Legislature(2019 - 2020)GRUENBERG 120

04/23/2019 10:00 AM FISHERIES

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 116 AQUATIC FARM/HATCHERY SITE LEASES TELECONFERENCED
Heard & Held
-- Testimony <Invited & Public> --
*+ HR 8 2019: INT'L YEAR OF THE SALMON TELECONFERENCED
Moved HR 8 Out of Committee
-- Testimony <Invited & Public> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
            HB 116-AQUATIC FARM/HATCHERY SITE LEASES                                                                        
                                                                                                                                
10:04:10 AM                                                                                                                   
                                                                                                                                
CHAIR STUTES announced  that the first order of  business would be                                                              
SPONSOR SUBSTITUTE  FOR HOUSE  BILL NO. 116,  "An Act  relating to                                                              
the renewal  or extension of site  leases for aquatic  farming and                                                              
aquatic plant and shellfish hatchery operations."                                                                               
                                                                                                                                
10:04:14 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  ANDI STORY, Alaska  State Legislature,  introduced                                                              
SSHB 116  as the sponsor.   She said  SSHB 116 would  simplify the                                                              
Department  of   Natural  Resources  (DNR)  renewal   process  for                                                              
aquatic farms  that grow such things  as oysters, kelp,  and other                                                              
shellfish.   If enacted,  the bill would  help small  Alaska based                                                              
aquaculture   businesses   succeed  by   reducing   administrative                                                              
burdens and  expediting the  lease renewal  process.   Aquaculture                                                              
is  an  industry with  a  lot  of  promise  and Alaska  with  more                                                              
coastline  than  all  the  other  states  combined  has  bountiful                                                              
potential  as a  site  for aquatic  farms  of  oysters, kelp,  and                                                              
other shellfish.   The  Alaska Mariculture Task  Force set  a goal                                                              
of making this a $100 million industry in the next 20 years.                                                                    
                                                                                                                                
REPRESENTATIVE  STORY drew  attention  to the  flow  chart in  the                                                              
committee packet  and noted  that the  requirements to  permit and                                                              
receive  regulatory  approval  to   operate  an  aquatic  farm  or                                                              
related  hatchery are  complex.   She said the  most rigorous  and                                                              
time-consuming  portion  of  the   approval  process  is  the  DNR                                                              
aquatic farming  site lease  for both the  original lease  and the                                                              
lease renewal.   Because of the  recent increase in the  number of                                                              
aquaculture farm lease  applications - one for a  new aquatic farm                                                              
in 2016,  17 in 2017, and  16 in 2018    coupled with  recent cuts                                                              
to agency  staff, it  now takes  on average 18  months or  more to                                                              
approve an  aquatic farm lease.   Simplifying the  renewal process                                                              
for  aquatic  farm leases  would  reduce  the burden  on  division                                                              
staff,   allowing  them   more  time   to  focus   on  new   lease                                                              
applications.                                                                                                                   
                                                                                                                                
REPRESENTATIVE  STORY  pointed  out  that an  aquatic  farm  lease                                                              
renewal must  undergo the  same lengthy  approval process  similar                                                              
to an  original lease.   This  is not  required of numerous  other                                                              
DNR  lease types,  and  SSHB 116  would  align  the lease  renewal                                                              
process for aquatic  farms to the lease renewal  process for other                                                              
DNR leases.   This  change would  significantly shorten  the first                                                              
renewal  process  while  still   allowing  appropriate  regulatory                                                              
oversight,  public  engagement,   and  appeal  of  any  DNR  lease                                                              
decision.   She emphasized  that the bill  does not  affect leases                                                              
for salmon hatcheries.                                                                                                          
                                                                                                                                
REPRESENTATIVE  STORY  stated that  as  a  new legislator  she  is                                                              
pleased  with  how  SSHB  116 began  and  how  it  was  developed.                                                              
Shortly after  taking office  she was  contacted by a  constituent                                                              
who was in  the process of  transferring an aquatic farm  lease, a                                                              
process that would  not be affected by SSHB 116.   The constituent                                                              
shared  the   experience  of  the   lease  transfer   process  and                                                              
suggested  a few  possible  changes  that might  help  applicants.                                                              
After subsequent  conversations with DNR, DNR staff  mentioned the                                                              
streamlining  of  the  aquatic  farm  renewal  process  to  reduce                                                              
regulatory burden  on applicants  while also reducing  workload on                                                              
an understaffed  state  agency.   She said her  staff person,  Mr.                                                              
Greg Smith, is  available to explain the four  proposed changes to                                                              
the statute included in the bill.                                                                                               
                                                                                                                                
10:08:20 AM                                                                                                                   
                                                                                                                                
CHAIR  STUTES  requested  the  sponsor   to  explain  the  changes                                                              
between the root version of the bill and the sponsor substitute.                                                                
                                                                                                                                
REPRESENTATIVE  STORY  replied that  the  only  change  is in  the                                                              
title.   She explained  that after talking  with people  about the                                                              
bill, she  wanted to  make it  very clear  what the bill  affected                                                              
and that it did not affect salmon hatcheries.                                                                                   
                                                                                                                                
REPRESENTATIVE  VANCE observed  that time  for public comment  and                                                              
testimony is  provided for  an initial lease.   She  asked whether                                                              
public  comment would  still be  taken under  the renewal  process                                                              
proposed by SSHB 116.                                                                                                           
                                                                                                                                
REPRESENTATIVE STORY  responded yes and  deferred to Mr.  Smith to                                                              
elaborate.                                                                                                                      
                                                                                                                                
10:09:21 AM                                                                                                                   
                                                                                                                                
GREG  SMITH,  Staff,  Representative   Andi  Story,  Alaska  State                                                              
Legislature,   on  behalf   of   Representative  Story,   sponsor,                                                              
explained there  would still  be public  notice and public  appeal                                                              
during the  renewal process.   He said  someone who  is personally                                                              
affected  would be  able  to reach  out to  the  director and  the                                                              
commissioner to request a review or an appeal of the decision.                                                                  
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS requested  a review  of the  bill's                                                              
mechanics.                                                                                                                      
                                                                                                                                
MR. SMITH  explained Section 1  of SSHB 116, Version  31-LS0696\U,                                                              
would  add  AS  [38.05.083],  the   section  of  law  specific  to                                                              
aquaculture   farm   and   related    hatchery   leases,   to   AS                                                              
[38.05.070(e)],  which is the  subsection empowering  the director                                                              
to renew a lease  under this section.  Section 2  would remove the                                                              
words  "or renew" from  two places  so that  those sections  would                                                              
then focus  on the requirements  of only a new  lease application.                                                              
Section  3  would  do  the same  thing  of  removing  the  renewal                                                              
process  from  AS  38.05.083(b).    Section 4  would  [add  a  new                                                              
subsection]  that explicitly  states the  commissioner may,  under                                                              
AS 38.05.070(e)-(g),  extend or renew a lease  under AS 38.05.083,                                                              
which is the aquaculture farm and related hatcheries section.                                                                   
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS referenced  a letter in  support of                                                              
the  bill  from   the  Alaska  Fisheries   Development  Foundation                                                              
(AFDF), dated 4/15/19.   He observed that page 2,  paragraph 2, of                                                              
the  letter states  the bill  would allow  for one  renewal of  an                                                              
aquatic farm  site through  a simpler  internal process  that does                                                              
not   require  public   comment   [if  the   lease   is  in   good                                                              
standing/compliance].    He  inquired whether  that  is  basically                                                              
what this bill does.                                                                                                            
                                                                                                                                
MR. SMITH  responded  yes, it aligns  the renewal  process  for an                                                              
aquatic  farm or  related hatchery  lease  to a  process that  DNR                                                              
follows for many  other types of leases that  the department does,                                                              
such  as hydroelectric  facilities, fish  processing docks,  power                                                              
lines,  telecommunication  sites,  grazing,  cabins,  hunting  and                                                              
fishing lodges, and other uses.                                                                                                 
                                                                                                                                
10:13:12 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS   further  observed  that  page  2,                                                              
paragraph  2,  of AFDF's  letter  of  support  goes on  to  state,                                                              
"However,  the  second  renewal  would still  be  required  to  go                                                              
through the  extended process similar  to a new application."   He                                                              
asked whether  there is a  section of law  that would  provide for                                                              
that more exhaustive  process with the second renewal  that is not                                                              
excerpted in SSHB 116.                                                                                                          
                                                                                                                                
MR.  SMITH answered  that the  language  not being  changed in  AS                                                              
38.05.070(e)  can be  seen  on page  1, lines  8-9,  of the  bill,                                                              
which state  that the lease may  be renewed only once  [for a term                                                              
not longer  than the initial term  of the lease].  For  the second                                                              
attempt  at  a  renewal  the applicant  would  have  to  again  go                                                              
through the original  lease application process.  So,  if the bill                                                              
were to pass,  the original lease  for an aquatic farm  would have                                                              
a  more exhaustive  process,  less  so on  the  renewal, and  then                                                              
after  a period  of 20 years  total there  would  again be a  very                                                              
exhaustive process for the third period.                                                                                        
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS said  this  information is  helpful                                                              
and he  will read  that section  of law  to become more  familiar.                                                              
He commented that  he has heard from across Southeast  Alaska that                                                              
it is a  royal headache getting  these leases and trying  to get a                                                              
site  up and  running  even  when a  person  has the  capital  and                                                              
energy to  do it.   He stated he  is glad  to see the  bill coming                                                              
forward and  inquired whether there  are other things  that should                                                              
be done to make this easier.                                                                                                    
                                                                                                                                
REPRESENTATIVE  STORY replied there  have been other  suggestions,                                                              
but it was thought that this was a good place to start.                                                                         
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS  suggested  to the  committee  that                                                              
there might  be a receptive audience  to doing even more  if there                                                              
are other "cut and  dry changes" that could be added.   He said he                                                              
has his  differences with  this governor, but  he thinks  there is                                                              
probably alignment in streamlining things as much as possible.                                                                  
                                                                                                                                
10:16:21 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  VANCE said  it  seems like  this  is a  regulatory                                                              
issue  that  the department  could  do  internally to  reduce  the                                                              
regulation.   But, she  continued, it seems  the bill  would clear                                                              
up  a statutory  obligation  that  would clean  up  the process  a                                                              
little  to allow  [aquaculture farm  owners] to  get that  renewal                                                              
quicker and easier.                                                                                                             
                                                                                                                                
REPRESENTATIVE  STORY  responded  yes  and  related  that  through                                                              
conversation DNR  suggested that  simplifying the renewal  process                                                              
would be one thing that could be done for those exact reasons.                                                                  
                                                                                                                                
10:17:05 AM                                                                                                                   
                                                                                                                                
CHAIR  STUTES  asked  what  the  length of  time  is  between  the                                                              
inception  of  starting   a  shellfish  farm  and   producing  and                                                              
generating revenue from that farm.                                                                                              
                                                                                                                                
REPRESENTATIVE  STORY answered  that the  process has been  taking                                                              
18 months,  but there are people  online who have been  living and                                                              
breathing this  and could  answer the question.   She  deferred to                                                              
Mr. Smith to answer further.                                                                                                    
                                                                                                                                
MR. SMITH suggested it might be better to have DNR clarify.                                                                     
                                                                                                                                
CHAIR STUTES  specified she  is talking about  the length  of time                                                              
between  deciding to  have an aquatic  or shellfish  farm  and the                                                              
time  where that  product is  taken to  market.   She invited  Ms.                                                              
Julie Decker to respond.                                                                                                        
                                                                                                                                
10:18:43 AM                                                                                                                   
                                                                                                                                
JULIE  DECKER, Chair,  Alaska  Mariculture  Task Force;  Executive                                                              
Director, Alaska  Fisheries Development  Foundation, replied  that                                                              
as far as  revenue production once  a lease is issued  it can take                                                              
one year for seaweed,  an annual crop; seven to eight  years for a                                                              
species like  geoducks, a longer  lived animal; and three  to four                                                              
years for  oysters.  That  time span, she  pointed out,  is before                                                              
the initial  $1 is  generated.   There is  much investment  and it                                                              
will take even longer before the farm operator is in the black.                                                                 
                                                                                                                                
CHAIR STUTES opened invited testimony.                                                                                          
                                                                                                                                
10:19:40 AM                                                                                                                   
                                                                                                                                
META  MESDAG, Owner,  Salty Lady  Seafood  Company; Board  Member,                                                              
Alaska Shellfish  Growers  Association, on  behalf of herself  and                                                              
the association,  provided  invited testimony  in support  of SSHB                                                              
116.   She said she  has a farm  site in  Juneau with a  lease for                                                              
oysters, kelp,  and geoduck, and  for which she submitted  a lease                                                              
transfer  last year.   She currently  has oysters  and is  getting                                                              
ready to  seed geoduck.  The  oysters will take about  three years                                                              
to  grow before  they are  ready for  the market  and the  geoduck                                                              
will take seven.   Unfortunately, she only has five  years left on                                                              
her  lease so  will not  see any  revenue from  her geoduck  sales                                                              
before she  must go  through the renewal  process all  over again.                                                              
The intention  with her  very small  family farm  in Juneau  is to                                                              
grow  food for  the community.   Ms.  Mesdag said  SSHB 116  would                                                              
allow DNR  to renew a  lease one time so  people like her  who are                                                              
in good standing  have an opportunity to actually  earn revenue at                                                              
the farm  site.  The  bill means  a lot to  her and her  family as                                                              
well as to the other growers in the state.                                                                                      
                                                                                                                                
10:21:25 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE   KREISS-TOMKINS  offered   his  belief   that  Ms.                                                              
Mesdag's  husband   is  the  lobbyist,   so  to  speak,   that  he                                                              
previously spoke  with.  He thanked  Ms. Mesdag for  her testimony                                                              
and  for being  in the  vanguard  of mariculture  in  Alaska.   He                                                              
inquired  whether  there are  statutory  changes  on Ms.  Mesdag's                                                              
wish list  beyond what is presently  in the bill that  are onerous                                                              
or don't create value.                                                                                                          
                                                                                                                                
MS. MESDAG  responded that  the bill  is a  great place  to start.                                                              
She said another  change that has been talked  about is regulatory                                                              
and is  about changing  the lease terms.   To get  that done  is a                                                              
bit more  tedious, so this approach  was taken first as  the place                                                              
to  start  that would  alleviate  some  of  the burden  on  people                                                              
looking to  invest in the  industry as  well as the  agencies that                                                              
must  regulate it.   During  that  period new  businesses are  not                                                              
being  put to  work.   A lot  of people  are lined  up waiting  to                                                              
start with  capital in line  and the gumption  to do this,  but it                                                              
is  going to  take them  up to  two  years before  they see  their                                                              
lease  and  then they  start  the  build-out  process.   It  takes                                                              
people with vision.   She isn't exactly sure  what other statutory                                                              
changes could  be made to  help the process,  but she  knows there                                                              
is  room for  improvement.   There needs  to be  due process,  she                                                              
advised,  when  talking  about tideland  leases.    She  suggested                                                              
looking to DNR for ways that would help the department.                                                                         
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS said  he  realizes that  regulatory                                                              
changes  are outside  the scope  but asked  what those  regulatory                                                              
changes are.                                                                                                                    
                                                                                                                                
MS. MESDAG answered  it would be the duration of  the lease terms,                                                              
changing it  from a 10-year lease  to match the other  DNR leases,                                                              
which are  20-25 years  on average  for a  tideland lease  or land                                                              
leases.  This  congruence for mariculture is desirable  because of                                                              
the length  of time  that it  takes to  have a marketable  product                                                              
and  before farmers  start seeing  any  revenue, and  this is  not                                                              
even talking about profit.                                                                                                      
                                                                                                                                
10:23:51 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE   VANCE   referenced  the   goal   of  the   Alaska                                                              
Mariculture  Task Force  to grow  a  $100 million  industry in  20                                                              
years.   She asked  Ms. Mesdag  to speak  to how  much capital  it                                                              
takes to start this  type of venture and the amount  of capital it                                                              
takes each year.                                                                                                                
                                                                                                                                
MS.  MESDAG replied  her small  family farm  has half  an acre  of                                                              
oysters  and half  an acre  of geoducks.   She  will be  investing                                                              
upwards of  $150,000 with the  hope of  making an income  of about                                                              
$70,000  a year  working full  time with  her kids.   She and  her                                                              
husband want to  provide their kids with an opportunity  unique to                                                              
Alaska  where they  can grow  up as  part of  the family  business                                                              
working outside.   As a  micro-scale farm,  she is not  looking at                                                              
making hundreds  of thousands of  dollars; rather, she  is looking                                                              
at making  a livable  wage that  provides intrinsic  value  to her                                                              
family.                                                                                                                         
                                                                                                                                
REPRESENTATIVE VANCE  offered her  understanding that it  is labor                                                              
intensive  and that  the $70,000  would not be  just Ms.  Mesdag's                                                              
wage, but her  entire family's wage.  Given the  contribution that                                                              
aquaculture makes to  Alaska, she said it makes sense  to ease the                                                              
regulatory  and  statutory  burden   and  she  sees  SSHB  116  as                                                              
necessary for all aquaculture farmers.                                                                                          
                                                                                                                                
10:26:52 AM                                                                                                                   
                                                                                                                                
MS.  DECKER  on   behalf  of  the  Alaska   Fisheries  Development                                                              
Foundation  (AFDF) and  the Alaska  Mariculture  Task Force  (MTF)                                                              
provided invited  testimony in support  of SSHB 116.   She related                                                              
that members  of AFDF  comprise  a broad spectrum  of the  seafood                                                              
industry and  the board of  directors is comprised  of harvesters,                                                              
processors,  and support  sector  businesses  from across  Alaska.                                                              
Founded  in 1978,  AFDF's  mission  is to  identify  opportunities                                                              
common  to the  Alaska  seafood  industry and  develop  efficient,                                                              
sustainable  outcomes  that  provide   benefits  to  the  economy,                                                              
environment, and communities.                                                                                                   
                                                                                                                                
MS. DECKER stated  that the mariculture initiative  is spearheaded                                                              
by AFDF  and grew  into the  Alaska Mariculture  Task Force.   She                                                              
drew attention  to the  2018 Alaska  Mariculture Development  Plan                                                              
included in  the committee packet, which  has a goal of  growing a                                                              
$100 million  industry in  20 years.   A result  of MTF's  work is                                                              
increased interest  by the  private sector  in aquatic  farming in                                                              
Alaska.   This has  led to  a backlog  of lease applications  with                                                              
DNR and SSHB 116 would help alleviate some of that backlog.                                                                     
                                                                                                                                
MS. DECKER  explained the bill was  yet to be written  at the time                                                              
of  MTF's last  meeting, but  attendees  did conceptually  discuss                                                              
what is contained  in SSHB 116 plus had thorough  discussions with                                                              
DNR.   Conceptually  MTF agrees  with  SSHB 116  as a  piece of  a                                                              
broader solution  to reduce  the backlog and  focus DNR's  time on                                                              
new permit applications so those folks can get up and running.                                                                  
                                                                                                                                
MS. DECKER  noted that  another possible  change discussed  by MTF                                                              
and DNR was potentially  changing the lease term from  10 years to                                                              
20 years.  She  offered her understanding that this  could be done                                                              
via regulation  but  that it also  has broader  impacts, which  is                                                              
why [MTF]  has not  yet moved  this forward.   Going  to a  longer                                                              
lease term  automatically kicks  in DNR's  requirement for  a site                                                              
survey, but  surveys on the  water in some  of these  remote areas                                                              
might be  expensive and  would also  slow down  the process.   So,                                                              
given  the  possible  complications,   the  easiest  and  simplest                                                              
solutions were started with first and this bill is that.                                                                        
                                                                                                                                
MS.  DECKER  said SSHB  116  would  reduce  the workload  for  DNR                                                              
staff;  prioritize   DNR  staff  time   on  the  new   farm  lease                                                              
applications, which  would help grow  the industry; and  give more                                                              
certainty  to farmers  who have  invested  in site  infrastructure                                                              
for those  first  10 years.   She pointed  out that  DNR has  many                                                              
other leases  that are anywhere from  20 to 50 years in  terms, so                                                              
this would remain a very conservative leasing program.                                                                          
                                                                                                                                
10:31:41 AM                                                                                                                   
                                                                                                                                
CHAIR STUTES inquired  whether Paula Cullenberg is  still involved                                                              
in the Alaska Mariculture Task Force.                                                                                           
                                                                                                                                
MS.  DECKER replied  no, Ms.  Cullenberg has  retired from  Alaska                                                              
Sea  Grant and  Heather Brandon  is now  the director  and on  the                                                              
task force.                                                                                                                     
                                                                                                                                
CHAIR STUTES  [closed invited  testimony] on  SSHB 116  and opened                                                              
public testimony.                                                                                                               
                                                                                                                                
10:32:24 AM                                                                                                                   
                                                                                                                                
MARGO  REVEIL, President,  Alaska  Shellfish Growers  Association,                                                              
testified in  support of SSHB 116.   She said it is  a modest bill                                                              
that  would bring  the aquaculture  lease process  more into  line                                                              
with other leases.   Her farm is one of 13 in Kachemak  Bay and is                                                              
coming up  for its second renewal  because she bought  an existing                                                              
farm   that  had   already  been   through   the  first   renewal.                                                              
Therefore, the bill  would not directly impact her  farm except in                                                              
that it might free  up the staff time and allow  more effort to be                                                              
put into  the building  of a stronger  blue economy  and achieving                                                              
economic diversification  of Alaska.   As well, she would  like to                                                              
see DNR putting more effort into running the program.                                                                           
                                                                                                                                
10:33:42 AM                                                                                                                   
                                                                                                                                
TAMSEN  PEEPLES,  Alaska  Mariculture   Manager,  Blue  Evolution,                                                              
testified  in support  of SSHB  116.   She stated  the bill  would                                                              
improve the permitting  and leasing process.  Blue  Evolution, she                                                              
related,  has  worked  closely  over  the  last  four  years  with                                                              
independent farmers  across Alaska to pioneering  and establishing                                                              
commercial seaweed  mariculture in  a sustainable and  responsible                                                              
fashion.   Over this time  Blue Evolution has witnessed  firsthand                                                              
the challenges and  frustration of this entire  permitting process                                                              
and has  seen the direct  impact that this  glacial pace  can have                                                              
on individual farms  and the entire industry.   There is currently                                                              
a large amount of  interest in the industry.  She  has talked with                                                              
several  individuals  who are  prospective  kelp  farmers and  the                                                              
inability to bring  farms online quickly is a huge  issue and most                                                              
likely  will  hamstring  further  development and  growth  of  the                                                              
industry.   Changing  and improving  the entire  lease process  is                                                              
paramount for  this industry  to grow, and  the hope is  that this                                                              
amendment will lighten the load for DNR.                                                                                        
                                                                                                                                
MS. PEEPLES  strongly urged  the committee  to consider  that farm                                                              
size is not  accounted for in the  bill.  She reported  that there                                                              
have been multiple  100-plus acre farms applied  for and approved,                                                              
some of  which are scheduled  to begin  operation this fall.   The                                                              
impacts of  these farms are  unknown, and  it can only  be assumed                                                              
that larger  farms will  have larger  impacts on the  environment,                                                              
the ecosystem,  and communities,  but to  what degree  is unknown.                                                              
Currently  there are  no additional  state  regulations for  these                                                              
larger farms  and Blue Evolution believes  there is going  to be a                                                              
need  for strong  agency  and public  insight  during the  initial                                                              
years of  operation, including that  initial renew process.   Blue                                                              
Evolution believes  it is unfair and unwise to  regulate farms the                                                              
same regardless  of their size.   A single farmer with  an acre or                                                              
less is  going to be underneath  the exact same  regulation, cost,                                                              
and  leasing process  as  a huge  corporate  entity  with lots  of                                                              
personnel  and money  at its  disposal.   Blue Evolution  believes                                                              
this is especially  true given the current regulations  that allow                                                              
large  leases to  be  held  but are  only  charged  for the  small                                                              
percentage  of the  area  of that  farm  that  is currently  being                                                              
farmed; certain  farmers  across the state  are already  utilizing                                                              
this.   Blue Evolution  believes this  will lead  to a  land grab,                                                              
which will inundate DNR even further with more applications.                                                                    
                                                                                                                                
MS. PEEPLES  said Blue  Evolution is glad  progress is  being made                                                              
and  that these  amendments are  happening.   However, she  added,                                                              
more needs to be done to continue to develop the industry.                                                                      
                                                                                                                                
10:36:48 AM                                                                                                                   
                                                                                                                                
NANCY HILLSTRAND,  Pioneer Alaskan  Fisheries, testified  that her                                                              
company  is a  processing business  that helped  start the  oyster                                                              
farms  in Kachemak  Bay by  building  an oyster  cooler to  assist                                                              
them in  getting started.   She  said she  is concerned  about the                                                              
very  large sized  oyster farms.   She  wants to  help the  small,                                                              
Alaska based  businesses, but is  also concerned for  the affected                                                              
stakeholders.    Problems have  been  seen  in Kachemak  Bay  when                                                              
people  want to  expand, or  new  people come  in, because  people                                                              
live in these  remote areas and  these are navigable waters.   The                                                              
April issue  of National Fisherman  included a full-page  ad about                                                            
the  East Coast's  problems  between  fishermen and  these  larger                                                              
mariculture businesses.                                                                                                         
                                                                                                                                
MS. HILLSTRAND inquired  about a definition for  "small" farms and                                                              
suggested consideration  be given as to  how big it is  wanted for                                                              
these  farms  to get.    She urged  that  the  bill be  for  small                                                              
businesses  as indicated  by the  sponsor.  Some  of the  proposed                                                              
farms are  150 acres or  more, which is  a blanket  over navigable                                                              
waters.  She  suggested the committee  look at a [size]  cap or at                                                              
densities  within   regions  or  bays.    She   advised  that  the                                                              
notification  system  is  archaic,   so  people  don't  even  know                                                              
permits  have  been  applied  for  and  suddenly  an  oyster  farm                                                              
appears  in  their  area.   Unforeseen  issues  arise  and  become                                                              
evident after  initial permits are  required; therefore,  a strong                                                              
renewal  process  is needed  so  affected stakeholders  can  voice                                                              
their concerns.                                                                                                                 
                                                                                                                                
MS. HILLSTRAND reiterated  that it is important  to define "small"                                                              
Alaska based businesses  because oyster farming can  be noisy with                                                              
a lot of added  traffic.  She said it is important  to protect the                                                              
common good, which is the waters of the state of Alaska.                                                                        
                                                                                                                                
10:39:48 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  TARR acknowledged  the concerns  expressed by  the                                                              
last two  witnesses regarding  farm size.   She asked  whether Ms.                                                              
Hillstrand had in mind a specific size or density restriction.                                                                  
                                                                                                                                
MS. HILLSTRAND  replied that  34 percent of  all the  oysters from                                                              
Alaska come  out of  Kachemak Bay,  yet there  is pressure  to put                                                              
more  and more.   When is  enough and  how large  should they  be?                                                              
She advised  that even  farms of  half an  acre or  an acre  are a                                                              
large  size  in the  middle  of  navigable  waters.   She  further                                                              
advised that  10 acres is  huge, and 150  acres is gigantic.   One                                                              
farm  in  Kachemak Bay  wants  to  enlarge  to  10 acres  and  she                                                              
understands  that  about  50 comments  were  submitted  requesting                                                              
this  not be  done because  it pretty  much closes  off that  bay.                                                              
The  farm  in  the National  Fisherman  article  that  is  causing                                                            
controversy  is 40  acres.  She  suggested this  be addressed  and                                                              
figured   out   by   the   committee,    the   shareholders,   the                                                              
stakeholders, and DNR  because the scale and magnitude  of what is                                                              
being  done is  often  forgotten about  and  suddenly these  farms                                                              
located  in   the  common   waters  of   the  state  are   causing                                                              
controversy.   Because this  is still new,  care must be  taken to                                                              
not  make  mistakes  at the  beginning  to  prevent  problems  and                                                              
controversies.                                                                                                                  
                                                                                                                                
REPRESENTATIVE  TARR  offered  her  understanding  that  SSHB  116                                                              
relates  to the step  after the  initial tideland  lease has  been                                                              
issued by  DNR; a renewal  would be something  on which  the local                                                              
community has already  weighed in.  She offered  her understanding                                                              
that the  [initial] part of the  process would not be  changed and                                                              
Ms.  Hillstrand's concern  would  be addressed  under that  review                                                              
and  public comment,  and so  there  wouldn't be  a lease  renewal                                                              
that  would  be  of  the size  or  production  level  that  became                                                              
overwhelming of that particular area.                                                                                           
                                                                                                                                
10:43:23 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE NEUMAN  observed the aquatic farm  application flow                                                              
chart states  that the leases go  through a 10-year term  and will                                                              
then  be looked  at,  and what  is  looked at  is  extensive.   He                                                              
surmised Ms. Hillstrand's  concerns about farms growing  too large                                                              
would be  addressed by this being  checked every 10  years because                                                              
the check  would include  how the operation  is going  and whether                                                              
the waters  are  staying clean  and such.   He noted  20 years  is                                                              
being  considered, but  10 years  seems practical.   He  requested                                                              
Ms. Hillstrand's opinion in this regard.                                                                                        
                                                                                                                                
MS. HILLSTRAND responded  that that allows people to  see what did                                                              
happen during that  time and voice their concerns.   Things happen                                                              
during the year;  for example, power washers running  all day long                                                              
to clean  gear.  People  who have  spent a lot  of money  on their                                                              
homes didn't  realize there would be  loud noise and lots  of boat                                                              
traffic created  by the farm.   She is  concerned because  she has                                                              
dealt with many  people and seen these problems arise.   Ten years                                                              
is a long  time for the opportunity  to address any  problems, but                                                              
at least  it isn't a  whole generation,  which would be  20 years.                                                              
In  the past  the magnitude  of  what is  being  done hasn't  been                                                              
looked at  and suddenly it  grows out of  control.   She expressed                                                              
her hope  that this can be  kept for the small  Alaskan businesses                                                              
and local  communities and  not let  it become huge  international                                                              
sales where the state receives little or no money.                                                                              
                                                                                                                                
REPRESENTATIVE  NEUMAN stated  that a  company needs  at least  10                                                              
years to establish  itself before being put under  the microscope.                                                              
He  concluded  that  the  proposal  is  accurate,  practical,  and                                                              
addresses concerns.                                                                                                             
                                                                                                                                
REPRESENTATIVE  VANCE  inquired  whether  a farm  that  wanted  to                                                              
expand in size after  the 10 years would have to  start with a new                                                              
application or could do so through the renewal application.                                                                     
                                                                                                                                
10:46:47 AM                                                                                                                   
                                                                                                                                
CHRISTIANNA  COLLES, Leasing Unit  Manager, Southcentral  Regional                                                              
Land Office,  Division of  Mining, Land  and Water, Department  of                                                              
Natural Resources  (DNR), answered that  a farm wanting  to expand                                                              
in size at  any time during  its operation would have  to re-apply                                                              
and the application  would go back  out for public notice.   It is                                                              
not  automatic, she  continued; for  example, a  farm in  Kachemak                                                              
Bay that wanted  to expand in size is currently  going through the                                                              
public notice process.                                                                                                          
                                                                                                                                
REPRESENTATIVE VANCE  asked whether there  is a limitation  on the                                                              
size and scope of a farm in the current permitting process.                                                                     
                                                                                                                                
MS. COLLES replied  yes, regulations require that a  farm not take                                                              
up more  than one-third  of a bight  or bay, so  DNR looks  at the                                                              
placement  of where these  leases are  going to  be located.   She                                                              
said  DNR also  works with  the National  Oceanic and  Atmospheric                                                              
Administration (NOAA)  and the Alaska Department of  Fish and Game                                                              
(ADF&G)  on  where  a  site  might   be  located  to  see  whether                                                              
complications might be caused for navigation or marine mammals.                                                                 
                                                                                                                                
REPRESENTATIVE   VANCE  inquired  whether   Ms.  Colles   has  any                                                              
recommendations  on how  to  ease or  address  the concerns  about                                                              
larger corporations coming in and taking up extensive acreage.                                                                  
                                                                                                                                
MS. COLLES  responded  that new  farms of this  magnitude  in size                                                              
are  new to  Alaska, so  there hasn't  been much  chance to  think                                                              
about how to address  them.  She said they are  usually located in                                                              
areas  that are  much larger  and aren't  in a bay  or bight  that                                                              
might  cause navigation  issues.    Regarding a  size  restriction                                                              
that says  if it is  over a  certain size it  must go  through the                                                              
full process,  she is  unsure and doesn't  have any  clear answers                                                              
to the question.                                                                                                                
                                                                                                                                
10:48:58 AM                                                                                                                   
                                                                                                                                
CHAIR STUTES  surmised that there  really isn't a  size limitation                                                              
because  if it was  a huge  bay the  farm could  not take  up more                                                              
than one-third of that bay.                                                                                                     
                                                                                                                                
MS. COLLES answered correct.                                                                                                    
                                                                                                                                
10:49:27 AM                                                                                                                   
                                                                                                                                
MARKOS SCHEER,  CEO, Premium Aquatics,  LLC, testified  in support                                                              
of SSHB 116.  He  said his farm is located south  of Craig and has                                                              
127 acres  for kelp and shellfish  mariculture.  He noted  he sits                                                              
on  the  board of  the  Alaska  Fisheries  Development  Foundation                                                              
(AFDF) and  Southeast Conference  but is  testifying on  behalf of                                                              
Premium Aquatics.   He  supports SSHB  116 as a  good step  in the                                                              
right direction,  one reason being  the kind of capital  and grow-                                                              
out time that are  needed.  Committing to that kind  of capital on                                                              
a  10-year  lease  materially  increases  the  risk  to  potential                                                              
investors.   Longer lease  terms provide  more opportunity  to get                                                              
an operation up and running, particularly when farming longer-                                                                  
lived  shellfish species  like geoduck,  which take  7-9 years  to                                                              
reach market  size.  The  capital and labor  cost must  be carried                                                              
until that product reaches market size.                                                                                         
                                                                                                                                
MR. SCHEER  maintained it is  incorrect that  a lease fee  is paid                                                              
only for  the area that  is being  used.  He  said a lease  fee is                                                              
paid for the whole  area regardless of whether it  is used.  Under                                                              
a revenue  production requirement, the  lease will be lost  if, by                                                              
year five, a farm  is not producing the minimum  amount of revenue                                                              
on an  annual basis.   The regulation  already provides  an avenue                                                              
that if something isn't being used the lease will be lost.                                                                      
                                                                                                                                
MR. SCHEER further  maintained that the idea that  these sites are                                                              
large is an inaccurate  assessment.  For example,  he said, Taylor                                                              
Shellfish  Farms on  the  West Coast  is 17,000  acres.   His  own                                                              
operation  has 25  acres  allocated to  shellfish,  which is  like                                                              
other farms, and  the rest is kelp production.  Only  so much kelp                                                              
can  be   produced  on  a  particular   acreage.    In   a  global                                                              
marketplace  where  the  world  production  of  kelp  is  some  30                                                              
million tons,  a farm must have  some space to do  that production                                                              
to be  relevant.  Although  this is a  new transition  for Alaska,                                                              
the relative scale of what is being done here is modest at best.                                                                
                                                                                                                                
10:53:49 AM                                                                                                                   
                                                                                                                                
CHAIR STUTES  closed public  testimony after  ascertaining  no one                                                              
else wished to testify.                                                                                                         
                                                                                                                                
REPRESENTATIVE NEUMAN  observed the bill's original  title stated,                                                              
"aquatic farming  and hatchery  site leases",  while the  title of                                                              
the  sponsor  substitute  (SS) states  "site  leases  for  aquatic                                                              
farming  and aquatic  plant  and shellfish  hatchery  operations."                                                              
He  requested the  sponsor  to explain  why  the differences  were                                                              
included in the title.                                                                                                          
                                                                                                                                
REPRESENTATIVE STORY  replied to make  more clarity.   She related                                                              
that with  the original title  there were questions  about whether                                                              
hatcheries included  salmon hatcheries and  she wanted to  make it                                                              
clear it was aquatic and not salmon.                                                                                            
                                                                                                                                
10:55:05 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE   TARR  asked  whether   it  is  correct   that  an                                                              
expansion would  fall outside  of this  renewal process  and would                                                              
require another  public process  that would allow  the opportunity                                                              
for concerns to be raised.                                                                                                      
                                                                                                                                
MR. SMITH  responded that  for granting of  the initial  lease DNR                                                              
reaches out  heavily, sends out  postcards to neighbors,  and must                                                              
respond to every  question and comment.  Currently,  as well as in                                                              
the  proposed renewal  process,  a renewal  is publically  noticed                                                              
and  there  is  a  grievance  process  if  someone  is  personally                                                              
affected,  but [the  proposed process]  is not  as broad and  time                                                              
consuming and  the notice is  not as great.   However,  a proposed                                                              
change in footprint  or size would require a  broader and involved                                                              
public process.                                                                                                                 
                                                                                                                                
10:57:22 AM                                                                                                                   
                                                                                                                                
CHAIR STUTES invited the sponsor to make closing comments.                                                                      
                                                                                                                                
REPRESENTATIVE  STORY  said SSHB  116  would  be an  advantage  to                                                              
streamline the renewal process and help this business grow.                                                                     
                                                                                                                                
CHAIR STUTES held over SSHB 116.                                                                                                
                                                                                                                                

Document Name Date/Time Subjects
HB 116 - AFDF Letter of Support 2019-04-15.pdf HFSH 4/23/2019 10:00:00 AM
HFSH 4/25/2019 10:00:00 AM
HRES 5/10/2019 1:00:00 PM
HB 116
HB116 Aquatic Farm Application Review Flow Chart 4.15.19.pdf HFSH 4/23/2019 10:00:00 AM
HFSH 4/25/2019 10:00:00 AM
HB 116
HB116 ASGA Letter of Support 04.15.19.pdf HFSH 4/23/2019 10:00:00 AM
HFSH 4/25/2019 10:00:00 AM
HRES 5/6/2019 1:00:00 PM
HRES 5/10/2019 1:00:00 PM
HB 116
HB116 Explanation of Changes ver A to ver U 4.15.19.pdf HFSH 4/23/2019 10:00:00 AM
HB 116
HB116 DNR Fiscal Note 4.15.19.pdf HFSH 4/23/2019 10:00:00 AM
HFSH 4/25/2019 10:00:00 AM
HB 116
HB116 Sponsor Statement 4.15.19.pdf HFSH 4/23/2019 10:00:00 AM
HFSH 4/25/2019 10:00:00 AM
HRES 5/6/2019 1:00:00 PM
HB 116
HB116 Supporting Document- Mariculture Plan.pdf HFSH 4/23/2019 10:00:00 AM
HFSH 4/25/2019 10:00:00 AM
HB 116
HB116 ver U 4.12.19.PDF HFSH 4/23/2019 10:00:00 AM
HB 116
HR08 Fiscal Note-LEG 05.15.19.pdf HFSH 4/23/2019 10:00:00 AM
HR 8
HR08 Sponsor Statement 04.10.19.pdf HFSH 4/23/2019 10:00:00 AM
HRES 4/26/2019 1:00:00 PM
HR 8
HR08 Supporting Docuemnt- HJM4012-Year of the Salmon - Washington State.pdf HFSH 4/23/2019 10:00:00 AM
HRES 4/26/2019 1:00:00 PM
HR 8
HR08 Supporting Document - Email in Support McPhee 4.15.19.pdf HFSH 4/23/2019 10:00:00 AM
HR 8
HR08 Supporting Document - Letter of Support Alaska Trollers Association 4.12.19.pdf HFSH 4/23/2019 10:00:00 AM
HR 8
HR08 Supporting Document - Letter of Support from Salmon Beyond Borders 4.15.19.pdf HFSH 4/23/2019 10:00:00 AM
HR 8
HR08 Supporting Document - Letter of Support from Salmon State 4.15.19.pdf HFSH 4/23/2019 10:00:00 AM
HR 8
HR08 Supporting Document - Letter of Support from Territorial Sportsmen 4.15.19.pdf HFSH 4/23/2019 10:00:00 AM
HR 8
HR08 Supporting Document - Letter of Support NOAA, NMFS Alaska Region 4.15.19.pdf HFSH 4/23/2019 10:00:00 AM
HR 8
HR08 Supporting Document - Summary from the International Year of the Salmon Website 4.10.19.pdf HFSH 4/23/2019 10:00:00 AM
HR 8
HR08 Supporting Document- HCR35 - Year of the Salmon - Oregon State.pdf HFSH 4/23/2019 10:00:00 AM
HCR 35
HR 8
HR08 Version A 4.10.19.PDF HFSH 4/23/2019 10:00:00 AM
HR 8