Legislature(2001 - 2002)

04/02/2001 03:35 PM Senate RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     ALASKA STATE LEGISLATURE                                                                                   
                    SENATE RESOURCES COMMITTEE                                                                                
                           April 2, 2001                                                                                        
                             3:35 p.m.                                                                                          
MEMBERS PRESENT                                                                                                               
Senator John Torgerson, Chair                                                                                                   
Senator Drue Pearce, Vice Chair                                                                                                 
Senator Pete Kelly                                                                                                              
Senator Robin Taylor                                                                                                            
Senator Kim Elton                                                                                                               
Senator Georgianna Lincoln                                                                                                      
MEMBERS ABSENT                                                                                                                
Senator Rick Halford                                                                                                            
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 76                                                                                                              
"An  Act amending  the  permissible  period of  renewal  of a  lease                                                            
entered  into  under  the  Alaska  Right-of-Way   Leasing  Act,  and                                                            
providing for  treatment of a pending application  for lease renewal                                                            
as a lease  continued under  its existing  terms until entry  of the                                                            
final  determination  affecting  the application  for  renewal;  and                                                            
providing for an effective date."                                                                                               
     MOVED SSSB 76 (RES) OUT OF COMMITTEE                                                                                       
SENATE BILL NO. 121                                                                                                             
"An Act  adding, for  purposes  of the Alaska  Right-of-Way  Leasing                                                            
Act, a definition  of 'substantial change' as applied  to an amended                                                            
right-of-way  lease  application;  and providing  for  an  effective                                                            
     MOVED CSSB 121 (RES) OUT OF COMMITTEE                                                                                      
SENATE BILL NO. 148                                                                                                             
"An Act relating to remote water storage for fire departments."                                                                 
     MOVED SB 148 OUT OF COMMITTEE                                                                                              
SENATE BILL NO. 141                                                                                                             
"An Act relating to aquatic  farming of shellfish; and providing for                                                            
an effective date."                                                                                                             
     HEARD AND HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
SB 76 - No previous action to record.                                                                                           
SB 121 - See Resources minutes dated 3/16/01.                                                                                   
SB 141 - No previous action to record.                                                                                          
SB 148 - No previous action to record.                                                                                          
WITNESS REGISTER                                                                                                              
Senator Therriault                                                                                                              
State Capitol  Bldg.                                                                                                            
Juneau AK 99811                                                                                                                 
POSITION STATEMENT: Sponsor of SB 76.                                                                                         
Ms. Steve Jones                                                                                                                 
TAPS Right-of-way Manager                                                                                                       
No address  provided                                                                                                            
POSITION STATEMENT: Supported SB 76.                                                                                          
Mr. Bill Britt, State Pipeline Coordinator                                                                                      
Department of Natural Resources                                                                                                 
400 Willoughby  Ave.                                                                                                            
Juneau, AK  99801-1724                                                                                                          
POSITION STATEMENT: Supported SB 76.                                                                                          
Ms. Annette Kreitzer                                                                                                            
Staff to Senator Leman                                                                                                          
State Capitol  Bldg.                                                                                                            
Juneau AK 99811                                                                                                                 
POSITION STATEMENT: Commented on SB 121 for sponsor.                                                                          
Mr. Jim Eason                                                                                                                   
Foothills Pipe Lines Ltd.                                                                                                       
3100 - 707 Eighth Ave. S.W.                                                                                                     
Calgary Alberta T2P 3W8                                                                                                         
POSITION STATEMENT: Commented on SB 121.                                                                                      
Mr. Darwin  Peterson                                                                                                            
Staff to Senator Torgerson                                                                                                      
State Capitol  Bldg.                                                                                                            
Juneau AK 99811                                                                                                                 
POSITION STATEMENT: Commented on SB 148 and SB 141 for sponsor.                                                               
Mr. Joe Stam,  Chief                                                                                                            
Fire Program                                                                                                                    
Division of Forestry                                                                                                            
Department of Natural Resources                                                                                                 
550 West 7th Ave., Ste 1450                                                                                                     
Anchorage AK 99501                                                                                                              
POSITION STATEMENT: Supported SB 148.                                                                                         
Ms. Roberta Highland                                                                                                            
Kachemak Bay Conservation Society                                                                                               
P.O. Box 846                                                                                                                    
Homer AK 99603                                                                                                                  
POSITION STATEMENT: Opposed SB 141.                                                                                           
Ms. Nina Faust                                                                                                                  
P.O. Box 2994                                                                                                                   
Homer AK 99603                                                                                                                  
POSITION STATEMENT: Opposed SB 141.                                                                                           
Mr. Scott Thomas                                                                                                                
Alaska Trade Mark Shellfish                                                                                                     
945 Lincoln St.                                                                                                                 
Ketchikan AK 99901                                                                                                              
POSITION STATEMENT:  Commented on SB 141.                                                                                     
Mr. Ron Long                                                                                                                    
Qutekcak Hatchery                                                                                                               
Seward AK 99664                                                                                                                 
POSITION STATEMENT: Commented on SB 141.                                                                                      
Mr. John Agosti                                                                                                                 
Alaska Shellfish Growers Association                                                                                            
Seward AK 99664                                                                                                                 
POSITION STATEMENT:  Commented on SB 141.                                                                                     
Ms. Janice Adair, Director                                                                                                      
Division of Environmental Health                                                                                                
Department of Environmental Conservation                                                                                        
555 Cordova Street                                                                                                              
Anchorage AK 99501                                                                                                              
POSITION STATEMENT:  Commented on SB 141.                                                                                     
Mr. Mike Bangs                                                                                                                  
P.O. Box 1733                                                                                                                   
Petersburg AK 99833                                                                                                             
POSITION STATEMENT: Opposed SB 141.                                                                                           
Mr. Rick Harness                                                                                                                
P.O. Box RDO, Red Mountain                                                                                                      
Homer AK 99603                                                                                                                  
POSITION STATEMENT: Opposed SB 141.                                                                                           
Mr. Ray Rowland, Aquaculture Specialist                                                                                         
University of Alaska Southeast                                                                                                  
11120 Glacier Hwy.                                                                                                              
Juneau AK 99801                                                                                                                 
POSITION STATEMENT: Supported SB 141.                                                                                         
Mr. Bob Hartley                                                                                                                 
Alaska Shellfish Growers Association                                                                                            
Homer AK 99603                                                                                                                  
POSITION STATEMENT: Supported SB 141.                                                                                         
Ms. Julie Decker, Executive Director                                                                                            
Southeast Alaska Regional Dive Fisheries Association (SARDFA)                                                                   
P.O. Box 2138                                                                                                                   
Wrangell AK 99929                                                                                                               
POSITION STATEMENT: Supported SB 141 with some changes.                                                                       
Mr. Bob Loeffler, Director                                                                                                      
Division of Mining, Land and Water                                                                                              
Department of Natural Resources                                                                                                 
550 W 7th Ave, Ste 1070                                                                                                         
Anchorage AK 99501                                                                                                              
POSITION STATEMENT: Commented on SB 141.                                                                                      
Ms. Vi Jerra                                                                                                                    
Anchor Point AK                                                                                                                 
POSITION STATEMENT: Opposed SB 141.                                                                                           
Mr. Mako Haggerty                                                                                                               
P.O. Box 2001                                                                                                                   
Homer AK 99603                                                                                                                  
POSITION STATEMENT: Opposed SB 141.                                                                                           
Mr. Don Fell                                                                                                                    
P.O. Box 615                                                                                                                    
Homer AK 99603                                                                                                                  
POSITION STATEMENT: Supported SB 141.                                                                                         
Ms. Nancy Hillstrand                                                                                                            
P.O. Box 674                                                                                                                    
Homer AK 99603                                                                                                                  
POSITION STATEMENT: Opposed SB 141.                                                                                           
Mr. Doug Mecum, Director                                                                                                        
Division of Commercial Fisheries                                                                                                
Department of Fish & Game                                                                                                       
PO Box 25526                                                                                                                    
Juneau, AK  99802-5226                                                                                                          
POSITION STATEMENT: Commented on SB 141.                                                                                      
Ms. Shannon O'Fallon, Assistant Attorney General                                                                                
Department of Law                                                                                                               
PO Box 110300                                                                                                                   
Juneau, AK  99811-0300                                                                                                          
POSITION STATEMENT: Commented on SB 141.                                                                                      
Mr. Roger Painter                                                                                                               
Alaska Shellfish Growers' Association                                                                                           
Juneau AK                                                                                                                       
POSITION STATEMENT: Supported SB 141 with changes.                                                                            
ACTION NARRATIVE                                                                                                              
TAPE 01-25, SIDE A                                                                                                            
Number 001                                                                                                                      
                  SB  76-RIGHT-OF-WAY LEASING ACT                                                                           
CHAIRMAN  JOHN  TORGERSON  called  the  Senate  Resources  Committee                                                          
meeting  to order  at 3:35 p.m.  and announced  SB 76  to be up  for                                                            
SENATOR  THERRIAULT,  sponsor  of  SB  76,  said  since  the  bill's                                                            
introduction,  the Administration  has carried on negotiations  with                                                            
officials  at  Alyeska  regarding  terms.  All have  agreed  to  the                                                            
language  in the sponsor  substitute. He  explained the contents  of                                                            
the bill as follows.                                                                                                            
Section  1 modifies  the  length in  which a  lease  for a  pipeline                                                            
right-of-way  can be granted from  10 years to 30 years.  That would                                                            
conform to federal law.  He thought it made sense to conform our law                                                            
to federal laws so that  pipelines that cross both state and federal                                                            
lines  would  be  assured  they  have  a right-of-way   to  continue                                                            
Section  2  deals  with  the  issue of  how  to  deal  with  ongoing                                                            
negotiations that  exceed the original lease length.  The state does                                                            
not want to be  subject to litigation just because  negotiations are                                                            
Section  3 deals  with  reimbursements  of  the state's  expense  in                                                            
negotiating  for  a  lease  extension,  language  that  was  in  the                                                            
Governor's original bill.                                                                                                       
Section 4 deals with the  definition of state land and rights-of-way                                                            
across it.                                                                                                                      
Section  5 deals with  the 30 years  applicable  to leases that  are                                                            
currently in existence.                                                                                                         
SENATOR ELTON  asked if there is a definition in statute  of "timely                                                            
SENATOR  THERRIAULT answered  that there  is no  definition of  that                                                            
term in statute but there  is one in regulation that says two years.                                                            
He thought  the committee  might want to  allow some flexibility  in                                                            
regard to the TransAlaska pipeline.                                                                                             
SENATOR LINCOLN  said the fiscal note indicates a  potential savings                                                            
to the state  that would  begin to accrue  in 2014. She asked  if he                                                            
had any idea what the cost savings would be.                                                                                    
SENATOR THERRIAULT  replied, "The expense of the permitting  process                                                            
will  get rolled  into  the tariff  that is  paid  for shipping  the                                                            
product down the  line. That impacts on the state  treasury, because                                                            
it reduces  the  wellhead  value. It  doesn't start  accruing  until                                                            
then, because right now  if existing law continued, it would be back                                                            
before us in 10 years…"                                                                                                         
MR. STEVE JONES,  TransAlaska Pipeline  System right-of-way  renewal                                                            
project manager, stated  support for SB 76 and pointed out that they                                                            
had  spent the  last  month  and a  half working  on  language  that                                                            
everyone would be happy with.                                                                                                   
MR. BILL BRITT,  State Pipeline Coordinator,  stated support  for SB
76.  Regarding Senator  Elton's  question  about the  term,  "timely                                                            
requested,"  the  Right-of-way  Leasing Act  only applies  to  large                                                            
common  carrier oil  and gas  pipelines and  does not  apply to  the                                                            
smaller gathering lines.                                                                                                        
CHAIRMAN TORGERSON  asked what his  intentions are for the  renewal,                                                            
which says up to 30 years.                                                                                                      
MR. BRITT answered  they would first have to receive  an application                                                            
and the applicant would  request the term of renewal. He presumes it                                                            
will be  30 years. He said  they are in  the process of cooperating                                                             
with Alyeska  to do a  reliability center  maintenance study,  which                                                            
will give them  the exact physical  condition of what they  consider                                                            
to be  the critical  systems on  the TransAlaska  Pipeline. He  also                                                            
pointed  out that  five other pipeline  right-of-way  leases on  the                                                            
North Slope  expire on the  same day as  the TransAlaska  Pipeline's                                                            
right-of-way lease. DNR  will have to deal with those five pipelines                                                            
at the same time.                                                                                                               
CHAIRMAN TORGERSON  asked what DNR  will do if they are found  to be                                                            
out of  compliance with  the lease  and they have  signed a  30-year                                                            
MR. BRITT  said he presumed  Senator Torgerson  meant they had  a 30                                                            
year  lease  and  encountered   a problem   after  the  renewal.  He                                                            
explained  the lease has a  number of tools  so that, "We can  issue                                                            
orders directing  Alyeska to take specific actions."  They have done                                                            
this a number  of times and  Alyeska has responded  to every  one of                                                            
MR. BRITT explained,  "Should that  fail, we have the ability  to go                                                            
perform  the work  ourselves  and bill  the operator  for doing  the                                                            
work. Should the operator  not respond, we have the ability to go to                                                            
court and  a whole  series of tools  we can use  to affect  whatever                                                            
change we think is necessary."                                                                                                  
SENATOR  LINCOLN asked  how many times  the state  has utilized  the                                                            
"recourse" he is talking about.                                                                                                 
MR. BRITT said  he has been employed  in this position for  the last                                                            
four years  and prior to  that some actions  were taken. During  his                                                            
term, he has issued about  10 directives instructing Alyeska to take                                                            
specific actions. No further steps needed to be taken.                                                                          
SENATOR ELTON asked if he supports the legislation.                                                                             
MR. BRITT responded that he does support it.                                                                                    
SENATOR ELTON asked his definition of "timely requested."                                                                       
MR. BRITT stated that DNR  has recently promulgated regulations that                                                            
ask  that  applications   be  submitted  two  years   prior  to  the                                                            
expiration  of the  lease  and that  would  be his  definition.  The                                                            
regulations  allow  the commissioner  to  waive that  period  should                                                            
circumstances  warrant a waiver.  He reiterated  for the purpose  of                                                            
this bill, he is only talking about the big pipelines.                                                                          
SENATOR  ELTON asked  how  he would  define  a feeder  line off  the                                                            
pipeline, like the feeder line to Williams.                                                                                     
MR. BRITT told  members DNR does not have a separate  lease for that                                                            
line; it is covered by the TAPS right-of-way lease.                                                                             
Number 1000                                                                                                                     
SENATOR PEARCE  moved to pass SSSB  76 from committee with  its zero                                                            
fiscal   note  and  individual   recommendations.   There  were   no                                                            
objections and it was so ordered.                                                                                               
                  SB 121-RIGHT-OF-WAY LEASING ACT                                                                           
CHAIRMAN TORGERSON announced SB 121 to be up for consideration.                                                                 
MS. ANNETTE  KREITZER, staff  to Senator Leman,  sponsor of  SB 121,                                                            
     During the last hearing  there were three concerns brought                                                                 
     to  the committee's  attention concerning  this bill.  One                                                                 
     was  changes in  the routing  of a pipeline,  another  was                                                                 
     changes from  above ground to below ground pipeline  and a                                                                 
     third  was a change  in the  diameter of  a pipeline.  The                                                                 
     department  has dealt administratively  with the diameter                                                                  
     and changing from above  ground to below ground issues. So                                                                 
     we think  the only remaining  issue is the routing issue.                                                                  
MS.  KREITZER  indicated there  was  an amendment  to  clarify  that                                                            
language on page 2, lines 5 - 7.                                                                                                
MS. KREITZER said:                                                                                                              
     I want to put Senator Leman's  intention on the record. He                                                                 
     intends that the amendment  addressing routing makes clear                                                                 
     that routing  changes would not be considered  substantial                                                                 
     changes, which trigger all  the provisions of the Pipeline                                                                 
     Right-of-way  Leasing Act. Specifically, his intention  is                                                                 
     not to  prohibit a pipeline from  being built on one  side                                                                 
     of a creek  or the other. This type of deviation  from the                                                                 
      pipeline would not be considered a substantial change.                                                                    
MS. KREITZER used a map to illustrate his point.                                                                                
SENATOR  PEARCE said  as long  as the  route roughly  parallels  the                                                            
Alaska Highway  that would not be a substantial change,  even though                                                            
it might move a little bit.                                                                                                     
MS. KRIETZER responded  that the intent is to allow  those decisions                                                            
to be made onsite.                                                                                                              
CHAIRMAN TORGERSON asked  if it would still have to meet the test of                                                            
a net increase of 10 percent in subsection (1).                                                                                 
MS. KRIETZER replied that was correct.                                                                                          
SENATOR PEARCE moved to adopt Amendment 1.                                                                                      
SENATOR  ELTON  asked  for  further  clarification  and  said,  "For                                                            
instance,  if you take an  elbow out to save  two miles and  it goes                                                            
through  a  neighborhood,  would   the sponsor   of  this  amendment                                                            
consider that a substantial change?"                                                                                            
MS. KRIETZER  said that  she would  defer to Mr.  Britt's answer  on                                                            
that, but she  didn't think a deviation  of two miles would  show up                                                            
on her map.                                                                                                                     
MR. BRITT  responded that  he thought Senator  Elton was  discussing                                                            
the situation  on a case-by-case basis. He remarked,  "The wording I                                                            
have  in  front of  me  is  a fundamental  change  proposed  by  the                                                            
applicant  and  the  general  route  as  set  out  in  the  original                                                            
CHAIRMAN TORGERSON said that is correct.                                                                                        
MR. BRITT said depending  on the length of the pipeline, a deviation                                                            
of less than two  miles with generally the same origin  and the same                                                            
end points  would probably  not be  considered to  be a fundamental                                                             
CHAIRMAN TORGERSON  asked if he favored  the amendment and  the bill                                                            
as amended.                                                                                                                     
MR. BRITT replied that  he could administer the bill in front of him                                                            
but they are seeking clarification of the undefined term.                                                                       
SENATOR ELTON said:                                                                                                             
     It seems  to me that what we've  had put on the record  is                                                                 
     we held  up a map that's 18 x  24 inches that has a  green                                                                 
     line running  down through it  with the only geographical                                                                  
     demarcation being Fairbanks,  and it seems to me that what                                                                 
     the maker  of the amendment proposes  is that, if you  can                                                                 
     see a change  in that line across the room, then  that's a                                                                 
     substantial  change. To me that seems to be an  unworkable                                                                 
     definition of 'substantial change.'                                                                                        
CHAIRMAN  TORGERSON said,  "I did clarify  that it  had to meet  the                                                            
rest of  page 1, 10 percent.  You have the  same test regardless  of                                                            
what she was pointing at on the map."                                                                                           
SENATOR  ELTON responded,  "Absolutely,  Mr. Chair,  but I think  we                                                            
established through the  discussion on this bill previously that you                                                            
could completely change  the route and still not have a problem with                                                            
the 10 percent  threshold. You'd just be exchanging  some state land                                                            
for other state property."                                                                                                      
CHAIRMAN TORGERSON  said, "That isn't  the way I read it."  He asked                                                            
Mr. Britt if that was the way he read it.                                                                                       
MR. BRITT replied it is.                                                                                                        
MR. JIM EASON, Foothills Pipe Lines, attempted to clarify the                                                                   
situation by saying:                                                                                                            
     I  think there  may be  some misunderstanding  about  what                                                                 
     happens in a circumstance  where the hypothetical that has                                                                 
     been   proposed   by  Senator   Elton  might   occur.   My                                                                 
     understanding  is, and our belief in supporting  this bill                                                                 
     is,  that  there are  provisions,  which  Mr.  Britt  will                                                                 
     administer   to  have   public  notice   and  to  have   a                                                                 
     commissioner's  best interest  finding about changes  that                                                                 
     occur in a proposed application.                                                                                           
     The  issue that we're  trying to address  and, hopefully,                                                                  
     this bill  will address is whether  all the provisions  of                                                                 
     the Pipeline Right-of-Way  Act are implicated any time you                                                                 
     have a substantial  change and how you define  substantial                                                                 
     change.  So the intent is not  to do something that  would                                                                 
     not  have  notice, in  the  case that  Senator  Elton  has                                                                 
     proposed  or  provided as  a hypothetical,  but  with  the                                                                 
     amendment   that  is  under  consideration  here,  you're                                                                  
     defining  a third standard  with the  first two being  the                                                                 
     option  of  proposing  the  use  of  10  percent  or  more                                                                 
     additional  state acreage that was originally  proposed in                                                                 
     an application.                                                                                                            
     Secondly, if you propose  to substitute less effective and                                                                 
     environmental   protection  or  technology,  once  you've                                                                  
     submitted  an application; and thirdly, if you  proposed a                                                                 
     fundamental  change in the general  route. The reason  for                                                                 
     the selection of those words  is important because, as all                                                                 
     of us would agree, changes  in a route are gradational and                                                                 
     they  are in  the  eye of  the beholder.  We  think it  is                                                                 
     fundamentally unfair and  probably not a good idea for the                                                                 
     state  or  an applicant  to  leave open  the  question  of                                                                 
     whether  minimal changes  where they  are proposed by  the                                                                 
     applicant  or  by the  agencies  in order  to accommodate                                                                  
     routing selection criteria  that the agency develops or to                                                                 
     avoid  communities or to do whatever  an applicant has  to                                                                 
     do  after he  has submitted  a requested  proposed route,                                                                  
     those  things  should  not be  the triggers  for  all  the                                                                 
     provisions in the chapter.  In other words, if you're down                                                                 
     a  year or  so into  an application  and  it's determined                                                                  
     that,  to use the  example of  the map, that  you have  to                                                                 
     cross a creek for whatever  reason from a different angle,                                                                 
     we think that is entirely  appropriate, if that's what the                                                                 
     agencies  decide  or  if they  decide  based  upon public                                                                  
     comment  that some accommodation  of  the route is needed                                                                  
     but  there's  a  difference  between  having  full public                                                                  
     comment  and agency  review of those  kinds of decisions,                                                                  
     and  the thing we're  hoping we can all  agree on that  we                                                                 
     need to avoid. That is retriggering  all the provisions of                                                                 
     Title 38.35,  which would include going back and  refiling                                                                 
     an application  and going through  every procedure that's                                                                  
     outlined in that statute.                                                                                                  
SENATOR ELTON  said he understands  that, but  they have just  heard                                                            
testimony  from Mr. Britt  that his hypothetical  scenario  does, in                                                            
fact, preclude  him from defining  that as a substantial  change and                                                            
that  bothers  him  [Senator  Elton].  He  thought   that  provision                                                            
essentially says: "The  pipeline, if you take away 1,000 state acres                                                            
here and  you add 1,080 state  acres there,  that is precluded  as a                                                            
substantial change. "                                                                                                           
MR.  BRITT commented,  "While  that's correct,  what  Mr. Eason  was                                                            
indicating is,  in fact, correct as well. Many of  the safeguards to                                                            
the public  process would  occur after  such a change  - by  which I                                                            
mean that  we promulgate  a commissioner's  analysis  on a  proposed                                                            
lease  and  we've  public  noticed  those  vehicles  in  and  around                                                            
potentially affected areas.  If there is sufficient public interest,                                                            
we  hold  a public  hearing  prior  to  making a  decision.  So  the                                                            
commissioner's  analysis would ultimately  have to reflect  whatever                                                            
piece of ground it is we finally are talking about."                                                                            
SENATOR  PEARCE  tried to  clarify  the situation  and  said in  the                                                            
beginning  someone has to  come up with a  route and if a  community                                                            
wanted  to change  it  from north  of  town to  south  of town,  the                                                            
company  would  have  to start  the  application  process  from  the                                                            
beginning  as opposed to  being able to move  forward with  a change                                                            
that everyone wants. She asked if that's what the bill does.                                                                    
MR. BRITT replied,  "It depends. We  make those decisions  on a case                                                            
by case basis based on  what we have in front of us." He thought the                                                            
example  the committee  was using was  outside of  the realm  of any                                                            
process. It  would be up to the department  to decide if  that was a                                                            
substantial  change and that  decision would  be open to  litigation                                                            
CHAIRMAN TORGERSON  announced an at-ease  from 4:10 to 4:25  p.m. He                                                            
asked if  there was  any further  discussion on  Amendment 1.  There                                                            
were no further questions and it was adopted.                                                                                   
SENATOR  PEARCE moved  to  pass CSSB  121(RES) from  committee  with                                                            
individual recommendations  and its zero fiscal note.  There were no                                                            
objections and it was so ordered.                                                                                               
         SB 148-REMOTE WATER STORAGE FOR FIRE DEPARTMENTS                                                                   
 CHAIRMAN TORGERSON announced SB 148 to be up for consideration.                                                                
MR. DARWIN PETERSON, staff  to Senator Torgerson, sponsor, described                                                            
the measure as follows.                                                                                                         
     SB  148 instructs  the  Department  of  Natural Resources                                                                  
     [DNR]  to construct  remote water storage  sites for  fire                                                                 
     protection.  These  sites will  consist  of 10,000-gallon                                                                  
     underground  storage tanks with a pump and a hydrant.  DNR                                                                 
     will solicit  applications for these remote storage  tanks                                                                 
     from all the organized fire  service areas statewide. Then                                                                 
     the Department  will rank the applications and  based upon                                                                 
     appropriations  available  construct as  many as they  can                                                                 
     afford. The  applications will be ranked by the  following                                                                 
     · distance from an adequate water supply;                                                                                  
     · number of buildings to be protected;                                                                                     
     · extent of spruce bark beetle infestation;                                                                                
     · ability of the fire service to provide matching funds; and                                                               
     · ability to maintain and operate the remote water storage                                                                 
The need for remote water  storage sites is evident in many areas of                                                            
the state,  especially  in the  areas where  beetle infested  timber                                                            
greatly   increases  the   risk  of  catastrophic   wildfire.   This                                                            
legislation  will help protect the  lives of those people  living on                                                            
the fringe of fire service  areas. It will also reduce property loss                                                            
and possibly lower ISO rates for our residents.                                                                                 
SENATOR TAYLOR  asked if  the spruce bark  beetle infestation  areas                                                            
are considered in the bill.                                                                                                     
MR.  PETERSON said  the  bill is  not supposed  to  eliminate  those                                                            
CHAIRMAN TORGERSON said  an applicant might actually get more points                                                            
if the site is in a spruce  bark beetle infested area. It's for fire                                                            
protection in general, not just wildfire and oil well fires.                                                                    
MR.  JOE STAM,  Chief,  Fire Program,  DNR,  said initially  he  was                                                            
neutral on  the bill but he talked  to some fire departments  across                                                            
the state that  are interested in this and he would  be glad to help                                                            
facilitate it.                                                                                                                  
SENATOR TAYLOR moved SB 148 from committee with individual                                                                      
recommendations and the accompanying fiscal note. There were no                                                                 
objections and it was so ordered.                                                                                               
                SB 141-AQUATIC FARMS FOR SHELLFISH                                                                          
CHAIRMAN TORGERSON announced SB 141 to be up for consideration.                                                                 
MR. DARWIN PETERSON, staff to Senator Torgerson, sponsor, described                                                             
the bill as follows.                                                                                                            
     The Alaska  Department of Fish  and Game [ADF&G] recently                                                                  
     proposed  new mariculture regulations  that were met  with                                                                 
     sharp  criticism from  the aquatic  farming industry.  The                                                                 
     industry feels  that the proposed regulations  impose such                                                                 
     restrictive  and unreasonable  operational procedures  for                                                                 
     farmers  that, if implemented,  [they] would constitute  a                                                                 
     regulatory  ban on shellfish farming in Alaska.  SB 141 is                                                                 
     a  good  faith  effort  to  mitigate  the  unsatisfactory                                                                  
     relationship between the  aquatic farming industry and the                                                                 
     department. This legislation  is also intended to preserve                                                                 
     an   industry  that   has   been  proven   successful   in                                                                 
     diversifying the economy of Alaska.                                                                                        
     SB 141 requires the Department  of Natural Resources [DNR]                                                                 
     to offer  public leases on 60  suspended shellfish sites,                                                                  
     20 clam  sites and 20 geoduck  sites. These leases are  in                                                                 
     addition  to permits already  issued. The leasing program                                                                  
     charges   more  money  for  sites   rich  in  harvestable                                                                  
     shellfish  and less money for  barren sites. If shellfish                                                                  
     are  located on  the site, the  farmer must  abide by  the                                                                 
     sustained  yield principle of  management when harvesting                                                                  
     the wild  stock. When selecting  the sites for lease,  the                                                                 
     commissioner  of  DNR must  solicit nominations  from  the                                                                 
     industry  and  select  sites  that  don't  interfere  with                                                                 
     established commercial, subsistence, or personal use.                                                                      
     SB  141  is  intended   to  maintain  the  existence   and                                                                 
     prosperity   of   a  viable   Alaskan   industry  without                                                                  
     interfering with other user groups.                                                                                        
SENATOR TAYLOR asked how the value of a site is determined.                                                                     
MR. PETERSON said he assumes the department has that information                                                                
when it is charged with finding the fair market value.                                                                          
SENATOR  TAYLOR said that  part of  his concern  is that before  one                                                            
could acquire a site, [ADF&G]  would have to make a valuation of the                                                            
shellfish  onsite.  That might  create  a  situation in  which  only                                                            
wealthy fishing  organizations, perhaps from offshore,  could bid on                                                            
MR. PETERSON  said that is correct,  but the intent was not  to deal                                                            
with the common  property clause, which has been a  very contentious                                                            
issue  with the  state and  the industry.  Leasing  these sites  and                                                            
having the  industry pay the state  for the stock is one  idea in an                                                            
effort  to get  around the  common  property clause.  He  suggested,                                                            
"There may be a better way to do that."                                                                                         
SENATOR  TAYLOR agreed  saying that  the common  property clause  is                                                            
probably  one of the  more difficult  aspects to  work with  in this                                                            
CHAIRMAN  TORGERSON said they  would continue  to discuss the  issue                                                            
until they get it figured out.                                                                                                  
Number 2200                                                                                                                     
MS. ROBERTA  HIGHLAND,  Kachemak  Bay Conservation  Society  (KBCS),                                                            
asked if this  applies to residents  only or whether it would  allow                                                            
large corporations to come in.                                                                                                  
CHAIRMAN  TORGERSON said  his intent  was to take  testimony  on the                                                            
bill today [and not to take action on it].                                                                                      
MS.  HIGHLAND   responded  that  while   the  KBCS  recognizes   the                                                            
importance  of supporting a sustainable  industry like mariculture,                                                             
it is concerned  about how the industry  grows, where it  is located                                                            
and how it is regulated.  SB 141 and HB 208 mandate leasing 90 sites                                                            
statewide to different  mariculture uses. The KBCS  does not see the                                                            
need to mandate  leases. As needs  develop, the agriculturists  find                                                            
suitable locations.  Sites should  be evaluated for suitability  and                                                            
consistency with state laws.                                                                                                    
She said that  a disposal of this number of sites  all at once would                                                            
overburden the  fishery managers and not allow complete  evaluation.                                                            
She also said that as mariculture  expands into new areas, they have                                                            
to be certain  that conflicts between user groups  are resolved. She                                                            
said,  "ADF&G  does  a  good  job  in  its  analysis   of  available                                                            
information  and public  input. Literature  about shellfish  farming                                                            
indicates  that  we should  continue  vigilance  in  inspections  of                                                            
shellfish  farms  to prevent  introduction  of diseases  and  exotic                                                            
species. East  Coast oyster farming  brought in exotic pests  there.                                                            
In Chesapeake Bay a disease wiped out natural oysters…"                                                                         
She suggested a ban on  genetic alterations of shellfish and the use                                                            
of antibiotics and fertilizers on shellfish farms.                                                                              
MS. NINA  FAUST, a Homer  resident, said she  didn't see a  need for                                                            
this bill  because it  will artificially  speed  the growth of  this                                                            
industry  faster than  it  can be  monitored. She  stated,  "Natural                                                            
growth  of this  industry  is preferable."  She  said  if this  bill                                                            
passes, she  would like it to set  a maximum number of sites  rather                                                            
than a minimum.                                                                                                                 
TAPE 01-25, SIDE B                                                                                                            
MS.  FAUST asked  if  residents  would be  able  to comment  on  the                                                            
nominated sites. She thought  that would be an important part of the                                                            
process and  asked, "Where  is the public  oversight to protect  the                                                            
public interest?"                                                                                                               
MS. FAUST  said she  has concerns  about restocking  natural  stocks                                                            
with farmed stocks because  many of the places where mariculture has                                                            
proliferated  have  problems  with introduced  species  and  genetic                                                            
disorders. She  also thought this bill would overburden  the budgets                                                            
of the Department of Environmental  Conservation (DEC) and ADF&G and                                                            
they wouldn't  be able  to do a good  job for  the state. She  had a                                                            
concern with public  auctions, especially if they're  not restricted                                                            
to state residents.  They could perhaps  bring in outside  interests                                                            
that may outbid local residents.  The bill also says that sites must                                                            
be included in areas where  mariculture is already occurring and she                                                            
is concerned with the numbers in Kachemak Bay (23 leases).                                                                      
MS. FAUST  also submitted  written testimony  from Ann Weiland,  who                                                            
opposed the bill.                                                                                                               
MR.  SCOTT   THOMAS,   Alaska  Trade   Mark   Shellfish,  said   his                                                            
organization is  currently involved in a lawsuit with  the state and                                                            
hasn't  had a  chance to  take  a position  on the  legislation.  He                                                            
stated, "At first glance,  the bill is a start and you have to start                                                            
somewhere.  I  think  it  forces  the  department  to  at  least  do                                                            
something here."                                                                                                                
MR. THOMAS  said he  thought the  first section,  which directs  the                                                            
department to  establish fair market value, will be  cumbersome. The                                                            
second section, which requires  the sites to be restocked, is one of                                                            
the conditions his organization  proposed to the department earlier.                                                            
It proposed a performance  bond on every animal to be held in escrow                                                            
as  a  replant.  He said,  "We  are  already  being  taxed  on  this                                                            
industry. For  example, our company last year, when  we acquired our                                                            
leases, we  had to put up $20,000  in bonding to DNR." In  addition,                                                            
they had to pay $6,000  in lease fees and will pay a raw fish tax on                                                            
the stock they harvest.  He thought the bill should concentrate more                                                            
on  propagation  and  perpetuation  of  the species,  not  just  the                                                            
standing stock and its value.                                                                                                   
MR. RON  LONG, Qutekcak  Hatchery,  Seward, stated  support for  the                                                            
idea  behind the  bill. He  said the  way to determine  fair  market                                                            
value was in statute,  but he is concerned that the  term "potential                                                            
productivity"  is unclear. He thought,  "They could do a  better job                                                            
of returning  appropriate value to  the state for the resource  in a                                                            
back-end loaded  solution rather than  a front-end loaded  solution,                                                            
something  in the form of  a royalty based  on what's extracted.  If                                                            
the productivity  is null,  we can only guess  on what productivity                                                             
will be until we try it."                                                                                                       
MR. LONG suggested  including a provision  in Section 3 that  would,                                                            
in addition to charging  the commissioner with identifying sites and                                                            
zones, engage the stake  holders in a planning effort that would get                                                            
them past the perceived conflicts as they arise.                                                                                
MR. LONG told  members that no exotic  species are being  introduced                                                            
in Alaska.  The department  has a very strict  genetics policy  that                                                            
does not  allow genetic modification  to the  native species.  He is                                                            
not aware  of any  farms  in Alaska  that use  fertilizers on  their                                                            
sites. Some  have commented  that this would  stimulate big  outside                                                            
interests to come to Alaska  and he believes this would be precisely                                                            
the kind of investment  that would be needed to reach  critical mass                                                            
in the industry. He suggested  if all other resources are limited to                                                            
in-state  only bidders,  that  resource industry  will  be lost.  He                                                            
remarked "That  may be okay with some,  but it's not okay  with me."                                                            
In reference to comments  that there are already too many farm sites                                                            
and development  is happening too fast, he said no  new permits have                                                            
been issued in the last six years.                                                                                              
MR. JOHN AGOSTI,  Alaska Shellfish Growers Association,  said he has                                                            
problems with  the definition of "essential productivity  of a site"                                                            
in  section 1.  There are  too  many natural  and  human factors  to                                                            
realistically   and   fairly   determine  potential   productivity.                                                             
Additionally,  he would like to see the Department  of Community and                                                            
Economic  Development (DCED)  involved  in the list  of agencies  in                                                            
section  3. DCED could  play an  essential role  in selecting  sites                                                            
with community wide planning  and a hearing type process. On line 13                                                            
he  suggested  replacing  the word  "identify"  with  "planning  and                                                            
MS.  JANICE  ADAIR,  Director,  Division  of Environmental   Health,                                                            
Department  of  Environmental  Conservation  (DEC), said  she  would                                                            
answer questions.                                                                                                               
CHAIRMAN TORGERSON asked  if she was trying to balance her budget on                                                            
the one fiscal note.                                                                                                            
MS. ADAIR responded, "There  are some requirements we have to follow                                                            
under  the  National Shellfish  Sanitation  Program  and  we  really                                                            
didn't  know what  'suitable' meant.  If 'suitable'  was defined  as                                                            
sites that were  already in areas certified by DEC,  then our fiscal                                                            
note would be zero.                                                                                                             
MR.  MICHAEL  BANGS, a  Petersburg  resident,  said  it might  be  a                                                            
suitable  bill to  help aquatic  farms,  but he  is concerned  about                                                            
geoducks.  He  is  on the  board  of  directors  for  the  Southeast                                                            
Regional   Dive   Fisheries   Association,   although   he  is   not                                                            
representing  it today.  Their  mission is  to develop,  expand  and                                                            
enhance the  dive fisheries  in Southeast  Alaska. He told  members,                                                            
"When you  entered geoducks  in this  Act, you  created a  situation                                                            
where we're  mandated by the state  to develop the fishery  and when                                                            
you have geoducks  being farmed on a site that has  existing stocks,                                                            
it creates conflicts."                                                                                                          
MR. BANGS explained the  reason that many of these areas aren't open                                                            
for  harvest to  geoduck  divers is  because  they haven't  had  the                                                            
funding from the  legislature to expand into the areas.  They are in                                                            
the process of  expanding through self-taxation. He  said, "If there                                                            
would have been a little  bit more communication, I think they would                                                            
have found that as a regional  dive association, one of the original                                                            
protocols  for developing  the geoducks  fishery  was to reseed  the                                                            
population  as we harvest  them and do a  lot of farming  techniques                                                            
that  the farm  applicants  plan on  doing  as individuals.  We  are                                                            
planning  virtually the  same thing  on a regional  basis. All  of a                                                            
sudden, we have  a wall in front of us and that really  bothers me."                                                            
He thought  in  terms of  common property  law,  the legislature  is                                                            
contradicting itself in helping the fishery.                                                                                    
MR. RICK  HARNESS, a  Homer resident,  opposed SB  141 and said  his                                                            
area of Kachemak  Bay is a critical  habitat area that has  too much                                                            
development already. This  proposal would cripple the ecosystem even                                                            
more. He  said they have  already lost indigenous  species,  such as                                                            
crabs  and shrimp.  Now they  are  concerned about  shellfish  being                                                            
diminished because of the  biomass. He noted, "We need to study what                                                            
we have so we can better manage it."                                                                                            
MR.  RAY ROWLAND,  Aquaculture  Specialist,  University  of  Alaska,                                                            
supported  the committee's  efforts  to resolve  the  issue and  the                                                            
general  contents behind  the bill.  He said there  is a  tremendous                                                            
amount of ignorance  about how this industry runs  and the impact it                                                            
has on the environment.  He expressed concern about the productivity                                                            
issue in Section  1 and said, "The potential productivity  of a site                                                            
is often  determined  by the farmers  themselves.  You could  have a                                                            
highly productive  area with a farmer  that's not doing a  very good                                                            
He said that  productivity is also  quite variable from one  year to                                                            
the  next. He  also  expressed  concern about  the  up-front  public                                                            
auction.  He  said  they  had talked  about  placing  some  kind  of                                                            
assessment on  harvested stock as payback to the State  of Alaska as                                                            
the farmer operates that facility.                                                                                              
MR. BOB HARTLEY, Alaska  Shellfish Association, said he is an oyster                                                            
farmer in Kachemak  Bay. Generally,  the bill tries to accomplish  a                                                            
number of things. He sees  a couple of problems in Section 1 and the                                                            
requirement  that the value  of the lease  is to be appraised  every                                                            
five years. He  wanted to know what the value would  be based on and                                                            
questioned whether it would  be the value of the improved beaches in                                                            
the  area.  He  thought  "productivity"  needed  clarification.   He                                                            
thought Section 3 gave  them a good date to shoot for, but suggested                                                            
DCED should  be involved in the process  since new farms  would help                                                            
develop  a community.  He thought  it made  sense  to get  community                                                            
involvement on an area wide basis rather than statewide.                                                                        
On line  19, he thought  the word "interfere"  should be changed  to                                                            
"significantly alter" since  that is the term used in regulation and                                                            
the present state mariculture law.                                                                                              
MS.  JULIE   DECKER,  Southeast  Alaska   Regional  Dive   Fisheries                                                            
Association  (SARDFA),  thanked  the committee  for  taking up  this                                                            
     SARDFA foresees  several problems with offering  leases of                                                                 
     wild resources to the highest  bidder. First, allowing the                                                                 
     resource  to go  to the  highest bidder  often  sets up  a                                                                 
     system  that  is  beneficial  to  large corporations   and                                                                 
     precludes   the  smaller,  independent  business  person.                                                                  
     Second,  this form of leasing  of wild stocks seems  to be                                                                 
     following  the  direction  of  the  state  of Washington.                                                                  
     Please  allow me to  give you some  information regarding                                                                  
     commercial  diving  and  aquatic farming  of  geoducks  in                                                                 
     Washington.  For its commercial  dive fishery, Washington                                                                  
     leases tracts  of its wild geoducks on sub tidal  lands to                                                                 
     the  highest  bidder through  its  Department  of Natural                                                                  
     Resources. This system does several things:                                                                                
             · It brings in approximately $30 million per year to                                                               
                WA DNR (or 80% of the ex-vessel value).                                                                         
             · It yields approximately $.50/per pound to the diver                                                              
                (or approximately 10% ex-vessel value).                                                                         
             · It yields approximately $0.50/per pound to the                                                                   
                leaseholder (or approximately 10% ex-vessel value).                                                             
             · It allows large Chinese-owned, Canadian companies                                                                
                to dominate the leases and control the geoducks                                                                 
             · It precludes management by the WA Fish & wildlife                                                                
                Service and does not allow the commercial industry                                                              
                to employ other management techniques or begin                                                                  
                enhancement strategies.                                                                                         
             · It has encouraged highgrading of geoducks, which                                                                 
                may lead to problems with sustainability.                                                                       
SARDFA  members  believe  this is  exactly  the  opposite  direction                                                            
Alaska should  be taking to protect the long-term  sustainability of                                                            
the geoducks  resource. In  the words of a  SARDFA member,  "Some of                                                            
the dirtiest words a geoducker  can hear are DNR, highest bidder and                                                            
MS. DECKER told members:                                                                                                        
     However,  in Washington, geoducks  are being successfully                                                                  
     farmed  on private, intertidal  areas, where very few,  if                                                                 
     any,  wild stocks  grow. This  example  demonstrates  that                                                                 
     wild geoducks  are not needed for biological or  financial                                                                 
     reasons  in  order  to  farm  geoducks.     The  two  most                                                                 
     important  factors  in  successful  geoduck   farming  are                                                                 
      having the proper substrate and having access to seed.                                                                    
     Although   SARDFA  understands   the  necessity  to   make                                                                 
     suggestions  of changes, which will remedy this  situation                                                                 
     to  our satisfaction,  SARDFA  does  not currently  see  a                                                                 
     clear solution to this problem.                                                                                            
     The next  problem SAFDFA sees  in this bill is continuing                                                                  
     conflicts  between  existing  users  in the  the geoducks                                                                  
     fishery.  SARDFA  suggests three  possible  solutions  for                                                                 
     this problem that could be inserted into these bills:                                                                      
             · Require that on-bottom farming sites be                                                                          
             · Require that on-bottom farming sites have                                                                        
                little stocks, for example, setting density                                                                     
                levels above which the site would not be                                                                        
             · Require that geoduck farming sites have no                                                                       
                wild stocks.                                                                                                    
     In  1997,  the  divers  and municipalities   in Southeast                                                                  
     recognized  that with budget reductions, there  was little                                                                 
     hope  of money  being  appropriated  to develop  the  dive                                                                 
     fisheries.   Thus,  the  divers  and  the  municipalities                                                                  
     stepped forward  to develop a program in which  the divers                                                                 
     would tax themselves and  work in a partnership with ADF&G                                                                 
     and  ADEC  to  develop  the  fishery  in  an  orderly  and                                                                 
     economically  beneficial manner. SARDFA is glad  to report                                                                 
     that   we  are  moving  forward   in  a  coordinated   and                                                                 
     productive mode.                                                                                                           
     Senator   Torgerson,   you  were   a  supporter   of   our                                                                 
     legislation  and it is something you should be  pleased to                                                                 
     have  had a  part in.  SARDFA  hopes the  aquatic farming                                                                  
     industry  will be one that is  mutually beneficial to  the                                                                 
     dive industry; not destructive to it.                                                                                      
MR. BOB  LOEFFLER,  Director, Division  of Mining,  Land and  Water,                                                            
DNR,  thanked  the committee  for  taking  up  this issue  but  told                                                            
members  DNR has  a number of  concerns  with the bill.  He said  he                                                            
believes DNR's  program works; a vast  majority of applications  get                                                            
approved.  SB  141 would  make  a one-time  separate  procedure  for                                                            
cultures and  the program's real problem  is the difference  between                                                            
common property  resources  with respect to  on-bottom culture.  His                                                            
concern  is that  this bill  will not  solve that  problem but  just                                                            
establishes a new procedure.                                                                                                    
MR. LOEFFLER said DNR received  45 applications in 1999 and that was                                                            
after it hadn't  had an opening for  a number of years. DNR  expects                                                            
to receive an average of  15 - 20 applications for most openings. He                                                            
noted, "This is  a much bigger program; it returns  about $48,000 of                                                            
income to the state in terms of beach rentals."                                                                                 
MR. LOEFFLER  said DNR is  concerned that  the requirements  for the                                                            
state  to identify  locations means  it must  gather expensive  site                                                            
specific environmental  information that's typically gathered by the                                                            
private  sector,  such  as  stock  density,   water  quality,  water                                                            
flushing  out and  other site specific  information.  Those are  the                                                            
major costs in DNR's fiscal note.                                                                                               
MS. VI  JERRA, an Anchor  Point resident,  opposed SB 141.  She said                                                            
they want the  public access and beaches  to be kept for  public use                                                            
and not restricted  to private uses.  She thought private  use might                                                            
be unconstitutional.                                                                                                            
MR. MAKO  HAGGERTY,  a Homer resident,  opposed  SB 141 for  several                                                            
reasons, one being  the use of public property for  private use. His                                                            
second concern  is restricting  the habits  of everything that  eats                                                            
the clams,  like ducks and fish. His  greatest concern is  that this                                                            
is  an  end run  around  ADF&G  in  terms  of  regulation  and  it's                                                            
dangerous  territory for  the legislature  to  be micromanaging  the                                                            
MR.  DON FELL,  a Homer  resident,  stated support  for  SB 141.  He                                                            
believes it is a good idea  to establish mariculture. He thought the                                                            
farmers should  have the first option and can best  decide where the                                                            
site should be, not ADF&G.  He thought the language on line 19 was a                                                            
bit vague.  He said that  some of his neighbors  are concerned  with                                                            
lost species and stated,  "Kachemak Bay has been pretty well drained                                                            
of everything  that I've seen  here since I  came and it is  time to                                                            
replace some of  these species rather than to continually  take them                                                            
out. Seabirds  have  been depleted,  not because  of mariculture  or                                                            
oyster farms;  but because  of eagles, which  are being fed  off the                                                            
MR. FELL said  if clam farming were given a chance,  his colleagues'                                                            
concerns  would  be  alleviated   as,  "The  oyster  farms  in  this                                                            
community have added a  permanent resource to the community. This is                                                            
the only  seafood that  comes out  of our bay  year-round and  we've                                                            
brought  in over  $100,000 worth  of products  into  Homer. The  end                                                            
product for local restaurants could easily be tripled."                                                                         
MR.  FELL said  that  taking public  beaches  is the  equivalent  of                                                            
limited entry.  The beaches are a  public resource that can  be used                                                            
for all the public's good in terms of jobs.                                                                                     
MS.  NANCY HILLSTRAND  said  she  has worked  for  20  years in  the                                                            
Division  of Fisheries Rehabilitation  and  Enhancement on  depleted                                                            
stocks  of salmon.  She said  they  instituted hatcheries,  but  the                                                            
enhancement  that started  out  as something  good  has turned  into                                                            
something that is quite  bad. It's created problems with production,                                                            
disease,  predatory   control,  and  crash  prices  for   commercial                                                            
fisheries.  She noted, "It's  just the nature  of the beast  that we                                                            
need  to have  a handle  on these  things."  Right now  they have  a                                                            
processing plant, an oyster  bar, a gift shop, a retail outlet and a                                                            
mail order seafood  business in Homer. Even though  clams could help                                                            
their business,  she thought open  access taking of the clams  would                                                            
be better than mariculture.                                                                                                     
MS. HILLSTRAND  thought this process  should go before the  Board of                                                            
Fisheries as  a developing fisheries  proposal, which would  then go                                                            
to the  local  Fish and  Game Advisory  committees  and through  the                                                            
public  process.  She  noted,  "Commercial   fisheries,  if  managed                                                            
wisely, can  be regulated  with bag limits,  season limits  and open                                                            
access.  On-bottom  intertidal  dredging is  something  there is  no                                                            
handle on.  There can't be, as I saw  for 20 years in the  hatchery.                                                            
There were many policies  in place, but still disease was allowed to                                                            
continue and the problems were tremendous."                                                                                     
MS. HILLSTRAND concluded  by saying if the state does not follow its                                                            
three-point constitutional  mandate of utilization, development, and                                                            
conservation, it's going to be in trouble.                                                                                      
MR. MARK  DONAHUE, a Homer  resident, said  he supports SB  141 with                                                            
reservations.   He  questions  the   bid  process  and  having   the                                                            
department  determine values. He wished  the state had started  with                                                            
shellfish hatcheries before fish hatcheries.                                                                                    
MR. DOUG MECUM,  Director, Division of Commercial  Fisheries, ADF&G,                                                            
said ADF&G  has looked at  previous versions  of this bill  and does                                                            
not believe  the exclusive  right of fishery  and common use  issues                                                            
have  been solved  with  the current  language.  He  said Section  1                                                            
requires DNR  to include the value  of harvestable resources  on the                                                            
site in determining the fair market value.                                                                                      
TAPE 01-26, SIDE A                                                                                                            
MR. MECUM said:                                                                                                                 
     We  have  similar  concerns  with  Section 2  in  that  it                                                                 
     implies  that a  farmer has  somehow obtained  a right  to                                                                 
     harvest  these wild resources  on the site. We do support                                                                  
     the idea in Section 3(b)  that sites for on-bottom farming                                                                 
     be  chosen  in  areas where  wild  stocks  do  not exist.                                                                  
     Subsection (c), however,  conflicts with that and allows a                                                                 
     farmer  to apply for  a site they've  chosen with no  such                                                                 
     restriction on the presence of the wild stock.                                                                             
     One  sort  of  a  housekeeping  issue  is  defining   what                                                                 
     constitutes  an  established  commercial,  subsistence  or                                                                 
     personal use  fishery. That might be something  that could                                                                 
     be included in the bill.                                                                                                   
     ADF&G's  part of it isn't so  much in the site selection.                                                                  
     One  of the  things  we would  suggest  for consideration                                                                  
     would be something we have  talked to various people about                                                                 
     and talked to the industry  about and that is setting up a                                                                 
     system  in  areas  where there  essentially  are  no  wild                                                                 
     stocks  present. There's clearly  no common use issue,  no                                                                 
     constitutional  roadblock. In  areas where there are  lots                                                                 
     of  these resources,  highly abundant  geoduck clams,  for                                                                 
     example, and  perhaps that area would be the kind  of area                                                                 
     that would  be established as  a commercial fishing  area,                                                                 
     personal  use and subsistence.  In this  gray zone or  in-                                                                 
     between  zone  where  there's  some, but  not  very  many,                                                                 
     perhaps not supporting a  commercial fishery, some sort of                                                                 
     a  mechanism   could  be  established  to  harvest   those                                                                 
     resources  and put them into some sort of program  receipt                                                                 
     account  or something  along  those lines  to prepare  the                                                                 
     site  for  farming.   I would   also  say  that  we  would                                                                 
     certainly  support your  efforts to try  to jumpstart  the                                                                 
     process. We'd like to work  with you on suggestions to the                                                                 
CHAIRMAN TORGERSON asked where the suggestions were that he asked                                                               
for two months ago.                                                                                                             
MR. MECUM said that they responded with some suggestions, which are                                                             
also in a letter to the committee.                                                                                              
CHAIRMAN TORGERSON asked what happened to the list of things the                                                                
department had agreed to do.                                                                                                    
MR. MECUM  said he  thought  they had responded  to  a lot of  those                                                            
concerns and he  would go through the list with him  point by point.                                                            
CHAIRMAN  TORGERSON  said,  "It's  a  waste  of  my  time."  He  was                                                            
convinced that  the department did  not want to go forward  with it.                                                            
SENATOR TAYLOR asked what  impact this legislation would have on the                                                            
regulations they are in the process of submitting.                                                                              
MR.  MECUM replied  that he  didn't  think it  would have  a lot  of                                                            
impact. They have  had two public workshops and extended  the public                                                            
comment deadline  on those regulations.  He thought they  would come                                                            
up with very acceptable regulations when the process was done.                                                                  
SENATOR TAYLOR  asked what affect  he thought the regulations  would                                                            
have upon  the pending  litigation  with the  shellfish mariculture                                                             
MS. SHANNON O'FALLON,  Department of Law, responded  that they don't                                                            
have a ruling  from the Superior Court  judge yet. She didn't  think                                                            
the  regulations  would  have any  impact  on  it, but  the  judge's                                                            
decision  could  have an  impact on  the  regulations  in regard  to                                                            
access to common  property resources  on a farm site. She  explained                                                            
if the judge  were to find that the  department's interpretation  of                                                            
the constitution  is inconsistent  and would find that the  statutes                                                            
do allow a  farmer to access common  property resources,  they would                                                            
have to look at  changing the regulations or, "More  than likely, we                                                            
would ask for  a stay of the Superior Court decision  pending appeal                                                            
to the Supreme Court while we take this issue up."                                                                              
SENATOR TAYLOR  said that was what  he thought and he was  concerned                                                            
that  the  department  "fast  tracked"   the  regulations  with  the                                                            
litigation pending,  especially with some of the allegations  within                                                            
the  litigation  of coercion  on  the  part of  the  department.  He                                                            
thought that  maybe they  should defer to  the judiciary to  resolve                                                            
the  initial  problems,  "before   we attempt   through  either  the                                                            
legislature or  the department to come in with a back  door solution                                                            
that may very well preclude the findings of the judiciary."                                                                     
MS. O'FALLON responded:                                                                                                         
     There  are a  number of issues  in the  litigation,  apart                                                                 
     from the common  property resource and exclusive  right to                                                                 
     fishery issues. One of the  allegations was the department                                                                 
     applied   policies  that   weren't  in   regulation   and,                                                                 
     therefore,  the application of those policies  is invalid.                                                                 
     So  the  promulgation  of  regulations   that  more  fully                                                                 
     implement the Aquatic Farm  Act is a good idea. One of the                                                                 
     things  the department  argued  to the  court  was to  the                                                                 
     extent  you  find  that  we improperly  applied  policies                                                                  
     because they  weren't in regulation, the proper  remedy is                                                                 
     not to just  grant the applications. The proper  remedy is                                                                 
     to  remand the  applications  back to the  department  for                                                                 
     consideration  under the new  regulations. There are  also                                                                 
     some issues  with concerns with  statutory interpretation                                                                  
     over  conflicts  with  different  fisheries,  traditional                                                                  
     fisheries,  etc.  I  think  that  in  the  next  round  of                                                                 
     applications  these regulations will get the department  a                                                                 
     long way  towards having a smoother  application process.                                                                  
CHAIRMAN TOGERSON asked where the department's fiscal note was.                                                                 
MR. MECUM responded  that DNR submitted  the fiscal note  and it had                                                            
an RSA  for a  quarter of  a million  dollars going  back to  ADF&G,                                                            
which is  roughly the equivalent  to what  they requested last  year                                                            
for a similar thing.                                                                                                            
MR.   ROGER   PAINTER,   Alaska  Shellfish    Growers  Association,                                                             
complimented  the chairman on his  attempt to address some  of these                                                            
troubling issues. He said  he is glad that the chairman said this is                                                            
a work in progress, because  he has some concerns with two sections.                                                            
In  section  1 the  phrase,  "potential  productivity,"  is  a  very                                                            
difficult  concept to define.  Professor Weiland  said that  natural                                                            
productivity  varies significantly  with  environmental conditions.                                                             
It's really inadvertent,  but the new language would  result in much                                                            
higher lease fees  for all farmers, whether or not  there's standing                                                            
stocks on the site. He  said that he would get suggested language in                                                            
the near future on that issue.                                                                                                  
MR. PAINTER  pointed out that Alaska  already has the highest  lease                                                            
fees for aquatic  farm sites in the country and section  1 would add                                                            
to those already high costs.  He added that he was glad the chairman                                                            
clarified that  the special process  wouldn't supplant the  existing                                                            
application process  in section 3(c), but he was concerned  with the                                                            
last clause  on line 27 "leases for  aquatic farming sites  that are                                                            
issued after  the effective date of  this Act on the basis  of lease                                                            
applications filed with  the department before the effective date of                                                            
the Act may  be counted toward the  satisfaction of the requirement                                                             
established by  (a) of this section." He thought that  it could mean                                                            
if he  came in  with applications  for another  acre  to add to  his                                                            
farm, that he would be  put in the position of a competitive auction                                                            
on that particular site. He wasn't sure that was the intent.                                                                    
MR. PAINTER  said that  Professor Weiland  had commented earlier  on                                                            
aquaculture development  zones and they are very interested  in this                                                            
concept  and  have  been trying  to  work  with  local communities,                                                             
governments  and state  agencies  on furthering  it.  He thought  it                                                            
could be embodied  in this bill as it gets toward  the legislation's                                                            
MR. PAINTER  said he  differed with  Mr. Mecum  in that the  Alaskan                                                            
Shellfish  Grower's  Association   is  not  real  pleased  with  the                                                            
regulations.  He  said  they  were  pleased  with  the  progress  in                                                            
changing them,  "That's much different  than being pleased  with the                                                            
final product."  He explained that the regulations  started out "95%                                                            
bad" and they have probably corrected 75% so far.                                                                               
SENATOR TAYLOR  asked what he thought  about using a royalty  on the                                                            
product coming  off of the ground  instead of a bidding process  for                                                            
MR. PAINTER  answered that that concept  is already in effect  since                                                            
they do  pay a  fisheries business  tax  that is equal  to what  the                                                            
commercial  fishermen  pay  that is  based  on  the value  of  their                                                            
production. In addition  to the lease fees they pay, they are paying                                                            
a value on the production on the site.                                                                                          
SENATOR TAYLOR  asked if that wasn't  just a flat 3 percent.  He was                                                            
talking about a royalty that would include the lease.                                                                           
MR. PAINTER  answered if it were a  royalty instead of a  lease fee,                                                            
they would  be very interested  in pursuing  it further. Mr.  Thomas                                                            
pointed out  earlier that they are  paying lease fees on  sites they                                                            
are not able  to farm right now. It  is a problem to get  sites late                                                            
in the  year  that they  are not  able to  use for  that  particular                                                            
growing  season and  having  to pay  lease fees  on  them. They  are                                                            
paying lease  fees on  a site that  won't see  profits for three  or                                                            
four years.                                                                                                                     
There being no  further questions or discussion, CHAIRMAN  TORGERSON                                                            
adjourned the meeting at 5:45 pm.                                                                                               

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