Legislature(2005 - 2006)CAPITOL 124

03/16/2005 08:30 AM House FISHERIES

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HB 218-PRIVATE HATCHERY COST RECOVERY FISHERIES                                                                               
8:43:27 AM                                                                                                                    
CO-CHAIR LEDOUX announced  that the next order  of business would                                                               
be  HOUSE  BILL  NO.  218,  "An Act  relating  to  cost  recovery                                                               
fisheries for private nonprofit hatchery facilities."                                                                           
IAN   FISK,  Staff   to  Representative   Thomas,  Alaska   State                                                               
Legislature presented HB 218 on  behalf of Representative Thomas,                                                               
bill sponsor.  He explained  that there are 29 private, nonprofit                                                               
[PNP] hatcheries  statewide which  produced over 50  million fish                                                               
that were harvested in 2003.   This accounts for about a third of                                                               
the statewide harvest by volume and  about a quarter of the state                                                               
harvest by value.   Sport fishermen caught  481,000 hatchery fish                                                               
in  2003.   "It's  truly  been  a  very successful  program,"  he                                                               
     What  we're here  to  discuss today  is  the method  by                                                                    
     which   hatcheries  recover   their  costs.   ...  Cost                                                                    
     recovery  is   currently  done  by  a   system  whereby                                                                    
     hatcheries  contract with  certain  processors and  the                                                                    
     processor,  through a  bid  process,  is selected.  ...                                                                    
     Typically   very    few   fishing    vessels   actually                                                                    
     participate  in the  harvest.    Now there's  different                                                                    
     hatcheries that  have different circumstances  by which                                                                    
     they actually  recover their costs, and  what this bill                                                                    
     will  do is  it will  provide permissive  language that                                                                    
     will  allow them  to ...  make more  fish available  to                                                                    
     common property  harvest.   In Section  2 of  the bill,                                                                    
     you'll see  that there's permissive language,  and this                                                                    
     is one of  the keys to HB  218.  [On page  1, lines 11-                                                                    
     14]  it specifies  that a  hatchery  permit holder  may                                                                    
     harvest  salmon for  a facility  in  a special  harvest                                                                    
     area through  agents, contractees, or employees  of the                                                                    
     permit  holder as  provided  under  regulations of  the                                                                    
     Board   of  Fisheries   or   through  common   property                                                                    
     fisheries.   The  remainder of  the bill  sets out  the                                                                    
     process  by which  rates  will be  set  for the  common                                                                    
     property cost  recovery fishery.  It  specifies that as                                                                    
     the  bill currently  reads, ...  [Alaska Department  of                                                                    
     Revenue]  will   annually,  in  conjunction   with  ...                                                                    
     hatchery permit holders and  affected fishermen ... set                                                                    
     the  rate for  the cost  recovery harvest,  and they'll                                                                    
     collect and distribute the funds.                                                                                          
MR. FISK continued:                                                                                                             
     In Section  2 ... the  regulations to govern  this cost                                                                    
     recovery fishery  will be set  out by both  the [Alaska                                                                    
     Department   of  Fish   and   Game]   and  in   certain                                                                    
     circumstances by the [Board of  Fisheries].  [The Board                                                                    
     of  Fisheries] will  be involved  if there  is anything                                                                    
     that  will alter  allocation plans  that allocate  fish                                                                    
     between  different  user  groups.   In  subsection  (c)                                                                    
     there's  language that  sets out  that a  fisherman who                                                                    
     participates in  the fishery agrees  to the  payment of                                                                    
     the  assessment and  so that  there'll be  a method  by                                                                    
     which ...  the assessment will be  determined annually.                                                                    
     And  that's   to  give  some  flexibility   because  of                                                                    
     changing market circumstances.                                                                                             
8:47:32 AM                                                                                                                    
MR. FISK reviewed the findings in Section 1, which reads:                                                                       
     The Alaska  State Legislature  finds that  the economic                                                                    
     interests  of the  commercial salmon  fishery are  best                                                                    
     served by  the harvest  of salmon returning  to private                                                                    
     nonprofit hatcheries  in common property  fisheries and                                                                    
     the  reduction or  elimination of  the  direct sale  of                                                                    
     salmon by hatchery permit  holders, especially when all                                                                    
     fisheries enhancement  loan obligations incurred  for a                                                                    
     hatchery facility have been repaid.                                                                                        
8:48:14 AM                                                                                                                    
REPRESENTATIVE ELKINS asked, "If a  fisherman ... exports his own                                                               
fish, how do you know you're going to get your money?"                                                                          
MR.  FISK replied,  "The  enforcement details  of  this bill  are                                                               
something  that still  need to  be worked  out."   He noted  that                                                               
there is  a provision near the  end of the bill  that states that                                                               
violations of this  law would be a class A  misdemeanor, which is                                                               
similar to other fishing violations.                                                                                            
8:49:37 AM                                                                                                                    
GARY  FANDREI noted  that he  is the  Executive Director  of Cook                                                               
Inlet Aquaculture  Association (CIAA),  but because the  CIAA has                                                               
not reviewed  the bill,  he was  speaking for  himself only.   He                                                               
stated that he wanted to make three major points on HB 218.                                                                     
     First of all,  I applaud the concept.  I  think this is                                                                    
     something  that   some  members   of  the   fleet  have                                                                    
     expressed an  interest in.   It is also  something that                                                                    
     we  have looked  at a  number of  times but  we haven't                                                                    
     quite  been able  to figure  out how  to make  it work.                                                                    
     Having said that,  I'm not sure that this  bill does it                                                                    
     either.   Another point  I'd like to  make is  the bill                                                                    
     seems to encourage loans in  that it does not allow for                                                                    
     the  development of  any type  of a  reserve associated                                                                    
     with  the facility.   In  other words,  if you  come up                                                                    
     short on  your cost  recovery one  year, and  you don't                                                                    
     have money some place else,  you're going to have to go                                                                    
     out and  get a loan to  make the project work  for that                                                                    
     year.   The last  thing I'd  like to  say on  the major                                                                    
     points  is that  the option  to use  this type  of cost                                                                    
     recovery strategy,  I feel, must  be at  the initiative                                                                    
     or the  option of the  hatchery operator.  I'd  hate to                                                                    
     get  into  a position  where  we're  forced into  doing                                                                    
     something like  this, because  it may  not work  in all                                                                    
8:51:22 AM                                                                                                                    
MR. FANDREI continued:                                                                                                          
     For this  to work for  the hatcheries, I think  in some                                                                    
     instances  we may  need to  redefine our  cost recovery                                                                    
     harvest  areas, and  so that  should be  something that                                                                    
     people should be  aware of. ... I also  have a question                                                                    
     on  how  buyers  will  keep   up  with  the  assessment                                                                    
     program;  it  seems  a  little  bit  cumbersome  to  be                                                                    
     dealing  with an  assessment  program  that's going  to                                                                    
     vary  area-by-area  and   year-to-year.  ...  The  last                                                                    
     comment I would make is  that the 40 percent assessment                                                                    
     rate  probably  is  a  fairly  reasonable  rate  to  be                                                                    
     dealing with.  We have  looked at our programs and that                                                                    
     40 percent  rate represents a 1:2.5  cost benefit ratio                                                                    
     and  that  it's  pretty  reasonable  for  many  of  the                                                                    
     programs that we  do; we're usually in that  1:3 to 1:6                                                                    
     cost benefit  ratio with most  of the programs  that we                                                                    
8:52:20 AM                                                                                                                    
CO-CHAIR THOMAS asked Mr. Fandrei to  describe the make up of the                                                               
CIAA board.                                                                                                                     
MR. FANDREI replied,  "We are a regional association  and we have                                                               
a number of commercial fishermen on  the board.  And we also have                                                               
representatives from  the local  communities, the borough,  and a                                                               
number  of other  groups  in the  area such  as  ... [Cook  Inlet                                                               
Region, Incorporated (CIRI)]."                                                                                                  
CO-CHAIR THOMAS asked, "When you  have put your cost recovery out                                                               
to bid,  do you  get more  for your  bid for  your fish  than the                                                               
common property fishermen get, or so they get more?"                                                                            
MR. FANDREI  responded that on  the average, [CIAA]  usually gets                                                               
less because:                                                                                                                   
     In Cook  Inlet, our cost  recovery programs are  set up                                                                    
     where we  are the last ones  in line.  In  other words,                                                                    
     the  commercial  fishery  goes  first  and  if  there's                                                                    
     anything left ..., we're allowed  to cost recover those                                                                    
     fish and we  don't really have predefined  set of goals                                                                    
     for some of  them.  So on the average  we probably do a                                                                    
     little bit  less than the  fleet because our  fish tend                                                                    
     to be a little bit more mature."                                                                                           
8:53:36 AM                                                                                                                    
CO-CHAIR THOMAS asked what fish [CIAA] produces.                                                                                
MR.  FANDREI replied  that they  produce  sockeye for  commercial                                                               
harvest and coho for sport harvest.                                                                                             
REPRESENTATIVE  WILSON pointed  out that  Section 2  of the  bill                                                               
relating to  the cost recoveries,  and stated, "It  definitely is                                                               
permissive.  I think I see the word more than five times."                                                                      
8:54:23 AM                                                                                                                    
CO-CHAIR THOMAS asked who formed CIAA.                                                                                          
MR.  FANDREI  answered  that  it was  formed  by  the  commercial                                                               
fishing industry.   He stated, "Our  goal is to produce  fish for                                                               
the common  property fishermen.   We don't  necessarily recognize                                                               
any particular  user group  in establishing that  goal.   But the                                                               
reality  of it  is [that]  our income  comes from  the commercial                                                               
fishing industry."                                                                                                              
CO-CHAIR THOMAS asked why [CIAA]  would have problems with giving                                                               
more  fish to  the  common  property fishery  if  [CIAA] was  the                                                               
originally started by fishermen.                                                                                                
MR. FANDREI replied,  "That is our goal whenever  we're trying to                                                               
do a  common property fishery; ...  to try to get  the best price                                                               
we can  for our fish  so that we can  get the greatest  number of                                                               
fish back into the common property hands."                                                                                      
8:55:44 AM                                                                                                                    
JASON  WELLS, Executive  Director,  Valdez Fisheries  Development                                                               
Association  (VFDA),  stated  that  he  was  representing  Valdez                                                               
Hatchery.   Regarding the findings in  Section 1 of the  bill, he                                                               
     I feel  that these  findings are  inaccurate and  set a                                                                    
     bad  precedent for  the PNP  hatchery  system.   Valdez                                                                    
     Fisheries   Development   conducted   preseason   sales                                                                    
     agreements  with two  strong buyers  with whom  we have                                                                    
     developed strong track records.   In the past 11 years,                                                                    
     despite  the bad  pricing, we've  managed  to save  $10                                                                    
     million or 86 million pounds  of pink salmon by selling                                                                    
     our  cost  recovery  above  the  grounds  price.    The                                                                    
     aforementioned  savings  have   been  returned  to  the                                                                    
     common property  fishery via their  catch.  As  you can                                                                    
     see  there is  a significant  economic interest  in the                                                                    
     hatchery   conducting  its   own   cost  recovery   and                                                                    
     conducting direct sales.   The hatchery preseason sales                                                                    
     contracts are  the last vestige of  competition between                                                                    
     processors to  purchase Alaska  salmon.   The fishermen                                                                    
     no  longer  have  viable organizations  to  put  upward                                                                    
     pressure on grounds price.   My major problem with this                                                                    
     legislation is the issue of  whether it is voluntary on                                                                    
     the  part  of hatchery  operators  or  whether it  will                                                                    
     morph  into  a  mandatory program.    Our  corporation,                                                                    
     through  the Board  of Directors,  is obligated  to the                                                                    
     State of  Alaska for loan  repayment.   We're obligated                                                                    
     to  our personnel,  properties,  and  to several  small                                                                    
     businesses.   These obligations have been  made under a                                                                    
     set of  assumptions, ... that  we remain in  control of                                                                    
     our revenue  stream.  If  this legislation  hinders our                                                                    
     ability  to perform  our  fiduciary responsibility,  it                                                                    
     needs to  have a  fiscal note attached.   The  Board of                                                                    
     Directors of a  private, nonprofit hatchery corporation                                                                    
     must be allowed  to choose ... to  use this legislation                                                                    
     or  not.   Further, if  a PNP  elects to  investigate a                                                                    
     common  property  fishery  for  cost  recovery  and  it                                                                    
     cannot    negotiate   agreement    suitable   to    the                                                                    
     corporation's  financial  responsibilities, there  must                                                                    
     be a back-out mechanism.                                                                                                   
8:58:45 AM                                                                                                                    
MR. WELLS continued:                                                                                                            
     If the  bill remains  voluntary to PNP  hatchery permit                                                                    
     holders, there are still several  problems with HB 218.                                                                    
     The  first is  that  the [Alaska  Department of  Public                                                                    
     Safety] must be committed  to fish hold inspections and                                                                    
     to show up  for each and every  common property fishery                                                                    
     in the  special harvest area.   Our experience  is that                                                                    
     fisheries [indisc.] are not  high on the [department's]                                                                    
     priority  list.   Secondly, [regarding]  page 2,  lines                                                                    
     16-18: not  all buyers or  processors pay for  the fish                                                                    
     upon  which they  write  fish tickets.    How will  the                                                                    
     state ensure that the hatchery  gets paid for its fish,                                                                    
     and in  what time  frame will  those payments  be made?                                                                    
     Third,   this   legislation    requires   the   [Alaska                                                                    
     Department of Revenue]  to set a rate  of harvest prior                                                                    
     to the  season. ...  Our experience  is that  there are                                                                    
     too many variables such as:   fish size, grounds price,                                                                    
     exploitation rates of the  common property fishery, and                                                                    
     ocean  survivals to  make accurate  preseason estimates                                                                    
     of harvest.  The problem  has resulted in VFDA managing                                                                    
     cost  recovery towards  a dollar  goal, not  a poundage                                                                    
     goal or an exploitation rate.   We have been doing this                                                                    
     since 1988 with  good success.  I  doubt the Department                                                                    
     of Revenue will be  better at predicting salmon returns                                                                    
     than [the  Alaska Department of  Fish &  Game (ADF&G)],                                                                    
     who've thrown  their hands  up and  no longer  make run                                                                    
     predictions   on  hatchery   stocks.     Finally,  this                                                                    
     legislation limits  the assessment  rate to  40 percent                                                                    
     of the run.  What mechanism  is in place to ensure that                                                                    
     the hatchery continues to operate  should we have a run                                                                    
     failure  and  all of  the  return  is needed  to  cover                                                                    
     hatchery operations expenses?                                                                                              
9:01:02 AM                                                                                                                    
MR. WELLS continued:                                                                                                            
     House  Bill 218  is a  piece of  legislation with  many                                                                    
     possible  unintended  consequences.   This  legislation                                                                    
     requires consultation  with PNP operators before  it is                                                                    
     rushed through.  I think the  intent of HB 218 would be                                                                    
     better handled  in the  private nonprofit  boardroom by                                                                    
     the fishermen.                                                                                                             
CO-CHAIR LEDOUX recommended that Mr. Wells submit his testimony                                                                 
in written form as well.                                                                                                        
9:01:33 AM                                                                                                                    
MIKE  ROUND,   Assistant  General  Manager,   Southern  Southeast                                                               
Regional  Aquaculture Association,  Inc. (SSRAA),  commented that                                                               
SSRAA is not opposed  to the bill but instead views  it as one of                                                               
many options that the hatchery operators could use.  He stated:                                                                 
     We do  not at this time  [wish], and are not  likely in                                                                    
     the future, to  change the way we do  business and cost                                                                    
     recovery, and  we found  ... that  we can  minimize our                                                                    
     cost  recovery by  maximizing the  value  of our  fish.                                                                    
     One of  the things [SSRAA]  does is ... make  sure that                                                                    
     those fish do not compete  with the fishermen's fish at                                                                    
     the dock.  We retain those  fish and sell them into the                                                                    
     market well  beyond the local  processor point  so that                                                                    
     it  does not  compete with  the commercial  fishermen's                                                                    
     catch at  the dock,  as it has  very little  effect, if                                                                    
     any, on the fluctuation of  the price to the fishermen.                                                                    
     We see this  as ... another option  that the hatcheries                                                                    
     ... not  only may  elect to choose  but should  also be                                                                    
     able to  choose to drop it  at any point where  it does                                                                    
     not any longer  make sense. ... Some of  the aspects of                                                                    
     the bill seem to make it  sound as if any time you have                                                                    
     a  special harvest  area open  to  the common  property                                                                    
     fishery,  that   all  gear  holders  may   attend  that                                                                    
9:03:56 AM                                                                                                                    
CO-CHAIR THOMAS asked who formed SSRAA.                                                                                         
MR.  ROUND replied  that the  commercial fishing  industry formed                                                               
SSRAA, and 13 of the 21 board members are commercial fishermen.                                                                 
CO-CHAIR asked if  the goal of SSRAA is to  provide more fish for                                                               
the common property fishermen.                                                                                                  
MR. ROUND responded  affirmatively.  He stated  that the ultimate                                                               
goal  is  that  75  percent  of production  would  go  to  common                                                               
property  fishery  and 25  percent  would  be for  cost  recovery                                                               
operations.   He  noted,  "However, that  also  assumes that  all                                                               
things being  equal, our debts are  paid down, [and] we  have our                                                               
reserves fully funded.  There  are a lot of other considerations,                                                               
but that is our ultimate goal."                                                                                                 
CO-CHAIR THOMAS asked what the actual percentages are.                                                                          
MR.  ROUND answered  that the  number fluctuates  each year,  but                                                               
right now it  is about 60 percent to common  property fishery and                                                               
40 percent to the hatchery.                                                                                                     
CO-CHAIR THOMAS asked, "I understood  ... Ketchikan was doing all                                                               
cost recovery  in the area where  you could have had  rotation of                                                               
fishery, and  that wasn't  occurring because of  your debt.   Was                                                               
that correct?"                                                                                                                  
MR. ROUND  replied that SSRAA  has debts  that it has  paid down.                                                               
He remarked:                                                                                                                    
     Paying the bills  is certainly ... the  major factor in                                                                    
     cost recovery  operations. ... When  we did get  a loan                                                                    
     from the  sustainable salmon fund,  we used  that money                                                                    
     ... to buy  time in the common property  fishery in the                                                                    
     special harvest  area to do  gear rotation.  We  do try                                                                    
     to get the benefits of  hatchery production back to the                                                                    
     fishermen as  we are able, depending  upon our economic                                                                    
9:06:47 AM                                                                                                                    
CO-CHAIR THOMAS commented:                                                                                                      
     When you went  into ... major cost  recovery there, you                                                                    
     shifted the gill  net fleet from Ketchikan  to Taku and                                                                    
     to Haines and  to Sitka, and actually  took my earnings                                                                    
     while  you filled  your  coffers ...  to  pay off  your                                                                    
     debt, and left  me hanging out here with  an extra 100-                                                                    
     150 boats or more because they were displaced....                                                                          
MR. ROUND replied:                                                                                                              
     In the  past we have  received as much as  $1.5 million                                                                    
     to  $2 million  on the  enhancement tax,  and ...  even                                                                    
     though the  enhancement tax we receive  is considerably                                                                    
     reduced,  I think  this year's  was around  [$300,000].                                                                    
     The benefit  to the fishermen  is still about  three to                                                                    
     one: three  times the amount  of fish [that]  have been                                                                    
     caught [compared  with] the  value of  what he  pays in                                                                    
     enhancement  tax.     We  would  like   to  do  better,                                                                    
     certainly, but it still is  providing a good benefit to                                                                    
     the commercial fishermen.                                                                                                  
9:08:23 AM                                                                                                                    
CO-CHAIR THOMAS asked why processors pay SSRAA more for fish                                                                    
than they pay [fishermen].                                                                                                      
MR. ROUND replied:                                                                                                              
     We  do  not sell  our  fish  to the  local  processors,                                                                    
     period.   We  retain our  cost recovery  fish and  sell                                                                    
     them into  the world market  at a point beyond  the ...                                                                    
     processors at  the local docks.  ... We go  through the                                                                    
     processing  of the  fish, freeze  the fish,  retain the                                                                    
     fish, and sell  them through a broker.  We  do not sell                                                                    
     our fish  locally to  the processors  unless we  have a                                                                    
     run  above and  beyond our  means to  deal with  at the                                                                    
     cost recovery  site, in  which case it  goes out  for a                                                                    
     second  place processing,  and they  would  bid on  the                                                                    
     fish at that  point, but that hasn't occurred  in a few                                                                    
     years....  We usually do  not receive a higher price in                                                                    
     that case.  There might  be exceptions to that, but for                                                                    
     the  most part,  our operations  and cost  recovery are                                                                    
     done in-house  and processed and  sold into  the market                                                                    
     well above  the point of  the local processors  and the                                                                    
     dockside price.                                                                                                            
9:10:31 AM                                                                                                                    
DEBORAH LYONS,  Secretary/Treasurer, Northern  Southeast Regional                                                               
Aquaculture Association  (NSRAA) commented  that the  NRSAA board                                                               
had just  looked at  HB 218 yesterday  and hadn't  yet completely                                                               
evaluated it.   She stated  that she  concurred with many  of the                                                               
statements made  by the representatives of  other aquaculture and                                                               
PNP  hatcheries.   The bill  is  so complicated  that she  really                                                               
wasn't sure what it meant, she opined.    She stated that she was                                                               
concerned  by  the  findings  in  Section  1  of  the  bill,  and                                                               
     Our aquaculture  association is sort of  like the state                                                                    
     in that,  if we could  run everything off of  taxes off                                                                    
     of a  resources, like the  state runs off of  taxes off                                                                    
     of  oil,  if   we  could  just  exist   solely  on  the                                                                    
     enhancement  tax  that  fishermen  make,  it  would  be                                                                    
     great; we wouldn't  have to do any cost  recovery.  But                                                                    
     you know  that tax values  fluctuate with the  value of                                                                    
     your  commodity  resource,  and we  couldn't  build  an                                                                    
     operations budget  and maintain it solely  on those tax                                                                    
     revenues,  so  there  arose  the   need  for  the  cost                                                                    
     recovery fisheries.  ... I think this  legislation grew                                                                    
     out of  some dissatisfaction out of  a certain fishery,                                                                    
     and  that's the  Hidden  Falls seine  fishery.   And  I                                                                    
     think fishermen should be maybe a little more patient.                                                                     
MS. LYONS continued:                                                                                                            
     Chum salmon  aren't very  valuable compared  to chinook                                                                    
     and coho,  and ... we  have to  take a large  number of                                                                    
     chum salmon to meet the  cost recovery needs to balance                                                                    
     the  budget.   But  this year  a  great development  is                                                                    
     seeing our coho and chinook  programs come on line, and                                                                    
     the  value  of  those  fish as  they  enter  into  cost                                                                    
     recovery.    This  year the  total  cost  recovery,  25                                                                    
     percent of that  value, came from the  coho and chinook                                                                    
     programs.  And as those  mature there will be less chum                                                                    
     salmon that need  to be taken.  And  Hidden Falls seine                                                                    
     fishermen  have  been  before   our  board  with  three                                                                    
     different proposals to change  the way cost recovery is                                                                    
     done  in  that  particular  fishery.   I  believe  this                                                                    
     legislation is  directed towards  NSRAA because  of the                                                                    
     language about  the debt.   And  I think  you're wading                                                                    
      into a little bit of a fish fight.  And I've seen a                                                                       
      few of them, having served on the Board of Fisheries                                                                      
     and the Pacific Salmon Commission.                                                                                         
9:14:01 AM                                                                                                                    
CO-CHAIR THOMAS asked Ms. Lyons if she is a fisherman.                                                                          
MS.  LYONS  replied that  she  fished  for  many years  with  her                                                               
husband,  and   currently  she  works   as  a  crewmember   on  a                                                               
CO-CHAIR THOMAS  remarked that  to him, chum  fish is  money fish                                                               
even when the  price is low; it's really matter  of the volume of                                                               
chums  that  one catches.    He  asked  if  NSRAA has  a  reserve                                                               
account, and if so, how much it is.                                                                                             
MS. LYONS  replied that the NSRAA  board set a goal  of reserving                                                               
$4  million  for  operational  reserve  to  cover  all  costs  of                                                               
operation if  there was  a catastrophic failure.   She  said, "In                                                               
establishing  reserve accounts,  we feel  like we  are protecting                                                               
the organization  and the interests  of the  commercial fishermen                                                               
by  being fiscally  responsible in  that  way."   She noted  that                                                               
currently  NSRAA  has  about  $3.2  million  in  the  operational                                                               
reserve.   She added  that a financial  advisor advised  NSRAA to                                                               
also save for capital projects; there  is $1 million in a capital                                                               
replacement  fund, but  it  was  advised that  the  fund be  much                                                               
larger.  She  noted that NSRAA also has a  scholarship account of                                                               
about $100,000.                                                                                                                 
MS. LYONS  noted that she  didn't mean to devaluate  any fishery;                                                               
she meant to demonstrate the  comparative values of the fish, and                                                               
"as we are able  to sell more of these coho  and chinook that are                                                               
coming  on line,  more  of the  chums will  be  available in  the                                                               
common property for the fishermen."                                                                                             
9:17:30 AM                                                                                                                    
CO-CHAIR THOMAS requested that all  of the hatcheries send to him                                                               
a list of their cost recovery  receipts.  He remarked, "I want to                                                               
see if  you're really  there for the  fishermen or  [what] you're                                                               
there for."   He reiterated  his concern that cost  recovery fish                                                               
prices are higher than prices for other fisheries.                                                                              
9:18:26 AM                                                                                                                    
ROB  ZUANICH,  Executive  Director,   Alaska  Seine  Boat  Owners                                                               
Association, commented:                                                                                                         
     In essence what this bill  does is that when a hatchery                                                                    
     permit  holder   deems  it  appropriate   ...,  revenue                                                                    
     heretofore generated  in cost recovery  fisheries could                                                                    
     be  substituted by  an assessment  on salmon  landed in                                                                    
     specified  regions set  by the  hatchery operator.  ...                                                                    
     There may  be wordsmithing  that needs to  get everyone                                                                    
     on the  same page.   But  at the end  of the  day, this                                                                    
     legislation as  it sits has the  appropriate checks and                                                                    
     balances for the hatcheries  to satisfy their fiduciary                                                                    
     obligations  and chart  a  better  course for  Alaska's                                                                    
     commercial fishermen.                                                                                                      
MR.  ZUANICH,  in response  to  Co-Chair  Thomas, commented  that                                                               
Alaska Seine Boat  Owners is about 70 percent  seine fleet, about                                                               
10-15 percent longliners, and the rest are "miscellaneous."                                                                     
CO-CHAIR THOMAS noted that there  is no cost recovery fishery for                                                               
9:21:01 AM                                                                                                                    
BOB  THORSTENSON, Executive  Director,  Southeast Alaska  Seiners                                                               
Association, testified that his  association strongly supports HB
218.   He noted that it  is not the  intent of the bill  to force                                                               
hatcheries to do anything.  He  commented, "I think this is going                                                               
to  be  a   very  progressive  piece  of   legislation.  ...  The                                                               
enforcement concerns that I've heard,  I believe, are going to be                                                               
very easily addressed."                                                                                                         
9:23:47 AM                                                                                                                    
CO-CHAIR THOMAS  requested that anyone  interested in  helping to                                                               
refine HB 218 call his staff.                                                                                                   
REPRESENTATIVE   WILSON  asked   for  further   clarification  on                                                               
language in the bill regarding debt.                                                                                            
CO-CHAIR THOMAS pointed out that  this was listed in the findings                                                               
section on page 1, lines 8-9:                                                                                                   
     when   all  fisheries   enhancement  loan   obligations                                                                    
     incurred for a hatchery facility have been repaid.                                                                         
CO-CHAIR THOMAS continued:                                                                                                      
     It is  my understanding  that NSRAA is  one of  the few                                                                    
     hatcheries that have probably  zero-debt, and so that's                                                                    
     why   I'm  wondering   why   they're  concerned   about                                                                    
     enhancement  debt, unless  they're looking  to obligate                                                                    
     the fishermen  to build another hatchery  or something.                                                                    
     But right now,  as far as I know, they  are pretty much                                                                    
REPRESENTATIVE WILSON asked what happens after the debt is paid.                                                                
CO-CHAIR THOMAS replied,  "Typically I think when  they have cost                                                               
recovery fishery,  it's to build  the reserves for the  next year                                                               
or  to  pay  for  the  debt for  that  year.  ...  Several  other                                                               
hatcheries I know,  their debt is so huge that  they need to take                                                               
every  fish they  can."   He remarked  that when  hatcheries were                                                               
first built in the 1980s, fish  prices were high, and so once the                                                               
prices dropped, it was difficult to pay back debt.                                                                              
CO-CHAIR LEDOUX  commented that she  was curious why some  of the                                                               
hatcheries were selling  their fish above the market  price.  She                                                               
said, "And  then you had  that problem  in Bristol Bay  where the                                                               
cost recovery system was really driving the prices down."                                                                       
CO-CHAIR THOMAS remarked  that the only reason he  could think of                                                               
for why  hatcheries [were  able to  sell their  fish at  a higher                                                               
cost] than the  gillnetters and the seiners was  the tender fleet                                                               
costs.   He explained,  "[The hatcheries] only  have to  send one                                                               
big  tender to  a  cost  recovery area  and  haul  out a  million                                                               
pounds, whereas when  you serve a gillnet fishery  you'll have as                                                               
many  as four  tenders  to pack  maybe 100,000  pounds  a day  or                                                               
something, and they're rotating back and forth.                                                                                 
9:28:21 AM                                                                                                                    
CO-CHAIR LEDOUX announced that HB 218 would be held over.                                                                       

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