CS FOR HOUSE BILL NO. 208(RES) "An Act relating to aquatic farming of shellfish; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. REPRESENTATIVE DREW SCALZI informed the Committee that the Aquatic Farm Act, enacted by the State in 1988, was intended to streamline the process of developing aquatic farms; however, problems have arisen regarding the Department of Natural Resource's mariculture review process through which areas are selected for development. He explained that protests from individuals not wishing to have a mariculture operation near their property or from user groups such as lodge owners, have furthered these problems. He explained that this bill proposes to appropriate money to the Department of Fish and Game to identify appropriate sites and then coordinate efforts with the Department of Natural Resources to finalize site selections. He stated that 90 sites are identified in this bill as suitable for: suspended culture sites for oysters and mussels; on- bottom little neck clams; and geoduck mariculture. Representative Scalzi asserted that some of the 90 identified areas might incur "common-use" conflicts that would require an Alaska Coastal Management Plan review. He informed the Committee that the State of Connecticut has 50,000 acres of land similarly under lease, whereas Alaska, with more coastline, currently has 500 acres under lease. He continued that this bill would improve the current process by providing pre-selected sites, providing for public hearings in accordance with the Alaska Coastal Management Plan Review, and establishing the land-lease component. He specified that the annual lease fee would be $350 for the first acre and $100 per each additional acre, and that, depending on whether half or all of the sites were leased, the accompanying $220,000 fiscal note could be recouped in ten years or five years, respectively. He stressed that this legislation would establish the means to stimulate new economic development in coastal communities, and surmised that though the process might be slow; the potential is immense. PAUL FUHS, Representative, Alaska Trademark Shellfish, voiced that this legislation would assist an industry that could provide benefits to the State. He noted that the Department's lack of support for mariculture combined with citizen opposition, has resulted in no sites being available for the aquatic industry, and asserted that this legislation could provide the needed sites. Mr. Fuhs pointed out that industry concerns regarding wildstocks are not addressed in this legislation. He shared with the Committee that the aquatic industry has proposed to temporarily harvest and then transplant wildstocks; however, the Department has stated that this "would be a violation of common property use." He continued that because of the wildstock issue, the industry is concerned that the twenty sites pre-selected in this legislation for the shellfish industry "would have absolutely no animals on them," which is indicative of "a bad habitat" for growing shellfish. Mr. Fuhs stated that the organization has worked with the Department and the bill's sponsor to resolve the habitat concern. However, he stated a "Catch 22" exists in establishing a common property habitat policy because the Alaska Court System has declared that it could not make a ruling on common property because the Legislature has not established a policy, and the Legislature states that it could not address the situation because the Court has not issued a ruling. He asserted that this issue must be resolved to allow the industry to move forward. Co-Chair Kelly asked the testifier whether he supports the bill. Mr. Fuhs relayed that the organization holds a neutral position on the bill. He commented that while the bill provides benefits to the suspended culture and little neck clams industries; it offers no benefits to the geoduck farming industry. Senator Austerman expressed support for the bill as it does contain merits. Mr. Fuhs concurred; however, he declared that the bill should not be necessary, and that it is unfortunate that the Department is not actively granting permits. Representative Scalzi agreed that there are issues involving the existing geoduck industry applicants; however, he assured that the Department is committed to providing leases and is addressing the issue "by offering sites where there are no standing stocks and that would certainly take care of the problem of common property." He furthered, "With issue of any standing stocks, their intent is to have an open access fishery, remove those stocks, and then have that site suitable for farming." He stated that the bill does attempt to address the testifier's concern regarding existing geoduck applicants. Senator Austerman stated that the concerns of the geoduck industry should be addressed; however, he stressed that this legislation should not be delayed as it encourages economic development in the State. Senator Austerman remarked that he and two other Committee members traveled to Chile to witness that country's aquatic farming operations, and he attested that the government of Chile aggressively supports the process. He stressed that this legislation is an attempt to get the State "moving in an aggressive manner" to stimulate economic development. Senator Green asked whether issues raised in a letter addressed to Senators and Representatives from Gary Zaugg, dated March 13, 2002 [copy on file] are similar to those raised by Mr. Fuhs. Co-Chair Kelly confirmed the concerns are the same. Senator Ward asked Mr. Fuhs how the concerns of the geoduck industry could be addressed. Mr. Fuhs clarified that except for the common property issue, the Department of Fish and Game has addressed other management concerns raised by the industry. He explained that the industry has proposed a plan to conduct an annual geoduck harvest involving no more that 20 percent of the existing resources and, as part of that plan, the wildstocks harvested would be required to be successfully transplanted. He continued that the harvested resource must be completely replaced before the next 20 percent could be harvested, and he attested, this plan contains the necessary safeguards to expand the industry. Senator Ward asked why this language is not included in the bill. Representative Scalzi responded that efforts were made to incorporate the industry's suggestions; however it was not included due to resistance from the Department of Fish and Game and the Department of Law regarding common property uses. Senator Ward opined that the Department of Law and the sponsor "have opted to let the Court" System rather than the Legislature determine what should be included in the bill. Representative Scalzi responded that the omitted language pertains "to an existing applicant, this is not something that is out there for anybody, this is specific to one or two parties so for those reasons, it is not. I believe the Department of Law says, [it is] specific to an individual; therefore, it is not constitutional where everybody has the same equal access to this proposal. My take on it, Senator, is that if we changed our law, which I would support to make it more like what we do with timber, you have a selected site of geoducks or little necks and you offer to have that for lease. I think that that would be consistent with what we do for timber; however, aquaculture and mariculture does not apply with our Constitution. Our Constitution does not apply the same standards to those species, so there would need [to be] a change according to the Department of Law." Co-Chair Donley asked which fiscal notes are applicable to the House Resources committee substitute. Senator Wilken identified the four corresponding fiscal notes by Department. AT EASE 11:07 AM /11:12 AM Senator Wilken continued to clarify the fiscal notes by Department and date. AT EASE 11:15 AM /11:16 AM Co-Chair Donley asked whether departments could absorb the expenses within their existing annual budgets. Representative Scalzi responded that some of the expenses are being covered through existing budgets, and he exampled that the Department of Environmental Conservation currently performs work that this bill would require, and therefore, it is included in the existing budgets. DOUG MECUM, Director, Division of Commercial Fisheries, Department of Fish and Game stated that the Department of Natural Resources is primarily involved in this bill; however, the Department of Fish and Game would incur additional expenses resulting from the projected intensive public process and the resource inventory process this bill would require. Co-Chair Donley asked whether funds were allotted when the original program was adopted. Mr. Mecum replied that the program was adopted more than twelve years ago, and since that time, the Department's budget has been reduced 30 percent. He surmised that there is "little likelihood" that additional monies were funded when the program was adopted. Co-Chair Donley identified that the Division of Commercial Fisheries fiscal note contains funds to employ scuba divers as well as a seasonal biologist to assess potential sites. Mr. Mecum stated that, although the original fiscal request was higher; the Department collaborated with the Shellfish Growers Association to have the Association absorb some of the workload, which allowed the request to be lowered to this level. He specified that $50,000 would be required to: conduct the dive surveys to identify whether soil at the sites are biologically suitable; to identify the types of standing stocks the areas support as well as the existing uses of an area in order to not conflict with existing aquatic life and land; and other traditional uses of the site. Co-Chair Donley asked for assurance that the project would be completed if funding were allotted. Mr. Mecum answered that the Department's obligations would be met. Representative Scalzi stated that the fiscal note includes lease revenue, but does not include the contributions to the general fund resulting from either the State Business Tax or the Raw Fish Tax. Representative Scalzi stressed that by dedicating this funding the Departments would be obligated to conduct the required work. Senator Wilken offered a motion to "report Committee Substitute for House Bill 208 (Resources) Version 'P' from Committee with individual recommendations and fiscal notes as set forth" in earlier discussion. There being no objections, CS HB 208(RES) was REPORTED from Committee with a new zero fiscal note dated February 28, 2002 from the Department of Environmental Conservation; a $98,300 fiscal note dated March 12, 2002 from the Department of Natural Resources; a $50,000 fiscal note dated April 21, 2002 from Division of Commercial Fisheries, Department of Fish and Game; and a previous $72,500 fiscal note dated March 5, 2002 from the Division of Habitat and Restoration, Department of Fish and Game.