Legislature(2001 - 2002)
04/02/2001 03:35 PM Senate RES
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
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SB 141-AQUATIC FARMS FOR SHELLFISH CHAIRMAN TORGERSON announced SB 141 to be up for consideration. MR. DARWIN PETERSON, staff to Senator Torgerson, sponsor, described the bill as follows. The Alaska Department of Fish and Game [ADF&G] recently proposed new mariculture regulations that were met with sharp criticism from the aquatic farming industry. The industry feels that the proposed regulations impose such restrictive and unreasonable operational procedures for farmers that, if implemented, [they] would constitute a regulatory ban on shellfish farming in Alaska. SB 141 is a good faith effort to mitigate the unsatisfactory relationship between the aquatic farming industry and the department. This legislation is also intended to preserve an industry that has been proven successful in diversifying the economy of Alaska. SB 141 requires the Department of Natural Resources [DNR] to offer public leases on 60 suspended shellfish sites, 20 clam sites and 20 geoduck sites. These leases are in addition to permits already issued. The leasing program charges more money for sites rich in harvestable shellfish and less money for barren sites. If shellfish are located on the site, the farmer must abide by the sustained yield principle of management when harvesting the wild stock. When selecting the sites for lease, the commissioner of DNR must solicit nominations from the industry and select sites that don't interfere with established commercial, subsistence, or personal use. SB 141 is intended to maintain the existence and prosperity of a viable Alaskan industry without interfering with other user groups. SENATOR TAYLOR asked how the value of a site is determined. MR. PETERSON said he assumes the department has that information when it is charged with finding the fair market value. SENATOR TAYLOR said that part of his concern is that before one could acquire a site, [ADF&G] would have to make a valuation of the shellfish onsite. That might create a situation in which only wealthy fishing organizations, perhaps from offshore, could bid on them. MR. PETERSON said that is correct, but the intent was not to deal with the common property clause, which has been a very contentious issue with the state and the industry. Leasing these sites and having the industry pay the state for the stock is one idea in an effort to get around the common property clause. He suggested, "There may be a better way to do that." SENATOR TAYLOR agreed saying that the common property clause is probably one of the more difficult aspects to work with in this area. CHAIRMAN TORGERSON said they would continue to discuss the issue until they get it figured out. Number 2200 MS. ROBERTA HIGHLAND, Kachemak Bay Conservation Society (KBCS), asked if this applies to residents only or whether it would allow large corporations to come in. CHAIRMAN TORGERSON said his intent was to take testimony on the bill today [and not to take action on it]. MS. HIGHLAND responded that while the KBCS recognizes the importance of supporting a sustainable industry like mariculture, it is concerned about how the industry grows, where it is located and how it is regulated. SB 141 and HB 208 mandate leasing 90 sites statewide to different mariculture uses. The KBCS does not see the need to mandate leases. As needs develop, the agriculturists find suitable locations. Sites should be evaluated for suitability and consistency with state laws. She said that a disposal of this number of sites all at once would overburden the fishery managers and not allow complete evaluation. She also said that as mariculture expands into new areas, they have to be certain that conflicts between user groups are resolved. She said, "ADF&G does a good job in its analysis of available information and public input. Literature about shellfish farming indicates that we should continue vigilance in inspections of shellfish farms to prevent introduction of diseases and exotic species. East Coast oyster farming brought in exotic pests there. In Chesapeake Bay a disease wiped out natural oysters…" She suggested a ban on genetic alterations of shellfish and the use of antibiotics and fertilizers on shellfish farms. MS. NINA FAUST, a Homer resident, said she didn't see a need for this bill because it will artificially speed the growth of this industry faster than it can be monitored. She stated, "Natural growth of this industry is preferable." She said if this bill passes, she would like it to set a maximum number of sites rather than a minimum. TAPE 01-25, SIDE B MS. FAUST asked if residents would be able to comment on the nominated sites. She thought that would be an important part of the process and asked, "Where is the public oversight to protect the public interest?" MS. FAUST said she has concerns about restocking natural stocks with farmed stocks because many of the places where mariculture has proliferated have problems with introduced species and genetic disorders. She also thought this bill would overburden the budgets of the Department of Environmental Conservation (DEC) and ADF&G and they wouldn't be able to do a good job for the state. She had a concern with public auctions, especially if they're not restricted to state residents. They could perhaps bring in outside interests that may outbid local residents. The bill also says that sites must be included in areas where mariculture is already occurring and she is concerned with the numbers in Kachemak Bay (23 leases). MS. FAUST also submitted written testimony from Ann Weiland, who opposed the bill. MR. SCOTT THOMAS, Alaska Trade Mark Shellfish, said his organization is currently involved in a lawsuit with the state and hasn't had a chance to take a position on the legislation. He stated, "At first glance, the bill is a start and you have to start somewhere. I think it forces the department to at least do something here." MR. THOMAS said he thought the first section, which directs the department to establish fair market value, will be cumbersome. The second section, which requires the sites to be restocked, is one of the conditions his organization proposed to the department earlier. It proposed a performance bond on every animal to be held in escrow as a replant. He said, "We are already being taxed on this industry. For example, our company last year, when we acquired our leases, we had to put up $20,000 in bonding to DNR." In addition, they had to pay $6,000 in lease fees and will pay a raw fish tax on the stock they harvest. He thought the bill should concentrate more on propagation and perpetuation of the species, not just the standing stock and its value. MR. RON LONG, Qutekcak Hatchery, Seward, stated support for the idea behind the bill. He said the way to determine fair market value was in statute, but he is concerned that the term "potential productivity" is unclear. He thought, "They could do a better job of returning appropriate value to the state for the resource in a back-end loaded solution rather than a front-end loaded solution, something in the form of a royalty based on what's extracted. If the productivity is null, we can only guess on what productivity will be until we try it." MR. LONG suggested including a provision in Section 3 that would, in addition to charging the commissioner with identifying sites and zones, engage the stake holders in a planning effort that would get them past the perceived conflicts as they arise. MR. LONG told members that no exotic species are being introduced in Alaska. The department has a very strict genetics policy that does not allow genetic modification to the native species. He is not aware of any farms in Alaska that use fertilizers on their sites. Some have commented that this would stimulate big outside interests to come to Alaska and he believes this would be precisely the kind of investment that would be needed to reach critical mass in the industry. He suggested if all other resources are limited to in-state only bidders, that resource industry will be lost. He remarked "That may be okay with some, but it's not okay with me." In reference to comments that there are already too many farm sites and development is happening too fast, he said no new permits have been issued in the last six years. MR. JOHN AGOSTI, Alaska Shellfish Growers Association, said he has problems with the definition of "essential productivity of a site" in section 1. There are too many natural and human factors to realistically and fairly determine potential productivity. Additionally, he would like to see the Department of Community and Economic Development (DCED) involved in the list of agencies in section 3. DCED could play an essential role in selecting sites with community wide planning and a hearing type process. On line 13 he suggested replacing the word "identify" with "planning and select". MS. JANICE ADAIR, Director, Division of Environmental Health, Department of Environmental Conservation (DEC), said she would answer questions. CHAIRMAN TORGERSON asked if she was trying to balance her budget on the one fiscal note. MS. ADAIR responded, "There are some requirements we have to follow under the National Shellfish Sanitation Program and we really didn't know what 'suitable' meant. If 'suitable' was defined as sites that were already in areas certified by DEC, then our fiscal note would be zero. MR. MICHAEL BANGS, a Petersburg resident, said it might be a suitable bill to help aquatic farms, but he is concerned about geoducks. He is on the board of directors for the Southeast Regional Dive Fisheries Association, although he is not representing it today. Their mission is to develop, expand and enhance the dive fisheries in Southeast Alaska. He told members, "When you entered geoducks in this Act, you created a situation where we're mandated by the state to develop the fishery and when you have geoducks being farmed on a site that has existing stocks, it creates conflicts." MR. BANGS explained the reason that many of these areas aren't open for harvest to geoduck divers is because they haven't had the funding from the legislature to expand into the areas. They are in the process of expanding through self-taxation. He said, "If there would have been a little bit more communication, I think they would have found that as a regional dive association, one of the original protocols for developing the geoducks fishery was to reseed the population as we harvest them and do a lot of farming techniques that the farm applicants plan on doing as individuals. We are planning virtually the same thing on a regional basis. All of a sudden, we have a wall in front of us and that really bothers me." He thought in terms of common property law, the legislature is contradicting itself in helping the fishery. MR. RICK HARNESS, a Homer resident, opposed SB 141 and said his area of Kachemak Bay is a critical habitat area that has too much development already. This proposal would cripple the ecosystem even more. He said they have already lost indigenous species, such as crabs and shrimp. Now they are concerned about shellfish being diminished because of the biomass. He noted, "We need to study what we have so we can better manage it." MR. RAY ROWLAND, Aquaculture Specialist, University of Alaska, supported the committee's efforts to resolve the issue and the general contents behind the bill. He said there is a tremendous amount of ignorance about how this industry runs and the impact it has on the environment. He expressed concern about the productivity issue in Section 1 and said, "The potential productivity of a site is often determined by the farmers themselves. You could have a highly productive area with a farmer that's not doing a very good job." He said that productivity is also quite variable from one year to the next. He also expressed concern about the up-front public auction. He said they had talked about placing some kind of assessment on harvested stock as payback to the State of Alaska as the farmer operates that facility. MR. BOB HARTLEY, Alaska Shellfish Association, said he is an oyster farmer in Kachemak Bay. Generally, the bill tries to accomplish a number of things. He sees a couple of problems in Section 1 and the requirement that the value of the lease is to be appraised every five years. He wanted to know what the value would be based on and questioned whether it would be the value of the improved beaches in the area. He thought "productivity" needed clarification. He thought Section 3 gave them a good date to shoot for, but suggested DCED should be involved in the process since new farms would help develop a community. He thought it made sense to get community involvement on an area wide basis rather than statewide. On line 19, he thought the word "interfere" should be changed to "significantly alter" since that is the term used in regulation and the present state mariculture law. MS. JULIE DECKER, Southeast Alaska Regional Dive Fisheries Association (SARDFA), thanked the committee for taking up this issue. SARDFA foresees several problems with offering leases of wild resources to the highest bidder. First, allowing the resource to go to the highest bidder often sets up a system that is beneficial to large corporations and precludes the smaller, independent business person. Second, this form of leasing of wild stocks seems to be following the direction of the state of Washington. Please allow me to give you some information regarding commercial diving and aquatic farming of geoducks in Washington. For its commercial dive fishery, Washington leases tracts of its wild geoducks on sub tidal lands to the highest bidder through its Department of Natural Resources. This system does several things: · It brings in approximately $30 million per year to WA DNR (or 80% of the ex-vessel value). · It yields approximately $.50/per pound to the diver (or approximately 10% ex-vessel value). · It yields approximately $0.50/per pound to the leaseholder (or approximately 10% ex-vessel value). · It allows large Chinese-owned, Canadian companies to dominate the leases and control the geoducks markets. · It precludes management by the WA Fish & wildlife Service and does not allow the commercial industry to employ other management techniques or begin enhancement strategies. · It has encouraged highgrading of geoducks, which may lead to problems with sustainability. SARDFA members believe this is exactly the opposite direction Alaska should be taking to protect the long-term sustainability of the geoducks resource. In the words of a SARDFA member, "Some of the dirtiest words a geoducker can hear are DNR, highest bidder and lease." MS. DECKER told members: However, in Washington, geoducks are being successfully farmed on private, intertidal areas, where very few, if any, wild stocks grow. This example demonstrates that wild geoducks are not needed for biological or financial reasons in order to farm geoducks. The two most important factors in successful geoduck farming are having the proper substrate and having access to seed. Although SARDFA understands the necessity to make suggestions of changes, which will remedy this situation to our satisfaction, SARDFA does not currently see a clear solution to this problem. The next problem SAFDFA sees in this bill is continuing conflicts between existing users in the the geoducks fishery. SARDFA suggests three possible solutions for this problem that could be inserted into these bills: · Require that on-bottom farming sites be intertidal. · Require that on-bottom farming sites have little stocks, for example, setting density levels above which the site would not be suitable. · Require that geoduck farming sites have no wild stocks. In 1997, the divers and municipalities in Southeast recognized that with budget reductions, there was little hope of money being appropriated to develop the dive fisheries. Thus, the divers and the municipalities stepped forward to develop a program in which the divers would tax themselves and work in a partnership with ADF&G and ADEC to develop the fishery in an orderly and economically beneficial manner. SARDFA is glad to report that we are moving forward in a coordinated and productive mode. Senator Torgerson, you were a supporter of our legislation and it is something you should be pleased to have had a part in. SARDFA hopes the aquatic farming industry will be one that is mutually beneficial to the dive industry; not destructive to it. MR. BOB LOEFFLER, Director, Division of Mining, Land and Water, DNR, thanked the committee for taking up this issue but told members DNR has a number of concerns with the bill. He said he believes DNR's program works; a vast majority of applications get approved. SB 141 would make a one-time separate procedure for cultures and the program's real problem is the difference between common property resources with respect to on-bottom culture. His concern is that this bill will not solve that problem but just establishes a new procedure. MR. LOEFFLER said DNR received 45 applications in 1999 and that was after it hadn't had an opening for a number of years. DNR expects to receive an average of 15 - 20 applications for most openings. He noted, "This is a much bigger program; it returns about $48,000 of income to the state in terms of beach rentals." MR. LOEFFLER said DNR is concerned that the requirements for the state to identify locations means it must gather expensive site specific environmental information that's typically gathered by the private sector, such as stock density, water quality, water flushing out and other site specific information. Those are the major costs in DNR's fiscal note. MS. VI JERRA, an Anchor Point resident, opposed SB 141. She said they want the public access and beaches to be kept for public use and not restricted to private uses. She thought private use might be unconstitutional. MR. MAKO HAGGERTY, a Homer resident, opposed SB 141 for several reasons, one being the use of public property for private use. His second concern is restricting the habits of everything that eats the clams, like ducks and fish. His greatest concern is that this is an end run around ADF&G in terms of regulation and it's dangerous territory for the legislature to be micromanaging the fisheries. MR. DON FELL, a Homer resident, stated support for SB 141. He believes it is a good idea to establish mariculture. He thought the farmers should have the first option and can best decide where the site should be, not ADF&G. He thought the language on line 19 was a bit vague. He said that some of his neighbors are concerned with lost species and stated, "Kachemak Bay has been pretty well drained of everything that I've seen here since I came and it is time to replace some of these species rather than to continually take them out. Seabirds have been depleted, not because of mariculture or oyster farms; but because of eagles, which are being fed off the spit…" MR. FELL said if clam farming were given a chance, his colleagues' concerns would be alleviated as, "The oyster farms in this community have added a permanent resource to the community. This is the only seafood that comes out of our bay year-round and we've brought in over $100,000 worth of products into Homer. The end product for local restaurants could easily be tripled." MR. FELL said that taking public beaches is the equivalent of limited entry. The beaches are a public resource that can be used for all the public's good in terms of jobs. MS. NANCY HILLSTRAND said she has worked for 20 years in the Division of Fisheries Rehabilitation and Enhancement on depleted stocks of salmon. She said they instituted hatcheries, but the enhancement that started out as something good has turned into something that is quite bad. It's created problems with production, disease, predatory control, and crash prices for commercial fisheries. She noted, "It's just the nature of the beast that we need to have a handle on these things." Right now they have a processing plant, an oyster bar, a gift shop, a retail outlet and a mail order seafood business in Homer. Even though clams could help their business, she thought open access taking of the clams would be better than mariculture. MS. HILLSTRAND thought this process should go before the Board of Fisheries as a developing fisheries proposal, which would then go to the local Fish and Game Advisory committees and through the public process. She noted, "Commercial fisheries, if managed wisely, can be regulated with bag limits, season limits and open access. On-bottom intertidal dredging is something there is no handle on. There can't be, as I saw for 20 years in the hatchery. There were many policies in place, but still disease was allowed to continue and the problems were tremendous." MS. HILLSTRAND concluded by saying if the state does not follow its three-point constitutional mandate of utilization, development, and conservation, it's going to be in trouble. MR. MARK DONAHUE, a Homer resident, said he supports SB 141 with reservations. He questions the bid process and having the department determine values. He wished the state had started with shellfish hatcheries before fish hatcheries. MR. DOUG MECUM, Director, Division of Commercial Fisheries, ADF&G, said ADF&G has looked at previous versions of this bill and does not believe the exclusive right of fishery and common use issues have been solved with the current language. He said Section 1 requires DNR to include the value of harvestable resources on the site in determining the fair market value. TAPE 01-26, SIDE A MR. MECUM said: We have similar concerns with Section 2 in that it implies that a farmer has somehow obtained a right to harvest these wild resources on the site. We do support the idea in Section 3(b) that sites for on-bottom farming be chosen in areas where wild stocks do not exist. Subsection (c), however, conflicts with that and allows a farmer to apply for a site they've chosen with no such restriction on the presence of the wild stock. One sort of a housekeeping issue is defining what constitutes an established commercial, subsistence or personal use fishery. That might be something that could be included in the bill. ADF&G's part of it isn't so much in the site selection. One of the things we would suggest for consideration would be something we have talked to various people about and talked to the industry about and that is setting up a system in areas where there essentially are no wild stocks present. There's clearly no common use issue, no constitutional roadblock. In areas where there are lots of these resources, highly abundant geoduck clams, for example, and perhaps that area would be the kind of area that would be established as a commercial fishing area, personal use and subsistence. In this gray zone or in- between zone where there's some, but not very many, perhaps not supporting a commercial fishery, some sort of a mechanism could be established to harvest those resources and put them into some sort of program receipt account or something along those lines to prepare the site for farming. I would also say that we would certainly support your efforts to try to jumpstart the process. We'd like to work with you on suggestions to the bill. CHAIRMAN TORGERSON asked where the suggestions were that he asked for two months ago. MR. MECUM said that they responded with some suggestions, which are also in a letter to the committee. CHAIRMAN TORGERSON asked what happened to the list of things the department had agreed to do. MR. MECUM said he thought they had responded to a lot of those concerns and he would go through the list with him point by point. CHAIRMAN TORGERSON said, "It's a waste of my time." He was convinced that the department did not want to go forward with it. SENATOR TAYLOR asked what impact this legislation would have on the regulations they are in the process of submitting. MR. MECUM replied that he didn't think it would have a lot of impact. They have had two public workshops and extended the public comment deadline on those regulations. He thought they would come up with very acceptable regulations when the process was done. SENATOR TAYLOR asked what affect he thought the regulations would have upon the pending litigation with the shellfish mariculture group. MS. SHANNON O'FALLON, Department of Law, responded that they don't have a ruling from the Superior Court judge yet. She didn't think the regulations would have any impact on it, but the judge's decision could have an impact on the regulations in regard to access to common property resources on a farm site. She explained if the judge were to find that the department's interpretation of the constitution is inconsistent and would find that the statutes do allow a farmer to access common property resources, they would have to look at changing the regulations or, "More than likely, we would ask for a stay of the Superior Court decision pending appeal to the Supreme Court while we take this issue up." SENATOR TAYLOR said that was what he thought and he was concerned that the department "fast tracked" the regulations with the litigation pending, especially with some of the allegations within the litigation of coercion on the part of the department. He thought that maybe they should defer to the judiciary to resolve the initial problems, "before we attempt through either the legislature or the department to come in with a back door solution that may very well preclude the findings of the judiciary." MS. O'FALLON responded: There are a number of issues in the litigation, apart from the common property resource and exclusive right to fishery issues. One of the allegations was the department applied policies that weren't in regulation and, therefore, the application of those policies is invalid. So the promulgation of regulations that more fully implement the Aquatic Farm Act is a good idea. One of the things the department argued to the court was to the extent you find that we improperly applied policies because they weren't in regulation, the proper remedy is not to just grant the applications. The proper remedy is to remand the applications back to the department for consideration under the new regulations. There are also some issues with concerns with statutory interpretation over conflicts with different fisheries, traditional fisheries, etc. I think that in the next round of applications these regulations will get the department a long way towards having a smoother application process. CHAIRMAN TOGERSON asked where the department's fiscal note was. MR. MECUM responded that DNR submitted the fiscal note and it had an RSA for a quarter of a million dollars going back to ADF&G, which is roughly the equivalent to what they requested last year for a similar thing. MR. ROGER PAINTER, Alaska Shellfish Growers Association, complimented the chairman on his attempt to address some of these troubling issues. He said he is glad that the chairman said this is a work in progress, because he has some concerns with two sections. In section 1 the phrase, "potential productivity," is a very difficult concept to define. Professor Weiland said that natural productivity varies significantly with environmental conditions. It's really inadvertent, but the new language would result in much higher lease fees for all farmers, whether or not there's standing stocks on the site. He said that he would get suggested language in the near future on that issue. MR. PAINTER pointed out that Alaska already has the highest lease fees for aquatic farm sites in the country and section 1 would add to those already high costs. He added that he was glad the chairman clarified that the special process wouldn't supplant the existing application process in section 3(c), but he was concerned with the last clause on line 27 "leases for aquatic farming sites that are issued after the effective date of this Act on the basis of lease applications filed with the department before the effective date of the Act may be counted toward the satisfaction of the requirement established by (a) of this section." He thought that it could mean if he came in with applications for another acre to add to his farm, that he would be put in the position of a competitive auction on that particular site. He wasn't sure that was the intent. MR. PAINTER said that Professor Weiland had commented earlier on aquaculture development zones and they are very interested in this concept and have been trying to work with local communities, governments and state agencies on furthering it. He thought it could be embodied in this bill as it gets toward the legislation's objective. MR. PAINTER said he differed with Mr. Mecum in that the Alaskan Shellfish Grower's Association is not real pleased with the regulations. He said they were pleased with the progress in changing them, "That's much different than being pleased with the final product." He explained that the regulations started out "95% bad" and they have probably corrected 75% so far. SENATOR TAYLOR asked what he thought about using a royalty on the product coming off of the ground instead of a bidding process for leases. MR. PAINTER answered that that concept is already in effect since they do pay a fisheries business tax that is equal to what the commercial fishermen pay that is based on the value of their production. In addition to the lease fees they pay, they are paying a value on the production on the site. SENATOR TAYLOR asked if that wasn't just a flat 3 percent. He was talking about a royalty that would include the lease. MR. PAINTER answered if it were a royalty instead of a lease fee, they would be very interested in pursuing it further. Mr. Thomas pointed out earlier that they are paying lease fees on sites they are not able to farm right now. It is a problem to get sites late in the year that they are not able to use for that particular growing season and having to pay lease fees on them. They are paying lease fees on a site that won't see profits for three or four years. There being no further questions or discussion, CHAIRMAN TORGERSON adjourned the meeting at 5:45 pm.
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