Legislature(2003 - 2004)
03/31/2003 05:35 PM House EDT
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT,
INTERNATIONAL TRADE AND TOURISM
March 31, 2003
5:35 p.m.
MEMBERS PRESENT
Representative Cheryll Heinze, Chair
Representative Pete Kott
Representative Vic Kohring
Representative Sharon Cissna
Representative Harry Crawford
MEMBERS ABSENT
Representative Lesil McGuire, Vice Chair
Representative Nancy Dahlstrom
COMMITTEE CALENDAR
OVERVIEW: AGRIUM, KENAI NITROGEN PRODUCTION AND INTERNATIONAL
MARKETS
OVERVIEW: ALASKA SEAFOOD MARKETING INSTITUTE
[For the regular meeting minutes, see the 5:14 p.m. minutes for
this date.]
TAPES
03-6, SIDE(S) A & B
CHAIR CHERYLL HEINZE reconvened the meeting of the House Special
Committee on Economic Development, International Trade and
Tourism at 5:35 p.m. Present were Representatives Heinze, Kott,
Kohring, Cissna, and Crawford.
SUMMARY OF INFORMATION
OVERVIEW: AGRIUM, KENAI NITROGEN PRODUCTION AND INTERNATIONAL
MARKETS
MIKE NUGENT, General Manager, Agrium Kenai Nitrogen Operations,
introduced his colleagues, Lisa Parker, community relations
coordinator for Agrium U.S., and John Miller, who is in charge
of international marketing. Mr. Nugent provided handouts and
presented an overview of Agrium. He began by stating that he
would discuss their operations at Kenai and describe what Agrium
does. He went on to say that he would then discuss the Cook
Inlet operations, following which John Miller would discuss
Agrium's international program.
MR. NUGENT told members that Agrium produces nitrogen fertilizer
products. Agrium is the largest producer of nitrogen products
in North America, with a total of 6.9 million tons produced a
year. The facility at Kenai is responsible for 6 percent of
North America's total output of nitrogen. Two products are
produced from nitrogen: ammonia and urea.
MR. NUGENT went on to describe some aspects of the economic
impact of Agrium, which produces high-paying jobs and is a
value-added manufacturer. Agrium has 292 year-round employees,
which puts it in third place for largest private-sector
employers. Pay at Agrium is 2.5 times higher than the Kenai
Peninsula Borough average wage. Agrium has paid $2.4 million in
property taxes to the Kenai Peninsula Borough. It is active in
charitable giving, focusing its funds on youth-based charities.
Agrium contributes $1.4 million to state funding for education.
MR. NUGENT went on to discuss Agrium's activity in Cook Inlet.
Major oil and gas fields exist in Cook Inlet, but the potential
is underdeveloped. Agrium is unable to operate at capacity in
Cook Inlet due to inadequate supply. The Cook Inlet facility he
described as a world-class facility that competes in the world
market. He said Agrium is committed to further growth and
development of the Cook Inlet facility.
JOHN MILLER, Manager, Industrial and International Sales, Agrium
Inc., Calgary, Alberta, spoke next. He showed an international
map outlining Agrium's international markets for ammonia. Korea
accounts for 92 percent of its market, Thailand 16 percent, the
Philippines 5 percent, and Taiwan 3 percent. Agrium does not
sell its product to the Lower 48 because of the Jones Act and
the lack of access to a Jones Act-approved barge for the
transport of anhydrous ammonia.
MR. MILLER further described the major global competition faced
by Agrium. He again showed a map portraying the Middle East as
the primary competitor, with Malaysia, Indonesia, Russia, and
Venezuela representing other areas of competition for Agrium's
products. Agrium enjoys a distinct freight cost advantage over
its competitors. With the cost of gas increasing, this
advantage is at risk. There is a distinct need for further gas
development to allow Agrium to continue to grow and prosper.
OVERVIEW: ALASKA SEAFOOD MARKETING INSTITUTE
RAY RIUTTA, Executive Director, Alaska Seafood Marketing
Institute (ASMI), introduced his associate, Laura Fleming. He
provided handouts and presented an overview of ASMI, the state's
seafood marketing arm, which was developed by a combined effort
of industry and government. He reported that ASMI functions by
developing strong relationships with major foodservice chains,
retail chains, restaurants, and chefs. Alaskan salmon commands
an excellent price but has faced sharp declines in price due to
farmed salmon that has flooded the market. He said ASMI
revenues have declined, paralleling the decline in salmon price
and revenues. Over the past year, ASMI has seen a drop in
revenue of 42 percent.
MR. RIUTTA told members that ASMI also has a focus on exports,
considering itself an expert at exports, with six full-time
overseas staff in addition to four local full-time staff. The
federal government contributes 78 percent of the funding to ASMI
for its overseas marketing efforts. However, the United States
Department of Agriculture (USDA) channels this funding to growth
markets. Thus mature markets such as Japan have become a
problem for ASMI in terms of continued marketing efforts.
MR. RIUTTA noted that competition in salmon marketing comes from
several areas. Norway, another major marketer of salmon,
produces similar quantities of salmon. But whereas Norway
spends $40 million to market this salmon, ASMI has $4 million to
spend on marketing all of Alaska's seafood products. Another
challenge for Alaskan salmon results from the inconsistent
market, with seasonal changes in availability. Farmed salmon,
with its consistent quality and availability, has been able to
bite into the wild salmon market.
MR. RIUTTA said ASMI plans to focus marketing efforts on the
uniqueness of the Alaskan product. It is also focusing on other
fish products. In the United Kingdom (UK) and Europe, for
instance, Alaskan pollock and cod have found large markets due
to the decline of local stocks of these fish. Currently, ASMI's
largest overseas market for fish is Japan at 48 percent; Europe
is next at 19 percent. South Korea is a growing market, but
serves primarily as a warehouse from which it ships the fish to
markets throughout Asia.
MR. RIUTTA said another focus of ASMI in its marketing efforts
has been directed toward chefs. Contests using Alaskan seafood
have been successful. Partnerships with various groups such as
McCormick and Schmick's restaurant chain, Alaska Airlines, and
the soy sauce industry also have met with success. He reported
that ASMI is very active in trade shows, public relations,
technical training, and special events. Very little of its
effort is focused on advertising.
REPRESENTATIVE KOHRING asked why ASMI does not fund itself by
directly taxing the salmon industry and the seafood processors.
MR. RIUTTA responded that most federal grants require state
matching funds.
REPRESENTATIVE CISSNA asked if other states have seafood markets
that they promote.
MR. RIUTTA responded that other states are using ASMI as their
model for marketing including, recently, even the farmed salmon
industry.
REPRESENTATIVE CISSNA asked if the U.S. is not doing a great job
in marketing seafood.
MR. RIUTTA responded that the sale of seafood is not down. The
problem is the flooding of the market with farmed fish so that
the prices are down.
CHAIR HEINZE asked how the committee can help to support ASMI.
MR. RIUTTA responded that anytime someone travels, he or she
should market the seafood from Alaska; ASMI will provide
material to assist with this. The markets in need of help are
Japan and the growing market in China. Australia, he said, is a
pretty weak market.
CHAIR HEINZE asked if the war is having an impact.
MR. RIUTTA indicated the war will probably affect all of ASMI's
exports.
CHAIR HEINZE asked if people can expect to see Alaskan salmon
served on Alaska Airlines.
MR. RIUTTA responded that ASMI recently had a very positive
meeting with Alaska Airlines. There is a hope that the airline
will help to promote Alaskan salmon, and may serve it in first
class.
REPRESENTATIVE McGUIRE asked what legislators can do if Alaska's
own airline won't serve Alaskan fish.
MR. RIUTTA responded that the problem is the price point.
Farmed salmon with its low price makes it very difficult to
compete.
REPRESENTATIVE CISSNA asked if she understands correctly that
while Alaskan salmon sales have declined, other salmon sales
have increased.
MR. RIUTTA affirmed that this is correct.
ANNOUNCEMENTS
There were no announcements.
COMMITTEE ACTION
The committee took no action.
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Economic Development, International Trade
and Tourism meeting was adjourned at 7:00 p.m.
NOTE: The meeting was recorded and handwritten log notes were
taken. A copy of the tape(s) and log notes may be obtained by
contacting the House Records Office at State Capitol, Room 3,
Juneau, Alaska 99801 (mailing address), (907) 465-2214, and
after adjournment of the second session of the Twenty-Third
Alaska State Legislature this information may be obtained by
contacting the Legislative Reference Library at (907) 465-3808.
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