Legislature(2009 - 2010)BUTROVICH 205

03/25/2010 03:30 PM Senate RESOURCES


Download Mp3. <- Right click and save file as

Audio Topic
03:37:50 PM Start
03:39:04 PM Cook Inlet Natural Gas: the Way Forward
04:17:51 PM SB294
04:22:54 PM SB275
04:45:38 PM SR10
04:50:43 PM SB143
05:28:57 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Cook Inlet Natural Gas: The Way Forward
+= SR 10 DOMESTIC NATURAL GAS & ALT. ENERGY TELECONFERENCED
Moved SR 10 Out of Committee
+= SB 143 RAILBELT ENERGY & TRANSMISSION CORP. TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
= SB 275 AQUATIC FARMING
Heard & Held
= SB 294 SPORT FISH GUIDE LICENSES
Moved SB 294 Out of Committee
                     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.                                                                  

Document Name Date/Time Subjects