SB 255-FISH PROCESSOR FEES, LICENSES, RECORDS  4:21:41 PM CO-CHAIR WIELECHOWSKI announced SB 255 to be up for consideration. 4:22:29 PM TIM BENINTENDI, staff to Senator Olson, sponsor of SB 255, explained that a program is already in place whereby the National Marine Fishery Service provides loans to groups formed for the purpose of reducing fleet capacity by engaging in permit buy-backs. The Southeast Revitalization Association (SRA) is engaged in such an arrangement and operates with a self-imposed 3 percent fee on fish sales from those remaining permit holders. He said this fee is the basis for repaying federal loans and any new fish buyer must agree to collect and remit the fee upon entering the fishery. SB 255 authorizes the Alaska Department of Fish and Game (ADF&G) and the Commercial Fishery Entry Commission (CFEC) to provide individual fish ticket data to the National Marine Fishery Service (NMFS) that will support monitoring the loan program by allowing them to confirm that the assessments are correct and have been paid. SB 255 is supported by the CFEC, several fisheries groups and it also has a zero fiscal note. SENATOR STEDMAN asked if anyone opposed the bill. MR. BENINTENDI answered that he hadn't heard of any opposition. The Pacific Seafood Processors Association (PSPA) had an issue once, but an arrangement has been worked out in terms of the draft letter of intent, which the sponsor supports. 4:24:14 PM CO-CHAIR WIELECHOWSKI noted the letter of intent that had just come to them. MR. BENINTENDI explained that there was a difference of opinion on a peripheral issue, and it came through by virtue of this bill into a discussion. The letter of intent is a product of the resolution. CO-CHAIR WIELECHOWSKI said it is proposed by the seiners and processors, but nothing had been formalized. SENATOR HUGGINS asked if the administration supports this bill. MR. BENINTENDI answered yes. 4:25:52 PM ROB ZUANICH, Manager, Southeast Revitalization Association (SRA), said he represents the 180 Southeast purse seine limited entry permit holders for the salmon fishery. He provided testimony entitled "The Long Road to Implementing a Consolidation Program for the Southeast Purse Seine Salmon Fishery." He said the genesis of this concept came up in the Salmon Legislative Task Force at the same time the salmon production credit came up. In 2002 the legislature allowed associations to be formed to consolidate permits, and in 2004 the SRA was created for that purpose. In 2005, they went to Congress to specifically amend the Magnuson Stevens Act to give them access to a federal loan program to finance this consolidation plan. In 2006 Congress appropriated money to guarantee the loan; in 2008 this legislature appropriated $3 million in grants to allow the first phase of this program to go forward. In 2009, they had this bill that the NMFS says is required before they can finance the loan before them. MR. ZUANICH said the loan program provides that permit holders can voluntarily decide to sell their permit and submit a bid for a dollar amount that they wish to sell it for. If they submit a bid, they sign a contract agreeing to relinquish their permit if it is accepted. The bids will be submitted to a certified public accountant that will rank them and report the results. The SRA will then look at those bids and if they are satisfied, that is the basis to go forward with the consolidation plan. They submit it to the NMFS. The NMFS would then conduct a referendum of the permit holders to see whether they are willing to go along with the plan. If a majority approves it, the plan will be implemented. The plan will also require that only a minimum of 260 permits will remain in the fishery after this program is implemented. SENATOR STEDMAN asked of the potential permits that will be retired how many are held by Alaskans. MR. ZUANICH answered that a majority of the permits to be retired will be owned by non-residents. In phase 1 of the program 31 of the 35 permits retired were of non-residents. So, they believe it will stabilize and "Alaskan-ize" the purse seine fishery. 4:29:55 PM SENATOR STEDMAN asked why 260 was the number of permits selected as the number to remain. MR. ZUANICH replied, "I guess it was your back room brokered agreement between the Southeast Seiners Association and the affected seafood processors." Their concern was that the program could go too far and there would be too few fishermen to harvest the available salmon to supply their plants. They are trying to show that past large catches have been when 209 and 213 permits were fished; so they are satisfied that the 260 threshold is more than adequate. SENATOR WAGONER said the biologists have the ability to adjust the catch with openings and number of days fished. 4:30:55 PM BOB THORSTENSON, Executive Director, Southeast Alaska Seiners Association (SASA), supported SB 255. He said the number of 260 permits was carefully chosen by his members. It will be good for long term stability of the industry for both investments in the processing sector and the fishery. It will be good for young fishermen, because it allows more permits than are currently fished. Also buying into the fishery now would cost $500,000 to $1 million knowing that twice as many boats won't be coming up in the future is reassuring for that kind of investment. He said they really appreciate the support the legislature has given them. This bill is really a simple accounting procedure, but it is a very important nexus to the federal loan program. This is the first state waters fishery that has been able to access a federal loan program. His members have polled 77-86 percent in favor of this program over the last 20 years; and the processing sector is either for it or neutral. SENATOR HUGGINS asked the geographical boundaries of the bill. MR. THORSTENSON replied that the bill applies to any limited entry fishery in Alaska. He is attempting to apply it to SO1A, the Southeast Alaska Purse Seine. SENATOR HUGGINS asked what the numbers of the fisheries were in the state a decade ago. MR. THORSTENSON replied that his constituents fish in Southeast Alaska and that is the reason there is an emphasis on Southeast. They are the only ones who have used the 2002 legislation (HB 286) to organize and proceed with the federally funded buy back. About 22 percent of the permits have already been retired through grant money. This is the final closing document for paying the loan. SENATOR STEDMAN wanted the geographic breakdown of the 212 permits that were fished in 2008 along with the 168 that weren't fished. MR. THORSTENSON responded that he could get that information for them. 4:36:38 PM FRANK HOHMAN, Commissioner, Commercial Fisheries Entry Commission (CFEC), said their packets had a one-page statistical breakdown of the fleets for the last 12 years. It had a breakdown of resident and non-resident figures. In 2008 of the 212 that fished 113 were resident and 90 were non-resident. Of the 168 that did not fish, 55 percent were non-residents and 44 percent were residents. Looking back over the statistics, a majority of not fished permits have been owned by non-residents. CO-CHAIR WIELECHOWSKI asked if the administration supports this. MR. HOHMAN said that every administration since 2002 has worked to resolve this issue. SENATOR HUGGINS asked what affect reducing the number of permits to 260 would have on the value of the permits. MR. HOHMAN replied that the tendency would be for them to become more valuable, but the main emphasis behind the program was to enhance economic return to the participants. 4:43:18 PM SENATOR STEDMAN said he had heard that the state might help some of the smaller villages in buying entry permits to help them regain the fishing fleets that they used to have. He asked if the state would be able to issue additional permits in the future or would it have to buy some of the 260 permits and spread those around. MR. HOHMAN answered that the way the Limited Entry Law is structured, only an individual could hold an entry permit; villages can't. But the state has two loan programs - the Division of Investments and the Commercial Fishing and Agriculture Bank - that have the ability to loan for permits in any field. In this program specifically, the permits would be retired permanently. The state couldn't reissue them. The state would always maintain its responsibility for managing the fishery and if the situation - either through conservation or management or economics - changed in the future, the state would always have the ability to put more permits back into any fishery, but that would be done through a complicated process involving an optimum number study. 4:46:24 PM JOE PLESHA, General Counsel, Trident Seafoods, supported SB 255 with the understanding that the SESA has agreed that 260 permits will be available at the end of this process. He said Trident has seafood processing facilities in Ketchikan, Petersburg and Wrangell; they have spent millions of dollars in the last few years increasing capacity as well as value-added product forms that are produced from pink salmon. As a result of those efforts and efforts and those of other processors, the market for pink salmon is very healthy and permit values are as high now as they were in the mid-1990s. He said Trident was concerned that they didn't know the scope of this program and if too many permits were bought back it wouldn't allow for processors to achieve their daily production capacities through their plants. They believe 260 permits will allow for them to attain financial stability as well as for the Seiners Association. 4:47:47 PM MARK PALMER, President, Ocean Beauty Seafoods, supported SB 255. He said it is important to consider investments that have been made in the production facilities in the shore-based communities they exist in. The number of 260 permits ensures their long term viability as well as their ability to grow and meet the needs of the markets they are in today. 4:48:33 PM CO-CHAIR WIELECHOWSKI closed public testimony and set SB 255 aside.