HOUSE BILL NO. 484 "An Act allowing for revenue received from issuance of additional entry permits to be appropriated for reimbursement to salmon fishery associations." REPRESENTATIVE PEGGY WILSON, sponsor, introduced her staff. LINDA MILLER, STAFF, REPRESENTATIVE PEGGY WILSON, related the history of HB 484. In 2002, the Alaska Legislature created salmon fishery associations under AS 16.40.250 to encourage fleet reduction in the Alaska salmon fisheries. Salmon fishery associations may be formed in salmon fisheries throughout the state to facilitate a permit buy back program. This means that a group of fishermen may form an association and vote to assess themselves for purposes of Buying Back Salmon Permits in their fishery. Ms. Miller explained that the Southeast Seiners have formed an association to develop a buy back program for Southeast seine permits. One of the questions raised by fishermen was "What would happen if we assess ourselves to buy back these permits then at some point in the future the Commercial Fisheries Entry Commission sells permits back into the fishery?" Their dilemma was that they wanted a guarantee that they would get their money back if that actually happened. HB 484 answers that question. Ms. Miller reported that the CS for HB 484 that is before the committee is a housekeeping measure to clarify what may happen to the revenue if the Commercial Fisheries Entry Commission should find it necessary to sell or re-issue permits that have been relinquished under the buy back program authorized under AS 16.40.250. This bill makes it clear that in the unlikely event CFEC sells more permits than were previously purchased by an association, the legislature may appropriate money back to that association. The change from the original version to the current CS is to make it clear that the fishery association that actually did the buy back is the fishery association that may receive the payback. Under this bill the legislature may appropriate revenue from the permit sale to the association that paid money or incurred debt to remove the permit from the market in the first place. The state or CFEC has the responsibility to monitor each limited entry fishery. In the event that CFEC determines more permits are needed in a salmon fishery through an optimum number determination or court action, the provisions of HB 484 would apply. Ms. Miller stated that the Commercial Fisheries Entry Commission, who worked with the Southeast Seiners in developing their association, supports this bill. Peter Froehlich, Commissioner of CFEC, and Jerry McCune from the United Fishermen of Alaska were available to answer any questions. Ms. Miller requested support for the CS for HB 484 - Fishery Association Reimbursement. 9:17:07 AM Representative Stoltz asked about self-funded buy backs. He saw no clear separation for that. PETER FROEHLICH, COMMERCIAL FISHERIES ENTRY COMMISSION, related that there is no limit in the bill as to the source of the funds. Association funds used for the buy back could be reimbursed under this bill. Representative Stoltze noted that most buy back mechanisms use federal funds. He said it appears that there is nothing that would limit those federal funds from being paid back to individual fishers. Mr. Froehlich replied that the association could use federal funding, or self-assessment, or a combination of the two. The legislature could later reimburse the association, not the individual fishers. Representative Wilson added that in this instance, they are assessing themselves and borrowing the money to do it. She stated no problem with clarifying the idea. Representative Stoltze reported on a likely mechanism for funding. He wanted to ensure that it is the intent of the bill to refund the amount that the association has assessed. Mr. Froehlich said that is the intent of the bill. It was crafted with UFA and the Southeast Seiners, who are working with Congress and Senator Stevens' office. Representative Wilson added that when the association borrows money they want to be sure they are reimbursed. Representative Stoltze summarized that there are two parts in need of reimbursement, self-assessment and federal funds. 9:24:18 AM Representative Kerttula suggested that the money could be used for other things to enhance the fishery if it is going into the buy back. She did not see a concern because the bill solves the problem and the money would go back to the fishery. Representative Wilson agreed. Mr. Froehlich added that the version of the language in Congress considers it a federal loan where financing is required. Representative Kerttula said that is even more of a reason for the bill. 9:26:40 AM Co-Chair Chenault asked what gives the impression that if the association goes through a buy back provision, the state would go back in and resell more permits. Representative Wilson responded that has never been the case. The association is nervous about taking this big step because of the large amount of money. It is a "what if" statement. Co-Chair Chenault voiced concern about it being a long time into the future before any state department would want to increase permits. 9:28:47 AM Representative Weyhrauch asked what percent of the funds go to permits. JERRY MCCUNE, UNITED FISHERMAN'S ASSOCIATION, related that the bill allows the association to create a committee, voted on by the permit holders, to accept money or assess themselves. He explained that if there was a buy back, they could set a price for the permit. The only reason that they would have to put permits back, would be like the case in Sitka where they went to court and asked for more permits. The judge ruled that a fishery could be made too exclusive. If the association used their own money they would have the opportunity to ask the legislature at a later date if they could get any money back. Mr. Froehlich related two possibilities for having to issue more permits: setting an optimum number that is higher than the number of permits reduced by the buy back, and a court order. He addressed Representative Weyhrauch's concern. All of the funding would go to permitees in the buy back. 9:32:18 AM Representative Weyhrauch said it seems like it is a risk for the state. If there is a challenge, then the fishers might be in a position of having sold their permits and obtained money. If permits have to be put back, there may be a legal risk to the state. Mr. McCune thought a lawsuit would be unlikely because the state can defend an optimum number. There is also a provision to own two permits. He said he could not guarantee there would be no lawsuit. Representative Weyhrauch summarized it would have to be equal to, or greater than, the optimum number set by the commission. Mr. McCune agreed. 9:34:32 AM Representative Stoltze asked if the salmon fisheries association is made up of those that have limited entry permits. Mr. Froehlich replied yes, commercial harvesters. Representative Stoltze asked about concerns related to conservation and sport fishing. Mr. Froehlich said he is not aware of any mechanism that would allow others to participate in a buy back. Representative Stoltze thought there might be others interested in participating in a buy back. He wondered if that would be a policy concern. Mr. Froehlich said it is a policy question beyond the scope of the bill. Mr. McCune responded that only permit holders could participate in the buy back. Representative Stoltze commented that the association does not want anyone else to participate. Mr. McCune responded that the permit holders are the ones that are going to be assessed. Representative Stoltze noted a reluctance to provide a mechanism. He asked about buy backs and conservation. Representative Kerttula noted that there needs to be an optimum number of permits. She said a theoretical risk is always there. She noted that sport fishing does not fit into the commercial fisheries entry. Representative Stoltze maintained that it is hard to separate them. 9:40:11 AM Representative Weyhrauch suggested a three-part process for sport fishers to participate. Mr. Froehlich said that is accurate since the bill refers to associations qualified under AS 216.42.50. Representative Stoltze shared some discomfort but said it is not his intent to bog down the bill. Representative Weyhrauch spoke about conflicts between user groups with a limited resource. He suggested involving all regions by having a broad policy such as this one. 9:43:20 AM Representative Kelly voiced a concern about a person with the intent to shut down the fisheries in order to limit the market. Mr. McClune reported that only permit holders can form an association, so that is not a danger. No one has to sell a permit. The association is trying to reduce permits for those who want to get out of the fishery. 9:45:32 AM Representative Kelly asked if there is a danger of a cartel. Mr. McCune explained market limitations. Representative Weyhrauch noted that last year the commercial fisheries entry commission tried to amend provisions of those statutes that dealt with a moratorium. This bill is a vehicle for fixing an unworkable statute. Co-Chair Chenault stated that it is a voluntary buy back program. 9:48:51 AM Co-Chair Meyer noted a new zero fiscal note from the Department of Fish and Game. SUZANNE CUNNINGHAM, STAFF, REPRESENTATIVE MEYER, explained that the House Special Committee on Fisheries drafted fiscal note #1. She has requested a new zero note by Department of Fish and Game. 9:50:49 AM Representative Foster MOVED to report CSHB 484 (FSH) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSHB 484 (FSH) was REPORTED out of Committee with a "no recommendation" and with a new zero fiscal note by the Department of Fish and Game. 9:51:29 AM