HB 188-SEAFOOD PRODUCT DEVELOPMENT TAX CREDIT  10:12:39 AM CHAIR TARR announced that the final order of business would be HOUSE BILL NO. 188, "An Act relating to a seafood product development tax credit; providing for an effective date by repealing secs. 32 and 35, ch. 61, SLA 2014; and providing for an effective date." 10:13:05 AM SARA PERMAN, Staff, Representative Louise Stutes, Alaska State Legislature, presented HB 188 on behalf of Representative Stutes, prime sponsor. She said the proposed legislation would extend the sunset date for a tax credit applied to seafood processors to December 31, 2025, and extend the seafood tax credit on salmon and herring to also include cod and pollock. This credit allows processors who have invested in updating their equipment to process more byproduct - thus getting more value out of the fish - to receive up to 50 percent back for that investment. Finding additional uses for each fish, such as for bone meal or fish oil supplements, adds to the value of the fish. Extending the credit to pollock and cod is valuable, because they make up about 60 percent of Alaska's fish harvest. 10:15:34 AM CHAIR TARR announced the committee would next hear invited testimony. 10:15:56 AM CHRIS BARROWS, President, Pacific Seafood Processors Association, noted written testimony had been submitted. He said the Pacific Seafood Processors Association (PSPA) is a nonprofit trade association founded in 1914 that comprised eight major seafood processing companies around the state. Members operate 25 facilities in 15 communities, including 3 floating processors. He said the bill's proposed inclusion of pollock and cod is important because it would create the opportunity to obtain more value from high volume species over the long term. He pointed out that more value added to fishers and processors means more value to local governments and the state through taxes based on the value of fish. He said HB 188 also incentivizes greater use of each fish, which would allow processors to invest more in product development and marketing for ancillary products. He emphasized the importance of diversity in returning value to the state. Mr. Barrows talked about an attachment to the letter in the committee packet that includes a summary of conclusions and description of net gains. He said analysis indicates that this program has directly contributed to the generation of an additional $114.4 million to the state's general fund. 10:21:13 AM MARK PALMER, President/CEO, OBI Seafoods, said OBI Seafoods [name derived from the merging of Ocean Beauty Seafoods and Icicle Seafoods] has 10 processing plants in Alaska. He stated that OBI Seafoods supports HB 188; [the tax credit] works. He highlighted the need to use every bit of protein from each fish, because the harvest count can change notably from year to year. He spoke about the U.S. market being the biggest in terms of Alaska seafood, and pointed out the benefit of sending product to the Lower 48 rather than internationally where other countries create the jobs and the value-added product. He said this [tax credit] has a proven track record for over 15 years; co-investment adds jobs in Alaska and investment to run sophisticated equipment. Further, he related that those jobs are "higher paying than the typical production working jobs in our factories." 10:24:03 AM JEREMY WOODROW, Alaska Seafood Marketing Institute, stated that the Alaska Seafood Marketing institute (ASMI) supports all efforts to increase the value of Alaska's fisheries, and HB 188 will provide the industry the incentive and support needed to continue investing in processing facilities and creating more value in seafood. Mr. Woodrow reported that Alaska's commercial fisheries harvest, on average, 5.5 billion pounds of seafood annually. After processing approximately 2.6 billion pounds sold to markets worldwide, there are 3 billion pounds of potential product that would increase the value of the state's seafood resources. He gave examples of products made with fish byproducts and mentioned other areas in which additional growth is forecasted. Byproducts used include fish skin and heads and crab shells. Mr. Woodrow cited a McDowell Group report which states that Alaska's major shoreside seafood processors invest over $100 million annually in capital expenditures. He said expanding value makes it possible for companies to expand seafood plants, expand production lines, and pay higher fish prices, all of which benefit local communities. He said market research shows that consumers want high-quality convenience products, and this trend provides the opportunity for the industry to create "new, innovative, and value-added seafood products" and "match consumer demands," and HB 188 would support this goal. 10:26:37 AM REPRESENTATIVE KREISS-TOMKINS remarked that the addition of cod and pollock would be a massive change to the program and would more than double the cost to the state; therefore he said he wants to be sure "we give that due diligence." He remarked that pollock is primarily processed at sea, but then amended that to express that pollock has a different "value chain to the state." He observed that the taxes collected on pollock are a fraction of that brought in from salmon. He asked if someone could speak to what kind of equipment would likely qualify for the tax credit, and what kind of onshore and offshore facilities would be captured by the proposed legislation. 10:28:05 AM MR. BARROWS responded that he was not sure the assumption that pollock was primarily processed at sea was accurate, and he said he would like to look into that and provide an answer. He noted that there is "a lot of shoreside production for pollock." 10:28:53 AM REPRESENTATIVE KREISS-TOMKINS, regarding the assumption, noted that he had "walked that back." Nevertheless, suggested the answer should be available for consideration as to what percentage of pollock is processed offshore versus on land, and he flagged that as "relevant information." 10:29:23 AM MR. PALMER shared that OBI Seafoods' Kodiak facility only heads and guts pollock; it does not produce surimi, for example, which would be "a much higher value-use product." Its headed and gutted (H&G) pollock is exported to foreign markets. He stated, "That would be, I guess, one example of how it could potentially be utilized and benefit a shore plant, create a higher-value product, and also probably focus on a domestic market." 10:30:07 AM CHAIR TARR opened public testimony on HB 188. After ascertaining that there was no one who wished to testify, she closed public testimony. 10:30:14 AM CHAIR TARR said she was considering an amendment deadline of Monday but did not want to rush the process. REPRESENTATIVE KREISS-TOMKINS proffered that he would desire a lot more information regarding HB 188. 10:30:29 AM CHAIR TARR announced that HB 188 was held over.