Legislature(2009 - 2010)BUTROVICH 205
03/25/2010 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| Cook Inlet Natural Gas: the Way Forward | |
| SB294 | |
| SB275 | |
| SR10 | |
| SB143 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SR 10 | TELECONFERENCED | |
| += | SB 143 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | SB 275 | ||
| = | SB 294 | ||
SB 275-AQUATIC FARMING
4:22:54 PM
CO-CHAIR MCGUIRE announced the next order of business to come
before the committee was SB 275.
ESTHER CHA, aide to Senator McGuire, said SB 275 addresses the
issue of reasonable compensation for the removal of wild stocks
of geoducks, exceeding an insignificant amount, from an aquatic
farm site. Reasonable compensation is required because shellfish
are a public trust resource committed to the common use of the
public. Previous legislation defined insignificant populations
of geoducks as less than 2000 lbs per acre but did not set a
compensation rate.
SB 275 proposes compensation to the state in the amount of 50
percent of the net profits from harvesting surplus wild geoducks
from farm sites. SB 275 sets the tax rate for live geoducks at
10 percent of the exvessel value. This figure was determined by
using the ADF&G's formula of providing the state with 50 percent
of the net profits of the sales. The 10 percent compensation to
ADF&G is on top of the 3.5 percent fisheries business tax that
farmers have to pay. As the price for processed geoducks is much
lower than for live geoducks, SB 275 also sets a tax rate of 3
percent of the exvessel value on processed geoducks. The 3
percent rate was suggested by geoduck farmers during the public
comment period on proposed regulations as a good faith offer to
provide some compensation to the state even though they would
lose money if they had to sell processed geoducks.
CO-CHAIR MCGUIRE said when the legislature passed the Aquatic
Farm Act in 1984, finfish farming was explicitly excluded. But
the feeling was that an aquaculture economy in Alaska could be
good for small communities and a healthy shell fish mari-culture
industry has been a dream of some legislators. The state
constitution requires sharing resources and developing them for
the maximum benefit of Alaskans.
4:26:29 PM
CO-CHAIR MCGUIRE called an at ease from 4:26 p.m. to 4:27 p.m.
due to technical difficulties.
4:27:35 PM
CO-CHAIR MCGUIRE continued and said the idea of SB 275 is to get
the industry moving by fixing reasonable challenges. In 2004,
the Supreme Court made it clear that these sites could not have
significant stock on them. The legislature defined significant
stock at more than 2,000 pounds. For sites with more than an
insignificant stock, the question is, what is the value. She
commented that she is in conversation with the governor and
ADF&G to see if this can be handled by regulation.
PAUL FUHS, Sea Farms Alaska, said when the Supreme Court made
its ruling, the Legislature had 3 weeks left in the session.
Without enough time to go through the numbers, a hurried statute
was passed saying reasonable compensation would be provided.
Coming up with what is reasonable has been difficult for ADF&G
without any guidance from the Legislature who usually sets tax
rates for resources. SB 275 is an attempt to do that. On page 4
of SB 275, "reasonable compensation" is defined. He referred to
a calculations worksheet and said $3.50 per pound was a figure
provided by ADF&G.
4:30:54 PM
Referring to the calculations worksheet, he explained that the
exvessel value is a public, published number representing the
value of all fish caught divided by the number of pounds each
year. ADF&G provided the figure of $3.50 per pound as the
average exvessel price. He summarized the farmer costs for
harvesting and replacing wild geoducks: A diver is paid $2.00
per pound. Every geoduck taken must be replaced at a rate of 5
to 1. A geoduck from the hatchery costs about 57 cents. PSP
testing is about 12 cents per pound and involves flying samples
to the Department of Environmental Conservation (DEC). The state
raw fish tax is about 11 cents per pound. That leaves about 70
cents per pound [profit]. A 50 percent net profits tax is 35
cents per pound which is 10 percent of the exvessel price. He
noted that processed geoducks get a much lower price and do not
make any profit. He also noted that the standard raw fish tax is
also paid at 3.5 percent.
MR. FUHS said he has committed to the governor and commits to
the committee that if this issue is resolved reasonably, all
outstanding lawsuits will be dismissed.
He also said he was surprised by the United Fisherman of Alaska
(UFA) letter. He has talked regularly to geoduck dive fisherman
and they did not take a position. He said the UFA letter debates
what is "reasonable" and not the legislation itself.
SENATOR HUGGINS asked if the economic structure and taxing of
geoducks and clams are different.
MR. FUHS replied that normally a 3.5 percent raw fish tax is
paid and will be paid for farmed fish product too. Use of the
state waters is paid for in addition to an annual lease fee to
the Department of Natural Resources (DNR). This is a public
resource that is owned by everybody and geoduck farmers should
pay more for exclusive use of those geoducks.
4:35:12 PM
RODGER PAINTER, president, Alaskan Shellfish Growers Association
(ASGA) said SB 275 has limited applicability. Before the Supreme
Court decision, this tax may have been applied to seven sites.
Afterwards, ADF&G adopted very strict pre-leasing survey
requirements to ensure that no new farm sites would have more
than an insignificant amount [of geoducks]. A tax rate equal to
the highest tax rate the state has for any resource meets the
definition of reasonable compensation. Resolving this issue
would allow the industry to move forward and contribute to the
economy of rural Alaska.
SENATOR STEVENS asked Mr. Painter to speak to the UFA letter.
MR. PAINTER replied that one point in the UFA letter is that the
Supreme Court said farm sites with significant amount of stock
cannot be issued. Following the Supreme Court decision,
provisions were written into law, knowing that some sites with
significant stock may exist and that is why the tax was
developed. The UFA letter also refers to an agreement between
ASGA and divers made right after the Supreme Court decision. The
UFA letter refers to a provision that was not implemented. The
Legislature at the time decided it should be reasonable
compensation rather than 100 percent as shown in the agreement.
4:39:16 PM
MARK VINCEL, executive director, United Fisherman of Alaska
(UFA), said the matter of SB 275 was brought to a recent board
meeting by representatives of Southeast Alaska Regional Dive
Fisheries Association (SARDFA). The UFA board unanimously
approved SARDFA's motion to oppose SB 275 on the grounds that it
is against the intent of the Supreme Court decision that they do
not have rights to large amounts of standing stock that belong
to the public. It is against the agreement that SARDFA made with
the divers at the time and the subsequent regulations that were
promulgated through the public process of proposed regulation
and public comment. ADF&G codified the tax at 21 cents per pound
on the standing stock to be sold live. The amount of geoducks
that can be sold live, which is more lucrative, has increased
dramatically due to the state's investment in a testing facility
and changes in the testing protocols. The production of
shellfish should be increased, not just reallocated. Rather than
a high tax on standing stock in places with a lot of geoducks,
choosing locations to grow geoducks should be incentivized. This
will increase production.
4:42:42 PM
CO-CHAIR MCGUIRE pointed out that SB 275 is just trying to wrap
up the issue of the few sites that were in place prior to the
Supreme Court ruling and asked if this lessened Mr. Vincel's
concerns. She pointed out that SB 275 is not a mechanism to go
back on a Supreme Court decision and say any site is available,
even ones with significant stock.
MR. VINCEL responded yes, he understands that the sites being
discussed have already been established - existing sites where
someone wanted a lease on something with a large amount of
geoducks because that can be very profitable.
CO-CHAIR MCGUIRE said she will continue to read the UFA letter
but the policy decision has been made by the Supreme Court and
SB 275 is trying to comply with that decision and deal with the
question of value. She said Section 2 of UFA's letter deals with
value and will be a part of the record.
CO-CHAIR MCGUIRE closed public testimony and set SB 275 aside.
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