Legislature(2001 - 2002)

04/08/2002 04:48 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                    
                   SENATE RESOURCES COMMITTEE                                                                                 
                          April 8, 2002                                                                                         
                            4:48 p.m.                                                                                           
MEMBERS PRESENT                                                                                                               
Senator John Torgerson, Chair                                                                                                   
Senator Gary Wilken, Vice Chair                                                                                                 
Senator Rick Halford                                                                                                            
Senator Ben Stevens                                                                                                             
Senator Kim Elton                                                                                                               
MEMBERS ABSENT                                                                                                                
Senator Robin Taylor                                                                                                            
Senator Georgianna Lincoln                                                                                                      
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 131                                                                                                              
"An Act relating to standards for  forest resources and practices;                                                              
and providing for an effective date."                                                                                           
     MOVED HB 131 OUT OF COMMITTEE                                                                                              
CS FOR HOUSE BILL NO. 286(RES) am                                                                                               
"An Act  allowing a  person to hold  two commercial fishing  entry                                                              
permits for a salmon fishery for  the purpose of consolidating the                                                              
fishing fleet  for a  salmon fishery;  relating to salmon  fishery                                                              
associations and to salmon fishery  assessments; and providing for                                                              
an effective date."                                                                                                             
     HEARD AND HELD                                                                                                             
CS FOR HOUSE BILL NO. 288(FIN) am                                                                                               
"An Act relating  to commercial fishing limited  entry permit buy-                                                              
back programs, to  a permit buy-back assessment,  and to voluntary                                                              
relinquishment  of   commercial  fishing  permits;   and  defining                                                              
'optimum number.'"                                                                                                              
     MOVED CSHB 288(FIN)am OUT OF COMMITTEE                                                                                     
WITNESS REGISTER                                                                                                              
Mr. Bob Zachel                                                                                                                  
No Address Provided                                                                                                             
Fairbanks AK                                                                                                                    
POSITION STATEMENT: Supported HB 131.                                                                                         
Representative Scalzi                                                                                                           
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Sponsor of HB 286 and HB 288.                                                                             
Ms. Mary McDowell, Commissioner                                                                                                 
Commercial Fisheries Entry Commission                                                                                           
8800 Glacier Hwy, Ste 109                                                                                                       
Juneau AK 99801-8079                                                                                                            
POSITION STATEMENT: Commented on HB 286 and HB 288.                                                                           
Mr. David Bedford                                                                                                               
Southeast Alaska Seiners Association                                                                                            
526 Main Street, Ste 200                                                                                                        
Juneau AK 99801                                                                                                                 
POSITION STATEMENT: Commented on HB 286.                                                                                      
Mr. Don Johnson                                                                                                                 
Soldotna AK                                                                                                                     
POSITION STATEMENT: Commented on HB 288.                                                                                      
ACTION NARRATIVE                                                                                                              
TAPE 02-16, SIDE A                                                                                                            
Number 001                                                                                                                      
CHAIRMAN  JOHN TORGERSON  called  the Senate  Resources  Committee                                                            
meeting to order  at 4:48 p.m. Senators Wilken,  Halford, Stevens,                                                              
Elton  and Chairman  Torgerson  were present.  Chairman  Torgerson                                                              
announced HB 131 to be up for consideration.                                                                                    
          HB 131-FOREST RESOURCES & PRACTICES STANDARDS                                                                     
MR. BOB ZACHEL, Fairbanks, stated support for HB 131 as written.                                                                
CHAIRMAN TORGERSON  asked Mr. Zachel  if he had  previously raised                                                              
questions about HB 131.                                                                                                         
MR. ZACHEL said he did, but he talked  to representatives from the                                                              
Alaska Department  of Fish  & Game (ADF&G)  and his concerns  were                                                              
SENATOR  WILKEN  moved   to  pass  HB  131  from   committee  with                                                              
individual recommendations  with the attached fiscal  notes. There                                                              
were no objections and it was so ordered.                                                                                       
    CSHB 286(RES) am-FISHING PERMITS/ASSOCIATIONS/ASSESSMENTS                                                               
CHAIRMAN  TORGERSON  announced  CSHB  286(RES)  am to  be  up  for                                                              
REPRESENTATIVE DREW  SCALZI, sponsor of HB 286,  said this measure                                                              
is a  consolidation bill that  allows fishermen to  take advantage                                                              
of an effort to help themselves and  the fishery at a time when an                                                              
exorbitant  number of  permits aren't  being fished.  It allows  a                                                              
person to hold  two permits in the  same area. It will  also allow                                                              
fishermen to establish non-profit  associations for the purpose of                                                              
consolidating the  salmon fleets and allow fishermen,  with a two-                                                              
thirds  vote  of the  permit  holders  in  their fishery,  to  tax                                                              
themselves to help pay for the consolidation.                                                                                   
He  noted that  some of  these ideas  came  from fishing  industry                                                              
members.  The initial  plan was to  draft a  "stacking bill"  that                                                              
allowed a  person to hold two  permits. Two permits  would provide                                                              
some type  of fishing advantage, such  as an extra day  of fishing                                                              
or use of extra gear. However, because  of a decision by the Board                                                              
of  Fisheries  in  the  Chignik  issue,  industry  members  became                                                              
concerned  about  moving  too  fast  or  too  far  in  one  swoop.                                                              
Therefore, the  bill was limited  to ownership of two  permits for                                                              
the  purpose  of  consolidation.  Currently,  the  optimum  number                                                              
involved in a fishery  is subject to a challenge  by the courts if                                                              
a certain  fishery is  considered  to be too  restrictive.  HB 286                                                              
doesn't pertain  to that  issue, because  these permits  are still                                                              
available for sale. The permits are  not retired, as they would be                                                              
in a buy  back program. He noted  this bill passed the  House with                                                              
36 yeas and four absent.                                                                                                        
CHAIRMAN TORGERSON  asked if a person  could fish only  one permit                                                              
at a time.                                                                                                                      
REPRESENTATIVE  SCALZI answered  that is  correct; a person  would                                                              
gain no fishing privileges by holding two permits.                                                                              
CHAIRMAN TORGERSON asked if CSHB  286(RES) am would just eliminate                                                              
the competition.                                                                                                                
REPRESENTATIVE SCALZI said it would.                                                                                            
CHAIRMAN TORGERSON  asked, under uses  of the money on page  8, if                                                              
part  of  it could  be  used  to consolidate  the  salmon  fishing                                                              
industry even if HB 288 doesn't pass.                                                                                           
REPRESENTATIVE SCALZI replied that is correct.                                                                                  
CHAIRMAN TORGERSON asked how that would work.                                                                                   
REPRESENTATIVE SCALZI replied:                                                                                                  
     First of  all, you have  formed an association  with 66%                                                                   
     of the  permit holders agreeing  to it. The  collection,                                                                   
     as I would anticipate - and  this is something - I don't                                                                   
     think  any of these  plans are  in concrete,  this is  a                                                                   
     tool for them to utilize - you  would be able to collect                                                                   
     up  to 5% and,  perhaps, if  you held  two permits,  the                                                                   
     association could  pay you for  not fishing that  or for                                                                   
     not selling that permit, but  holding it in some type of                                                                   
     category where  it's not being fished. As  an incentive,                                                                   
     you could  encourage other people to buy  another permit                                                                   
     through  the funds  that accumulate  over the course  of                                                                   
     time. It's a  flexible tool that would allow  for others                                                                   
     to  achieve money  to pay for  consolidation. There  are                                                                   
     some folks  here who  are very  interested in that  that                                                                   
     could speak to it better.                                                                                                  
CHAIRMAN   TORGERSON  said   he  thought   it  offered   financial                                                              
assistance to  permit holders  and assumed it  was some type  of a                                                              
loan program.  He questioned what  that is for, since  they aren't                                                              
allowing associations to buy permits.                                                                                           
REPRESENTATIVE  SCALZI  said the  permits  can  only be  owned  by                                                              
CHAIRMAN TORGERSON  asked if  it allows  the association  to spend                                                              
its money to lobby the Board of Fish for the legislature.                                                                       
REPRESENTATIVE  SCALZI said he  didn't think  that is the  intent,                                                              
but  a non-profit  association  has  certain guidelines  that  may                                                              
allow for that. He wasn't sure.                                                                                                 
CHAIRMAN TORGERSON  asked if marketing  fish could be  included in                                                              
the by-laws.                                                                                                                    
REPRESENTATIVE  SCALZI said  that marketing  could be included  at                                                              
the discretion of  the members and certainly marketing  is done by                                                              
a lot of associations and could be by these.                                                                                    
CHAIRMAN   TORGERSON  said   that  basically   they  are   letting                                                              
associations do whatever they have  a 66% vote for up to 5% of the                                                              
value of the fishery.                                                                                                           
REPRESENTATIVE SCALZI said that is correct.                                                                                     
CHAIRMAN TORGERSON asked  if there would be any  limitation on the                                                              
size of the fishery that could undertake this.                                                                                  
REPRESENTATIVE SCALZI replied there is not.                                                                                     
4:00 p.m.                                                                                                                       
SENATOR ELTON gave  an example of how a salmon  fishery is defined                                                              
using the  Southeast power  troll fishery  and the Southeast  hand                                                              
troll fishery.                                                                                                                  
REPRESENTATIVE SCALZI replied that  the bill applies to all of the                                                              
exclusive  fisheries  with limited  entry.  If  the limit  of  the                                                              
permits  were power  trolling,  that  would be  the  limit of  the                                                              
association, and likewise for hand trolling.                                                                                    
SENATOR ELTON  asked if  it could apply  to trolling,  which would                                                              
include power and hand trolling.                                                                                                
REPRESENTATIVE SALZI replied:                                                                                                   
     If  you were  going  to  have both  associations,  which                                                                   
     would  be both  power  troll and  hand  troll, agree  to                                                                   
     something like  that, I would  think there would  be the                                                                   
     latitude to allow that to happen,  but you would have to                                                                   
     have consensus on both limited entry fisheries.                                                                            
SENATOR ELTON  said he understood,  then, that a person  could end                                                              
up owning  two power  troll permits  and two  hand troll  permits,                                                              
amounting to four Southeast troll permits.                                                                                      
REPRESENTATIVE SCALZI said that is  correct; now they can have two                                                              
permits - one power troll and one hand troll.                                                                                   
CHAIRMAN TORGERSON added  that they could still only  fish the two                                                              
they originally had.                                                                                                            
SENATOR  ELTON said  in effect  they  would only  be fishing  one,                                                              
because  the   seasons  for  hand   troll  and  power   troll  run                                                              
SENATOR HALFORD said  it takes a two-thirds majority  of the total                                                              
permit holders to create the assessment  and a two-thirds majority                                                              
of the total permit holders to get rid of the assessment.                                                                       
REPRESENTATIVE  SCALZI replied  it  takes 25%  to  get a  petition                                                              
going and it could be dissolved with a two-thirds vote.                                                                         
SENATOR HALFORD said:                                                                                                           
         It seems if you got a major campaign to create                                                                         
       something, sometimes that succeeds and then you can                                                                      
     never get  rid of it, because  you can't ever  quite get                                                                   
     the  people together  to know  what  to do  about it.  I                                                                   
     would be  a lot more comfortable  if they could  get rid                                                                   
     of it  - if either it  had a sunset that  was automatic.                                                                   
     The  object  of  this  thing  is  to  maintain  a  super                                                                   
     majority level  of consensus  that it's working  and you                                                                   
     can do  that by  having a lower  percentage for  getting                                                                   
     rid of  it or by having  some requirement that  on four-                                                                   
     year  basis or  whatever, they  have  to reaffirm  their                                                                   
     support for doing it.                                                                                                      
REPRESENTATIVE SCALZI  said he assumed if the  association came up                                                              
with guidelines  for the two-thirds majority, they  could probably                                                              
rewrite  that and  put  their own  sunset in  as  a provision  for                                                              
acceptance of the  association. He thought the  more latitude they                                                              
had in forming  the association, the better. He  didn't think that                                                              
with 26 different regional fisheries  they would all fit under the                                                              
same set of guidelines.                                                                                                         
SENATOR  HALFORD  asked if  he  considered  putting the  Board  of                                                              
Fisheries in  the cycle somewhere  in the creations,  because non-                                                              
permit holders would feel that the  general public was represented                                                              
in these decisions  rather than just the stakeholders  through the                                                              
limited entry system.                                                                                                           
REPRESENTATIVE  SCALZI  said  he   originally  had  the  Board  of                                                              
Fisheries determine,  through the  public process, if  individuals                                                              
with two  permits could  fish more gear  or get more  time fishing                                                              
but, the United  Fishermen of Alaska (UFA) felt that  the Board of                                                              
Fisheries, after the Chignik proposal  went through, showed a lack                                                              
of consideration of the downstream  effect and lacked knowledge of                                                              
the commercial fisheries.  He thought that the  permit holders who                                                              
have the vested  interests in the fisheries would  not necessarily                                                              
support  having   the  public  involved  in  the   general  voting                                                              
SENATOR  HALFORD said  he  wasn't suggesting  that  the public  be                                                              
involved in the  voting mechanism, but that the  general interests                                                              
of the  common property  resource be represented  in some  way and                                                              
the Board of Fisheries would be a logical place to do that.                                                                     
REPRESENTATIVE SCALZI  said ADF&G  still manages the  resource and                                                              
the Board of Fisheries still allocates. He added:                                                                               
     So, whether  a person holds  one permit or  two permits,                                                                   
     whether  there's consolidation  on that  end of it,  the                                                                   
     allocation remains  the same. So,  I don't know  why the                                                                   
     Fish Board would have to get  into it at this particular                                                                   
     stage unless they had a problem  with or concerns of the                                                                   
     industry itself being too limited.                                                                                         
SENATOR HALFORD  said one  of his  concerns is  that in  one major                                                              
fishery,  probably the  largest in the  state, non-residents  hold                                                              
the majority of the permits and only  one-third of the permits are                                                              
held within the region of that fishery. He remarked:                                                                            
     If there  were a significant  difference in  the support                                                                   
     levels for a  given proposal based on that  residency, I                                                                   
     think  it substantially  hurts  the credibility  of  the                                                                   
     entire   process.   Frankly,    if   there   were   some                                                                   
     constitutional  way  to  do  it, I  wouldn't  allow  the                                                                   
     outside permit  holders to vote at all and  obviously, I                                                                   
     don't  know  that  that  can   be  done.  At  least  I'm                                                                   
     concerned that  there be some kind of check  and balance                                                                   
     there  that in that  case particularly  the resource  is                                                                   
     managed first for the people closest.                                                                                      
REPRESENTATIVE  SCALZI  said  he  didn't  disagree  and  had  many                                                              
discussions about  how they could  create more incentives  for the                                                              
local  residents to  obtain the  permits. HB  286, in  particular,                                                              
tries to  legally encourage Alaskan  residents to own  the permits                                                              
but, because of  the interstate commerce clause, there  are only a                                                              
certain number of things they can do.                                                                                           
SENATOR  STEVENS  asked  if  the  assessment  is  imposed  by  the                                                              
original election, whether  the pool of money is  then used by the                                                              
members to  buy back  more permits  through a  loan process  or to                                                              
contract with permit holders to keep  permits in their possession.                                                              
He  commented if  you  initially need  two-thirds,  and that  pool                                                              
continues  to shrink  to  250, and  then  it takes  two-thirds  to                                                              
either assess it  or get rid of it, it would be  harder to get the                                                              
two-thirds to get rid of the tax.                                                                                               
REPRESENTATIVE SCALZI  said he assumed each individual  would have                                                              
two votes if they held two permits.                                                                                             
SENATOR STEVENS  asked if  it would be  the permit holder  of each                                                              
permit or the permit holder of record.                                                                                          
REPRESENTATIVE  SCALZI replied it  would be  the permit  holder on                                                              
record.  He asserted,  "If you  own  two permits,  you've got  two                                                              
CHAIRMAN TORGERSON noted that someone  in the audience was shaking                                                              
her head no.                                                                                                                    
SENATOR STEVENS said  either way, it would still  be harder to get                                                              
rid of the assessment.                                                                                                          
REPRESENTATIVE SCALZI said that could be true.                                                                                  
MS.  MARY  MCDOWELL,  Commissioner,   Commercial  Fisheries  Entry                                                              
Commission (CFEC), explained  that if a person held  more than one                                                              
permit, he or she would still only get one vote. She stated:                                                                    
     My  only comment  about  as  the pot  shrinks  - if  the                                                                   
     assessment  were  used  to   permanently  buy  out  some                                                                   
     permits, so there  would be fewer, or if it  was used to                                                                   
     contract  with  people  who  hold  two to  not  fish  or                                                                   
     whatever,  over   time,  if  this  is   successful,  the                                                                   
     fishermen  who  remain  in the  fishery  would  be  less                                                                   
     inclined to want to continue  to have an assessment. You                                                                   
     will have achieved  what you were trying to  do and they                                                                   
     would just  as soon keep  that money because  it's going                                                                   
     to come right off the top of their earnings.                                                                               
SENATOR   STEVENS   asked   her   to  explain   how   the   actual                                                              
extinguishment takes place under this bill if it's voluntary.                                                                   
MS.  MCDOWELL   replied  that  her   understanding  is   that  the                                                              
associations would have a lot of  flexibility about how they would                                                              
use  the  money  collected  through  the  assessment.  They  could                                                              
contract with  fishermen to relinquish their  permits permanently,                                                              
they  could contract  with them  to  not use  their permits,  they                                                              
could contract  to create  some kind of  incentive to buy  two and                                                              
stack  them  up.  They  have  a   lot  of  flexibility  to  either                                                              
permanently or temporarily  retire permits. She guessed  that in a                                                              
fishery  that was way  overcapitalized they  would probably  spend                                                              
some of the initial  money to permanently retire  some permits and                                                              
get the  whole pool  down somewhat. Then  after that,  she thought                                                              
they would  take temporary  measures  in hope  that over time  the                                                              
fishery would  rebound and they could  get the permits out  in the                                                              
fishery again.                                                                                                                  
CHAIRMAN TORGERSON asked how they would permanently retire one.                                                                 
MS.  MCDOWELL replied  that  under  the Limited  Entry  Act, if  a                                                              
fisherman doesn't  pay annual  renewal fees to  the state  for two                                                              
consecutive  years, the  permit is  forfeited. HB  288 contains  a                                                              
provision  that says  fishermen may  voluntarily relinquish  their                                                              
permits rather than wait out the two-year non-renewal period.                                                                   
SENATOR  STEVENS said  he knew  a fisherman  who cited  a case  in                                                              
which an  individual paid  the back  fees 10  years later  and re-                                                              
activated the permit.                                                                                                           
MS. MCDOWELL replied  if a permit was forfeited for  lack of fees,                                                              
CFEC has  the discretion to re-activate  the permit. In  this type                                                              
of  a situation,  the individual  would actually  contract to  not                                                              
reactivate  it. She  repeated that  if  HB 288  passes, there's  a                                                              
provision  that specifically  states a  fisherman may  voluntarily                                                              
relinquish his permit.                                                                                                          
SENATOR  STEVENS said  they are  making an  assumption that  there                                                              
would be some sort of release they would sign from CFEC.                                                                        
MS. MCDOWELL indicated that was right.                                                                                          
CHAIRMAN TORGERSON  asked for  clarification of the  association's                                                              
MR. DAVID BEDFORD, Southeast Alaska  Seiners Association, replied:                                                              
     The  idea  we have  within  an  association is  that  it                                                                   
     creates  a group  that represents  the fishermen  within                                                                   
     the  fishery  and  it  would  lay  out  its  article  of                                                                   
     incorporation  and bylaws and  it would tell  the people                                                                   
     in the fishery this is our plan,  this is what we intend                                                                   
     to do. So,  if you've got a fishery with  100 permits in                                                                   
     it, we're  going to buy  and contract to extinguish  25;                                                                   
     we're  going to  pay people  to  hold onto  10 of  them;                                                                   
     we're  going to reduce  the effort  level down to  about                                                                   
     two-thirds of  what it currently  is. This is  our plan,                                                                   
     this  is the assessment  that  we want you  to pay.  The                                                                   
     money  would   then  come  into  the   association;  the                                                                   
     association would,  as an actor in the free  market, say                                                                   
     all ye, all  ye come in free. What kind of  a deal would                                                                   
     you make to extinguish your  permit or what kind of deal                                                                   
     would you  make to  hold on to  your permit? They  would                                                                   
     use the money of the fishermen's  assessment in the most                                                                   
     efficient kind  of way to  accomplish the purposes  they                                                                   
     promised  those  folks  that  they're going  to  try  to                                                                   
CHAIRMAN  TORGERSON asked  if this  will be  like farming  without                                                              
planting crops.                                                                                                                 
MR. BEDFORD replied:                                                                                                            
     Not at all  - the idea here is that what  we want to do,                                                                   
     Mr. Chairman, is reduce the  number of fishermen who are                                                                   
     out there so that they can work  hard like they are now,                                                                   
     but  gain some  kind  of reasonable  rate  of return  on                                                                   
     their time and capital investment.                                                                                         
CHAIRMAN TORGERSON said, "But we  would be paying fishermen not to                                                              
SENATOR  STEVENS  commented,  "They would  be  paying  themselves,                                                              
MR. BEDFORD  said you  could have  specific instances  in which  a                                                              
fisherman receives some kind of money  for holding on to a permit.                                                              
If he were  running the association,  he would seek  out fishermen                                                              
who held  a second permit  who remained active  fishermen, because                                                              
the bargain  he would be  making gives  the people two  benefits -                                                              
the benefit of  whatever the association gives to  them to hold on                                                              
to a permit  and the additional benefit  that when they  go out to                                                              
the grounds, there's one less person  out there fishing because of                                                              
the  permit  they  left  in  their  filing  cabinet  at  home.  He                                                              
     I think  the bargain I made  with that guy cost  me less                                                                   
     than  it would  cost  me if  someone  in  New York  city                                                                   
     bought a permit and was speculating  and thinking he was                                                                   
     going to cut  a deal with me on this and  make some kind                                                                   
     of money. If  I was running an association,  that's what                                                                   
     I would be looking for and I  think the market will lead                                                                   
     us to just that result.                                                                                                    
CHAIRMAN TORGERSON asked  if the owner of the  second permit could                                                              
sell it at any time.                                                                                                            
MR. BEDFORD replied:                                                                                                            
     Under the  law he can certainly  do that. So if  we were                                                                   
     making  an arrangement  with somebody  who is holding  a                                                                   
     second  permit, then  perhaps  it would  read  something                                                                   
     like, 'If you  have held that permit, you  have not sold                                                                   
     it, you have  not fished it, then on December  31 of the                                                                   
     year, we  would give you  whatever consideration  it was                                                                   
     you  agreed to.'  If, however,  we  made an  arrangement                                                                   
     with you and for some reason  you decided you were going                                                                   
     to  sell it  or  fish it,  then  there wouldn't  be  any                                                                   
     consideration forthcoming.                                                                                                 
CHAIRMAN  TORGERSON said  this might  work during  a poor  fishing                                                              
season, but when  the fish start coming back,  the fishermen would                                                              
come back.                                                                                                                      
MR. BEDFORD replied that is a very serious concern:                                                                             
     We  have some  fisheries in  which  we have  50% of  the                                                                   
     permits  inactive at  this point.  Clearly,  one of  the                                                                   
     problems that we  have here is we don't want  to wind up                                                                   
     creating  a situation where  fishermen have invested  to                                                                   
     try  to make circumstances  better,  then any time  that                                                                   
     they improve,  have permits come flooding back  in. That                                                                   
     is why  I suggested, again, if  it was me who  was going                                                                   
     to set one  up, what I'd do is say, 'Well,  there's some                                                                   
     level  of permits  that we  wish  to permanently  remove                                                                   
     from the fishery. So, the example  that I gave is you've                                                                   
     got  100 -  let's extinguish  25  of them  so that  they                                                                   
     can't possibly  come back. Let's hold out  another 10 or                                                                   
     15, so that  if things get dramatically  better…We could                                                                   
     say maybe things have gotten  a little too exclusive and                                                                   
     let some  of those  go back out,'  but not to  the point                                                                   
     where  it would  depress  things back  to  the point  of                                                                   
     where we're at now.                                                                                                        
CHAIRMAN TORGERSON asked if it would  take a two-thirds vote to do                                                              
that, but then  surmised that it wouldn't, because  the individual                                                              
permit holder  would be  able to  sell the permit  at any  time he                                                              
MR. BEDFORD added:                                                                                                              
     By the same token, the association  could, at some point                                                                   
     say,  well, we're  not  willing to  pay  the price  that                                                                   
     you're asking and so, we're not going to pay you.                                                                          
CHAIRMAN TORGERSON said they couldn't lease these permits.                                                                      
MR. BEDFORD indicated that is correct.                                                                                          
SENATOR  ELTON  said  he  assumed that  before  an  election,  the                                                              
association would  indicate how many permits should  be fishing in                                                              
the  fishery and  the amount  of the  assessment. The  association                                                              
would  then  hold  an  election of  the  permit  holders  in  that                                                              
fishery. He  asked whether changing  the amount of  the assessment                                                              
would then only take a vote of a simple majority.                                                                               
MR. BEDFORD  replied,  "Yes. The  one thing that  requires  a two-                                                              
thirds concurrence of the fishermen  would be either instituting a                                                              
levy to  start with  or modifying  it or  extinguishing it  in the                                                              
future." Some fishermen he spoke  to about this were skeptical and                                                              
during  the  process of  developing  the  bylaws and  articles  of                                                              
incorporation they would decide what kind of vote it would take.                                                                
SENATOR ELTON said  in the fisheries with only 50%  of the permits                                                              
being fished, he  could see an association being  supported wildly                                                              
by those  who have a  permit but aren't  fishing it,  because they                                                              
see a potential economic benefit that they are not now getting.                                                                 
MR. BEDFORD  said he  is correct  and fishermen  in Kodiak,  where                                                              
that is  the case,  raised this issue  with UFA.  That is  why the                                                              
threshold is two-thirds, which will require a lot of leg work.                                                                  
SENATOR  ELTON emphasized  the threshold  is two-thirds of  permit                                                              
MR. BEDFORD said that is correct.                                                                                               
CHAIRMAN  TORGERSON asked  if  a two-thirds  vote  is required  to                                                              
MR. BEDFORD said that wouldn't take  a vote, but the key is before                                                              
they can  levy any kind  of assessment to  carry out the  goals as                                                              
laid out in the  legislation, a two-thirds vote of  all the permit                                                              
holders  within  a  fishery  would be  required.  He  noted,  "The                                                              
association  doesn't  have  much   practical  affect  absent  that                                                              
ability to collect some money to satisfy the purpose."                                                                          
CHAIRMAN  TORGERSON said  he assumed that  board membership  could                                                              
change each  year and one could  be conservative and one  could be                                                              
liberal and they  couldn't raise the assessment,  but could change                                                              
the spending pattern.                                                                                                           
SENATOR STEVENS asked if Section  1 goes into place and allows for                                                              
the  consolidation of  permits in,  for  instance, the  100-permit                                                              
fishery and  there are 50  permits on  record, but they  can't get                                                              
the 50  to generate any  money, all they would  need to do  is get                                                              
two-thirds of that 50. He surmised:                                                                                             
     So,  the original  100 that  were  participating in  the                                                                   
     fishery goes  down to 43  that are going to  participate                                                                   
     in the assessment. So, 33 can  then determine if they're                                                                   
     going  to  buy permits  from  each other,  because  they                                                                   
     would  be the  only ones  left? That  could happen.  The                                                                   
     point   I'm  more   concerned  about   being  either   a                                                                   
     reauthorization of the tax or  the ability to get rid of                                                                   
     it once you've gotten what you wanted to achieve.                                                                          
MR. BEDFORD responded  that theoretically it is  possible everyone                                                              
in the  fishery could  buy a  second permit,  thereby cutting  the                                                              
number in half,  and then everyone could hold on  to them prior to                                                              
making an assessment.  However, he didn't think  that would happen                                                              
because there wouldn't  be that many people rushing  out to grab a                                                              
second permit  until they saw that  it was actually going  to lead                                                              
to the sort of  result they had in mind. He said  when he looks at                                                              
the legislation, he views the practical  difficulties in getting a                                                              
two-thirds majority on anything as  being the real limitation and,                                                              
the larger the fishery is, the more  that limitation is magnified.                                                              
It would work the opposite way in a smaller fishery.                                                                            
SENATOR STEVENS  explained that he  was saying that at  some point                                                              
group  members could  decide  they  didn't need  it  any more.  He                                                              
wanted to know how they could get rid of it.                                                                                    
MR. BEDFORD  replied, "Get  a two-thirds majority  and get  rid of                                                              
it." He added that  if he was one of the remaining  33 members and                                                              
they were  electing a  board of directors,  he would  elect people                                                              
who would not make any leases.                                                                                                  
SENATOR STEVENS said  as you achieve what you want  to achieve, it                                                              
looks like it's hard to just say that and get rid of it.                                                                        
CHAIRMAN TORGERSON said  he agrees that they have  to come up with                                                              
some way of making it go away. He added:                                                                                        
     What David is relying on is  really the inability of the                                                                   
     fishermen to  get along very  well and the  thought that                                                                   
     66% can come  together on any issue, it's  just a hurdle                                                                   
     that's  beyond  belief  and  we  have  to  look  at  the                                                                   
     legislative part  of that and  not buy into  that…Do you                                                                   
     expect  this group,  these associations,  to be able  to                                                                   
     accept grants?                                                                                                             
MR. BEDFORD  replied that  he didn't  know if  state law  places a                                                              
limit on non-profit associations from accepting grants.                                                                         
CHAIRMAN TORGERSON said he thought  it was just a wash through the                                                              
SENATOR ELTON said another way to  dissolve the associations or to                                                              
change  the  rules  under  which  they operate  is  to  amend  the                                                              
statute. He noted, "That might be the safety valve."                                                                            
SENATOR STEVENS  asked if these  assessments would be  exempt from                                                              
federal taxation.                                                                                                               
MR. BEDFORD said  this would create trade associations  that could                                                              
not get  non-profit  status and would  not be  exempt from  paying                                                              
federal taxes.  He thought  they could be  set up with  C-5 status                                                              
under federal tax law.                                                                                                          
CHAIRMAN TORGERSON  said he didn't  think they would ever  get rid                                                              
of these  associations once they  got started just because  of the                                                              
assets of the non-profit.                                                                                                       
SENATOR HALFORD  asked, as a general  rule, how much of  the value                                                              
of  the   permit  would  be  lost   if  the  permit   became  non-                                                              
TAPE 02-16, SIDE B                                                                                                            
MS. MCDOWELL replied that a non-transferable  permit has no value.                                                              
It expires when the person dies or retires.                                                                                     
SENATOR HALFORD said he thought it would have some value.                                                                       
MS. MCDOWELL  responded that to the  person who has use  of it, it                                                              
doesn't have monetary value, because the permit can't be sold.                                                                  
SENATOR  HALFORD said  he  was concerned  that  the  value of  the                                                              
permit would be affected.                                                                                                       
CHAIRMAN TORGERSON asked  who sets the value for  the permits when                                                              
they are bought back.                                                                                                           
MS.  MCDOWELL replied  that the  state has  never had  a buy  back                                                              
program, but it would be whatever the market could bare.                                                                        
CHAIRMAN  TORGERSON said  he would  hold the bill  today and  deal                                                              
with some of  the questions. One question is if  someone else sets                                                              
the value and the federal government  is paying for it, that value                                                              
would be artificially  raised to some height as long  as the money                                                              
is not an individual's money.                                                                                                   
MR.  BEDFORD  said  that  Representative  Scalzi  introduced  this                                                              
legislation  at the  request of  UFA and  it is  UFA's number  one                                                              
priority. There are  a lot of places where people  would be asking                                                              
for federal  help on this.  He thought  the 51% opt  out provision                                                              
was a very important point and that  it would work fine along with                                                              
the two-thirds vote to start up an assessment.                                                                                  
CHAIRMAN TORGERSON  agreed and said he thought  the specific goals                                                              
could  be  outlined  more  clearly   in  the  bill  and  that  the                                                              
assessment could be tied to them better.                                                                                        
SENATOR ELTON said he was concerned  about what other duties could                                                              
be assigned to the association, such as marketing or lobbying.                                                                  
   CSHB 288(FIN) am-LIMITED ENTRY BUY-BACK PROGRAM/ASSESSMENT                                                               
CHAIRMAN TORGERSON announced HB 288 to be up for consideration.                                                                 
REPRESENTATIVE DREW  SCALZI, sponsor of HB 288,  told members that                                                              
he  looked at  tools  to revitalize  the  fishing industry.  Since                                                              
limited  entry was  instituted,  a lot  of  efficiencies had  been                                                              
developed but  some inefficiencies  were developed as  well. Those                                                              
inefficiencies need to be evaluated. He stated:                                                                                 
     Buying  back  permits  is  certainly   authorized  under                                                                   
     statute currently.  To authorize a buy back,  we have to                                                                   
     do  an  optimum  number study  to  determine  what  that                                                                   
     number  is. When CFEC  asks the  courts what the  number                                                                   
     is,  the courts say  go ahead  and have  a buy back  and                                                                   
     we'll tell you  when you hit it. They will  not tell you                                                                   
     ahead  of  time  what  that   optimum  number  is.  But,                                                                   
     currently  under  statute, if  you  do have  an  optimum                                                                   
     number study, it automatically  triggers a buy back. You                                                                   
     can't turn  back. CFEC, according  to statute has  to go                                                                   
     through with a buy back. In  a buy back proposal now you                                                                   
     have  to  buy  back  the permit,  the  boat,  the  gear,                                                                   
     skiffs, nets - everything involved  in the fishery. That                                                                   
     can be  cumbersome and  very expensive  and it could  be                                                                   
     certainly a  number that would  be hard to  hit, because                                                                   
     every fisherman  has different  values to their  gear to                                                                   
     their vessels. So, it wouldn't be a simple task.                                                                           
     What  HB 288 does  is it  first of  all lets an  optimum                                                                   
     number study come forward and  not automatically trigger                                                                   
     a buy  back. But,  what it  would allow  is the CFEC  to                                                                   
     develop a  plan and take that  to the public and  see if                                                                   
     it's worth implementing a buy back.                                                                                        
     It also does not require that  the gear and the boat and                                                                   
     the ex-wife  and everybody that  goes along with  it has                                                                   
     to be bought back. Only the  permits may be bought back.                                                                   
     It  also  makes  it  voluntary  rather  than  mandatory.                                                                   
     Currently,  if you have  an optimum  number study,  as I                                                                   
     said, and  you implement a buy  back, it is  a mandatory                                                                   
     buy back.                                                                                                                  
Being voluntary,  this  wouldn't keep someone  from selling  their                                                              
permit and boat as a package, if they wanted to do.                                                                             
CHAIRMAN TORGERSON asked who set the assessments.                                                                               
REPRESENTATIVE SCALZI replied that  the assessment is up to 7% and                                                              
that is developed in the plan.                                                                                                  
CHAIRMAN  TORGERSON noted  that  it says  CFEC  may establish  the                                                              
assessment by regulation and asked  if that's what CFEC intends to                                                              
REPRESENTATIVE  SCALZI said  he understood  that CFEC already  has                                                              
the authority  to set  it but,  under this  provision, CFEC  would                                                              
have to develop  a plan that went through public  review first. It                                                              
would have to be  related to the numbers in each  fishery and CFEC                                                              
would be the best agency to know that.                                                                                          
SENATOR  STEVENS asked  if optimum  studies had  been done  on any                                                              
salmon fisheries.                                                                                                               
MS.  MCDOWELL,  CFEC,  replied  that  CFEC  did  one  full-fledged                                                              
optimum salmon study  on the Sitka sac roe fishery  and on Chatham                                                              
Straits black cod. CFEC has just  undertaken another optimum study                                                              
on  the  Bristol  Bay  drift  gill  net  fishery.  Staff  is  just                                                              
completing  a survey  to send to  permit holders.  She added  that                                                              
there is  a buy back statute  in current law that  also functions,                                                              
theoretically, with  the assessment. The problem  with the current                                                              
statute is that the funding mechanism  is unconstitutional because                                                              
it creates a dedicated fund. She explained:                                                                                     
     So,  the   main  feature  of   this  bill  is   that  it                                                                   
     restructures  the path the money  would take to  make it                                                                   
     constitutional. Under  the current statute it  just says                                                                   
     the  commission will  decide  there needs  to  be a  buy                                                                   
     back. The  commission does an  assessment and  creates a                                                                   
     buy  back  program,  which  is  a  dedicated  fund.  The                                                                   
     Department of Law has given us an opinion on that…                                                                         
She  explained that  the  funding  path would  be  similar to  the                                                              
aquaculture assessment or the ASMI  1% tax where CFEC would create                                                              
a  buy back  program  and  a plan  for  it and  adopt  regulations                                                              
establishing  an  assessment.  The  Department  of  Revenue  would                                                              
collect the assessment through fish  tickets, just like the salmon                                                              
enhancement tax. That  money would go into the  state treasury and                                                              
the legislature  could appropriate  it back  to CFEC to  implement                                                              
this fisheries  program for which  it was collected. It  creates a                                                              
constitutional   funding  mechanism   for  what  they   originally                                                              
anticipate  by the  legislature.  She noted  regarding a  question                                                              
about  the  Entry  Commission not  having  taxing  authority,  the                                                              
Department of Revenue does so this bill fixes those problems.                                                                   
SENATOR WILKEN asked what an optimal study is.                                                                                  
MS. MCDOWELL replied that by statute,  when CFEC originally limits                                                              
a  fishery, it  creates a  maximum  number of  permits to  target.                                                              
After  that,  once the  permits  have  been  issued, CFEC  can  be                                                              
petitioned if there's a belief that  the fishery has either become                                                              
too  exclusive,  is   too  small  and  lucrative   or,  it's  over                                                              
capitalized.  CFEC  can  be petitioned  to  undertake  an  optimum                                                              
number study where  they do an economic analysis  to determine the                                                              
target  number  that  would  be   the  best  number  to  meet  the                                                              
constitutional  provisions of  limited entry:  not more  exclusive                                                              
than necessary  to provide  for conservation  of the resource  and                                                              
the economic health of the fishery.                                                                                             
SENATOR WILKEN asked  if that method is used worldwide  or whether                                                              
it is an Alaskan invention.                                                                                                     
MS.  MCDOWELL  said  she  didn't  know,  but  it  is  one  of  the                                                              
provisions  that  keeps  limited entry  constitutional  under  our                                                              
state constitution.  She added that  another important  feature of                                                              
this  bill  is that  it  defines  optimum  number  as a  range  of                                                              
numbers,  which makes the  process much  more meaningful.  Current                                                              
statute just says optimum number. She added:                                                                                    
     If we  have to choose one  number - this is  the perfect                                                                   
     number of permits  for this given fishery  over all time                                                                   
     - you  can see  how any variable  could change and  make                                                                   
     that a  pretty meaningless number  - the price  of fish,                                                                   
     the strength  of the run, the economics of  the fishery.                                                                   
     By giving us  the authority to define optimum  number as                                                                   
     a  range, we've  got  a target  range  so  any of  those                                                                   
     variables can  fluctuate a little  bit and you're  still                                                                   
     in  your target  range and  that's a  valuable piece  of                                                                   
     this legislation.                                                                                                          
CHAIRMAN  TORGERSON asked  Representative  Scalzi  if he  intended                                                              
this to piggy-back on top of the previous legislation, HB 286.                                                                  
REPRESENTATIVE SCALZI said no, they're  independent of each other.                                                              
CHAIRMAN TORGERSON  asked if  they could both  be in place  at the                                                              
same time.                                                                                                                      
REPRESENTATIVE SCALZI  they could and  he noted that  the industry                                                              
is taxed pretty heavily.                                                                                                        
4:55 p.m.                                                                                                                       
CHAIRMAN TORGERSON said it looked like they were starting to be.                                                                
REPRESENTATIVE SCALZI  said the industry  and members of  UFA came                                                              
up  with the  association  idea and  they were  going  to have  to                                                              
figure out whether they wanted to be taxed.                                                                                     
SENATOR  ELTON thought  this bill  is a little  different in  that                                                              
there is an assessment  to buy back permits, but  the value of the                                                              
permits that  are held would probably  go up at the same  time, so                                                              
he thought it would work out to be a wash.                                                                                      
CHAIRMAN TORGERSON  asked if under  this program the  permit would                                                              
come back to the person who retired it.                                                                                         
REPRESENTATIVE SCALZI indicated that was right.                                                                                 
MR. DON JOHNSON, Soldotna, said he  wanted to speak to the optimum                                                              
number definition.  He thought using a  range is a good  idea, but                                                              
he believes the  most important issue is that  under AS 16.43.290,                                                              
three points are used to qualify  the optimum number, that being a                                                              
single  number or a  range of  numbers. The  points are  basically                                                              
laid out  by the commercial fishing  industry. The first  point is                                                              
the economic health of the commercial  industry; the second is the                                                              
amount of harvestable fish to be  taken efficiently; and the third                                                              
is  to avoid  economic  hardship in  the  commercial industry.  He                                                              
agreed that the optimum numbers keep  limited entry constitutional                                                              
but since the  range was laid out by the commercial  industry, the                                                              
public, including  subsistence users and the sport  industry, need                                                              
to be involved too. He thought the  federal government would agree                                                              
with him.                                                                                                                       
MS. MCDOWELL responded that when  they look at the optimum number,                                                              
they look at the number of people  in a given fishery harvesting a                                                              
resource as it's  been allocated by the Board  of Fisheries, which                                                              
decides what goes  to sport and commercial, etc.  In looking at an                                                              
optimum  number, they  look at  what  has been  allocated to  that                                                              
fishery and  the number of participants  in that fishery  that can                                                              
make a reasonable living.                                                                                                       
CHAIRMAN  TORGERSON  asked where  in  the legislation  the  public                                                              
comments  were covered  and what  process they  would use if  they                                                              
were to implement the 7% assessment.                                                                                            
MS. MCDOWELL replied:                                                                                                           
     This bill directs us to, once  we get an optimum number,                                                                   
     at that point, assuming that  you pass HB 286 as well as                                                                   
     this bill,  most likely what  would happen is if  we did                                                                   
     an optimum number study that  showed there were too many                                                                   
     participants  than the  optimum number  in the  fishery,                                                                   
     probably  the first  thing  we  would do  is  go to  the                                                                   
     industry and see  if they plan to do something  under HB
     286. Are they  going to among themselves work  out a way                                                                   
     to get  the number of permits  down? If not,  that would                                                                   
     leave us  with this tool where  we could then  propose a                                                                   
     plan…and then propose an assessment.  The only mechanism                                                                   
     that we, as  an agency, have for doing things  like that                                                                   
     is by regulation. So, that presupposes  we would propose                                                                   
     regulations that would create  that and then we would go                                                                   
     through the entire public process.                                                                                         
CHAIRMAN TORGERSON asked if CFEC  does it through regulation only.                                                              
MS. MCDOWELL answered that is correct.                                                                                          
CHAIRMAN TORGERSON  asked if CFEC promulgates  regulations fishery                                                              
by fishery.                                                                                                                     
MS. MCDOWELL said it does.                                                                                                      
CHAIRMAN TORGERSON  asked if they  intend to wait until  they have                                                              
the  money collected  before buying  the permits  or whether  they                                                              
would enter into  lease/loan agreements that they  would pay based                                                              
upon receiving the 7% income.                                                                                                   
MS. MCDOWELL said that question is one of the shortfalls of the                                                                 
buy back program. She explained:                                                                                                
     The best way for a buy back  program to work would be if                                                                   
     you had upfront  money, whether it was funding  from the                                                                   
     state or the  federal government, where you  could do it                                                                   
     all  at once  and then  use  an assessment  to pay  that                                                                   
     back.  I think  that would  be the  ideal situation.  We                                                                   
     don't have  lending authority.  We would need  statutory                                                                   
     language  for  that. Otherwise  the  mechanism  proposed                                                                   
     here is an  assessment and as you accrue  the money, you                                                                   
     do a  buy back. But it  would be much more  effective to                                                                   
     have upfront money that we could use.                                                                                      
CHAIRMAN TORGERSON asked her to make sure that CFEC has the                                                                     
authority to receive federal funds to do this.                                                                                  
SENATOR WILKEN moved to pass CSHB 288(FIN) am from committee with                                                               
individual recommendations and attached fiscal notes. There were                                                                
no objections and it was so ordered.                                                                                            
CHAIRMAN TORGERSON said that concluded the hearing and adjourned                                                                
the meeting at 5:05 p.m.                                                                                                        

Document Name Date/Time Subjects