Legislature(2009 - 2010)BUTROVICH 205

02/03/2010 03:30 PM Senate RESOURCES

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Heard & Held
Heard & Held
Heard & Held
        HB  20-FISHERIES LOANS:ENERGY EFFICIENCY/AMOUNT                                                                     
4:13:43 PM                                                                                                                    
CO-CHAIR   WIELECHOWSKI   announced   HB   20  to   be   up   for                                                               
consideration. [CSHB 20(FIN) was before the committee.]                                                                         
4:14:03 PM                                                                                                                    
TIM  CLARK, staff  to Representative  Edgmon, sponsor  of HB  20,                                                               
explained that the current loan  fund has six loan programs. They                                                               
are divided into subsections in  statute and indicated by letters                                                               
A  through  F. This  bill  addresses,  for  the most  part,  only                                                               
changes  in  how  the  programs   in  subsections  A  and  B  are                                                               
administered. He  explained that  section A loans  are for  up to                                                               
$300,000 for entry permits and  existing vessel and gear upgrades                                                               
to  improve  seafood  quality.  Section  B loans  can  be  up  to                                                               
$100,000 and be used for  entry permits, vessel and gear upgrades                                                               
for nearly  any purpose including  energy efficiency,  vessel and                                                               
gear purchases and  new vessel construction; section  C loans are                                                               
for purchasing quota shares; section  D loans are to help satisfy                                                               
past  due  federal  tax  obligations;  section  E  loans  are  to                                                               
purchase quota shares by a  community quota entity; and section F                                                               
loans  are  for  existing  tender vessel  and  gear  improvements                                                               
relating to seafood quality.                                                                                                    
4:16:47 PM                                                                                                                    
MR. CLARK  said in  2008 the Division  of Investments  promoted a                                                               
program under  subsection B that  made loans for the  purposes of                                                               
improvements for energy efficiency  on existing vessels and gear.                                                               
Because  it is  so  successful,  they want  to  make the  program                                                               
available to a  larger number of people in  the fishing industry.                                                               
So, HB  20 adds improving  energy efficiency to the  purposes for                                                               
which the A loans can be  made and eliminates a prohibition for a                                                               
borrower who  has never had  a loan  out under subsection  A from                                                               
applying for a  subsequent loan in the subsection  B program. But                                                               
it  is  only  eliminated  if  the   purpose  of  the  B  loan  is                                                               
specifically for improving energy efficiency.                                                                                   
MR. CLARK  said the  other amendment  raises the  total allowable                                                               
balance outstanding on loans to an  individual who has both A and                                                               
B loans  from $300,000  to $400,000  - recognizing  the increased                                                               
cost  for a  lot of  their  equipment. He  reported that  overall                                                               
programs under  the loan fund  have a  cap of $400,000  for total                                                               
outstanding debt  and this increase  does not change  that total.                                                               
SB 104 has an immediate effective date.                                                                                         
4:19:47 PM                                                                                                                    
SENATOR  STEVENS  said it  looks  like  these  loans go  to  only                                                               
Alaskans, but  at the  beginning of  the commercial  fishing loan                                                               
summary it says "predominantly resident  fisheries" and he wanted                                                               
to know what that meant.                                                                                                        
MR. CLARK answered that no loans  under the fund are available to                                                               
SENATOR STEVENS said he absolutely supports this program.                                                                       
SENATOR WAGONER  explained that some  vessels are home  ported in                                                               
Alaska and also  fish in Alaska, but he also  knew of one Alaskan                                                               
who fished the herring fishery in San Francisco.                                                                                
4:21:41 PM                                                                                                                    
SENATOR HUGGINS  said some  guys live  in Senator  Wagoner's area                                                               
who do  halibut charters and  he asked  where they would  fall in                                                               
the definition of commercial.                                                                                                   
4:22:45 PM                                                                                                                    
SENATOR STEDMAN joined the committee.                                                                                           
MR.  CLARK  replied  that  these  commercial  fishing  loan  fund                                                               
programs would not be open  to sport fish and charter operations.                                                               
He has been  told that those loans are  also administered through                                                               
the Division of Investments.                                                                                                    
4:22:57 PM                                                                                                                    
CO-CHAIR  WIELECHOWSKI  asked  if "energy  efficiency"  has  been                                                               
MR.  CLARK replied  that the  division  has successfully  written                                                               
regulations that ensure the loans go for the proper purpose.                                                                    
4:23:53 PM                                                                                                                    
GREG WINEGAR,  Director, Division  of Investments,  Department of                                                               
Commerce,  Community  &  Economic Development  (DCCED),  said  he                                                               
administers  the  commercial  fishing revolving  loan  fund  that                                                               
would be  amended by HB 20.  He said the program  has been around                                                               
since the early 70s and its  purpose is to create a predominantly                                                               
resident  fishery.  It  does  that by  making  loans  to  Alaskan                                                               
residents  (of two  years). This  fund has  been very  successful                                                               
from both policy  and fiscal standpoints and it  has been totally                                                               
self sufficient for  many years. The bill allows  both sections A                                                               
and B borrowers to obtain a  low interest loan to upgrade vessels                                                               
to  improve energy  efficiency. In  most cases  they are  talking                                                               
about a more fuel efficient engine.                                                                                             
He said  that this would help  increase fishermen's profitability                                                               
and  it has  the  added  benefit of  helping  the environment  by                                                               
lowering  the  industry's  carbon   footprint.  The  fiscal  note                                                               
indicates an  uptick in loan  demand and the fund  has sufficient                                                               
capital to handle that.                                                                                                         
SENATOR   STEDMAN  asked   if   this   would  encourage   instate                                                               
development  of fisheries.  He asked  how this  bill would  "help                                                               
bring home our permits out of Washington."                                                                                      
MR.  WINEGAR replied  that  the  overall intent  is  to create  a                                                               
"predominantly  resident  fishery."  This   will  help  a  larger                                                               
portion of the Alaskan fleet obtain  low interest loans to put in                                                               
more energy efficient engines, which  would lower their operating                                                               
costs.  It  helps  the  whole industry  by  lowering  its  carbon                                                               
CO-CHAIR  WIELECHOWSKI asked  if  it is  constitutional to  limit                                                               
loans to residents. Had it been tested?                                                                                         
MR.  WINEGAR replied  yes it  had been  tested. At  one time  the                                                               
program had a five-year residency  requirement, but that ran into                                                               
constitutional issues.  The legislature made a  change some years                                                               
ago and dropped  it down to two years, which  has not been tested                                                               
in court. It was felt at  the time that two years was justifiable                                                               
because  the fishing  industry is  a fairly  mobile industry  and                                                               
people  move  around quite  a  bit  back  and forth,  as  Senator                                                               
Wagoner mentioned.                                                                                                              
SENATOR STEDMAN asked if hand trollers would qualify too.                                                                       
MR. WINEGAR answered yes.                                                                                                       
SENATOR STEDMAN  asked if the  boat has  to have a  percentage of                                                               
its business in the hand troll  business or does one just have to                                                               
own a hand toll license and land a couple of fish to qualify.                                                                   
MR.  WINEGAR answered  that  the boat  could  qualify under  both                                                               
sections A  and B. Under  section A they  would have had  to fish                                                               
three  of the  past five  years including  the preceding  season.                                                               
Section B criteria  is a little different; you  basically have to                                                               
be  in  an   area  that  doesn't  have   any  other  occupational                                                               
opportunities  other than  fishing or  you  have to  have had  25                                                               
percent of  your income over  the past two years  from commercial                                                               
4:28:48 PM                                                                                                                    
JERRY  MCCUNE,   United  Fishermen  of  Alaska   (UFA),  said  he                                                               
wholeheartedly  supported HB  20.  New engines  that create  less                                                               
emissions have been  designed, he said, which  are wonderful, but                                                               
he has  just found out that  he can't use his  outdrives, because                                                               
of the  back pressure.  So he  has to buy  all new  engines which                                                               
will cost  around $50,000. A  lot of that  will be going  on with                                                               
other  fishermen. He  said  this will  help  everyone across  the                                                               
state, especially the little guys  who can get new outboards that                                                               
put out  fewer emissions.  Everyone is going  to have  to repower                                                               
some time. New EPA rules are also coming out.                                                                                   
SENATOR  WAGONER asked  which fisheries  are  excluded from  this                                                               
MR.  MCCUNE said  he didn't  know of  any fishery  that had  been                                                               
4:31:48 PM                                                                                                                    
JASON  BRUNE, Executive  Director,  Resource Development  Council                                                               
(RDC),  supported  HB  20.  He  said  the  RDC  is  comprised  of                                                               
individuals and companies from all  the major sectors of Alaska's                                                               
economy including  the fisheries.  Its purpose  is to  link these                                                               
diverse  interests together  to  encourage  a strong  diversified                                                               
private  sector  in  Alaska.  He said  that  Alaskans  have  been                                                               
struggling with high energy costs  for the last several years and                                                               
fuel costs and usage have  escalated as fishermen are required to                                                               
go further  out for  their catch due  to impacts  from endangered                                                               
species   listing,   critical    habitat   designations,   marine                                                               
protection  areas and  fish  movement.  Opportunities to  improve                                                               
energy efficiency through state loans  are important not only for                                                               
the pocketbooks  of the  fishermen who harvest  over half  of our                                                               
nation's total catch, but also  for the communities in which they                                                               
live and,  of course, for  the environment.  Increased efficiency                                                               
will likely lead  to lower costs and  ultimately decreased carbon                                                               
MR.  BRUNE noted  that this  bill has  bipartisan support  on the                                                               
House side,  with both  the Majority and  Minority signing  on as                                                               
co-sponsors. It  makes good  sense and  he urged  its expeditious                                                               
CO-CHAIR WIELECHOWSKI closed public testimony.                                                                                  
4:34:02 PM                                                                                                                    
SENATOR HUGGINS said  the cruise ship industry  has standards for                                                               
discharges and other  things. He asked if it  said somewhere what                                                               
an upgrade really is.                                                                                                           
4:35:39 PM                                                                                                                    
MR.  WINEGAR  answered that  3  AAC  80.0550 has  fairly  general                                                               
language  that says  "an engine  efficiency upgrade  an applicant                                                               
must establish  to the  satisfaction of  the department  that the                                                               
upgrade to  be financed  with the loan  will reduce  emissions or                                                               
improve fuel  productivity." Significant  savings have  been seen                                                               
in the loans they have done so far.                                                                                             
SENATOR HUGGINS said  this is a great idea; he  has listened to a                                                               
number of  people in the Kenai  being irritated by the  fact that                                                               
you can  use "X" engine  for certain periods  of time and  "Y" in                                                               
others; they  have other equipment  made in various parts  of the                                                               
world, but  for loaning  money he wanted  some degree  of comfort                                                               
that what they are doing makes sense.                                                                                           
MR. WINEGAR  said they look at  each loan on an  individual basis                                                               
and ask  the borrower  to demonstrate what  the savings  will be.                                                               
They also  look at the literature  on the engines as  part of the                                                               
evaluation process.                                                                                                             
SENATOR HUGGINS  asked if  he takes  out the  loan and  makes the                                                               
modification, then decides to move  to Seattle, does the loan get                                                               
MR.  WINEGAR replied  that the  division doesn't  have the  legal                                                               
ability to call  the loan, because of  constitutional issues, but                                                               
if  a person  needs  an extension  on  the loan  and  is still  a                                                               
resident, they have the legal ability  to put the interest into a                                                               
non-accruing account.  If the  borrower is  no longer  a resident                                                               
that interest can be added to the balance like a bank loan.                                                                     
4:38:41 PM                                                                                                                    
SENATOR HUGGINS asked what happens if he sells the boat.                                                                        
MR. WINEGAR replied that the division takes a security position                                                                 
in the vessel, so he would be required to pay off the loan.                                                                     
4:39:47 PM                                                                                                                    
CO-CHAIR WIELECHOWSKI thanked everyone for their testimony and                                                                  
finding no further business to come before the committee, he                                                                    
adjourned the meeting at 4:40 p.m.                                                                                              

Document Name Date/Time Subjects
SB 104 Bill Packet.pdf SRES 2/3/2010 3:30:00 PM
SB 104
SB 195 - Bill Packet.pdf SRES 2/3/2010 3:30:00 PM
SB 195