Legislature(2003 - 2004)
04/23/2003 08:39 AM House FSH
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON FISHERIES
April 23, 2003
8:39 a.m.
MEMBERS PRESENT
Representative Paul Seaton, Chair
Representative Peggy Wilson, Vice Chair
Representative Cheryll Heinze
Representative Dan Ogg
Representative Ralph Samuels
Representative Ethan Berkowitz
MEMBERS ABSENT
Representative David Guttenberg
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 25
Supporting Alaska's independent commercial fishermen and
Alaska's fish processing industry and opposing the establishment
of processor quota shares.
- HEARD AND HELD
PREVIOUS ACTION
BILL: HJR 25
SHORT TITLE:COMMERCIAL FISHING & PROCESSOR SHARES
SPONSOR(S): REPRESENTATIVE(S)SEATON
Jrn-Date Jrn-Page Action
04/16/03 1008 (H) READ THE FIRST TIME -
REFERRALS
04/16/03 1008 (H) FSH, STA, RES
04/16/03 1008 (H) REFERRED TO FISHERIES
04/22/03 1058 (H) COSPONSOR REMOVED: HEINZE
04/23/03 (H) FSH AT 8:30 AM CAPITOL 124
WITNESS REGISTER
TAMMY SCHRADER
Homer, Alaska
POSITION STATEMENT: Testified in support of HJR 25.
WALTER TELLMAN
Unalaska Fisherman's Association
Unalaska, Alaska
POSITION STATEMENT: Testified in support of HJR 25.
BOB STORRS, Vice President
Unalaska Native Fisherman's Association
Unalaska, Alaska
POSITION STATEMENT: Testified in support of HJR 25.
BOB NEHUS
Unalaska, Alaska
POSITION STATEMENT: Testified in support HJR 25.
KEN DUCKETT
United Southeast Alaska Gillnetters Association
Ketchikan, Alaska
POSITION STATEMENT: Testified in support of HJR 25.
KEITH GAIN, City Council Member
City of Seldovia
Seldovia, Alaska
POSITION STATEMENT: Testified in support of HJR 25.
FRANK KELTY
Unalaska, Alaska
POSITION STATEMENT: Testified in opposition to HJR 25.
DON GRAVES, Research and Development Manager
UniSea, Inc.;
City Council Member, City of Unalaska
Unalaska, Alaska
POSITION STATEMENT: Testified in opposition to HJR 25.
PHILLIP LESTENKOF, City Council Member
City of Saint Paul
Saint Paul, Alaska
POSITION STATEMENT: Testified in opposition to HJR 25.
SIMEON SWETZOF, Jr., Mayor
City of Saint Paul
Saint Paul, Alaska
POSITION STATEMENT: Testified in opposition to HJR 25.
STEVE MINOR, Public Relations/Fisheries Consultant
City of Saint Paul;
Central Bering Sea Fishermen's Association (CBSFA)
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to HJR 25.
JOSEPH CHILDERS, Director
Western Gulf of Alaska Fishermen's Association;
Board Member, United Fishermen of Alaska (UFA);
National Committee Issues Chairman
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to HJR 25.
JOHN GARNER, Executive Director
North Pacific Crab Association;
Owner, Northwest Seafoods Company
Seattle, Washington
POSITION STATEMENT: Testified in opposition to HJR 25.
LINDA KOZAK
Kodiak, Alaska
POSITION STATEMENT: Testified in support of HJR 25
DAVID POLUSHKIN
K-Bay Fishing Association
Willow, Alaska
POSITION STATEMENT: Testified in support of HJR 25.
GORDON BLUE
C.R.A.B. Group
Sitka, Alaska
POSITION STATEMENT: Testified in support of HJR 25.
BUCK LAUKITIS, President
North Pacific Fishing Association
Homer, Alaska
POSITION STATEMENT: Testified in support of HJR 25.
JOE MACINKO
Kodiak, Alaska
POSITION STATEMENT: Testified in support of HJR 25.
ACTION NARRATIVE
TAPE 03-25, SIDE A
Number 0001
CHAIR PAUL SEATON called the House Special Committee on
Fisheries meeting to order at 8:39 a.m. Representatives Seaton,
Heinze, Ogg, and Samuels were present at the call to order.
Representatives Wilson and Berkowitz arrived as the meeting was
in progress.
HJR 25-COMMERCIAL FISHING & PROCESSOR SHARES
Number 0065
CHAIR SEATON announced that the only order of business would be
HOUSE JOINT RESOLUTION NO. 25, Supporting Alaska's independent
commercial fishermen and Alaska's fish processing industry and
opposing the establishment of processor quota shares.
Number 0116
REPRESENTATIVE OGG moved to adopt Amendment 1, which read
[original punctuation provided]:
Page 1, line 2,
After the words "processor quota shares" insert the
following
in the Bering Sea Aleutian Islands crab
rationalization plan.
Page 2, line 2,
After the word "area" Delete the following
and is currently developing a rationalization plan for
the Gulf of Alaska groundfish stocks
Page 2, line 7 insert the following Whereas
Whereas to mitigate the affects of Processor Quota
Shares the council has adopted port of delivery
restrictions and federal binding arbitration
amendments, which on their own may create financial
hardship on commercial fishermen; and
Page 2, line 18,
After the words "processor quota "shares." insert the
following and re-punctuate.
port of delivery restrictions and federal binding
arbitration in the Bering Sea/Aleutians Islands crab
plan.
Number 0145
REPRESENTATIVE SAMUELS objected for purposes of discussion.
REPRESENTATIVE OGG explained that Amendment 1 is designed to
focus the resolution so it reflects what has passed most of the
hurdles of the North Pacific Fishery Management Council (NPFMC).
He added that there will be a hearing with a select committee on
this plan in the U.S. Capitol in the near future. Amendment 1
changes the language within the resolution to clearly focus on
the Bering Sea and Aleutian Islands crab rationalization plan.
Number 0468
REPRESENTATIVE SAMUELS offered a friendly amendment to Amendment
1, on page 2, line 2, to add a semicolon after "area".
CHAIR SEATON questioned its necessity.
REPRESENTATIVE SAMUELS withdrew his friendly amendment. He
asked about the portion of Amendment 1 that refers to page 2,
line 18. He suggested it expands the scope of the resolution
and isn't on one topic.
CHAIR SEATON offered his belief that it is one topic. He
explained that the language refers to elements of the processor
quota share section.
REPRESENTATIVE OGG said there were discussions about including
the elements of the crab rationalization plan, but the decision
was made to leave those out of the amendment. He said if Chair
Seaton believes including them will enhance the clarity of the
resolution, he doesn't have a problem with adding them back in.
CHAIR SEATON said a committee substitute will be provided so the
members can review [the changes].
REPRESENTATIVE SAMUELS told the members he doesn't believe that
portion of the amendment should be included because the point of
the resolution is to address the issue of processor quota
shares.
REPRESENTATIVE OGG commented that there are other elements of
the plan that are of concern.
REPRESENTATIVE SAMUELS asked if the other elements are under the
umbrella of this resolution. If not, then he believes there are
three different subjects being dealt with in this resolution.
CHAIR SEATON asked Representative Ogg if he would agree to leave
[page 2, line 18] out of the amendment.
REPRESENTATIVE OGG responded that he does not agree with
removing this portion of the amendment.
Number 0689
REPRESENTATIVE SAMUELS told the members he maintains his
objection to the second two portions of Amendment 1, relating to
page 2, lines 7 and 18. He explained that the first two
sections of the amendment seem to clarify the resolution;
however, the second two sections seem to expand it. He asked if
the amendment could be split in two, since he had no objection
to the first two parts of Amendment 1.
REPRESENTATIVE OGG asked Representative Samuels if changing the
title of the resolution would eliminate his concerns.
REPRESENTATIVE SAMUELS responded that if [the resolution] is all
about processor quota shares, then he believes it is better not
to get into the details of the issue. If the resolution isn't
about the processor quota shares, then this part of the
amendment really is expanding the scope of the resolution. He
told the members he has a problem with that.
REPRESENTATIVE OGG offered his understanding that binding
arbitration is part of the crab rationalization plan. He
explained that the binding arbitration element is a default
result of the processor quota shares; because once processor
quota shares was addressed, there was a need to address binding
arbitration and port delivery restrictions as part of the plan
itself.
CHAIR SEATON suggested that Amendment 1 be divided into two
amendments.
REPRESENTATIVE HEINZE said she needs clarification of the Bering
Sea Aleutian Islands crab rationalization plan and the
rationalization plan for the Gulf of Alaska groundfish.
Number 0960
REPRESENTATIVE OGG moved to divide Amendment 1, with the first
two sections as [new] Amendment 1, and the second two sections
as Amendment 2. [No objection was stated, and it was treated as
two amendments.]
CHAIR SEATON asked if the members wished to adopt [new]
Amendment 1.
REPRESENTATIVE HEINZE said she'd like clarification on the plan
before moving forward.
Number 1093
[Chair Seaton handed the gavel to Vice Chair Wilson.]
CHAIR SEATON, sponsor, explained that HJR 25 addresses the
Bering Sea Aleutian Island crab [rationalization] plan and the
elements that establish processor quota shares. [The concept
of] processor quota shares is new and different; it establishes
that fishermen will have to deliver their product to certain
named processors. Furthermore, 90 percent of the fishermen's
catch would have to be delivered to these processors. He
reiterated that this is a drastic change because these fishermen
will be told where to sell their private property or product.
CHAIR SEATON said the Aleutian Islands crab [rationalization]
plan started a number of years ago with fishermen on the
downswing of the crab fisheries. It was thought that there
should be a change in the structure of management and harvesting
of fish so it would be more economical, stretch the season out,
and accomplish some conservation goals that can be attempted by
a longer-duration in the season.
Number 1220
CHAIR SEATON explained that the plan was modeled slightly on the
halibut and sablefish IFQ [individual fishery quota] plan. He
said one thing that happened with halibut and sablefish is that
once the plan went into effect, the object of the plan was being
fulfilled, which was to deliver fish in a way that made them
more valuable. The result was that there was a shift in
delivery ports to areas that were on the road system; the season
lasted eight months instead of a few days; the price of fish was
up; and there was a lot more fresh fish on the market. Although
the halibut and sablefish plan succeeded in accomplishing the
goal of creating more value in the fish, it also shifted some of
the ways in which fish were delivered.
CHAIR SEATON said one problem identified with a long season was
that processors didn't need the large plants originally used -
there was no need to handle a glut of fish at one time. This
led to "stranded capital" because a smaller plant could handle
the fishery stretched out over time. Processors were concerned
about tying up capital in those plants and wanted some way to
have that capital compensated. Chair Seaton commented that
almost everyone agrees that it is a problem. However, most
agree that if there is stranded capital, then there [needs to
be] compensation for that capital, the process moves on in the
free enterprise system, and everyone is competitive.
CHAIR SEATON suggested that this is a two-quota system. One
quota is for fishermen that catch a resource owned by all
[Alaskans] and deliver it. This is a mechanism to control
resource harvest, he commented. The second is for specified
processors who process the fish. He explained that this would
tremendously distort the free-enterprise system because now the
fishermen cannot sell their product to whomever they wish.
CHAIR SEATON said in the Bering Sea plan, processor quota shares
were setup for processors, based on the historic amount [of fish
processed]. Fishermen would have to take their fish to these
particular processors, based on those percentages. He said 90
percent of the fish would have to go to those existing
processors. However, the first element of the plan was that
processors that have quotas can process the fish at any plant
they wish. Chair Seaton told the members that this plan doesn't
create the same stability in the communities that would be
expected [historically], because the processors can shuffle
where the fishermen have to take their fish. For example, if a
processor has a plant in Adak and in Unalaska, it could be
decided that the fishermen will have to run to Adak to sell
their fish, a 1,000 mile run from the fishing grounds. There
would be nothing [fishermen or communities] could do about it,
he added.
Number 1399
CHAIR SEATON pointed out that this [plan] creates a distortion
if this is the only place a fisherman can sell his fish. Where
does price competition come into [the plan]? One processor
cannot gain any more fish by raising his price. He reiterated
that it does not matter how much the processor pays, there is
only so much product coming to them. So as a result price
competition between processors goes away. This is how binding
arbitration became an element of the plan, and what it means is
that a fisherman would have to sign a contract with a processor
before the fisherman knows what the price is. If the fisherman
and the processor could not agree on a price, then the federal
government would come in, look at the expenses of both parties,
and set a price. The fishermen would be bound to that price.
Chair Seaton explained that part of the problem then is that the
fishermen could not refuse to fish and in fact would be forced
to fish whether or not it is economically beneficial. He
explained that if the fisherman did not fish for the price
offered, then he/she could be sued for loss of profits by the
processor.
Number 1548
CHAIR SEATON reiterated that the result of this plan is the
total distortion of the free market system. He used the analogy
of a farmer who would have to sell all his grain to Archer
Daniels Midland [Company]. If a farmer did not sell their
product to them, then the farmer could be sued by Archer Daniels
Midland [Company] because they lost profit on the grain the
farmer did not harvest because it was not economically feasible
at the price that was offered.
CHAIR SEATON went on to say that these are just a few of the
intricacies that have come out. He told the members of another
problem where there is a line [or barrier drawn] across the
middle of Bristol Bay [and an agreement] which says any fish
that were historically delivered North of [that line] have to be
delivered North of that line or [if the fish were historically
deliver South of that line, must be delivered] South of that
line. This creates a lot of artificial barriers and there is no
impetus for product development because the price does not
change.
Number 1640
CHAIR SEATON said part of the problem with this structure of
providing processor quota shares allows for a lot of anti-trust
manipulation, even with binding arbitration because most
processors are set up with a number of sub-corporations or
partners. He explained that a company could sell their
processing quota shares to someone else, even another
corporation that the company controls, then lease it back to
operate the business. By doing this, the processor has inflated
their cost structure. He pointed out that this is just one of
the simple mechanisms of inflating the processor's costs. When
the company goes into binding arbitration the [federal
government] looks at the cost structure and the processor has
this huge lease amount, so the fishermen's price could end up
being less, Chair Seaton said.
CHAIR SEATON told the members that this is one of the problems
that no one has been able to figure out. The entire structure
is basically a top-down controlled economy, which is a structure
that is not found in the United States. He said this plan
provides that independent businessmen/businesswomen are told
where they can sell their product. Chair Seaton noted that
there are a few exceptions with "high tech" products,
particularly with the U.S. Department of Defense; for example,
atomic bombs and cruise missiles cannot be sold on the open
market; they must be sold to the Department of Defense. He said
other than a few exceptions, private business people can sell
their product to whomever they want and wherever there is the
best deal. He pointed out that processor quota shares totally
changes that practice.
CHAIR SEATON summarized his comments by saying that the
fishermen tried a rationalization plan, a longer harvest plan,
and now almost all of the fishermen oppose this plan. He
commented that there will be a lot of testimony today from
individuals who are represented by the C.R.A.B. Group which is
made up of 104 vessels. Chair Seaton told the members that the
plan has been so distorted with the processor quota shares that
the fishermen definitely do not support it anymore because they
lose control of their future and their ability to make
decisions. He asked the members to look at the letters of
support on HJR 25.
Number 1796
REPRESENTATIVE SAMUELS told the members that he has trouble with
this legislation on many levels. He said once the number of
fishermen who are allowed to fish is limited the entire free
market concept has gone anyway. Representative Samuels said he
believes that in a true free market everyone fishes. When the
quota goes from 200 million pounds to 20 million pounds, the
little guys will all go bankrupt and the market place will take
care of too much capacity in the market.
Number 1839
REPRESENTATIVE SAMUELS commented that the biggest problem that
he has with this is that the [North Pacific Fisheries
Management] Council has been dealing with these [issues] for
years. He asked if anyone can related to a compromised position
that comes out of a group like that. He told the members that
he believes this must have been a painful process for the
[NPFMC]. He said he cannot imagine having the same meetings the
members are having now, only having it for year, after year,
after year. He explained that the legislature should be able to
relate to this because whatever is done is a compromise and the
members always get beat up on issues.
Number 1879
REPRESENTATIVE SAMUELS pointed out that everyone that will
testify before the committee today, probably already testified
before the NPFMC. He said he believes that it is disheartening
to the [NPFMC] because if there is no agreement, then a
government agency will end up making the decisions. He told the
members he does not believe anyone wants a bureaucracy making
decisions when there can be some say on who is on the [NPFMC].
CHAIR SEATON acknowledged that NPFMC worked to develop a
structure of fisheries management. However, the legislature has
a different prospective, in that our efforts are on behalf of
Alaskan communities. Chair Seaton commented that the federal
government does provides management at the 200-mile limit;
however, it often defers to the Alaska Department of Fish and
Game to do the technical management. When the regulations are
done by the federal government it can have huge impacts upon
Alaskan coastal communities, fishermen, and residents. He
reiterated his comments by saying that the legislature is
considering this issue from a different prospective. Chair
Seaton pointed out that there are many resolutions in the
members' packets from Alaskan coastal communities who are
extremely worried about this issue. He said while this may be a
federal management plan, it has direct effects on Alaskan
coastal towns.
Number 2009
CHAIR SEATON explained that this resolution is not meant to
recreate the management plan, but to point out that certain
elements of the management plan are going to have severe
economic impacts upon Alaskans, Alaskan fishermen, and Alaskan
coastal towns. He said he believes it is the legislature's job
to bring forth those considerations. He pointed out that the
NPFMC is an advisory group to the Secretary of Commerce, and
does not have the last word on this plan. Chair Seaton told the
members that Senator Ted Stevens will be conducting a hearing in
May. This resolution is [meant] to provide input to those
hearings, as well as, Alaska's other delegation members in
Congress, [by] letting them know our concerns on this element of
the plan, the way it works, and the effect it will have on
Alaskans and Alaskan communities, he said.
CHAIR SEATON told the members he believes it is the role of the
legislature to comment when federal actions are going to have
severe impacts upon coastal Alaska. He reiterated that the
legislature and the [NPFMC] missions are different, and it is
not the intent of this resolution for the Alaska Legislature to
rewrite the rationalization plan. He told the members that he
is sure there will be a lot of testimony today expressing the
dramatic impact this plan will have on Alaskans.
Number 2140
CHAIR SEATON pointed out that 46 percent of the crab in Alaska
will be allocated to foreign owned companies. Here is a plan
that will set forth a vast quantity of our fish into foreign
controlled countries. This was not the intent of the Magnuson
Act [Magnuson-Stevens Fishery Conservation and Management Act]
when a 200-mile limit was established.
Number 2199
REPRESENTATIVE HEINZE asked if the anti-trust laws apply to
processors.
CHAIR SEATON replied that issue is being addressed in
Washington, D.C. Processors would probably have to have an
anti-trust exemption because this [plan] would form a cartel, he
said. Chair Seaton told members that 90 percent of the crab
will go to six processors. These processors will forever own,
90 percent of all the crab that is produced in the Bering Sea.
He pointed out that it does not matter who produces the crab,
these processors will own them because the crab will have to be
sold to them. Because of this, it will be necessary to get an
anti-trust exemption and that is why Congress must act on this
plan.
Number 2260
REPRESENTATIVE SAMUELS said he assumes it is the same problem
with fishermen. The number of fishermen and crew shares have
been limited. There is the same capitalization problem in that
the fishermen need to limit the number of boats because these
are expensive pieces of machinery, and the fishermen have the
same problem that the processors have once the plant and or crab
boat is built and it is not used, then the owners are stuck with
it. With the rise and fall of the price of the product it is a
problem. Representative Samuels reiterated his original point
that the NPFMC has already looked at all of these issues.
CHAIR SEATON responded that there is quite a difference between
[the fishermen and the processors]. There is a buy-back plan,
where there is a $100-million loan that the fishermen will pay
back over time to buy out some of the capital and remove it from
the fleet. He told the members that it still comes down to a
public resource, in which there is an efficient design to
harvest. When discussing processor quota shares it is not a
public resource, it is a restriction of people's ability to sell
their product in a competitive market system. He compared this
to a five-year plan in Russia. It is very interesting when
looked at from another perspective outside of a crab plan. This
is a structure where someone is told where and to whom they have
to sell their product at a state set arbitrated price.
REPRESENTATIVE SAMUELS replied that this plan eliminates his
ability to go fishing at all. He pointed out that this is a
shift, but the fishermen are doing the same thing to the rest of
Alaskans who are not [commercial] fishermen. He reiterated that
he can no longer go crabbing. So the same argument can be made
on having any plan whatsoever.
VICE CHAIR WILSON announced that the committee will take public
testimony on HJR 25.
Number 2412
TAMMY SCHRADER testified in support of HJR 25. She told the
members that she is a small-boat halibut fisherman, and is in
full support of HJR 25, which opposes processor quota shares.
The reason she opposes processor quota shares is that she does
not believe it is a good precedent to change the anti-trust laws
of the nation. She went on to say it will upset the balance of
power between the processors and the fishermen. She asked the
name of the legislator who spoke about the [NPFMC] process.
VICE CHAIR WILSON replied that it was Representative Samuels.
MS. SCHRADER commented that she would like Representative
Samuels to know that she does not agree with the council's
[NPFMC] process on this issue. She pointed out that the council
[NPFMC] is composed of members who have potential conflicts of
interest and she does not feel that her voice was heard in this
process. The council [NPFMC] members are political appointees
versus legislators who are elected officials. Ms. Schrader
explained that she could not afford to go to every council
[NPFMC] meeting that covered every nuance that may come out of
these meetings. She said as elected officials it is important
legislators hear the concerns of the communities and she
believes it is their responsibility to go back to the council
[NPFMC] and say look, the people who elected us are concerned
about this, and tell them to take another look. The council
[NPFMC] process is broken on this issue.
Number 2539
VICE CHAIR WILSON announced that there are over 30 people who
have signed up to testify, and time is limited, so she explained
that she would be limiting testimony to one and a half minutes.
Number 2577
WALTER TELLMAN, Unalaska Fisherman's Association, testified in
support of HJR 25. He told the members that he supports HJR 25
because free enterprise is an important concept to maintain.
There are many family members in the Aleut community who have
children that would like to earn a living off of the resources
of the region and would like to see that door remain open.
Unalaska is not a CDQ [community development quota] community.
Number 2624
BOB STORRS, Vice President, Unalaska Native Fisherman's
Association testified in support of HJR 25. He told the members
that he is a small boat fishermen, and has crab fished for many
years. He told the members that it is important for the them to
know that there is only one active fisherman on the NPFMC. From
the very beginning the processor industry said there would be a
"poison pill", any rationalization program would have to include
a processor quota system or the processors would not allow the
plan to get through, he said.
Number 2700
MR. STORRS said the Alaska Native Fisherman's Association has
been involved from the very beginning, and he wants the members
to understand that this is way more than settling on a price for
fish, it changes the whole fabric of the communities forever.
For example, there are three people who wanted to testify from
the community today, who cannot. One was told by the processor
not to do so because he/she has a contract where they catch and
sell bait to that company. Another one has a small freezer
long-liner and was told that if he dared to actively oppose this
[plan], the market for his cod might be eliminated. The third
is a person who works for a union that has close dealing with
processors and could not compromise his position there. Mr.
Storrs pointed out that this [plan] reaches right into the very
fabric of the community. It is important to note that these
fishermen would be the only people in the United States who
would not be covered by the anti-trust legislation and would not
be able to remain a cooperative that was initially formed seven
years ago. [The cooperative] would be functionally illegal
because there can be no cooperative if federal law says 90
percent of the members' product has to go to the competition.
This policy takes a huge step back to the old days of company
towns [during] territorial days. Mr. Storrs summarized his
comments by saying he is opposed to the processor quota shares
policy.
Number 2765
BOB NEHUS testified in support HJR 25. He told the members that
he is fisherman from Unalaska and is opposed the rationalization
plan for processor quota shares for crab. Mr. Nehus explained
that it would not only establish a precedent in the crab
industry, but it could spread statewide into other fisheries,
and perhaps, nationwide.
Number 2786
JANICE KRUKOFF testified in support of HJR 25. She told the
members that while she is not a fisherman, she is a 44 year
resident of Unalaska and has two children. Ms. Krukoff
expressed her support of HJR 25 and opposition to the crab
rationalization plan. She said her boys, who are under 14 years
old, should have the opportunity to crab fish and she believes
this plan would be a detriment to their future.
Number 2814
KEN DUCKETT, United Southeast Alaska Gillnetters Association,
testified in support of HJR 25. He told the members that the
association is opposed to the processor [quota] shares in
principle. He said the association fears that with current
stress in the salmon industry, if this plan is established, some
form of reorganization may occur. Mr. Duckett told the members
that if the plan is approved for the Bering Sea crab [fishery],
it may become applicable to other fisheries, and the association
does not want that to happen. He reiterated his support of HJR
25.
Number 2874
KEITH GAIN, City Council Member, City of Seldovia, testified in
support of HJR 25. He told the members that Seldovia is
particularly interested in this plan as it may set a precedent
for other management decisions. This kind of plan has never
been done before for a lot of good reasons. The two-pie system
is not supported by communities. It was brought about by power
lobbying from the canneries, he said. These are the same kinds
of issues that brought about statehood. Mr. Gain told the
members that the residents of Seldovia opposes any kind of
cartel having a stranglehold on the state's fisheries.
Number 2928
FRANK KELTY testified in opposition to HJR 25. He told the
members that he is a former 20-year elected official of
Unalaska, and worked in the seafood industry 30 years in the
community. He said he believes this resolution is very one-
sided and does not make mention of the millions of dollars that
the processing industry sends into the general fund for the
State of Alaska through fisheries taxes. Nor does this
resolution make any mention of the millions of dollars of
revenue that is generated in property and sales taxes that are
paid to local fishery dependent communities by the processing
sector, he said. Mr. Kelty told the members he believes if the
government is going to give away the public resources, then it
should be given away to everyone that is invested in it. In
Unalaska and other Bering Sea communities where the bulk of the
crab is processed, 85 percent is processed in communities in the
Bering Sea. He said he doubts there are very many resolutions
opposing this plan [from communities] in the Bering Sea area
such as Saint Paul, Saint George, and Unalaska. He suggested
that the committee has a lot of resolutions from communities
that are not heavily involved in the crab fisheries. Mr. Kelty
summarized his comments by saying that he does not support the
resolution because he believes there needs to be consideration
for the investment that has been made in the crab industry [by
processors].
MR. KELTY read what Chairman Benton sent to Congress when the
plan was adopted:
The adoption of the council of processing quota shares
as a fundamental part of the program is probably the
most controversial aspect of the program. However,
the council believes as reflected in the unanimous
vote of 11 to 0 that the crab fisheries of the Bering
Sea and Aleutian Islands requires this innovative
comprehensive management approach to adamantly
recognize and protect the interests of all
participants. It recognizes all components of the
fishery as a balanced linked system, rather than the
individual competing opponent. It may not be an
appropriate model for other fisheries in the nation or
other fisheries in the North Pacific and it is not
intended to be a template for other fisheries.
TAPE 03-25, SIDE B
Number 2991
DON GRAVES, Research and Development Manager, UniSea, Inc.
("UniSea"), City Council Member, City of Unalaska, testified in
opposition to HJR 25. He told the members that UniSea employs
700 year-round people in Unalaska. Their community has passed
resolutions supporting crab rationalization [plan], and as an
individual, he said he supports what the NPFMC has done. He
said he believes it is in the best interest of Unalaska to move
the plan forward. Mr. Graves told the members that as a
research and development manager for UniSea he has seen the
benefits of cooperation between the fishermen and the processors
to increase the value and move the product forward to a retail
market, and process the raw material here in Alaska. This has
created more jobs and that in turn creates more revenues and a
tax base for the state.
MR. GRAVES said there was a person who testified earlier about
concerns on delivering to some of the plants. One of those
people who testified against the crab rationalization plan
delivered to his plant this morning, and there will be no
ramifications against that person. He told the members that
these businesses in Unalaska support a lot, and without the
vested interest of both parties, the community does not have the
resources or the ability to make investments to improve products
and create more jobs.
Number 2838
STEVEN STUBBE testified in opposition to HJR 25. He told the
members that he has been a resident of Dutch Harbor/Unalaska for
the past 20 years, has worked as a processor, and has some
involvement in the fishing industry. He said he worked for one
of the smaller crab operations, and he strongly opposes any
resolution that would preclude processors from some kind of
protection in this plan. It was mentioned earlier that
rationalization was patterned after IFQs. He said he does not
believe that is true, and thinks some of it might have come from
the IFQs program and also the American Fisheries Act. Mr.
Stubbe said with reference to the IFQ fisheries that he no
longer participates in the longline halibut fishery because
outside interests, such as brokers, have taken control. These
brokers do not pay taxes in this state, do not have employees
who work in this community, and the money goes out of the
community and out of the state of Alaska. Mr. Stubbe said he
finds it hard to believe that the legislature is going to
unravel a program that was brought to the council [NPFMC] by the
State of Alaska itself, and passed unanimously. There is a huge
tax base in this community and some of the best facilities,
schools, and community centers have been generated by people who
have made huge investments in Unalaska, whether the company is
[owned by citizens of the United States] on not. Mr. Stubbe
pointed out that the NPFMC has spent years trying to protect the
communities, the harvesters, and the processors. This
resolution would only serve to delay the progress of a fishery
that cannot even be managed by the State of Alaska at this
point. Mr. Stubbe summarized his comments by saying the members
need to better educate themselves before objecting to the plan.
Number 2715
PHILLIP LESTENKOF, City Council Member, City of Saint Paul,
testified in opposition to HJR 25. He told the members that for
the last three years he and Mayor Simeon Swetzof have been
attending the North Pacific Fishery Management Council meetings,
as the council worked on the crab rationalization program. He
said as a councilman, local halibut fisherman, and participant
of the local CDQ group, he does not support HJR 25. Mr.
Lestenkof told the members that the Pribilof Islands of Saint
Paul and Saint George are unique because of their strategic
location to the Bering Sea opilio crab fishery. Over 20 years
ago the Pribilof Island lost their main stay economy which was
the harvesting of the northern fur seals for commercial pelt
sales. When that was terminated by the federal government the
Pribilof Islands developed their harbors, and it only succeeded
because of the community's strategic location to the fisheries
resource. He said he wants to make it clear that the community
is not being threatened by processors and that the community
views this plan from their own perspective. He said because of
the processors investments and operations in the Pribilof
Islands the communities are able to exist. Mr. Lestenkof closed
his comments by saying he does not support HJR 25.
Number 2560
SIMEON SWETZOF, JR., Mayor, City of Saint Paul, testified in
opposition to HJR 25. He said he agrees with all the points
that Mr. Lestenkof mentioned. Mayor Swetzof explained that for
those who have not been attending all the [NPFMC] meetings, this
has been a very long process, and a difficult, painful process.
When the crab market went under, the city applied for disaster
relief, funds were received last year, but nothing has been
received this year. He said the community wants the crab
rationalization [debate] to end. Mayor Swetzof reminded the
members that they need to pay very close attention to the
communities in the other parts of the state that depend entirely
on halibut and crab fisheries.
Number 2425
STEVE MINOR, Public Relations/Fisheries Consultant, City of
Saint Paul and Central Bering Sea Fishermen's Association
(CBSFA), testified in opposition to HJR 25. He told the members
that this process has been going on at the council [NPFMC] for
four years. There have been three economists, over 1,000 pages
of analysis, six working groups, and [many] committees of which
he has served on a majority of them. The meetings have been
held in Kodiak, Dutch Harbor, Anchorage, Sitka, and Seattle,
numerous times, so there has been access to the hearings. It
has been a very open, comprehensive, and extensive process. He
pointed out that 85 percent of the economy in Saint Paul is
based on the crab fishery. Mr. Minor apologized that there was
no testimony before the legislature sooner, but it had been
viewed as a council [NPFMC] issue and he invested time and money
there. It was never imagined that this issue would be brought
to the state legislature. He reiterated that the issue is very
comprehensive and complex.
MR. MINOR said he wanted to refocus the discussion by addressing
some of Chair Seaton's comments. He explained that there are
two types of coastal fisheries dependent communities in Alaska.
There are those that rely heavily on harvesters, like Kodiak,
which has over 80 boats in the crab fisheries, and those that
depend heavily on processing activities like Dutch Harbor, Saint
Paul, and Saint George. He pointed out that these three
communities account for over 80 percent of the opilio processing
activities. He asked the members to understand that this is not
salmon, cod, or halibut, it is crab which is very capital
intensive, and landings intensive, because so much must be
invested in a crab plant and crab harvesting. Mr. Minor
commented that most of the letters of support [for this
resolution] are from non-crab communities.
Number 2287
MR. MINOR summarized by saying that processor quota [shares],
which seems to be the main concern, was designed over a long
period of time as the best community protection measure. He
explained that process quotas will be issued and are then
restricted to the communities where it earns that quota. He
pointed out that one mistake that Chair Seaton made in his
statement is that the quotas can be moved. It cannot. Mr.
Minor explained that in the first two years the processors
cannot move their quotas between communities at all. After the
first two years, the only movement that is allowed is intra-
company transfers. He said he believes there are less than
three companies that can take advantage of that. Under no
circumstances will the quota be allowed to leave the regions in
which it was earned. He said if a processor does not want to do
business in a particular town any more, that community through
its CDQ group or nonprofit entity can buy that quota from that
processor to keep it in the town. Mr. Minor told the members
that processor quotas were designed as a community protection
mechanism by the communities that are most dependent on this
resource. He said he has not seen that fact brought up in the
discussion today. Mr. Minor closed his comments by saying that
if the committee votes to support HJR 25 the members are saying
that the committee is in agreement with stripping away the only
community protections that have logically been built into this
program.
Number 2268
JOSEPH CHILDERS, Director, Western Gulf of Alaska Fishermen;
Board Member, United Fishermen of Alaska (UFA); National
Committee Issues Chairman, testified in opposition to HJR 25.
He said he wants to make it clear that he is representing only
the Western Gulf of Alaska Fishermen in his testimony today. He
told the members that the fishermen in his group typically fish
in 58-foot vessels; they harvest fish in purse seine fisheries,
troll fisheries, pot fisheries, and longline fisheries. They
harvest fish from the squid fishery off of Windy Bay to the
troll fisheries in Adak. Mr. Childers said his group has solid
support for the North Pacific Fishery Management Council.
MR. CHILDERS said it is an extremely open, accessible, and
excruciatingly thorough process. He said to try to thumbnail
the crab process plan in an hour, day, week, month, or year, is
impossible. He told the members that he has attended every
council [NPFMC] meeting for the last five years; he began
attending just prior to the implementation of the American
Fisheries Act. Mr. Childers explained that he sat through the
processor debates on pollock and crab fisheries. In all that
time, this is the first testimony he has ever given about the
crab plan. It has been very thoroughly investigated including
three sets of economists, one from the State of Alaska, NPFMC
economists, and private economists. Every type of analysis has
been done on this issue. He urged the members to read the final
report, which is over 500 pages long. Mr. Childers told the
members that to think that the members could debate this issue
today without reading the report is impossible. He said the
council [NPFMC] process should not be jeopardized in any
flippant way. The process has included the Magnuson-Stevens
Fishery Conservation and Management Act, the appointment
processes, and public process. It has tremendous value. Alaska
has the strongest fisheries in the world today, the most
dynamic, adaptive management programs, and in large part [NPFMC]
is responsible for the system, he said.
Number 2070
MR. CHILDERS summarized his comments by saying rationalization
of public resources is a tremendously complicated subject and
very emotional because it is in effect the privatization [of the
resource]. When there are quota shares, and distribution of
public resources, that creates wealth and there are very few
things that bring up a lot of controversy when [government]
starts distributing the public wealth to people. He said that
is what is going on here. Quota shares are not about harvesting
fish; it is about accessing the wealth of the fishery. It can
be done by giving the shares to the harvester or the processor,
but that is what is happening here. What is being rationalized
is the wealth of the fishery. Mr. Childers told members that
the communities need to be central to that. The communities
need to be far more responsible because they are far more
dependent than the harvesters or the processors. He said if the
wealth of the fishery is going to be given away, do not give it
all to one group because no one has the moral high grown.
Number 2057
JOHN GARNER, Executive Director, North Pacific Crab Association;
Owner, Northwest Seafoods, testified in opposition to HJR 25.
He told the members that North Pacific Crab Association
represents about 85 percent of the crab purchased and processed
in the Bering Sea. Mr. Garner added that he is also an owner of
Northwest Seafoods, which has shore plants in Ketchikan, two in
Petersburg, Cordova, Chignik, and floating processors that
operate primarily in the Bering Sea area, one of which is in the
crab fishery. He shared that he has been fishing since he was
13 years old, was a fisherman for many years, and became a
processor.
MR. GARNER told members that he wants to echo what the members
have already heard. This is a systemic approach to rationalize
the fishery, and [the plan] attempts to address all of the
concerns and direction from Congress in terms of developing the
plan, he said. That direction was to include communities,
harvesters, and processors to develop a plan that would
eliminate the race for fish, the deaths that go along with the
race that currently occurs, and conservation concerns. Mr.
Garner commented that the members are aware that the [NPFMC] is
composed of 11 voting members - 6 are from Alaska, and the chair
is from Alaska. This plan was put forward by the representative
from the State of Alaska, and was voted on unanimously. He said
he supports that exhaustive process. The processors are not
saying that the fisheries need to be rationalized. He commented
that he believes that is a decision for the Secretary of
Commerce and the NPFMC. However, what the processors are saying
is that they stood at Dutch Harbor and Saint Paul Island and
made investments like everyone else did.
Number 1898
MR. GARNER summarized his comments by saying that if there is
going to be a change in the way those investments are deployed,
he believes the processors should be considered. He told
members he would send them a copy of the opinion of the
Congressional Research Service which reviewed the anti-trust
implications of the proposed plan. It addresses many of the
concerns that have been articulated here and identifies the
number of circumstances where a regulated industry of this type
of market share allocation has occurred. It makes it very clear
that there is no anti-trust exemption with respect to price
activities, he said.
CHAIR SEATON asked those that are on-line who have written
testimony to please send it to the committee.
Number 1865
LINDA KOZAK testified in support of HJR 25. She told members
that she is a lifelong Alaskan, has fished salmon in Bristol Bay
all of her life, and works with crabbers who fish in the Bering
Sea Aleutian Islands. Ms. Kozak pointed out that the issue of
processor shares has been rejected in every other part of the
country with the exception of Alaska. The NPFMC was required by
congressional law to analyze rationalization in the crab
fisheries and to prepare a report for Congress. They prepared
and submitted the report to Congress last summer, and the action
[NPFMC] took on the preferred alternative is not final action by
the council, but simply a preferred alternative to be included
in the report, she said.
MS. KOZAK pointed out that Congress must take two specific
actions for the council [NPFMC] plan to go forward. Those
[points] include addressing the processor share quota and the
community-landing requirement. She said it is important to
recognized that the NPFMC has not taken final action; therefore,
it is really appropriate for the legislature to look at a
resolution and make a finding in regard to the appropriateness
of processor shares in the state of Alaska, and whether this
should be established as a precedent nationwide. Ms. Kozak read
the following text from [page 155] a portion of a report done by
the National Academy of Sciences that studied the issue of
processor shares:
The committee was not convinced, however, that the
solution to the perceived problems lies in the
allocation of either the harvesting or processing
quota shares to processors.
MS. KOZAK read another portion of the report from page 205,
saying, "Nor did the committee find a compelling reason to
establish a separate, complementary processor quota system or
two-pie system." She summarized by saying she supports HJR 25.
She pointed out that if there were processor shares in the sable
fish and halibut fisheries, the raw fish tax to the State of
Alaska would be substantially less because the price would be
substantially lower.
Number 1718
DAVID POLUSHKIN, K-Bay Fishing Association, testified in support
of HJR 25. He told the members that the association is
primarily a small-boat fleet, under 50 feet [in length]. Most
of the comments that he wished to make have already been made,
he said. Mr. Polushkin reiterated that the association members
support HJR 25.
Number 1690
GORDON BLUE, C.R.A.B. Group, testified in support of HJR 25. He
told the members that the group includes sports membership, but
most of the members are independent crab vessel [owners] that
harvest crab in the Bering Sea. Mr. Blue said its group has
also been involved in the NPFMC process, and found that the real
problem that manifests with processing of quota shares that has
not been touched on is that in trying to establish [quota
shares] NPFMC has wrestled for a year to arrive at some
solutions. The council [NPFMC] promised last June that there
would be protection for the harvesters from the imbalance in
bargaining power that was created by processors quota shares.
He said NPFMC promised that they would protect communities.
Then the council [NPFMC] spent the next year, actually up to
this month, in a committee process of which the group took part
in, trying to work out how to do that and it has not succeeded,
he said.
Number 1592
MR. BLUE said the NPFMC came up with a binding arbitration
method which would require harvesters to sign a contract before
they know what the price might be. He pointed out that once the
arbitration was concluded the harvesters would be bound to
deliver no-matter-what at that price. It was important to note
that there were no harvester organizations that came out of the
NPFMC meeting in support of this plan, he said. However, he
understands that some organizations are trying to negotiate some
changes. Mr. Blue said the lack of support is due to the fact
that the processors have too much power under this plan because
the processing quota shares are market allocation to only a few
companies. That marketing allocation stays with the processor.
He said he heard testimony from communities in Western Alaska
who feel they have been protected by the NPFMC's actions, but
what the members have not heard from people who understand that
the council's [NPFMC] plan does no such thing. There are so
many loopholes in the council's [NPFMC] plan that allow for
processors to move their quotas that there is no protection for
these communities. Under this plan [these communities] very
likely will find themselves bereft of any processing activity in
the very near term and will be unable to get it back. Mr. Blue
summarized his comments by saying that the group opposes
processing quotas because of the distortions that it introduces
into the market economy.
Number 1466
BUCK LAUKITIS, President, North Pacific Fishing Association
(NPFA), testified in support of HJR 25. He told the committee
that NPFA members include Bering Sea crabbers, halibut and sable
fish longliners, Gulf of Alaska ground fishermen, fixed-gear
harvesters, fishermen who catch and process their own fish for
export markets, and salmon fishermen. Mr. Lukitis reiterated
their strong support for HJR 25, and strong opposition to
processor shares in any Alaska fishery. North Pacific Fishing
Association submitted a resolution to the committee and he hopes
the members have had a chance to review it. He commented that
NPFA and many people in communities see corporate consolidation
of the fisheries and the drive-by national food companies to
control Alaska's fishery resource management, and in turn
control fishermen in coastal communities as the number one
threat they face. Mr. Lukitis told members that the fishermen
want the full protection of federal anti-trust laws. The fish
dock in Homer is thriving because of healthy competition among
halibut and sable fish buyers.
Number 1411
MR. LUKITIS told the members that there has never been a
coherent rational justification given for processor shares,
except that processors wanted them, and were and are willing to
hold any fishery rationalization process hostage unless the
processors got what they wanted. He said "PQS" [processor quota
shares] in the crab plant are an artifact of the Knowles
Administration. The PQS are under consideration for Gulf of
Alaska groundfish and salmon rationalization now. He said many
pointed out that the economic analysis known as the Matulich
Study used by the State of Alaska and paid for by the processors
to justify this aberrant plan which necessitates eliminating
protections under federal anti-trust laws is seriously flawed.
MR. LUKITIS summarized his comments by saying that the General
Accounting Office (GAO) in Washington, D.C., came to the same
conclusion that the Matulich [Study] analysis is seriously
flawed. He emphasized earlier statements concerning the
National Academy of Science's view that "found no compelling
reason to establish separate complimentary processor
assistance." In conclusion, he said he supports the resolution
and believes it is important, not only for the crab fishery, but
for the Gulf of Alaska groundfish rationalization as well. Mr.
Lukitis closed by saying NPFA supports the resolution without
amendments.
Number 1309
JOE MACINKO testified in support of HJR 25. He told the members
he is a 20-year resident of Alaska and a commercial fisherman.
He said he supports the resolution, but not the amendments
because they serve to confuse the issue. Processor shares will
facilitate the export of money as low value fish out of the
state. It will cost the state and communities jobs and tax
revenues. He pointed out that crab, pollock, and salmon are
already being sent to Thailand and China to avoid state and
local taxes. Mr. Macinko commented that there has been an 11-0
vote for processor shares by the NPFMC and it has been referred
to as a compromise, but he said he believes it is more power
politics. None of the people who voted for that plan were
subject to the processor share provision, he said. The CDQ
groups got their portion of the resource increased from 7.5
percent to 10 percent, and they are allowed to sell their
product to the highest bidder. He compared this vote to the
[legislature's] fixing Alaska's fiscal problems by taxing
everyone except those that live in the district represented by
the legislator who is voting. Mr. Macinko told the members he
does not think this is good public policy. He urged members to
please stand up for those in their communities.
[HJR 25 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Fisheries meeting was adjourned at
10:00 a.m.
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