Legislature(2017 - 2018)SENATE FINANCE 532
04/03/2018 01:30 PM Senate FINANCE
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CS FOR HOUSE BILL NO. 76(FSH) "An Act relating to the mariculture revolving loan fund and loans and grants from the fund; and providing for an effective date." 1:42:12 PM REPRESENTATIVE DAN ORTIZ, SPONSOR, introduced himself. LIZ HARPOLD, STAFF, REPRESENTATIVE DAN ORTIZ, introduced herself. Representative Ortiz explained the bill. He stated that the bill amends the existing Alaska Mariculture Revolving Fund to allow for up to 40 percent to be used for loans to permitted shellfish hatcheries for planning, construction, and operation. He stated that Alaska shellfish farms did not currently have a stable supply of seed. 1:44:36 PM Ms. Harpold discussed the Sectional Analysis (copy on file): Section 1. Adds a declaration of policy for the state's Mariculture Revolving Loan Fund. Section 2. Amends a spanned statutory citation in AS 6.10.900 to conform with the provision added by section 1 of the bill. Section 3. Require 40 percent of the money appropriated to the fund be used for (1) making loans to state residents and Alaskan organizations and businesses that operate hatcheries or aquatic farms of the purpose of producing aquatic plants or shellfish or conduct shellfish enhancement projects or (2) making grants to certain nonprofits. Requires the remaining 60 percent of the funds appropriated to the fund to be used for other loans from the fund. Section 4. Authorizes the Department of Commerce, Community and Economic Development to make loans to an eligible applicant for the planning, construction, an operation of a (1) hatcher that artificially propagates marine aquatic plants or shellfish or (2) shellfish enhancement project. Permits the department to make one-time grants for organizational and planning purposes to certain nonprofit organizations. Amends spanned statutory citations to conform with the provision added by sex. 1 of the bill. Section 5. Limits the amount other department may make in grants to nonprofits for organizational and planning purposes. Section 6. Expands the classes of person eligible for a loan from the fund to include state residents or entities organized under state law that (1) hold a permit to operate a hatchery or aquatic farm for the purposes of producing aquatic plants or shellfish or (2) conduct shellfish enhancement projects. Section 7. Conforms the residency requirements for fund loan applicants to reflect that entities organized under state law are also eligible for loans from the fund. Section 8. Establishes ne loan terms for loans from the fund. Section 9. Provided that a subsequent loan may not be made to a resident of the state or entity organized under the laws of thousand state that holds a permit to 9operate a hatchery or aquatic farm for the purpose of producing aquatic plants or shellfish or that conducts shellfish enhancement projects if the person's outstanding balance exceeds $,000,000. Section 10. Allows a loan to be made from the fund for the purchase of boats or vessels determined to be integral to the operation of a hatcher. Section 11. Amends a spanned statutory citation in AS 16.10.915(d) to conform with the provision added by section 1 of the bill. Section 12. Adds a new subsection to AS 16.10.915. Prohibits the department from making certain loans from the fund unless the department determines that (1) a loan applicant's hatchery or enhancement project will be managed in a manner reasonably expected to result in repayment of the loan and (2) conduct shellfish enhancement projects. Section 14. Provides authority for certain associations of limited entry permit holders o levy and collect an assessment from its members to secure or repay a loan from the fund. Allows the department to rely on certain assessments in deciding whether to make a loan from the fund. Section 15. Amends a spanned statutory citation in AS 16.10.935 to conform with the provision added by section 1 of the bill Section 16. Adds new definitions for AS 16.10890 - 16.10.945. Section 17. Clarifies that changes made by the bill to loan terms from the fund do not apply to loans made before the bill's effective date. Section 18. Provides the bill with an immediate effective date. 1:49:58 PM AT EASE 1:51:35 PM RECONVENED Co-Chair MacKinnon queried clarity about how long a person could defer payments on the loan. 1:53:09 PM BRITTENY CIONI-HAYWOOD, DEPARTMENT OF COMMERCE, COMMUNITY, AND ECONOMIC DEVELOPMENT, ANCHORAGE (via teleconference), replied that it would be six years for a farm, or eleven years for a hatchery. Co-Chair MacKinnon queried the reason for deferring payment of interest and principal for that period of time. Ms. Cioni-Haywood replied that it took time to develop the projects, therefore the loan went into the deferral period. Senator von Imhof wondered whether there was a biological reason a farm or a hatchery would need so many years of deferral. She asked whether it was a construction, permitting, or biological issue related to the significant delay in payment. Ms. Cioni-Haywood deferred to the Department of Fish and Game (DFG). Ms. Cioni-Haywood stated that geoducks had a nine to ten year grow out, oysters were in the five year range. 1:55:42 PM AT EASE 1:58:27 PM RECONVENED 1:58:43 PM SAM RABUNG, DEPARTMENT OF FISH AND GAME, JUNEAU, stated that the bill was modeled after the salmon fishery enhancement revolving loan fund, with a deferral period based on the biological life cycle of the organisms. Senator von Imhof remarked that it took approximately 5 or 6 years for a geoduck to become fully mature, and oyster maturation was slightly longer. She felt that there would be a large balloon payment on year 7, because there was no interest paid during that time. She wondered whether the principal would be amortized over ten or twelve years. Mr. Rabung deferred to the Department of Commerce, Community and Economic Development. He asserted that it was probably amortized into the annual payment. 2:00:36 PM Senator Stevens wondered whether seaweed production was in the Department of Fish and Game purview. Mr. Rabung replied in the affirmative. Senator Stevens queried the success of other states' seaweed production. He felt that other states had been successful. Mr. Rabung replied that it was a growth industry, with success on both coasts. He felt that the time was right for seaweed production. Vice-Chair Bishop queried the process of an oyster hatchery. Mr. Rabung replied that adult oysters would be collected from a farm site, and taken to a hatchery to induce to spawn with temperature manipulation. The larvae would set and grow as juveniles. The spat would then be distributed to nurseries and farms for further grow out to market size. The process took approximately three years. Vice-Chair Bishop wondered whether the hatchery was shore based, or whether the hatchery needed to lease land from the state. Mr. Rabung replied that either was possible. Vice-Chair Bishop asked where the stock was sourced. Mr. Rabung replied that oysters did not reproduce or occur naturally in the state, so they were all sourced through approved sources on the west coast out of state. He stated that oysters were a farmed product. Co-Chair MacKinnon wondered why oysters were not considered an invasive species. Mr. Rabung replied that oysters could not reproduce in Alaska, because of the cold temperature. Senator von Imhof wondered whether the shellfish hatcheries included crab and shrimp. Mr. Rabung replied in the affirmative. He stated that there were no hatcheries, because those organisms did not fair well in Alaska while in captivity. 2:04:21 PM AT EASE 2:05:07 PM RECONVENED Co-Chair MacKinnon stated that there were multiple questions regarding the mariculture loan fund. She wanted an accounting and short history of the fund. There was a desire to know the number of current loans and the deferral rate. She queried the remaining balance to loan against, and other financial specifics of the revolving loan fund. Co-Chair MacKinnon OPENED public testimony. Co-Chair MacKinnon queried comments on the legislation. Ms. Cioni-Haywood stated that she could answer the questions related to balloon payments. She stated that on the initial period there was no payments or interest that would accrue. She shared that the payments would start after that initial period. Co-Chair MacKinnon surmised that the first six years saw no interest, because the state loaned money principal and received no money in return. Ms. Cioni-Haywood agreed. She explained that the payments began after the initial period for farmers or after the initial period for hatcheries within the changes in the bill. Co-Chair MacKinnon wondered whether that was similar to the salmon enhancement or the other funds. Ms. Cioni-Haywood replied in the affirmative. She explained that it was similar to the Fisheries Enhancement Revolving Load Fund. Co-Chair MacKinnon asked whether it was similar conditions to the farming operations in the ocean. Ms. Cioni-Haywood replied that she may not understand the question. She announced that the fisheries enhancement would be through the regional aquaculture associations through the hatchery system. 2:10:02 PM Co-Chair MacKinnon looked at page 5, Section 10, line 3, which said that a loan under 16.10.910 attempted to add hatcheries to be able to purchase a boat under the hatchery program. Ms. Cioni-Haywood replied that it allowed the hatcheries to purchase a boat, if that boat would be used for the hatchery business. She stated that the farmers could already purchase a vessel under the current loan fund. Co-Chair MacKinnon looked at line 5, which said that it may not be deferred for a period more than six years of the loan. She noted that another statute outlined eight years. She wondered whether there was different efforts for farming and hatcheries, and if so, she queried the reason for that distinction. Ms. Cioni-Haywood agreed that there was a difference between farmers and hatchers. She understood that the language taken for the hatcheries was based on the fisheries enhancement statutes that outlined the fisheries enhancement revolving loan fund. She stated that those statutes had it at ten years. She furthered that the farmers would be six years. Co-Chair MacKinnon queried additional comments on the overall structure of the bill. She asked whether the administration was supportive of the bill. Ms. Cioni- Haywood replied that the administration was supportive of the bill, and she had no additional comments on the structure of the bill. 2:12:17 PM JULIE DECKER, CHAIR, MARICULTURE TASK FORCE, shared that in 2016, Governor Walker created the Mariculture Task Force with eleven members from broad backgrounds. She shared that one of the top five priorities in the plan was this bill. She felt that the bill was a component in moving the industry forward. She stated that the goal of the task force was to grow a $100 million in 20 years. She noted that the original focus was for a $1 billion industry in 30 years. She shared that work with economic advisor groups encouraged the reduction of the timeline with a realistic goal. She stated that the goal was focused on six species: pacific oysters, which was the only nonnative species in the state, because they did not reproduce; geoduck; sea cucumbers; blue mussels; and several species of seaweed. She remarked that there was a plan to develop the industry. She clarified that mariculture did not mean finfish farming, because it was not legal in the state. She shared that it included aquatic farming. Vice-Chair Bishop recalled that there was one time when the shellfish industry had $30 million revenue to the state. He wondered whether there was a problem in obtaining tidelands or leases from the Department of Natural Resources (DNR) to expand the business. Ms. Decker replied that it was one of the hurdles, because there was a public process. She remarked that there was a balance of potential for public use versus a private use of the area was always challenging. She hoped some of the applications for farms would be permitted. 2:20:11 PM Senator Stevens requested comment on the seaweed industry. Ms. Decker replied that seaweed was a large worldwide industry at $6 billion to $10 billion. She remarked that the seaweed industry was barely in Alaska. She stressed that it worked well with the existing seafood industry, because it was planted in the fall and harvested in the spring. She remarked that there were many excess fishing vessels and process at capacity those time periods. She felt that it would be a nice fit for Alaska. Co-Chair MacKinnon asked about sea otters. Ms. Decker encouraged people to purchase sea otter products. She stated that sea otters were a serious challenge in the mariculture industry. She felt that it would require some federal partnership and impetus. Co-Chair MacKinnon stressed that a business to survive in Alaskan waters might be destroyed, because it was difficult to control the predators that may destroy the crops. Ms. Decker replied that oysters were contained in cages, so that was positive for otter predation. She added that otters did not eat seaweed. 2:23:36 PM TOMMY SHERIDAN, DIRECTOR GOVERNMENT AFFAIRS, SILVER BAY SEAFOODS, ANCHORAGE (via teleconference), spoke in support of the legislation. He stated that altering the mariculture revolving loan fund to make it accessible hatchery operators would help to provide better security for the state's mariculture industry. Senator Stevens noted that there was a letter that asserted that development of shellfish and seaweed could help to mitigate ocean acidification. He requested more information on that issue. Mr. Sheridan stated that his experience in the issue was limited. He noted that there were large scale experiments with kelp that might potentially offset the impacts of ocean acidification. 2:27:22 PM TOMI MARSH, PRESIDENT, VOLUNTEER BOARD, OCEANS ALASKA, KETCHIKAN (via teleconference), supported the legislation. She stated that bill would allow for shellfish and seaweed hatcheries to access loan funds for operation cost of seed. She stated that it would also allow the mariculture industry to grow, because industry growth required a consistent and healthy seed source. She shared that the bill would put shellfish and seaweed hatcheries on a path to financial stability. 2:28:56 PM MARKOS SCHEER, MANAGER, PREMIUM AQUATICS, SEATTLE (via teleconference), spoke in support of the bill. He anticipated that the first phase of his operation would employ as many as 50 people year round. He felt that it would be a significant impact to the economy, and asserted that the bill was a vital part of that development. 2:31:56 PM TREVOR SANDY, ALASKA SHELLFISH GROWERS ASSOCIATION, KETCHIKAN (via teleconference), spoke in support of the bill. He shared his personal experiences about why the bill was personally important. He stated that he became interested in farming, because of the potential for growth in the industry. 2:35:50 PM TAMSEN PEEPLES, ALASKA MARICULTURE MANAGER BLUE EVOLUTION, KODIAK (via teleconference), spoke in support of the bill. She stated that she had built and designed hatcheries. She shared that one of those hatcheries was able to produce over 70,000 seeded line with kelp seedlings, and worked below half capacity in the last season. She shared that the design and installation of the hatcheries was the first major hurdle in investment in the state. She shared that a major challenge was the cost of shipping and installing large materials. She remarked that the ability to work in cooperation with the National Oceanic and Atmospheric Administration (NOAA) lab was helpful in fulfilling the project. She supported responsible mariculture in the state. Co-Chair MacKinnon CLOSED public testimony. Vice-Chair Bishop addressed the fiscal notes. CSHB 76(FSH) was HEARD and HELD in committee for further consideration.