Legislature(1995 - 1996)
04/19/1995 03:10 PM House L&C
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE LABOR & COMMERCE STANDING COMMITTEE
April 19, 1995
3:10 p.m.
MEMBERS PRESENT
Representative Pete Kott, Chairman
Representative Norman Rokeberg, Vice Chairman
Representative Kim Elton
Representative Gene Kubina
Representative Brian Porter
MEMBERS ABSENT
Representative Jerry Sanders
Representative Masek
COMMITTEE CALENDAR
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."
HEARD AND HELD
* HB 144: "An Act relating to salaries for officers and
employees of the state who are not members of a
collective bargaining unit; and providing for an
effective date."
SCHEDULED BUT NOT HEARD
* HB 298: "An Act making appropriations for the monetary terms
of the collective bargaining agreement with the Alaska
Public Employees Association, Supervisory Unit; and
providing for an effective date."
SCHEDULED BUT NOT HEARD
* HB 299: "An Act making appropriations for the monetary terms
of the collective bargaining agreement with the
Inlandboatmen's Union of the Pacific; and providing
for an effective date."
SCHEDULED BUT NOT HEARD
* HB 300: "An Act making appropriations for the monetary terms
of the collective bargaining agreement with Public
Employees Local 71, Labor, Trades and Crafts Unit; and
providing for an effective date."
SCHEDULED BUT NOT HEARD
* HB 305: "An Act making appropriations to satisfy the agreed
upon monetary terms of a collective bargaining
agreement for certain employees of the University of
Alaska; and providing for an effective date."
SCHEDULED BUT NOT HEARD
(* First public hearing)
WITNESS REGISTER
REPRESENTATIVE GARY DAVIS
Alaska State Legislature
State Capitol Building, Room 420
Juneau, Alaska 99801-1182
Telephone: (907) 465-2693
POSITION STATEMENT: Sponsor of HB 260
JEFF BUSH, Deputy Commissioner
Department of Commerce and Economic Development
P. O. Box 110800
Juneau, Alaska 99811
Telephone: (907) 465-2500
POSITION STATEMENT: Testified on HB 260
PAUL FUHS, Lobbyist
Southwest Alaska Pilots Association
10652 Porter Lane
Juneau, Alaska 99801
Telephone: (907) 790-3030
POSITION STATEMENT: Testified on HB 260
DAN TWOHIG, Marine Pilot Coordinator
Board of Marine Pilots
Department of Commerce & Economic Development
P.O. Box 110806
Juneau, Alaska 99811-0806
Telephone: (907) 465-2548
POSITION STATEMENT: Testified on HB 260
MICHAEL SPENCE, Representative
Alaska Coastwise Pilots
P.O. Box 6337
Ketchikan, Alaska 99901
Telephone: (907) 225-7245
POSITION STATEMENT: Testified on HB 260
HANS ANTONSEN, Representative
Southeastern Alaska Pilots Association
P.O. Box 6100
Ketchikan, Alaska 99901
Telephone: (907) 225-9696
POSITION STATEMENT: Testified on HB 260
DAVE SANDERS, Vice President
Alaska Marine Pilots
P.O. Box 730
Dutch Harbor, Alaska 99692
Telephone: (907) 581-1240
POSITION STATEMENT: Testified on HB 260
GAYLE HORETSKI, Assistant Attorney General
Commercial Section, Civil Division
Department of Law
P.O. Box 110300
Juneau, Alaska 99801
Telephone: (907) 465-3600
POSITION STATEMENT: Testified on HB 260
GINNY FAY
9850 Nine Mile Creek Road
Juneau, Alaska 99801
Telephone: (907) 586-2465
POSITION STATEMENT: Testified on HB 260
JOE KYLE, Representative
Alaska Steamship Association
234 Gold Street
Juneau, Alaska 99801
Telephone: (907) 586-3107
POSITION STATEMENT: Testified on HB 260
PREVIOUS ACTION
BILL: HB 260
SHORT TITLE: MARINE PILOTS
SPONSOR(S): TRANSPORTATION
JRN-DATE JRN-PG ACTION
03/15/95 745 (H) READ THE FIRST TIME - REFERRAL(S)
03/15/95 745 (H) TRANSPORTATION, LABOR & COMMERCE
03/22/95 (H) TRA AT 01:00 PM CAPITOL 17
03/22/95 (H) MINUTE(TRA)
03/24/95 (H) TRA AT 01:00 PM CAPITOL 17
04/05/95 (H) TRA AT 01:00 PM CAPITOL 17
04/05/95 (H) MINUTE(TRA)
04/07/95 1170 (H) TRA RPT CS(TRA) 2DP 2NR 2AM
04/07/95 1171 (H) DP: BRICE, WILLIAMS
04/07/95 1171 (H) NR: MACLEAN, SANDERS
04/07/95 1171 (H) AM: JAMES, G.DAVIS
04/07/95 1171 (H) FISCAL NOTE (DCED)
04/12/95 (H) L&C AT 03:00 PM CAPITOL 17
04/18/95 1356 (H) FIN REFERRAL ADDED
04/19/95 (H) L&C AT 03:00 PM CAPITOL 17
BILL: HB 144
SHORT TITLE: NONUNION STATE EMPLOYEE SALARY INCREASE
SPONSOR(S): RULES BY REQUEST
JRN-DATE JRN-PG ACTION
02/01/95 200 (H) READ THE FIRST TIME - REFERRAL(S)
02/01/95 200 (H) FINANCE
04/10/95 1226 (H) L&C REFERRAL ADDED
04/19/95 (H) L&C AT 03:00 PM CAPITOL 17
BILL: HB 298
SHORT TITLE: APPROP: MONETARY TERM APEA SUPERVISOR CON
SPONSOR(S): FINANCE
JRN-DATE JRN-PG ACTION
04/05/95 1027 (H) READ THE FIRST TIME - REFERRAL(S)
04/05/95 1027 (H) LABOR & COMMERCE, FINANCE
04/19/95 (H) L&C AT 03:00 PM CAPITOL 17
BILL: HB 299
SHORT TITLE: APPROP: MONETARY TERM IBU CONTRACT
SPONSOR(S): FINANCE
JRN-DATE JRN-PG ACTION
04/05/95 1028 (H) READ THE FIRST TIME - REFERRAL(S)
04/05/95 1028 (H) LABOR & COMMERCE, FINANCE
04/19/95 (H) L&C AT 03:00 PM CAPITOL 17
BILL: HB 300
SHORT TITLE: APPROP: MONETARY TERM LOCAL 71 CONTRACT
SPONSOR(S): FINANCE
JRN-DATE JRN-PG ACTION
04/05/95 1028 (H) READ THE FIRST TIME - REFERRAL(S)
04/05/95 1028 (H) LABOR & COMMERCE, FINANCE
04/19/95 (H) L&C AT 03:00 PM CAPITOL 17
BILL: HB 305
SHORT TITLE: APPROP: UNIV. OF AK LABOR AGREEMENTS
SPONSOR(S): FINANCE
JRN-DATE JRN-PG ACTION
704/11/95 1237 (H) READ THE FIRST TIME - REFERRAL(S)
04/11/95 1237 (H) LABOR & COMMECE, FINANCE
04/19/95 (H) L&C AT 03:00 PM CAPITOL 17
ACTION NARRATIVE
TAPE 95-41, SIDE A
Number 001
The House Labor and Commerce Standing Committee was called to order
by Chairman Pete Kott at 4:32 p.m. Members present at the call to
order were Representatives Kott, Porter, Elton and Kubina. Members
absent were Representatives Rokeberg, Masek and Sanders.
CHAIRMAN PETE KOTT announced there were several measures before the
committee including HB 260 relating to marine pilots, and HB 144,
HB 298, HB 299, HB 300, and HB 305 which are the contract
provisions. Chairman Kott said it was not his intention to hear
any of the contract provisions because of the late start of the
meeting and other members needing to leave for other meetings. He
said those bills would be held over until Friday.
Representative Rokeberg arrived at 4:35 p.m.
HB 260 - MARINE PILOTS
Number 026
CHAIRMAN KOTT introduced Representative Gary Davis, prime sponsor
of HB 260.
REPRESENTATIVE GARY DAVIS, Sponsor and Chairman of the House
Transportation Committee introduced HB 260. He said the House
Transportation Committee had some rather extensive hearings on this
legislation and would briefly go over what they did in that
committee concerning HB 260.
REPRESENTATIVE DAVIS said HB 260 extends the Board of Marine Pilots
which will sunset June 30 and there is a portion of the existing
law that sunsetted earlier; that being the maximum tariff provision
which was Alaska Statute 08.62.045. Representative Davis said in
the House Transportation Committee hearings, there was a list of
recommendations from the Administration to do a number of house
cleaning measures and those are all incorporated in the bill.
There wasn't a lot of debate or contention among those house
cleaning issues. The sectional analysis is rather extensive; there
are 22 sections. He said the bottom line is that after the House
Transportation Committee heard the debate, the contentious item is
unquestionably the provision that he had included in the
legislation which referred to conflict resolution and was addressed
through binding arbitration. The discussion in the committee and
the result of a committee vote, pulled that provision from the
legislation so there is currently no conflict resolution in the
legislation. Representative Davis said it is felt, and there will
undoubtedly be discussion from the interested and involved parties
that some feel there is no need for it, others feel there is a
strong need for it, and others will probably remain neutral.
Number 054
REPRESENTATIVE DAVIS pointed out that there may be a question on
Section 2. One thing the House Transportation Committee did was
increase the size of the Marine Pilots Board. They increased the
pilot organizations members by one and increased the industry
representation by one on the board. Some people question if that
isn't an increase in cost. Representative Davis said it is, but
not to the state. The dues and fees paid for by the organizations
pay for the activities of the board, so that is not a concern as
far as a fiscal note to the state. Representative Davis commented
there wasn't a lot of debate on that; it was somewhat accepted, but
he wasn't exactly sure because it had been a couple of weeks since
the House Transportation Committee heard it and there's been
opportunity for people to reconsider everything that has been done.
Number 067
REPRESENTATIVE DAVIS commented that he would leave the majority of
the debate up to the involved parties. He said there was a maximum
tariff before. There is some question in the Department of Law and
he indicated he would leave that up to the Department of Law to
discuss and explain the antitrust provisions and possible problems
from that area as it relates to what will be referred to as the
state action exemption. If the state gets an exemption from the
federal antitrust laws, then there has to be some rate setting
scenario in the legislation. Representative Davis said he would
probably lean toward the maximum tariff provision. His whole
argument in including a conflict resolution clause in the
legislation is, since this is mandated by the state, is there an
opportunity or will there be an opportunity out there, for any
emergency provision to provide these services. Is there or could
there be an opportunity for a vessel movement where a pilot would
not be provided. If that could ever be the case, how is it going
to be handled? What is the resolution to that conflict? He
commented that was his feeling and it still is that the best
interest of the state should have something included in the
legislation that would address that. Most of the debate will be
centered around that issue. He said since maximum tariff was a
provision and had been a provision previously, it would be a strong
contender for reinsertion to address that conflict resolution.
Representative Davis said he was available to answer any questions.
Number 095
CHAIRMAN KOTT said it was his understanding that under existing
law, there is a $250,000 liability limitation and he thought there
was an exception if the accident is based on incompetence. He
didn't think that exception was there in the new bill, which would
indicate to him a problem as to who would pick up the bill if it
exceeded that $250,000 liability limitation.
REPRESENTATIVE DAVIS commented that issue wasn't debated
extensively enough to where he could recollect exactly what the
debate was. He said he would leave that up to the Department of
Law to respond.
CHAIRMAN KOTT asked if there were any questions for the sponsor.
Hearing none, he asked Gayle Horetski to give the committee her
position. Ms. Horetski responded that Jeff Bush from the
Department of Commerce and Economic Development was present to
testify and said she was available to answer questions.
Number 111
JEFF BUSH, Deputy Commissioner, Department of Commerce and Economic
Development; and the Commissioner's representative on the Board of
Marine Pilots, said he was present to testify that the department
is fully in support of this legislation. He commented that the
bill before the committee is a bill that just about everybody here,
can agree is good. The issue isn't what is here; it is what isn't
here and that is where the debate will go. Mr. Bush pointed out
that the department does mildly disagree with the changes made in
Section 2 to increase the Board of Marine Pilot membership by
adding an extra pilot member and an extra industry representative,
because that does in fact increase the cost. He said as the
legislature well knows, the cost for occupational licensing boards
has to be borne by the licensees, by statute, and the Board of
Marine Pilots licenses, for example, are $3200 a piece per year.
So, we're talking about a significant amount of money and the
department is interested in trying to keep those costs down in
whatever way possible. Increasing a board0 from seven members to
nine members does a couple of things: It increases the number of
people who have to attend the meetings, airfares, etc.; and it also
can make board meetings take longer in that every time you add more
people, it takes longer to complete business. Mr. Bush said it was
a very mild objection, but it is something the department would
like to point out to the committee for consideration.
Number 136
MR. BUSH referred to the conflict resolution issue and said the
department has and will continue to take a neutral position on this
issue of whether we have conflict resolution or dispute resolution,
binding arbitration or maximum tariff placed in the bill. Whatever
device, or no device, that the legislature feels is appropriate,
the department does not take a position on any of those. The
department's interest is in maintaining enough pilots and
maintaining safety in terms of quality pilots, out on the waters.
He didn't think the state should be in the middle of disputes over
what a particular pilot should be paid. Mr. Bush said he would
entertain any questions from the committee.
Number 147
CHAIRMAN KOTT asked Mr. Bush what the state's primary
responsibility was.
MR. BUSH said, safety - no question. He said we talk about two
things -- safety and availability of pilots, but he thought
availability of pilots is actually a subgroup of safety. Making
sure that you have enough pilots and quality pilots available so
that every ship gets a pilot. He said in some sense they have
another interest which is commerce, which is raised in the
availability of pilots issue and we certainly don't want commerce
to come to a halt because there is not enough pilots.
Number 153
REPRESENTATIVE BRIAN PORTER asked (indisc.) the safety issue is
(indisc.) primarily by the qualifications and licensing of
(indisc.).
MR. BUSH said, "Yes, I do and the board has over the past several
years been making those qualifications tougher and has focused and
concentrated on safety issues in making sure the pilots are well
trained and keep up their training."
Number 158
REPRESENTATIVE GENE KUBINA asked why two of the groups were being
increased, but not the public person?
MR. BUSH responded that the groups must have come forward and
recommended those changes. The department's position was that
everything was fine before. The argument was made in the earlier
committee that there are in fact three public representatives
because there's two plus the Commissioner of the Department of
Commerce and Economic Development, and this is merely equalizing
it between industry and the pilots. It is in fact a dilution of
the public representation on the board. Even though he has never
talked to anyone about it, he thought the department would be
concerned about that. However, it's not a significant concern
because quite frankly, Mr. Bush said he has a lot of respect for
the people on the board and felt they did a good job. Even though
you hear about issues like safety and concerns about safety, he
felt the primary interest of every one of the various interests
groups was safety. The ship owners want to move their products at
a reasonable price, but the fact is, when you're dealing with ships
of that size and that value, any accident whatsoever is extremely
costly, so everybody is concerned about making sure accidents don't
occur.
Number 174
REPRESENTATIVE KIM ELTON said what he found unusual about the
makeup of the board is that someone from the commissioner's office
is on period. He asked how many occupational boards the department
has where the commissioner or the commissioner's designee serves
and why is it on this one?
MR. BUSH responded this was the only one, and the why is -- Mr.
Bush said he wasn't around when this was done, but he thought it
essentially has been tradition. He said quite frankly when he took
this job, originally one of the things he wanted look at was why
the deputy commissioner should be on this board. He raised that
issue and everyone said it was important for that person to be
there because this board, at least in terms at the moment, there is
so much safety interest from the public's standpoint that there is
a need for someone who is in the government sector, who is also
concerned with the public interest, to sit on this particular board
until, at least, this board works more smoothly and has had a
longer chance and more time as an occupational licensing
organization to get used to regulating itself. Mr. Bush said that
is the rationale. He said it makes several things occur: One is
that it makes him in an unusual situation where he has to build a
Chinese wall between his own staff on investigations and quasi-
judicial proceedings. That doesn't occur in any other licensing
board. On the other hand, the Department of Commerce and Economic
Development is much more active on this board than any other
because of (indisc.).
Number 199
CHAIRMAN KOTT said he had asked the sponsor of the bill about the
$250,000 limit regarding liability and wasn't sure if he dismissed
it or if it has been removed from the current version. If so, what
would happen if that liability exceeded $250,000 if an act of
negligence or incompetence...
MR. BUSH responded that it was still in Section 15. He said it
doesn't apply essentially in cases of gross negligence, willfulness
or, he believed, alcohol or drug abuse kinds of situations.
Number 221
PAUL FUHS, Lobbyist, Southwest Alaska Pilots Association, said he
was representing Captain Eric Eliassen, who is the Chairman of the
Southwest Pilots Association, who pilots ships in Southcentral
Alaska -- Cook Inlet, Prince William Sound and Kodiak. Captain
Eliassen is also the chairman of the Alaska Statewide Pilots
Alliance. Mr. Fuhs said this issue has been very contentious, so
this was an effort to try to pull the pilots together and see if
the level of contention could be reduced and come up with
recommendations for the legislature on marine pilotage that could
reduce some of the fees, the lawsuits, etc., and he thought this
legislation does that. He said the Department of Law had some
concerns about level of litigation and this really helps solve many
of those problems. One of the things the group agree to is they
would accept the competitive model that the legislature adopted in
1991, where you can have more than one pilot group per region.
Here is where the rub comes in terms of tariffs. You have
competing groups that are negotiating for contracts and yet, here
comes a proposal for the government to come in and set tariffs when
they are supposed to be competing. It just doesn't add up, and
that's why there has been some friction on this. You have one or
the other. The Southwest Pilots Association said they would accept
binding arbitration and he thought they were the only group that
said that. That would allow them to negotiate freely with
industry, like any other industry, and have a method of conflict
resolution without the government being involved in the business of
setting tariffs. Apparently, that was not acceptable. He said the
Southwest Pilots Association would have gladly accepted that
provision, but it's not in there. In the absence of that, the
association does not support the government setting tariffs. They
would like to see the bill go through as it is in its current form.
He commented that he wanted to explain that as to why this doesn't
seem to add up - the competitive position with also imposing
tariffs by the government.
Number 249
MR. FUHS referenced the other issue of liability and thought he
could answer Chairman Kott's question. He said it was something
that the pilots agreed on. The legislation says that you've got a
limit of your liability of $250,000 for what you can go after a
pilot for if they make a mistake and a ship runs aground. You
would lose that limitation of the liability if you did it on
purpose, if it was willful, if it was grossly negligent, or if you
were on alcohol or drugs. That means that if you were drunk and
ran a ship aground, they could after your house, they could go
after any holdings that you had - unlimited. They could take
everything that you own. So, it is unlimited liability. He
explained the previous law said if you are under board sanction,
you would lose the limitation of liability. That could be for
something as small as the board wrote you a letter of reprimand
because you didn't file your paperwork properly. It wasn't felt
that was justified - losing your limitation of liability. It is
actually a double insurance because every ship is insured anyway,
but in addition to that, the pilot knows they could lose everything
they own if they willfully run a ship aground or are grossly
negligent or on alcohol or drugs. He felt that was a significant
incentive to make sure these pilots operate to the best of their
ability in a safe manner.
CHAIRMAN KOTT interjected for clarification that for common
negligence, the cap is $250,000.
MR. FUHS responded that was correct.
CHAIRMAN KOTT asked if beyond that, you would have to go after the
shipper?
MR. FUHS said the shipper's insurance would cover any damage beyond
that. The shipper could actually have a claim against the pilot,
if the pilot was on drugs or alcohol, or were willfully negligent,
also. If the damage was $2 million, and the pilot had a $2 million
house, you could go after it if it was for those provisions, but
not if the pilot had a letter of reprimand in his file from the
board on paperwork. It was felt that was just too wide open. That
is why this issue was addressed. It is the same limit of liability
that an airline pilot has also. He said there have been other
issues raised, including the issue of cross regionalization. It
was his understanding that would not be brought up at this meeting,
so he was not going to address it. He expressed to the committee
that this bill is a substantial improvement, should help stabilize
the industry, and encouraged the committee to pass it out in its
current form. He added that the Southwest Pilots Association did
not take a position on the composition of the board. They did not
support it or testify against adding people to the board.
Number 288
DAN TWOHIG, Marine Pilot Coordinator, Board of Marine Pilots,
Department of Commerce and Economic Development, said his position
was created by the Marine Pilotage Act of 1991 and his job was to
oversee the day-to-day operations of the Board of Marine Pilots as
their executive secretary. He works as a licensing examiner with
the Department of Commerce and Economic Development and acts as the
state's investigator for maritime matters. He said he fully agreed
with Jeff Bush in that this is a good bill and most of the
housekeeping measures that are contained in the bill were written
by Mr. Twohig. He said he was available to answer questions from
the committee.
Number 301
REPRESENTATIVE KUBINA asked where did adding board members come
from?
MR. TWOHIG responded the adding of board members was an amendment
that was added from somewhere outside of the Department of Commerce
and Economic Development. He was not sure who exactly wanted it
added.
CHAIRMAN KOTT referred to page 3, line 9, relating to temporary
licenses for a period of not more than one year and asked if a
temporary license could be reissued or renewed, or are there
additional requirements?
MR. TWOHIG said the addition of that language was suggested by the
Alaska Pilots Alliance. The original bill has a clause in
08.62.080 that states, "A pilot may not be licensed in more than
one region at a time unless the board determines it is in the best
interest of the state to do so." The Pilot Alliance wanted that
better defined. In answer to Chairman Kott's question, he thought
a temporary license in this case, was designed to take care of a
specific problem of a shortage of pilots. For instance, if there
is a plane crash and 20 pilots die, there is going to be an
instantaneous shortage that has to be addressed somehow and in
order for the system to keep moving and to bring things in line
until the pilot associations in that area can cover the shortage,
there has to be a mechanism for the state to issue these licenses
on a temporary basis.
CHAIRMAN KOTT asked if the license would be reissued or renewed if
after one year that shortage still existed.
MR. TWOHIG said it was his understanding that the license would be
renewable, at the discretion of the board, or in this case if the
commissioner makes a determination there is still a shortage. If
the shortage still exists, the problem is still there and the
license can be reissued. He assumed that would need to be cleaned
up in regulation to decide exactly what that process would be. The
current regulations do not address this.
CHAIRMAN KOTT asked what the process is for issuing the temporary
licenses.
MR. TWOHIG said right now, there is no process. Since the Marine
Pilot Act of 1991, there has only been one instance where the board
has determined that they needed endorsements to licenses for more
than one region. That was a transitional regulation that was
written that allowed pilots in region 2 to train pilots in the
newly created region 3 and to bring them up to speed in the Port of
Dutch Harbor. Those endorsements to those licenses had their own
life; they had a cutoff date on them and what was discovered was
that the training problem had been taken care of before that time
period elapsed and the licenses went away by themselves, of their
own accord. If there had continued to be a shortage, he was fairly
certain the board would have extended it through regulation.
Number 350
REPRESENTATIVE ELTON referred to Chairman Kott's question on
liability and said he thought it changes. The new language in
Section 15 essentially means that the cap of $250,000 would apply
now even if a pilot is determined incompetent in the performance of
pilotage duties or is guilty of misconduct during the course of
employment. He felt it was more than housekeeping to take that out
of the existing statute and apply the cap. He thought that was
fairly substantive.
MR. TWOHIG said this amendment to the law was also requested by the
Pilots Alliance. The Department of Commerce and Economic
Development had no problem with it. The thing that needs to be
looked at closely is again the pilots now have a limitation of
liability of $250,000. In a maritime accident, $250,000 goes very
fast. By removing the portions of the law that say, for instance,
you are incompetent -- it's a legal question, but you can be
incompetent for a moment, you can be incompetent for a long period
of time, you could be totally incompetent. He felt the teeth was
still there in the law. There's willful misconduct, there's gross
negligence which is something that is often tried to be proven in
maritime cases, and also there are the drug and alcohol provisions.
He said as Mr. Fuhs testified, the pilots were concerned that
literally if they got a letter of reprimand from the board for
something very minor, they would lose this limitation of liability.
REPRESENTATIVE ELTON expressed concern about having a cap imposed
because a person is incompetent may not seem fair.
MR. TWOHIG said that you have to look at the legal definition of
incompetent. Because you could be incompetent for the moment. You
could have a heart attack and fall over so therefore you were
incompetent to do that job. If you are incompetent over a long
period of time, hopefully the licensing examination process would
have weeded you out and you would not have gotten that far. He
felt the concern centered around the legal definition of
incompetent. It is a broadly defined term, which makes it
difficult to put incompetent in this law and decide exactly what
that means in each and every case.
Number 400
MICHAEL SPENCE, Representative, Alaska Coastwise Pilots, stated he
had been a marine pilot in Southeastern Alaska for going on 19
years. He also holds federal pilot licenses in Puget Sound, San
Francisco, and the common waters of New Jersey and New York and has
also worked as a marine pilot in those waters. He supported the
legislation as written and wanted to comment on the issue of
competition (indisc.). From his firsthand observation in Alaska
and also in the other states that he had worked, competition is not
only widespread, it is increasing nationally. There have been no
findings by any state agency or federal agency that this
competition has adversely affected the public safety. Since the
public safety is the primary objective of the regulation of
pilotage, the Alaska Coastwise Pilots feel that the state of Alaska
is taking a wise course to neither promote nor discourage
competition in marine pilotage. They feel this policy allows the
state to focus on the issues that are directly pertinent to public
safety, and that is competence of pilots, accountability to safe
standards of pilotage.
MR. SPENCE referred to the issue of membership and the composition
of the board. He said in the early 1970s when the present makeup
of the board was set up, there were two regions of pilotage in the
state in practice and there were approximately 30 pilots in the
entire state. Now there are four regions, as defined in statute,
and there are approximately 80 plus licensed pilots. Commerce has
increased dramatically in the Western region, also the Southeastern
region. So, the situation that has evolved is that with two
members on the board, inevitably one region is not represented with
any expertise on the board. Questions come up to the board
routinely that require the expertise of a pilot on the board in a
particular region. As presently composed, there is a built-in
limitation that you are going to be represented in two of the
regions. Three of the four regions, he believed, should not go
without representation on the board for the simple reason that the
board cannot adequately address the issues that are unique to each
of these regions without having the additional member. So the
intent was to add the additional expertise for an additional region
without disturbing the balance of power, as it might be referred to
on the board. Therefore, the request was made by industry to also
increase their member on the board by the same number.
Number 454
MR. SPENCE referred to the issue of the $250,000 limitation of
liability and said this is a feature that was added in the 1991
legislation as a result of the great difficulty that marine pilots
had in obtaining any insurance for any kind of civil liability. He
explained they could get insurance for defense against license
actions, but no underwriter would touch the potential liabilities
that would arise in a marine disaster. So, following the models
that had been set in other states where pilots have been bonded or
have been given statutory limits of liability, we asked for this
and it was granted in the 1991 legislation. However, the wording
as it was written in that legislation, says that any kind of a
sanction issued by either the Coast Guard or the state, which could
be a very minor sanction, that exclusion or that limitation of
liability becomes invalid. The changes made in this legislation
are to let it happen that the limitation of liability can be struck
in a case of gross negligence or involvement of drugs of alcohol,
but for more minor violations, that limitation of liability stands.
MR. SPENCE said the Alaska Coastwise Pilots are supporting this
legislation as written and encouraged the committee to pass it.
Number 480
REPRESENTATIVE KUBINA said he thought this board's main function is
obviously safety and he didn't care if the board was increased to
include a pilot from every region, but he personally wanted to see
a private person also on that board. It was his understanding this
board is paid for by their fees and if they want to raise the fees
to do that, he didn't object but he wanted to see the private
individual also on the board.
MR. SPENCE commented that the point made by Mr. Bush is very well
taken that in practice now, you have two public members on the
board and you have the commissioner's designee, who also is, in
practice, a representative from the public sector. He felt there
is a balance there now; although, Alaska Coastwise Pilots would not
oppose the addition of another member from the public if it was
felt that would preserve a balance.
MR. SPENCE said on the issue of tariffs, the Alaska Coastwise
Pilots strongly urge the legislature to get away from the practice
of economic regulations of pilotage in the form of tariffs. If it
is found to be necessary to satisfy other interests to have some
form of tariff regulation, they would hope that it would be a
maximum tariff, not a fixed tariff. Again, the reason for this is
that the primary purpose of the state's regulation of pilotage is
safety. Tariff regulation has proven to be something that is very
burdensome, time consuming, and the board has lacked the expertise
to deal with it effectively. He thought all parties involved have
agreed that tariff regulation is a dead loser for a state that has
limited resources with which to manage the board.
Number 482
HANS ANTONSEN, Representative, Southeastern Alaska Pilots
Association (SEAPA), said the association operates in region 1 from
Dixon Entrance as far west as Yakutat Bay and employs approximately
31 pilots, both full-time and part-time, to cover the needs of
ships in that region. He referenced Section 2 and said that SEAPA
supports maintaining the seven person board. The primary reason
for that is they believe that the public constituency on the board
should not be watered down. The public is that representation on
the board that looks out primarily for safety and they would
support a seven man board composed of all public members if there
was no need for pilots to be on the board for licensing, exams,
expertise for the licensing examination process. As it is, SEAPA
supports the board in the form that it has worked fine for a number
of years. SEAPA believes that a nine-man board gets cumbersome and
difficult to work with and there is too much chance of a balance
and quorum to shift representation unduly away from the public's
interest. They don't see where having a representative from the
department constitutes public representation. He felt that was the
state and the department representation, so he didn't believe that
there were three public members on the board. SEAPA does not see
a need to increase the board and does not favor the increase. He
said it was not important whether their association is represented
on the board or not, they think the most important thing is that
the board is able to, in an efficient and timely way, address the
matters before it and a seven man board works a lot better than a
nine man board. A five man board works even better, but they
support the seven man board.
Number 499
MR. ANTONSEN wished to comment on the questions asked concerning
the limitation of liability. At the hearings in the House
Transportation Committee, it was stated that upon research, the
average limitation on pilot's liability is $5,000 in pilotage
regions in the United States. We have $250,000 and the reason that
number came to be was, in some cases it was chance but in other
cases it was a number they felt they could get; it was a number
they felt was a reasonable cap that they could actually get
insurance for. They have only two major carriers of insurance that
even provide coverage for pilots. They are listed as high risk in
some regards as to the type of work they do, so it is difficult to
get any insurance, period. That is the highest limitation on
liability anywhere in the United States for marine pilots. Marine
pilots are not like airline pilots. A marine pilot when he is on
the bridge of a ship, does not have sole control over the handling
of the ship and the decisions being made and they get navigating
that ship through waters, transiting and also docking the ship.
The man who is ultimately responsible for that ship and the safety
of that ship and the crew is the master. The pilot is an advisor
to the master, so the concern that a pilot may not have unlimited
liability in some cases where the ship may run aground and spill
oil, is addressed because there is also a master, through his sea-
going experience and knowledge must be able to look out after the
safety of his ship and recognize when his ship is heading into
danger. There is a difference as far as marine pilots and airline
pilots go. That is why SEAPA believes that limitation liability is
acceptable where they are able to get insurance for that amount.
MR. ANTONSEN said SEAPA believes the measure contained in the
legislation to create temporary licenses in regions to address a
sudden need for pilots, addresses the concerns that some industry
people may have about running into a shortage of pilots and not
having pilots sufficient to move the volume of ships that come in
from year to year. SEAPA also believes that if industry and pilots
were able to work a little closer together in communicating new
expected traffic in the future, pilots would then have a better
ability to address their present and future pilot needs and be able
to recruit and train pilots sufficiently to be able to serve the
pilot needs of that region. But oftentimes, with a competitive
environment, they don't get firsthand information of new ships
coming on line because there is always the question of who is going
to do the piloting. Is it going to be group A or is it going to be
group B. So, SEAPA feels that with more communication they could
better address industry's and the state's concern in keeping
qualified pilots aboard.
MR. ANTONSEN said as far as the tariff issue is concerned, they
also concur that they would like to see tariff not addressed in
this legislation and not in the hands of the state, while we are in
this....
TAPE 95-41, SIDE B
Number 001
MR. ANTONSEN...addressed industry's concerns, our customer's
concerns, including extending contracts if there is a dispute among
particulars of the contract, including conflict resolution in the
form of binding arbitration, including not having binding
arbitration. In each instance, we have addressed industry's
concern and done our best that within the context of a contract to
give industry assurance or whatever we can to address the concerns
that they may not have pilots for ships. We feel we have been very
successful in directly negotiating with industry, to private
parties, and addressing all those concerns. If there is anything
else we can do within the context of these contracts that were
signed, (indisc.) of industry that would address the state's
further concerns, or the legislator's concerns, we would be more
than happy to take any suggestion and implement it to the best of
our ability.
REPRESENTATIVE PORTER wanted clarification on Mr. Antonsen's
testimony that the average limit of liability requirement outside
is $5,000 or was that the average claim.
MR. ANTONSEN responded the average limitation on liability of
pilots is $5,000 across the United States and that statement, he
believed, was made by Bob Evans at a previous hearing. He checked
that out and that $5,000 compares with our limitation of $250,000.
Number 017
REPRESENTATIVE KUBINA apologized for having to leave the meeting.
Number 023
DAVE SANDERS, Vice President of Alaska Marine Pilots, one of the
pilot groups out in region 3, which is the Western Alaska region
including Dutch Harbor, Aleutian Islands, Bristol Bay and Alaska
Peninsula south and west of Kodiak Island. He said Alaska Marine
Pilots supports HB 260 as written. They like it just like they see
it. They believe the board should stay as it is, with the
exception they believe the board should stay as it is -- two
members. He commented that it is expensive. The fees for the
licenses have gone up every year since he had started piloting and
now it is $3200 biennially. Those are significant costs, and they
feel the board is working fine like it has with a seven man board.
Therefore, they do not see a need to increase the size of the board
to nine members.
CHAIRMAN KOTT asked if they were not in support of the current
legislation, as it is written.
MR. SANDERS responded they were with the exception of the increase
to the board. Mr. Sanders said the limitation of liability had
been addressed by other pilots, but added that insurance costs the
pilots around $3200 a piece per year. It is another substantial
expense and it is quite high. It's a redundant insurance - the
ships carry insurance as well. He believed Captain Antonsen's
comments were succinct in that it's not the same with just the
pilot of the ship being in total control. The master is there to
oversee his ship. In reference to the tariff issues, Mr. Sanders
said they do not feel any tariff should be addressed in this
legislation. Things are working well for them in Western Alaska
with the absence of the maximum tariff. They haven't been able to
get contracts previous to the lapse of the maximum tariff and in
the last 10 months they have been able to get contracts with one of
their main customers. In those contracts, conflict resolution was
addressed. They have three to five year contracts and they have
contracts on the table with the other customers in the region,
which they don't believe they would have been able to get with a
maximum tariff. He reiterated they would like to see no tariff
language at all in the legislation.
CHAIRMAN KOTT asked Gayle Horetski to address the antitrust tariff
issue.
Number 056
GAYLE HORETSKI, Assistant Attorney General, Commercial Section,
Civil Division, Department of Law, said her present assignment is
to assist in occupational licensing matters, and the Board of
Marine Pilots is one of the boards that she has been working on.
She said from the viewpoint of the Department of Law, this is a
very good bill. There has been a lot of litigation since she
began working with the Board of Marine Pilots on various aspects of
the present statute, license issues, examination issues, etc. She
commented she had not seen a level of litigation regarding board
matters ever in her legal career, as she has seen in connection
with this Board of Marine Pilots. Ms. Horetski commented that she
and Mr. Twohig had worked closely in drafting and reviewing this
bill, and obviously there are sections that were put in by the
Pilots Alliance and committees. However, by and large from their
point of view the amendments in this bill clear up areas that have
lead to litigation in the past. She said they have been trying to
calm the waters and make it clear, as best they can, based on her
approximate 18-months of experience in working with the board.
Number 072
MS. HORETSKI stated the board has expired. She referred to
previous testimony that indicated the board was going to expire.
She referred to Section 1, and said the board expired in 1994. It
is in its wind down year. If it is not extended, it is gone. So,
from the Department of Law's point of view, this bill is extremely
important and the extension of the board is absolutely essential.
It has to occur during this legislative session because it is in
its wind down year. It doesn't have a wind down year left, it is
in it right now.
CHAIRMAN KOTT pointed out for the record that even though this
particular bill has the extension, there is another vehicle that is
currently in the House Rules Committee (indisc.) for a floor vote
(indisc.) the Board of Marine Pilots.
MS. HORETSKI said at one point that bill had had only a one year
extension in it.
CHAIRMAN KOTT interjected that it had been changed.
MS. HORETSKI said that would at least preserve the existence of the
board. She felt that the changes in this bill, if it is adopted
this session, will vastly improve the board's ability to regulate
in this area in a manner that decreases this exposure to
litigation, which is one of her goals on behalf of the state.
Number 087
MS. HORETSKI referred to the antitrust/tariff issue and stated the
Board of Marine Pilots had the authority to set tariffs before and
what they had under the statute was a maximum tariff that was set
at a certain level and pilot associations were free to charge less
than that if they wanted, but that became a ceiling. That tariff
provision expired by its own terms in June 1994. Since that time,
there has been no tariff of any sort regarding marine pilotage
services in the state of Alaska -- maximum, fixed or nothing. The
board has continued to operate and shipping has continued since the
expiration of that tariff. The concern is basically a public
policy concern. The reason that these ships of a certain size, of
a certain type, have to have a pilot is because the state says they
have to have a pilot and safety, of course, is the reason for that.
Nonetheless, the reason they need a pilot at all is because the
state law says they have to. So, if they are required to take a
pilot and in fact, face possible criminal sanctions and a
substantial civil fine if they don't take a pilot, then right now
we have a situation where the law is absolutely silent about what
that pilot or that pilot association can charge for that service.
As the bill is presently structured, there is no fixed tariff
provision, there is no maximum tariff provision, and there is no
dispute resolution mechanism. So, if a shipper needs a pilot and
he calls up and asks for a pilot, and the pilot says it will be x
amount, if a dispute arises between the shipper and the pilot as to
the reasonableness of those quoted rates, there is no dispute
mechanism right now specified. So the shipper's choice is to move
the ship without a pilot, which causes safety concerns; to not
move, which causes commerce concerns; or to pay whatever rate the
pilot is asking. She said there may be other options in addition
to those, but those are the three come to mind. The shipper is
required by law to have a pilot, and that is what the law says.
She said the concern that has come up in other committee hearings
is that there is a state antitrust law pilot associations are
immune by a specific exception in the state law from any antitrust
liability, so that's fine under state law. There is also federal
antitrust law, generally it's the Sherman Act, and the U.S. Supreme
Court has said in a whole line of case law since the Sherman Act
was adopted, that if a state chooses to regulate in an area - fine,
the federal government won't fuss in that area. The state
basically preempts and regulates, then there is no antitrust
liability on the part of the people who are regulated by the state.
That is a sensible policy, of course. In a case that came out in
June 1992, which is after the 1991 act was adopted in Alaska, the
U.S. Supreme Court ruled in the TICORE Title Insurance case that --
what happened is the FTC had issued a complaint against the title
insurance companies in several states for basically fixing prices.
She explained what the title insurance companies were doing was
sending in rates to a rate setting bureau and the rate bureau set
the rates. Those rates are the ones that applied in the states
unless the state disapproved within a certain period of time. It
was kind of a negative option. The rates were originally set by
the rate bureau, but then the state had some oversight authority
where they could review it, and approve it or disapprove it. What
the evidence showed in that case in the hearing before the FTC was
that in essence, in those states that were concerned, there was no
active state supervision of that rate setting process. It was more
or less a rubber stamp. In fact, some of these provisions were not
even checked for accuracy, for arithmetic. They were just sort of
filed and that was the rate that applied. The U.S. Supreme Court
said for the antitrust immunity to be afforded to these people - in
that case, the title insurance companies - there must be two things
present: There must be a clearly articulated state policy that
they are going to regulate in this area, and there was in that case
because there were statutes that were passed that established these
rate bureaus; but then the U.S. Supreme Court in the TICORE title
case said there also has to be active state supervision of that
particular area - whether it is utilities, title insurance, pilots
or whatever, and the U.S. Supreme Court ruled on the facts of that
case, that there was not sufficient state oversight in order to
allow the title insurance companies to avail themselves of the
immunity as it (indisc.). She stated this is something the
Department of Law has brought to the attention of the legislature
because the department's concern was possible antitrust liability
of the pilots or the pilot associations under federal law if the
state regulation was not sufficient under the TICORE title
standards to (indisc.) this immunity upon them. As it has
developed in some of the hearings and based on testimony that Ms.
Horetski has heard, it appears the pilot associations don't want
tariff provisions and really don't want dispute resolution
mechanisms that were in an earlier version of the bill. So, it is
like they are saying, "We'll assume the risk of that possible
liability under the federal law if and when we do anything that
would violate the federal law." She said that is a policy call and
there are possible dangers presented to the associations under that
approach; however, she emphasized it was not a danger that the
state is facing, because the state would not be charged with
anything under the federal antitrust. It would be the associations
and the members of the associations that are possibly at risk.
Number 162
REPRESENTATIVE PORTER asked what kinds of behavior would the pilots
typically do to get themselves in trouble with federal antitrust,
assuming that they lost their state exemption?
MS. HORETSKI said in the past, there have been some concerns about
associations, by their actions, keeping pilots out of the
profession, whether out of the particular association or out of the
profession, in general, through not giving the training and
experience and the ability to qualify for the licenses. Price
fixing is another thing, but federal antitrust laws (indisc.), but
whether or not a pilot association would be liable under the
federal law for something like that is not clear under the present
committee substitute that is proposed because there are two things
in that bill: One, it says the pilot associations may enter into
agreements with shippers to provide these services; and then it
also says that pilots may not charge rates that are different than
the one set by their association. So, the bill contains authority
for the associations basically to set their own tariff. They don't
call it a tariff, but to set their own price. Ms. Horetski said
she wasn't saying that anybody is going to do anything that would
violate federal antitrust law, but collusive behavior that
establishes a monopoly -- that either goes to getting all the
business or setting the price at which services are offered --
collusive activity of that sort is the kind of thing that
ordinarily, absent state intervention, would most likely violate
federal antitrust laws.
Number 184
REPRESENTATIVE PORTER commented that in an area that is serviced by
one association, this bill provides that that association will
negotiate with shippers.
MS. HORETSKI interjected "may." Section 12 says, "The board shall
impose a sanction on the person licensed under chapter when the
board finds that the person....." and on page 5, line 25, says "...
collects, charges or receives an amount of services that is
different from the amount set by the organization." That is the
language that says a pilot has to abide by the rate that the
organization has set. She referred to page 7, subsection F, says,
"A pilot organization recognized by the board may enter into
agreements with the master, owner or agent of a vessel concerning
the terms and conditions." It doesn't say negotiate, it says
"may" enter into agreements. Negotiate is clearly implied in
there, because an agreement will never reached if you don't talk
about it.
REPRESENTATIVE PORTER said he wasn't all that familiar with federal
antitrust laws. He asked Ms. Horetski if she would say that if an
association that represents one district, that has no competition,
that sets its own price, is price fixing and that would be a
violation?
MS. HORETSKI responded that she would not say that, because the law
gives the association the authority to do that. She said the
antitrust law is odd in that it allows private parties to enforce
it. So, one association can sue another association and seek
treble damages under the antitrust law, and the state is not
involved at all, the FTC is not at all; nobody is charging that
association in an official sense, with any conduct, but yet you
have an antitrust lawsuit...
REPRESENTATIVE DAVIS asked if under the antitrust laws, was the
TICORE case related to the prices of employees or was it
contractors? Because in this case where an organization, and the
pilots are contractors to the organization, not employees, does
that have any bearing or any relation to the antitrust case that
Ms. Horetski cited.
MS. HORETSKI said the facts of the TICORE title insurance case were
that the title insurance companies in the states involved put in
their request for rates and the rates were those that were charged
by the title insurance company to members of the public for things
like title search fees and that kind of thing in connection with a
house or checking out who owns land, so it was a fee charged by the
companies to members of the public that were trying to sell and
purchase real property. She commented that if pilot associations
were business entities and the people who work for them were
employees, then she thought you would get away from the antitrust
issue because one company can't conspire with itself. For example,
General Motors can't conspire with itself, it has to conspire with
someone else, and that's where you get the collusive activity. She
explained the pilots are independent contractors, not employees, so
then you have the question of all the pilots coming together, as
independent contractors in this association, and what are the
possible liabilities of the pilots or the possible liabilities of
the association. The pilots are required by state law to be a
member of an association. It's an offense if they are not.
Number 246
GINNY FAY, testified on behalf of Bill Walker, President, Prince
William Sound Regional Citizens Advisory Council (RCAC). She said
RCAC's work is guided by its contract with the Alyeska Pipeline
Service Company and sanctioned under the Oil Pollution Act of 1990.
The residents of Prince William Sound and Southcentral Alaska are
acutely aware of issues regarding marine pilotage and what can
happen when there are oversights or minor adjustments in pilotage
areas, as happened with the Exxon Valdez oil spill. Safety is
RCAC's primary concern. They have no economic interest; all they
care about is safe pilotage. They appreciate the work done by the
Department of Commerce and Development during recent years in
improving safety, licensing and examination. She commented there
has been a great deal of improvement made to the system; however,
RCAC questions whether or not a competitive system is really the
safest system. Alaska is somewhat unique in that it is the state
in the country that has competition the way that we do, because we
require pilots and require shippers to use pilots, but then pilot
associations can compete against each other based on fees. While
Prince William Sound has had a very good piloting system and has
not been affected by it, they question whether or not the
competitive system is a threat to safety in that area. They've had
pilots express that they do not feel that they can openly say what
some of their safety concerns are because of the threat of
competition. RCAC's primarily concerned about this because it
doesn't appear that the legislature really is interested in
addressing the issues of competition, which is probably one of
their greatest concerns.
Number 280
MS. FAY said the most significant problem RCAC has with the bill
right now is the change in the board makeup. The Marine Pilot
Board is a safety board, it's a licensing board. The reason
industry traditionally has sat on the board was because the board
was setting tariffs, and so it made sense to have the pilots and
the industry when the tariffs were being set, sit there along with
the public, who is interested in safety. If they are not going to
be setting tariffs, then the questions arises, why not just have
the pilots and the public on the board. She commented that is
unlikely to happen, but she thought the changes that were made in
the composition was that the public is really not highly
represented in these hearings, and so the pilots wanted another
member on the board, industry wanted another member on the board
and there really wasn't anyone to say, "wait a minute, this is
supposed to be a public safety issue." Ms. Fay did not think there
was another board in the state that calls an employee of the state
agency, a public member. Technically, any public members on any
boards are public members, not agency members. She concluded that
RCAC's position is that they would like the board either left alone
or they would like a public member added along with the additional
pilot and industry member, because they think the public interest
is diluted with that change.
Number 300
REPRESENTATIVE NORMAN ROKEBERG asked Ms. Fay if she had testified
that the legislature wasn't interested in competition or what?
MS. FAY responded that she has been under the impression from the
hearings to date that the issue of competition to going to a fixed
tariff and being a much more regulated system, as it was prior to
1991. She said she may be mistaken, but it was her impression that
the legislature is unlikely to do that.
REPRESENTATIVE DAVIS clarified that the legislation put together
here was an attempt to deal with the issues that the pilots and
industry were dealing with and that was not something that was
brought forth. The regulated monopoly question was not something
that was proposed by anyone and we wanted to deal with the involved
parties. It came up in discussions, but it was never formulated as
to being included in the bill.
Number 322
JOE KYLE, Representative, Alaska Steamship Association (ASA),
testified he was the only person before the committee testifying on
behalf of the shipping industry. He said their membership includes
everybody in the state that is required to use state pilots with
the exception of Prince William Sound and the agencies that work
there are in their association, but not ARCO, BP or Deep River.
That may sound like a huge exception; however, if you look at how
many state pilot moves are required throughout the state over the
course of a year, their membership represents about 80 to 90
percent of the revenue that is paid out to pilot associations
because of all the moves in Southeast with cruise ships, Cook Inlet
oil and the tramper trade in the Bering Sea, Sea-Land and APL. So,
they are the most significant user of state pilots in the state.
MR. KYLE said as far as the bill that was before the committee,
much as Deputy Commissioner Bush said, ASA thinks it is a great
bill, with one major glaring deficiency; that is there is nothing
in this act that addresses dispute resolution or conflict
resolution or maximum tariff between industry and pilots. He said
it is just polyanna, pie-in-the-sky to think that pilots and
industry are not going to fuss over what it costs to move a ship.
It is somewhat simplistic to say, "you've got competition, why do
you need somebody to help you adjust price, if you can't agree."
He explained they have a very limited number of service providers.
They can't go shop around for another service provider if they
reach an impasse with a pilot association over price. There were
over 120 licenses in the state a couple of years ago, there is
about 80 right now. At the same time that over 40 licensed pilots
have been lost in the state, the number of ships and vessel traffic
is moving up, so there is a greater demand for pilot services at
the same time the number of licensed pilots in the state is going
down. Likewise, through regulatory action taken by the board,
there are significant impediments to entry into this profession.
And they are legitimate impediments; we want a rigorous training
program and certification program. So what he was saying, is that
it is really wrong to push somebody through the pipeline to make
that number that is around 80 right now, move to a higher number.
The state said they are very concerned about safety and
availability of pilots, and Mr. Kyle said he could tell the
committee today, that it is possible that we will run short of
pilots in Southeast Alaska this summer with the increased cruise
traffic and it is almost a certainty that we will be short of
pilots in Southeast Alaska in 1996. He said under that scenario,
it is just not possible that we are going to get in a situation
with pilots where we've got a new ship, there is no existing
contract, what's the number to move this ship and we feel the
number that is going to be presented to us is way too high, and
we're going to say that we can't live with that number - can we
negotiate, and we really don't have anybody to negotiate with.
Even where we have competition, there is two associations in
Southeast Alaska right now. They used to all be the same. They
were the same group and they splintered and next week they can go
back together. Then we've really got nobody to negotiate with.
Mr. Kyle explained the same situation exists out west. There are
two associations out west; they splintered. You can't go grow a
third very quickly. They are just going to come from who they are,
and next week they could join back together and be one pilot
association. It is all up to them as to whether there is
competition or not. And yet we've got to bargain with them and
deal with them on rates. Mr. Kyle said he supposed they could take
care of themselves under that scenario, however, they run a great
risk of moving a ship without a pilot, but there is also a state
interest involved here and we are required to use their services -
the state requires that we use their services and we want to use
their services - but what do we do when we can't agree on price.
Personally, he didn't understand how the state can walk away from
that and say that's not an issue they are concerned about, because
when it happens that we do move a ship into state waters without a
pilot, God forbid an accident would occur on that same ship that
didn't have a pilot aboard, the industry is going to pay no matter
what, but he felt the state is going to pay a severe price for not
having some mechanism in its Marine Piloting Act to resolve
disputes.
MR. KYLE commented they have tried everything they could to get the
pilots to like something. For various and sundry reasons, they
oppose it. In their judgment, the (indisc.) to all this is
regulated monopoly versus free and open competition. There are
certain, very strong pilot associations that just desperately want
a regulated monopoly and there are legitimate reasons for them to
feel that way. They definitely want that and they are going to do
anything they can to prove competition doesn't work. Mr. Kyle
mentioned that the committee had heard the argument this afternoon
that we've got competition, why do we need conflict resolution if
you can't agree on rates. The state shouldn't be involved in
setting a tariff. Mr. Kyle said we don't have competition in the
sense of there is a half a dozen vendors we can go shop with if we
don't like dealing with this hardware store. We've only got two.
It's just like when we had Exxon and Union 76 here in town. We had
competition in gasoline stations, but the price was $1.65 and $1.66
and every month or two they flip flopped around. Then Mapco came
to town, and prices dropped 30 or 40 cents a gallon for gas.
That's the kind of competitive situation we live with right now.
He stated we have two and they all came from the same group, they
all trained each other, they are professional colleagues, and he
fully expects they will go back together one day, probably. Mr.
Kyle emphasized they think it is poor public policy if this act
cannot, if in some way, get a conflict resolution section in it.
He said the maximum tariff was tried and it worked for three years.
They tried desperately to get the maximum tariff extended last
session, but they were fought by the same pilot associations this
year. So we said, "fine, you don't like the maximum tariff, how
about binding arbitration. Most public employees/public service-
type occupations like binding arbitration. We ran that up the
flagpole. Nope, they don't want binding arbitration. So, we said
how about conflict mediation. Let's go through a mediation process
so that if you and me disagree over price, you'll still provide the
state's mission by moving my ship, and I'll pay into an escrow
account someplace, while a third party figures out what the right
price should be. No, we don't want that. You've got a comparative
environment, we're not going to deal with that either." Mr. Kyle
said they don't know where to go. They've pulled all the rabbits
out of the hat they have - binding arbitration, conflict resolution
and they tried to get the maximum tariff last session. He
commented they were willing to give you anything you might want
that will help get us out of this box, but the pilots - there are
some pilots that are philosophically opposed to competition - are
going to oppose anything that might help it work. That gets us
back to conflict resolution, maximum tariff, or binding
arbitration. Mr. Kyle said they were not going to be happy or be
able to support this bill if there isn't something in there - be it
binding arbitration or conflict resolution mediation or maximum
tariff that provides them some rate protection when they have a
very limited market to deal with and a compulsory service to use.
Number 440
CHAIRMAN KOTT asked Mr. Kyle what they did right now when they
transverse a ship to an area that only has one pilot group in that
region and they establish the rate and it's a rate that you can't
live with?
MR. KYLE said, "The reality of where we have that right now is in
Prince William Sound, Cook Inlet and the Kodiak area and we
negotiated a contract with that single service provider, I want to
say in the summer of 1993, that was a three year deal, that would
take us past the maximum tariff expiring last summer and the board
maybe this summer, so when we negotiated a contract with them, that
contract would take us through to some certainty in the
legislature. Right now we have a good contract with them, we deal
very professionally with them, they deal very professionally with
us, and we've got a good relationship and I think that will
continue. When we do have new business with them they sit down and
negotiate with us in a very respectful and professional manner and
we've been able to reach an agreement with them up to this point.
One thing that induces them, of course, to deal with us that way is
that there is always the threat of competition in their area. It
would be easy for a group, say to splinter off and form a Cook
Inlet Pilot Association or a Kodiak Pilot Association, so they want
to do business well with us and they'd like to stay intact and not
have disgruntled members and form a new association. So, the
threat of competition in that region, I think, helps bring them to
the table with us and they do a hell of a job for us and they
provide a great service and so that's what brings us to the table
to want to negotiate with them." He said the relationships in the
other regions aren't as harmonious. They weren't before - there
was a splintering off and they haven't been since.
CHAIRMAN KOTT referenced the makeup of the board and asked Mr. Kyle
if it was safe to assume that industry supports the bill as it is
written with the additional member from industry on the board.
MR. KYLE said from an intellectual point of view, the region out
west should be represented on the board by both pilots and
industry. It is a totally different business out there, a totally
different trade. It is mostly Pacific Rim shipping companies in
the fishing business bringing trampers that are Korean, Japanese or
Chinese into the Bering Sea. They hit the Western Alaska ports and
go back to the Far East. It's a very different shipping trade than
what's in Southeast, Prince William Sound or Cook Inlet. There is
Sea-Land and APL out there that somewhat are more Cook Inlet and
Southeast in their make up. So academically, there should be a
pilot from the Western Alaska area on the board. The industry
problems are unique out there. He commented that the gentleman
from out there who testified, said they have never had signed
contracts with industry out West. Mr. Kyle said he would disagree
with him as to why they do have a few now. He reiterated that the
trade is totally different. It's oriented around the fishing
industry, it's very seasonal, it's nonpredictable, the ships come
over when the herring, salmon or crab come in. With cruise ships,
they know years in advance how many will be coming in. Cook Inlet
oil runs are very predictable. So, from an academic point of view,
absolutely that representation should be on the board. He said
they were concerned about the public input as well. They feel the
department is on the board to represent the public. They don't
divorce the state from the public. It comes down to money. In his
opinion, the board has been very generous about letting the Western
region pilots come up and speak to their problems in front of the
board. They've let the industry do that as well.
Number 499
CHAIRMAN KOTT referred to Ms. Fay's testimony that the state is
really responsible for safety. He said based on his understanding
of what the board does and albeit that this provision does not
establish a fixed tariff or a maximum tariff, what would the role
of industry be on that board?
MR. KYLE explained that he objected strongly with several things
that Ms. Fay said. First of all, she said Alaska is the only state
in the country with competition. He said that is a gross
misrepresentation or inaccurate statement. It is rare on the East
Coast and he thought Connecticut and maybe either Maryland or
Virginia is about it. However, on the West Coast, the way piloting
is done is all over the board. Hawaii has got a competitive
system, the Port of San Diego does not require state pilots if you
come into the Port more than 10 times a year, San Francisco has a
regulated monopoly, Long Beach has a private company but contract
pilots that the city hires, in the Port of Los Angeles, they are
municipal employees of the city of Los Angeles, so it is all over
the board on the West Coast. In terms of industry's interest on
the board, he felt Ms. Fay's statement was cynical. He explained
that we need pilots to help us around waters that ships don't come
into that often. Mr. Kyle stressed they are very interested in the
level of training that pilots get, what the training program is,
what the recertification program is, what the licensing program is.
He said, "We pay their ticket, if you will and as long as we're
paying that tariff and we're paying their ticket and they're going
to be advising our masters on how to move ships in and out of state
waters, we want to be part of that process. We're a stake holder
in this." He said it is a significant financial issue for them in
terms of whether they make money or lose money operating in Alaska.
They want pilots that are well-trained and they want to have a hand
in that training program.
CHAIRMAN KOTT said in Ms. Fay's defense, he wasn't sure that she
said there shouldn't be industry on the board. That was what he
was leading into.
MR. KYLE said in that case, he would apologize to Ms. Fay.
CHAIRMAN KOTT closed public testimony on HB 260 and the bill was
held over until Friday at 3:00 p.m.
ADJOURNMENT
CHAIRMAN KOTT adjourned the House Labor & Commerce Committee at
6:04 p.m.
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