HB 20-FISHERIES LOANS:ENERGY EFFICIENCY/AMOUNT  4:13:43 PM CO-CHAIR WIELECHOWSKI announced HB 20 to be up for consideration. [CSHB 20(FIN) was before the committee.] 4:14:03 PM TIM CLARK, staff to Representative Edgmon, sponsor of HB 20, explained that the current loan fund has six loan programs. They are divided into subsections in statute and indicated by letters A through F. This bill addresses, for the most part, only changes in how the programs in subsections A and B are administered. He explained that section A loans are for up to $300,000 for entry permits and existing vessel and gear upgrades to improve seafood quality. Section B loans can be up to $100,000 and be used for entry permits, vessel and gear upgrades for nearly any purpose including energy efficiency, vessel and gear purchases and new vessel construction; section C loans are for purchasing quota shares; section D loans are to help satisfy past due federal tax obligations; section E loans are to purchase quota shares by a community quota entity; and section F loans are for existing tender vessel and gear improvements relating to seafood quality. 4:16:47 PM MR. CLARK said in 2008 the Division of Investments promoted a program under subsection B that made loans for the purposes of improvements for energy efficiency on existing vessels and gear. Because it is so successful, they want to make the program available to a larger number of people in the fishing industry. So, HB 20 adds improving energy efficiency to the purposes for which the A loans can be made and eliminates a prohibition for a borrower who has never had a loan out under subsection A from applying for a subsequent loan in the subsection B program. But it is only eliminated if the purpose of the B loan is specifically for improving energy efficiency. MR. CLARK said the other amendment raises the total allowable balance outstanding on loans to an individual who has both A and B loans from $300,000 to $400,000 - recognizing the increased cost for a lot of their equipment. He reported that overall programs under the loan fund have a cap of $400,000 for total outstanding debt and this increase does not change that total. SB 104 has an immediate effective date. 4:19:47 PM SENATOR STEVENS said it looks like these loans go to only Alaskans, but at the beginning of the commercial fishing loan summary it says "predominantly resident fisheries" and he wanted to know what that meant. MR. CLARK answered that no loans under the fund are available to non-residents. SENATOR STEVENS said he absolutely supports this program. SENATOR WAGONER explained that some vessels are home ported in Alaska and also fish in Alaska, but he also knew of one Alaskan who fished the herring fishery in San Francisco. 4:21:41 PM SENATOR HUGGINS said some guys live in Senator Wagoner's area who do halibut charters and he asked where they would fall in the definition of commercial. 4:22:45 PM SENATOR STEDMAN joined the committee. MR. CLARK replied that these commercial fishing loan fund programs would not be open to sport fish and charter operations. He has been told that those loans are also administered through the Division of Investments. 4:22:57 PM CO-CHAIR WIELECHOWSKI asked if "energy efficiency" has been defined. MR. CLARK replied that the division has successfully written regulations that ensure the loans go for the proper purpose. 4:23:53 PM GREG WINEGAR, Director, Division of Investments, Department of Commerce, Community & Economic Development (DCCED), said he administers the commercial fishing revolving loan fund that would be amended by HB 20. He said the program has been around since the early 70s and its purpose is to create a predominantly resident fishery. It does that by making loans to Alaskan residents (of two years). This fund has been very successful from both policy and fiscal standpoints and it has been totally self sufficient for many years. The bill allows both sections A and B borrowers to obtain a low interest loan to upgrade vessels to improve energy efficiency. In most cases they are talking about a more fuel efficient engine. He said that this would help increase fishermen's profitability and it has the added benefit of helping the environment by lowering the industry's carbon footprint. The fiscal note indicates an uptick in loan demand and the fund has sufficient capital to handle that. SENATOR STEDMAN asked if this would encourage instate development of fisheries. He asked how this bill would "help bring home our permits out of Washington." MR. WINEGAR replied that the overall intent is to create a "predominantly resident fishery." This will help a larger portion of the Alaskan fleet obtain low interest loans to put in more energy efficient engines, which would lower their operating costs. It helps the whole industry by lowering its carbon footprint. CO-CHAIR WIELECHOWSKI asked if it is constitutional to limit loans to residents. Had it been tested? MR. WINEGAR replied yes it had been tested. At one time the program had a five-year residency requirement, but that ran into constitutional issues. The legislature made a change some years ago and dropped it down to two years, which has not been tested in court. It was felt at the time that two years was justifiable because the fishing industry is a fairly mobile industry and people move around quite a bit back and forth, as Senator Wagoner mentioned. SENATOR STEDMAN asked if hand trollers would qualify too. MR. WINEGAR answered yes. SENATOR STEDMAN asked if the boat has to have a percentage of its business in the hand troll business or does one just have to own a hand toll license and land a couple of fish to qualify. MR. WINEGAR answered that the boat could qualify under both sections A and B. Under section A they would have had to fish three of the past five years including the preceding season. Section B criteria is a little different; you basically have to be in an area that doesn't have any other occupational opportunities other than fishing or you have to have had 25 percent of your income over the past two years from commercial fishing. 4:28:48 PM JERRY MCCUNE, United Fishermen of Alaska (UFA), said he wholeheartedly supported HB 20. New engines that create less emissions have been designed, he said, which are wonderful, but he has just found out that he can't use his outdrives, because of the back pressure. So he has to buy all new engines which will cost around $50,000. A lot of that will be going on with other fishermen. He said this will help everyone across the state, especially the little guys who can get new outboards that put out fewer emissions. Everyone is going to have to repower some time. New EPA rules are also coming out. SENATOR WAGONER asked which fisheries are excluded from this program. MR. MCCUNE said he didn't know of any fishery that had been excluded. 4:31:48 PM JASON BRUNE, Executive Director, Resource Development Council (RDC), supported HB 20. He said the RDC is comprised of individuals and companies from all the major sectors of Alaska's economy including the fisheries. Its purpose is to link these diverse interests together to encourage a strong diversified private sector in Alaska. He said that Alaskans have been struggling with high energy costs for the last several years and fuel costs and usage have escalated as fishermen are required to go further out for their catch due to impacts from endangered species listing, critical habitat designations, marine protection areas and fish movement. Opportunities to improve energy efficiency through state loans are important not only for the pocketbooks of the fishermen who harvest over half of our nation's total catch, but also for the communities in which they live and, of course, for the environment. Increased efficiency will likely lead to lower costs and ultimately decreased carbon emissions. MR. BRUNE noted that this bill has bipartisan support on the House side, with both the Majority and Minority signing on as co-sponsors. It makes good sense and he urged its expeditious passage. CO-CHAIR WIELECHOWSKI closed public testimony. 4:34:02 PM SENATOR HUGGINS said the cruise ship industry has standards for discharges and other things. He asked if it said somewhere what an upgrade really is. 4:35:39 PM MR. WINEGAR answered that 3 AAC 80.0550 has fairly general language that says "an engine efficiency upgrade an applicant must establish to the satisfaction of the department that the upgrade to be financed with the loan will reduce emissions or improve fuel productivity." Significant savings have been seen in the loans they have done so far. SENATOR HUGGINS said this is a great idea; he has listened to a number of people in the Kenai being irritated by the fact that you can use "X" engine for certain periods of time and "Y" in others; they have other equipment made in various parts of the world, but for loaning money he wanted some degree of comfort that what they are doing makes sense. MR. WINEGAR said they look at each loan on an individual basis and ask the borrower to demonstrate what the savings will be. They also look at the literature on the engines as part of the evaluation process. SENATOR HUGGINS asked if he takes out the loan and makes the modification, then decides to move to Seattle, does the loan get modified. MR. WINEGAR replied that the division doesn't have the legal ability to call the loan, because of constitutional issues, but if a person needs an extension on the loan and is still a resident, they have the legal ability to put the interest into a non-accruing account. If the borrower is no longer a resident that interest can be added to the balance like a bank loan. 4:38:41 PM SENATOR HUGGINS asked what happens if he sells the boat. MR. WINEGAR replied that the division takes a security position in the vessel, so he would be required to pay off the loan. 4:39:47 PM CO-CHAIR WIELECHOWSKI thanked everyone for their testimony and finding no further business to come before the committee, he adjourned the meeting at 4:40 p.m.