seems as though that's
what we're looking at here. ...
Our corporation relies on policy that sustains
fisheries. Habitat sustains fish. And the community
and most other coastal communities rely on the
oversight needed from this policy to create a level of
planning to minimize "oops." "Oops" is when we make
costly mistakes because of lack of ... conscientious,
meaningful debate. "Oops" causes extremely expensive
restoration.
And I wonder: are we willing to be responsible to pay
this price in the future? Thank heavens for delays,
because it's really important for us to have good
debate and good, conscientious oversight, because that
way, we won't have to pay in the future. And so, I
thank you very kindly, and I'm against [HB] 191.
Number 1380
MARV SMITH, Coastal Zone Coordinator, Lake & Peninsula Borough,
thanked Ms. Rutherford and the DNR staff for listening to and
incorporating earlier testimony. However, he voiced concerns
with Section 14, specifically, the ability for local districts
to have some control over how they implement changes in their
plans. He said it seems DNR still has too much control over how
that can happen effectively. Referring to sub-subparagraph
(2)(C)(i), he therefore suggested "demonstrated" should be
changed back to "identified".
MR. SMITH turned attention to Section 22 and the 90 days to get
a coastal consistency review completed. He asked:
If we ... do not have all the information we need to
effectively do a consistency review, is that 90 days'
clock still [ticking]? Will ... the clock stop?
Because if that's the case, then we'll be forced to
[be] inconsistent with the consistency review. We
just need to know: the 90-day rule, is it from start
to finish or whatever? It's vague in how it's worded;
I think it should be clarified a little better in that
category because it could make ... far more ability of
us to do a better job. If we've got a good product to
begin with and we can do a good consistency review, we
like to do those. And we want to do them on time, and
we agree with the administration's policies on getting
them done timely in all manner, and we try, every
effort we can, to do that.
Also, another concern ... is that if we do have to do
all these plans and go through the public hearings,
... the recent budget cuts [are] going to drastically
affect our ability to do them in a timely manner.
Just going to places like Chignik, ... from King
Salmon it's a $500 plane ticket for one person;
additionally, if you go to the northern parts of our
borough where you [have] to charter an airplane, it's
almost a thousand dollars. ... You can fly to ... the
Lower 48 cheaper than you can fly ... to some portions
of our borough to make these meetings. So it's going
to be very costly [for] us to do that.
Number 1547
MR. SMITH referred to discussion in a previous hearing. He
asked that instead of [districts] having to rewrite their plans
completely, time should be taken to help them identify what is
needed to make the plans meet the needs of the administration.
He suggested this would be much more effective.
Number 1576
JOHN OSCAR, Program Director, Ceñaliulriit Coastal Resource
Service Area Board, who'd testified at the previous hearing,
referred to Section 29 and questioned the relationship of the
state constitution to these bills.
Where the federal government requires equal treatment
in the coastal zone communities, only the
municipalities in these bills can be represented in
the makeup of [the proposed] Alaska Coastal Program
Evaluation Council. If the traditional, primary
governments are to be included in these bills, does
this also provide the state's recognition in the
existence of these traditional governments?
Two, would these traditional governments be also
considered as affected parties? And, third, ...
there's no fiscal note attached with these bills. It
will also cost the state hundreds of thousands of
dollars to provide for the rewrite of all 33 coastal
districts' [plans] in Alaska. We are already [short]
of funds. But how is the state going to adequately
provide for these public hearings?
Number 1674
DANIEL BEVINGTON, Coastal District Coordinator, Kenai Peninsula
Borough, told members:
The borough has a long history of support for its
coastal program; it goes back more than two decades.
We've found that the coordinated review of permitting
under the ACMP has helped us manage our resources and
expedite development, which benefits the applicant,
our communities, ... and the environment. A good
example of this is the Kenai gas pipeline that's well
underway.
The legislation asserts that the local government
should exert its own coastal management control
through planning and zoning powers. At this time, it
is our view that this would add an unneeded complexity
and duplication, and ultimately slow down valuable
economic development opportunities throughout the
borough. We also concur with the comments made by ...
Lake & Peninsula Borough.
One crucial aspect of the bill proposal is the
elimination of local district review of oil-spill
prevention and contingency plans. Also, the bill
removes the district from reviews of federal outer
continental shelf [OCS] plans. On this first point,
the lower Cook Inlet has ... [a] significant amount of
activity requiring oil-spill ... plans. And presently
the district reviews all those plans and participates
when it's appropriate.
On the second point, a great area of federal waters
occurs within the boundaries of the Kenai Peninsula
Borough in lower Cook Inlet, and the activities in
that area could very well affect and significantly
impact the resources and ... ultimately the
[socioeconomic] well-being of our communities.
So the issue of promoting economic development while
balancing development interests with our long-term
community interests is a complex ... subject which
demands meaningful involvement of our communities
across the state of Alaska, including the local
districts. ...
Number 1786
MR. BEVINGTON continued:
At a minimum, the bill should assure that the local
district has a seat at the table for oil-spill
contingency plans and federal outer continental shelf
plans. ... Also, we're very concerned with the
elimination of the structure under the [Alaska]
Coastal Policy Council structure, and believe that ...
DNR should adopt some representative body which would
allow that type of involvement of our communities in
the planning for the Alaska Coastal Management Plan.
Number 1825
REPRESENTATIVE WOLF asked that Mr. Bevington call his office to
talk about this.
Number 1845
CHAIR FATE closed public testimony.
Number 1865
MS. RUTHERFORD referred to concern about the DNR process and
said:
First of all, I want to assure people that DNR has
probably the most expansive public process imbedded in
statute, in regulation, and the [resultant] case law
of any other agency. It exceeds the APA
[Administrative Procedure Act] that is in place for
most other agencies. And I might note that ... the
commissioner of DNR regularly balances various
interests as part of all their areawide planning
exercises that they do. And that is something that is
inherent in DNR's function. ... It's imbedded in their
area-planning exercises, in their special-use
designation development; it's imbedded in forest-
timber sales, land sales, and oil and gas lease sales.
So this balancing of interests that involves the
public process will be part of what DNR does as they
proceed [under] the new legislation.
Another thing that I want to note is, this bill,
again, does not eliminate the districts' place at the
table. They will be at the table. They will have due
deference on their enforceable policies. And that's
something that the districts need to hear again,
because it's important to them and we recognize that.
Number 1938
MS. RUTHERFORD continued:
The other thing that I think is important:
Mr. Shavelson made a reference to the EIS process.
One of the things that I think will bring a lot of
comfort to the Office of [Ocean and] Coastal Resource
Management ... is the fact that under this revised CS
that replaced the original [HB] 191, statewide
standards and local enforceable policies will
continue. And those statewide standards are a
comprehensive body of standards. Under the old bill,
they were ... eliminated, and that would have been a
major concern to OCRM. ...
On the funding: the reason there's not fiscal notes
associated with this bill is there are special project
monies that are available to the coastal management
program, and they will simply be refocused to help
support the districts as they rewrite their plans or
review their plans and rewrite their local enforceable
policies. Again, hopefully, the department will be
helping them to identify those truly problematic
enforceable policies, instead of just having to sort
of pick up the rock and see whether it's the right
one.
Number 1998
MS. RUTHERFORD continued:
Regarding the 90-day clock, someone asked whether ...
there was some additional opportunity. ... It is a
comprehensive timeframe, except if there is an
elevation. ... It does provide for a 45-day elevation.
However, this has been an issue that has been focused
on by Alaska Municipal League, and we're trying to see
whether or not there is a way to provide them some
comfort.
I would note something, however, that under ... the
federal law there are already timeframes in place that
very closely mimic what was in this bill, now, in the
new sections, that for federal activities there is a
60-day clock: if, in fact, the state doesn't act
within that ... 60-day ... clock, then an activity is
presumed consistent. ... For federally regulated
activities, it's a six-month clock. And, frankly, 80
percent of all projects that are reviewed under the
coastal management consistency review program are
subject to one of these ... federal clocks. So I
think that's ... another important piece to it.
And, finally, ... I want to assure Dan Bevington and
the Kenai Peninsula Borough that ... the program as
it's currently laid out in this bill does allow for
OCS enforceable policies. It's one of the primary
concerns of this administration, and it is protected.
And we want to assure you that ... those [kinds] of
enforceable policies are allowed.
Number 2082
REPRESENTATIVE KERTTULA expressed concern that although the OCS
may be included, there is a definite change with regard to "how
we're dealing with DEC standards"; that the program is only
continued for a couple of years while everything else is put in
place; and about the language that says "we continue only if
it's not inconsistent with the Act." She highlighted the number
of issues remaining. [HB 191 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 3:15 p.m.
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