05/06/2021 10:00 AM House FISHERIES

         HB 188-SEAFOOD PRODUCT DEVELOPMENT TAX CREDIT                                                                      
                                                                                                                                
10:12:39 AM                                                                                                                   
                                                                                                                                
CHAIR TARR  announced that the  final order of business  would be                                                               
HOUSE  BILL  NO. 188,  "An  Act  relating  to a  seafood  product                                                               
development  tax  credit;  providing  for an  effective  date  by                                                               
repealing secs.  32 and 35, ch.  61, SLA 2014; and  providing for                                                               
an effective date."                                                                                                             
                                                                                                                                
10:13:05 AM                                                                                                                   
                                                                                                                                
SARA PERMAN,  Staff, Representative  Louise Stutes,  Alaska State                                                               
Legislature,  presented  HB  188   on  behalf  of  Representative                                                               
Stutes, prime sponsor.   She said the  proposed legislation would                                                               
extend  the sunset  date  for  a tax  credit  applied to  seafood                                                               
processors  to December  31,  2025, and  extend  the seafood  tax                                                               
credit on  salmon and  herring to also  include cod  and pollock.                                                               
This  credit  allows processors  who  have  invested in  updating                                                               
their equipment  to process  more byproduct  - thus  getting more                                                               
value out  of the  fish - to  receive up to  50 percent  back for                                                               
that investment.  Finding additional  uses for each fish, such as                                                               
for bone meal  or fish oil supplements, adds to  the value of the                                                               
fish.   Extending  the credit  to  pollock and  cod is  valuable,                                                               
because they make up about 60 percent of Alaska's fish harvest.                                                                 
                                                                                                                                
10:15:34 AM                                                                                                                   
                                                                                                                                
CHAIR  TARR  announced  the committee  would  next  hear  invited                                                               
testimony.                                                                                                                      
                                                                                                                                
10:15:56 AM                                                                                                                   
                                                                                                                                
CHRIS    BARROWS,   President,    Pacific   Seafood    Processors                                                               
Association,  noted written  testimony  had been  submitted.   He                                                               
said  the  Pacific Seafood  Processors  Association  (PSPA) is  a                                                               
nonprofit trade association founded  in 1914 that comprised eight                                                               
major  seafood processing  companies around  the state.   Members                                                               
operate  25 facilities  in 15  communities, including  3 floating                                                               
processors.   He said  the bill's  proposed inclusion  of pollock                                                               
and cod is  important because it would create  the opportunity to                                                               
obtain more  value from high  volume species over the  long term.                                                               
He pointed  out that more  value added to fishers  and processors                                                               
means  more value  to  local governments  and  the state  through                                                               
taxes  based  on  the  value  of  fish.   He  said  HB  188  also                                                               
incentivizes  greater  use  of   each  fish,  which  would  allow                                                               
processors to  invest more in  product development  and marketing                                                               
for  ancillary  products.    He   emphasized  the  importance  of                                                               
diversity in  returning value to  the state.  Mr.  Barrows talked                                                               
about an  attachment to the  letter in the committee  packet that                                                               
includes a summary  of conclusions and description  of net gains.                                                               
He  said  analysis  indicates  that  this  program  has  directly                                                               
contributed to the generation of  an additional $114.4 million to                                                               
the state's general fund.                                                                                                       
                                                                                                                                
10:21:13 AM                                                                                                                   
                                                                                                                                
MARK  PALMER,  President/CEO,  OBI Seafoods,  said  OBI  Seafoods                                                               
[name  derived from  the  merging of  Ocean  Beauty Seafoods  and                                                               
Icicle Seafoods] has 10 processing plants  in Alaska.  He  stated                                                               
that OBI  Seafoods supports HB 188;  [the tax credit] works.   He                                                               
highlighted the need to use every  bit of protein from each fish,                                                               
because the harvest  count can change notably from  year to year.                                                               
He spoke  about the  U.S. market  being the  biggest in  terms of                                                               
Alaska seafood,  and pointed out  the benefit of  sending product                                                               
to  the   Lower  48  rather  than   internationally  where  other                                                               
countries create the  jobs and the value-added product.   He said                                                               
this [tax  credit] has a proven  track record for over  15 years;                                                               
co-investment  adds   jobs  in  Alaska  and   investment  to  run                                                               
sophisticated  equipment.   Further, he  related that  those jobs                                                               
are "higher  paying than the  typical production working  jobs in                                                               
our factories."                                                                                                                 
                                                                                                                                
10:24:03 AM                                                                                                                   
                                                                                                                                
JEREMY WOODROW,  Alaska Seafood Marketing Institute,  stated that                                                               
the  Alaska  Seafood  Marketing  institute  (ASMI)  supports  all                                                               
efforts to increase  the value of Alaska's fisheries,  and HB 188                                                               
will provide  the industry  the incentive  and support  needed to                                                               
continue  investing in  processing facilities  and creating  more                                                               
value in seafood.  Mr.  Woodrow reported that Alaska's commercial                                                               
fisheries  harvest, on  average,  5.5 billion  pounds of  seafood                                                               
annually.   After  processing  approximately  2.6 billion  pounds                                                               
sold  to  markets  worldwide,  there  are  3  billion  pounds  of                                                               
potential product  that would increase  the value of  the state's                                                               
seafood resources.   He gave examples of products  made with fish                                                               
byproducts and  mentioned other areas in  which additional growth                                                               
is forecasted.   Byproducts used include fish skin  and heads and                                                               
crab shells.   Mr.  Woodrow cited a  McDowell Group  report which                                                               
states that  Alaska's major  shoreside seafood  processors invest                                                               
over  $100 million  annually in  capital expenditures.   He  said                                                               
expanding  value  makes  it  possible  for  companies  to  expand                                                               
seafood  plants, expand  production  lines, and  pay higher  fish                                                               
prices, all of  which benefit local communities.   He said market                                                               
research  shows  that  consumers  want  high-quality  convenience                                                               
products,  and  this  trend  provides  the  opportunity  for  the                                                               
industry  to create  "new,  innovative,  and value-added  seafood                                                               
products" and "match consumer demands,"  and HB 188 would support                                                               
this goal.                                                                                                                      
                                                                                                                                
10:26:37 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE KREISS-TOMKINS  remarked that the addition  of cod                                                               
and pollock  would be a massive  change to the program  and would                                                               
more than  double the  cost to  the state;  therefore he  said he                                                               
wants to be sure "we give  that due diligence."  He remarked that                                                               
pollock is primarily  processed at sea, but then  amended that to                                                               
express that pollock has a  different "value chain to the state."                                                               
He observed  that the taxes  collected on pollock are  a fraction                                                               
of that brought in from salmon.   He asked if someone could speak                                                               
to  what kind  of  equipment  would likely  qualify  for the  tax                                                               
credit, and  what kind of  onshore and offshore  facilities would                                                               
be captured by the proposed legislation.                                                                                        
                                                                                                                                
10:28:05 AM                                                                                                                   
                                                                                                                                
MR. BARROWS  responded that he  was not sure the  assumption that                                                               
pollock was primarily processed at  sea was accurate, and he said                                                               
he would like to look into that  and provide an answer.  He noted                                                               
that there is "a lot of shoreside production for pollock."                                                                      
                                                                                                                                
10:28:53 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS, regarding  the assumption,  noted                                                               
that  he had  "walked that  back."   Nevertheless, suggested  the                                                               
answer  should   be  available  for  consideration   as  to  what                                                               
percentage of pollock  is processed offshore versus  on land, and                                                               
he flagged that as "relevant information."                                                                                      
                                                                                                                                
10:29:23 AM                                                                                                                   
                                                                                                                                
MR. PALMER shared  that OBI Seafoods' Kodiak  facility only heads                                                               
and guts pollock; it does  not produce surimi, for example, which                                                               
would  be "a  much higher  value-use  product."   Its headed  and                                                               
gutted (H&G) pollock is exported  to foreign markets.  He stated,                                                               
"That would be, I guess, one  example of how it could potentially                                                               
be  utilized and  benefit a  shore plant,  create a  higher-value                                                               
product, and also probably focus on a domestic market."                                                                         
                                                                                                                                
10:30:07 AM                                                                                                                   
                                                                                                                                
CHAIR  TARR   opened  public   testimony  on   HB  188.     After                                                               
ascertaining that  there was  no one who  wished to  testify, she                                                               
closed public testimony.                                                                                                        
                                                                                                                                
10:30:14 AM                                                                                                                   
                                                                                                                                
CHAIR TARR said she was considering an amendment deadline of                                                                    
Monday but did not want to rush the process.                                                                                    
                                                                                                                                
REPRESENTATIVE KREISS-TOMKINS proffered that he would desire a                                                                  
lot more information regarding HB 188.                                                                                          
                                                                                                                                
10:30:29 AM                                                                                                                   
                                                                                                                                
CHAIR TARR announced that HB 188 was held over.