Legislature(2001 - 2002)
04/08/2002 04:48 PM Senate RES
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE RESOURCES COMMITTEE
April 8, 2002
4:48 p.m.
MEMBERS PRESENT
Senator John Torgerson, Chair
Senator Gary Wilken, Vice Chair
Senator Rick Halford
Senator Ben Stevens
Senator Kim Elton
MEMBERS ABSENT
Senator Robin Taylor
Senator Georgianna Lincoln
COMMITTEE CALENDAR
HOUSE BILL NO. 131
"An Act relating to standards for forest resources and practices;
and providing for an effective date."
MOVED HB 131 OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 286(RES) am
"An Act allowing a person to hold two commercial fishing entry
permits for a salmon fishery for the purpose of consolidating the
fishing fleet for a salmon fishery; relating to salmon fishery
associations and to salmon fishery assessments; and providing for
an effective date."
HEARD AND HELD
CS FOR HOUSE BILL NO. 288(FIN) am
"An Act relating to commercial fishing limited entry permit buy-
back programs, to a permit buy-back assessment, and to voluntary
relinquishment of commercial fishing permits; and defining
'optimum number.'"
MOVED CSHB 288(FIN)am OUT OF COMMITTEE
WITNESS REGISTER
Mr. Bob Zachel
No Address Provided
Fairbanks AK
POSITION STATEMENT: Supported HB 131.
Representative Scalzi
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor of HB 286 and HB 288.
Ms. Mary McDowell, Commissioner
Commercial Fisheries Entry Commission
8800 Glacier Hwy, Ste 109
Juneau AK 99801-8079
POSITION STATEMENT: Commented on HB 286 and HB 288.
Mr. David Bedford
Southeast Alaska Seiners Association
526 Main Street, Ste 200
Juneau AK 99801
POSITION STATEMENT: Commented on HB 286.
Mr. Don Johnson
Soldotna AK
POSITION STATEMENT: Commented on HB 288.
ACTION NARRATIVE
TAPE 02-16, SIDE A
Number 001
CHAIRMAN JOHN TORGERSON called the Senate Resources Committee
meeting to order at 4:48 p.m. Senators Wilken, Halford, Stevens,
Elton and Chairman Torgerson were present. Chairman Torgerson
announced HB 131 to be up for consideration.
HB 131-FOREST RESOURCES & PRACTICES STANDARDS
MR. BOB ZACHEL, Fairbanks, stated support for HB 131 as written.
CHAIRMAN TORGERSON asked Mr. Zachel if he had previously raised
questions about HB 131.
MR. ZACHEL said he did, but he talked to representatives from the
Alaska Department of Fish & Game (ADF&G) and his concerns were
addressed.
SENATOR WILKEN moved to pass HB 131 from committee with
individual recommendations with the attached fiscal notes. There
were no objections and it was so ordered.
CSHB 286(RES) am-FISHING PERMITS/ASSOCIATIONS/ASSESSMENTS
CHAIRMAN TORGERSON announced CSHB 286(RES) am to be up for
consideration.
REPRESENTATIVE DREW SCALZI, sponsor of HB 286, said this measure
is a consolidation bill that allows fishermen to take advantage
of an effort to help themselves and the fishery at a time when an
exorbitant number of permits aren't being fished. It allows a
person to hold two permits in the same area. It will also allow
fishermen to establish non-profit associations for the purpose of
consolidating the salmon fleets and allow fishermen, with a two-
thirds vote of the permit holders in their fishery, to tax
themselves to help pay for the consolidation.
He noted that some of these ideas came from fishing industry
members. The initial plan was to draft a "stacking bill" that
allowed a person to hold two permits. Two permits would provide
some type of fishing advantage, such as an extra day of fishing
or use of extra gear. However, because of a decision by the Board
of Fisheries in the Chignik issue, industry members became
concerned about moving too fast or too far in one swoop.
Therefore, the bill was limited to ownership of two permits for
the purpose of consolidation. Currently, the optimum number
involved in a fishery is subject to a challenge by the courts if
a certain fishery is considered to be too restrictive. HB 286
doesn't pertain to that issue, because these permits are still
available for sale. The permits are not retired, as they would be
in a buy back program. He noted this bill passed the House with
36 yeas and four absent.
CHAIRMAN TORGERSON asked if a person could fish only one permit
at a time.
REPRESENTATIVE SCALZI answered that is correct; a person would
gain no fishing privileges by holding two permits.
CHAIRMAN TORGERSON asked if CSHB 286(RES) am would just eliminate
the competition.
REPRESENTATIVE SCALZI said it would.
CHAIRMAN TORGERSON asked, under uses of the money on page 8, if
part of it could be used to consolidate the salmon fishing
industry even if HB 288 doesn't pass.
REPRESENTATIVE SCALZI replied that is correct.
CHAIRMAN TORGERSON asked how that would work.
REPRESENTATIVE SCALZI replied:
First of all, you have formed an association with 66%
of the permit holders agreeing to it. The collection,
as I would anticipate - and this is something - I don't
think any of these plans are in concrete, this is a
tool for them to utilize - you would be able to collect
up to 5% and, perhaps, if you held two permits, the
association could pay you for not fishing that or for
not selling that permit, but holding it in some type of
category where it's not being fished. As an incentive,
you could encourage other people to buy another permit
through the funds that accumulate over the course of
time. It's a flexible tool that would allow for others
to achieve money to pay for consolidation. There are
some folks here who are very interested in that that
could speak to it better.
CHAIRMAN TORGERSON said he thought it offered financial
assistance to permit holders and assumed it was some type of a
loan program. He questioned what that is for, since they aren't
allowing associations to buy permits.
REPRESENTATIVE SCALZI said the permits can only be owned by
individuals.
CHAIRMAN TORGERSON asked if it allows the association to spend
its money to lobby the Board of Fish for the legislature.
REPRESENTATIVE SCALZI said he didn't think that is the intent,
but a non-profit association has certain guidelines that may
allow for that. He wasn't sure.
CHAIRMAN TORGERSON asked if marketing fish could be included in
the by-laws.
REPRESENTATIVE SCALZI said that marketing could be included at
the discretion of the members and certainly marketing is done by
a lot of associations and could be by these.
CHAIRMAN TORGERSON said that basically they are letting
associations do whatever they have a 66% vote for up to 5% of the
value of the fishery.
REPRESENTATIVE SCALZI said that is correct.
CHAIRMAN TORGERSON asked if there would be any limitation on the
size of the fishery that could undertake this.
REPRESENTATIVE SCALZI replied there is not.
4:00 p.m.
SENATOR ELTON gave an example of how a salmon fishery is defined
using the Southeast power troll fishery and the Southeast hand
troll fishery.
REPRESENTATIVE SCALZI replied that the bill applies to all of the
exclusive fisheries with limited entry. If the limit of the
permits were power trolling, that would be the limit of the
association, and likewise for hand trolling.
SENATOR ELTON asked if it could apply to trolling, which would
include power and hand trolling.
REPRESENTATIVE SALZI replied:
If you were going to have both associations, which
would be both power troll and hand troll, agree to
something like that, I would think there would be the
latitude to allow that to happen, but you would have to
have consensus on both limited entry fisheries.
SENATOR ELTON said he understood, then, that a person could end
up owning two power troll permits and two hand troll permits,
amounting to four Southeast troll permits.
REPRESENTATIVE SCALZI said that is correct; now they can have two
permits - one power troll and one hand troll.
CHAIRMAN TORGERSON added that they could still only fish the two
they originally had.
SENATOR ELTON said in effect they would only be fishing one,
because the seasons for hand troll and power troll run
congruously.
SENATOR HALFORD said it takes a two-thirds majority of the total
permit holders to create the assessment and a two-thirds majority
of the total permit holders to get rid of the assessment.
REPRESENTATIVE SCALZI replied it takes 25% to get a petition
going and it could be dissolved with a two-thirds vote.
SENATOR HALFORD said:
It seems if you got a major campaign to create
something, sometimes that succeeds and then you can
never get rid of it, because you can't ever quite get
the people together to know what to do about it. I
would be a lot more comfortable if they could get rid
of it - if either it had a sunset that was automatic.
The object of this thing is to maintain a super
majority level of consensus that it's working and you
can do that by having a lower percentage for getting
rid of it or by having some requirement that on four-
year basis or whatever, they have to reaffirm their
support for doing it.
REPRESENTATIVE SCALZI said he assumed if the association came up
with guidelines for the two-thirds majority, they could probably
rewrite that and put their own sunset in as a provision for
acceptance of the association. He thought the more latitude they
had in forming the association, the better. He didn't think that
with 26 different regional fisheries they would all fit under the
same set of guidelines.
SENATOR HALFORD asked if he considered putting the Board of
Fisheries in the cycle somewhere in the creations, because non-
permit holders would feel that the general public was represented
in these decisions rather than just the stakeholders through the
limited entry system.
REPRESENTATIVE SCALZI said he originally had the Board of
Fisheries determine, through the public process, if individuals
with two permits could fish more gear or get more time fishing
but, the United Fishermen of Alaska (UFA) felt that the Board of
Fisheries, after the Chignik proposal went through, showed a lack
of consideration of the downstream effect and lacked knowledge of
the commercial fisheries. He thought that the permit holders who
have the vested interests in the fisheries would not necessarily
support having the public involved in the general voting
mechanism.
SENATOR HALFORD said he wasn't suggesting that the public be
involved in the voting mechanism, but that the general interests
of the common property resource be represented in some way and
the Board of Fisheries would be a logical place to do that.
REPRESENTATIVE SCALZI said ADF&G still manages the resource and
the Board of Fisheries still allocates. He added:
So, whether a person holds one permit or two permits,
whether there's consolidation on that end of it, the
allocation remains the same. So, I don't know why the
Fish Board would have to get into it at this particular
stage unless they had a problem with or concerns of the
industry itself being too limited.
SENATOR HALFORD said one of his concerns is that in one major
fishery, probably the largest in the state, non-residents hold
the majority of the permits and only one-third of the permits are
held within the region of that fishery. He remarked:
If there were a significant difference in the support
levels for a given proposal based on that residency, I
think it substantially hurts the credibility of the
entire process. Frankly, if there were some
constitutional way to do it, I wouldn't allow the
outside permit holders to vote at all and obviously, I
don't know that that can be done. At least I'm
concerned that there be some kind of check and balance
there that in that case particularly the resource is
managed first for the people closest.
REPRESENTATIVE SCALZI said he didn't disagree and had many
discussions about how they could create more incentives for the
local residents to obtain the permits. HB 286, in particular,
tries to legally encourage Alaskan residents to own the permits
but, because of the interstate commerce clause, there are only a
certain number of things they can do.
SENATOR STEVENS asked if the assessment is imposed by the
original election, whether the pool of money is then used by the
members to buy back more permits through a loan process or to
contract with permit holders to keep permits in their possession.
He commented if you initially need two-thirds, and that pool
continues to shrink to 250, and then it takes two-thirds to
either assess it or get rid of it, it would be harder to get the
two-thirds to get rid of the tax.
REPRESENTATIVE SCALZI said he assumed each individual would have
two votes if they held two permits.
SENATOR STEVENS asked if it would be the permit holder of each
permit or the permit holder of record.
REPRESENTATIVE SCALZI replied it would be the permit holder on
record. He asserted, "If you own two permits, you've got two
votes."
CHAIRMAN TORGERSON noted that someone in the audience was shaking
her head no.
SENATOR STEVENS said either way, it would still be harder to get
rid of the assessment.
REPRESENTATIVE SCALZI said that could be true.
MS. MARY MCDOWELL, Commissioner, Commercial Fisheries Entry
Commission (CFEC), explained that if a person held more than one
permit, he or she would still only get one vote. She stated:
My only comment about as the pot shrinks - if the
assessment were used to permanently buy out some
permits, so there would be fewer, or if it was used to
contract with people who hold two to not fish or
whatever, over time, if this is successful, the
fishermen who remain in the fishery would be less
inclined to want to continue to have an assessment. You
will have achieved what you were trying to do and they
would just as soon keep that money because it's going
to come right off the top of their earnings.
SENATOR STEVENS asked her to explain how the actual
extinguishment takes place under this bill if it's voluntary.
MS. MCDOWELL replied that her understanding is that the
associations would have a lot of flexibility about how they would
use the money collected through the assessment. They could
contract with fishermen to relinquish their permits permanently,
they could contract with them to not use their permits, they
could contract to create some kind of incentive to buy two and
stack them up. They have a lot of flexibility to either
permanently or temporarily retire permits. She guessed that in a
fishery that was way overcapitalized they would probably spend
some of the initial money to permanently retire some permits and
get the whole pool down somewhat. Then after that, she thought
they would take temporary measures in hope that over time the
fishery would rebound and they could get the permits out in the
fishery again.
CHAIRMAN TORGERSON asked how they would permanently retire one.
MS. MCDOWELL replied that under the Limited Entry Act, if a
fisherman doesn't pay annual renewal fees to the state for two
consecutive years, the permit is forfeited. HB 288 contains a
provision that says fishermen may voluntarily relinquish their
permits rather than wait out the two-year non-renewal period.
SENATOR STEVENS said he knew a fisherman who cited a case in
which an individual paid the back fees 10 years later and re-
activated the permit.
MS. MCDOWELL replied if a permit was forfeited for lack of fees,
CFEC has the discretion to re-activate the permit. In this type
of a situation, the individual would actually contract to not
reactivate it. She repeated that if HB 288 passes, there's a
provision that specifically states a fisherman may voluntarily
relinquish his permit.
SENATOR STEVENS said they are making an assumption that there
would be some sort of release they would sign from CFEC.
MS. MCDOWELL indicated that was right.
CHAIRMAN TORGERSON asked for clarification of the association's
role.
MR. DAVID BEDFORD, Southeast Alaska Seiners Association, replied:
The idea we have within an association is that it
creates a group that represents the fishermen within
the fishery and it would lay out its article of
incorporation and bylaws and it would tell the people
in the fishery this is our plan, this is what we intend
to do. So, if you've got a fishery with 100 permits in
it, we're going to buy and contract to extinguish 25;
we're going to pay people to hold onto 10 of them;
we're going to reduce the effort level down to about
two-thirds of what it currently is. This is our plan,
this is the assessment that we want you to pay. The
money would then come into the association; the
association would, as an actor in the free market, say
all ye, all ye come in free. What kind of a deal would
you make to extinguish your permit or what kind of deal
would you make to hold on to your permit? They would
use the money of the fishermen's assessment in the most
efficient kind of way to accomplish the purposes they
promised those folks that they're going to try to
achieve.
CHAIRMAN TORGERSON asked if this will be like farming without
planting crops.
MR. BEDFORD replied:
Not at all - the idea here is that what we want to do,
Mr. Chairman, is reduce the number of fishermen who are
out there so that they can work hard like they are now,
but gain some kind of reasonable rate of return on
their time and capital investment.
CHAIRMAN TORGERSON said, "But we would be paying fishermen not to
fish."
SENATOR STEVENS commented, "They would be paying themselves,
potentially."
MR. BEDFORD said you could have specific instances in which a
fisherman receives some kind of money for holding on to a permit.
If he were running the association, he would seek out fishermen
who held a second permit who remained active fishermen, because
the bargain he would be making gives the people two benefits -
the benefit of whatever the association gives to them to hold on
to a permit and the additional benefit that when they go out to
the grounds, there's one less person out there fishing because of
the permit they left in their filing cabinet at home. He
continued:
I think the bargain I made with that guy cost me less
than it would cost me if someone in New York city
bought a permit and was speculating and thinking he was
going to cut a deal with me on this and make some kind
of money. If I was running an association, that's what
I would be looking for and I think the market will lead
us to just that result.
CHAIRMAN TORGERSON asked if the owner of the second permit could
sell it at any time.
MR. BEDFORD replied:
Under the law he can certainly do that. So if we were
making an arrangement with somebody who is holding a
second permit, then perhaps it would read something
like, 'If you have held that permit, you have not sold
it, you have not fished it, then on December 31 of the
year, we would give you whatever consideration it was
you agreed to.' If, however, we made an arrangement
with you and for some reason you decided you were going
to sell it or fish it, then there wouldn't be any
consideration forthcoming.
CHAIRMAN TORGERSON said this might work during a poor fishing
season, but when the fish start coming back, the fishermen would
come back.
MR. BEDFORD replied that is a very serious concern:
We have some fisheries in which we have 50% of the
permits inactive at this point. Clearly, one of the
problems that we have here is we don't want to wind up
creating a situation where fishermen have invested to
try to make circumstances better, then any time that
they improve, have permits come flooding back in. That
is why I suggested, again, if it was me who was going
to set one up, what I'd do is say, 'Well, there's some
level of permits that we wish to permanently remove
from the fishery. So, the example that I gave is you've
got 100 - let's extinguish 25 of them so that they
can't possibly come back. Let's hold out another 10 or
15, so that if things get dramatically better…We could
say maybe things have gotten a little too exclusive and
let some of those go back out,' but not to the point
where it would depress things back to the point of
where we're at now.
CHAIRMAN TORGERSON asked if it would take a two-thirds vote to do
that, but then surmised that it wouldn't, because the individual
permit holder would be able to sell the permit at any time he
wanted.
MR. BEDFORD added:
By the same token, the association could, at some point
say, well, we're not willing to pay the price that
you're asking and so, we're not going to pay you.
CHAIRMAN TORGERSON said they couldn't lease these permits.
MR. BEDFORD indicated that is correct.
SENATOR ELTON said he assumed that before an election, the
association would indicate how many permits should be fishing in
the fishery and the amount of the assessment. The association
would then hold an election of the permit holders in that
fishery. He asked whether changing the amount of the assessment
would then only take a vote of a simple majority.
MR. BEDFORD replied, "Yes. The one thing that requires a two-
thirds concurrence of the fishermen would be either instituting a
levy to start with or modifying it or extinguishing it in the
future." Some fishermen he spoke to about this were skeptical and
during the process of developing the bylaws and articles of
incorporation they would decide what kind of vote it would take.
SENATOR ELTON said in the fisheries with only 50% of the permits
being fished, he could see an association being supported wildly
by those who have a permit but aren't fishing it, because they
see a potential economic benefit that they are not now getting.
MR. BEDFORD said he is correct and fishermen in Kodiak, where
that is the case, raised this issue with UFA. That is why the
threshold is two-thirds, which will require a lot of leg work.
SENATOR ELTON emphasized the threshold is two-thirds of permit
holders.
MR. BEDFORD said that is correct.
CHAIRMAN TORGERSON asked if a two-thirds vote is required to
incorporate.
MR. BEDFORD said that wouldn't take a vote, but the key is before
they can levy any kind of assessment to carry out the goals as
laid out in the legislation, a two-thirds vote of all the permit
holders within a fishery would be required. He noted, "The
association doesn't have much practical affect absent that
ability to collect some money to satisfy the purpose."
CHAIRMAN TORGERSON said he assumed that board membership could
change each year and one could be conservative and one could be
liberal and they couldn't raise the assessment, but could change
the spending pattern.
SENATOR STEVENS asked if Section 1 goes into place and allows for
the consolidation of permits in, for instance, the 100-permit
fishery and there are 50 permits on record, but they can't get
the 50 to generate any money, all they would need to do is get
two-thirds of that 50. He surmised:
So, the original 100 that were participating in the
fishery goes down to 43 that are going to participate
in the assessment. So, 33 can then determine if they're
going to buy permits from each other, because they
would be the only ones left? That could happen. The
point I'm more concerned about being either a
reauthorization of the tax or the ability to get rid of
it once you've gotten what you wanted to achieve.
MR. BEDFORD responded that theoretically it is possible everyone
in the fishery could buy a second permit, thereby cutting the
number in half, and then everyone could hold on to them prior to
making an assessment. However, he didn't think that would happen
because there wouldn't be that many people rushing out to grab a
second permit until they saw that it was actually going to lead
to the sort of result they had in mind. He said when he looks at
the legislation, he views the practical difficulties in getting a
two-thirds majority on anything as being the real limitation and,
the larger the fishery is, the more that limitation is magnified.
It would work the opposite way in a smaller fishery.
SENATOR STEVENS explained that he was saying that at some point
group members could decide they didn't need it any more. He
wanted to know how they could get rid of it.
MR. BEDFORD replied, "Get a two-thirds majority and get rid of
it." He added that if he was one of the remaining 33 members and
they were electing a board of directors, he would elect people
who would not make any leases.
SENATOR STEVENS said as you achieve what you want to achieve, it
looks like it's hard to just say that and get rid of it.
CHAIRMAN TORGERSON said he agrees that they have to come up with
some way of making it go away. He added:
What David is relying on is really the inability of the
fishermen to get along very well and the thought that
66% can come together on any issue, it's just a hurdle
that's beyond belief and we have to look at the
legislative part of that and not buy into that…Do you
expect this group, these associations, to be able to
accept grants?
MR. BEDFORD replied that he didn't know if state law places a
limit on non-profit associations from accepting grants.
CHAIRMAN TORGERSON said he thought it was just a wash through the
state.
SENATOR ELTON said another way to dissolve the associations or to
change the rules under which they operate is to amend the
statute. He noted, "That might be the safety valve."
SENATOR STEVENS asked if these assessments would be exempt from
federal taxation.
MR. BEDFORD said this would create trade associations that could
not get non-profit status and would not be exempt from paying
federal taxes. He thought they could be set up with C-5 status
under federal tax law.
CHAIRMAN TORGERSON said he didn't think they would ever get rid
of these associations once they got started just because of the
assets of the non-profit.
SENATOR HALFORD asked, as a general rule, how much of the value
of the permit would be lost if the permit became non-
transferable.
TAPE 02-16, SIDE B
MS. MCDOWELL replied that a non-transferable permit has no value.
It expires when the person dies or retires.
SENATOR HALFORD said he thought it would have some value.
MS. MCDOWELL responded that to the person who has use of it, it
doesn't have monetary value, because the permit can't be sold.
SENATOR HALFORD said he was concerned that the value of the
permit would be affected.
CHAIRMAN TORGERSON asked who sets the value for the permits when
they are bought back.
MS. MCDOWELL replied that the state has never had a buy back
program, but it would be whatever the market could bare.
CHAIRMAN TORGERSON said he would hold the bill today and deal
with some of the questions. One question is if someone else sets
the value and the federal government is paying for it, that value
would be artificially raised to some height as long as the money
is not an individual's money.
MR. BEDFORD said that Representative Scalzi introduced this
legislation at the request of UFA and it is UFA's number one
priority. There are a lot of places where people would be asking
for federal help on this. He thought the 51% opt out provision
was a very important point and that it would work fine along with
the two-thirds vote to start up an assessment.
CHAIRMAN TORGERSON agreed and said he thought the specific goals
could be outlined more clearly in the bill and that the
assessment could be tied to them better.
SENATOR ELTON said he was concerned about what other duties could
be assigned to the association, such as marketing or lobbying.
CSHB 288(FIN) am-LIMITED ENTRY BUY-BACK PROGRAM/ASSESSMENT
CHAIRMAN TORGERSON announced HB 288 to be up for consideration.
REPRESENTATIVE DREW SCALZI, sponsor of HB 288, told members that
he looked at tools to revitalize the fishing industry. Since
limited entry was instituted, a lot of efficiencies had been
developed but some inefficiencies were developed as well. Those
inefficiencies need to be evaluated. He stated:
Buying back permits is certainly authorized under
statute currently. To authorize a buy back, we have to
do an optimum number study to determine what that
number is. When CFEC asks the courts what the number
is, the courts say go ahead and have a buy back and
we'll tell you when you hit it. They will not tell you
ahead of time what that optimum number is. But,
currently under statute, if you do have an optimum
number study, it automatically triggers a buy back. You
can't turn back. CFEC, according to statute has to go
through with a buy back. In a buy back proposal now you
have to buy back the permit, the boat, the gear,
skiffs, nets - everything involved in the fishery. That
can be cumbersome and very expensive and it could be
certainly a number that would be hard to hit, because
every fisherman has different values to their gear to
their vessels. So, it wouldn't be a simple task.
What HB 288 does is it first of all lets an optimum
number study come forward and not automatically trigger
a buy back. But, what it would allow is the CFEC to
develop a plan and take that to the public and see if
it's worth implementing a buy back.
It also does not require that the gear and the boat and
the ex-wife and everybody that goes along with it has
to be bought back. Only the permits may be bought back.
It also makes it voluntary rather than mandatory.
Currently, if you have an optimum number study, as I
said, and you implement a buy back, it is a mandatory
buy back.
Being voluntary, this wouldn't keep someone from selling their
permit and boat as a package, if they wanted to do.
CHAIRMAN TORGERSON asked who set the assessments.
REPRESENTATIVE SCALZI replied that the assessment is up to 7% and
that is developed in the plan.
CHAIRMAN TORGERSON noted that it says CFEC may establish the
assessment by regulation and asked if that's what CFEC intends to
do.
REPRESENTATIVE SCALZI said he understood that CFEC already has
the authority to set it but, under this provision, CFEC would
have to develop a plan that went through public review first. It
would have to be related to the numbers in each fishery and CFEC
would be the best agency to know that.
SENATOR STEVENS asked if optimum studies had been done on any
salmon fisheries.
MS. MCDOWELL, CFEC, replied that CFEC did one full-fledged
optimum salmon study on the Sitka sac roe fishery and on Chatham
Straits black cod. CFEC has just undertaken another optimum study
on the Bristol Bay drift gill net fishery. Staff is just
completing a survey to send to permit holders. She added that
there is a buy back statute in current law that also functions,
theoretically, with the assessment. The problem with the current
statute is that the funding mechanism is unconstitutional because
it creates a dedicated fund. She explained:
So, the main feature of this bill is that it
restructures the path the money would take to make it
constitutional. Under the current statute it just says
the commission will decide there needs to be a buy
back. The commission does an assessment and creates a
buy back program, which is a dedicated fund. The
Department of Law has given us an opinion on that…
She explained that the funding path would be similar to the
aquaculture assessment or the ASMI 1% tax where CFEC would create
a buy back program and a plan for it and adopt regulations
establishing an assessment. The Department of Revenue would
collect the assessment through fish tickets, just like the salmon
enhancement tax. That money would go into the state treasury and
the legislature could appropriate it back to CFEC to implement
this fisheries program for which it was collected. It creates a
constitutional funding mechanism for what they originally
anticipate by the legislature. She noted regarding a question
about the Entry Commission not having taxing authority, the
Department of Revenue does so this bill fixes those problems.
SENATOR WILKEN asked what an optimal study is.
MS. MCDOWELL replied that by statute, when CFEC originally limits
a fishery, it creates a maximum number of permits to target.
After that, once the permits have been issued, CFEC can be
petitioned if there's a belief that the fishery has either become
too exclusive, is too small and lucrative or, it's over
capitalized. CFEC can be petitioned to undertake an optimum
number study where they do an economic analysis to determine the
target number that would be the best number to meet the
constitutional provisions of limited entry: not more exclusive
than necessary to provide for conservation of the resource and
the economic health of the fishery.
SENATOR WILKEN asked if that method is used worldwide or whether
it is an Alaskan invention.
MS. MCDOWELL said she didn't know, but it is one of the
provisions that keeps limited entry constitutional under our
state constitution. She added that another important feature of
this bill is that it defines optimum number as a range of
numbers, which makes the process much more meaningful. Current
statute just says optimum number. She added:
If we have to choose one number - this is the perfect
number of permits for this given fishery over all time
- you can see how any variable could change and make
that a pretty meaningless number - the price of fish,
the strength of the run, the economics of the fishery.
By giving us the authority to define optimum number as
a range, we've got a target range so any of those
variables can fluctuate a little bit and you're still
in your target range and that's a valuable piece of
this legislation.
CHAIRMAN TORGERSON asked Representative Scalzi if he intended
this to piggy-back on top of the previous legislation, HB 286.
REPRESENTATIVE SCALZI said no, they're independent of each other.
CHAIRMAN TORGERSON asked if they could both be in place at the
same time.
REPRESENTATIVE SCALZI they could and he noted that the industry
is taxed pretty heavily.
4:55 p.m.
CHAIRMAN TORGERSON said it looked like they were starting to be.
REPRESENTATIVE SCALZI said the industry and members of UFA came
up with the association idea and they were going to have to
figure out whether they wanted to be taxed.
SENATOR ELTON thought this bill is a little different in that
there is an assessment to buy back permits, but the value of the
permits that are held would probably go up at the same time, so
he thought it would work out to be a wash.
CHAIRMAN TORGERSON asked if under this program the permit would
come back to the person who retired it.
REPRESENTATIVE SCALZI indicated that was right.
MR. DON JOHNSON, Soldotna, said he wanted to speak to the optimum
number definition. He thought using a range is a good idea, but
he believes the most important issue is that under AS 16.43.290,
three points are used to qualify the optimum number, that being a
single number or a range of numbers. The points are basically
laid out by the commercial fishing industry. The first point is
the economic health of the commercial industry; the second is the
amount of harvestable fish to be taken efficiently; and the third
is to avoid economic hardship in the commercial industry. He
agreed that the optimum numbers keep limited entry constitutional
but since the range was laid out by the commercial industry, the
public, including subsistence users and the sport industry, need
to be involved too. He thought the federal government would agree
with him.
MS. MCDOWELL responded that when they look at the optimum number,
they look at the number of people in a given fishery harvesting a
resource as it's been allocated by the Board of Fisheries, which
decides what goes to sport and commercial, etc. In looking at an
optimum number, they look at what has been allocated to that
fishery and the number of participants in that fishery that can
make a reasonable living.
CHAIRMAN TORGERSON asked where in the legislation the public
comments were covered and what process they would use if they
were to implement the 7% assessment.
MS. MCDOWELL replied:
This bill directs us to, once we get an optimum number,
at that point, assuming that you pass HB 286 as well as
this bill, most likely what would happen is if we did
an optimum number study that showed there were too many
participants than the optimum number in the fishery,
probably the first thing we would do is go to the
industry and see if they plan to do something under HB
286. Are they going to among themselves work out a way
to get the number of permits down? If not, that would
leave us with this tool where we could then propose a
plan…and then propose an assessment. The only mechanism
that we, as an agency, have for doing things like that
is by regulation. So, that presupposes we would propose
regulations that would create that and then we would go
through the entire public process.
CHAIRMAN TORGERSON asked if CFEC does it through regulation only.
MS. MCDOWELL answered that is correct.
CHAIRMAN TORGERSON asked if CFEC promulgates regulations fishery
by fishery.
MS. MCDOWELL said it does.
CHAIRMAN TORGERSON asked if they intend to wait until they have
the money collected before buying the permits or whether they
would enter into lease/loan agreements that they would pay based
upon receiving the 7% income.
MS. MCDOWELL said that question is one of the shortfalls of the
buy back program. She explained:
The best way for a buy back program to work would be if
you had upfront money, whether it was funding from the
state or the federal government, where you could do it
all at once and then use an assessment to pay that
back. I think that would be the ideal situation. We
don't have lending authority. We would need statutory
language for that. Otherwise the mechanism proposed
here is an assessment and as you accrue the money, you
do a buy back. But it would be much more effective to
have upfront money that we could use.
CHAIRMAN TORGERSON asked her to make sure that CFEC has the
authority to receive federal funds to do this.
SENATOR WILKEN moved to pass CSHB 288(FIN) am from committee with
individual recommendations and attached fiscal notes. There were
no objections and it was so ordered.
CHAIRMAN TORGERSON said that concluded the hearing and adjourned
the meeting at 5:05 p.m.
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