HOUSE SPECIAL COMMITTEE ON FISHERIES March 20, 1995 6:10 p.m. MEMBERS PRESENT Representative Alan Austerman, Chairman Representative Kim Elton Representative Carl Moses, Vice-Chair MEMBERS ABSENT Representative Scott Ogan Representative Gary Davis COMMITTEE CALENDAR *HCR 12: Relating to management of the salmon fisheries of the upper Cook Inlet area. HEARD AND HELD SB 3: "An Act relating to an antitrust exemption for persons engaged in the fishing industry." PASSED OUT OF COMMITTEE (* First public hearing) WITNESS REGISTER REPRESENTATIVE BEVERLY MASEK Capitol Building, Room 418 Juneau, AK 99801 Phone: 465-2679 POSITION STATEMENT: Prime Sponsor of HCR 12 JERRY MCCUNE, PRESIDENT United Fishermen of Alaska 212 Fourth Street, Suite 112 Juneau, AK 99801 Phone: 586-2820 POSITION STATEMENT: Opposed HCR 12 ROSEMARY ALEXANDER, LEGISLATIVE AIDE to Senator Jim Duncan Capitol Building, Room 119 Juneau, AK 99801 Phone: 465-4766 POSITION STATEMENT: Provided sponsor testimony for SB 3 RICK LAUBER, LOBBYIST Pacific Seafood Processor Association 321 Highland Drive Juneau, AK 99801 Phone: 586-6366 POSITION STATEMENT: Supported SB 3 and offered amendment SCOTT MCALLISTER Southeast Seiners 820 Dixon Street Juneau, AK 99802 Phone: 463-5831 POSITION STATEMENT: Supported SB 3 DEAN PADDOCK Bristol Bay Driftnetters' Association P.O. Box 21951 Juneau, AK 99802 Phone: 463-4970 POSITION STATEMENT: Supported SB 3 PREVIOUS ACTION BILL: HCR 12 SHORT TITLE: UPPER COOK INLET SALMON FISHERIES MGN'T SPONSOR(S): REPRESENTATIVE(S) MASEK, Mulder JRN-DATE JRN-PG ACTION 02/22/95 447 (H) READ THE FIRST TIME - REFERRAL(S) 02/22/95 447 (H) FSH, RESOURCES 03/06/95 (H) FSH AT 05:00 PM CAPITOL 124 03/06/95 (H) MINUTE(FSH) 03/13/95 (H) FSH AT 05:00 PM CAPITOL 124 03/20/95 (H) FSH AT 05:00 PM CAPITOL 124 BILL: SB 3 SHORT TITLE: ANTITRUST EXEMPTION FOR FISHERMEN SPONSOR(S): SENATOR(S) DUNCAN, Zharoff, Hoffman, Taylor, Halford, Lincoln, Pearce, Donley,Salo,Leman; REPRESENTATIVE(S) Grussendorf, Ivan JRN-DATE JRN-PG ACTION 01/06/95 13 (S) PREFILE RELEASED - 1/6/95 01/16/95 13 (S) READ THE FIRST TIME - REFERRAL(S) 01/16/95 13 (S) RES, JUD 01/17/95 35 (S) COSPONSOR: ZHAROFF 01/25/95 (S) RES AT 03:30 PM BUTROVICH ROOM 205 01/25/95 (S) MINUTE(RES) 01/27/95 (S) RES AT 03:30 PM BUTROVICH ROOM 205 01/27/95 (S) MINUTE(RES) 02/01/95 133 (S) COSPONSOR: HOFFMAN 02/03/95 (S) RES AT 03:30 PM BUTROVICH ROOM 205 02/03/95 (S) MINUTE(RES) 02/06/95 180 (S) RES RPT 5DP 02/06/95 180 (S) ZERO FISCAL NOTE (LABOR #1) 02/22/95 (S) JUD AT 01:30 PM BELTZ ROOM 211 02/27/95 (S) JUD AT 01:30 PM BELTZ ROOM 211 02/27/95 (S) MINUTE(JUD) 02/28/95 417 (S) JUD RPT 3DP 2NR 02/28/95 417 (S) ZERO FN (LABOR #1) 02/28/95 425 (S) COSPONSOR(S): TAYLOR 03/02/95 (S) RLS AT 11:25 AM FAHRENKAMP ROOM 203 03/02/95 (S) MINUTE(RLS) 03/07/95 516 (S) RULES TO CALENDAR 3/7/95 03/07/95 521 (S) READ THE SECOND TIME 03/07/95 522 (S) COSPONSOR(S): HALFORD, LINCOLN, PEARCE, DONLEY, SALO, LEMAN 03/07/95 521 (S) ADVANCED TO THIRD READING UNAN CONSENT 03/07/95 522 (S) READ THE THIRD TIME SB 3 03/07/95 522 (S) PASSED Y18 E2 03/07/95 525 (S) TRANSMITTED TO (H) 03/08/95 632 (H) READ THE FIRST TIME - REFERRAL(S) 03/08/95 632 (H) FISHERIES, RESOURCES, JUDICIARY 03/08/95 666 (H) CROSS SPONSOR(S): GRUSSENDORF, IVAN 03/20/95 (H) FSH AT 05:00 PM CAPITOL 124 ACTION NARRATIVE TAPE 95-18, SIDE A Number 000 CHAIRMAN ALAN AUSTERMAN called the meeting to order at 6:10 p.m. and noted, for the record, Representatives Moses and Elton were in attendance and that a quorum was present. HFSH - 03/20/95 HCR 12 - UPPER COOK INLET SALMON FISHERIES MGN'T Number 022 REPRESENTATIVE BEVERLY MASEK, PRIME SPONSOR OF HCR 12, testified, "I am here before you today because a vital resource is in a crisis situation. I use the term 'vital' because there is a large economy built upon this resource. An economy which starts at the dinner table of Alaskan families and extends outward to those whose livelihood depends on a healthy resource. We can all agree there is a critical problem with king salmon in Upper Cook Inlet. We can all agree serious measures are needed to correct the problem. The sport fish users in my district are very upset. The people who bring fish home to their families are very upset. They are upset because this has happened. They are upset because they are losing fish and an important economy but they have all agreed to support the closures and reductions to save the resource. Mr. Chairman this resolution is asking the board to look very closely at this crisis, to determine what other measures may be necessary to build back as rapidly as possible, a threatened resource. I feel it is wrong to zero one user group out and let other user groups continue to take fish needed for escapement. It is wrong to cripple one economy and let another continue to fish if they are taking Susitna Bound Kings. If the Board has made a mistake with management do not make my constituents absorb all the damage. This resolution, this committee, can not solve this crisis. But it can act so the board is sent a clear message. A message to revisit this issue. To make sure everything is being done to assist the resource that can be done. A message to not let this happen again. If over harvest is the problem then do not let it happen again. If intercept fisheries are the problem do not let them continue. Finally, this resolution will hopefully help to get the Governor involved in the issue. My constituents back home are feeling neglected by this Administration. Imagine for a moment that these are your district businesses, livelihoods, and traditional family activities being zeroed out. Mr. Chairman, I ask this committee to assist me on behalf of the resource in bringing all parties to the table to accomplish this critical task. If the language of this resolution can be better drafted to accomplish this goal, I encourage you as chairman to use your prerogative to accomplish this. I do ask in the interest of time to expedite this resolution. We must request the board to act before any more kings are taken by anyone. We can work out allocation issues after the resource is healthy again. But now we must act. We must concentrate on the resource. I am not a biologist, not an expert on any of the details. I am however, fully committed to bring all those parties together. We must quit using outdated management plans which have little relevance to the problems we are facing today in the Northern Districts of Cook Inlet. Human populations have increased dramatically in Upper Cook Inlet over the last ten years, and yet the board still has not developed a new allocation plan for making allocation decisions. It is time for us to provide a serious nudge to those who allocate our resources. It is time we explain that the legislature, not the board has to ultimately accepted the blame if they, the board, fail. It is the legislature that confirms appointees and gives the board its authority and guidelines. Not the other way around. We are, whether we like it or not, where the fish buck stops." Number 137 CHAIRMAN AUSTERMAN brought forth a committee substitute for HCR 12. REPRESENTATIVE CARL MOSES moved that the CS be adopted. There were no objections. CHAIRMAN AUSTERMAN ascertained that the sponsor was familiar with the committee substitute adopted. REPRESENTATIVE MASEK indicated her familiarity and said, "As in my previous statement, I encourage you to do what you can to help bring the issues on the table and I support your CS." Number 178 JERRY MCCUNE, PRESIDENT, United Fishermen of Alaska, testified saying, "I've had a chance to read the CS and I appreciate some of the things that were changed in it but still our organization is opposed to this resolution and there are several reasons why. It's not for the good of the resource. We're always for the good of the resource and also for (solving) the problems in the Cook Inlet. Particularly one stock, we're talking one or two stocks, we're not talking all the stocks of Cook Inlet are in crisis. We've seen a lot of presentations, habitat presentations, everybody's view and Fish and Game's view and our policy at the UFA is to keep the legislature and the Governor out of the fish arena. This is the Board of Fish and the Department of Fish and Game's issue. A lot of these things are governed by this, Title 16, Alaska Statutes. In this book here are the guidelines for sustained yield, allocation plans in the different uses. I think, if I'm not mistaken, there are 4 or 5 different management plans on the Kenai River, all different stocks. So it's a complex problem and just to deal from one segment is very hard. I'm for the message of yes, the Department should do all they can, the users should do all they can and the state of Alaska should do all they can to make sure that the stocks are healthy. And that's under Title 16 that's the Department of Fish and Games mandate, the first thing is, sustained yield. So if there's a problem with sustained yield which we don't quite know yet because the way I understand it is this is the first year that the stocks have declined that far on the Deshka, king salmon. We also need the tools. And this gets back to all the budget talks that we've had around the state here and we see what's going to happen most likely to the Fish and Game budget here. We need these tools, weirs, index studies, not only in the Kenai, we need them around the other river systems." Number 231 REPRESENTATIVE ELTON said he appreciated the work that went into the committee substitute as it is more "palatable". He then added, "The problem that I've got is the resolves. We're resolving that we're going to spend more money. We're resolving that we're going to divert time and energy from an already stressed staff support system. I mean, where does that additional effort come from," and, "I know that we have interception problems elsewhere around the state, and frankly, what we're doing as a legislature, if we pass this, we're setting allocation priorities and that bothers me." CHAIRMAN AUSTERMAN agreed with Representative Elton. He said, "There is a priority problem as far as monies being allocated to Fish and Game for example because I think the resource, fish resource, in this state is so vast and so great, and the benefit to this state is so vast and so great as far as that resource is concerned that we are constantly cutting our own throat as far as the fisheries are concerned by under funding Fish and Game and their ability to research and figure out exactly what's happening with that resource. That's one reason I guess that I do favor the CS. Like you, this is more palatable than the original document because I had a little bit of a problem with that but at the same point in time, this doesn't necessarily delve into the allocation issue, I don't think, so much as it delves into more emphasis on taking care of that important resource. Whether the governor gets involved or not, we have to as a legislature spend more time paying attention to it and maybe put more funds into it." Number 288 REPRESENTATIVE ELTON agreed and said, "This is an allocation, one step removed. An example that I'll use is there is a proposal to cut the habitat division by a third which essentially means that we're going to be sending sportfish biologists and commercial fish biologists out to make determinations on what trees can be taken out of a stream set aside. There's a work group that was requested by the Board of Fish on the Kodiak-Cook Inlet situation that they just had. That further reduces the amount of staff resources that can be done. And if we then add this as a priority for the department, that further cuts it. So what we are doing, one step removed, is we are making an allocation decision and we're saying that these things are things that the legislature is mandating and because of that we're going to have less attention paid elsewhere. And I'm not so sure that we should be substituting the legislature's judgement on what need to be addressed first. I'm much more comfortable leaving that in the hands of the Board of Fish and the department than I am to the whims of the political winds." CHAIRMAN AUSTERMAN pointed out that lines 10 and 11, on page 2 of the CS, refers to a development of a "long-range management plan for the protection and sustainable yield of the salmon stocks of the upper Cook Inlet area." REPRESENTATIVE CARL MOSES said, "I do get concerned when (we) infer that somebody else is catching their fish. When I first served in the legislature 30 years ago, that was a big issue between Bristol Bay and False Pass and interestingly enough, since then Bristol Bay has had some major runs (that) broke all records. Apparently, it wasn't the False Pass fishery. Throughout the state we have the same problem, everybody's accusing their brothers of catching their fish." Number 365 CHAIRMAN AUSTERMAN asked if a motion was in order. There being no motion forthcoming, he tabled the CS for HCR 12. HFSH - 03/20/95 SB 3 - ANTITRUST EXEMPTION FOR FISHERMEN ROSEMARY ALEXANDER, Aide, Senator Jim Duncan, testified, "Senate Bill 3 will allow fishermen to form associations to collectively negotiate fish prices with processors. While this bill covers collective bargaining between fishermen and a processor, or a group of processors, it does not authorize processors to agree among themselves on the prices they will pay fishermen. Senator Duncan believes that a state antitrust exemption is a first step to stabilizing Alaska's fishing industry. This exemption applies only to state antitrust laws, it will also be necessary to gain Congressional approval for a federal exemption. But once the legislature has approved SB 3, the state, fishermen and processors would be in a better position to request a federal antitrust exemption. The attitude toward a federal exemption may be favorable now that Alaska's congressional delegation is in the majority. MS. ALEXANDER continued, "SB 3 also clarifies an ambiguity in state law, which does not expressly allow fishermen to market and sell their fish as a group. Currently state antitrust law only permits them to form associations to catch and prepare their fish for market. As you know, federal law expressly permits them to form associations to catch and prepare their fish for market. As you know, federal law expressly permits fishermen to collectively engage in more activities, including marketing their fish. The incongruities between current state and federal law make it possible for some fishermen's organizations to be in compliance with federal antitrust law, yet breaking state law, or be in compliance with state antitrust law and violating federal law. Passage of SB 3 will make state law consistent with federal law. During previous hearings on SB 3, CDFU testified that the inconsistency between state and federal law had become a real problem for some members. A state and the corresponding federal exemption were recommended in the 1993 Alaska Attorney General's Report on the Bristol Bay sockeye salmon industry. The fishing industry is Alaska's largest private employer, and contributes to the state's general fund. Collective bargaining between fishermen and processors will help stabilize commercial fishing prices, bolstering local and state economies. Stable raw fish prices will promote stable consumer prices for processed seafood products, which means greater sales of Alaska seafood." MS. ALEXANDER concluded, "SB 3 passed the Senate without opposition on March 7. It has a zero fiscal note. You will find letters of support in your packets from fishing organizations, the Department of Commerce and Economic Development, and the Department of Labor. The Pacific Seafood Processors Association also has testified in favor of the legislation. A similar bill was introduced last year with the complete support of the former Hickel Administration. It passed the Senate, but got caught in the final rush of legislation in the House and did not get to the House floor but it did have complete support from the former Hickel Administration as it does from the Knowles Administration." NUMBER 430 RICK LAUBER, LOBBYIST, Pacific Seafood Processors Association, testified, "We have had continuing problems, we in fish price negotiations, and I'm not going to attempt to mislead you that this bill standing as it does will resolve all those problems, but at least it will take care of some of the more, what I would consider ridiculous situations where fish processors and fishermen could not be in the same room when someone else for instance is discussing fish prices." He continued, "The major problem would still remain and that's the federal antitrust law but as I repeatedly said, this would be an excellent first step. You've got to start someplace. You've got to change both the state law and the federal law in order to do what this bill would attempt to do. Let me say again what Senator Duncan has said a number of times and it's very clear in the legislation and that is that this law, if there's a corresponding law passed by the federal government would still not allow processors to sit down and fix prices. There was a recent article by a major news service that reported on passage of this bill, I believe in the Senate, and they implied that that was the case. Nothing can be further from the truth. There is never going to be any law in the United States that would allow price fixing on the part of fishermen or processors." MR. LAUBER added, "In working with this bill last year and again, this year and having turned it over to attorneys to review. I apparently neglected a section of the bill is probably not going to be the end of the world but I am getting so much, not flack in the sense of anybody telling me that this is the end of the world but I hate to have anyone laugh at a piece of legislation and particularly one that I testified in favor of. I'm referring to on page two, line 12, the language for the rest of the sentence starting with '(2) minimum price that fish processors will accept for the sale of processed aquatic products'. What in effect this says, if you read (1) and (2) together, the fish processors and fishermen could talk about price paid for the fishermen for aquatic products and that, of course, is what we are attempting to do to be in discussions about that. But I have not been able to find anyone, either fishermen or processor that wants or thinks that processors and fishermen would ever agree as to the minimum price that fish processors will accept for the product when they sell the finish product. It would probably be almost an impossibility to reach such an agreement. I would compare this to a situation where the Ford Motor Company is negotiating wages with their employees and their employees are vitally interested in wages and working conditions but the employees to my knowledge have never attempted or requested to be able to dictate to the Ford Motor Company the price that they will sell each individual automobile and its various accessories on the open market. Or what each individual dealer would then sell for. It just is so ludicrous that no one would ever ask to do it. But yet that is in here. I guess one could counter and say, 'Well, if they will never do it, then what harm is done'. But it is beyond humorous. If this passes this way it will make a law of the state of Alaska a kind of a ridiculous document. I've discussed this with United Fishermen of Alaska and asked sincerely, is there any legitimate reason for this, is there someone that wants this for a valid purpose. Neither from UFA or anyone else has been able to tell me any valid reason, anything that this would do to help anything." CHAIRMAN AUSTERMAN asked if Mr. Lauber was requesting that that line be taken out. MS. ALEXANDER explained, "That particular line did come out of the Attorney General's recommendation to George Utermohle who wrote the legislation. I have talked to Legal Services about this and I have an opinion from Jim Forbes, the Assistant Attorney General in the Fair Business Practices Section of the Attorney General's Office," and, "Mr. Lauber raised this question to us. This should be something the processors would keep in consideration when they negotiate this particular section, they felt that this would be something that would help level the negotiation field, the playing field, if you will, between fishermen and processors. Senator Duncan is not here and whether or not we would want to amend this without him, I don't think would be the case. I guess I would appreciate it if you would consider talking to him about this particular section." Number 570 SCOTT MCALLISTER, Southeast Seiners, testified in support of SB 3, saying, "I think that this bill does potentially go a long way to level the playing field, so to speak, between the processors and the fishermen." He said, "Giving the fishermen the benefit of the wholesale arena where a fisherman with a processor or a group of processors, could essentially sit down and have a tremendous advantage in the marketplace enjoyed by very few in a free market except for a few primary producers and the farming industries that enjoy these antitrust exemptions as well, and together, to the benefit and advantage of both control volumes of product and be able to negotiate the wholesale level, prices to the advantage of the seafood industry as a whole." He concluded, "I support this bill, our organization supports this bill, in its current form. Without that particular wording, it puts us back where we have always been." Number 652 REPRESENTATIVE ELTON said, "It seems to me that you're inducing additional restriction that may be hard to live up to. It also seems to me, and again, this is partly my background speaking, you may be taking away a marketing capability. For example there may be a lot of value to selling into the school lunch program at a lower price than you might get if you hold your pack later. And that advantage would be that you're creating new eaters of the product. And it seems to me that you have the minimal price language that you may be taking away some of those opportunities. For example an opportunity to sell 200,000 cases into the school lunch program at less than an agreed upon minimum wholesale price. It seems to me we're complicating an awful lot." Number 672 MR. MCALLISTER said, "Well, we could be. These are ponderables. They're all what-ifs in a market place that is forever changes (indisc.), it has a life of its own. And pondering minimum price advantages or disadvantages into the future, are things that (indisc.) those prices will be there regardless." TAPE 95-18, SIDE B Number 016 DEAN PADDOCK, LOBBYIST, Bristol Bay Driftnetters Association and United Fishermen of Alaska, said, "Jerry McCune, because he wanted to go to a basketball game and because I'm a member of the Executive Committee of the UFA, authorized me to speak in behalf of the United Fishermen as well. We urge your support for this bill. The fishermen need all the help they can get. I think that this legislation should have been introduced many many years ago." He added, "This legislation should be motherhood and apple pie. I think it is and I'm sorry that some attorney somewhere saw fit to throw that clause in there. I don't think it adds a whole lot," and, "The deletion of the section mentioned by Mr. Lauber in my mind would not notably reduce the value or the importance of this bill or our support for it." Number 155 REPRESENTATIVE ELTON moved to pass SB 3 out of committee with individual recommendations proposing that the possible amendment could be addressed in House Resources, the next committee of referral. There was no opposition. CHAIRMAN AUSTERMAN adjourned the meeting at 7:04 p.m.