Legislature(1993 - 1994)
02/09/1994 08:15 AM House RES
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* first hearing in first committee of referral
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HJR 50 - NPFMC COMPREHENSIVE RATIONALIZATION PLAN CHAIRMAN WILLIAMS told committee members there is a draft Resources Committee Substitute (CS) in their folders. The CS was drafted to correct a technical error in the original bill; page 2, line 12, in the whereas clause that states the amount of money the Alaska seafood processing industry has invested in shoreside processing plants. He said in the original bill, the dollar amount was listed as one million dollars, but it should have read one billion dollars. Number 022 REPRESENTATIVE CARL MOSES, PRIME SPONSOR, HJR 50, said he introduced the resolution to address a potential problem for shore-based processors and the granting of Individual Fishing Quotas (IFQs) to individual fish harvesters. He stressed if consideration is not given to shore-based processors, zero fish will be going to shore. REPRESENTATIVE ELDON MULDER referring to page 1, line 13, "WHEREAS the IFQ system would greatly reduce the volume of groundfish and crab sold to shore-based processors;" asked Representative Moses what basis he was using when saying the volume will definitely be reduced. REPRESENTATIVE MOSES responded that conceivably all fish could be transferred to a mother ship off shore. Number 046 REPRESENTATIVE CON BUNDE inquired if there are tax considerations which encourage offshore processors not to come to shore. REPRESENTATIVE MOSES answered that was correct as many ports have a sales tax. REPRESENTATIVE BILL HUDSON said in reviewing page 2, it states the dollar value paid to fish harvesters is $1.4 billion. He felt the figure quoted was high and asked if it included salmon, groundfish and all types of crab, etc. REPRESENTATIVE MOSES replied that was correct. REPRESENTATIVE HUDSON asked what percentage of that figure is nonresident. REPRESENTATIVE MOSES said he did not know, but guessed that the majority was nonresident. He stated the figure was taken from a resolution passed by the city of Unalaska. REPRESENTATIVE PAT CARNEY commented CSHJR 50(RES) contains many numbers and he hoped they are accurate. Number 077 RICK LAUBER, REPRESENTATIVE, PACIFIC SEAFOOD PROCESSORS ASSOCIATION, AND CHAIRMAN, NORTH PACIFIC FISHERIES MANAGEMENT COUNCIL, said the council is considering a comprehensive rationalization of the groundfish and crab fishers off the coast of Alaska and IFQs or Individual Transferable Quotas (ITQs). From research completed by several entities it was indicated that if an ITQ system is granted only to harvesters and factory trawlers, the shore- based industry in Alaska will go into a death spiral, lasting 5-7 years before they go bankrupt. He said that statement has been reviewed by the scientific and statistical committee of the council and other economists and has been verified. MR. LAUBER stressed there are many reasons for the situation including the fact that the factory trawl fleet and the mother ship operation offshore operate at a lower price. They are not burdened by the regulations which the shore- based industry face. For example, if there are four people working at a shore-based plant, according to the laws of the state of Alaska, 240 square feet has to be provided for sleeping accommodations whereas aboard ship, only 64 square feet of floor space has to be provided. MR. LAUBER pointed out that an ITQ is like a share of stock; it is owned, it can be transferred and it can be used as collateral. If a person has an IFQ share for one million pounds of fish, a loan for 70 percent of the value of the share can be secured and used to purchase more quota shares. He said the real threat is from the factory trawl fleet. MR. LAUBER mentioned the figures used in CSHJR 50(RES) were prepared by Pacific Associates, a research group, and he thought all of the numbers are official government numbers received from various agencies. He stressed in the state's traditional salmon and halibut fishing, the majority of fishermen are Alaskans. However, in the offshore fisheries, all of the factory trawlers are based outside of Alaska with crews also from outside the state. He noted the shore-based plants are all located in the state, paying local and state taxes. When the Magnuson Act was passed in 1976, it was hoped there would be benefits to the United States and to the state of Alaska and to this point, there have been. MR. LAUBER stressed if the ITQ system, which only grants quota shares to harvesters, factory ships and factory trawlers is used, there is a dangerous risk that the economists are correct and within a few years, there will be no shore-based processing plants for groundfish and crab. He expressed support of CSHJR 50(RES). Number 198 REPRESENTATIVE HUDSON asked if there should be language in one of the WHEREAS clauses relating to ITQs. MR. LAUBER responded it is not necessary, since the council uses the terms IFQs and ITQs interchangeably and both are understood. REPRESENTATIVE MULDER recalling the $1.4 billion going to out of state interests, asked if there are any steps the legislature can take to reverse the problem. MR. LAUBER responded there are many things which can be done, none of which could immediately change the situation. It is a matter of capital. There have been companies in Alaska, owned by Alaskans, who as they grew larger, found there was a need to compete which resulted in a need to move their corporate offices out of Alaska. He gave several examples of companies and their situations. MR. LAUBER told members what is important to remember is that those Alaskan-owned companies have an investment in Alaska, not where they may have their corporate offices. They are located in the state, they pay taxes here, they buy locally, and have a commitment in the state. He said often there is a hostile attitude regarding the regulatory process in the state and gave examples of situations and large fines being assessed. He felt that attitude often makes it difficult for these companies to invest, expand or add added-value facilities. Number 327 REPRESENTATIVE MULDER asked Mr. Lauber if he had seen the 20/20 program on television showing problems with the seafood industry and if so, questioned if there are ways to insure the quality of the product. MR. LAUBER stressed a television show like the 20/20 program does horrible damage to the seafood industry. He said up until recently, the state was putting money into the Alaska Seafood Marketing Institute (ASMI) and currently, the industry is putting a substantial amount of money into the ASMI program. He noted that most of the television program centered on the problem of what happens to the product after it leaves the fishing vessel and the processing plant. The program focused on fish markets, consumer markets or the distribution point of seafood. MR. LAUBER stated the standards which Alaska are held to are far higher than any other state but once the product leaves the state, it can be misused and there is not much the state can do about it. REPRESENTATIVE HUDSON mentioned he was distressed that the program used Alaska posters, when in reality the subject matter was not directly related to the product coming from the state. He felt there needs to be a continued, expanded effort by ASMI to educate consumers and institutions on how to handle and use seafood as well as how to maintain the quality of the product. REPRESENTATIVE HUDSON asked if the study that Mr. Lauber referred to earlier which provided the figures in CSHJR 50(RES) is available. MR. LAUBER said it is available probably through Representative Moses' office. He stressed the seafood industry is interdependent. The companies who operate in Alaska have a broad range of species and product forms which they purchase and sell. What happens to companies in the salmon market affects their general business health. Therefore, it is true that ITQs on groundfish and crab might not directly impact the salmon or halibut industry but it does affect other industries. REPRESENTATIVE HUDSON said there is some precedence, as a percentage of the allocation was previously granted to onshore processors. MR. LAUBER replied that was correct and noted they are currently operating under the inshore/offshore allocation and will do so through 1995. The allocation includes: fishermen delivering to inshore operations receive 35 percent; the offshore sector gets 75 percent; and 7 1/2 percent goes to the community development quota (CDQ) program. He noted that in the Gulf of Alaska, the onshore allocation is 100 percent. REPRESENTATIVE HUDSON asked Mr. Lauber if he envisioned an expansion of the CDQ program. MR. LAUBER responded the only eligible communities in the current CDQ program on pollock are within 50 miles of the coast of the Bering Sea. There are a number of communities that the state did not find eligible such as Dutch Harbor and Unalaska. Number 498 REPRESENTATIVE CARNEY made a motion to ADOPT the draft committee substitute for HJR 50 as CSHJR 50(RES). CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, CSHJR 50(RES) was ADOPTED. OLE HARDER, KODIAK, said he has been involved in Alaska fisheries since 1948 including all types of fish and canneries. He felt the resources and the fishing business are in the worst condition ever. He stressed a high percentage of the salmon industry will go broke this year. Unless $20-25 million is devoted to saving the second biggest industry in the state, it will go broke. Mr. Harder emphasized this will be an even worse year for the industry. He favors additional taxes to save the industry. REPRESENTATIVE CARNEY asked if additional money is allocated, what it will be used for. MR. HARDER responded additional efforts other than ASMI are needed. He stressed there is a need for high line marketing. REPRESENTATIVE HUDSON wondered if Mr. Harder meant that the $25 million a year will expand the domestic market. MR. HARDER said that is correct. Number 605 REPRESENTATIVE BUNDE made a motion to MOVE CSHJR 50(RES) out of committee with INDIVIDUAL RECOMMENDATIONS. CHAIRMAN WILLIAMS asked if there were any objections. Hearing none, the motion PASSED. (CHAIRMAN WILLIAMS noted for the record that REPRESENTATIVE GREEN had joined the committee at 8:22 a.m.) TAPE 94-11, SIDE B Number 000
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