CSHB(FIN) 218-PRIVATE HATCHERY COST RECOVERY FISHERIES    CHAIR WAGONER announced HB 218 to be up for consideration. IAN FISK, staff to Representative Bill Thomas, presented the bill on behalf of the sponsor and clarified that the committee was working from Version R that passed the House. He explained that HB 218 addresses the way hatcheries recover costs. Under the current system a hatchery takes bids from processors for recovery of the anticipated return and allocates a certain percentage of the harvest as cost recovery. The percentage varies from hatchery to hatchery. The intent of the bill is to maximize the benefit to the user groups and so HB 218 creates a system whereby the hatchery operator has the option of collecting the cost recovery through a fishery that is open to all fishermen who hold permits to harvest fish in the hatchery area. MR. FISK explained that for a hatchery to be able to recover its costs through a common property fishery there would have to be an assessment on the fish that are harvested specifically in the cost recovery area. That terminal harvest area is typically located directly in front of a hatchery or remote release site. The Board of Fisheries or the commissioner of Alaska Department of Fish and Game (ADF&G) sets the boundaries. The language in the bill establishes an assessment between 1 and 40 percent of the value of the fish. The proceeds would be recovered in a manner similar to the salmon enhancement tax. The hatcheries would not collect the tax. MR. FISK emphasized that this is optional and the sponsor would not support making it mandatory. He has worked with hatchery operators to reach a comfort zone and is willing to continue doing so. 4:11:39 PM CHAIR WAGONER stated he intended to hold the bill until Friday. 4:12:18 PM SENATOR STEDMAN said he had a meeting on the bill earlier today and the version that was discussed wasn't Version R. He appreciated the additional time to consider the bill because that alone has created confusion. CHAIR WAGONER said a suggested CS came out of the sponsor's office, but there would be a Senate Resource Committee CS presented on Friday. MR. FISK commented, "The version that we've been working on reflects a lot of the changes that have been worked on in the Interim... We've just tried to address some of the hatcheries' concerns." There is nothing in it that is drastically different. He noted that he had a list of the changes that have been made as the bill moved through the process to accommodate concerns and the idea is to work with the hatcheries to keep it optional. SENATOR BEN STEVENS asked if Version B is the work draft. MR. FISK said Version B is a work draft that reflects changes made in response to hatchery concerns. Those changes are not in Version R. CHAIR WAGONER clarified that Version B was discussed in the meeting Senator Stedman mentioned. CHAIR WAGONER opened public testimony. 4:15:23 PM KEVIN MCDOUGALL, President, Northern Southeast Regional Aquaculture Association (NSRAA) Board of Directors, said cost recovery is a difficult issue but HB 218 is a knee-jerk reaction to low returns. The NSRAA Board is open to ways to deal with this issue and has decided it will not oppose the bill but the fact remains that it does have reservations about it. He urged the committee to review the documents that NSRAA has submitted before making a decision on the legislation. [Abbreviated testimony due to audio difficulties.] 4:20:05 PM DIANE PLATT, Cordova District Fishermen United (CDFU), stated support for HB 218. CDFU believes that many fishermen support the effort to get away from existing processor practices and this is a good starting point. 4:20:51 PM ERIC JORDAN, Sitka commercial fisherman, said HB 218 needs further consideration, but he applauds the direction because there is a problem with the current cost recovery. There was a fundamental error when cost recovery was established because there was no intention to pay for it through the common property fishery. He said that HB 218 is going in the right direction, but the details require work. He suggested a change on page 2, lines 7-10 and said it would be a good idea to appoint a task force to look at the problem of cost recovery not going to a common property fishery. 4:26:40 PM SENATOR ELTON explained that component of the bill is telling the Board of Fisheries it can adopt regulations regarding a fisheries management plan that includes allocation plans, but doesn't preclude anything else. He said it might make sense to use the language that's there and do it through the Board of Fisheries process rather than micromanaging the regulations in statute. He asked Mr. Jordan to respond. MR. JORDAN said he agreed with concept, but the more specific guidance the legislature provides as to intent the better. This is a big issue, he said, and we need to rethink the terminal harvest or special harvest areas if we're going to conduct these types of fisheries for all gear groups. 4:28:43 PM DEBRA LYONS, Secretary/Treasurer, NSRAA Board of Directors, asked the committee not to not pass HB 219 until more work is done. She noted that the fiscal notes state zero and the Department of Revenue fiscal note comments say the bill doesn't authorize it to enforce assessments. She asked when the enforcement would occur if nothing is budgeted to enforce the language in the bill. A further comment states that a successful program needs regular staffing yet nothing is budgeted for that. As a member of the NSRAA board, she is interested in preserving flexibility to respond to changes during the season. If this were to pass, she understands that NSRAA would be bound to a common property fishery at the assessment established for the year regardless of the strength of the return. This would be particularly problematic in years in which the anticipated return was stronger than what materialized. The bill has further inflexibility in that it would bind NSRAA's ability to fund operating reserves to 100 percent and it doesn't allow the board flexibility in setting financial policies and in making financial decisions. A further concern relates to risk. A worst-case scenario is that the NSRAA Board and the fishermen agree, in good faith, to participate in the common property fishery, but when the season comes along the fishermen choose not to participate. NSRAA would have no fish taken for cost recovery and would have nothing in place with buyers to conduct a tradition cost recovery fishery on such short notice. MS. LYONS referenced subsection (d) on page 2 and suggested changing the wording to, "The Department of Revenue will set the assessment based on the recommendation of the board of directors of the affected hatchery." She said she didn't understand the difference between this assessment and a tax and why it can be adopted without a vote of the fishermen. MS. LYONS said there is little understanding of NSRAA's strategic plans to diversify their cost recovery fishery over time to allow more Chinook and Coho to be harvested and reduce the burden on the Chum fishery. She suggested that other alternatives could be explored. Perhaps the sport fishery could contribute something toward NSRAA's operation and the aquaculture tax could be increased a little. That combined with relying on other species for revenue would be a preferred solution to HB 218. She reiterated her request to hold the bill. 4:36:19 PM DAN CASTLE, President, Southeast Alaska Seiners Association (SEAS), said a vast majority of the SEAS membership accepts the idea of doing something different with cost recovery in Southeast Alaska. Cost recovery programs have evolved and are required to take an increasing amount of hatchery return and the benefit is spreading to the fishermen. SEAS would like to see the returns pass through the fish holds of the fishermen that are making a living from fishing. This would strengthen the relationship that individual fishermen have with processors. MR. CASTLE emphasized that the language in the bill is permissive and reiterated supported for HB 218. 4:39:03 PM BRUCE WALLACE, commercial fisherman from Ketchikan, said SB 218 is just a tool. The cost recovery program is not working and change needs to occur. He agreed with Senator Elton that micromanaging cost recovery through statute probably isn't the answer and the decisions are probably better left to the Board of Fisheries. Since the language is permissive and doesn't mandate that NSRAA or any non-profit use the tool, he suggested it is an appropriate vehicle to expand the toolkit. He urged the committee to support HB 218. 4:41:21 PM JERRY McCUNE, United Fishermen of Alaska, stated support for HB 218. He thanked the sponsor for accommodating the hatcheries' concerns. Referencing page 2, line 10, he noted that the Board of Fisheries already has the authority to review allocation plans among user groups of hatchery stocks and to close a fishery if a run is weak and isn't sufficient for cost recovery or to get the brood stock. All this bill does is let fishermen come to an agreement with a hatchery to be able to take fish under common property and sell them to the processor so the fishermen have access and aren't sitting around waiting for the hatchery to do the common property harvest. With regard to subsection (b) he said the attorney general advised that it has to be in the bill; it is part of existing statute. 4:44:49 PM BOB THORSTENSON, Executive Director, Southeast Alaska Seiners Association (SEAS), referenced Ms. Lyons' concern regarding an assessment fishery without a vote of the fishermen and reminded her that the current cost recovery is without a vote of the fishermen. He said if SEAS members were polled, they would overwhelmingly vote to eliminate cost recovery. Furthermore, he said, SEAS fishermen are willing to pay to cover the cost recovery goals in Southeast, but they don't want to put those costs on the back of other gear groups. Regarding the suggestion for a task force, he said that approach has been tried for many years and HB 218 is partially the result of a task force. Under this legislation the people who catch the fish would pay the tax. "We're willing to pay the tax so we can have our boats working and not have just a few people catching all the fish and one processor processing all the fish," he said. SEAS believes it has to be in statute and that paying the tax is the responsible thing to do. 4:47:46 PM MITCH EIDE, Petersburg, Board Member, Southeast Alaska Seiners Association, asked the committee to support HB 218 because it will give fishermen access to more fish through the common property fishery. CHAIR WAGONER closed public hearing and held HB 218 in committee to allow time to prepare a committee substitute.