SENATE BILL NO. 315 "An Act relating to the administration of commercial fishing entry permit buy-back programs." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Wilken stated that this legislation "relates to the limited entry fishing permit buy-back program" in that it would allow the commercial Fisheries Entry Commission "to front fund a buy-back program if the money is available." Senator B. Stevens, the bill's sponsor, reported that this bill "is the product of the Joint Legislative Salmon Industry Task Force." He noted that the bill would alter statutes to allow the Commercial Fisheries Entry Commission to implement "a loaded buy-back permit" program were money available. He shared that current statutes allow for a fishery levy to be assessed, and, upon completion of an optimum number study for the permits in that fishery, a permit buy- back could occur. Continuing, he explained that this legislation would provide money to accelerate the buy-back process. The funds provided by this legislation, he noted, could be paid back via multiple options including an assessment of the remaining permit holders. He stressed that while this legislation would maintain the requirement that an optimum number study be conducted, it would provide a funding mechanism to quicker implement a buy-back if one were to occur. He pointed out that the legislation has no fiscal impact as it is "just a management tool" to allow a quicker process. Senator Hoffman asked the status of the optimum number of fisheries permit studies. FRANK HOMAN, Commissioner, Commercial Fisheries Entry Commission, Department of Fish and Game, responded that two or three optimum number studies have been completed and one is currently being conducted in the Bristol Bay region fishery. He declared that these studies are very extensive, involve a lot of manpower, and therefore require a long time to conduct. He stated that due to the difficulty in managing these studies, one study is conducted at a time. He assured that a study would be required were a buy-back in a fishery desired. Co-Chair Wilken asked whether the funds involved in this legislation would be general funds or federal funds. Senator B. Stevens responded that numerous funding options could be available, including federal funding. He noted that while it is not the issue with this legislation, other federally funded buy-backs that have occurred in the State primarily involved fisheries in which there were depleted stock assessments. Other funding options, he continued, could be in the form of a federal loan or grant; however, he opined that a federal loan would be the more likely because this legislation would address "an economically distressed region rather than a biologically distressed region." He stated that no funding source has been identified at this time as this legislation is just an option that the task force desired to have in place where a buy-back situation to occur. Co-Chair Wilken asked for verification that this legislation is the result of Salmon Task Force efforts. Senator B. Stevens confirmed. He stated that the Commercial Fisheries Entry Commission brought the concept to the Salmon Task Force which then brought the idea forward. Co-Chair Green asked for further information regarding the current buy-back program as she noted that the bill analysis indicates that the current buy-back program structure would be maintained. Senator B. Stevens explained that the current program requires an optimum number study to be conducted before a buy-back program is implemented. In addition, he noted that the Limited Fisheries Entry Commission has the authority to assess a seven percent "up-front" assessment on "the permit holder based on their value." He stated that the assessment is coordinated with the permit holders annual permit re-application. Continuing, he shared that the assumption is that the assessed funds would accumulate and allow for permits to be purchased in order to reduce the number of permits in the fishery. However, he stated, the issue is that to collect the amount of funds required would take a long time. Therefore, he stated that the purpose of this legislation is to provide upfront funds, make the assessments, and reimburse the fund later. Mr. Homan concurred. Senator B. Stevens stated that currently the program must be sufficiently funded, through the assessment process, before the buy-back program could occur. Co-Chair Green understood therefore that in a situation in which there is the desire to buy-back permits in a fishery, the process would be required to wait until sufficient funds accumulate to support it. Senator B. Stevens concurred. Co-Chair Green concluded therefore, that the program is currently a fishery self-assessment program with the Commercial Fisheries Entry Commission managing the funds that are assessed and collected. Senator B. Stevens replied that the funds could result from a self- assessment, a grant, or a loan for instance from the National Marine Fisheries fishing vessel obligation guarantee. Co-Chair Green asked for confirmation that these options are currently available. Senator B. Stevens confirmed that they are. Senator Olson asked how the optimum numbers study "relates" to studies conducted by the Board of Fish for the State's fishing regions; specifically Area M. Senator B. Stevens responded that he is unsure of how the optimum number study would relate to a situation wherein there is an allocation conflict between various regions. He stated that the optimum number study is unique to a fishery and is a gauge for determining the economic output, the number of participants, and the number of sustainable participants in the future. Mr. Homan stated that while he is unsure how the optimum numbers study would relate to regions such as Area M, the Bristol Bay optimum study survey, for instance, would review historical catch records on the resources, as well as the economic value of the fisheries and the number of vessels required to catch that resource overtime. Then, he continued, the information would be used to project into the future to estimate the resource and economic return to the fisherman in that district. He stated that a complicated series of questions are used to calculate such things as the minimal number of vessels that would be required to catch the resource over the next twenty years once the number of the resource is determined, as well as how many permits would be required to provide an economic return to the fishermen in that district. He commented that the historical record of the area would be affected by factors such as whether an area, like Area M might be open or closed to fishing. Senator Olson noted that decisions regarding areas such as Area M are affected by Administrative and Board of Fisheries changes. Mr. Homan assured that the optimum numbers survey is a long-range study that could encompass twenty or more years. He voiced uncertainty as to how a single event, like that occurring in Area M, would impact the study overtime. Senator B. Stevens stressed that an optimum number study, which is the process that determines the economic capacity of a fishery in a region, must be conducted before a buy-back program could be implemented. He clarified that a buy-back program would not apply to the entire industry of a region, but would be limited to a certain percentage of that fishery's participants in order to reduce the number to economically sustain and stabilize its participants. He clarified that the purpose of the buy-back is not to eliminate the fishery within the region, but is rather to ensure that the participants desiring to remain in that fishery could be more economically sustained and "the capacity able to endure the swings in the market volatility into the future." He reiterated that the self-assessment program is simply a measure to allow those who wish to remain in the industry more stability in the future. Senator Hoffman, noting the "reasonable costs to be offset by the Department" language located in Section 1, page one, lines 13 and 14 that pertains to the expenses of managing the program, asked whether a definition or percentage estimation is provided to clarify what the costs of managing the program might be. Mr. Homan responded that the costs have not been established at this time, as he stated, these expenses would be addressed during the planning of the buy-back program. Continuing, he noted that this planning and the level of the assessment must adhere to State regulations. Senator Dyson stated, for the record, that he has divested himself of his investments in this area, and therefore, he has no conflict of interest regarding this legislation. Continuing, he characterized government efforts to manage the economic component of fisheries as "well-intended and wide of the mark and quite ineffective." He speculated that, in the long run, a review of fishery resource management practices would "indicate that the limited entry program was a bad idea," and that the industry and its participants have been "masked from the price signals" that should have been an indicator of the economics of the fisheries. He stated that this legislation would "help extricate fishermen from bad or sub-optimal government interference." He stated that he would support this legislation, and that he "personally" feels that government "does very badly in its efforts to manage virtually every enterprise." He voiced the hope that government would learn from this experience and refrain from getting involved in the future. Co-Chair Wilken inquired regarding the authority through which the Commission would be authorized "to incur debt" for the program as specified in Section 1, page two, line one. Mr. Homan clarified that the Commission could not incur a debt and that any appropriation to the Limited Fisheries Entry Commission must be advanced by the Legislature. Co-Chair Green understood therefore that even were this legislation adopted, the Legislature would be involved in the process. Mr. Homan affirmed. Senator B. Stevens moved to report the bill from Committee with individual recommendations and accompanying fiscal note. There being no objection, SB 315 was REPORTED from Committee with zero fiscal note #1 from the Department of Fish and Game.