HB 365-FISH PROCESSOR FEES, LICENSES, RECORDS  2:35:33 PM CO-CHAIR JOHNSON announced that the next order of business would be HOUSE BILL NO. 365, "An Act relating to sharing records regarding fish purchased by fish processors with certain federal agencies, to requirements to obtain and maintain a fisheries business license, and to payment of industry fees required of fish processors; and providing for an effective date." 2:35:49 PM REPRESENTATIVE CHARISSE MILLETT, Alaska State Legislature, presented HB 365 as sponsor. She described HB 365 as "a completion of a bill that was started in 2002" regarding fisheries permit buybacks. She explained that the intent of allowing buybacks of fisheries permits is to stabilize and sustain the fishery. The bill would allow a fishery to buy back a permit with the agreement of two-thirds of its permit holders, and would give the fishery access to $21 million through the federal marine fisheries program. She noted that the Southeast Alaska Purse Seine fishery is the first to have elected to pursue the buyback. She related that fisheries that want to buy back a fishery must agree to a self-assessed tax of 3 percent on each sale of fish they catch to cover the costs of the program. Furthermore, the program is voluntary; only those fishermen who choose to sell their permits may do so. She reported that currently over half of the permits in the Southeast Alaska Purse Seine fishery are not being used. She remarked upon the unusual occurrence of a large group of fishermen coming to agreement on any issue. 2:38:15 PM REPRESENTATIVE KAWASAKI said HB 365 was previously heard by the House Special Committee on Fisheries, but he did not recall there being a letter of intent, which he observed has been added. He questioned the reason for the addition of the letter of intent, and asked if the focus of the bill is being limited to Southeast Alaska. REPRESENTATIVE MILLETT responded that the Southeast Alaska Purse Seine fishery is "the only group of fishermen that [has] decided to go forward with the fisheries buyback," although the buyback is open to all of Alaska's fisheries. Regarding the letter of intent, she noted that people in "the processor group" were concerned about "the ability of the $21 million to buy back a portion of permits that exceeded what they thought they needed to keep their processors full." She indicated a connection between the letter of intent and the processors being comfortable with the legislation. In response to a follow-up question, she clarified that the letter of intent is specific to "this buyback program"; however, the bill itself does not limit participation to Southeast fisheries. 2:40:04 PM REPRESENTATIVE P. WILSON noted that in the committee packet is a memorandum of understanding between the producers and fishermen. 2:40:47 PM REPRESENTATIVE SEATON directed attention to language in Section 2, on page 3, and he asked the bill sponsor to confirm that "department" is the Department of Revenue and "annual fee" is a business license fee. REPRESENTATIVE MILLETT answered that is correct. REPRESENTATIVE SEATON noted that there are other buyback programs, such as the Bering Sea Crab fishery program, which could fall under HB 365. He said there is a situation in the bill in which the Department of Revenue would be offering a business license and denying it based on federal provisions. He said the federal government has the ability to "search and seek" its own remedies. He opined that it is problematic for the state to deny a business the ability to operate in state waters because of a federal obligation, and he relayed that he would be offering an amendment to address this issue. 2:42:35 PM REPRESENTATIVE MILLETT, in response to Co-Chair Johnson, confirmed that the buyback program has a federal funding mechanism. She said Representative Seaton's concern relates to an agreement between the Southeast Alaska Purse Seiner fishery and National Marine Fisheries Service (NMFS) to ensure that the fish tickets collected by processors make it to NMFS so it can not only collect the tax but also administer the program. She said this is the main focus of the bill, and Representative Seaton's amendment would gut that. She said that without the fish tickets there would be no ability to assess the tax. In response to Co-Chair Johnson, she indicated that the Department of Revenue was also involved in the agreement. 2:44:16 PM REPRESENTATIVE SEATON clarified that Section 1 addresses the issue of fish tickets, but that he is concerned about language in Section 2, which proposes not allowing the Department of Revenue to issue a license to a processor. He said Sections 2 and 3 are about the fees and not about the data. 2:45:15 PM REPRESENTATIVE JOHNSON said he would like the amendment mentioned by Representative Seaton to be offered in order to hear the testimony related to it. 2:45:40 PM REPRESENTATIVE SEATON moved to adopt Amendment 1, labeled 26- LS1514\A.3, Kane, 4/1/10, which read as follows: Page 1, lines 2 - 3: Delete ", to requirements to obtain and maintain  a fisheries business license, and to payment of  industry fees required of fish processors" Page 3, line 19, through page 5, line 6: Delete all material. Renumber the following bill section accordingly. REPRESENTATIVE P. WILSON objected for discussion purposes. 2:46:04 PM REPRESENTATIVE SEATON offered his understanding that the committee packet contains information regarding public law, the buyback, and the Reduction Act, and that payments and collections shall be in accordance with requirements of U.S.C. 1801 - not just a negotiation between Alaska authorities and NMFS, but a requirement under federal law to ensure payments are collected. He noted that the Internal Revenue Service (IRS) is a part of this, as well. He indicated that there is nothing under the federal law that requires it to also be under state law. 2:47:37 PM CO-CHAIR JOHNSON reminded the committee of his intent to hear testimony and come back to the proposed Amendment 1, which he opined is germane to the entire bill. 2:48:09 PM REPRESENTATIVE MILLETT asked the committee to remember that the program through which the Southeast Alaska Purse Seiners have worked to attain money is a federal one. Taking the business license portion of the bill out, she warned, will leave no mechanism for enforcement for the Southeast Alaska Purse Seiners to receive the money or pay it back. She said she cannot imagine that any processor would not "comply with this." 2:49:39 PM BOB THORSTENSON JR., Executive Director, Southeast Alaska Seiners Association, testified that when the association began work on the buyback program in 2002, it was part of the Alaska State Legislature Salmon Task Force. He said the association already has total congressional authorization and has received $3 million in the form of a grant from the federal government, and it has purchased 35 permits with that money. He said approximately one-quarter of the entire program has already been paid for by "you" and the federal government. He noted that at first, the processors had some concerns, but the association worked through those with a memorandum of understanding (MOU) and a letter of intent. MR. THORSTENSON stated that the proposed Amendment 1 would "kill this and send us back into the dark ages." He said he appreciates the concern held by some people. He stated, "We didn't enter into this attempting to lead Alaskans into some type of a new relationship with the federal government where they could somehow shut down our processors and then we'd all be stuck not fishing." He said the association has spoken with all the major processors involved, and he offered his understanding that Trident Seafoods, for example, has said it pays taxes to the State of Alaska and has no intention of ever not doing so, "so, in that sense, this won't ever apply to us." He noted that the Department of Law, "CVC," and the Department of Revenue all had people at the table working on this issue; the issue was extremely vetted with the administration, and the purpose of his coming before the legislature today is to ensure that the issue is vetted with the legislature, as well. He reiterated that the association is opposed to the proposed Amendment 1, but emphasized the association's support of the bill, with the MOU and the letter of intent, and he urged the committee to support it. 2:52:49 PM CO-CHAIR JOHNSON related that Mr. Thorstenson had said he had moved to Juneau "as a result of this bill." 2:52:59 PM REPRESENTATIVE SEATON asked if the major processors to which Mr. Thorstenson had referred buy fish from federal waters. MR. THORSTENSON estimated that nearly every one of the major Southeast Alaska purse seine and salmon processors "also buys fish in federal waters"; and nearly every one of them has had its attorneys and/or CEOs, CFOs, and lobbyists look at this legislation. REPRESENTATIVE SEATON concluded that in purchasing fish from federal waters, those entities would be required to hold an NMFS permit. MR. THORSTENSON said he presumes so, but related that he personally does not purchase fish from or fish in federal waters. CO-CHAIR JOHNSON questioned if the proposed Amendment 1 would "violate the agreements of the agreement." 2:53:51 PM THOMAS LENHART, Assistant Attorney General, Natural Resources Section, Civil Division (Juneau), Department of Law, responded, "It is my opinion that the National Marine Fisheries Service would not go through with this program without it." He related that he has had the opportunity to work with council from NMFS, as well as "some of the program people" for the last three years, and he said the biggest sticking point in [NMFS] doing this program has always been a mechanism for them to have assurance that they will get repaid. He said this is different from other buybacks [NMFS] has done, because he indicated others have been in federal waters and done through federal programs where mechanisms are already in place. But in this program, [NMFS] would be funding a buyback in a fishery that is entirely state run. MR. LENHART explained that NMFS has some cumbersome and uncertain mechanisms for collecting debt; it basically has to rely on a civil action, bringing in the U.S. Department of Justice to try to collect a debt. The entity has made it clear from the start that it needs "a little bit of a safe assistance here with the mechanism that would do two things." He said the first part of the bill would require the state to share with NMFS the information on fish tickets that would be confidential otherwise, so that NMFS would have some documentation of what has actually been caught and what is due. Mr. Lenhart stated that [NMFS] remains concerned about an appropriate mechanism to guarantee that money is collected by the processors and turned over to the federal government. He stated, "This was the one mechanism that people were able to agree upon." He offered his understanding, based on his conversation with NMFS over the years, that the future of the whole program is "very much in doubt if this amendment goes through." 2:56:36 PM REPRESENTATIVE SEATON, regarding the processors collecting money and the sharing of confidential information, asked, "How big of a hook is it for them to put a hold on a federal fisheries permit and [prevent] those folks from buying any fish from federal waters ...?" 2:57:14 PM MR. LENHART said he has never had that discussion and cannot speak for NMFS. Notwithstanding that, he imparted that NMFS's council was "not comfortable with that" and "did not feel that was adequate." 2:57:39 PM REPRESENTATIVE SEATON asked Mr. Lenhart to clarify if he is saying that it was not adequate or that "it wasn't proposed that they put a hold on the fisheries permits that the National Marine Fisheries Service issues, instead of requiring the state to put a hold on the licenses it issues." MR. LENHART replied that based on his conversations with [NMFS] over the years, that entity does not feel it has "an adequate remedy." He reiterated that he did not specifically discuss what Representative Seaton is suggesting; however, he stated that [NMFS] was seeking any mechanism that it felt would be effective, and it concluded that it does not have one. 2:58:31 PM ROB ZUANICH, Manager, Southeast Revitalization Association, stated, "This bill is essential to the implementation of our consolidation buyback program." He said that four years after the Alaska State Legislature passed a bill allowing salmon permit holders to form nonprofit associations to reduce or buy back permits in the fishery, the U.S. Congress amended the Magnusson Stevens Act, which made SRA eligible for a federal loan to finance the program. He noted that this would be the first time this program would be used in state water fisheries. He relayed that the loan would be administered by the fishery service and repaid by an assessment on the catch of fishermen remaining in the fishery. The loan will be funded, he said, and fishery services need assurances that it can "timely audit repayment of the loan," and that there is a mechanism to ensure collection of the assessment. Mr. Zuanich stated that [HB 365] would provide that assurance. He said the bill language carefully balances the need of the fishery service and the buyer or processor of the salmon who is responsible for the collection and remittance of the assessment. MR. ZUANICH said the proposed Amendment 1 not only would be fatal to the program, but also is misguided and fails to recognize that it is state fishermen and state processors that want this mechanism. He stated, "We could see nothing more detrimental than to have a recalcitrant buyer of salmon withhold the tax and then not remit it to the federal government to repay the loan we must repay." Equally troubling, he opined, would be processors or buyers that did not withhold the tax and had an unfair advantage over those processors who wanted to play the game fairly. He said the mechanism is not only required by the fishery service, but is also urgently needed by fishermen and processors who want this to be a fair, equitable, and fully- funded program. 3:01:44 PM JOE PLESHA, Chief Legal Officer, Trident Seafoods Corporation, Testifying in support of HB 365, noted that Trident Seafoods Corporation has salmon processing facilities in Southeast Alaska, at Ketchikan, Petersburg, and Wrangell. He related that early on in this process, Trident had concerns that the magnitude of the buyback may be too great, because since at least 2002, processors have invested heavily in value-added and increased production of pink salmon, so that now "we are all searching for more boats to fish for our plants." Mr. Plesha expressed appreciation for the work of Mr. Thorstenson and the Southeast Alaska Purse Seiners fishery, with whom he indicated Trident was able to negotiate "a floor below which they've committed not to buy back permits," which allows Trident to support the proposed legislation, along with the letter of intent from the legislature acknowledging that the floor exists. MR. PLESHA stated that while he appreciates the purpose for which Representative Seaton has offered Amendment 1, Trident has an accounting staff dedicated to ensure that the corporation correctly pays its taxes and meets all its requirements, and he expressed confidence that "we'll be able to do that without a great deal of extra burden." He clarified that Trident Seafoods Corporation does not believe that the proposed Amendment 1 is necessary. 3:03:30 PM FRANK M. HOMAN, Chairman/Commissioner, Commercial Fisheries Entry Commission (CFEC), Alaska Department of Fish & Game (ADF&G), stated that CFEC has worked for a number of years with the Southeast Alaska Purse Seiners fishery, and it is taking direction from state statute that was passed by the legislature in 2002 that authorized these programs. He said CFEC's role is to facilitate the wishes of the legislature. He said the procedures resulted from discussions during [the Alaska Joint Legislative Salmon Industry Task Force], which was attended by fishermen and processors. He characterized [HB 365] as the last phase of a series of legislative initiatives spanning the last 8-10 years. MR. HOMAN, regarding the proposed Amendment 1, drew attention to language in Section 3, which states that NMFS would not be owed to arbitrarily seek to withhold a business license, but would have to exhaust all legal administrative remedies. Where this could occur, he said, is with "some maverick processor who's not following the rules"; however, he noted that the committee had just heard from one of the major processors that it does accounting and knows the procedures. He said he thinks it is unlikely that any processor would not comply with the federal requirements. 3:06:34 PM REPRESENTATIVE SEATON said he was on the aforementioned task force and supported the program; however, he recollected that there never was a discussion of withholding state business licenses. He asked if that issue was a private negotiation. 3:07:08 PM MR. HOMAN responded that the program in general was discussed [by the task force]; however, he offered his understanding that the specifics of HB 365 were not even on the table at that time. He said, "This came about in the last several years with negotiations with the National Marine Fisheries." 3:07:31 PM JEREMY JENSEN testified on behalf of himself in support of HB 365. He related that he is a lifetime resident of Petersburg and has worked as a commercial salmon seiner for the past 10 years. He stated opposition to the proposed Amendment 1. 3:08:18 PM MITCH EIDE testified on behalf of himself in support of HB 365. He related that he is a lifelong resident of Petersburg, and said he has operated a seiner in Southeast Alaska for 25 years. He said there are fishermen who support this legislation who have been trying for eight years to get this program started. He expressed his wish that his five-year-old will be able to take his place some day. He urged the committee to support the bill without the proposed Amendment 1. 3:09:02 PM TROY THOMASSON testified on behalf of himself in support of HB 365. He said he is a lifelong resident of Petersburg, and he has been an owner/operator of a seiner for the last 10 years. 3:09:32 PM CO-CHAIR JOHNSON, after ascertaining that no one else wished to testify, closed public testimony on HB 365. 3:09:43 PM REPRESENTATIVE SEATON, referring back to Amendment 1, said the committee has heard in testimony that the processors have federal fisheries permits and obligations, and NMFS has full applicability to withhold licenses, as well as its own ways of enforcing this program. He said there have been instances where federal government has "come down with REAL ID" to enforce certain things, and the state has consistently said it does not want to tie its hands with the requirements of the federal government when those requirements are not appropriate. He noted that listed on page 3, [line 26, through page 4, line 6], there are "a number of conditions where we can withhold a business license"; however, he said nowhere in the language does it say that "we're going to withhold these for ... federal government obligations." He said he understands that it is convenient for people to negotiate and say "we" will withhold our Alaska business licenses based on a desire by a federal agency - "not to exert their control through their own licenses" - but he said he thinks this is a matter of state's rights, and he opined that it is important to "make the requirements in the states and the political subdivisions of the state - not the federal government." 3:12:01 PM REPRESENTATIVE P. WILSON maintained her objection to Amendment 1. A roll call vote was taken. Representatives Seaton and Kawasaki voted in favor of Amendment 1. Representatives Tuck, P. Wilson, Olson, Edgmon, and Johnson voted against it. Therefore, Amendment 1 failed by a vote of 2-5. 3:13:09 PM REPRESENTATIVE EDGMON moved to report HB 365 out of committee with individual recommendations, accompanying fiscal notes, and letter of intent. There being no objection, HB 365, with attached letter of intent, was reported from the House Resources Standing Committee.