HB 20-FISHERIES LOANS:ENERGY EFFICIENCY/AMOUNT    4:08:29 PM CHAIR WIELECHOWSKI announced HB 20 to be the next order of business to come before the committee [CSHB 20(FIN) was before the committee]. SENATOR STEVENS asked Tim Clark to comment on eliminating the prohibition on people who have had loans in the past. TIM CLARK, staff to Representative Edgmon, said in the past a prohibition prevented anyone who has ever had a loan under subsection A from becoming a borrower under subsection B. HB 20 eliminates that prohibition if the loan is for improving energy efficiency of the vessel or operation. SENATOR STEVENS asked if the balance that a fisherman can owe according to the loan has changed. MR. CLARK replied that the limits set in each program, A and B, would remain the same. However, the total amount that a single borrower can have outstanding from the combination of Program A and Program B would increase from $300,000 to $400,000. SENATOR STEVENS thinks that is a major improvement. 4:11:53 PM SENATOR STEDMAN said he is concerned the parameters are too broad and suggested targeting engines should be more specific. He thought some discussion should take place on what should be targeted. GREG WINEGAR, Director, Division of Investments, said the division had the authority, under Section B, to make a loan for improving a vessel and went through a regulatory process to provide a lower interest rate for an engine. In the last year or so, the industry has suggested other types of improvements could qualify such as certain types of hulls or generators that are far more efficient. Some early testimony suggested that expanding the language could be beneficial. SENATOR STEDMAN asked if engines, but not generators, were classified as qualifying in regulations. MR. WINEGAR replied that is correct under Section B currently; when the regulation was put in place engines were targeted. Money can be borrowed for the other things, such as generators, but the loan for a more efficient engine has a lower interest rate. 4:14:37 PM SENATOR STEDMAN asked if any engine qualifies in terms of energy efficiency. MR. WINEGAR said the engine must be more energy efficient. The Division compares the efficiency rating of the engine being purchased versus the engine being replaced. In almost every case it is a "pretty substantial difference" because newer engines are much more efficient. SENATOR STEDMAN asked what the increase in efficiency is. MR. WINEGAR answered that the efficiency increase is generally in the 20 to 30 percent range with some as high as 40 percent. He said the current regulation is under 3 AAC 80.055.02 [Alaska Administrative Code, Title 3, Chapter 80, Section 55] and reads "for 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." He explained a set percentage does not have to be met. SENATOR STEDMAN asked about comparing engines. For example: If an 8 year old Caterpillar was going to be replaced with a new Caterpillar, does the Division look at the original consumption specs from 8 years ago for the old Caterpillar engine or the current consumption with wear and tear. MR. WINEGAR replied that the Division does compare the specs of the engine being replaced with the newer engine and gets input from the borrower. SENATOR STEDMAN asked if the specs used for comparisons are from the 8 year old engine when it was new. MR. WINEGAR replied that is correct. 4:17:03 PM SENATOR STEDMAN said he is still concerned that HB 20 is too broad. He asked what the lending capacity is. MR. WINEGAR answered the fund itself will have a balance of about $30 million at the end of the fiscal year. He said the annual volume runs between $10 and $14 million. SENATOR STEDMAN said some language exists adding another subsection on upgrading vessels and gear for the purposes of improving energy efficiency with a minimum 5 percent reduction. He felt that was extremely low. He said he understood going from a two stroke to a four stroke with a fuel consumption spread of 20 to 40 percent improvement, for example, but suggested HB 20 could allow any hull improvement or engine change to qualify. MR. WINEGAR said he did not have an amendment in front of him. He said he has no objection to some sort of limit and he is not fixed on a certain percentage. He said the engine comparisons the Division has looked at have been much higher than 5 percent. He said he would defer to HB 20's sponsor but he has no objection to inserting some criteria. He said that would be a policy call by the Legislature. 4:19:09 PM SENATOR STEVENS asked what the savings might be with the lower interest rate. MR. WINEGAR said the rate is prime minus 2 percent with a floor of 3 percent. Right now, it would mean the difference between a 3 percent loan and a 5.5 percent loan because of the 3 percent floor at this time. CHAIR WIELECHOWSKI said this was the second day HB 20 was before the committee and it has another referral to finance. He stated he would like to get an amendment or move HB 20 out of committee. SENATOR STEVENS moved to report HB 20 from committee with individual recommendations and accompanying fiscal notes. There were no objections and CSHB 20(FIN) moved from the Senate Resources Standing Committee.