Legislature(2017 - 2018)HOUSE FINANCE 519
04/14/2017 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Spring Revenue Forecast: Powerpoint | |
| HB103 | |
| HB76 | |
| HB128 | |
| SB3 | |
| HB167 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | HB 76 | TELECONFERENCED | |
| + | HB 128 | TELECONFERENCED | |
| *+ | HB 167 | TELECONFERENCED | |
| + | SB 3 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 103 | TELECONFERENCED | |
HOUSE BILL NO. 76
"An Act relating to the mariculture revolving loan
fund and loans from the fund; and providing for an
effective date."
3:55:40 PM
REPRESENTATIVE DAN ORTIZ, SPONSOR, mentioned that about 6
weeks prior US Senator Dan Sullivan addressed the Alaska
State Legislature. In his address, he spoke of the robust
fishing industry ($6 billion/year) existing in Alaska. He
spoke about how the State of Alaska provided about 60
percent of the seafood sold within the U.S. He had also
spoken about the need to do everything possible to protect
and enhance the fishing industry. He relayed that HB 76
looked to provide a small jump-start to a potential part of
the fishing industry growing it by another $1 billion/year.
In the previous year, the governor appointed a mariculture
task force with the intent of exploring ways in which to
develop mariculture along the coastal communities of
Alaska.
Representative Ortiz read the sponsor statement:
This bill amends the existing Alaska Mariculture
Revolving Loan Fund to allow up to forty percent of
the fund to be used for loans to permitted shellfish
hatcheries for planning, construction and operation.
Alaska shellfish farms currently do not have a stable
supply of seed for the propagation of oysters, and no
regular, in-state source of seed for resident aquatic
plants and other shellfish. A stable supply of seed is
one of many hurdles the industry must overcome to grow
and become a viable Alaskan industry.
This bill will amend the program to shift its focus
and eligibility from individual mariculture farmers to
include shellfish hatcheries that would market stock
to local Alaskan mariculture farmers.
The mariculture industry in Alaska is not yet fully
developed, and is extremely high risk, from a
financial standpoint. These obstacles make private
financing difficult to obtain, but this bill will
enable Alaskans to maintain their businesses and grow
Alaska's mariculture industry.
Co-Chair Foster relayed a list of available testifiers.
3:59:37 PM
Vice-Chair Gara was hesitant about expanding the use of
hatcheries in the state because of the possible
contamination of wild fish. However, in the legislation
being discussed he only saw changes to the eligibility and
the use of the loan fund, not changes to the ability to
engage in mariculture. He wondered if his assessment
accurate. Representative Ortiz responded that he was
correct.
Representative Wilson asked if the bill offered up to $1
million per year for an applicant.
ELIZABETH BOLLING, STAFF REPRESENTATIVE DAN ORTIZ,
explained that the $1 million per year limit only applied
to the 40 percent (non-profit associations and enhancement
projects). She expounded that the cap for one loan would be
$1 million. However, she did not believe it was likely for
people to ask for $1 million loans due to the collateral
requirements.
Representative Wilson wanted to know the number of loans
that were $1 million. She pointed to page 5, lines 27-31 of
the bill. It stated that the department could defer the
principle of and interest on a loan made under the terms of
the bill for a period of up to 11 years after the loan was
made. She argued that it was a long time. It also appeared
that the state could deter the interest between 6 years and
11 years. She wondered if the terms were based on an
outside model. She thought many people would like the terms
of such a loan. Ms. Bolling replied that the deferred
interest was accrued on individual farmers in the 40
percent category. The 6 years to 11 years was consistent
with the finfish fund, a fund that had been very
successful. She noted that additional deferments applied to
the non-profit associations.
Representative Wilson did not understand the difference
between an individual receiving the loan and a non-profit.
She wondered what type of non-profit would apply for the
loan. Ms. Bolling responded that it was very expensive to
operate a seed supply organization. The payoff was small
and only came over a long period. She suggested it would be
unreasonable to expect a short-term payback. The reason the
bill was needed and why there was a bottleneck in the
growing industry was because there was no substantial gain
from participating in just the seed supply. She opined that
it was necessary for the state to get involved due to the
riskiness of the developing industry. She noted that it was
unlikely to be able to find financing in the private
sector.
Representative Wilson asked Ms. Bolling if she was
concerned that an entity could get into the process and not
be able to pay the money back to the state. Representative
Ortiz deferred to the Department of Commerce, Community and
Economic Development.
BRITTENY CIONI-HAYWOOD, DIRECTOR, DIVISION OF ECONOMIC
DEVELOPMENT AND COMMERCE, DEPARTMENT OF COMMERCE,
introduced herself and asked Representative Wilson to
repeat her question.
Representative Wilson suggested that the bill would allow
her to borrow $1 million with a plan. She could obtain $100
thousand in grant funding to develop her plan. The
committee had just heard that the industry was difficult to
get started and to see returns. She asked if the department
had concerns that the payments would not begin for 11
years. Ms. Cioni-Haywood indicated that the department was
diligent about properly collateralizing the loans to
protect the state's assets. She was more concerned about
the loan fund and its ability to be revolving in the first
decade. Once the payments started returning a revolving
loan fund would be available for the industry.
Representative Wilson asked Ms. Cioni-Haywood about the
number of loans. Ms. Cioni-Haywood responded there were
currently 5 loans all of which were loans made to
individual farmers rather than hatcheries.
Representative Wilson asked about the balances. She had a
figure of approximately $4.5 million in the fund. Ms.
Cioni-Haywood answered that Representative Wilson was
correct.
4:05:53 PM
Representative Pruitt reported that it had been 3 years or
4 years since he had visited one of the farms in Ketchikan.
He recalled that most of the seed was coming from the Puget
Sound area. He wondered if he was correct. Representative
Ortiz responded that there was an organization called
Oceans Alaska in the Ketchikan area that provided seed that
was not in business 4 years previously.
Ms. Bolling added that per a regulation from the Department
of Fish and Game (DFG) all native plants and marine aquatic
shellfish that were produced in the State of Alaska were
required to come from seed created in Alaska.
Representative Pruitt noted that 3 years or 4 years ago
South or Southeast was a great place for this emerging
industry. He asked if some of the seed could be utilized
outside of Alaska. He wondered if the intent was to grow
the industry in Alaska or to possibly to provide seed to
places outside of Alaska to make a profit. Representative
Ortiz responded that the intent of the bill was to promote
local mariculture farms. He understood that the demand for
seed was strong enough that it would like be used up in
Alaska. In the case of Oceans Alaska, he understood they
could not produce seed fast enough for the demand within
the state.
Representative Pruitt asked if there was a market. He
wondered if there would be a challenge to pay the funds in
the future. Representative Ortiz thought it was
appropriate, as it was a developing industry. However,
there was an element of risk. He did not see a way to
develop the industry to get to the point where there was a
viable industry without getting through a period of
relatively high risk.
4:10:05 PM
Representative Pruitt asked if the expansion of the loan
fund - by adding another group - would create a problem
with pressure on the fund at a future time. Ms. Cioni-
Haywood responded that it explained the reason for the
construction of a 40/60 split. She noted that 60 percent of
the fund would remain available for individual farmers. The
remaining 40 percent (set at a particular time so it would
not be in flux) would be available for hatchery and
enhancement projects.
Representative Kawasaki asked about the 40/60 split. He
wondered if the 60 percent portion would be enough for the
remaining mariculture businesses that were originally
listed. Representative Ortiz replied that to-date the fund
had been underutilized. There were currently 5 loans with a
balance of just under $5 million in the fund. The initial
funding amount was $5 million. The industry recognized that
the supply of seed was a problem. If the state were to see
an increase in the manufacturing of seed resulting from the
40/60 split, then it was possible there would also be an
increase in the number of farmers interested in getting
into the business. There would likely be an increase on the
demand of the remaining 60 percent. He noted Ms. Cioni-
Haywood talking about the fund initially not having a
revolving nature because of the funds being expended. He
thought it was better to have a fund that was being used
rather than underutilized.
Co-Chair Seaton noted that there was a shellfish hatchery
in Seward focused on a King Crab project. He reported that
the oyster farms in the area were having difficulty getting
seed. He clarified that seeds other than oyster seeds could
not be brought into Alaska. Oyster seeds were grandfathered
in. Currently, because of warm waters, the State of
Washington's seed production was down significantly.
Farmers in Alaska had to have new seed each year if they
were harvesting annually. He concluded that without a good
seed supply, the business model would not work. He wanted
to make sure to report that the bill was not only related
to Southeast Alaska. He mentioned another bill that had
passed regarding Geoducks. It was 9 years to 11 years
before Geoducks were harvestable. He suggested that putting
off the payment of principle and interest was necessary. He
pointed out that a farmer might have a valuable product
with a lengthy cycle. He mentioned that previously Geoducks
could not be planted or farmed anywhere outside of
Southeast Alaska. It did not make sense because they did
not reproduce naturally further North. However, North could
provide a great growing area. He cited a village
corporation project in the Port Graham area.
4:15:42 PM
Co-Chair Foster OPENED Public Testimony.
4:16:05 PM
TAMSEN PEEPLES, LEAD ALASKA OPERATIONS, BLUE EVOLUTION,
JUNEAU, spoke in favor of HB 76. Blue Evolution was a
company developing commercial seaweed maricultures in
Alaska. The previous August she constructed and operated
the first commercial kelp hatchery in the state located in
Juneau, Alaska, at the University of Alaska Southeast in
the Anderson Building. She produced over thirty thousand
feet of seeded line and distributed it to three independent
Alaskan growers: two out of Kodiak and one out of
Ketchikan. The first harvest of material would occur the
following week. The company aimed to collect over thirteen
thousand pounds of kelp that grew from its independent
farmer from seed material produced in Juneau. Her company
would be purchasing the product from the farmer, drying it,
and making added value products such as a seaweed pasta.
Her company was already producing the pasta and selling it
online. As Representative Ortiz mentioned, seed was a huge
choke point in production even within her own company. All
three independent farmers applied to increase their farm
space substantially. The company would be going over 500
percent production from the past year. She relayed that
having access through the mariculture revolving loan fund
to the hatcheries would greatly increase Blue Evolution's
production but all other shellfish and seaweed hatcheries
throughout the state. As an Alaskan and marine biologist,
she whole-heartedly supported the industry in its entirety.
4:18:00 PM
JULIE DECKER, ALASKA FISHERIES DEVELOPMENT FOUNDATION,
JUNEAU, spoke in support of HB 76. She explained that her
organization broadly represented the seafood industry from
harvesters, processors, and support sector businesses. The
foundation had a vision to grow a $1 billion industry in 30
years. The foundation believed that there was a major
opportunity in developing mariculture in the State of
Alaska including wild fishery enhancement, aquatic farming,
and restoration of shellfish and aquatic plants. She
mentioned that finfish farming was off the table and not
allowed in the state. The organization believed there was
serious opportunity available. She mentioned examples in
the State of Washington and provided some statistics. She
also noted an announcement in a publication that China was
making a $200 million investment in Eastern Russia to grow
sea cucumbers, mussels, and scallops - three species
present in Alaska. The foundation firmly believed there was
an opportunity. In addition to supporting HB 76, she
offered that the following bill, HB 128, was also a part of
the building blocks needed to develop the industry
efficiently. The governor's mariculture task force agreed
that the two bills were necessary and supported both bills.
There was also a list of 16 other organizations from across
the state that supported the bills. She also mentioned the
support of the farmers because they needed a consistent
source of seed. She thanked the committee.
4:20:20 PM
TOMI MARSH, BOARD MEMBER, OCEANS ALASKA, KETCHIKAN (via
teleconference), spoke in support of HB 76 and HB 128.
Oceans Alaska was a non-profit shellfish hatchery. The
company started producing oyster seed prior to 2015 and
wanted to expand into seaweed and geoduck seed. It went
from producing 5.0 thousand oyster seeds to about 10.0
million oyster seeds. The non-profit's ability to produce
seeds would allow more expansion by existing and new
Alaskan businesses and farmers and would help with
rehabilitation and enhancement. She reported that the
Ketchikan Gateway Borough had invested over $600 thousand
of economic development funds to Oceans Alaska. Many
individual board members had also contributed. There was a
significant amount of local support for the hatchery. She
indicated that if the bill passed Oceans Alaska would
pursue a loan from the Mariculture revolving loan fund,
which would help stabilize its existing operations and
allow for expansion.
4:22:06 PM
ERIK O'BRIEN, SOUTHWEST ALASKA MUNICIPAL CONFERENCE
(SWAMC), ANCHORAGE (via teleconference), spoke in favor of
HB 76. He was an independent farmer and intended to apply
for a mariculture loan. He thought kelp mariculture was a
stepping-stone into other mariculture activities. He also
planned on participating in hatchery operations.
4:23:33 PM
DOUG GRIFFIN, SOUTHWEST ALASKA MUNICIPAL CONFERENCE,
ANCHORAGE (via teleconference), spoke in support of HB 76.
He explained that about 4 years prior SWAMC had become
interested in mariculture as a development initiative to
increase economic activity. It was seen as a perfect fit in
communities that were experiencing a loss of fisheries
access. Coastal communities were well placed to succeed in
the mariculture industry. The bottleneck for development
was access to capital to get into what was considered by
regular banks as a speculative industry. The initiative
SWAMC started 4 years ago had not gained momentum for the
reasons he mentioned. He opined that Mariculture was
complimentary to other fisheries and would be a great
initiative of job creation. He relayed that high value
products in demand worldwide would come from the industry.
He asserted that along with the initiative the state would
need to move to marketing and other items. He noted that
Kodiak was actively looking at permitting and access to
capital within the mariculture industry.
Co-Chair Foster CLOSED Public Testimony.
Co-Chair Foster relayed that amendments were due in his
office by Tuesday, April 17th.
HB 76 was HEARD and HELD in committee for further
consideration.