HOUSE BILL NO. 218 "An Act relating to cost recovery fisheries for private nonprofit hatchery facilities." Co-Chair Meyer MOVED to ADOPT the work draft for HB 218, labeled 24-LS0544\X, Utermohle, 4/26/05. There being NO OBJECTION, it was so ordered. 3:46:06 PM IAN FISK, STAFF, REPRESENTATIVE BILL THOMAS, spoke in support of HB 218. He maintained that the hatchery system is a great success as an economic development program. He observed that 25 percent of the salmon value is produced by hatcheries. Hatchery operators contract with bid processors through a bid process every spring for product harvest. The commercial fishing industry would like to see that hatcheries maximize the amount of fish that return to the hatchery in the common property fishery. He maintained that those that are intended to benefit from the hatchery program should have the most fish possible. The legislation is an optional bill. He pointed out that the sponsor is a supporter of hatcheries. The legislation would provide sufficient revenue by increasing the assessment to 40 percent. 3:50:03 PM Representative Hawker asked how the bill relates to corporations organized under the state's Aquaculture Act vs. the Salmon Farming Act. Mr. Fisk explained that the state hatchery program has helped the system develop, which is basically ocean ranching as wild fish are protected from predation and returned to the ocean. Representative Hawker noted that it is not salmon farming. 3:51:31 PM Representative Hawker observed that the legislation is a complex implementation of a way to pay for the cost of operating hatcheries. He referred to Page 3, line 20. He noted that once the Department of Revenue has the funds the legislature "may" appropriate the funds. He questioned if the legislature has to appropriate the money in order for the hatchery to receive operating funds. Mr. Fisk acknowledged that the legislature would have to make the decision and stated that he confidence [that the appropriation would be made] based on other pass through taxes. He noted that the intent is very clear, though there are some in the hatchery business who are uncomfortable about giving up control. Representative Hawker summarized that the intent is that the hatchery would make the ultimately decision to pursue the venue for funding. He wanted to assurance that the interests of the investors were protected. 3:55:01 PM Representative Weyhrauch referred to Page 3, line 28, and questioned if "is" should be changed to "may be". Mr. Fisks stressed that the intent is that people be held accountable. A misdemeanor under the section is a step above a regular class A misdemeanor and could result in the loss of a vessel, fishing gear or fish on board at the time of violation. The intent is to maintain a strong penalty. Representative Weyhrauch asked if there is intent to interfere with the cost recovery program of private non- profit hatcheries. Mr. Fisk noted that the issue would come under subsection (1) on Page 1, which is existing statute. There is no intent to interfere; the intent is to leave it up to hatcheries. Representative Weyhrauch emphasized that cost recovery and management of the fisheries would remain with the Department of Fish and Game. Mr. Fisk agreed. 3:58:37 PM Representative Croft observed that currently hatcheries contract with fishermen for enough to sell for the cost of operations and close the fisheries to anyone other than the hatchery authorized contract fisherman. Mr. Fisk agreed and added that the procedure has been in place for a while and is part of the genesis of the bill. Representative Croft observed that if enough fish are not harvested the opening would be extended. He acknowledged the difficulty of extending the opening, but asked why someone might switch to a system where a fish assessment would be taken on every opening. Mr. Fisk pointed out that there is variability in every system measuring wild stock and periodic adjustments are needed. The Southeast Alaska fishing fleet has shown the most interest in the option. 4:01:53 PM JASON WELLS, EXECUTIVE DIRECTOR, VALDEZ FISHERIES DEVELOPMENT ASSOCIATION (VFDA), testified via teleconference against HB 218. He maintained that the legislation would inhibit the hatcheries ability to make processors compete to purchase salmon. He asserted that the ability of hatcheries to negotiate price has saved fishermen millions of dollars over the years. He suggested that if direct sales must be minimized, as contained in the findings section, that hatcheries would be open to legal action annually by any processor that feels they have sold to many fish or should have sold him the fish. He maintained that if the findings in the bill are passed, that the hatchery would lose its ability to set budgets. He observed that hatcheries are the last vestige of upward pressure on the pink salmon price by competition. If the ability to bid salmon is lost, hatcheries would be at the mercy of the processor to set grounds prices. He expressed concern that the legislation could be made mandatory, which would result in a loss of the revenue stream and an inability to repay state loans. He asked that the findings section be eliminated. 4:05:49 PM PETER ESQUIRO, NSSRAA, SITKA, testified via teleconference. He suggested changes to the legislation (version S). The first suggestion was to add "if not a qualified regional aquaculture association" on Page 2, line 16 and on Page 3, line 8". On Page 3, line 9, he suggested elimination of "to the state", which refers to covered debt service to the state of Alaska. He added that Page 3, line 11 should include "operational" and spoke in support of a new line stating: "a corporation board of directors may create other funds as deemed appropriate to carrying out its fiduciary responsibilities". He also asked that "the amount of existing reserve" be changed "to undesignated reserve" on Page 3, line 14. Representative Weyhrauch stated that he would work with Mr. Esquerro and discuss his suggestions with the sponsor. 4:10:32 PM CORA CROME, PETERSBURG VESSEL OWNERS ASSOCIATION, PETERSBURG, Alaska Salmon Fisheries, testified via teleconference in support of the legislation. She maintained that the bill would allow another option for operational cost recovery. She maintained that the legislation is permissive. 4:11:28 PM RUSSELL COCKRUM, KETCHIKAN, Salmon Seiner, spoke in support of HB 218. He maintained that the legislation would increase the value, quality production timing of the harvest. He observed that cost recovery fish receive a higher price. He suggested that the program be mandatory. 4:14:01 PM Representative Weyhrauch MOVED to ADOPT Conceptual Amendment 1, to remove Section 1, delete the findings section (section 1). Co-Chair Meyer OBJECTED for discussion purposes. Mr. Fisk stated that the amendment would be acceptable to the sponsor. 4:16:10 PM At ease. 4:20:23 PM HB 218 was HELD in Committee for further consideration. 4:21:17 PM