Legislature(2009 - 2010)BARNES 124

04/11/2010 12:00 PM House RESOURCES

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to a Call of the Chair --
-- Continued from 04/10/10 --
Scheduled But Not Heard
Moved Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
Heard & Held
         HB 365-FISH PROCESSOR FEES, LICENSES, RECORDS                                                                      
2:35:33 PM                                                                                                                    
CO-CHAIR JOHNSON announced that the  next order of business would                                                               
be  HOUSE BILL  NO.  365,  "An Act  relating  to sharing  records                                                               
regarding fish purchased by fish  processors with certain federal                                                               
agencies,  to requirements  to obtain  and  maintain a  fisheries                                                               
business license,  and to  payment of  industry fees  required of                                                               
fish processors; and providing for an effective date."                                                                          
2:35:49 PM                                                                                                                    
REPRESENTATIVE  CHARISSE   MILLETT,  Alaska   State  Legislature,                                                               
presented  HB  365 as  sponsor.    She  described  HB 365  as  "a                                                               
completion  of  a  bill  that  was  started  in  2002"  regarding                                                               
fisheries  permit buybacks.   She  explained that  the intent  of                                                               
allowing  buybacks  of  fisheries  permits is  to  stabilize  and                                                               
sustain the fishery.  The bill  would allow a fishery to buy back                                                               
a permit with the agreement  of two-thirds of its permit holders,                                                               
and  would give  the fishery  access to  $21 million  through the                                                               
federal marine fisheries  program.  She noted  that the Southeast                                                               
Alaska  Purse Seine  fishery  is  the first  to  have elected  to                                                               
pursue the buyback.  She related  that fisheries that want to buy                                                               
back a fishery must agree to  a self-assessed tax of 3 percent on                                                               
each sale of  fish they catch to cover the  costs of the program.                                                               
Furthermore, the  program is voluntary; only  those fishermen who                                                               
choose  to sell  their  permits may  do so.    She reported  that                                                               
currently over half of the  permits in the Southeast Alaska Purse                                                               
Seine fishery are not being used.   She remarked upon the unusual                                                               
occurrence of a  large group of fishermen coming  to agreement on                                                               
any issue.                                                                                                                      
2:38:15 PM                                                                                                                    
REPRESENTATIVE KAWASAKI said  HB 365 was previously  heard by the                                                               
House  Special Committee  on  Fisheries, but  he  did not  recall                                                               
there  being a  letter  of  intent, which  he  observed has  been                                                               
added.  He  questioned the reason for the addition  of the letter                                                               
of intent,  and asked if the  focus of the bill  is being limited                                                               
to Southeast Alaska.                                                                                                            
REPRESENTATIVE MILLETT responded that  the Southeast Alaska Purse                                                               
Seine fishery is "the only  group of fishermen that [has] decided                                                               
to go forward  with the fisheries buyback,"  although the buyback                                                               
is open  to all of Alaska's  fisheries.  Regarding the  letter of                                                               
intent,  she noted  that  people in  "the  processor group"  were                                                               
concerned about  "the ability of  the $21  million to buy  back a                                                               
portion of  permits that exceeded  what they thought  they needed                                                               
to  keep their  processors  full."   She  indicated a  connection                                                               
between   the  letter   of  intent   and  the   processors  being                                                               
comfortable with  the legislation.   In  response to  a follow-up                                                               
question, she clarified that the  letter of intent is specific to                                                               
"this buyback program";  however, the bill itself  does not limit                                                               
participation to Southeast fisheries.                                                                                           
2:40:04 PM                                                                                                                    
REPRESENTATIVE P. WILSON noted that  in the committee packet is a                                                               
memorandum of understanding between the producers and fishermen.                                                                
2:40:47 PM                                                                                                                    
REPRESENTATIVE SEATON  directed attention to language  in Section                                                               
2,  on page  3, and  he asked  the bill  sponsor to  confirm that                                                               
"department" is the  Department of Revenue and "annual  fee" is a                                                               
business license fee.                                                                                                           
REPRESENTATIVE MILLETT answered that is correct.                                                                                
REPRESENTATIVE  SEATON   noted  that  there  are   other  buyback                                                               
programs,  such as  the Bering  Sea Crab  fishery program,  which                                                               
could fall  under HB 365.   He said there  is a situation  in the                                                               
bill  in which  the Department  of  Revenue would  be offering  a                                                               
business license and denying it  based on federal provisions.  He                                                               
said the federal government has  the ability to "search and seek"                                                               
its  own remedies.   He  opined that  it is  problematic for  the                                                               
state to deny  a business the ability to operate  in state waters                                                               
because of a federal obligation, and  he relayed that he would be                                                               
offering an amendment to address this issue.                                                                                    
2:42:35 PM                                                                                                                    
REPRESENTATIVE   MILLETT,  in   response  to   Co-Chair  Johnson,                                                               
confirmed  that  the  buyback   program  has  a  federal  funding                                                               
mechanism.   She said Representative Seaton's  concern relates to                                                               
an agreement  between the Southeast  Alaska Purse  Seiner fishery                                                               
and National Marine  Fisheries Service (NMFS) to  ensure that the                                                               
fish tickets  collected by processors make  it to NMFS so  it can                                                               
not only  collect the tax but  also administer the program.   She                                                               
said  this is  the main  focus  of the  bill, and  Representative                                                               
Seaton's amendment  would gut  that.  She  said that  without the                                                               
fish tickets  there would be  no ability to  assess the tax.   In                                                               
response to  Co-Chair Johnson, she indicated  that the Department                                                               
of Revenue was also involved in the agreement.                                                                                  
2:44:16 PM                                                                                                                    
REPRESENTATIVE  SEATON clarified  that  Section  1 addresses  the                                                               
issue of  fish tickets, but  that he is concerned  about language                                                               
in  Section 2,  which  proposes not  allowing  the Department  of                                                               
Revenue to  issue a license to  a processor.  He  said Sections 2                                                               
and 3 are about the fees and not about the data.                                                                                
2:45:15 PM                                                                                                                    
REPRESENTATIVE  JOHNSON   said  he   would  like   the  amendment                                                               
mentioned  by Representative  Seaton to  be offered  in order  to                                                               
hear the testimony related to it.                                                                                               
2:45:40 PM                                                                                                                    
REPRESENTATIVE  SEATON moved  to adopt  Amendment 1,  labeled 26-                                                               
LS1514\A.3, Kane, 4/1/10, which read as follows:                                                                                
     Page 1, lines 2 - 3:                                                                                                       
          Delete ", to requirements to obtain and maintain                                                                    
        a fisheries business license, and to payment of                                                                       
     industry fees required of fish processors"                                                                               
     Page 3, line 19, through page 5, line 6:                                                                                   
          Delete all material.                                                                                                  
     Renumber the following bill section accordingly.                                                                           
REPRESENTATIVE P. WILSON objected for discussion purposes.                                                                      
2:46:04 PM                                                                                                                    
REPRESENTATIVE   SEATON  offered   his  understanding   that  the                                                               
committee packet  contains information regarding public  law, the                                                               
buyback,   and  the   Reduction  Act,   and  that   payments  and                                                               
collections shall  be in accordance  with requirements  of U.S.C.                                                               
1801  - not  just a  negotiation between  Alaska authorities  and                                                               
NMFS, but a requirement under  federal law to ensure payments are                                                               
collected.  He  noted that the Internal Revenue  Service (IRS) is                                                               
a part  of this,  as well.   He indicated  that there  is nothing                                                               
under the  federal law that  requires it  to also be  under state                                                               
2:47:37 PM                                                                                                                    
CO-CHAIR JOHNSON  reminded the  committee of  his intent  to hear                                                               
testimony and  come back  to the proposed  Amendment 1,  which he                                                               
opined is germane to the entire bill.                                                                                           
2:48:09 PM                                                                                                                    
REPRESENTATIVE MILLETT  asked the committee to  remember that the                                                               
program  through which  the Southeast  Alaska Purse  Seiners have                                                               
worked to  attain money is  a federal  one.  Taking  the business                                                               
license  portion of  the  bill  out, she  warned,  will leave  no                                                               
mechanism for enforcement for the  Southeast Alaska Purse Seiners                                                               
to  receive the  money  or pay  it  back.   She  said she  cannot                                                               
imagine that any processor would not "comply with this."                                                                        
2:49:39 PM                                                                                                                    
BOB  THORSTENSON   JR.,  Executive  Director,   Southeast  Alaska                                                               
Seiners Association,  testified that  when the  association began                                                               
work on  the buyback program in  2002, it was part  of the Alaska                                                               
State Legislature  Salmon Task  Force.   He said  the association                                                               
already has  total congressional  authorization and  has received                                                               
$3 million  in the form of  a grant from the  federal government,                                                               
and  it has  purchased  35  permits with  that  money.   He  said                                                               
approximately one-quarter of the  entire program has already been                                                               
paid for by  "you" and the federal government.   He noted that at                                                               
first,  the processors  had some  concerns,  but the  association                                                               
worked  through those  with a  memorandum of  understanding (MOU)                                                               
and a letter of intent.                                                                                                         
MR. THORSTENSON stated that the  proposed Amendment 1 would "kill                                                               
this  and  send  us  back  into  the dark  ages."    He  said  he                                                               
appreciates  the concern  held by  some people.   He  stated, "We                                                               
didn't  enter into  this attempting  to lead  Alaskans into  some                                                               
type  of a  new relationship  with the  federal government  where                                                               
they could somehow shut down our  processors and then we'd all be                                                               
stuck not fishing."  He said  the association has spoken with all                                                               
the major  processors involved, and he  offered his understanding                                                               
that Trident  Seafoods, for  example, has said  it pays  taxes to                                                               
the State  of Alaska and has  no intention of ever  not doing so,                                                               
"so, in that sense, this won't ever  apply to us."  He noted that                                                               
the Department of  Law, "CVC," and the Department  of Revenue all                                                               
had people  at the  table working  on this  issue; the  issue was                                                               
extremely vetted with the administration,  and the purpose of his                                                               
coming before the  legislature today is to ensure  that the issue                                                               
is vetted with the legislature, as  well.  He reiterated that the                                                               
association  is   opposed  to  the  proposed   Amendment  1,  but                                                               
emphasized the  association's support of  the bill, with  the MOU                                                               
and the letter  of intent, and he urged the  committee to support                                                               
2:52:49 PM                                                                                                                    
CO-CHAIR JOHNSON  related that  Mr. Thorstenson  had said  he had                                                               
moved to Juneau "as a result of this bill."                                                                                     
2:52:59 PM                                                                                                                    
REPRESENTATIVE SEATON asked if the  major processors to which Mr.                                                               
Thorstenson had referred buy fish from federal waters.                                                                          
MR.  THORSTENSON estimated  that nearly  every one  of the  major                                                               
Southeast  Alaska purse  seine and  salmon processors  "also buys                                                               
fish in  federal waters"; and  nearly every  one of them  has had                                                               
its  attorneys and/or  CEOs,  CFOs, and  lobbyists  look at  this                                                               
REPRESENTATIVE  SEATON concluded  that  in  purchasing fish  from                                                               
federal waters, those entities would  be required to hold an NMFS                                                               
MR.  THORSTENSON  said  he  presumes  so,  but  related  that  he                                                               
personally  does  not  purchase  fish from  or  fish  in  federal                                                               
CO-CHAIR  JOHNSON questioned  if the  proposed Amendment  1 would                                                               
"violate the agreements of the agreement."                                                                                      
2:53:51 PM                                                                                                                    
THOMAS  LENHART, Assistant  Attorney  General, Natural  Resources                                                               
Section, Civil  Division (Juneau), Department of  Law, responded,                                                               
"It  is my  opinion that  the National  Marine Fisheries  Service                                                               
would not go  through with this program without it."   He related                                                               
that he has  had the opportunity to work with  council from NMFS,                                                               
as  well as  "some  of the  program people"  for  the last  three                                                               
years, and  he said  the biggest sticking  point in  [NMFS] doing                                                               
this  program  has always  been  a  mechanism  for them  to  have                                                               
assurance that they  will get repaid.  He said  this is different                                                               
from other buybacks [NMFS] has  done, because he indicated others                                                               
have been  in federal  waters and  done through  federal programs                                                               
where  mechanisms are  already in  place.   But in  this program,                                                               
[NMFS] would be  funding a buyback in a fishery  that is entirely                                                               
state run.                                                                                                                      
MR.  LENHART   explained  that  NMFS  has   some  cumbersome  and                                                               
uncertain  mechanisms for  collecting debt;  it basically  has to                                                               
rely  on a  civil  action,  bringing in  the  U.S. Department  of                                                               
Justice to try to  collect a debt.  The entity  has made it clear                                                               
from the start  that it needs "a little bit  of a safe assistance                                                               
here with the  mechanism that would do two things."   He said the                                                               
first part  of the  bill would  require the  state to  share with                                                               
NMFS the information  on fish tickets that  would be confidential                                                               
otherwise, so  that NMFS  would have  some documentation  of what                                                               
has actually  been caught and  what is  due.  Mr.  Lenhart stated                                                               
that [NMFS]  remains concerned about an  appropriate mechanism to                                                               
guarantee that  money is collected  by the processors  and turned                                                               
over to  the federal government.   He  stated, "This was  the one                                                               
mechanism that people  were able to agree upon."   He offered his                                                               
understanding,  based  on his  conversation  with  NMFS over  the                                                               
years, that  the future  of the  whole program  is "very  much in                                                               
doubt if this amendment goes through."                                                                                          
2:56:36 PM                                                                                                                    
REPRESENTATIVE SEATON, regarding  the processors collecting money                                                               
and the sharing  of confidential information, asked,  "How big of                                                               
a  hook is  it for  them to  put a  hold on  a federal  fisheries                                                               
permit  and  [prevent] those  folks  from  buying any  fish  from                                                               
federal waters ...?"                                                                                                            
2:57:14 PM                                                                                                                    
MR.  LENHART said  he has  never had  that discussion  and cannot                                                               
speak for  NMFS.  Notwithstanding  that, he imparted  that NMFS's                                                               
council was  "not comfortable with  that" and "did not  feel that                                                               
was adequate."                                                                                                                  
2:57:39 PM                                                                                                                    
REPRESENTATIVE  SEATON asked  Mr.  Lenhart to  clarify  if he  is                                                               
saying that it was not adequate  or that "it wasn't proposed that                                                               
they  put a  hold  on  the fisheries  permits  that the  National                                                               
Marine Fisheries  Service issues, instead of  requiring the state                                                               
to put a hold on the licenses it issues."                                                                                       
MR. LENHART replied  that based on his  conversations with [NMFS]                                                               
over the  years, that entity  does not  feel it has  "an adequate                                                               
remedy."   He  reiterated that  he did  not specifically  discuss                                                               
what  Representative Seaton  is  suggesting;  however, he  stated                                                               
that  [NMFS] was  seeking any  mechanism  that it  felt would  be                                                               
effective, and it concluded that it does not have one.                                                                          
2:58:31 PM                                                                                                                    
ROB  ZUANICH,  Manager,   Southeast  Revitalization  Association,                                                               
stated,  "This bill  is essential  to the  implementation of  our                                                               
consolidation buyback  program."  He  said that four  years after                                                               
the  Alaska  State  Legislature passed  a  bill  allowing  salmon                                                               
permit holders  to form nonprofit  associations to reduce  or buy                                                               
back  permits  in the  fishery,  the  U.S. Congress  amended  the                                                               
Magnusson  Stevens Act,  which made  SRA eligible  for a  federal                                                               
loan to  finance the program.   He noted  that this would  be the                                                               
first time this  program would be used in  state water fisheries.                                                               
He relayed  that the  loan would be  administered by  the fishery                                                               
service and  repaid by  an assessment on  the catch  of fishermen                                                               
remaining in the fishery.  The  loan will be funded, he said, and                                                               
fishery  services  need  assurances  that it  can  "timely  audit                                                               
repayment of the  loan," and that there is a  mechanism to ensure                                                               
collection of the  assessment.  Mr. Zuanich stated  that [HB 365]                                                               
would  provide  that  assurance.    He  said  the  bill  language                                                               
carefully balances the need of  the fishery service and the buyer                                                               
or processor of the salmon  who is responsible for the collection                                                               
and remittance of the assessment.                                                                                               
MR.  ZUANICH said  the proposed  Amendment  1 not  only would  be                                                               
fatal  to  the  program,  but  also is  misguided  and  fails  to                                                               
recognize that  it is state  fishermen and state  processors that                                                               
want  this mechanism.   He  stated,  "We could  see nothing  more                                                               
detrimental than to have a  recalcitrant buyer of salmon withhold                                                               
the tax and then not remit  it to the federal government to repay                                                               
the loan we must repay."   Equally troubling, he opined, would be                                                               
processors or  buyers that did  not withhold  the tax and  had an                                                               
unfair advantage  over those  processors who  wanted to  play the                                                               
game fairly.   He said the mechanism is not  only required by the                                                               
fishery service,  but is  also urgently  needed by  fishermen and                                                               
processors  who want  this to  be a  fair, equitable,  and fully-                                                               
funded program.                                                                                                                 
3:01:44 PM                                                                                                                    
JOE PLESHA,  Chief Legal  Officer, Trident  Seafoods Corporation,                                                               
Testifying  in support  of HB  365, noted  that Trident  Seafoods                                                               
Corporation  has   salmon  processing  facilities   in  Southeast                                                               
Alaska, at Ketchikan, Petersburg, and  Wrangell.  He related that                                                               
early  on  in  this  process,   Trident  had  concerns  that  the                                                               
magnitude  of the  buyback may  be  too great,  because since  at                                                               
least 2002,  processors have invested heavily  in value-added and                                                               
increased  production of  pink salmon,  so that  now "we  are all                                                               
searching for  more boats to  fish for  our plants."   Mr. Plesha                                                               
expressed appreciation  for the work  of Mr. Thorstenson  and the                                                               
Southeast Alaska  Purse Seiners  fishery, with whom  he indicated                                                               
Trident  was  able to  negotiate  "a  floor below  which  they've                                                               
committed  not to  buy  back permits,"  which  allows Trident  to                                                               
support  the  proposed  legislation,  along with  the  letter  of                                                               
intent from the legislature acknowledging that the floor exists.                                                                
MR.  PLESHA stated  that  while he  appreciates  the purpose  for                                                               
which Representative Seaton has  offered Amendment 1, Trident has                                                               
an  accounting staff  dedicated  to ensure  that the  corporation                                                               
correctly pays its  taxes and meets all its  requirements, and he                                                               
expressed confidence  that "we'll  be able to  do that  without a                                                               
great deal of extra burden."   He clarified that Trident Seafoods                                                               
Corporation does  not believe  that the  proposed Amendment  1 is                                                               
3:03:30 PM                                                                                                                    
FRANK  M.  HOMAN,   Chairman/Commissioner,  Commercial  Fisheries                                                               
Entry  Commission  (CFEC),  Alaska  Department  of  Fish  &  Game                                                               
(ADF&G), stated that  CFEC has worked for a number  of years with                                                               
the  Southeast Alaska  Purse Seiners  fishery, and  it is  taking                                                               
direction from state  statute that was passed  by the legislature                                                               
in 2002 that  authorized these programs.  He said  CFEC's role is                                                               
to  facilitate  the wishes  of  the  legislature.   He  said  the                                                               
procedures  resulted from  discussions during  [the Alaska  Joint                                                               
Legislative Salmon  Industry Task  Force], which was  attended by                                                               
fishermen and processors.  He  characterized [HB 365] as the last                                                               
phase of  a series of  legislative initiatives spanning  the last                                                               
8-10 years.                                                                                                                     
MR. HOMAN, regarding the proposed  Amendment 1, drew attention to                                                               
language in Section  3, which states that NMFS would  not be owed                                                               
to arbitrarily  seek to  withhold a  business license,  but would                                                               
have to  exhaust all legal  administrative remedies.   Where this                                                               
could occur, he said, is  with "some maverick processor who's not                                                               
following the  rules"; however, he  noted that the  committee had                                                               
just  heard  from  one  of  the major  processors  that  it  does                                                               
accounting and  knows the procedures.   He  said he thinks  it is                                                               
unlikely that  any processor  would not  comply with  the federal                                                               
3:06:34 PM                                                                                                                    
REPRESENTATIVE  SEATON said  he  was on  the aforementioned  task                                                               
force  and supported  the program;  however, he  recollected that                                                               
there  never  was  a discussion  of  withholding  state  business                                                               
licenses.  He asked if that issue was a private negotiation.                                                                    
3:07:08 PM                                                                                                                    
MR. HOMAN  responded that  the program  in general  was discussed                                                               
[by the task  force]; however, he offered  his understanding that                                                               
the specifics of HB 365 were not  even on the table at that time.                                                               
He  said,  "This  came  about  in the  last  several  years  with                                                               
negotiations with the National Marine Fisheries."                                                                               
3:07:31 PM                                                                                                                    
JEREMY JENSEN  testified on  behalf of himself  in support  of HB
365.   He related that  he is  a lifetime resident  of Petersburg                                                               
and has  worked as  a commercial  salmon seiner  for the  past 10                                                               
years.  He stated opposition to the proposed Amendment 1.                                                                       
3:08:18 PM                                                                                                                    
MITCH EIDE testified  on behalf of himself in support  of HB 365.                                                               
He  related that  he is  a lifelong  resident of  Petersburg, and                                                               
said he has  operated a seiner in Southeast Alaska  for 25 years.                                                               
He  said there  are fishermen  who support  this legislation  who                                                               
have been  trying for  eight years to  get this  program started.                                                               
He  expressed his  wish that  his five-year-old  will be  able to                                                               
take his place  some day.  He urged the  committee to support the                                                               
bill without the proposed Amendment 1.                                                                                          
3:09:02 PM                                                                                                                    
TROY THOMASSON  testified on behalf  of himself in support  of HB
365.   He said he  is a lifelong  resident of Petersburg,  and he                                                               
has been an owner/operator of a seiner for the last 10 years.                                                                   
3:09:32 PM                                                                                                                    
CO-CHAIR JOHNSON, after  ascertaining that no one  else wished to                                                               
testify, closed public testimony on HB 365.                                                                                     
3:09:43 PM                                                                                                                    
REPRESENTATIVE SEATON,  referring back  to Amendment 1,  said the                                                               
committee  has  heard  in  testimony  that  the  processors  have                                                               
federal  fisheries permits  and  obligations, and  NMFS has  full                                                               
applicability to  withhold licenses, as  well as its own  ways of                                                               
enforcing this program.  He  said there have been instances where                                                               
federal  government  has "come  down  with  REAL ID"  to  enforce                                                               
certain things, and  the state has consistently said  it does not                                                               
want  to tie  its  hands  with the  requirements  of the  federal                                                               
government  when  those requirements  are  not  appropriate.   He                                                               
noted that listed  on page 3, [line 26, through  page 4, line 6],                                                               
there  are  "a number  of  conditions  where  we can  withhold  a                                                               
business license"; however, he said  nowhere in the language does                                                               
it  say that  "we're  going  to withhold  these  for ...  federal                                                               
government  obligations."   He  said he  understands  that it  is                                                               
convenient for  people to  negotiate and  say "we"  will withhold                                                               
our  Alaska business  licenses based  on  a desire  by a  federal                                                               
agency - "not to exert  their control through their own licenses"                                                               
- but he said  he thinks this is a matter  of state's rights, and                                                               
he opined that  it is important to "make the  requirements in the                                                               
states  and the  political subdivisions  of the  state -  not the                                                               
federal government."                                                                                                            
3:12:01 PM                                                                                                                    
REPRESENTATIVE P.  WILSON maintained  her objection  to Amendment                                                               
A roll call vote was  taken.  Representatives Seaton and Kawasaki                                                               
voted in favor of Amendment  1.  Representatives Tuck, P. Wilson,                                                               
Olson,  Edgmon,  and  Johnson   voted  against  it.    Therefore,                                                               
Amendment 1 failed by a vote of 2-5.                                                                                            
3:13:09 PM                                                                                                                    
REPRESENTATIVE EDGMON  moved to  report HB  365 out  of committee                                                               
with individual  recommendations, accompanying fiscal  notes, and                                                               
letter  of  intent.   There  being  no  objection, HB  365,  with                                                               
attached letter of intent, was  reported from the House Resources                                                               
Standing Committee.                                                                                                             

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