Legislature(1995 - 1996)
04/21/1995 03:10 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 260 - MARINE PILOTS Number 030 CHAIRMAN PETE KOTT announced the first order of business would be HB 260, "An Act relating to marine pilots and the Board of Marine Pilots; extending the termination date of the Board of Marine Pilots; and providing for an effective date." DAN TWOHIG, Coordinator, Board of Marine Pilots, Department of Commerce and Economic Development (DCED), testified via teleconference. He said he supports the bill as it is currently written. He referred to Amendment 0.1, which deals with pilotage tariffs and establishing a maximum tariff, and said the DCED takes no position on the tariff issue. MR. TWOHIG referred to Amendment 0.2, relating to Section 2, which removes the extra seats on the board, and said the DCED supports the amendment. MR. TWOHIG referred to Amendment 3, which will add additional language to the cross regional licensing temporary license issue, and said the department supports it. Number 078 PAUL FUHS, Lobbyist, Southwest Alaska Pilots Association, was next to testify. He stated his organization hasn't taken a position on the composition of the board. He said it was probably an oversight to include the ability to relicense someone the next year if the shortage continues and if the commissioner finds there is a continuing shortage. Mr. Fuhs showed the committee a map showing the sizes of the three regions that currently exist. He said he doesn't support cross regionalization. The regions are very large and if you could keep up with what is going on within the regions, you would be doing well. Number 100 CAPTAIN RICHARD GURRY, President, Southeastern Alaska Pilots Association, was next to come before the committee. He noted the Southeastern Alaska Pilots Association is headquartered in Ketchikan, Alaska. Captain Gurry read his statement into the record: "I appreciate the opportunity to testify before this committee today. While we have several concerns about HB 260, which amends the Marine Pilot Act, I am going to focus only briefly on two aspects under consideration by this committee. "First, cross regionalization; second, composition of the Board of Marine Pilots; and, correct myself there is a third, the third is a request by shipping companies to impose a maximum tariff on pilot service fees. "First, cross regionalization. We oppose cross regionalization. We oppose cross regional licensing and support the Department of Commerce's position on this issue. "Second, composition of the Board of Marine Pilots. We support the current composition of the board and no additions of industry representatives on the board. The board should be comprised primarily of pilots who are regulated by the board; and public members because it is the public's interest that should be overseen by the board. We oppose adding additional industry members on this board. Industry agents are not restricted to working in regions as pilots are and, therefore, cannot offer specific expertise that a pilot can whose expertise lies only within a particular region. Larger boards are more cumbersome, more costly and less effective. Perhaps the best board make up would have three pilots, one from each region, three public members and one state representative. The board should be maintained as a Board of Marine Pilots and not a Board of Marine Agents. "Third, the maximum tariff. The State Board of Marine Pilots wrestled with a maximum tariff for several years. We spent countless hours on this matter taking up valuable board time which could have been used on more pertinent issues such as safety and training. Since last year, there has been no tariff for marine pilots, there have been no pilot shortages and no price gouging. We now hear from industry that a mechanism is needed for price disputes and to prevent work stoppages. SEAPA pilots have addressed both of these concerns in our contracts with cruise ship companies. Dispute resolution and automatic contract extensions have been suggested in every contract with vessel companies. Some companies have opted for these and some have not. Pilotage rates are below the tariffs set by the board in 1991. The reason why they are below is because pilots offered to discount their rates in exchange for long-term commitments. These commitments are needed in order for us to project our future pilotage requirements. In testimony before this committee on Wednesday, industry representatives suggested that there would be pilot shortage this year. The SEAPA pilots currently have 31 pilots on our roster. Not all of our members have renewed their license at this time. Many of our members would like to work a fuller schedule this summer, but because of lack of projected work, they have chosen to only work part-time. Industry has never specified a single blaring problem that now actually exists, in fact, as a consequence of the repealed maximum tariff. If industry is worried about the price and availability of pilots then it is incumbent upon the state to heavily regulate pilots to ensure that they are available and highly trained. A maximum tariff undercuts the system that the legislature has tried to enact, which is a competitive pilotage system. "Historically, under a state set maximum tariff, the board set the maximum tariff that could be charged but had no oversight over the actual amounts charged between pilots and vessels under private contracts. Maximum tariff does not either actively regulate pilotage or let pilots freely compete and this has serious repercussions. When there is competition, the market place decides the price and the Sherman Antitrust Act Law enforces competition and punishes those who conspired to restrain trade. When there is active state supervision of a private party, there is immunity from antitrust laws. However, under a maximum tariff true market forces are thwarted by establishing an artificial price ceiling and pilotage associations cannot enjoy antitrust immunity under a maximum tariff provision because there is not active supervision of pilotage prices actually charged. Therefore, we support leaving the bill as is - without a maximum tariff. Thank you. Number 197 REPRESENTATIVE ELTON asked Captain Gurry how much of the work that his organization does is provided to shippers that are under contract. He also asked how much of the pilotage work is done through people that they don't have contracts for. CAPTAIN GURRY said very close to 100 percent is done under contract. They have contracts that are through agents, and the scope of the vessels that they cover, the ships can come from anywhere. They represent such a broad scope of ships - different companies from different companies. He said it would be very cumbersome for them to get individual contracts from all the different freighter companies throughout the world, so they contract out with the agent that represents all those companies. REPRESENTATIVE ELTON said the contract with the agent would set a price for an individual (indisc.) CAPTAIN GURRY said that is correct. He noted it would cover any vessel that came in under the agent's authority. REPRESENTATIVE ELTON said any vessel that comes in probably has an agent. CAPTAIN GURRY responded in the affirmative. Number 224 BOB EVANS, Lobbyist, Alaska Marine Pilots, explained he was in attendance to speak to the maximum tariff. He said he has heard some concerns that the maximum tariff is necessary in order to avoid antitrust concerns on a federal level. Mr. Evans said he has given committee members a letter from Mark Ashburn, with Ashburn and Mason, which speaks to the fact that Sections 12 and 16 of the bill takes care of any concern about a maximum tariff. It provides the level of regulation, according to them, that is at least as good as a maximum tariff. Additionally, if that is a concern, his comments in the past have indicated a fixed tariff would make more sense. Mr. Evans said they are not asking for that at this time. This view is not only shared by Mr. Ashburn, who is formally the head of the Antitrust Section of the Attorney Generals Office, but it is shared by Dick Monkman, who is now the head of the Antitrust Section, and Mr. Weyhrauch who is with Faulkner Banfield. MR. EVANS said it has been suggested that this is a concern as a result of FTC versus TICORE. That case does not fall on all fours with the context - the facts of this case. That case is distinguishable from the facts in Alaska. TICORE involves the independent businesses that operate as title companies. Each of them independent of one another that come together as independent businesses, set a price and then offer that to some state authority which, in turn, will have to take some negative action to prevent that from becoming the price. If they fail to reject the price then the price goes forward as the price for the title companies. These are independent businesses. The factual context of Alaska is that these organizations, which are independent entities, will fix a price, set an amount, within the organization. Mr. Evans said there is nothing in the statute that says the Southeast Alaska Pilots Association (SEAPA) is supposed to sit down with Alaska Coastwise Pilots (ACP) and set a price or another organization. There is no price setting from one business entity to another which makes FTC versus TICORE not applicable to the facts of this case. MR. EVANS said there are two reasons off the top. The statutory provisions in the bill before the committee takes care of the concern of a maximum tariff for antitrust problems. The FTC versus TICORE is not applicable based upon the different factual context. Mr. Evans said he would point out that the people at risk are the individual businesses. They are not industry, it is not the state, is not anybody but themselves with the advice of their counsel and their own independent business decisions, they are prepared to take that risk. Public safety is not an issue here. This is a business/legal decision of these organizations. Mr. Evans said there is no good reason why the state ought to involve themselves in that kind of a decision. MR. EVANS referred to the maximum tariff and said if it is put in place, it will give a negotiating tool to one side that is not available to the pilots. In the past when the maximum tariff existed, there were no contracts. The individual pilot groups had to take what came whenever it came. There is no market share. They serviced the industry at the whim at getting a call or not getting a call. The maximum tariff that went away last year has brought more stability in the shipping lanes of the state of Alaska than anything that has occurred since 1991. He urged the committee to reject the amendment which establishes a maximum tariff. Number 293 REPRESENTATIVE ROKEBERG asked what the length of time has been that there hasn't been a maximum tariff. MR. EVANS said since June, 1994. REPRESENTATIVE ROKEBERG asked how many contracts have been entered into since that time. He also asked what the atmosphere has been between industry and the pilots. MR. EVANS said he could only speak for the organization he represents. He said they have signed one contract which amounts to about 21 percent of the work in their region. They are currently going through active negotiations with several others. He said his organization has been told that there is probably not much reason in negotiating until the legislature decides whether there is going to be a maximum tariff. He said other representatives could probably give a better answer to the number of contracts that have been signed. Number 310 BRUCE WEYHRAUCH, Representative, Southeast Alaska Pilots Association, was next to come before the committee to testify. He said in their capacity as attorneys representing the individuals who are working for pilot associations, the Southeast Alaska Pilots Association is not recommending that they would enjoy antitrust immunity under a maximum tariff provision. If the Department of Law suggests that it is better than nothing, then his organization would like an indemnity provision from the Department of Law that they will reimburse SEAPA for their legal fees and any damages they have to pay for an antitrust judgement. Currently, the negotiations between the pilot associations and the companies involved are at arm's length with transactions between two private parties over the terms of a contract, and that is what the legislature deemed which should take place in 1991 -- a competitive system of pilotage. MR. WEYHRAUCH said unless the state actively and aggressively supervises marine pilots, they will always face this antitrust threat. So it is active supervision by the state of every aspect, not just price. It includes training, entry, discipline, everything, and clearly articulating that policy to displace competition in the statue. That is what it will take before they recommend that they have antitrust immunity. MR. WEYHRAUCH said if a maximum tariff is imposed, why not a minimum tariff on the industry. He referred to the industry side of the issue and asked why the pilots should take all the heat. Number 337 GAYLE HORETSKI, Assistant Attorney General, Commercial Section, Civil Division, Department of Law, came forward to testify. She said the Department of Law would decline to accept Mr. Weyhrauch's invitation to indemnify them for their legal expenses. Ms. Horetski said she has personally spoken with Mr. Robert Schoder, Attorney, Federal Trade Commission (FTC), in Seattle. She informed the committee the FTC issued a generalized report about competition in the pilotage industry in Alaska. Mr. Schoder told her that the FTC agrees with the Department of Law's interpretation of the TICORE case as it applies to antitrust immunity, under federal law, for pilot associations. She said she did invite representatives of pilot associations to share with her any letters or memorandums that they received from Mr. Ashburn on this issue. She noted that several days ago the issue about Mr. Ashburn having a contrary opinion was first brought up in the Senate. To date, she hasn't seen anything in writing on that. She said she can't really respond to what Mr. Ashburn has allegedly said since she hasn't seen any documentation. There being no questions of Ms. Horetski, Mr. Kyle was next to testify. JOE KYLE, Alaska Steamship Association, said he would like to clarify a couple of things. He referred to the maximum tariff and said he would like to remind the committee that what industry is concerned about is not a maximum tariff so much as an impasse where pilots and shippers cannot agree on a price. Mr. Kyle referred to Captain Gurry's testimony and said he thinks that he gave a great example of how likely it is that they are not going to be able to agree all the time when he suggested that the industry be disenfranchised from the process of the Marine Pilot Board. Mr. Kyle said they are a major stakeholder in this entire process. They have hugh capital investments that they entrust to the care of pilots when they move into state waters. They want to be a player in the process that regulates those pilots. MR. KYLE referred to the issue of maximum tariffs being before the committee and said it is because the industry has already tried binding arbitration with the pilots as a dispute resolution mechanism. The pilots shot that down. They then tried a mediation process with the legislature. The pilots shot that down. Now we're back where we were before which is maximum tariffs. Mr. Kyle said different people will give different versions as to how well the maximum tariff worked since 1991. The reason it is back before the legislature is because they knew where they were with the maximum tariff. MR. KYLE said he doesn't know how binding arbitration, competition and mediation hurts pilots. He referred to the experience they had with the maximum tariffs over the last three years and said he doesn't know how that hurts pilots. Mr. Kyle said he would like to remind the committee that there needs to be some kind of mechanism in the Marine Pilot Act to get a handle on tariffs so the industry has some protection. MR. KYLE referred to Mr. Weyhrauch's comment about pilot associations and the companies involved are at arm's length and said that isn't accurate when the companies are required, by law, to engage the services of pilots. He said they are open to mediation and arbitration. Since that hasn't been satisfactory to the pilots, they are at the maximum tariff and that is what his association currently supports. Number 397 MR. WEYHRAUCH said, for the record, the pilot's have asked in their contracts for arbitration provisions. The companies have rejected those in contracts. The pilots are out there, they want to work on their own and they don't need the paternalistic attitude of industry trying to look out for their interests. He said they are ready to compete if that is what the legislature wants them to do. Number 410 There being no further witnesses to testify on the measure, CHAIRMAN KOTT closed public testimony. He said the committee has three proposed amendments before them 01, 02 and 03, Utermohle, dated 4/20/95. Chairman Kott moved Amendment 1. He noted the amendment was requested by bill's prime sponsor. The suggestion was that maximum tariff be established. Amendment 1 restores the language that existed prior to the exploration of the maximum tariff. REPRESENTATIVE KUBINA put a call on the committee. CHAIRMAN KOTT announced the committee would take an at ease at 3:35 p.m. The House Labor and Commerce Committee was called back to order at 3:37 p.m. CHAIRMAN KOTT said the call has been satisfied. He said Amendment 1 has been moved. He asked if there was an objection. REPRESENTATIVE KUBINA objected for the purpose of discussion. He said it seems like a maximum tariff would give a half of a solution. He indicated it doesn't seem like there is open competition. Representative Kubina said he would be very supportive of binding arbitration and the board could be the arbitrator. At least somebody is making a decision and they are hearing both sides of the story. To put a cap on it seems like the legislature is taking one side's point of view. He said he would support binding arbitration, total competition or mediation. Representative Kubina said the amendment appears to take one side over the other. CHAIRMAN KOTT said the state has essentially mandated that shippers/transporters are going to have to have pilots on board. The board will determine the maximum tariff. He noted the board consists of public members, shippers and pilots. Between the three of those groups, they should come up with a rational approach. Chairman Kott said Representative Kubina is right to a degree that they are somewhat curbing free and open market competition by establishing a maximum ceiling on what can be charged. Currently, as it stands in some of the regions there is not competition anyway. So what would prevent those individual groups from establishing whatever tariff they want to establish within reason. Number 456 REPRESENTATIVE KUBINA referred to his region, Prince William Sound, Region 2, and said there is no competition for tanker traffic coming in and out of the sound. He noted it is very substantive. It doesn't appear they're having a problem there. Representative Kubina said he would be more in support of the board deciding. He suggested not setting a cap, but let the board set the rate. CHAIRMAN KOTT said there may be some severe problems with letting the board set a rate as there may be problems in agreeing to that rate. REPRESENTATIVE KUBINA referred to the amendment and said they're setting a maximum rate. REPRESENTATIVE PORTER commented that he has been all over the board regarding the issue between safety, competition, etc. The state initiated this quandary by saying, "You will, shippers, have pilots. We will establish standards for their experience and training and (indisc.--coughing) and you will put them on your ships." So the state has interjected itself once and said if you don't, it's a crime. That is a pretty heavy sanction. Representative Porter said, "To me, then saying, `But we're not going to give you shippers any assistance in trying to reasonably meet our expectation of being able to reasonably compensate pilots' isn't there. So from that standpoint, and I have some labor management experience in my background, I was taken (indisc.) when I heard the representative of -- in effect management if this is one of those kinds of issues saying, `Please give me binding arbitration.' Wow! Binding arbitration generally does not favor management and my personal philosophy is such that unless employee who has the right to strike, which obviously pilots have the right to say `I'm not going,' binding arbitration seems to be inappropriate. So to hear the industry saying give us binding arbitration makes me believe that they're really in a vulnerable position." Representative Porter said he doesn't know that this is appropriate answer but it is an answer and he is willing to give it shot since it seems to have generated the contracts that are currently in existence. Number 501 REPRESENTATIVE ELTON said it is hard for him to think of this in terms of labor management -- talking about two different types of business groups. He said he isn't as concerned about the major shipping companies. They're going to be operating under a contract. It seems to him that the value of a maximum rate for an agent that's bringing in a ship that might come in once a year or once every three years seems to be the area in which there are vulnerabilities. REPRESENTATIVE ROKEBERG said if the committee were not to adopt Amendment 1 and leave the status quo as it currently is, there is the threat of the FTC finding there is some antitrust violations. He asked who would be penalized and what would be the corrective action. REPRESENTATIVE KUBINA said he believes the answer would be the pilot organizations who don't want this. REPRESENTATIVE ROKEBERG said they don't want it but they would be the ones to answer to it. REPRESENTATIVE PORTER said he thinks that there is substantial concern and this would go towards ameliorating that problem. Number 538 A roll call vote was taken on Amendment 1. Voting in favor of the amendment were Representatives Kott, Porter and Elton. Voting against Amendment 1 were Representatives Sanders, Kubina, Rokeberg and Masek. So Amendment 1 failed to be adopted. Number 547 CHAIRMAN KOTT moved Amendment 2 which restores the board back to the existing composition as it currently exists. Hearing no objection, Amendment 2 was adopted. Number 550 CHAIRMAN KOTT stated Amendment 3 addresses the renewal of a license by the commissioner in times of immanent shortage. It makes it simpler for him/her to continue with business under a shortage condition. He moved Amendment 3 be adopted. He asked if there was an objection. Hearing none, Amendment 3 was adopted. Number 554 REPRESENTATIVE KUBINA asked for a brief at ease at 4:50 p.m. CHAIRMAN KOTT called the meeting back to order at 4:55 p.m. He handed the committee members Amendment 4 which deals with dispute resolution. Do to the extensive nature of the amendment, he said he will hold the bill over pending the committees review of it. He said it would be brought up at another time. At this point an at ease was taken. The meeting was called back to order at 3:58 p.m.