01/25/1994 03:45 PM Senate O&G

 SENATOR LEMAN announced the Committee would end the "work                     
 session" and begin the hearing portion of the meeting and                     
 brought  SB 239  (NONCRUDE OIL OPERATIONS:FINANC'L RESPB'TY) up               
 for consideration.                                                            
                                                                               
 Number 394                                                                    
                                                                               
 MEAD TREADWELL, Deputy Director, Department of Environmental                  
 Conservation, explained that the law requires people providing                
 insurance as a form of financial responsibility have a policy                 
 which allows the insurer to be sued in a state court. Prior                   
 to Exxon Valdez no one had a problem getting this direct                      
 action insurance.  After the Exxon Valdez, OPA '90 was passed                 
 requiring direct action insurance nationally.  At that time,                  
 the London insurance market had stopped writing this kind of                  
 insurance as widely as it had.  DEC was faced with a situation                
 where they had to be able to grant waivers to small companies                 
 who could not get this kind of insurance or shut them down                    
 under the law.                                                                
                                                                               
 The legislature allowed them to grant waivers quarterly if                    
 people could not get direct action.                                           
                                                                               
 In summary, MR. TREADWELL said, they support the intent of                    
 this bill and suggest a simple amendment in Section 1 making                  
 the waiver provision permanent.                                               
                                                                               
 He explained that the waiver provision is very strictly                       
 enforced.                                                                     
                                                                               
 SENATOR SALO remarked that the direct action insurance is                     
 available to some, but not to others and asked what is the                    
 difference.                                                                   
                                                                               
 MR. TREADWELL answered part of it has to do with the position                 
 taken by the P&I clubs.  He said approximately 12 people have                 
 been able to get it and about 20 haven't.  He added that DEC                  
 enforces the general law on financial responsibility                          
 rigorously and there is 100% compliance.                                      
                                                                               
 Number 506                                                                    
                                                                               
 RAY GILLESPIE, Petro Marine Services, Crowley Maritime, and                   
 Delta Western, said his companies do a good percentage of                     
 distribution of refined oil products in the state.                            
 Unavailability of direct action insurance has been a                          
 consistent problem since right after the Exxon Valdez.                        
                                                                               
 Prior to the Exxon Valdez direct action insurance has been                    
 available, but not through the London market which provides                   
 an indemnification type of contract reimbursing operators'                    
 claims.  They have never agreed to be sued in every state.                    
                                                                               
 Companies satisfied the requirement prior to Exxon Valdez with                
 an insurance product that was sold in the U.S. domestic                       
 insurance market.  It was a binder of sorts that satisfied the                
 direct action requirement.  After the Exxon Valdez, that                      
 market dried up.  No company that operates vessels or shore-                  
 side tank farms has gotten a direct action policy.  Those that                
 have been written are for the upland facilities and some of                   
 the larger exploration companies that fall under another risk                 
 category for insurance than his operators do.                                 
                                                                               
 He supported the testimony from DEC and urged them to adopt                   
 the CS as distributed by staff.                                               
                                                                               
 Number 544                                                                    
                                                                               
 BILL SCHOEPHOESTER, Petro Marine Service and Association of                   
 Refined Oil Distributors, said he has been working directly                   
 with his insurance company and has not been able to come up                   
 with any direct action insurance he can buy.  He urged the                    
 committee to eliminate the temporary nature of the waiver.                    
                                                                               
 SENATOR LEMAN said they would take up SB 239 at their next                    
 meeting and hoped to move it from Committee and adjourned the                 
 meeting at 4:07 p.m.