Legislature(2003 - 2004)
02/24/2004 01:35 PM Senate L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 315-ENTRY PERMIT BUY-BACK PROGRAM
CHAIR CON BUNDE called the Senate Labor and Commerce Standing
Committee meeting to order at 1:35 p.m. Present were Senators
Gary Stevens, Ralph Seekins, Hollis French and Chair Con Bunde.
Senator Bettye Davis was excused. The first order of business to
come before the committee was SB 315.
MS. CHERYL SUTTON, Staff to Senator Ben Stevens and the Joint
Legislative Salmon Industry Task Force, said SB 315 is a
recommendation of the task force and provides language for the
Commercial Fisheries Entry Commission (CFEC) to fund a buyback
program. If CFEC was able to receive monies from any source,
those monies might have to be paid back, but currently there is
no process in statute under which that could happen.
CHAIR BUNDE asked if buybacks were on the horizon anywhere.
MS. SUTTON replied that the only buyback being discussed right
now is in the Southeast seine fishery, which has been dealing
with Senator Ted Stevens on the federal level. They have not
moved forward under the state law. She thought one of the big
reasons they hadn't moved forward is because laws governing
buybacks are not in place at the state level. "We have been
attempting to repair this statute over the last several years so
that if that case comes up, we would have a workable statute."
SENATOR RALPH SEEKINS asked if she was talking about a state-
funded program.
MS. SUTTON replied no and that an optimum numbers study, which
would determine whether too many permits existed in a fishery,
would need to be completed first. The proposed legislation also
provides for an assessment of up to 7 percent on the value of an
individual fisherman's fish ticket sales to fund the program.
SENATOR SEEKINS asked if language stating the commission will
cease a buyback once the optimum number has been reached has
been in statute before.
MS. SUTTON replied no.
SENATOR GARY STEVENS said the optimum numbers study might show
that there aren't enough permits in a fishery as well as show
there are too many.
MS. SUTTON followed up on the issue of the optimum number of
permits saying that one number was an unreasonable concept so
the statute was changed to reflect that an optimum number is
really a range of numbers. CFEC also has the authority to add
permits back into a fishery.
CHAIR BUNDE said SB 315 is not intended to present the
development of fisheries resources, but rather to optimize them.
MS. SUTTON agreed that it would benefit all Alaskans, but
particularly those in the coastal regions.
MR. FRANK HOHMAN, Commissioner, Commercial Fisheries Entry
Commission (CFEC), supported Ms. Sutton's comments and added
that this measure would make fleet consolidation somewhat easier
to accomplish. The reason for looking into fleet consolidation
is that the economic return in some fisheries might be
diminishing. An optimum number of permits could be found that
would represent how many fishermen and boats could harvest the
resource in an efficient manner and still have a reasonable
economic return.
The optimum number can tell you if there are too many
permits in the fishery or too few in the fishery. In
either case, we are told by the statutes that, if
there are too many permits, then we can establish a
buyback program to reduce the number of permits to an
optimum number. If there are too few permits after a
study, then we can provide more permits and sell them
back into the fishery to bring that number up.
CHAIR BUNDE asked how the state would reinject permits into the
market.
MR. HOHMAN replied that CFEC would probably do an analysis of
the value of the existing permits and figure out an average cost
and make them available using a currently unspecified method -
first come first served basis, a lottery, a high bid, something
like that. The 1 to 7 percent assessment would go into a fund
over a period of years and when it reached a point where the
required number of permits could be bought back, CFEC would go
ahead and buy them back.
Since establishing the fund would take a while, the task force
discussed borrowing money for the buyback and then paying it
back with the assessment money. But under that scenario, if the
upfront money was used to buy back permits, current statute says
the assessment has to stop. That's how this bill came about.
All it says is that once you reach the optimum number,
you can continue the assessment until repayment of any
debt that the commission had to establish the buyback
program in the beginning.
MR. HOHMAN said that the commission has no idea of a fund of
money out there for this purpose and also that, if grant monies
were used, they would not have to be paid back.
CHAIR BUNDE asked if there was any opposition to this program.
MR. HOHMAN answered that he was not aware of any.
SENATOR GARY STEVENS asked how an optimum number is defined.
MR. HOHMAN replied that an actual optimum number would be very
hard to find, but a couple of years ago, the CFEC changed the
definition from one number to a range of numbers.
CHAIR BUNDE questioned how the CFEC would determine what the
range is.
MR. HOHMAN replied that the CFEC would do a complete economic
analysis of the fishery.
SENATOR HOLLIS FRENCH asked if it is true that there is no money
in the buyback fund currently.
MR. HOHMAN replied that is right.
SENATO FRENCH asked if the assessment would begin only after
some monies are put into the fund and a buyback had taken place.
MR. HOHMAN replied that the optimum number for the fishery would
have to be established first.
SENATOR FRENCH asked if the 1 to 7 percent assessment was in
statute.
MR. HOHMAN replied yes and that language was put into statute to
accommodate the dedicated funds issue.
SENATOR FRENCH asked once the buyback is done, does CFEC intend
to totally repay the fund with the assessment or just the costs
of operating the buyback program.
MR. HOHMAN answered:
It depends on how we got the money. If the money was a
grant from somewhere, then we wouldn't have to repay
it. It would be, like you say, the cost of the
program. If the fund was established by the
Legislature and it needed to be repaid, then we would
continue it until we could repay.
SENATOR FRENCH recapped that absent a gift of money to do a
buyback, he envisions this program being some kind of loan. He
asked if the assessment would apply to just the affected fishery
or statewide.
MR. HOHMAN replied that the assessment would be applied to the
affected fishery.
SENATOR FRENCH asked how he imagined "reasonable" costs would be
figured out.
MR. HOHMAN answered before CFEC would even enter into a buyback
program, it would have to promulgate regulations and the
assessment process would be in those. It would be a very visible
process.
SENATOR FRENCH said he thought it sounded like a good idea.
MR. KEN DUCKETT, Executive Director, United Southeast Alaska
Gillnetters Association (USAG), said his members really were
undecided about supporting this legislation. One concern is
that, as the various different ideas for the buyback programs
have developed, a number of them have contained votes that would
occur by the permit holders. Some call for a majority or a
number of different percentages, but SB 315 does not require a
vote of the people who would be affected by a buyback program.
We think at the very minimum that it's prudent to have
at least a vote of 50 [percent] and a plurality of 50
percent of the permit holders that would approve going
into this program..... I'm sure it's fine that they
would promulgate regulations and have hearings, but as
you know, there's a lot of fishermen and a lot of
people in the general public, some of which will
participate in a hearing such as that and others will,
even if it affects them, will sit on the sidelines and
won't participate. We think, definitely, that some
kind of vote of the people who would be affected is
prudent in this situation.
MR. DUCKETT outlined another concern his members have.
In the mid-70s, if you had told people that we would
be where we are today with prices and our current
situation in the salmon market, folks wouldn't have
really believed you - that things could change as much
as they have changed. So, the point that I'm making is
the way this thing is structured now, with the 7
percent assessment on fishermen, you're asking
fishermen to buy permits back out of the fishery. If
we see a big change, say the farmed fish - they're
going to have too many PBCs or whatever have you, or
we have a market condition that goes back to earlier
times and we see a significant increase in prices in
our fish, which a lot of us hope would happen, maybe
additional permits want to be added to the fishery.
That situation could happen just like the situation
happens that makes us want to reduce the number now.
It's not fair in our assessment that the fishermen are
assessed for permits to leave the fishery and the
state gets the benefit of selling permits back into
the fishery if the number of permits wants to be
increased later on. That really bothers us.
MR. DUCKETT said USAG does not want to stand in the way of a
fleet that wants to reduce the number of its permits and hopes
the Southeast seiners are successful. Implementing a buyback
program with a federal grant is totally different than assessing
fishermen to have their permits bought back. "We think there are
some inequities here and I guess at that, I'll conclude my
testimony."
CHAIR BUNDE thanked him and promised to have the sponsor reflect
on and address his questions when the bill comes up again.
SENATOR BEN STEVENS, sponsor of SB 315, who arrived in the
middle of Mr. Duckett's testimony, said he sponsored this bill
at the request of the Commercial Fisheries Entry Commission and
wanted a chance to clarify Mr. Duckett's questions now. He said
there are two programs:
One does require a vote of the fishermen in the region
and the other one would allow the CFEC to implement
the program. So, there are two mechanisms for buyback.
One is a CFEC-run buyback developed by the optimum
yield; the other one is a buyback that's initiated by
the regional association.
CHAIR BUNDE said Mr. Duckett was also concerned that if a
buyback program is funded by fishermen in a certain fishery, if
on the flip side, additional permits were issued by CFEC, that
profit would go back to the state. He, personally, could see
that the state could issue permits at no expense, which would
decrease the value of existing permits, but he didn't know of
any mechanism whereby, if the state issued a new permit for
$10,000, that money would end up being distributed to the
members of the fishery.
SENATOR STEVENS said that is one of the complexities of the
situation right now.
You have to have an optimum study in order to buy back
the permits to retire them. It's just which way you do
it. If the optimum study says that the state can buy
them back, then the state can assess a buyback fund
and then retire the permits for $10,000. If the
association would buy back the permits, they would
also retire the permits. The question is, can the
permits that are bought back be retired and that's
what the bill is designed to do - to make sure that
that is correct - that when you buy the permits back,
the CFEC is not forced to put them back into the
market.
CHAIR BUNDE thought he had heard testimony earlier indicating
that, if the fishery expands, those permits would not be put
back into the market and another study would have to be done to
offer new permits.
SENATOR STEVENS replied that the CFEC could be forced by the
court to issue permits back again, but they wouldn't come from
the buyback pool. "[The permits] would come from another interim
use issuance."
CHAIR BUNDE said that he would hold the bill for further work.
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