Legislature(2005 - 2006)CAPITOL 124

03/09/2005 08:30 AM House FISHERIES

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSHJR 15(FSH) Out of Committee
Heard & Held
*+ "An Act relating to cost recovery TELECONFERENCED
fisheries for private nonprofit
hatchery facilities"
<Pending introduction and referral>
Scheduled But Not Heard
                    ALASKA STATE LEGISLATURE                                                                                  
              HOUSE SPECIAL COMMITTEE ON FISHERIES                                                                            
                         March 9, 2005                                                                                          
                           8:38 a.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Gabrielle LeDoux, Co-Chair                                                                                       
Representative Bill Thomas, Co-Chair                                                                                            
Representative John Harris                                                                                                      
Representative Peggy Wilson                                                                                                     
Representative Woodie Salmon                                                                                                    
MEMBERS ABSENT                                                                                                                
Representative Jim Elkins                                                                                                       
Representative Mary Kapsner                                                                                                     
OTHER LEGISLATORS PRESENT                                                                                                     
Representative Paul Seaton                                                                                                      
COMMITTEE CALENDAR                                                                                                            
HOUSE JOINT RESOLUTION NO. 15                                                                                                   
Relating to open ocean aquaculture in the federal exclusive                                                                     
economic zone.                                                                                                                  
     - MOVED CSHJR 15(FSH) OUT OF COMMITTEE                                                                                     
HOUSE BILL NO. 192                                                                                                              
"An  Act  relating  to  requirements to  obtain  and  maintain  a                                                               
fisheries  business license;  relating  to  security required  of                                                               
fish processors  and primary  fish buyers;  and providing  for an                                                               
effective date."                                                                                                                
     - HEARD AND HELD                                                                                                           
"An Act relating to cost recovery fisheries for private                                                                         
nonprofit hatchery facilities."                                                                                                 
     - NOT INTRODUCED                                                                                                           
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HJR 15                                                                                                                  
SHORT TITLE: OPEN OCEAN AQUACULTURE                                                                                             
SPONSOR(s): FISHERIES                                                                                                           
03/01/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/01/05       (H)       FSH, RES                                                                                               
03/09/05       (H)       FSH AT 8:30 AM CAPITOL 124                                                                             
BILL: HB 192                                                                                                                  
SHORT TITLE: FISHERIES BUSINESS LICENSE; BOND                                                                                   
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
03/02/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/02/05       (H)       FSH, L&C, FIN                                                                                          
03/09/05       (H)       FSH AT 8:30 AM CAPITOL 124                                                                             
WITNESS REGISTER                                                                                                              
IAN FISK, Staff                                                                                                                 
to Representative Bill Thomas                                                                                                   
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented HJR 15 on behalf of the House                                                                    
Special Committee on Fisheries, sponsor by request, which is co-                                                                
chaired by Representative Thomas                                                                                                
REPRESENTATIVE PAUL SEATON                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Posed questions to the committee regarding                                                                 
HJR 15.                                                                                                                         
ERIC JORDAN                                                                                                                     
Sitka, Alaska                                                                                                                   
POSITION STATEMENT:  Testified in support of HJR 15.                                                                            
HERMAN FANDEL                                                                                                                   
Kenai, Alaska                                                                                                                   
POSITION STATEMENT:  Testified in support of fish farming.                                                                      
IRENE FANDEL                                                                                                                    
Kenai, Alaska                                                                                                                   
POSITION STATEMENT:  Testified in support of fish farming.                                                                      
JERRY McCUNE, Lobbyist                                                                                                          
for United Fisherman of Alaska (UFA)                                                                                            
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions regarding HJR 15.                                                                       
PAULA TERREL                                                                                                                    
Alaska Marine Conservation Council                                                                                              
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions regarding HJR 15.                                                                       
CHUCK HARLAMERT, Juneau Section Chief                                                                                           
Tax Division                                                                                                                    
Alaska Department of Revenue                                                                                                    
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Presented  HB 192  and answered  questions                                                               
regarding the bill.                                                                                                             
GREY MITCHELL, Director                                                                                                         
Division of Labor Standards and Safety                                                                                          
Alaska Department of Labor and Workforce Development                                                                            
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions regarding HB 192.                                                                       
ACTION NARRATIVE                                                                                                              
CO-CHAIR  BILL  THOMAS  called the  House  Special  Committee  on                                                             
Fisheries  meeting  to  order at  8:38:53  AM.    Representatives                                                             
Thomas, LeDoux,  Harris, Salmon, and  Wilson were present  at the                                                               
call to order.  Representative  Harris arrived as the meeting was                                                               
in progress.                                                                                                                    
HJR 15-OPEN OCEAN AQUACULTURE                                                                                                 
8:39:13 AM                                                                                                                    
CO-CHAIR THOMAS announced that the  first order of business would                                                               
be  HOUSE  JOINT  RESOLUTION  NO. 15,  "Relating  to  open  ocean                                                               
aquaculture in the federal exclusive economic zone."                                                                            
8:39:49 AM                                                                                                                    
REPRESENTATIVE  WILSON  moved  to adopt  the  proposed  committee                                                               
substitute for  HJR 15,  labeled 24-LS0631\F,  Utermohle, 3/8/05,                                                               
as the  working document.   There being  no objection,  Version F                                                               
was before the committee.                                                                                                       
8:40:08 AM                                                                                                                    
IAN  FISK,  Staff to  Representative  Bill  Thomas, Alaska  State                                                               
Legislature,  speaking  as  the  committee  aide  for  the  House                                                               
Special  Committee  on  Fisheries,   presented  HJR  15  and  the                                                               
proposed CS.   He pointed  out that the  CS has a  few additional                                                               
lines  on page  1,  lines 15-16,  regarding genetically  modified                                                               
fish that read:                                                                                                                 
     WHEREAS  there are  patents  pending  to cultivate  and                                                                    
     introduce  genetically modified  fish into  open waters                                                                    
     which  will   pose  a  direct  threat   to  wild  stock                                                                    
MR. FISK  also noted  that the  CS has  an additional  resolve on                                                               
page 2, lines 27-20:                                                                                                            
     FURTHER  REOLVED  that  the  Alaska  State  Legislature                                                                    
     respectfully  urges Congress  to prohibit  the issuance                                                                    
     of any  license to permit an  aquaculture facility that                                                                    
     imports,  exports,  possesses,   cultivates,  sells  or                                                                    
     otherwise  handles  genetically  modified fish  in  the                                                                    
     federal exclusive  economic zone or has  access to open                                                                    
8:41:17 AM                                                                                                                    
MR. FISK  explained that  HJR 15 is  in reference  to legislation                                                               
that  is  being developed  by  the  U.S. Department  of  Commerce                                                               
National Marine Fisheries Service (NMFS).  He commented:                                                                        
     Alaskans  have  many  legitimate  concerns  about  this                                                                    
     concept,  especially in  light of  our experience  with                                                                    
     farmed salmon  and what  that has  done to  our economy                                                                    
     and   communities....  Some   of  these   concerns  are                                                                    
     environmental   in  nature,   for  instance:   disease-                                                                    
     transmission; damage  to the environment due  to anoxic                                                                    
     conditions that  are created  by overfeeding  in salmon                                                                    
     farms; concern about the  health ramifications to those                                                                    
     ... consumers  who choose to  eat farmed fish;  and, of                                                                    
     course,   escape  into   the  natural   environment  of                                                                    
     nonnative  species like  Atlantic salmon.   To  address                                                                    
     these  concerns,  this   resolution  asks  Congress  to                                                                    
     require  an  Environmental  Impact  Statement  for  any                                                                    
     proposal   to  license   an   open  ocean   aquaculture                                                                    
8:42:19 AM                                                                                                                    
MR. FISK  pointed out that  there are healthy  existing fisheries                                                               
in  the exclusive  economic zone  that have  been developed  over                                                               
decades such as the halibut  and sablefish industries, which have                                                               
been soundly managed for  biological and economic sustainability.                                                               
"People  are  very  concerned  that  the  advent  of  open  ocean                                                               
aquaculture  is  going  to  change  the  nature  of  the  seafood                                                               
business, and  we need to  know how this  is going to  affect our                                                               
communities and  their economies,"  he said, "so  this resolution                                                               
expresses   the   legislature's   commitment  that   open   ocean                                                               
aquaculture  do   no  harm   to  our   environment  and   to  our                                                               
MR.  FISK  reminded  the committee  that  the  state  legislature                                                               
enacted a  prohibition on  finfish farming in  1990, and  now the                                                               
state fishing  industry is starting  to see the benefits  of that                                                               
because "we've  differentiated ourselves in the  market; Alaska's                                                               
name is associated with natural,  wild products."  He opined that                                                               
if fish  were being farmed  offshore of Alaska, it  would confuse                                                               
the  market  place  and  damage   some  of  the  recent  industry                                                               
8:44:01 AM                                                                                                                    
MR. FISK continued:                                                                                                             
     Rumor  has it  that  this draft  legislation from  [the                                                                    
     U.S.] Department  of Commerce  is not going  to include                                                                    
     the [North  Pacific Fishery Management Council]  in the                                                                    
     process  of approving  permits.... It's  important that                                                                    
     we make a statement that  the council be involved since                                                                    
     they  manage all  the other  fisheries in  the Gulf  of                                                                    
     Alaska that are important to us.                                                                                           
8:45:01 AM                                                                                                                    
CO-CHAIR  THOMAS  noted  that  United  Fisherman  of  Alaska  had                                                               
submitted a letter of support for HJR 15.                                                                                       
REPRESENTATIVE PAUL  SEATON, Alaska  State Legislature,  asked if                                                               
the language on page 2, lines 27-30, referred to live fish.                                                                     
MR. FISK responded that it refers to genetically modified fish.                                                                 
REPRESENTATIVE SEATON clarified,  "I want to make  sure that what                                                               
we're talking about  is live fish or live animals,  and we're not                                                               
getting  too  much  into the  import/export  business,  ...  [or]                                                               
something that's being used for feed."                                                                                          
REPRESENTATIVE WILSON pointed  out the language on  page 1, lines                                                               
15-16, regarding genetically modified fish.                                                                                     
MR.  FISK stated,  "The language  about import  and export  is in                                                               
reference  to  the  idea  of people  bringing  in  a  genetically                                                               
modified  organism   and  introducing  it  for   the  purpose  of                                                               
cultivating it in the waters of the exclusive economic zone."                                                                   
8:48:29 AM                                                                                                                    
REPRESENTATIVE HARRIS asked  Mr. Fisk what kind  of escapement is                                                               
coming  from  fish  farms  in  Washington  and  British  Columbia                                                               
MR. FISK replied  that he did not have any  numbers, but he noted                                                               
that salmon have  escaped from farms in B.C. and  have been found                                                               
in  Alaska streams  as  far west  as the  Alaska  Peninsula.   He                                                               
remarked  that in  the case  of  open ocean  aquaculture, no  one                                                               
knows what  different species might  be proposed to  be developed                                                               
in local waters.                                                                                                                
8:49:30 AM                                                                                                                    
REPRESENTATIVE  HARRIS  asked  if   there  was  any  evidence  of                                                               
diseases introducing into Alaska by the fish farms.                                                                             
MR.  FISK  replied  that  he   was  not  aware  of  any  diseases                                                               
transmitted  from farmed  fish into  Alaska  wild salmon  stocks.                                                               
However,  he said,  there have  been documented  cases where  the                                                               
infectious hematopoietic neocrosis (IHN)  virus and sea lice have                                                               
been transmitted to wild fish stocks on the B.C. coast.                                                                         
REPRESENTATIVE WILSON  commented that her neighbor,  a fisherman,                                                               
caught  [an  escaped  farm  fish] that  was  very  unhealthy  and                                                               
covered with sea lice.  She  remarked that it could devastate the                                                               
entire fishing  industry if  [the farmed  fish infected  the wild                                                               
8:51:54 AM                                                                                                                    
ERIC  JORDAN  stated  that  he is  a  lifelong  Southeast  Alaska                                                               
resident and  a salmon troller.   He  mentioned that he  has also                                                               
been involved with  the Alaska Marine Conservation  Council as an                                                               
outreach coordinator  regarding salmon farming and  its potential                                                               
effect on ecosystems.  He stated:                                                                                               
     It's  my  opinion  that   open  ocean  aquaculture  ...                                                                    
     presents a  real threat  to the  health of  our fishing                                                                    
     industry  in Alaska  because we  are seeing  increasing                                                                    
     problems with ... the fish  farming industry around the                                                                    
     world    associated    with   disease,    environmental                                                                    
     pollution, escapes, and effects  on our wild resources.                                                                    
     My position  is ... that the  Alaska legislature should                                                                    
     notify  the  U.S.  Congress and  others  of  our  grave                                                                    
     concern about opening up  federal waters to aquaculture                                                                    
     development,  especially  finfish aquaculture  off  the                                                                    
     coast of Alaska.                                                                                                           
MR. JORDAN  noted that  he and  two other men  were in  Juneau to                                                               
meet  with   legislators  on  behalf   of  the   Alaska  Trollers                                                               
Association.   He expressed appreciation  to the  legislature for                                                               
the work it does for the fishing industry.                                                                                      
8:55:22 AM                                                                                                                    
REPRESENTATIVE SEATON asked Mr. Jordan  if he was also testifying                                                               
on shellfish, such as oysters and clams.                                                                                        
MR. JORDAN replied  that he was not testifying on  shellfish.  He                                                               
commented that  there are successful  oyster farms in  Alaska and                                                               
he had  not heard  of any  big environmental  problems associated                                                               
with  those.   He mentioned  that  his friend  runs a  successful                                                               
scallop and oyster  farm in Port Althorp.  He  clarified that his                                                               
testimony specifically in opposition to finfish farming.                                                                        
8:56:46 AM                                                                                                                    
HERMAN  FANDEL  testified  that  due  to  the  increasing  global                                                               
population, it  will become  necessary to  farm the  oceans "just                                                               
like we farm the lands of the world today."  He opined:                                                                         
     Today  more  fish  are needed  for  commercial  fishing                                                                    
     industry,    sport     fishing    industry,    tourism,                                                                    
     subsistance, and so on.  We  need more fish to feed the                                                                    
     world and the open  ocean aquaculture program certainly                                                                    
     will give us more fish.   It seems to me that we'd look                                                                    
     very foolish  today if our  forefathers decided  not to                                                                    
     farm the fertile farmlands in  our country.  And we may                                                                    
     look more foolish  in the future if we  decide today to                                                                    
     not farm the  endless oceans.  It is  important that we                                                                    
     get started now  so that the rest of  the world doesn't                                                                    
     leave us  behind.  Open  ocean aquaculture, I  feel, is                                                                    
     the  "wave  of  the  future."   To  oppose  open  ocean                                                                    
     aquaculture is  like some people ...  opposing drilling                                                                    
     for  oil  in  [the   Arctic  National  Wildlife  Refuge                                                                    
     (ANWR)].    We  should  not  let  fear  stop  progress.                                                                    
     Alaska's  wild stocks  cannot feed  the  world, and  we                                                                    
     should not  expect that  a shortage  of fish  will make                                                                    
     the  prices of  fish go  up.   Somewhere along  the way                                                                    
     we're going  to have to  have more fish, and  we've got                                                                    
     some big  fields out there that  we can farm and  get a                                                                    
     lot more  fish.  It's  coming; we might as  well adjust                                                                    
     our thinking to  it and join in with it.   I think it's                                                                    
     to our advantage to start; the sooner, the better.                                                                         
8:59:09 AM                                                                                                                    
IRENE FANDEL pointed out that NMFS was promoting legislation to                                                                 
permit open ocean aquaculture in federal waters.  She commented:                                                                
     Global   marketing  is   consistantly  increasing   and                                                                    
     demanding  seafood products.    Opening aquaculture  in                                                                    
     federal   waters   could   and  would   increase   [the                                                                    
     economies] of Alaska  coastal communities and subsidize                                                                    
     their  fishing season.  ... A  five-year moratorium  on                                                                    
     all permitting,  leasing, or development of  ocean pen-                                                                    
     raised shellfish and finfish  in the federal waters off                                                                    
     of  Alaska  will  just  set  Alaska  fisherman  further                                                                    
     behind in  the development  of ocean aquaculture.   The                                                                    
     social  and  economic   well-being  of  Alaska  coastal                                                                    
     communities  could  get a  boost  by  engaging in  open                                                                    
     ocean  aquaculture.    If there  are  problems  in  the                                                                    
     present process  of aquaculture  fisheries, I  urge you                                                                    
     to gather and work to  solve these problems rather than                                                                    
     to try to  stop it. Again, the population  of our earth                                                                    
     is  such that  we  need  to find  ways  of feeding  our                                                                    
     people  without   depleting  the  fish  stock   in  our                                                                    
     wonderful oceans.                                                                                                          
9:01:09 AM                                                                                                                    
CO-CHAIR THOMAS closed public testimony.                                                                                        
9:01:17 AM                                                                                                                    
REPRESENTATIVE HARRIS moved to report CSHJR 15, labeled 24-                                                                     
LS0631\F, Utermohle, 3/8/05, out of committee with individual                                                                   
recommendations and the accompanying zero fiscal notes.                                                                         
REPRESENTATIVE WILSON objected for discussion purposes.                                                                         
REPRESENTATIVE SEATON  pointed out that the  resolution refers to                                                               
aquaculture,  which  includes  filter-feeding shellfish  such  as                                                               
oysters  and mussels.    He  commented that  he  agreed with  the                                                               
concept of not  farming predatory shellfish such  as lobsters and                                                               
crab,  but  "I'm not  sure  that  the  same conditions  apply  to                                                               
oysters, clams, and mussels."                                                                                                   
9:03:19 AM                                                                                                                    
JERRY  McCUNE, Lobbyist  for United  Fisherman  of Alaska  (UFA),                                                               
explained that the NMFS legislation  lumps everything together as                                                               
"aquaculture", whether it's shellfish or  not.  He commented that                                                               
the  federal legislation  will be  better understood  once it  is                                                               
completely  drafted,  and  that  if  the  North  Pacific  Fishery                                                               
Management  Council is  involved, then  there would  be room  for                                                               
[limited  shellfish  farming].    He said,  "We're  not  opposing                                                               
shellfish, but  we're not  saying right now  openly until  we get                                                               
something  that we  can really  get our  hands around  and really                                                               
9:05:12 AM                                                                                                                    
PAULA  TERREL, Alaska  Marine Conservation  Council, agreed  with                                                               
Mr. McCune,  and she  noted that farming  shrimp, which  are also                                                               
considered  shellfish, could  have  a big  impact  on the  Alaska                                                               
shrimp  fishermen.   She  commented  that  some states  are  very                                                               
concerned about  shrimp farming because  of what has  happened to                                                               
their markets.   She said of the resolution,  "It's broad because                                                               
the legislation is  broad.  In other places  they use aquaculture                                                               
in a totally different way than we do here."                                                                                    
MR. McCUNE opined that each state  should have some say over what                                                               
happens off its shores.                                                                                                         
9:06:41 AM                                                                                                                    
REPRESENTATIVE SEATON commented that he  had wanted to get a feel                                                               
for  how the  committee  felt about  including  shellfish in  the                                                               
REPRESENTATIVE WILSON removed her objection.                                                                                    
MS. TERREL emphasized  the need to keep the  resolution broad for                                                               
9:07:37 AM                                                                                                                    
There being no objection, CSHJR  15(FSH) was moved from the House                                                               
Special Committee on Fisheries.                                                                                                 
HB 192-FISHERIES BUSINESS LICENSE; BOND                                                                                       
9:07:54 AM                                                                                                                    
CO-CHAIR THOMAS announced  that the next order  of business would                                                               
be  HOUSE BILL  NO.  192,  "An Act  relating  to requirements  to                                                               
obtain  and maintain  a fisheries  business license;  relating to                                                               
security  required of  fish processors  and primary  fish buyers;                                                               
and providing for an effective date."                                                                                           
9:08:58 AM                                                                                                                    
CHUCK  HARLAMERT,  Juneau  Section Chief,  Tax  Division,  Alaska                                                               
Department  of Revenue  presented HB  192 to  the committee.   He                                                               
     The bill has  two primary goals, the first  of which is                                                                    
     to increase  the accountability required  of processors                                                                    
     operating  in  the  state  for  the  payment  of  state                                                                    
     obligations  that support  the  industry.   And so  the                                                                    
     bill  adds to  the  existing list  of obligations  that                                                                    
     must be paid to  be licensed: the Unemployment Security                                                                    
     contributions,  ...  [Occupational  Safety  and  Health                                                                    
     Association  (OSHA)] fines,  and the  seafood marketing                                                                    
     assessment   that  funds   [Alaska  Seafood   Marketing                                                                    
     Institute (ASMI)].   The second  objective of  the bill                                                                    
     is to  improve the  protections that we  give fishermen                                                                    
     and  employees, who  either work  for or  sell fish  to                                                                    
     processors,  under  our  assurity  bonding  provisions.                                                                    
     Those changes are  contained in Section 2  of the bill.                                                                    
     They do this  in a couple of different ways.   First of                                                                    
     all,  the  bill  ...  attempts   to  make  the  bonding                                                                    
     requirement  more  responsive   to  processor  behavior                                                                    
     without  impacting  processors  who ...  don't  have  a                                                                    
     problem   paying  employees   or  fishermen   or  their                                                                    
     [Employment Security  Contributions (ESC)].  And  so it                                                                    
     eases the  conditions on which  a bond  ... requirement                                                                    
     can  be increased.   Second,  it restricts  the use  of                                                                    
     real  property.   Current law  allows real  property in                                                                    
     lieu  of a  bond.   If you  have real  property in  the                                                                    
     state at least  equal to what your  required bond level                                                                    
     would  be, you  don't need  to post  a bond.   That  is                                                                    
     difficult to  go against  and obtain  satifaction from,                                                                    
     and  so,  if  a   processor  has  demonstrated  ...  an                                                                    
     inability to pay fishermen, or  employees, or their ESC                                                                    
     at certain levels, they can  lose the right to use real                                                                    
     property  in lieu  of a  bond;  they must  post a  cash                                                                    
9:11:30 AM                                                                                                                    
MR. HARLAMERT continued:                                                                                                        
     Thirdly,  it allows  [Alaska  Department  of Labor  and                                                                    
     Workforce Development  ("Labor")] to reach the  bond to                                                                    
     pay  unpaid ESC  contributions in  a more  streamlined,                                                                    
     simplified  manner than  they can  today.   Current law                                                                    
     requires  Labor to  get a  judgment.... This  bill will                                                                    
     allow them to  go after that bond  after their internal                                                                    
     administrative  processes are  done;  they'd no  longer                                                                    
     have to go to court.                                                                                                       
9:12:02 AM                                                                                                                    
REPRESENTATIVE  HARRIS asked  for  further  clarification of  the                                                               
changes to the current statute.                                                                                                 
MR.  HARLAMERT explained  that certain  things  will not  change,                                                               
such as  the basic  bonding requirement, which  is $10,000  for a                                                               
normal processor.   No  changes were made  to the  increments for                                                               
higher bond levels,  as he explained, "In the  case where $10,000                                                               
is found  not to be  sufficient under  current law and  under the                                                               
proposed bill,  it goes  up to  either [$50,0000]  or [$100,000],                                                               
depending on  the level necessary  to meet the  risks anticipated                                                               
under those laws."  He then clarified two principle changes:                                                                    
     Under current  law, ...  in order  to increase  a bond,                                                                    
     you  actually have  to have  a judgment  paid from  the                                                                    
     bond, and  the bond  be insufficient  to pay  the whole                                                                    
     judgment. ...  Aside from  operating without  a license                                                                    
     or  other legal  behaviour, which  is unchanged  by the                                                                    
     bill,  that is  the  only condition  under current  law                                                                    
     where  you're  normally  going  to  see  a  bond  level                                                                    
     increase.   We found that  that is too  restrictive, or                                                                    
     has been  so restrictive ...  that it has left  us with                                                                    
     high-risk  processors with  a $10,000  bond or  nothing                                                                    
     more that  a $10,000 Deed  of Trust against  their real                                                                    
     property.    That  offers very  little  protection  for                                                                    
     fisherman and wage-earners.                                                                                                
9:15:35 AM                                                                                                                    
MR. HARLAMERT continued:                                                                                                        
     One  primary  difference  is, now  you  don't  have  to                                                                    
     actually  pay the  judgment from  the bond  to increase                                                                    
     the bond  level.   The simple  existence of  a judgment                                                                    
     over $10,000  can increase the  bond level  to $50,000.                                                                    
     The simple  existence of a  judgment over  $50,000 will                                                                    
     increase the  bond to [$100,000].   Second major change                                                                    
     is  that  Labor  no  longer  needs to  bring  to  us  a                                                                    
     judgment from a  court in order to go  after that bond.                                                                    
     And so they can reach that bond quicker.                                                                                   
9:16:23 AM                                                                                                                    
REPRESENTATIVE WILSON  asked Mr. Harlamert to  give the committee                                                               
an example of this.                                                                                                             
MR. HARLAMERT explained:                                                                                                        
     [The Department  of Revenue]  holds a  bond or,  in the                                                                    
     case  of  real  property,  a   Deed  of  Trust  on  the                                                                    
     taxpayer's   property   that   is  available   to   the                                                                    
     Department of  Labor or employees  of the  processor or                                                                    
     fishermen to  pay judgments  against the  processor for                                                                    
     unpaid   wages,  for   unpaid  fish,   or  for   unpaid                                                                    
     Employment  Security  Tax.    And  under  current  law,                                                                    
     Labor,  even after  going through  their administrative                                                                    
     processes,  holding  hearings   and  allowing  for  due                                                                    
     process appeals,  still has to  go one step  further to                                                                    
     court to  get a judgment  to go  after that bond.   And                                                                    
     that is a  principle change of the current  bill.  They                                                                    
     no longer  have to  do that; they  can simply  go after                                                                    
     the bond  now.   The taxpayer then  has to  replace it,                                                                    
     just like they do under existing law.                                                                                      
MR.  HARLAMERT related  that another  primary difference  is that                                                               
under current law,  there is a priority for payment  of the bond,                                                               
and employees  and fishermen are  first, while Labor  comes last.                                                               
In  practice, he  said, that  priority is  ineffective and  would                                                               
only  apply if  the claims  came  in at  the same  time and  were                                                               
competing, in  which case  the priority claim  would be  paid out                                                               
first.  But  if Labor came in first for  an ESC claim, Department                                                               
of  Revenue would  pay  out the  bond to  Labor  and, unless  the                                                               
[processor] intends  to stay in  business and  therefore replaces                                                               
that bond,  the fishermen  and employees  will not  be paid.   He                                                               
     Under this  bill, in order  to preserve  that priority,                                                                    
     where Labor now has an easier  route to get to the bond                                                                    
     than fishermen or employees, we  have basically a grab-                                                                    
     back provision, and so if,  for instance, Labor came in                                                                    
     and scooped up  the bond and ... if  subsequent to that                                                                    
     a fisherman  or employee brings a  judgment forward and                                                                    
     the  bond that  remains  was insufficient  to pay  that                                                                    
     judgment,  Labor is  obligated under  the bill  to kick                                                                    
     back what  they've collected against the  bond to cover                                                                    
     the  fishermen's claim.    So  it's substantially  more                                                                    
     protection for both employees  and fishermen than under                                                                    
     existing law.                                                                                                              
9:19:28 AM                                                                                                                    
CO-CHAIR  LEDOUX asked  Mr. Harlamert  why Labor  would take  the                                                               
bond if not for fishermen and employees.                                                                                        
MR. HARLAMERT  replied that  under current  law and  the proposed                                                               
law,  Labor has  the right  to use  the bond  to pay  unsatisfied                                                               
unpaid Employment Security Contributions.                                                                                       
CO-CHAIR  THOMAS asked  if contracted  tendermen can  file claims                                                               
against processors as well.                                                                                                     
MR.  HARLAMERT  replied  that tendermen  are  not  covered  under                                                               
current law or the proposed bill.                                                                                               
CO-CHAIR  THOMAS related  a  story about  a  contract tender  who                                                               
never  got  paid, yet  the  processor  continued to  operate  the                                                               
following  year.   He  asked  if the  bill  could  be amended  to                                                               
include contract tenders.                                                                                                       
9:21:57 AM                                                                                                                    
MR.  HARLAMERT  responded  that  the bill  could  be  amended  to                                                               
include tenders.  However, he said:                                                                                             
     Some players will  inherently have a leg  up on others.                                                                    
     We traditionally  see fishermen have an  advantage over                                                                    
     employees,  for  example,   because  their  claims  are                                                                    
     larger  [so] it's  more economical  to  pursue them  in                                                                    
     court.   And they tend  to beat employees to  the punch                                                                    
     at the  bond.   And if you  introduce tenders,  who, in                                                                    
     all  likelihood ...  would have  an even  higher claim,                                                                    
     then   you  would   further   ...  dilute   fishermen's                                                                    
     protections and those of employees.                                                                                        
CO-CHAIR THOMAS expressed interest in  adding new language to the                                                               
bill to include contract tenders.                                                                                               
9:23:36 AM                                                                                                                    
CO-CHAIR LEDOUX asked  if under the proposed  bill, the employees                                                               
would be able to file a claim to a bond without going to court.                                                                 
MR. HARLAMERT replied that the  proposed bill would still require                                                               
everyone except for Labor to get  a court judgment.  He explained                                                               
that the  processor is  entitled to due  process and,  unless the                                                               
Department of Revenue awards it, they  have to rely on some other                                                               
body [such  as a court].   He  reiterated that the  Department of                                                               
Labor  provides  due process  in  their  collection of  ESC,  but                                                               
independent  fishermen   and  employees  have  to   get  a  court                                                               
judgment, which is "the processor's  chance to give their side of                                                               
the story."                                                                                                                     
9:25:40 AM                                                                                                                    
CO-CHAIR LEDOUX asked  if there is an  administrative process for                                                               
MR.  HARLAMERT  replied  that  there   are  no  hearings  in  the                                                               
Department of Revenue's administration of the bond privisions.                                                                  
9:26:28 AM                                                                                                                    
GREY MITCHELL, Director, Division  of Labor Standards and Safety,                                                               
Alaska Department of Labor and Workforce Development, said:                                                                     
     There's  two different  reasons why  the Department  of                                                                    
     Labor  might be  interested in  a fish  processor bond.                                                                    
     One is  for taxes, and that's  this Employment Security                                                                    
     Tax issue  - Unemployment Tax contributions  [that] are                                                                    
     overdue  and  haven't  been paid  timely.    The  other                                                                    
     reason is  that we have  workers who haven't  been paid                                                                    
     their wages.   In the  case of the workers  who haven't                                                                    
     been  paid  their  wages,   this  bill  doesn't  change                                                                    
     anything.  It  still requires the same  process that is                                                                    
     currently in existence, which is  that we go through an                                                                    
     administrative process  with the  employer to  work out                                                                    
     the wage  claim if  we can,  and if  we can't,  then we                                                                    
     have to take him to court  and get a judgment before we                                                                    
     can pursue the  bond.  In the case  of the Unemployment                                                                    
     Insurance Taxes,  it's essentially the same,  where the                                                                    
     tax office has  to get a judgment to be  able to pursue                                                                    
     the bond proceeds.   This bill makes it  easier for the                                                                    
     tax   office   to   collect   dilinquent   Unemployment                                                                    
     Insurance  Taxes, but  then it  also puts  in this  ...                                                                    
     kick-back  requirement   where,  if   the  Unemployment                                                                    
     Insurance  Tax  people  come  in  and  seize  the  bond                                                                    
     proceeds, and  then a  fisherman or  a worker  comes in                                                                    
     and is  able to  get a judgment,  then that  ... trumps                                                                    
     the tax  collection and the  money had to be  paid back                                                                    
     to the worker.                                                                                                             
9:28:31 AM                                                                                                                    
CO-CHAIR LEDOUX commented, "Due  process doesn't mandate that the                                                               
department get a court order judgment.   It can be simply through                                                               
the administrative process of determining  that ... the funds are                                                               
owed.  Is that correct?"                                                                                                        
MR. MITCHELL replied:                                                                                                           
     I'm not sure exactly what  you're asking.  I think what                                                                    
     you're  asking is  whether  or  not the  administrative                                                                    
     process with  respect to determining whether  taxes are                                                                    
     delinquent is sufficient for  the Department of Revenue                                                                    
     to accept  that as  due process  for seizing  the bond.                                                                    
     And that's essentially what  they've accepted with this                                                                    
     bill;   ...  that   a  final   determination  for   the                                                                    
     Employment  Security Division  at  Department of  Labor                                                                    
     saying,  "This amount  is due",  is  good enough;  they                                                                    
     don't have to go to court to get that.                                                                                     
CO-CHAIR LEDOUX  asked, "Would it be  constitutionally acceptable                                                               
to  allow  the  bond  to   be  seized  by  employees  through  an                                                               
administrative  judgment?"   She  related to  the committee  that                                                               
last year  a processor in her  district hired 20 or  30 young men                                                               
from Turkey,  but then didn't  pay the men.   She noted  that the                                                               
employees' cases are still pending.                                                                                             
9:30:47 AM                                                                                                                    
MR. MITCHELL acknowledged that there  were problems with a few of                                                               
the  processors recently.    He commented  that  there are  still                                                               
about  100   wage  claims  still  open   against  one  particular                                                               
processor, and  "we're actually going  to get some  percentage of                                                               
funding  due  to  a  fish  pack  that  was  seized  by  the  U.S.                                                               
Department of  Labor in that  case, and  so somewhere close  to a                                                               
half million  dollars is going to  be paid back to  workers."  He                                                               
noted  that in  that particular  case, the  processor had  a bond                                                               
that  was  secured  with  real   property,  which  made  it  more                                                               
difficult to  pursue even with  a judgment because  "you're stuck                                                               
with trying to execute against a  piece of property rather than a                                                               
... cash bond."                                                                                                                 
9:31:53 AM                                                                                                                    
CO-CHAIR LEDOUX asked, since one of  the purposes of this bill is                                                               
to prevent  incidents like  that from happening,  if it  would be                                                               
easier if  the bond could  be seized  by the employees  after the                                                               
administrative  adjudication that  they are  in fact  owed funds,                                                               
rather  than  having to  go  to  the court  to  do  it after  the                                                               
administrative adjudication.                                                                                                    
MR. HARLAMERT  replied that the effect  of that would be  to push                                                               
the  fishermen's claims  out  of the  way  because, although  the                                                               
administrative  process  would  simplify the  process,  fisherman                                                               
would be left  with the same judgment requirement.    Because the                                                               
fishermen don't have a process in  place within the state to have                                                               
their claims  adjudicated, they still  have to go  through court.                                                               
Therefore the  consequence would be  to have a  superpriority for                                                               
wages, fishermen would  be pushed to number two,  and Labor would                                                               
be last.    In  order to prevent that  result, you would  have to                                                               
find some comparable  adjudictive process for fishermen  to get a                                                               
part of the bond.                                                                                                               
9:33:58 AM                                                                                                                    
CO-CHAIR THOMAS commented that he  once filed against a bond, and                                                               
only  three fishermen  were paid  off because  there was  no more                                                               
money to  pay the rest  of them.   He suggested that  perhaps the                                                               
bond requirement was  too small and the bond  should be increased                                                               
to $20,000 or $30,000.                                                                                                          
MR.  HARLAMERT   noted  that  the   Department  of   Revenue  had                                                               
considered   that  because,   in   most  cases   of  a   business                                                               
catastrophe,  $10,000  is  insufficient  [to cover  debts].    He                                                               
pointed out that  the department canvased other  states and found                                                               
that Alaska  is "already  the most  severe" state,  as it  is the                                                               
only state that  requires a bond for fish  buyers and processors,                                                               
although many  states have general  labor bond  requirements that                                                               
can be  imposed at the discretion  of the commissioner.   He also                                                               
noted:  "We are  looking at  some underperforming  processors ...                                                               
and we  wanted to  address that  problem but we  did not  want to                                                               
punish the  processors who are  good corporate citizens.   And so                                                               
we felt  we were limited  to keeping the  status quo so  that any                                                               
processor  without a  history of  problems is  unaffected by  the                                                               
9:36:17 AM                                                                                                                    
CO-CHAIR  THOMAS remarked,  "That's  another reason  why I  think                                                               
that  the contract  employee should  be involved  in there,  too,                                                               
because you  can dump a  contract employee if he's  not protected                                                               
under the bond."                                                                                                                
REPRESENTATIVE  WILSON asked  for  clarification as  to why  some                                                               
processors  don't   pay  their  employees,  fishermen,   and  the                                                               
contract tenders.                                                                                                               
CO-CHAIR THOMAS  answered, "They  are bad people.  ... If  we can                                                               
tighten this up ... we may get  rid of some of these bad people."                                                               
He explained that  a tender could owe a fishing  fleet as much as                                                               
$50,000-$70,000 for  a three-week period and  the processor could                                                               
leave without ever  paying the tender.  The  processor could then                                                               
return  to  the  fishing  grounds  the  following  year  under  a                                                               
different  company  name, which  has  happened  in the  past,  he                                                               
remarked.  He  said that for this reason he  supports raising the                                                               
bond and adding contract tenders to the bill.                                                                                   
9:39:16 AM                                                                                                                    
CO-CHAIR LEDOUX pointed out:                                                                                                    
     What  some of  [the  processors] do  is  they bring  in                                                                    
     students from  one country [to  work at  the processor]                                                                    
     one  year  - let's  say  they  bring in  students  from                                                                    
     Turkey one  year.  By  the next year, nobody  in Turkey                                                                    
     wants to work for them,  so then they bring in students                                                                    
     from  Croatia,   for  example,  the   next  year.     I                                                                    
     understand what you folks are  saying about not wanting                                                                    
     to penalize  ... our good  processors, and so  it seems                                                                    
     reasonable to  me to  leave the initial  bond at  a low                                                                    
     rate,  but  I'm not  sure  that  what you're  going  to                                                                    
     increase it to is enough.   In other words, if somebody                                                                    
     has claims  of $50,000  or more, you're  increasing the                                                                    
     amount of the  bond to $100,000.  I think  that some of                                                                    
     these [processors]  ..., by  the time  the adjudicative                                                                    
     process is  over, are going  to owe  significantly more                                                                    
     than $100,000.  ... I  would suggest  that maybe  if [a                                                                    
     processor]  got a  judgment  of  $75,000, for  example,                                                                    
     that the bond  the next year be increased  to twice the                                                                    
     amount of ... the previous year's judgment.                                                                                
9:41:03 AM                                                                                                                    
MR. HARLAMERT stated that he is  happy to work with the committee                                                               
to try to balance the needs of  the industry.  He said, "We don't                                                               
want  to  see any  unnecessary  barriers  to entry,  and  another                                                               
concern would be  ... [that] it's possible that a  'good guy' can                                                               
get stuck with a judgment."                                                                                                     
CO-CHAIR THOMAS asked Mr. Harlament,  "How do you track these bad                                                               
MR. HARLAMERT responded:                                                                                                        
     We can only stop them under  ... the rules that the law                                                                    
     allows  us  to.   And  essentially  [the Department  of                                                                    
     Revenue] can only  deny a license if  they haven't paid                                                                    
     their  tax, haven't  secured their  estimated tax,  and                                                                    
     don't  have  a  bond.    As long  as  they  meet  those                                                                    
     requirements it  really doesn't  matter that  they have                                                                    
     outstanding  obligations  to   any  other  business  or                                                                    
     fishermen  individually.   That's just  the way  law is                                                                    
     and  we're required  to  give them  a  license. ...  In                                                                    
     enforcing the restrictions we do  have, we look through                                                                    
     these front companies and look  back to business owner,                                                                    
     also the owner of someone who  has not paid us in prior                                                                    
     years,  and  we will  simply  look  through that  shell                                                                    
     company, and deny them their license until they pay.                                                                       
9:43:58 AM                                                                                                                    
REPRESENTATIVE WILSON  commented that  there are  processors that                                                               
are trying  to switch from  a cannery to  value-added processing,                                                               
which is an expensive process,  and those processors shouldn't be                                                               
MR. HARLAMERT noted:                                                                                                            
     Not   all   the   [processors]  who   don't   pay   are                                                                    
     legitimately  called  "bad  guys."    They  are  people                                                                    
     trying to protect their business  and in dire financial                                                                    
     straits,  and they  pay what  they have  to to  operate                                                                    
     first, and  what they  don't have to  [pay] to  stay in                                                                    
      business last. ... It's just what they have to do to                                                                      
     stay in business when things get lean.                                                                                     
9:45:38 AM                                                                                                                    
CO-CHAIR  LEDOUX remarked  to Mr.  Harlamert, "You  say you  look                                                               
past the  shell, but I  don't see  anything in this  statute that                                                               
has  you looking  past the  shell.   Is  that in  some other  law                                                               
MR. HARLAMERT  answered, "There  is nothing in  the statute.   If                                                               
you read  the statute quite  literally, someone could start  up a                                                               
brand new  company the  very next year  after they've  stiffed us                                                               
and ask  for a license."   He explained that if  he can determine                                                               
that a  new company is just  a sham to avoid  the consequences of                                                               
not paying [debts and taxes], he denies the company a licence.                                                                  
CO-CHAIR LEDOUX asked if he had done this in the past.                                                                          
MR. HARLAMERT replied affirmatively.                                                                                            
CO-CHAIR THOMAS announced that HB 192 would be held over.                                                                       
There being no  further business before the  committee, the House                                                               
Special Committee  on Fisheries meeting was  adjourned at 9:47:20                                                             

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