HOUSE BILL NO. 208 An Act relating to aquatic farming of shellfish; and providing for an effective date. REPRESENTATIVE DREW SCALZI, SPONSOR, testified via teleconference in support of HB 208. He explained that the legislation would change the way the Department of Fish and Game develops mariculture sites. Under the current statutory provision, applicants locate sites that they believe are applicable to developing mariculture. A problem arises when they locate a site only to find out when they return to the department that it conflicts with an earlier use. Under the legislation, the department would find sites and make them available: predisposing problems. The department would locate 90 sites; the Department of Fish and Game and Department of Natural Resources would set the criteria. The 90 sites would be divided: 60 suspended cultures such as mussels, oysters; 20 clams sites; and 10 geoduck sites. The sites would be available annually until taken; a ten-year lease would be required. Farmers must abide by the sustained yield principle in harvesting. The farming would not interfere with the established commercial, subsistence, or personal use fisheries. Upon expiration of the lease the permit holder must return the site in the condition that mirrors the population estimates that were in existence when the lease started. The bill is the first step by the state in supporting the development of shellfish farming in Alaska, since enactment of the Aquatic Farm bill of 1989. The demand for Alaska shellfish in the market place cannot be met with the small amount of farms that are now present. Shellfish farming is an excellent opportunity for displaced fishermen or fishermen that need to supplement their income. A 10-acre farm could produce 435,000 pounds of clams worth $1.1 million dollars annually. Alaska's largest seafood wholesaler estimates the clam market in Anchorage at over one million pounds a year. Representative Hudson referred to fiscal notes. Representative Scalzi estimated that over a 10-year period the collection would pay for the costs. ROGER PAINTER, ALASKA SHELLFISH GROWERS ASSOCIATION, JUNEAU, testified in support. He referred to section (b)(2): Before offering leases for aquatic farming sites under (a) of this section, the commissioner of natural resources shall solicit nominations of sites suitable for aquatic farming of clams, geoducks, and other shellfish from the aquatic farming industry in the state and the public." The Alaska Shellfish Growers Association is actively working with the University of Alaska on assessments of candidate sites. Under the current program the burden is on the applicant to provide site-specific information, which keeps the cost of the current program low. He suggested that nominated sites be required to provide site-specific information to keep the costs of the program down. He felt that the Department of Fish and Game's fiscal note could be reduced. He observed that the fiscal notes by the Division of Commercial Fisheries and Habitat Restoration were predicated on observations at the site. During a normal opening the Department of Fish and Game does not visit sites or conduct dive surveys. He maintained that the burden to provide the information should be on the industry. Representative John Davies questioned why not operate under the statutes. Mr. Painter explained that the sites would be located in areas of low conflict in areas where the industry is being encouraged. He referred to interaction with the Prince of Wales community, which is working to support industry. The cost to amend current land use plans, conduct public hearing on the Prince of Wales project is $140 thousand dollars, which would result in a small number of sites. The legislation would allow applicants to go into areas where there would be a high probability of farming. He emphasized the difficulty of locating sites that can be approved. There was one applicant for all of Southcentral in 1999. The legislation would open doors by pointing people into areas that would be successful. Representative John Davies questioned why the department would have more success. Mr. Painter responded that the department's role would not be to identify sites but to evaluate sites proposed by industry for points that would cause them to be rejected. Representative Scalzi referred to the Katchemak Bay area where there are a lot of home sites. The Administration can deal with relationships between user groups and expedite the process. TAPE HFC 02 - 72, Side B  Representative Hudson questioned if sites would be available by road or boat. Mr. Painter explained that they were close to the road but require a 2-mile boat ride. Representative Hudson questioned the cost of providing road access to the site. Mr. Painter noted that he flies all of his product from his farm site, even though it is relatively close to the road. He produces between a 1,000 and 2,000 pounds a week. He would like to work with other farms in the area to truck the product out as roads and ferry service is improved. Co-Chair Mulder observed the fiscal costs and questioned why the industry is not willing to pay for the up front costs to begin the program. Mr. Painter acknowledged that industry should pay a greater portion of the up front costs and reiterated that the fiscal notes could be reduced. The industry can complete surveys for less money than the state. He asserted that it would cost the department 50 times more than industry to deliver the data. Representative Lancaster asked for an example of the cost to survey a site. Mr. Painter noted that they surveyed 100 miles of coast at a cost of $4 thousand dollars. He added that he has worked with the Department of Community and Economic Development to develop a spreadsheet that demonstrates the flow of revenues back into the state treasury from the passage of the legislation. He explained that they visited clam sites and collected samples that allowed them to analyze the number of clams available, took soundings and salinity levels, and looked for sensitive habitat and other problems. The Department of Natural Resources has stated that 80 sites were permitted before the program was abandoned. DOUG MECUM, DIRECTOR, DIVISION OF COMMERCIAL FISHERIES, DEPARTMENT OF FISH AND GAME, provided information on the legislation. He noted that the department testified in support of the legislation. He had not heard any criticism on the fiscal note previously. He stressed the need to fund the program in order to jump-start the industry. The legislation would double the size of the industry. The department would do the work to find sites that are suitable and free of conflict. He emphasized that the funding is needed to do the work. He observed that no statutory change is necessary to keep the burden on the industry, but the department supports the approach taken in the legislation [to shift the burden to the department]. Representative Lancaster questioned if the sites had been previously surveyed. Mr. Mecum stated that they do not do a lot of surveys on suspended culture sites, but that they have been involved in surveying on bottom farm sites. He noted that the department is involved in litigation regarding geoducks, which are highly viable. Goeducks are worth $10 - $20 dollars a pound on the Asian live market. He noted that there were 40 applications put in during the last application period, 19 of which were ground bottom sites. The department surveyed the sites at their cost, which was expensive. He stressed the cost of "firing up" a research vessel with divers to survey sites with scuba gear to do actual quantitative surveys and estimates of the existing biomass and populations. He disagreed that the industry could provide the services cheaper and estimated the costs for one site at $20 thousand dollars. The legislation anticipates nine sites that could be anywhere in the state of Alaska. Representative Hudson questioned if there was conflict between the diver fisheries and the set aside sites. Mr. Mecum affirmed and acknowledged that potential dive sites would have to be taken into consideration for a third of the sites. He clarified that the intent of the legislation was for the agencies to do the public process and biological surveys to find areas that would have a reasonable expectation for approval. RICK THOMSPON, STATEWIDE AQUACULTURE PROGRAM, DEPARTMENT OF NATURAL RESOURCES, testified via teleconference in support of the legislation. He noted that the Department of Natural Resources has worked closely with the industry, sponsor and Department of Fish and Game to resolve issues. Representative John Davies asked if the number of sites and the potential of the industry expansion to all of the sites made available were practical. Mr. Thompson stated that he was not qualified to speak to the industry's capability to expand. He noted that the department is responsive and would work to eliminate conflicts. He stressed the need to build in efficiencies. There may be areas that can support 10 - 15 sites. He thought that it would be good to identify sites, when and where there are resources available. JULY DECKER, EXECUTIVE DIRECTOR, SOUTHEAST ALASKA DIVER FISHERIES ASSOCIATION, testified via teleconference in support of the legislation. She did not think that the legislation would be detrimental to the dive fisheries. JON AGOSTI, CHUGIAK SHELLFISH ASSOCIATION, SEWARD, testified via teleconference in support of the legislation. He noted that he is also the president of the Qutekcak Shellfish Hatchery. He emphasized the importance of the legislation to his and other state hatcheries. They provide four new species of shellfish cultured in the state in an attempt to diversify and grow the industry. The legislation is critical to help jump-start the industry. Grant funding is not going to continue. The two-year application process, which has less than a 50 percent chance of success, is a detriment to the industry. It is a large cost in time and money for unsuccessful applicants, which also acts as a deterrent. CAREN ROBINSON, THE SHELLFISH MARKET, JUNEAU, testified in support. She noted that she is a partner in a shellfish company located on Prince of Wales Island. She distributes the majority of oysters in Southeast Alaska and her biggest fear of each week is whether there will be enough product to meet demand. She noted that there is not enough to send out of state. Representative Hudson asked if the legislation extends the length of the lease and questioned if longer contracts would aid industry. Ms. Robinson agreed that it would be helpful to do anything to extend and simplify the lease process. Representative John Davies asked if the level of effort is reasonable. Ms. Robinson thought that the number was reasonable. She reiterated that she is unable to meet demand, yet it is a difficult industry to get started in. In response to a question by Representative Davies, Representative Scalzi could not provide additional information regarding the amount of public interest. He noted that if all 90 sites were released that the state would receive $58,000 annually, based on the assumption that all sites were released. He felt that there was an extensive level of interest. Representative Whitaker reviewed the fiscal notes: Department of Fish and Game, Division of Commercial Fisheries $90 thousand dollars, and the first year; Department of Natural Resources, $98.3 thousand dollars the first year; and Department of Fish and Game, Division of Habitat for $72.5 thousand dollars the first year. He emphasized that the funding would spur economic development. The total cost would be $272 thousand dollars. The Department of Environmental Conservation withdrew their fiscal note. He spoke in support of the legislation and emphasized that it would help a fledgling industry. Representative Lancaster pointed out that a hatchery was built in Seward that just delivered its first commercial product last fall, which could be used to support the industry. Representative Hudson questioned how many jobs would be involved in each project. Representative Scalzi observed that there are 14 members in the Katchemak Bay collective involved. Mr. Painter stated that there are four full time employees at their site. The site next to them has 2 full time partners with a few part-time workers. Representative Hudson estimated that there would be 270 individuals employed on the additional sites. Co-Chair Mulder spoke in support of the legislation. He asked the sponsor to work with industry and the department to look for funding efficiencies. Representative Lancaster MOVED to report CSHB 208 (RES) out of Committee with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSHB 208 (RES) was REPORTED out of Committee with a "do pass" recommendation and with previously published fiscal notes: DNR (#2), DFG (#3) and DFG (#4).