Legislature(2021 - 2022)BARNES 124
02/16/2022 01:00 PM House RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| HB209 | |
| HB52 | |
| HB287 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 209 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 52 | TELECONFERENCED | |
| += | HB 287 | TELECONFERENCED | |
HB 52-TUTKA BAY HATCHERY
1:47:56 PM
CHAIR PATKOTAK announced that the next order of business would
be HOUSE BILL NO. 52, "An Act providing that operation of the
Tutka Bay Lagoon Hatchery in Kachemak Bay is compatible with the
functions of Kachemak Bay State Park; and providing for an
effective date." [Before the committee was the proposed
committee substitute (CS) for HB 52, Version 32-LS0327\D,
Bullard, 2/4/22, ("Version D"), adopted as the working draft on
2/7/22.]
1:48:21 PM
REPRESENTATIVE SCHRAGE moved to adopt Amendment 1 to HB 52,
labeled 32-LS0327\D.1, Bullard, 2/12/22, which read:
Page 1, lines 1 - 2:
Delete "Tutka Bay Lagoon and"
Page 4, line 20, through page 6, line 3:
Delete all material and insert:
"* Sec. 2. The uncodified law of the State of
Alaska is amended by adding a new section to read:
REPORT TO LEGISLATURE; DEPARTMENT OF FISH AND
GAME AND DEPARTMENT OF NATURAL RESOURCES. The
Department of Fish and Game, in cooperation with the
Department of Natural Resources, shall provide a
written report to the legislature on the effects of
the Tutka Bay Lagoon Hatchery on the state's fish and
game, fish and game habitat, and land. The Department
of Fish and Game and the Department of Natural
Resources shall deliver the report to the senate
secretary and the chief clerk of the house of
representatives not later than January 1, 2026, and
shall notify the legislature that the report is
available.
* Sec. 3. The uncodified law of the State of Alaska
is amended by adding a new section to read:
REPORT TO LEGISLATURE; DEPARTMENT OF COMMERCE,
COMMUNITY, AND ECONOMIC DEVELOPMENT. The Department of
Commerce, Community, and Economic Development shall
provide a written report to the legislature on the
economic viability of the Tutka Bay Lagoon Hatchery.
The Department of Commerce, Community, and Economic
Development shall deliver the report to the senate
secretary and the chief clerk of the house of
representatives not later than January 1, 2026, and
shall notify the legislature that the report is
available."
Renumber the following bill section accordingly.
Page 6, line 4:
Delete "Except as provided in sec. 5 of this Act,
this "
Insert "This"
1:48:23 PM
CHAIR PATKOTAK objected for the purpose of discussion.
1:48:28 PM
REPRESENTATIVE SCHRAGE explained Amendment 1. He stated that
after public testimony and the bill presentation he has some
concern over acting on the Tutka Bay Lagoon Hatchery at this
time since there are 10 years to resolve this issue. Amendment
1 strikes the language exempting the hatchery from the park and
requests that the Alaska Department of Fish and Game (ADF&G),
along with the Department of Natural Resources (DNR), conduct a
study on the issues around the hatchery that were outlined in
the bill presentation and in testimony, such as the disposal of
fish and the potential impact on the lagoon, the predatory
creatures coming in to eat the carcasses and other wildlife, and
the concerns about pink salmon and their influx on that area and
on king runs. Amendment 1 also includes having the Department
of Commerce, Community, and Economic Development (DCCED) look at
the economic feasibility of the Tutka Bay Lagoon Hatchery given
the strong concerns that were outlined by so much of the public
testimony. The amendment asks for some more information given
that there are 10 years before this issue must be resolved. The
amendment does adopt the [three] parcels [of land] into the park
given they are already being managed as such and there is such a
large degree of public support for that.
1:50:33 PM
REPRESENTATIVE SARAH VANCE, Alaska State Legislature, prime
sponsor of HB 52, stated she opposes Amendment 1 because it guts
the purpose of the bill, which is to solve the legal land
disposal issue. She expressed concern that the amendment would
cause either unfunded mandates or a fiscal note for the
research. She said she supports looking into the future for
research in Kachemak Tutka bays for the effects of the entire
system because the effects of the salmon are not the only issue.
1:52:08 PM
CHRISTOPHER ORMAN, Assistant Attorney General, Natural Resources
Section, Civil Division (Juneau), Department of Law (DOL),
stated that legally, Amendment 1 would remove the carve-out for
the hatchery. As a result, the hatchery would remain within
legislatively withdrawn lands and therefore the disposal problem
would remain. While there would be reports, there would still
be a disposal problem, and pursuant to the disposal problem,
there would be a legal exposure to the state, meaning the
possibility of lawsuits and challenges pursuant to the hatchery
and hatchery operations as far as being an unconstitutional
disposal.
1:53:21 PM
MONICA ALVAREZ, Resource Assessment and Development Section
Chief, Central Office, Division of Mining, Land, and Water
(DMLW), Department of Natural Resources (DNR), concurred with
Mr. Orman that the disposal problem would still exist and be an
exposure for the department. She said DNR supports HB 52
because the department sees it as the necessary mechanism to
drive the two significant legal problems: the disposal of
legislatively withdrawn lands and the 1978 Interagency Land
Management Assignment (ILMA) between DNR and ADF&G.
MS. ALVAREZ addressed the disposal of legislatively withdrawn
lands. She pointed out that land disposal law has developed
over the last 20 years and activities that [DNR] once thought
permissible are now being analyzed under a different lens.
Accepting conditions as they have always been with the hatchery
is no longer an option given the legal challenges the department
now faces. The Alaska Supreme Court has made it clear that
functionally irrevocable agreements are a disposal of interest
and the functionally irrevocable test set up under the court
focuses on the likelihood of revocation instead of a contract's
actual language. An example in this instance is that in January
2021, DNR was informed by DCCED that the Cook Inlet Aquaculture
Association (CIAA) had to continue to operate the hatchery to
secure a return on its loan. This is the type of financial
interest that makes ADF&G's revocation of this agreement with
CIAA unlikely. The 2016 deed of trust and security assignment
of the lease, where these legislatively withdrawn lands are used
as collateral for a $922,000 loan, further establishes the
unlikelihood of revocation here as ADF&G has assured DCCED that
the hatchery operations will continue for that return on a loan.
MS. ALVAREZ addressed the ILMA. She specified that when the
legislature withdrew these lands in 1970 it mandated that the
lands be managed solely by DNR, it did not authorize other
agencies to manage Kachemak Bay State Park lands. In 1978 when
DNR issued the ILMA to ADF&G, it did so without legislative
authorization. Additionally, when the legislature adopted
various hatchery statutes in 1976 and 1988 under AS 16.10, the
legislature did not include amendment to Kachemak Bay State Park
enabling legislation the land and waters being managed by DNR.
So, returning these lands to the public domain, making them
general state lands, provides ADF&G and DNR the flexibility to
resolve these issues.
MS. ALVAREZ reminded the committee that DNR and ADF&G submitted
a letter in support of HB 52, and both agencies agree that it
provides a means for curing these legal issues. If these lands
remain legislatively withdrawn, the tools are way more limited
to resolve the issues.
1:57:37 PM
CHAIR PATKOTAK drew attention to an email from DCCED that states
DCCED anticipates a zero fiscal note from Amendment 1.
1:57:47 PM
SAM RABUNG, Director, Division of Commercial Fisheries, Alaska
Department of Fish & Game (ADF&G), stated that ADF&G owns the
hatchery in question and operates the hatchery on state park
lands through an ILMA that was thought to be proper at the time
it was issued. Also at the time, the state voted on bonds to
build and invest in this hatchery. He said ADF&G [operated the
hatchery] until the point where it contracted out the operation
to a private contractor to operate it on behalf of the state at
no cost to the state, which is where it is at now. He said
ADF&G agrees with Ms. Alvarez that Amendment 1 does nothing to
cure the paperwork issue with land use. As well, he added, the
ADF&G and DNR commissioners have submitted a joint letter in
support of HB 52 as written.
1:59:04 PM
REPRESENTATIVE FIELDS said he questions the validity of the
legal arguments just heard. Regarding Ms. Alvarez's argument
that the hatchery must be left in place to earn money to pay
back a loan, he contended that the hatchery is not making money,
so the loan isn't going to be repaid when [the state] is loaning
more money to this hatchery and taking on more financial
liability. That the land disposal problem is solved here by
carving out this land from the state park is also illogical, he
submitted. This is a hatchery in state park land and the park
plan says it is incompatible with the state park. Carving out
the land is not solving a problem so much as just changing the
use of the land that is inconsistent with what the legislature
did when the park was created.
MR. RABUNG responded that nobody has said this hatchery does not
pay its bills; it is viable, pays its bills, and is current on
all its loan payments. He said the contract between ADF&G and
the operator states explicitly that either party can end the
contract with 180 days' notice. The contractor will be allowed
to continue to harvest cost recovery fish until any fish the
contractor produces stop returning, which is two years for pink
salmon and three or four years for sockeye. That is the only
commitment. Regarding the lease agreement mentioned by Ms.
Alvarez, he said there is no lease agreement but there is from
DCCED an assurance that, were the operator to default on its
loans, DCCED would be allowed to enter the property to recover
any collateral assets. He stated he thinks it is called a deed
of trust and it is an assurance that DCCED has the legal
authority to enter the property to recover any assets that are
securing the loan. The facility itself and the land it sits on
do not secure the loans and cannot secure the loans. He pointed
out that the legislature created both the park and the hatchery.
2:00:17 PM
MR. ORMAN addressed Representative Fields's comments. He stated
that the financial success, and whatever that may mean for the
hatchery, is a separate issue. The question of whether there is
a disposal here and whether there is a functionally irrevocable
agreement between CIAA and ADF&G is relatively clear. The 2016
documents, the deed of trust, and the security assignment,
established that there is an agreement that is now sitting out
there for a loan of $922,500 by CIAA that is using state land
because it is a deed of trust, meaning an interest in state
land, in legislatively withdrawn land, to allow CIAA to build
capital improvements. So, DCCED is holding an interest in
legislatively withdrawn lands, and those legislatively withdrawn
lands that cannot be disposed of are now providing the
collateral for that loan.
MR. ORMAN, regarding the functionally irrevocable test, pointed
out that functionally irrevocable is not about the language in
the contract and not even necessarily about the intentions of
all the parties or what the parties had hoped for. The question
is whether the agreement between CIAA and ADF&G will be revoked
tomorrow. Is it truly what one would call a revocable at-will
agreement, like a permit? The answer is no because of the
interest that DCCED holds here. The deed of trust adds to the
investment and DCCED's interest to ensure that the hatchery
continues to operate. One can also turn to the language within
the agreement between CIAA and ADF&G that allows CIAA to receive
180 days' notice before termination of the agreement and
provides a mechanism for CIAA to be repaid for the capital
improvements that CIAA paid for.
2:05:01 PM
MR. ORMAN added that functionally irrevocable seems foreign
because it is not necessarily about the contract. It is
suddenly about what the investment interests are and what
happens with those interests and since that prevents, then, the
revocation of the agreement. He said ADF&G clearly disagrees
with that analysis; ADF&G disagrees with DNR who manages these
lands and the view that there is clearly a revocable problem
here with the agreement with CIAA. In completing the analysis,
Mr. Orman explained, his job as a lawyer is to determine if
exposure exists for the state and if the possibility exists for
that exposure to lead to lawsuit, and that is what has happened
here. In reviewing these issues, the determination has been
made that there is a disposal problem for these legislatively
designated lands. How this body or anyone chooses to cure that
disposal problem is clearly a policy question. The deed of
trust allows DCCED to come onto the property to operate the
hatchery if necessary for return of that investment. Also based
on the language in that agreement, DCCED is allowed to
potentially sub-lease and sell those lands if necessary to
receive a return on that. That is illegal, he continued, and
maybe that doesn't happen, but the language is there, and it is
in a recorded document; there is a deed of trust that clouds the
title on these lands.
2:07:11 PM
MS. ALVAREZ stated that the [Kachemak Bay State Park management]
plan listed the hatchery as incompatible for two reasons.
First, the hatchery is viewed as incompatible with the park
purposes listed in the statute. Second, DNR recognizes the
disposal of interest issue, and the hatchery is listed as
incompatible in the portion of the plan that park staff uses
when permitting activity. So, DNR would certainly not want
another hatchery permitted in the future and recognizes that
there are issues with this hatchery. Listing the hatchery as
incompatible was a recognition of the state disposal case law
development over the years and what DNR has come to know now as
compared to in the past with the original state park plan.
2:08:31 PM
REPRESENTATIVE FIELDS spoke to the issue of DCCED's exposure.
The right way to remedy that, he asserted, is not to liquidate
state park land but to protect the state from further exposure
from a financially risky investment.
MR. ORMAN reiterated that there is a disposal problem here and
solving the disposal issue is ultimately a policy decision. He
specified that there are legislatively withdrawn lands where a
hatchery is being operated, and that is inconsistent with AS
41.21.131, the enabling statute that establishes the park. It
is inconsistent with the case law that started in 2000 with
Northern Alaska Environmental Center (NAEC) and continued most
recently in August 2020 with the Southeast Alaska Conservation
Council (SEACC) decision. Many decisions were made in the
1970s, whether about university lands or mental health trust
lands. It has now been realized that maybe those weren't the
best decisions and that there are legal problems. Once these
things are discovered, they must be figured out.
MR. ORMAN continued his response and spoke to the ILMA. He
pointed out that when creating Kachemak Bay State Wilderness
Park, the legislature included a provision allowing for stream
rehabilitation. He said this shows that when the legislature is
setting aside and creating these kinds of lands, in this
circumstance creating a scenic park, it can mandate how the
lands are going to be maintained, who will maintain them, and
the purposes for which they can be used. In summary, he said,
he agrees with ADF&G that the core problem starts with the ILMA,
because there was no authority allowing the ILMA and DNR to let
another state agency to manage these lands. Once the hatchery
was in place, all these other problems snowballed from there.
2:12:19 PM
CHAIR PATKOTAK requested Mr. Orman to qualify from the legal
point of view that HB 52, as written without the amendment,
mitigates the liability for a lawsuit.
MR. ORMAN answered that HB 52, as written without the amendment,
would return these hatchery lands to public domain land. This
would cure the disposal problem, he explained, because with the
lands now being public domain land the only issue as far as
disposal in this context would be public notice. All the cases
that were cited talked about disposal of general state land and
that state sales provide sufficient public notice prior to the
disposal. If these lands that are removed from the park become
general public domain lands, then at that point the only real
issue that remains would be the opportunity to provide public
notice. All of which is to say that if these are removed from
the park it allows for the agencies to manage these lands how
they ostensibly would want to manage them and removes the
exposure that currently exists because legislatively withdrawn
lands cannot be disposed of by the executive branch.
2:14:00 PM
REPRESENTATIVE FIELDS stated he understands that narrow
perspective on legal issues. But, he contended, the broader
legal issue is that the purpose of this bill is to perpetuate a
hatchery that has financial exposure questions for the state
itself and is sustained by salmon enhancement tax paid by about
1,100 Cook Inlet fishermen, where pinks in Cook Inlet are
between 1.4 percent of ex-vessel value for the drift fleet and
2.1 percent for the setnet fleet. There are about 17 seiners
for whom these pinks are some 45 percent of ex-vessel value.
Over 1,100 people paying taxes to sustain this hatchery where a
very small number of people get a significant share of plurality
of their ex-vessel value from the pink fishery. Testimony was
heard from tourism operators about the value of Kachemak Bay in
terms of the tourism resource. Tutka Bay is the least developed
of the bays; it has tourism value in that sense. It is hard to
show, Representative Fields argued, that HB 52 provides for the
maximum benefit as per the constitution, and that is the broader
legal problem had with the bill. The bill is designed to
perpetuate a financially risky hatchery that benefits a tiny
number of purse seiners at the expense of over 1,000 drift and
gill netters, tourism operators in Homer, and the public at
large with an interest in the state park.
2:16:01 PM
MR. RABUNG pointed out that the pink salmon produced at Tutka
Bay Lagoon Hatchery are also the cost recovery mechanism that
supports the Lower Cook Inlet lakes sockeye program. Leisure,
Hazel, and Kirschner Lakes, and Tutka Bay Lagoon are all release
sites for those sockeye salmon where commercial and
noncommercial common fisheries occur. Without those pinks
paying the bill, that program goes away; that is a piece of the
equation that needs to be on the table. Further, CIAA's program
is an integrated program, so cost recovery that comes from one
location funds projects in other locations. Hidden Lake sockeye
on the Kenai River system is one of those projects that produces
between 40,000 and 80,000 sockeye a year for the common property
fishery. Pike control, Elodia control, and beaver dam notching
are CIAA projects done on the Matanuska-Susitna and these
projects funded with those pink salmon. So, it is not as simple
as saying 17 seiners are the only beneficiaries; it's part of a
portfolio. Investigation of CIAA can be done by talking with
the association and looking at its paperwork, which is posted
online. However, Mr. Rabung stated, that is not at issue here;
what is at issue is ADF&G's hatchery. The department can get a
different operator, but it is still the disposal of land issue.
The one thing that DNR and ADF&G agree on is that the state has
invested in this hatchery; it has been operated by both ADF&G
and the private sector since the late 1970s, and state bonds
built it. It has only recently come to light that the agreement
for the land use is in question, and that is what this bill
remedies. It is not about the hatchery itself; it is about
remedying the land use, curing that obligation and legal
jeopardy for the state, and the provision within HB 52 that
allows the land to revert to park land if ADF&G ceases to
operate the hatchery and remediates the site. From ADF&G's
perspective, it seems like a win-win.
2:19:08 PM
REPRESENTATIVE FIELDS argued that differentiation must be made
between the function of the pink hatchery and the function of
collecting sockeye eggs which are then reared at Trail Lakes.
The collection of those eggs is a less facility-intense
operation. This is not the only hatchery and most of them do a
lot better at cost recovery. If collecting sockeye eggs is
going to continue at Tutka Bay, the real question is, What is
the most efficient, lowest risk way to the state to do that and
is there a pink hatchery to support it? He said he thinks that
that is a very dubious argument financially. He continued with
a second part to his question and asked whether the other array
of hatcheries should be used as part of that ecosystem. He
maintained that sockeye eggs could be collected at Tutka Bay
Lagoon without a pink hatchery.
2:20:17 PM
REPRESENTATIVE VANCE stated that Mr. Rabung addressed a lot of
the issues. She pointed out that the 2.8 percent fisheries
enhancement tax is self-imposed by the fishermen who have a vote
on that and can make changes at their discretion, so it is not
being imposed upon them. The fishermen find that this tax and
the hatcheries in the portfolio are beneficial to them as
commercial fishermen as well as to the community. She related
that she has had commercial fishermen tell her that they are
glad they support personal use fisheries for the community to be
able to harvest food for their families. This is not just about
the hatchery, she continued. This is about the entire region
being able to meet everyone in the middle, and she said she
believes HB 52 does that specifically with the "reverter"
language, which provides that if the hatchery does not continue,
the lands carved out from the lagoon would go back into the
state park. Legislators have a duty to do what is best for the
people but also a fiscal responsibility for the state, she said,
and HB 52 does that.
2:21:48 PM
REPRESENTATIVE HANNAN inquired whether there are fiscal notes
from the agencies to comply with Amendment 1's report request.
MR. RABUNG replied that ADF&G has not done the analysis. He
said the amendment's language is vague and it would depend on
how detailed a study was done. A ballpark figure for a
fisheries biologist, travel, and support would be in the range
of $100,000-$130,000 a year. He advised that ADF&G's budget has
been cut to the bone and is at the point where any additional
cuts will mean reductions in fishery opportunity. Definitely,
funding would be needed to take on this work.
MS. ALVAREZ replied that DNR also has not had the opportunity to
do the analysis. She said she thinks there will be a fiscal
note but cannot put a figure on it at this time.
2:23:45 PM
REPRESENTATIVE HANNAN asked if any nearby properties outside the
existing state park boundaries have been identified by DNR and
ADF&G as being adequate for a hatchery, or if the carve-out is
the only land resolution that has been pursued.
MS. ALVAREZ answered that there were discussions with ADF&G, but
it is not something that DNR looked to in terms of the options
available to the department. She said CIAA has another hatchery
facility in Port Graham that was started up during the time the
plan was being developed, and it is her understanding that there
are issues with that facility. But, she continued, that is
beyond the scope of what DNR was trying to address during the
plan process.
MR. RABUNG replied that by statute and ADF&G guidance there is
very strict guidance on where a hatchery is allowed to be put,
and there are no available locations in the vicinity where ADF&G
could permit a new facility. He advised that the Port Graham
facility was built by the Port Graham Corporation on Port Graham
land; it was repossessed by DCCED, and CIAA bought the facility
from DCCED. It is very limited on water and could not take up
the program. So, no, there are no other locations, he stated,
this is it. If the land use agreement between DNR and ADF&G
goes away, then this hatchery goes away, and the sockeye
production in Lower Cook Inlet lakes ends.
2:26:44 PM
REPRESENTATIVE SCHRAGE recalled it being mentioned that [CIAA]
is current on its payments but observed from a CIAA profit and
loss statement that a profit was turned in only two of the last
10 years. He further observed that those profits are vastly
overwhelmed by the losses in the other eight of the 10 years.
He inquired about the viability of the hatchery and how that
would be used for cost recovery.
MR. RABUNG responded that it comes back to the portfolio effect;
CIAA operates many projects and has several sources of revenue.
The cost recovery from the pinks and sockeye is one piece. It
is also important to note that by law these are nonprofits and
not supposed to turn a profit; their mission is to provide fish
for the common property and pay their own way. He said CIAA is
in good standing with DCCED as far as its debt. He offered his
belief that CIAA's total combined corporate debt is around $14
million and said CIAA makes its annual loan payments from all
its revenue sources combined.
MR. RABUNG related that he has spent his career managing these
programs and understands how they work. His prior position was
as Aquaculture Section chief and before that, he was the Private
Nonprofit (PNP) Hatchery Program coordinator for ADF&G. Every
one of the 26 hatcheries operating in Alaska uses pinks and/or
chums as their cost recovery fish to pay for all their other
programs. Sockeye, coho, and chinook do not pay for themselves;
they all are paid for by the pinks and chums which are the
bread-and-butter fish that pay the bills. It's an intricate
portfolio and each organization is a little bit different, but
they are all nonprofits run by boards of directors made up of
the permit holders who voted to tax themselves to operate these.
Their operations and finances are available for anyone to look
at. Regarding HB 52, Mr. Rabung said ADF&G is interested in
continuing to operate this hatchery either by itself or at no
cost to the state through a PNP contractor. Twelve of the
department's hatcheries are contracted to the private sector and
this hatchery is one of them.
2:30:10 PM
REPRESENTATIVE SCHRAGE stated that in having an accounting
background he can appreciate a portfolio and one company under
an umbrella organization subsidizing the efforts and activities
of another sub-corporation. He asked whether it would not be
expected for a hatchery to turn a profit if it predominantly
rears pink salmon as its cost recovery fish. He further asked
whether any other hatcheries are turning a profit under their
umbrella or whether all are producing a loss.
MR. RABUNG reiterated that nonprofits cannot produce a profit.
They can be viable and can build reserves but cannot produce a
profit. The boards of directors of these hatcheries are made up
primarily of commercial fishermen. The feedback mechanism if a
hatchery starts generating more cost recovery than it needs is
that the fishermen on its board would rather catch those fish
themselves. So that is the mechanism to ensure the common
property fishery maximizes. On average statewide, the PNPs
contribute roughly 80 percent of their returns to the common
property harvest and the other 20 percent goes to cost recovery
and brood stock. That is a good return on investment and
certainly better than when ADF&G operated it and didn't conduct
cost recovery; it was funded by general funds up until that
point. The department has contracted out hatchery operations
since the late 1980s/early 1990s when the statute was passed,
allowing ADF&G to do so. Each of those facilities has paid its
own way; they are not supported by general funds or any other
funds from the state. There is a revolving loan fund that the
hatcheries can access to get through lean times, and CIAA has
gone through some lean times but is in good standing on its loan
payments. Mr. Rabung said he understands the revolving loan
fund has generated significant revenue from the interest rate
that is applied, so it has been a good return on investment for
the state. Pieces of the revolving loan fund have been carved
out and used for other projects. The CIAA's board of directors
comprises permit holders who pay the salmon enhancement tax, a
voluntary tax that they voted to impose on themselves. The CIAA
board has chosen to continue to operate this program and keep it
as a piece of CIAA's portfolio, but [CIAA's finances] are not
the topic of this bill.
2:34:08 PM
REPRESENTATIVE SCHRAGE remarked that he and Mr. Rabung have a
different understanding of how nonprofits function. With 10
years before this comes to a head, he said he doesn't understand
why not take the time to better understand this fishery, its
function within the Kachemak Bay area, as well as the impact on
it to the local wildlife and others that have been expressed by
citizens of the area. Public testimony has been very divided on
this issue, and he is trying to understand why not hit the
brakes and take the time to understand this issue better. He
inquired about the exposure to the state because of this ILMA
and the justification for taking this seemingly very
controversial position during this legislature.
MR. ORMAN answered that he does not have the number for a dollar
amount. To the best of his knowledge, this concern about a
disposal here, came to being around 2016-2017 and was mentioned
in part of the plan and the plan process for DNR, Division of
Mining, Land and Water. Regarding the disposal issue and the
legal exposure, he would foresee that someone would sue about
the hatchery based on comments that DNR has received and
comments that he has heard, including during the testimony
pursuant to this bill, he thinks the public is aware of the
legal problems here and the exposure. With all that he has said
to the committee today, he has arguably provided a road map in
some ways for a potential complaint if somebody wanted to file
that. The legal problems are clear. So, when talking about the
exposure, if someone filed a lawsuit, he questioned whether the
lawsuit would be successful. It is his job to look at this and
determine whether that possibility exists, and he believes it
exists here. Mr. Orman said he believes it is a kind of a
disposal problem pursuant to this hatchery, and the problem is
two-fold. One, the ILMA is separate and the problem with the
ILMA pertains to a potential violation of AS 41.21.131 and the
legislative mandate for who is supposed to be managing these
lands. Two, the disposal is more specific and pertains to the
agreements that exist here, the debts, the loans, the financial
interests, and the desire for CIAA to continue to operate this
hatchery to secure a return on those loans on that debt. He
noted that the security assignment by ADF&G and the deed of
trust that was filed by DCCED were recently put into BASIS. The
deed of trust is until 2066, so the understanding would be that
CIAA would ostensibly continue to operate this hatchery in some
way to allow for the full return of the $922,500 loan. He does
see strong exposure for the state. [Part of the urgency] is
that this is a strong legal problem and therefore trying to find
a solution to resolve that would be best.
2:39:05 PM
CHAIR PATKOTAK inquired about the probability of the hatchery
having to shut down with the success of a lawsuit.
MR. ORMAN replied that if someone filed a lawsuit challenging
the ILMA and asserting that there is a disposal of lands here,
he thinks the necessary result of that potential disposal and of
that litigation would be ending hatchery operation. He said he
cannot see that if somebody was successful in suing the state
here and presented the argument the way he thinks it would be
presented, they would lead anywhere but hatchery operations
ending in this location.
2:40:05 PM
CHAIR PATKOTAK requested Ms. Alvarez to provide initial capital
costs from the state to open the hatchery, and the overall worth
of the fish produced, to provide an understanding of the
financial fallout from closing the hatchery if a lawsuit were to
be successful.
MS. ALVAREZ concurred with Mr. Orman's statements and said she
doesn't know the financial impacts because DNR isn't in the
business of managing hatcheries. She said DNR supports HB 52
because it provides a legislative solution to these disposal
problems and an alternative to having the hatchery shut down.
She deferred to ADF&G to answer questions about hatchery
operations and their costs.
2:41:39 PM
REPRESENTATIVE SCHRAGE noted that the discussion has been about
the legal exposure to not curing this land disposal issue. He
asked whether there is any legal risk that the legislature would
be sued for passing HB 52.
MR. ORMAN answered that, as he reads the legislation as drafted
without Amendment 1, the purpose would be to remove the hatchery
from Kachemak Bay State Park and as a result, those lands would
be public domain lands. He said he believes that this cures the
disposal problem. He further said he believes it is well within
the legislature's authority to adjust the boundaries under
Article 8, Section 7, which provides the legislature the
authority to set aside lands and special purpose sites. Also,
he continued, the legislature has the authority to adjust those
boundaries and to determine what the boundaries of the park
should look like.
REPRESENTATIVE SCHRAGE offered his understanding that eggs can
be collected with a very limited footprint and rearing done at
Trail Lakes, then continuing to stock the other surrounding
areas. He asked whether it can be said definitively that
sockeye production would cease and inquired about what would
prohibit the continuation of sockeye production.
MR. RABUNG replied that there are two things. One is that the
land would still be occupied. A pipeline comes from the creek
to feed the lensing bags, and somebody must be on site for
collecting the fish and then holding them in the lensing bags
for several months until the egg-take occurs. The facilities
would have to either be brought in and out or the existing
facility utilized, which is on the land that is part of the
ILMA, so that issue remains. The second part is a question of
financial support. The only entity permitted to do this work is
CIAA, and CIAA funds the work itself. He questioned how CIAA
would continue to do the work if it loses its funding mechanism.
CHAIR PATKOTAK commented that it would be safe to say that,
regardless of what fish are being hatched, operating the
hatchery is still incompatible with the park land, which is the
whole purpose of the bill.
2:46:11 PM
CHAIR PATKOTAK removed his objection to the adoption of
Amendment 1 to Version D. He asked whether there was further
objection. He noted that someone [unidentified and inaudible]
had objected.
2:46:30 PM
A roll call vote was taken. Representatives Fields, Hopkins,
Hannan, and Schrage voted in favor of Amendment 1.
Representatives McKay, Cronk, Rauscher, Gillham, and Patkotak
voted against it. Therefore, Amendment 1 to HB 52, Version D,
failed by a vote of 4-5.
2:47:11 PM
REPRESENTATIVE HOPKINS moved to report CSHB 52, Version 32-
LS0327\D, Bullard, 2/4/22, out of committee with individual
recommendations and the accompanying fiscal notes.
2:47:25 PM
REPRESENTATIVE FIELDS objected. Taking land out of the state
park, he opined, needs to be done as a last resort if there is
no other option, and only if it is clearly compatible with the
overwhelming will of the public. In this case, it was the
public process on the park plan that determined this particular
use was incompatible. To second guess that, he would have to
see overwhelming public opinion from the region, but very mixed
opinion was heard before the committee. Additionally, he has
not seen the case made that red salmon cannot be reared, which
is the use that most people in the region support, namely the
China Poot fishery. He maintained that it has not been
demonstrated that reds cannot be reared here without rearing
pinks here. He said an important question is whether the egg
collection of those reds would be more compatible with the state
park plan compared to eggs plus a pink hatchery. It is a high
bar to withdraw those lands, Representative Fields continued.
It is important to consider all uses when looking at the
resource of the park in the bay, not just each type of fishery
but also the other economic benefits in the area. Public
comment included a lot of local tourism businesses in opposition
to the bill because of the economic impacts, which is an
important thing to take into consideration. Given the [10-year]
time horizon, he does not see a reason to rush to pick one thing
that seems incompatible with the public will as expressed
through a state park plan and incompatible with most of the
public testimony seen by the committee. For these reasons, he
said, he will be voting no.
2:49:49 PM
REPRESENTATIVE HANNAN stated she has grave concern about [the
legislature] changing the boundaries of this long-standing state
park at this juncture. The only precedent for removing lands
from a prior created state park was for a gasline easement
anticipating a major economic infusion to Alaska. Since that
easement has never had to be exercised, the public has had no
loss of use of that land as if it were still part of Denali
State Park. This circumstance is entirely different, she
continued, and some of the committee's discussions are shaded
with fish politics, which she wants to separate from the land
use. The problem as presented is that there is an exposure and
liability. But, she opined, she doesn't know that this is a
solution that gets to a place that she is comfortable with
regarding Kachemak Bay State Park. However, Representative
Hannan continued, having hatcheries in Lower Cook Inlet is
clearly a significant economic driver. She would like to pursue
looking at another hatchery in another location, which she does
not believe has been fully explored. She said she is going to
vote no on the bill because the carve-out from the state park is
a significant precedent and is separate from the fish politics.
2:51:42 PM
REPRESENTATIVE SCHRAGE said he doesn't necessarily oppose the
carve-out and the hatchery very well may be viable and serve the
best interest of the state. However, from the testimony and
listening to DNR and ADF&G, he opined, he doesn't know that the
case has been made that this meets Alaska's constitutional
requirement that the state's lands and waters be managed for the
best interest of the people. There are 10 more years to find
more information; there are lists of studies that are currently
ongoing. If ADF&G and DNR thought the cost was the prohibitive
factor here, he doesn't know that that means action should be
taken blindly because the cost cannot be afforded. Over the 10-
year horizon, more can be learned about the impact of this
hatchery, the financial viability of it, and the interplay
between the pink salmon, the cost recovery, and CIAA's other
operations. Representative Schrage further stated he doesn't
know that a proper case has been made that due diligence has
been done for ensuring that this is truly in the best interest
of the people, which public testimony before the committee
highlights. There are pages and pages of legitimate concerns
over the impact on other wildlife and how this impacts state
policy. He stressed that he doesn't want his vote to be
interpreted as being against this bill or against continuing
hatchery operation or against carving out this portion of the
park for the use of the hatchery. However, he thinks this is
rushed and action should not be taken at this time, so he is
going to vote no on the bill.
2:53:27 PM
REPRESENTATIVE FIELDS maintained his objection to the bill.
2:53:34 PM
A roll call vote was taken. Representatives Gillham, Rauscher,
Cronk, McKay, and Patkotak voted in favor of moving CSHB 52,
Version 32-LS0327\D, Bullard, 2/4/22, out of committee with
individual recommendations and the accompanying fiscal notes.
Representatives Schrage, Hannan, Hopkins, and Fields voted
against it. Therefore, CSHB 52(RES) was reported out of the
House Resources Standing Committee by a vote of 5-4.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 209 Sponsor Statement 2.16.2022.pdf |
HRES 2/16/2022 1:00:00 PM HRES 2/23/2022 1:00:00 PM |
HB 209 |
| HB 209 Supporting Document DNR Letter of Support 2.16.2022.pdf |
HRES 2/16/2022 1:00:00 PM HRES 2/23/2022 1:00:00 PM |
HB 209 |
| HB 52 Supporting Document Deed of Trust and Security Assignment Lease with DCCED 2.14.2022.pdf |
HRES 2/14/2022 1:00:00 PM HRES 2/16/2022 1:00:00 PM |
HB 52 |
| HB 52 Amendment Schrage D.1 2.14.2022.pdf |
HRES 2/14/2022 1:00:00 PM HRES 2/16/2022 1:00:00 PM |
HB 52 |
| HB 52 Testimony Received as of 2.16.2022.pdf |
HRES 2/16/2022 1:00:00 PM |
HB 52 |
| HB 52 DCCED Amendment D.1 Response 2.14.2022.pdf |
HRES 2/16/2022 1:00:00 PM |
HB 52 |