Legislature(2001 - 2002)
02/26/2002 03:20 PM House MLV
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HB 324-HOMELAND SECURITY APPROPRIATIONS CHAIR CHENAULT announced the final order of business, HOUSE BILL NO. 324, "An Act making supplemental and other appropriations for homeland security; and providing for an effective date." Number 2490 NANCY SLAGLE, Director, Division of Administrative Services, Department of Transportation & Public Facilities (DOT&PF), came forward to discuss DOT&PF's requests [listed in the document titled "Terrorism Disaster Policy Cabinet: Cost Estimates for Highest Priority Recommendations," dated 1/14/02]. MS. SLAGLE first addressed Item 107 ["Northern Region Highways and Aviation: Add municipal law enforcement officers for rural airports to meet FAA's mandatory 15 minute response time"]. She indicated the request is for FY 03 and a supplemental request for FY 02, and is for contract officers. Although the total listed is $1,596,000, Ms. Slagle pointed out that the department had submitted amendments to OMB [Office of Management & Budget], which the committee should probably receive tomorrow. The total request for [Item 107] will be $158,100: $88,100 for FY 02 and $70,000 for FY 03. MS. SLAGLE explained that following the [terrorist] attacks on September 11 there was a push by the Federal Aviation Administration (FAA) to increase security at all airports. One requirement was ensuring local law enforcement presence at Alaska's 16 certificated airports - those that accommodate airlines [carrying] 60 passengers or more: Barrow, Bethel, Cold Bay, Cordova, Deadhorse, Dillingham, Gustavus, King Salmon, Kodiak, Kotzebue, Nome, Petersburg, Sitka, Unalaska, Wrangell, and Yakutat. This was in addition to the presence of the National Guard, she indicated. She noted that the FAA has specific requirements for those airports under Section 107 of the C.F.R. [Code of Federal Regulations] with regard to "aviation security items." MS. SLAGLE said [DOT&PF] had done what it could using whatever was available in communities, including contractual relationships with [security firms]. Other requirements of rural airports included a 300-foot setback for vehicles. Because of the high cost, [DOT&PF] had requested and recently received waivers from the FAA for Alaska's rural airports for those two specific areas: the [local] law enforcement presence and the 300-foot setback. Thus the department's [requested amount] has dropped substantially because of no longer needing to provide that 24-hour-a-day law enforcement presence at or near those rural airports. In response to Chair Chenault, Ms. Slagle explained that Juneau hasn't been included because its airport isn't state-operated, but said to her belief it is pursuing a waiver as well. Number 2740 REPRESENTATIVE MURKOWSKI requested clarification about the mandatory 15-minute response time and whether it has been waived. MS. SLAGLE answered that it means law enforcement people must be within 15 minutes of the airport - available and close enough so that if something happens at the airport, they can respond immediately. That hasn't been waived. Rather, the full-time law enforcement presence has been waived. There are some projected expenditures for FY 03, Ms. Slagle pointed out. In the Southeast Region, for example, there will be additional costs for Gustavus, where [the state] has no law enforcement presence now. There is considerable [summer] activity there because of the tourist industry, and Alaska Airlines flies there. Thus [DOT&PF] will have to hire [a security firm] to provide that 15-minute [response time]. Number 2825 REPRESENTATIVE MURKOWSKI asked why Alaska Airlines personnel posted at a security checkpoint [in Gustavus] couldn't be used while the airport is open. MS. SLAGLE answered that it is the state's responsibility and that she doesn't believe Alaska Airlines would be willing to provide the needed assistance beyond baggage screening and so forth. The state also needs to check perimeters, to make sure somebody is there to respond to any incident, and so on. "The FAA guidelines are pretty specific on how we need to deal with it and respond to those security items," she added. REPRESENTATIVE MURKOWSKI noted that security people at the airport aren't Alaska Airlines [personnel]. MS. SLAGLE concurred. With regard to the baggage-screening personnel, she pointed out that at the [Ted Stevens] Anchorage International Airport, for example, those are provided by the airlines, not the airport, although in the future they will be federal [employees]. It is different depending on location: rural airports are different from Anchorage's airport. Number 2918 CHAIR CHENAULT asked whether there is a federal mandate relating to whether federal employees, for example, are being put in [as security personnel], in stages, depending on the size of the airport. MS. SLAGLE pointed out that those [federal] requirements are changing all the time, and that DOT&PF must keep up with them. She added that on December 6, FAA also "did some changes to the 14 C.F.R." that required fingerprinting of all [individuals in secure areas at both rural and international airports; she indicated background checks are required for all those individuals]. [The last portion isn't on the tape, but was transcribed from the Gavel to Gavel audio file.] TAPE 02-13, SIDE B Number 2972 MS. SLAGLE mentioned that for airport personnel, concessionaires, or others with access to secure areas, "badging" is also required in the rural airports. Part of the [funding] request is to add somebody who can deal with those fingerprinting [and badging] requirements. Ms. Slagle reported that [DOT&PF] has until December of this year to make sure all existing staff have been fingerprinted and have had criminal background checks; until now, there hasn't been that type of security in rural airports, including badging or fingerprinting. She added, "That is a requirement that FAA will not waive." CHAIR CHENAULT offered his assumption that the Central Region and Southeast Region will have some modifications and the same issue. MS. SLAGLE responded that it is part of the amendment [DOT&PF] is submitting: for the Central Region, the total [request] for FY 02 and FY 03 will drop to $129,000; although she didn't have the amount for the Southeast Region, she said that also will drop substantially. Number 2863 MS. SLAGLE began discussion of Item 115 ["Have DOT/PF maintenance personnel check key bridges on a daily basis and block access to roads under bridges"], which she said has no monetary impact. She explained that Item 115 is to have existing maintenance people, as they are "traveling through" and doing their appointed tasks on a daily basis, be able to report any suspicious activities or anything out of the ordinary about which they may need to contact law enforcement agencies. It acknowledges another level of security that those maintenance personnel need to assume in their regular job duties, including the [need] to identify [suspicious activities or anything out of the ordinary] to law enforcement or investigative agencies, and to know what those may be. It may require some training, for which [the department] has some federal dollars available. Number 2795 REPRESENTATIVE MURKOWSKI asked whether right now [DOT&PF] workers have a set schedule for going out and observing road conditions, for example. MS. SLAGLE affirmed that, mentioning the level of maintenance that happens on the road system and the bridges; the latter are critical, she said, and are more difficult to deal with than regular roadways because of icing, for instance. REPRESENTATIVE MURKOWSKI asked whether [the maintenance personnel] have a daily route on an individual basis. MS. SLAGLE questioned whether it would be on a daily basis, but said [Item 115] would be part of their responsibilities. It wouldn't take them out of a set routine or divert them from their regular activities, but would ensure that those bridges and areas are being observed a little more carefully. Prior to September 11, it wasn't even an issue, she noted. REPRESENTATIVE MURKOWSKI requested clarification, since [Item 115] says the bridges are to be checked on a daily basis. She said it sounds as though it would be in addition to regular duties. MS. SLAGLE agreed it would be an addition because, she was assuming, they would have to stop and look at a particular bridge, for example, which takes time [away] from what they normally would do. "But if they're going by the bridge, ... it certainly seems a reasonable thing for them to do," she added. Number 2664 MS. SLAGLE addressed Item 128 ["Port of Anchorage Access Road Security: Provide increased security at the Port of Anchorage Access Road"]. She explained that it was "felt that there was a requirement" for dealing with increased security into the Anchorage port facility for road traffic. The road to the port facility, a [DOT&PF] road, is part of the NHS [National Highway System]. Probably in early October, before the freeze-up, the guard shack for that area was moved and a loop was made so that if vehicles going up to the guard shack were turned back, those vehicles could leave. She offered her understanding that the port had provided the shack and moved it, whereas [DOT&PF] basically did the roadwork; she indicated that is what Item 128 pays for. Referring to the amendment she'd discussed earlier, she pointed out that part of it reduces [Item 128] from $30,000 to $17,000, which reflects [DOT&PF's] actual expenses in relation to this piece of road. Number 2584 REPRESENTATIVE MURKOWSKI pointed out that she has been following this particular issue because it is "just below my district, and we've kind of helped them with ... the security component of it"; she said that seems to be working out just fine. However, one of her concerns is that this is an "interim fix." She explained that there is a need to tighten security into the port area, and yet "the folks within the port," and certainly the truckers, have been clamoring for years for additional access into and out of the port. After September 11, there has been a need to restrict it despite the desires of [the truckers, for instance] to have another road, a tunnel, or [the ability to] "cut down through the neighborhood." She added, "They're recognizing now that the security component ... is very real and very legitimate." She continued: But now we're talking about the possibility of a Knik Arm crossing, and the crossing will come right through that port area. And it's not really an issue ... for this particular measure that we have in front of us, but I guess I'd just encourage the department to always be conscious of the fact that we do have a security issue down there in the port. And if we put a major thoroughfare right through the port, you're going to have some real serious security concerns. Number 2498 MS. SLAGLE began discussion of Item 133 ["Central Region Highways and Aviation: Purchase short-term War Risk Insurance for rural airports and analyze need for longer term insurance"]. [This discussion also involves Items 134 and 135, relating to the Northern Region and Southeast Region, respectively.] Ms. Slagle explained that within days of September 11, the insurance industry canceled war-risk and terrorism-related liability insurance coverage for all airports. The state administration believed it was important to continue to have that coverage, however; once it became available, she indicated, the state purchased [the coverage] for this year. She deferred to Brad Thompson to answer questions. CHAIR CHENAULT requested that Mr. Thompson explain not only what the war-risk insurance is, but also what it has cost the state in the past and will likely cost in the future. Number 2434 BRAD THOMPSON, Director, Division of Risk Management, Department of Administration, explained that his division operates and manages the state's self-insurance program; it also purchases excess catastrophe-level [insurance] for the huge potential liability arising from "our operations" for airports, aircraft, and the spaceport. Prior to September 11, [the state] had $500 million of liability insurance protection for which it paid $589,000 for the current fiscal year. That is just one of the "excess-insurance policies in our program," he said. Another is comprehensive marine insurance for the marine highways, which has a $250-million liability limit for the value of the vessel and injury to the crew or passengers; he indicated an approximate cost of [$1,200,000] for that. He explained: We purchased the war-risk [insurance] back. And the thing you have to understand is, for those two specialty insurances, there is an endorsement added in, as a normal course in any renewal, for the acts of terrorism, sabotage. And it's characterized or labeled "war risk." ... It doesn't become effective if you go to war. If the U.S. actually engages in war with a foreign power, we lose - that's an automatic termination. The underwriters, as a policy condition, have the option of issuing a notice of cancellation. Now, these insurances are placed with Lloyd's of London, other "major aerial syndicate" London companies, and international reinsurers. All of the aviation and marine insurance, post 9/11, including these war-risk endorsements, were canceled - not just for airports, [but for] all aircraft manufacturers, all airline operators. Congress passed a piece of legislation to protect the aircraft [manufacturers] and the aircraft operators, with a protection provided by the federal government if they were canceled and not able to renew the war-risk [insurance], and, in fact, continues to protect them above $100-million limits with financing from the U.S. Treasury for those extra, increased premiums. The airports were given no such protection; the airports attempted to get added into that airline transportation safety Act, unsuccessfully. That left the airlines, when it was available, with the dilemma of purchasing back the protection that [they] had. And, again, it's the liability insurance: if someone was able to gain access to an aircraft through one of our airports, do damage to the aircraft, somehow sabotage that aircraft, we would be, likely, named defendant on a liability claim, as is Logan Airport for those flights arising on 9/11. Number 2255 So we purchased back two layers - a primary layer of $50 million and an excess layer of $100 million - for the airport program; ... the first primary layer was 214,000 [dollars], and the second was 265 [thousand dollars]. We [are] now protected again for liability arising from not just the airports, but our aircraft. Our aircraft are fairly small in size compared to airlines, et cetera. But our major exposure is our airports - the security and the maintenance and operation of those airports. So we bought [it] back for the airport, and we also did the same thing for the marine highways. MR. THOMPSON concluded by indicating the detailed budget itemizes those charges incurred to date for [FY] 02, and projects those for [FY] 03; it is broken out for the major airports at Anchorage and Fairbanks, and then "the rural or the regional cost allocation." Number 2190 CHAIR CHENAULT offered his understanding: before September 11 there was $500 million in war-risk insurance at a cost of $589,000, whereas today there is $150 million [of insurance] at an approximate cost of $500,000. MR. THOMPSON responded with the following clarification: We have $500-million limits, except for today. So if our maintenance somehow [inappropriately] leaves a piece of equipment on the runway at Anchorage International [Airport] and a jet goes down, we have that available to us. That's not arising from an act of terrorism [or] sabotage, ... that other category labeled "war risk," which would be the terrorism- sabotage-type activity - intentional damage. That would be limited to $150 million today, ... at an additional cost of $480,000. Number 2140 REPRESENTATIVE MURKOWSKI requested confirmation that when the [war-risk insurance] was canceled, the state basically lost the $589,000 it had paid in already. MR. THOMPSON replied: We retained the coverage that we purchased. But in the policy form is a condition that subject to certain major world events, or on their own initiative, they can cancel this specialty protection. During the Gulf War, we were issued a notice of cancellation - we were able to purchase that back for a very small amount, under $25,000; that was not something that we brought to [the legislature's] attention - we just bought it back as a matter of course. These costs were the greater part of what we initially paid for the program. ... We paid on a per-$100 rate for the program, pre-9/11, 12 cents per $100; we paid 32 cents to buy back the war-risk [insurance]. MR. THOMPSON highlighted other airports as an example: for $150-million limits, Atlanta paid $3 million; LAX [in Los Angeles] paid $1.8 million for $50 million worth of coverage; and Chicago paid $10 million for $150 million [of coverage]. He cited the figures, on a per-$100 basis, of $3.60, $2.00, and $6.67 [respectively]. Mr. Thompson indicated that the more major an airport is, and the more toward the East Coast, the higher the rate. He added, "We paid a different rate for the two pieces: the 50 million [dollars] and then the 100 [million dollar] excess, but it averaged 32 cents per $100 of protection." CHAIR CHENAULT offered his understanding that the "buy-back" was just for the war-risk component that had been taken away. MR. THOMPSON specified that it is just that component for war- risk [insurance] that is being presented in [Items 133-135]. Number 2025 REPRESENTATIVE MURKOWSKI suggested the risk in rural areas wouldn't be nearly as high as in Anchorage or Newark [New Jersey]. She surmised that for smaller airports in the Southeast Region, there would be a much better rate because of the lower risk, which would be the reason for the smaller dollar amount being requested there. MR. THOMPSON answered: Quite frankly, ... I think that's purely an allocation throughout the segments of the operating budget of [DOT&PF]. There's no different rate from the underwriter. We have, for our risk, a single rate: it protects all of our aircraft, all of our airports, and our spaceport, quite frankly. REPRESENTATIVE MURKOWSKI asked how short "short-term" is. MR. THOMPSON answered: This purchase of the 480 [thousand dollars] was to replenish, to 150 [million dollars], what we had, through the end of this term. The projection for [FY] 03 is also ... presented, ... and we do not know with any certainty what the costs will be on renewal ... at 7/1 [the beginning of the next fiscal year]. AN UNIDENTIFIED SPEAKER asked whether this represents seven or eight months' worth of coverage. [There was no response.] Number 1943 REPRESENTATIVE MURKOWSKI referred to discussion in the House Labor and Commerce Standing Committee [which she chairs] of the widespread increase in insurance costs as a consequence of the September 11 events. She suggested this particular instance is one "where they get you coming and going." She asked whether any assistance is being discussed on the federal level. MR. THOMPSON offered his belief that there is still an effort to seek a federalized program to assist the total reinsurance market - not just for aviation or marine insurance. He said other countries have done so following September 11, "addressing airports." While Canada stepped in at the federal level and extended an umbrella to airport operators, the United States did not. Noting that he has information from all over the world, Mr. Thompson said many [countries provide this] on a national level to address terrorism, especially the European countries, which have experienced [terrorism] for years. Emphasizing that it is a very difficult issue for the reinsurers, he concluded, "But any certainty - I don't know." Number 1864 MS. SLAGLE returned attention to Item 107, the law enforcement presence, fingerprinting requirements, and so forth. She informed the committee that Congress had passed some appropriation bills; specifically, $175 million was made available for operating expenses for small, rural airports in the U.S. as a result of September 11. "We have applied to FAA for a portion of that," she reported. "And it looks very hopeful that we will ... may be receiving federal dollars to cover these expenses. And so we may be coming in with an amendment to change these from general fund to federal - just so you know that we are pursuing that." Number 1806 CHAIR CHENAULT asked whether there was any idea of an amount [DOT&PF] would be looking at receiving, in federal funds overall, not just for this particular item. MS. SLAGLE said she didn't have that figure. She pointed out that the items for the Anchorage International Airport are quite large, and she said most have been identified [by DOT&PF] for federal funding. She added: Some of them ... we've requested specifically from another $1.5-billion appropriation bill that the Congress has also, which would include operating and capital expenditures. And so we're pursuing that; ... I believe June is the deadline for that. ... If we don't get that, then there's also ... the ability to use some of our airport improvement program funding towards ... some of these items. So I don't know exactly how much we could anticipate from the federal government, but I think a large portion of it could be covered, specifically for the airports. CHAIR CHENAULT thanked testifiers and asked whether there were further questions; none were offered. [HB 324 was held over.]
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