HB 115-AQUATIC FARMING & HATCHERY SITE LEASES  3:36:55 PM CHAIR REVAK announced the consideration of HOUSE BILL NO. 115 am "An Act relating to aquatic farming and hatchery site leases; and requiring the director of the division of lands to provide the legislature with an annual report relating to aquatic farming and hatchery site leases." 3:37:11 PM REPRESENTATIVE ANDI STORY, Alaska State Legislature, Juneau, Alaska, sponsor of HB 115, introduced the legislation paraphrasing the following sponsor statement: [Original punctuation provided.] House Bill 115 simplifies the Department of Natural Resources (DNR) lease renewal process for aquatic farms to support Alaska's aquaculture sector while reducing administrative overhead. Examples of aquatic farm products include oysters, kelp, and other shellfish. HB115 makes the aquatic farm lease renewal process consistent with the renewal process for other DNR leases such as agricultural grazing, cabins and lodges, fish processing docks, and hydroelectric facilities. HB 115 does not affect salmon hatchery leases. If enacted, HB115 would expedite the lease renewal process lowering the risk for businesses investment and reducing the workload of an overstretched state agency. Current statute requires DNR to approve both initial and renewal aquatic farm leases using the same process, called a "945 authorization" (referring to the adjudication process found in AS 38.05.945), which takes around 200 days. HB115 would allow aquatic farm or hatchery renewals to be renewed in the same manner as most DNR leases like those listed above. This optional process allows the Director of the Division of Mining, Land and Water to renew a lease for a business in good standing and takes around 90 days. Applied to aquatic businesses, this option significantly shortens the renewal process while continuing appropriate regulatory oversight and public engagement. HB115 also requires DNR to submit an initial report on the backlog of pending aquatic farm and hatchery site lease applications, estimate economic impacts of pending leases, and provide recommendations for streamlining the lease approval process. Subsequent annual reports would detail the application backlog and list the number of leases renewals that underwent the time-intensive lease renewal process. This bill makes clear ecotourism and educational use of sites is allowed, and explicitly prohibits DNR from charging additional fees for persons using, or traversing, land leased for aquatic farms and hatchery sites. I respectfully ask for your support in the passage of HB115 REPRESENTATIVE STORY advised that the House floor amendment specified that the required reports must be delivered electronically. She expressed appreciation for the efficient and cost-saving measure. She highlighted that DNR brought forward two issues after the bill passed the House, both of which are addressed in the proposed Senate committee substitute. She said her staff would present the proposed changes. 3:41:08 PM GREG SMITH, Staff, Representative Andi Story, Alaska State Legislature, Juneau, Alaska, explained that the issues DNR brought forward have to do with the term "ecotourism" and the prohibition of fees in subsection (h). Because ecotourism is not defined in statute the plain meaning is used, and that includes "tourism directed towards exotic or threatened natural environments." The concern was that aquatic farm sites may not be considered exotic or threatened and therefore the allowance in subsection (h) would not stick. The second change appears in the prohibition of fees section. The concern was that the previous language was too broad and would have prevented the department from charging fees for several things they currently charge for, including amendments or changes to leases, subleases, or transfers of leases. The CS narrows the prohibition on fees that the department can charge to not allowing fees for tourism enterprises or educational purposes. The sponsor understood that was the original intent when it was added in Senate Finance last year. He offered his understanding that people in the industry do not object to the proposed changes in version O. CHAIR REVAK asked for a motion to adopt the Senate CS. 3:43:12 PM SENATOR MICCICHE moved to adopt the work draft [Senate] CS for HB 115, work order 32-LS0299\O. 3:43:26 PM CHAIR REVAK found no objection and the Senate committee substitute, version O, was adopted. CHAIR REVAK announced invited testimony. 3:43:48 PM HEATHER MCCARTY, Chair, Alaska Mariculture Task Force (AMTF), Juneau, Alaska, stated strong support for the [Senate] CS for HB 115. She said AMTF believes this legislation is an important part of the larger plan to fully develop the mariculture industry in Alaska. AMTF also believes this industry can play an important role in Alaska's economic recovery from COVID-19, and HB 115 is central to realize that potential. MS. MCCARTY related that when the task force was created in 2016, Governor Walker appointed a wide range of stakeholders as members. In 2018 the task force completed the comprehensive Alaska Mariculture Development Plan that specifically focused on: education and outreach, science and research, marketing and processing, and regulatory and statutory changes that might be necessary to remove obstacles to the development of mariculture. Several DNR issues were identified in the process and HB 115 is the result of some of the findings in the strategic plan. By the end of 2019, the task force released a five-year action plan and that too recognized the need for both regulatory and statutory changes to remove obstacles to the development of mariculture. She highlighted that Governor Dunleavy continued the task force when he was elected because he shares the vision of the important role mariculture could play in the state. 3:47:02 PM MS. MCCARTY informed the committee that HB 115, including the [Senate] committee substitute, has broad stakeholder support as an important step in developing the mariculture industry. In summary, the bill will align the lease renewal process for aquatic farms and hatcheries to the renewal process for most other types of state leases. This will simplify and shorten the current process, reduce the workload on DNR staff, and provide added certainty for mariculture/aquaculture businesses. The simpler reporting requirements for DNR will allow the legislature to better track and understand the industry, and it establishes in statute that tourism and educational activities are allowed on aquatic farm and hatchery sites. CHAIR REVAK thanked her and requested her testimony in writing. MS. MCCARTY agreed to provide it. 3:48:45 PM ERIC WYATT, President, Alaska Shellfish Growers Association (ASGA), Tokeen Cove, Alaska, stated ASGA is primarily made up of oyster farms from Homer to Ketchikan. He related he was a longtime member of the Alaska Mariculture Task Force and the director of Oceans Alaska Science Center Shellfish Hatchery in Ketchikan. He has been aquatic farming for nearly 20 years, and as such has been involved in lease renewals, initial leases, and all types of lease modification. MR. WYATT described HB 115 as a worthwhile means to responsibly improve the aquatic farming lease program. On behalf of ASGA he stated support for HB 115 and encouraged the committee to pass it. CHAIR REVAK requested he submit his testimony in writing to sres@akleg.gov. 3:51:04 PM PAUL FUHS, representative, Alaska Long Neck Farms, Anchorage, Alaska, stated that for the last 15 years he has been a commercial diver in the Geoduck mariculture industry, and he holds a lease site near Ketchikan. He said HB 115 is a good bill, but it would be very helpful to the Geoduck industry if it were amended to accommodate the specific nature of the biology of geoducks. He explained that this large clam grows to a kilogram in size, reaches maturity approximately seven years after it is planted, and can sell for $20-$30 apiece, primarily in the Chinese markets. The issue is that once the lease is issued, DNR requires the commercial entity to sell $15,000 worth of product a year. This is not possible in the first seven years for Geoduck farms, and in later years there are a number of reasons a Geoduck would not be harvested. Some of these reasons are the farm may have paralytic shellfish poisoning, there may be a trade war with China, and COVID-19. Fortunately, the biology of geoducks does not require annual harvesting. If a geoduck is not harvested one year, it is left in the ground to get larger. He noted these large clams live up to 150 years. MR. FUHS said the DNR lease requirement is a major impediment to investment because failure to sell $15,000 of product a year is grounds for lease revocation. The department has said this requirement would be selectively enforced, but that is not sufficient assurance for some investors. He said Alaska Long Neck Farms requests the committee amend HB 115 to say proof of the use of the lease is the planting of the Geoduck seed, not the arbitrary dollar amount of sales. 3:55:11 PM MR. FUHS described a separate issue that leases can only be renewed once, and again requested the committee amend the bill as he previously described. CHAIR REVAK asked Ms. Colles to respond to Mr. Fuhs' request for an amendment to bind the lease to planting the Geoduck seed. 3:57:22 PM CHRISTY COLLES, Chief of Operations, Division of Mining, Land, and Water, Department of Natural Resources, Anchorage, Alaska, acknowledged the regulations were out of date and said, "It is something that we recognize needs to be addressed when we redo our regulations." She noted both that current regulations allow the department to account for factors that might cause a farmer to fail to sell their product, and that the department has not denied or revoked any leases based on the inability to meet the commercial use requirement. 3:58:41 PM SENATOR VON IMHOF asked when the department expects to review those regulations. MS. COLLES estimated it would be another year before the department started to work on aquatic farm regulations. SENATOR VON IMHOF asked if the regulations address the issue of just one lease renewal. MS. COLLES replied, HB 115 would allow renewal for an additional term without repeating the initial process that involves a best interest finding, public comment, and a decision. After that, a second decision process would be necessary. SENATOR VON IMHOF summarized her understanding of what the bill would provide in terms of a lease renewal and that after 20 years Mr. Fuhs would need make a new application and potentially pay $40,000. She asked if that was correct. MS. COLLES answered no; Mr. Fuhs would not need to do the survey or appraisal unless he wanted to pursue a lease with a term longer than 10 years. The statute allows the department to issue leases for up to 55 years, but after 10 years an appraisal is required for that lease. She added, "He would have to reapply after he got another renewal; we would have to adjudicate and if he wanted to remain at a 10-year lease he would not be required to get a survey or an appraisal." 4:01:31 PM SENATOR VON IMHOF asked if a leaseholder could be fairly confident they could get three 10-year lease renewals in a row, thereby avoiding the need for an appraisal and the other requirements. MS. COLLES answered that is correct; the leaseholder can continue to request the lease be renewed after 10 years and they would not be required to pay the fees. Furthermore, as long as the leaseholder is not in default and the lease is found to be in the best interest of the state, the department could renew the lease for any number of terms. There is a decision process at the end of the first renewal of similar term to allow the public to comment and perhaps cause the department to decide to go in a different direction. However, she said that has not happened in the 15 years she has been in her current position. 4:02:46 PM SENATOR VON IMHOF asked if the department allows bidding wars. MS. COLLES answered no. There could be a competing application, but that has not happened for an aquatic farm. 4:03:18 PM SENATOR KIEHL noted that Section 4 removes the ability for the commissioner to deny an application to renew a lease for good cause. He asked if the department retains that ability elsewhere in the statute. MS. COLLES answered yes; the department has the ability to review the lease and case file to ensure it is in good standing, and a renewal may be denied for good cause. DNR may also choose to not renew a lease through the expedited process if there is reason to believe a full review and decision process is necessary. At the end of this process there is always the ability for the farmer or public to appeal. 4:05:00 PM CHAIR REVAK asked Mr. Fuhs to work with the sponsor. He announced he would hold HB 115 in committee.