HOUSE RESOURCES STANDING COMMITTEE March 29, 1995 8:15 a.m. MEMBERS PRESENT Representative Joe Green, Co-Chairman Representative Bill Williams, Co-Chairman Representative Scott Ogan, Vice Chairman Representative Alan Austerman Representative Ramona Barnes Representative Pete Kott Representative Irene Nicholia MEMBERS ABSENT Representative John Davies Representative Eileen MacLean COMMITTEE CALENDAR HB 207: "An Act relating to adjustments to royalty reserved to the state to encourage otherwise uneconomic production of oil and gas; relating to the depositing of royalties and royalty sale proceeds in the Alaska permanent fund; and providing for an effective date." CSHB 207(RES) PASSED OUT OF COMMITTEE Presentation on Stellar Sea Lions HRES - 03/29/95 HB 191: "An Act relating to the management and disposal of state land and resources; relating to certain remote parcel and homestead entry land purchase contracts and patents; and providing for an effective date." SCHEDULED BUT NOT HEARD WITNESS REGISTER REPRESENTATIVE NORMAN ROKEBERG Alaska State Legislature State Capitol, Room 110 Juneau, AK 99801 Phone: 465-4968 POSITION STATEMENT: Commented on proposed amendments to HB 207 KEN BOYD, Acting Director Division of Oil and Gas Department of Natural Resources 3601 C Street, Ste. 1380 Anchorage, AK 99503 Phone: 762-2547 POSITION STATEMENT: Commented on proposed amendments to HB 207 and suggested additional amendments to HB 207 ANDREW TRITES, Research Coordinator North Pacific Universities Marine Mammal Research Consortium University of British Columbia 6248 Biological Sciences Road, Room 18 Vancouver, British Columbia Canada V62 1Z4 Phone: (604) 822-8181 POSITION STATEMENT: Gave presentation on Stellar Sea Lions JERRY MCCUNE, President United Fishermen of Alaska 211 Fourth Street, No. 112 Juneau, AK 99801 Phone: 586-2820 POSITION STATEMENT: Voiced concerns regarding number of animals needed to get off endangered list SUE MELLO, Representative National Marine Fisheries Service 709 W. 9th Juneau, AK 99801 Phone: 586-7221 POSITION STATEMENT: Commented on getting animals off endangered list PREVIOUS ACTION BILL: HB 207 SHORT TITLE: ADJUSTMENTS TO OIL AND GAS ROYALTIES SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR JRN-DATE JRN-PG ACTION 02/27/95 501 (H) READ THE FIRST TIME - REFERRAL(S) 02/27/95 501 (H) OIL & GAS, RESOURCES, FINANCE 02/27/95 501 (H) FISCAL NOTE (DNR) 02/27/95 501 (H) 2 ZERO FISCAL NOTES (DNR, REV) 02/27/95 501 (H) GOVERNOR'S TRANSMITTAL LETTER 03/08/95 665 (H) CORRECTED FISCAL NOTE (DNR) 03/09/95 (H) O&G AT 12:00 PM CAPITOL 17 03/09/95 (H) MINUTE(O&G) 03/14/95 (H) O&G AT 10:00 AM CAPITOL 124 03/14/95 (H) MINUTE(O&G) 03/15/95 (H) O&G AT 05:00 PM BELTZ ROOM 211 03/15/95 (H) MINUTE(O&G) 03/16/95 (H) O&G AT 10:00 AM CAPITOL 124 03/16/95 (H) MINUTE(O&G) 03/17/95 (H) O&G AT 05:00 PM CAPITOL 124 03/17/95 (H) MINUTE(O&G) 03/20/95 (H) O&G AT 05:00 PM CAPITOL 106 03/21/95 (H) O&G AT 10:00 AM CAPITOL 124 03/22/95 848 (H) O&G RPT CS(O&G) NT 4DP 1NR 2AM 03/22/95 849 (H) DP: OGAN, BRICE, ROKEBERG, B.DAVIS 03/22/95 849 (H) NR: G.DAVIS 03/22/95 849 (H) AM: WILLIAMS, FINKELSTEIN 03/22/95 849 (H) 0&G LETTER OF INTENT 03/22/95 849 (H) INDETERMINATE FISCAL NOTE (REV) 03/22/95 850 (H) FISCAL NOTE (DNR) 3/8/95 03/22/95 850 (H) ZERO FISCAL NOTE (REV) 2/27/95 03/22/95 (H) RES AT 08:00 AM CAPITOL 124 03/22/95 (H) MINUTE(RES) 03/22/95 (H) O&G AT 05:00 PM 03/23/95 (H) O&G AT 10:00 AM CAPITOL 124 03/24/95 (H) RES AT 08:00 AM CAPITOL 124 03/24/95 (H) MINUTE(RES) 03/27/95 (H) RES AT 08:00 AM CAPITOL 124  BILL: HB 191 SHORT TITLE: MANAGEMENT OF STATE LAND AND RESOURCES SPONSOR(S): REPRESENTATIVE(S) THERRIAULT JRN-DATE JRN-PG ACTION 02/22/95 448 (H) READ THE FIRST TIME - REFERRAL(S) 02/22/95 448 (H) RESOURCES, FINANCE 03/15/95 741 (H) SPONSOR SUBSTITUTE INTRODUCED- REFERRALS 03/15/95 741 (H) READ THE FIRST TIME - REFERRAL(S) 03/15/95 741 (H) RESOURCES, FINANCE 03/22/95 (H) RES AT 08:00 AM CAPITOL 124 03/22/95 (H) MINUTE(RES) 03/29/95 (H) RES AT 08:00 AM CAPITOL 124 ACTION NARRATIVE TAPE 95-42, SIDE A Number 000 The House Resources Committee was called to order by Co-Chairman Green at 8:15 a.m. Members present at the call to order were Representatives Green, Austerman, and Kott. Members absent were Representatives Williams, Ogan, Barnes, Davies, MacLean, and Nicholia. CO-CHAIRMAN JOE GREEN announced the committee would hear HB 207 and a presentation on Stellar Sea Lions. The committee will not hear HB 191. HRES - 03/29/95 HB 207 ADJUSTMENTS OF OIL AND GAS ROYALTIES CO-CHAIRMAN GREEN stated the committee would review comments and suggestions presented at the previous hearing. He discussed changes contained in the work draft committee substitute (CS), version U, as they relate to the work draft CS, version K. CO-CHAIRMAN GREEN said the work draft CS, version U, contains a rewritten Section 1 which is the legislative intent. He explained the word "consider" on line 6, page 1, is a change from the language in version G & K where the word "encourage" was used. He noted the commissioner had made this suggestion. He felt the word "consider" will accomplish the same purpose but not tie the hands of the commissioner on a frivolous request. CO-CHAIRMAN GREEN told committee members the next change is on page 2, line 10, of the work draft CS, version U. He said the words "for sale" are included. He stated when talking about a production from a field, it will be production that has not been offered for sale, rather than any production. He added on page 2, line 16, of the work draft CS, version U, the words "price" replace the words "sale value". He stated the price of oil is a more generic, understandable, and parallel type of description when talking about an income from the sale of oil. CO-CHAIRMAN GREEN stated on page 2, line 31, of the work draft CS, version U, the words "by making reference to a sliding scale royalty or equivalent provision that provides for adjustment of royalty" were added, which the commissioner can refer to and those things which he should consider. CO-CHAIRMAN GREEN noted for the record that Representatives OGAN and WILLIAMS had joined the committee. Number 134 CO-CHAIRMAN GREEN said on page 3, lines 8-15, of the work draft CS, version U, subsection (4) reintroduces a floor which restricts the reduction of otherwise attainable royalty to not more than 80 percent for a new, undeveloped or delineated field and not more than 90 percent of what would have otherwise been available as royalty under an economically strapped existing field at its economic limit. He noted there has been discussion about having no restriction and restriction on new fields only, and this change reintroduces restrictions on both fields. He pointed out some royalty interest remains to the state from all leases. CO-CHAIRMAN GREEN explained the next change is contained on page 4, line 31, in the work draft CS, version U. He said in prior versions of the bill, there was reference to once the commissioner's determination is final, it is not subject to litigation. He noted that language previously was a subsection by itself. Now the language is included as item (D) under subsection (8). He explained it is the same intent but is repositioned. Number 190 CO-CHAIRMAN GREEN said there has been a lot of struggling, both in the Oil and Gas Committee (OGC) and the House Resources Committee, as to the oversight of the commissioner. He noted there are varying views from one extreme of absolutely no review, to an almost rigid type of review by various departments of state government. Each suggestion has some negativism to them. He explained the commissioner would be given the opportunity to proceed, get a consultant if necessary, get a fair determination of the royalty reduction if it is in the best interest of the state, and then have a public awareness of what has happened, and provide 30 days after public notice for written comments by members of the public to the commissioner on their views of what has transpired. The commissioner then finalizes his determination, summarizes the public input, and sends both to the presiding officers of the Senate and House and Chairs of the Senate and House Resources Committee. CO-CHAIRMAN GREEN felt this change brings the public into the picture, which is worthwhile. He said if HB 207 passes, the state will be going from a conventional safety cushion of offering land for lease, knowing there is going to be a certain royalty and being assured, to looking at those accumulations of resources that are marginal at best and under existing conditions, which the state has had for 20 years, probably would not be developed, in which case the state would get nothing. He stressed HB 207 will allow the state to provide an incentive, comparable to what other countries provide, saying there is a valuable product in the state, it is marginal, but what can be done so both the state and the company can gain. He felt from that standpoint, it is worthwhile for the public to have access during the process to make their feelings known. He stressed whatever royalty reduction is determined, it is imperative that the people of the state are aware of that agreement. Number 267 REPRESENTATIVE PETE KOTT made a MOTION to ADOPT the work draft CS, version U, as CSHB 207(RES). CO-CHAIRMAN GREEN asked if there were any objections. Hearing none, the MOTION PASSED. REPRESENTATIVE SCOTT OGAN made a MOTION to AMEND CSHB 207(RES) on page 2, line 25, through page 3, line 7: Delete all material and insert: "(3) shall, if preexisting economic conditions warrant, in the findings, determinations, and agreement, [THE REVENUE FROM THE LESSEE'S SHARE OF ALL HYDROCARBONS PRODUCED FROM THE FIELD IS AND IS LIKELY TO CONTINUE TO BE INSUFFICIENT TO PRODUCE A REASONABLE RATE OF RETURN WITH RESPECT TO THE LESSEE'S TOTAL INVESTMENT IN THE FIELD. THE COMMISSIONER MAY] condition the [A] royalty reduction granted under this subsection in any way necessary to protect the state's best interests; under this subsection, the commissioner shall include provisions to increase or otherwise modify the state's royalty share by a sliding scale royalty or other mechanism; the commissioner may consider one or more relevant factors, such as a change [INTEREST, INCLUDING RESTORATION OF THE STATE'S ROYALTY SHARE IN THE EVENT OF AN INCREASE] in the price of oil or gas, the projected ultimate recovery of oil and gas, field productivity or development costs and operating costs in the oil or gas field, pool, or portion of the field or pool;". REPRESENTATIVE OGAN said this amendment would tighten up the language and give the commissioner the ability to increase or otherwise modify the state's royalty. This amendment adds the word "increase". REPRESENTATIVE KOTT OBJECTED for discussion purposes. REPRESENTATIVE NORMAN ROKEBERG explained on line 3 of the amendment, the additional words are "if preexisting economic conditions warrant". He said rather than assume there is a macro condition of necessity to move forward with an application, this added language establishes there should be preexisting conditions both on the part of the applicant and perhaps in the world market place. He explained the reason for the word "agreement" on line 4 of the amendment, is to make sure that all provisions of the agreement are included in the contractual negotiations which take place up-front. For example, regarding the concept of reopeners, the word "agreement" is cited to make sure those discussions do take place and are bargained for up-front. This gives the applicant and the commissioner flexibility but also gives notice that these things should be done up-front. REPRESENTATIVE ROKEBERG stated on line 11 of the amendment, the stipulation of the word "increase" is important because this specifically grants the commissioner the power to increase the royalty rate on a sliding scale for whatever relevant factor or event which might cause that. He said this power could override an existing, pre-bargained for bid for royalty rate. He noted Co- Chairman Green feels the word "modify" covers that but Representative Rokeberg felt making it specific and explicit is helpful and will avoid any confusion in the future. Number 362 REPRESENTATIVE ROKEBERG said the balance of the amendment reflects Co-Chairman Green's language also. He stated the one point of distinction is the mandate of oil price. He noted in CSHB 207(RES) and the prior versions that is permissive because there are certain circumstances where price may not be a determining factor. This allows the commissioner to have a little more flexibility. REPRESENTATIVE ROKEBERG felt Co-Chairman Green's language and this amendment are very similar in intent. He urged support for Representative Ogan's amendment. (Representative BARNES joined the committee.) CO-CHAIRMAN GREEN said he preferred the language contained in CSHB 207(O&G). He stated that which is a preexisting condition is implicit because this issue would not even be on the table if it were not. Number 386 KEN BOYD, ACTING DIRECTOR, DIVISION OF OIL AND GAS, DEPARTMENT OF NATURAL RESOURCES (DNR), testified via teleconference and stated he agrees with the amendment to add the word "increase". CO-CHAIRMAN GREEN asked Mr. Boyd to also comment on adding the words "if preexisting economic conditions warrant". MR. BOYD said he did not understand that part and would like to see it in writing. He stated he is not sure what a preexisting factor is meant to mean. CO-CHAIRMAN GREEN clarified that Mr. Boyd would prefer to have the words "increase or otherwise modify". MR. BOYD replied yes. He felt it gives certainty to the word "modify" and the word "increase" says one can increase. Therefore, there is no possibility of misunderstanding. CO-CHAIRMAN GREEN felt the word "modify" meant increase or decrease in reference to a sliding scale, which goes either way. He wondered if Mr. Boyd would like to include the words "increase or decrease". MR. BOYD said that would be fine. Number 450 REPRESENTATIVE ROKEBERG said he would not object to deleting "if preexisting economic conditions warrant," on line 3 of the amendment and deleting the words "otherwise modify" and inserting the word "decrease". REPRESENTATIVE BILL WILLIAMS asked if the committee is making any changes to the bill with all this language. CO-CHAIRMAN GREEN replied probably not. REPRESENTATIVE BARNES asked since there has been a proposed language change to the amendment, and since it is a minor adjustment to the language contained in CSHB 207(RES), would it be better to not adopt the amendment and just put the words in the existing draft. REPRESENTATIVE OGAN WITHDREW his MOTION. CO-CHAIRMAN GREEN made a MOTION to AMEND CSHB 207(RES), on page 3, line 3, delete the word "modify" and insert after the word "to" the words "increase or decrease". CO-CHAIRMAN GREEN asked if there were any objections. Hearing none, the MOTION PASSED. REPRESENTATIVE OGAN asked for a brief at ease. CO-CHAIRMAN GREEN reconvened the meeting at 8:55 a.m. REPRESENTATIVE BARNES made a MOTION to MOVE CSHB 207(RES) as amended, with a zero fiscal note, out of committee with individual recommendations. REPRESENTATIVE KOTT OBJECTED because he would like to hear Mr. Boyd's testimony first. MR. BOYD stated he had a few suggestions which might clarify the bill better. He said on page 2, line 10, of CSHB 207(RES), the word "quantities" is not necessary because it is a word that was left over when the word "commercial" was deleted. On line 25, page 2, he noted the language contemplates a second document when in fact this is still the commissioner's finding and determination. He felt for consistency, the language should say, "shall, as part of the commissioner's finding and determination". MR. BOYD said on page 2, line 31, of CSHB 207(RES), the words "sliding scale royalty or equivalent provision" are too restrictive in that other mechanisms cannot be used. He suggested the words "sliding scale royalty or other mechanisms" be used. He felt the words "equivalent provision" means the commissioner cannot use anything else. He thought it was important to keep flexibility for the commissioner to modify the royalty in any way he or she seems appropriate. MR. BOYD stated on page 3, line 4, it says "economic factors including". He expressed concern that it appears the factors only include those terms listed. He suggested the words "may include" be used instead of "including". He mentioned page 3, lines 8-15, of CSHB 207(RES), and stressed there still is a desire to keep a floor of 25 percent. On page 3, line 17, it says "lessee or lessees to submit, with the application for the royalty reduction," and he felt that language is redundant with the language on the prior line 16. He felt one of the clauses needs to be removed. Number 570 MR. BOYD said on page 4, line 8, the language says, "make final written findings and a written determination". He suggested deleting the words "a written". He stated on page 4, line 31, the language says "the commissioner's written determination of royalty". He pointed out if the commissioner did not decide to give a royalty reduction, this language implies a different standard which could be appealed. He suggested the word "regarding" be used after the word "determination". REPRESENTATIVE BARNES felt Mr. Boyd's words did not have much substance but since Co-Chairman Green had spent a lot of time on the work draft, she requested he comment on Mr. Boyd's suggestions. CO-CHAIRMAN GREEN said in regard to page 2, line 25, he could understand Mr. Boyd's comments since there may be a finding which does not allow for a reduction. He stated the word "agreement" was used because there was a desire to have it as part of the agreement not a separate document. He felt the word "agreement" should remain in the language. CO-CHAIRMAN GREEN stated in regard to page 2, line 31, and the words "or equivalent provision". He recalled Mr. Boyd suggested the words "or other mechanisms". He said, "we wanted to include the fact that the commissioner would reference the sliding scale as a `yardstick' and whatever he did would not have to have that but it should be something akin to that. So if they can come to a different agreement that does provide for the state to have an increase if oil goes to $75 a barrel, that we would reap some of that benefit as well or if it drops to a nickel, that we would reduce the royalty. If they come to another method of doing that, that is fine as long as it is in the same...so we have some idea what is coming. I would prefer to leave it the way it is." CO-CHAIRMAN GREEN said in regard to page 3, line 4, of CSHB 207(RES) and Mr. Boyd's suggestion to change the word "including" to "may include", at one time different words were considered. He explained the bill drafter assured him on three separate occasions that by using the word "including", that does mean this is a basket the commissioner can pluck anything he wants to from. CO-CHAIRMAN GREEN said, "We have addressed the 25 percent floor, which the commissioner wishes versus the need, in my estimation, that he does need a little bit larger latitude because there may be, especially in the older fields, some that 25 percent may not be adequate. As far as being a potential for encouraging others to come and say, hey we can go to Alaska, explore and if for some reason we find a puddle but the puddle is not quite big enough, we know that they are in favor of us developing and will make an opportunity for us to do that rather than a rigid hard 25 percent." Number 622 REPRESENTATIVE OGAN said on page 3, line 13, of CSHB 207(RES), it indicates on older fields, up to 90 percent can be taken off. He recalled that Co-Chairman Green had said in the case of older fields, there may be a need for more latitude. He felt they have that latitude. He noted if Representative Barnes would withdraw her motion, he has an amendment to offer, changing the 80 percent on line 10 to 75 percent. CO-CHAIRMAN GREEN recalled that Mr. Boyd said the language on page 3, lines 16 and 17, is redundant. He said the language may appear redundant but the thought was one would be an accompanying document, not something that would be floating around somewhere else. He felt the language should be left as is. He stated in regard to Mr. Boyd's comments on page 4, line 9, he does not object to deleting the words "a written". REPRESENTATIVE BARNES WITHDREW her MOTION. REPRESENTATIVE BARNES made a MOTION to AMEND CSHB 207(RES) on page 4, line 8, delete the words "a written". CO-CHAIRMAN GREEN asked if there were any objections. Hearing none, the MOTION PASSED. REPRESENTATIVE BARNES made a MOTION to AMEND CSHB 207(RES) on page 4, line 31, delete the word "of" and insert the word "regarding". CO-CHAIRMAN GREEN asked if there were any objections. Hearing none, the MOTION PASSED. Number 660 REPRESENTATIVE OGAN made a MOTION to AMEND CSHB 207(RES) on page 3, line 10, delete the number "80" and insert the number "75". REPRESENTATIVE OGAN felt the state is going to have a constitutional problem because the state is required to protect the resources which belong to the people, not to the state. He thought the minimal amount from the state's resource development should be put into the permanent fund. He stated the legislature has a moral and legal obligation to do that. CO-CHAIRMAN GREEN stated there is no legal obligation. He said, "the amount `75' was arbitrary because I think it ties to the earlier version of leases that said 25 percent of the royalty received from that lease would go to the permanent fund, 1980 or 1979, it was up to 50 percent of whatever was received not that it would be of 12.5 percent or 16 percent or 20 percent, which numbers of royalties have been in other leases. That 75 to me is an arbitrary figure." CO-CHAIRMAN GREEN continued, "There is no change that what is received, whether it be only 20 percent of the 12.5 percent, roughly 2.4 percent...still 50 percent of the leases since 1981 will still go to the permanent fund and if it is prior to that, 25 percent will still go to the permanent fund and the 12.5 percent, I submit to you is a historic number, one-eighth and there is no real justification for that--that is an agreement struck between the lessor, in this case the state, and the lessee which is the company. We still protect the permanent fund. We are saying we would like a smaller piece but have something of that rather than a big piece of nothing." REPRESENTATIVE BARNES OBJECTED to the motion. CO-CHAIRMAN GREEN asked for a roll call vote. Voting in favor of the amendment were Representatives Kott, Nicholia, and Ogan. Voting against the amendment were Representatives Austerman, Barnes, Williams and Green. The MOTION FAILED 4-3. TAPE 95-42, SIDE B Number 000 REPRESENTATIVE OGAN made a MOTION to AMEND CSHB 207(RES), on page 4, lines 2-9 inserting the language contained in the earlier work draft, version K, page 4, lines 3-26. CO-CHAIRMAN GREEN OBJECTED. REPRESENTATIVE BARNES noted that this section had been modified as a result of Mr. Boyd's suggestion. Number 052 REPRESENTATIVE OGAN felt proper oversight of the process was not being provided. He said public comment is a good thing to do but stressed the public has no leverage over the commissioner. He stated the Alaska Oil and Gas Conservation Commission has the expertise to determine whether or not royalty reductions are a good idea and would provide some legislative oversight. REPRESENTATIVE ALAN AUSTERMAN OBJECTED. CO-CHAIRMAN GREEN asked for a roll call vote. Voting in favor of the amendment were Representatives Nicholia, Ogan, and Kott. Voting against the amendment were Representatives Barnes, Austerman, Williams, and Green. The MOTION FAILED 4-3. REPRESENTATIVE BARNES made a MOTION to MOVE CSHB 207(RES), as amended, with a zero fiscal note out of committee with individual recommendations. CO-CHAIRMAN GREEN asked if there were any objections. Hearing none, the MOTION PASSED. HRES - 03/29/95 PRESENTATION ON STELLAR SEA LIONS Number 148 DR. ANDREW TRITES, RESEARCH COORDINATOR, NORTH PACIFIC UNIVERSITIES MARINE MAMMAL RESEARCH CONSORTIUM, stated the consortium is a group of university researchers who are being funded by the fishing industry to look into the interactions between marine mammals and commercial fisheries. He said he would give an overview of some of the marine mammal issues the consortium and the fishing industry are concerned with. DR. TRITES stated most people in Alaska do not appreciate how important commercial fisheries are to the state. Commercial fishing is the largest private employer in Alaska, employing 23 percent of the state's work force. He said commercial fisheries provide 24 percent of the state's basic industry payroll, and is second only to the oil industry in its contributions to state government. Over the last 5 years, the Alaska seafood harvest has stabilized at record levels of over 5 billion pounds per year. This represents more than half of all the seafood harvested in the U.S., now making this fishery the largest fishery in the world. DR. TRITES felt everyone would agree that is a glowing report card for commercial fisheries in Alaska. He pointed out it hides the fact that all is not well in the North Pacific. He stated while the amount of fish landed has risen to all time highs, the numbers of some marine mammals in Alaska have declined. Many people assume that commercial fisheries are to blame for their demise, and they would like to see it stopped. DR. TRITES told committee members marine mammals are protected under two pieces of legislation: The Marine Mammal Protection Act (MMPA) and the Endangered Species Act (ESA). He said both Acts became law in the early 1970s when the abundance of many marine mammals was high. It was also a time when urban America felt outraged over the Japanese whale harvest, the Canadian harp seal hunt, and the dolphin/tuna kill in the tropical Pacific. He stated the MMPA prohibits the taking of any marine mammal unless an exception has been made. The ESA protects animals whose survival is in jeopardy by prohibiting the harassment, injury or death of endangered or threatened species. He noted that critical habitat must be designated and federal agencies must ensure that their actions are not likely to adversely modify the critical habitat. DR. TRITES stated there are currently 15 species of whales and dolphins in Alaska and 7 species of seals and sea lions. As far as is known, dolphin populations remain healthy and the great whales are slowly recovering from the over-exploitation that ended in the 1960s. He said many of the pinnipeds that were once so abundant are now in decline in many parts of Alaska. He explained the northern fur seal, which breeds on the Pribilof Islands in the middle of the Bering Sea, numbered about 2.5 million in 1950. Today, about 1 million remain and the specie has been declared depleted under the MMPA. He noted it is not clear why this population declined, nor why it has failed to recover. Number 199 DR. TRITES said harbour seals are also declining in many parts of Alaska. On Tugidak Island, the world's largest population of harbour seals dropped from 12,000 in 1976 to under 2,000 in 1988. Only in Bristol Bay and Southeast Alaska have their numbers remained healthy. He stated the third and greatest concern is over the disappearance of stellar sea lions from Alaska. He noted that many feel this species is destined to become the spotted owl of the North Pacific. Stellar sea lions are now classified as threatened with extinction and may soon be reclassified as endangered if recommendations made to the National Marine Fisheries Service are followed. DR. TRITES told committee members based on sporadic census counts, it appears that the total sea lion population in six regions of Alaska rose from 185,000 in 1956 to 200,000 in the 1970s. The population peaked at 225,000 in 1980 and fell to under 85,000 in 1990. He noted this decline has continued to the present and is underway currently. The only exception to the trend is in Southeast Alaska and British Columbia where the small populations have been increasing. He stated the population declines of all three species, harbour seals, northern fur seals and stellar sea lions, appear to be geographically related to the Gulf of Alaska. Number 224 DR. TRITES stated many people assume that commercial fisheries are ultimately responsible for the population declines. He noted that the total catch of salmon, herring, groundfish, shrimp and crabs rose from 100,000 metric tons to 500,000 in 1980. This represents over one billion pounds of seafood. He said most of the catch is salmon and pollock. He pointed out at the same time catches have risen, there has been a dramatic rise in the number of licenses issued and vessels involved in each of the fisheries. Thus, large amounts of fish are being removed, while sea lions continue to decline. DR. TRITES noted there is considerable nervousness among sectors of the fishing industry over marine mammals and what the future might hold. He said there are those who claim it will be business as usual, while others are predicting the closure of Alaskan fisheries. No one knows how the legislation will be applied to protect stellar sea lions and their habitat, nor how the story is going to ultimately unfold. DR. TRITES said in the summer of 1992, John Roos from the Pacific Seafood Processors Association wrote to Northwest universities on behalf of a group of representatives from the fishing industry and asked for proposals to study the decline of stellar sea lions. From that initial request, the North Pacific Universities Marine Mammal Research Consortium was formed with four members: The University of Alaska, the University of British Columbia, the University of Washington, and Oregon State University. He stated the consortium's mandate is to undertake a long term program of research on the relation between fisheries and marine mammals in the North Pacific. He noted that most of the initial focus is on the stellar sea lion. Number 258 DR. TRITES told committee members the consortium has built on the foundation of research conducted by the National Marine Fisheries Service and the Alaska Department of Fish and Game, and has developed a research program to address the major hypotheses put forward to explain the cause of the stellar sea lion population decline. He said ten hypotheses have been proposed, of which five have largely been discredited. These include storms, pollution, toxins, and entanglement and shooting. He stated the consortium's research program is addressing the remaining five. DR. TRITES said a parasitologist at the University of British Columbia is examining parasites from sea lion stomachs and feces, while the leading world expert on sea lion diseases from Oregon State University has proposed a long term study to evaluate the contributing role of disease to the population decline. He stated the predation hypothesis is intriguing. A dead killer whale washed ashore in Prince William Sound in the summer of 1992. Its stomach contained 14 flipper tags from stellar sea lions. He noted a study was started at the University of British Columbia to determine whether killer whale predation could significantly affect sea lion numbers. DR. TRITES stated the stomach contents collected over the past 20 years were compiled from eight stranded killer whales in Alaska and 14 in British Columbia. They support the view that there are two distinct killer whale races in the eastern North Pacific with non- overlapping diets. In all, 258 of the marine mammal eating transient whales were identified between Washington and western Alaska. He said a computer simulation model found that killer whale predation may currently account for a significant portion of the total annual mortality of sea lions in Alaska. When sea lion populations exceed 100,000, the effects of killer whale predation on sea lion dynamics appear minimal. However, at levels of 50,000 sea lions or less, the effects are more significant, and may be sufficient to drive a population decline. REPRESENTATIVE AUSTERMAN wondered of the percentage of sea lions tagged, is there a way to extrapolate out what the 14 tags found in the whale's stomach mean. DR. TRITES responded in that year, approximately 400 animals were tagged. Therefore, for this one animal to have such a high proportion of plastic in its stomach indicates it either had a taste for plastic, it was homing in on animals with tags or it is representative of a high rate of predation. He said a report is being prepared that looks at those various possibilities. REPRESENTATIVE AUSTERMAN clarified with the 14 tags, it is difficult to determine if there were more sea lions being eaten. DR. TRITES replied there is no doubt there would have been other animals eaten, as the 14 tagged sea lions were a small proportion of those marked. He said the fact that one animal had that many tags in its stomach is very significant. Number 327 DR. TRITES explained three other possible explanations for the sea lion decline are human disturbance, abherrent behavioral changes, and the hypothesis that everyone is looking at the hardest, nutritional stress. He said the consortium proposed a 5-year research plan in 1993 with three major components designed to test these hypotheses: Field studies, captive studies, and laboratory and data analyses. He stated the essence of the field program is to compare a healthy rookery with a declining rookery. The consortium began work at Forrester Island in Southeast Alaska where sea lions are healthy, and at Sugarloaf near Kodiak where sea lions are declining. DR. TRITES told committee members the consortium's field studies are being done with the collaboration and financial support of the Alaska Department of Fish and Game and involves many people. At the study sites, the consortium has access to animals to make direct behavioral observations, and to capture and track them at sea using satellites. He said the consortium is also collecting sea lion scats to identify diet from the remaining fish bones and would like to sample fish from around the study sites. One interesting finding is the diet of sea lions at the healthy site appears to be very similar to that at the declining site. The number one item on the sea lion menu in both areas appears to be pollock. DR. TRITES stated a major question is how much food do sea lions need to eat. To answer that question, the consortium captured sea lion pups and brought them to the Vancouver Aquarium. They are now one and one-half years old and weigh over 200 pounds each. He said from the six animals, the consortium is finding that their basal energy needs are not constant, but cycle over the course of a year. With a grant from the Alaska Science and Technology Foundation, the consortium will be building a swim mill to measure the energetic needs of the sea lions while swimming at different speeds. DR. TRITES said the consortium is also measuring the sea lions digestive efficiency to determine whether for example, pollock is as good a food source as for example herring. They are also trying to identify what and how much sea lions are eating in the wild by feeding the captive animals different foods and observing which bony hard bits survive the digestive process. He explained the culmination of these studies will be a calculation which considers seasonal and annual activity budgets for sea lions at both the individual and population levels, and makes predictions about the amount of food they need. He told committee members other consortium studies include an analysis of fishing activities around sea lion rookeries which is being done at Oregon State University. He noted this is the most thorough analysis of its kind to date. Number 363 DR. TRITES added that two novel studies at the University of Alaska are considering whether the population decline is related to an ecosystem shift. One is examining whiskers from sea lions collected over the past 40 years. What sea lions ate can be identified from the ratios of carbon and nitrogen isotopes present in their whiskers. He said carbon and nitrogen isotopes are concentrated up through the food chain. It is therefore possible to tell from what level of food chain the sea lions ate by simply measuring the isotopic ratio in the whiskers. He noted that identifying a shift in isotope levels would support the hypothesis that sea lions have changed their diet. DR. TRITES said the second study is considering whether whaling is responsible for the decline of sea lions. The removal of whales in the eastern Bering Sea and Gulf of Alaska that ended in the 1960s left thousands of tons of euphausids and fish larvae for other predators to eat. He noted that an initial calculation indicates approximately 100,000 tons per day of additional biomass was made available to other consumers by the removal of fin, sei, and sperm whales from the Bering Sea alone. This amount is about the same as the daily consumption of 5 million tons of fish. He stated this may mean that today's abundance of pollock may be linked to the removal of whales, and may have restructured the food base available to sea lions and other seals. Number 394 DR. TRITES told committee members that solving the mystery of the disappearing sea lions is not a trivial task, but one that requires a concerted effort and an open mind. He said university resources are being put to the task with the support of the industry. The Marine Mammal Research Consortium was formed with industry support to address issues related to marine mammal/fishery interactions in the North Pacific. He stated with that in mind, the consortium has undertaken a solid field program, a strong captive research program, and a major analytical research initiative. DR. TRITES noted that concern about interactions between marine mammals and commercial fisheries in Alaska is receiving more and more attention from the public. He stressed it is an issue that is not likely to go away, but one that needs good scientific research to be resolved. CO-CHAIRMAN GREEN recalled that Dr. Trites had mentioned that one of the concerns might be the food supply, which includes salmon. He noted that a large amount of salmon are returning. He asked if it is possible that salmon have changed their normal migration due to the fact they might be eaten by sea lions in that normal migration route. DR. TRITES said there has been a study looking at the changes in ocean circulation and atmospheric pressure. He noted there is something called the 18.6 year cycle where it appears that something changed in 1976, which seems to correlate with the strong abundance of salmon and the high record catches of salmon. He noted that pollock was not an abundant specie until recently. CO-CHAIRMAN GREEN asked if the major change in the whale population occurred at the turn of the century. He thought there had not been that great of a change during the period when the pollock numbers increased. DR. TRITES replied there would be a time lag involved but added the whaling ended in the late 1960s basically when the whales had been depleted and it was no longer economically feasible to hunt whales. He said the consortium has been putting together maps to see where these concentrations of whales were removed, along the Aleutians and in the Bering Sea. He noted those areas correspond to where some of the major concentrations of sea lions have been. CO-CHAIRMAN GREEN recalled that Dr. Trites had mentioned trauma as one of the ten hypotheses explaining the decline in stellar sea lions but noted that the consortium is using captive animals. He wondered if there was a possibility of trauma with captive animals. DR. TRITES replied there is always a concern with trying to extrapolate from a captive situation to the wild. He noted it is very difficult to capture animals in the wild and is also difficult to get enough measurements to say anything meaningful. He stated very intensive studies are done with captive animals and at the same time, a controlled study is done, where for example in measuring metabolic rates, animals are injected with a chemical called doubly labeled water. By drawing a blood sample, it can be determined how much (indiscernible) the animals have used over a period of time. Therefore, the animals are caught, injected, and then recaptured a week later. DR. TRITES explained it can then be determined in the wild what an animal is using, which then can be compared to the weekly or monthly measurements being taken in captivity. He felt the comparisons are close but there are always uncertainties. He did not think any better data could be achieved than what is being achieved with the captive animals. Number 458 DR. TRITES told committee members there is a hypothesis called the junk food hypothesis. It has been suggested that one of the problems the sea lions are having is they are eating too much pollock. He said pollock compares to humans trying to exist on popcorn--it fills your stomach but does not give you the proper nutrition. Therefore, the consortium is doing controlled feedings with the captive animals where the animals are fed pollock and the it is determined how well the animals can assimilate pollock as compared to herring, cod, salmon, squid, octopus, etc. CO-CHAIRMAN GREEN recalled that Dr. Trites had mentioned taking clippings off of the sea lions whiskers and by isotope analysis could determine what the sea lions diet had been. He wondered if whiskers stay with the animal or do they change as the diet changes. DR. TRITES replied it is not known how long the sea lions whiskers grow. He noted the captive animals' whiskers are being measured. He said the results of the isotope analyses are suggesting the whiskers are five to six years in length and are showing five year cycles. He said it looks as though the sea lions somehow change their diet over the course of a year. He added that from the scat samples collected in Southeast, it appears the summer-time salmon are quite important but in the winter time, it is herring and pollock. He stressed there are changes seasonally in terms of what these animals are eating. Therefore, that in turn reflects what those prey species have been consuming, as these isotopes are concentrated up through the food chain. CO-CHAIRMAN WILLIAMS asked Dr. Trites about incidental take. DR. TRITES responded a simulation model was put together to try and reconstruct what had happened in the past--how many sea lions were taken. He noted there are many stories, mostly anecdotal stories, that tell during the joint venture fisheries, as the trawls were being brought to the surface, there was competition as to who could shoot the most sea lions before noon or else the sea lions were being caught as the nets were being pulled to the surface. DR. TRITES noted at the peak it is estimated there were approximately 5,000 sea lions per year being destroyed through either intentional shooting or through incidental catches and entanglement. He pointed out the industry saw the writing on the wall through the early 1980s. There was an initiative in the mid- 1980s to put a stop to it by informing people they were cutting their own throats--by contributing to the decline, the fishery could end up being closed. He said the incidental catch has gone from a very high level, to a level now where it is estimated the number of sea lions caught incidentally this year will be less than 50. He noted even when the maximum numbers are looked at, which are based on observers and interviews with fishermen based on the number of vessels, the numbers are not enough to account for the decline. Number 507 CO-CHAIRMAN GREEN wondered if the consortium is also looking at sea lion pups to make sure there is nothing happening with them. DR. TRITES replied one of the studies being supported by the consortium through the University of Alaska is looking at blood hormones and proteins in the blood, trying to determine whether or not the animals appear stressed or compromised. He noted there is a student at Cape St. Elias who is watching animals and they seem to look great. However, the consortium does not find the animals who are missing, yet they know they are missing each year. CO-CHAIRMAN GREEN said as an adult, we might have the ability to fend off a disease but a two month baby may not be able to. He asked if there might be something killing the pups which does not affect the larger animals. DR. TRITES stated it is possible. He noted not much is known about disease and added that studying disease is very expensive. He said during a trip in January, he was on a site that did not have many animals on it--perhaps 100 animals--but in the 3 days there, he found 4 fetuses the animals had aborted. Therefore, the question becomes is there some sort of disease or viral infection involved. He pointed out in the end, things will be crossed off the list and hopefully the cause will be left. He added it may not be a single factor but a combination of a number of things--each piece contributing something, with a final outcome of a declining population. Number 538 REPRESENTATIVE AUSTERMAN felt it was very sad to see the decline in the sea lion population but added that the good outcome of the decline is the realization of the negligence in ongoing research abilities and what is done to look after the resources in the North Pacific. He noted the state is in the same position, as each year the fish and game budget is being reduced and the ability to research is being reduced--research to make sure what is being done is not causing something like this population decline to happen. CO-CHAIRMAN GREEN asked Dr. Trites what the state can do, other than funding research, in connection with the decline of stellar sea lions. DR. TRITES replied awareness would be helpful. He said most people do not realize what potentially is at stake or even aware there is a problem with sea lions. He added that the industry has taken an important step in approaching university researchers and forming a coalition in terms of trying to determine what is happening. He felt that is an important step which is ground breaking. From the industry's standpoint, they feel it is better to be part of the solution than to be seen as the problem. He pointed out the relationship with fishermen also gives the researchers the opportunity to talk directly to fishermen and hear what their ideas might be and to also learn about what is going on in places the researchers never see or hear about. DR. TRITES said the researchers have also developed good contacts with the Native community who provide samples from the subsistence hunts. He reiterated the more people aware of the problem, the more interest there will be in helping find a solution. CO-CHAIRMAN GREEN asked if there is a possibility that these sea lions migrate as far over as the former Soviet Union and there may be something happening there causing the problem. DR. TRITES responded the animals are also declining in the former Soviet Union. He said not a lot is known about the movements of animals. He stated several animals have been branded, tagged or are being satellite tracked. Essentially, it seemed the animals do not undertake a migration by a seasonable movement. In the summertime, the animals stay quite close to their rookeries and appear to come back to their rookery of birth. He explained the animals stay close to the rookeries in the summer, and disperse in the winter--perhaps 300 or 400 miles. Number 577 REPRESENTATIVE AUSTERMAN asked how far back the data goes on stellar lion research. DR. TRITES replied the consortium began two years ago. He said the captive animals being held are the first time captive sea lions have been kept for research purposes. Therefore, the work being done with the industry's support is really ground breaking. He stated in terms of what is known from far back, often times what happens is you wait until the problem is there before you start to study it. He noted the National Marine Fisheries Service and the Alaska Department of Fish and Game have conducted sea lion census which go back to 1956. He added the census are quite sporadic and the counts were not done every year. They also did a little research on stomach contents but not a whole lot. REPRESENTATIVE AUSTERMAN wondered if the research could be equated with the population of whales. DR. TRITES said the consortium has not looked specifically at whale numbers. He noted they started to put those numbers together but then it was reported that the Russian researchers indicated many more whales were killed than what was reported. The Russians then offered to sell this data to researchers to see how many whales were actually taken out of the North Pacific and the Antarctic. He noted there is now an attempt being made to put those numbers together. He added the numbers are huge. REPRESENTATIVE AUSTERMAN asked the status of classifying the stellar sea lions as endangered. Number 612 DR. TRITES responded a recovery team was appointed by the National Marine Fisheries Service which met the end of November. That team made two major recommendations. First, the team recommended the sea lion population be divided into two populations with the dividing line being above Prince William Sound. He stated that recommendation was based on genetic results which said there appears to be two genetically distinct stocks. He noted the stock in Southeast appears to be the healthy one, which is different than the one declining and whether there is some relationship to genetics is questionable. DR. TRITES said the second recommendation of the team was the status of the stellar sea lions should be changed from threatened to endangered. He stated that recommendation has been forwarded to the head of the National Marine Fisheries Service and is now waiting to be put on the Federal Register at which point there would be a 90 day period for the public to respond for comment, and then it could be a year after that before the sea lions would actually be put on the list. DR. TRITES noted the Endangered Species Act is up for reauthorization and it is not clear whether or not the Act might be changed. He said rumor is there will not be any additional species put on the list for as long as five years. It is not clear how Congress is going to handle the Act and how the stellar sea lions will fit into that situation. CO-CHAIRMAN GREEN noted the commercial fleets from Alaska are coming under a lot of attack because people think the fleets should allow more escapement, meaning a reduction in the fleet's harvest. He asked with the potential stellar sea lion problem, will there be a further impact on the Alaskan fishing fleet, as opposed to total fishing, because other flags are fishing the waters. He questioned if this population decline is an international problem being addressed or is it only the U.S. or just Alaska. DR. TRITES replied most of the effort is focused in Alaska because there is a lot more at stake plus Alaska is where the biggest problem is. He added that Alaska is the center of the sea lion range and Alaska is where the sea lions are disappearing from. Therefore, Alaska is where the greatest concern is. Number 650 JERRY MCCUNE, PRESIDENT, UNITED FISHERMEN OF ALASKA (UFA), stated UFA has contributed to the efforts Dr. Trites has discussed. He said as the decline of stellar sea lions is studied, the problem faced is the question of where was the population 20 years ago and where is the population supposed to be today. He questioned if the stellar sea lion is put on the endangered list, then what number does the population have to get back to, to get it off the endangered list. He stressed no one knows what the number of that population is supposed to be. He felt the state should encourage the federal government to get a scientific team to determine where the numbers are at. TAPE 95-43, SIDE A Number 000 DR. TRITES agreed. He said it is easy to get on the endangered list but very difficult to get off it. He stated the consortium has a proposed project this year to look at that question as to how criteria is applied. He noted one of the unfortunate things in legislation is it works with the idea there is a fixed number--an optimum population size--and does not take into account the fact that if there is an ecosystem shift, there may be different levels of equilibrium than what was there previously. Yet many look back to the date legislation was enacted and that is the magic number which should be there today. He stressed that does not work in reality because it is a system in constant motion. SUE MELLO, REPRESENTATIVE, NATIONAL MARINE FISHERIES SERVICE, said in regard to the concern about there being a number for delisting, in 1988 when the ESA was amended, that was one of the changes because of concerns about there being no numbers for getting animals off the list. She stated the recovery team has defined the number for delisting the stellar sea lions but she could not remember the number but could get the information for the committee. CO-CHAIRMAN GREEN asked what the team based the number on. MS. MELLO replied it was based on the count in the 1970s which was looked at as a healthy population and she thought the number was 40 percent of the count to get off the list. DR. TRITES felt the number for delisting is an area which needs more in-depth thinking than what it has been given thus far. MS. MELLO stated the recovery plan is going to need revising by 1997. Currently, the U.S. Fish and Wildlife Service and the National Marine Fisheries Service have come up with a more stringent approach to recovery plans than used in the past. She felt the recovery plan will be much more detailed than the first go around. CO-CHAIRMAN GREEN asked what she meant by stringent. MS. MELLO replied stringent in the requirements that the agency be very clear in defining all the considerations in the ecosystem which may be affecting the species, more details in the plans and more involvement of the public. Number 067 REPRESENTATIVE AUSTERMAN thought it was amazing how the different species are changing in populations. DR. TRITES agreed and added that the more one looks into it the more one realizes it is not a simple story. For example in the case of pollock, the size the fisheries are taking is bigger than what the sea lions eat and so it has been proposed that is good for the sea lions because the biggest predator on pollock is pollock itself. REPRESENTATIVE OGAN clarified that trawlers are not selective on what size they take--they take it all, process by size, and then dump the rest. CO-CHAIRMAN GREEN thanked Dr. Trites for his presentation. ADJOURNMENT There being no further business to come before the House Resources Committee, Co-Chairman Green adjourned the meeting at 9:58 a.m.