Legislature(1995 - 1996)
04/05/1995 01:11 PM TRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE TRANSPORTATION STANDING COMMITTEE April 5, 1995 1:11 p.m. MEMBERS PRESENT Representative Gary Davis, Chairman Representative Jeannette James Representative Eileen MacLean Representative Tom Brice Representative Jerry Sanders Representative Bill Williams MEMBERS ABSENT Representative Beverly Masek, Vice Chair 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." PASSED OUT OF COMMITTEE WITNESS REGISTER GEORGE UTERMOHLE, Attorney Legislative Legal Services Legislative Affairs Agency 130 Seward Street, Suite 400 Juneau, Alaska 99801-2105 Telephone: (907) 465-3808 POSITION STATEMENT: Provided technical information JEFF BUSH, Deputy Commissioner Department of Commerce and Economic Development P.O. Box 110800 Juneau, Alaska 99811 Telephone: (907) 465-2500 POSITION STATEMENT: Supported CSHB 260(TRA) with concern MICHAEL O'HARA, Ship Pilot Southwestern Alaska Pilots Association; and Member, Board of Marine Pilots P.O. Box 1443 Palmer, Alaska 99645 Telephone: (907) 745-3518 POSITION STATEMENT: Supported CSHB 260(TRA) with concern TEX EDWARDS, Executive Committee Member Prince William Sound Regional Citizens' Advisory Council 750 W. 2nd Avenue, Suite 100 Anchorage, Alaska 99501-2168 Telephone (907) 277-7222 POSITION STATEMENT: Testified on CSHB 260(TRA) HANS ANTONSEN, Pilot Southeast Alaska Pilots Association P.O. Box 6100 Ketchikan, Alaska 99901 Telephone:(907) 225-9696 POSITION STATEMENT: Supported CSHB 260(TRA) with concern GAYLE HORETSKI, Assistant Attorney General Civil Division Department of Law P.O. Box 110300 Juneau, Alaska 99801 Telephone: (907) 465-3600 POSITION STATEMENT: Provided legal information for CSHB 260(TRA) DOUG MACPHERSON, President Alaska Coastal Pilots Association P.O. Box 6337 Ketchikan, Alaska 99901 Telephone: (907) 225-7245 POSITION STATEMENT: Supported CSHB 260(TRA) LARRY COTTER, Representative Alaska Steamship Association 234 Gold Street Juneau, Alaska 99801 Telephone: (907) 586-3107 POSITION STATEMENT: Supported CSHB 260(TRA) with concern PETER GARAY, Pilot Alaska Marine Pilot P.O. Box 730 Dutch Harbor, Alaska 99692 Telephone: (907) 581-1240 POSITION STATEMENT: Supported CSHB 260(TRA) with concern 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: Supported CSHB 260(TRA) with concern 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 ACTION NARRATIVE TAPE 95-13, SIDE A Number 000 The House Transportation Committee was called to order by Chairman Gary Davis at 1:11 p.m. Members present at the call to order were Representatives Davis, James, MacLean, Brice, Sanders and Williams. Members absent were Representative Masek. HB 260 - MARINE PILOTS CHAIRMAN GARY DAVIS announced the agenda was to hear testimony on HB 260 and to review testimony for the amendments. He introduced Mr. George Utermohle from Legislative Legal Services and drafter of the legislation. CHAIRMAN DAVIS referred to a memo from Mr. Utermohle and asked for confirmation that the amendments contained in the letter will automatically be corrected within the legislation. Number 038 GEORGE UTERMOHLE, Legislative Counsel, Legislative Legal Services, Legislative Affairs Agency, explained the amendments before the committee were two typos which occurred in the bill and would be corrected without further action from the committee. CHAIRMAN DAVIS referred to amendment one, which he said seemed to be "boiler plate" language. He stated he wanted to go through some of these "boiler plate" amendments that were discussed previously. He said even though amendment one on page 3, line 19, looks innocuous, he would rather wait to address this amendment to ensure that everyone wishing to testify was present. Chairman Davis thanked Mr. Utermohle and introduced Mr. Jeff Bush. JEFF BUSH, Deputy Commissioner, Department of Commerce and Economic Development; and Commissioner's Designee for the Board of Marine Pilots, explained the department essentially agrees with amendments one, two, four, five, and six which have been described as technical changes. However, he stated the department is "mildly opposed" to amendment seven, which increases the size of the board from seven to nine, by adding an additional pilot member and industry member. He explained a board of nine members is more unwieldy than a board of seven and costs more to have the meetings. This would result in increased fees as the pilots themselves have to pay the cost for maintaining their board. He added the department has had complaints from the pilots that the fees are too high. He noted although the additional cost is not large, there will be a cost associated with it. Number 129 REPRESENTATIVE TOM BRICE stated he understood the pilots, through their license fees, pay for this board. He asked what contribution to the board is made by the industry. MR. BUSH explained the industry does sit on the board and agents pay a licensing fee, as well. He said he could request Mr. Dan Twohig, the Marine Pilot Coordinator, to present specific numbers. Number 141 REPRESENTATIVE BRICE asked for confirmation that the increase would be appropriately spread out for each of the... MR. BUSH interjected it was difficult to apportion accurately because when it comes to costs, the pilots receive more service from the board and the activities of the department, than the agents do. The pilots are paying for their own licensing and examinations. He explained the costs cannot be apportioned directly; however, an additional cost which could be factored directly to this increase of board members, theoretically could be split 50/50, since in fact, if all we were talking about is increased board costs for industry and pilot increase, they could be split. MR. BUSH referenced the amendments proposed by Representative Sanders and said if he understands them correctly, one part calls for the removal of the arbitration clause. He stated it does remove the requirements for essentially mandatory service by pilot associations as he understands it... Number 191 REPRESENTATIVE EILEEN MACLEAN asked for clarification on which one of Representative Sanders' amendments Mr. Bush was referring to. MR. BUSH commented that Representative Sanders' amendments were not numbered. CHAIRMAN DAVIS said page 6, lines 4 through 9 of the amendment submitted by Representative Sanders would be amendment eight; page 6, lines 26 through 30, will be amendment nine, also submitted by Representative Sanders; and page 7, lines 7 through 30, will be amendment ten, also by Representative Sanders. REPRESENTATIVE MACLEAN asked for clarification on a letter from Mr. Utermohle regarding the drafting of some amendments. CHAIRMAN DAVIS asked if she was referring to the letter dated April 4, 1995. REPRESENTATIVE MACLEAN responded, yes. CHAIRMAN DAVIS stated the letter had been addressed, and those amendments were drafting errors that have been corrected. REPRESENTATIVE MACLEAN asked if we are working with Version M of the bill. CHAIRMAN DAVIS responded in the affirmative. Number 260 MR. BUSH noted he has not had the opportunity to consider the implications of no longer mandating pilotage, if in fact, that is what these amendments do. He said he would rather reserve comment until later. He reiterated his comments from previous testimony regarding the state's concern to ensure that there are pilots on board the vessels from a safety perspective. If, in some way this could be interpreted as allowing vessels to operate without pilots, or could in some way create a situation where pilots would refuse to serve, thereby necessitating an emergency situation where a pilot would not be on board a vessel, the department would oppose it from that perspective. He said he was not sure of the implications of the amendments. MR. BUSH expressed concern for amendments eight, nine, and the first half of amendment ten, referencing Section 17 (d). He stated they all addressed the same issue. CHAIRMAN DAVIS felt from the discussions the committee has had, Section 14 (c) is clear; it was paragraph (d) that raised concern. He explained the (d) paragraph which reads, "a person licensed under this chapter who is a member of a pilot organization, shall provide pilotage services to a vessel upon being dispatched by the pilot organization." He asked Mr. Bush if he interpreted this section as the guts of mandating pilotage services. MR. BUSH said yes, and combined with page 7, Section 17, which states that "a pilot organization shall dispatch a person who is licensed under this chapter and who is a member under the organization to provide piloted services upon the request of a representative of a vessel required to employ a pilot." The association is required to dispatch under Section 17, and under Section 14, the person who is dispatched is then required to serve. Number 248 CHAIRMAN DAVIS expressed concern with Section 14 (d). He indicated the intent is that a pilot will provide service to a vessel. He explained those services are as mandated and does not require the pilot to move the ship if he deems it unsafe. MR. BUSH stated that Chairman Davis was correct...this was the department's interpretation. They interpret it that the pilot has to provide reasonable pilotage services and use his best judgment as to what the reasonable actions of the ship should be under particular circumstances. CHAIRMAN DAVIS said, "in previous discussions, there was concern that it was a maneuver to move the ship or take direction from the owners if it is not in the best interest of the ship." Number 285 REPRESENTATIVE SANDERS felt the reason they would like to see this omitted is because it is viewed as an anti-competitive clause and the idea is to have competition. He said if you can't compel or mandate that an individual has to show up - if it is a competitive situation - if he doesn't show up, you just go on to the next pilot or the next organization and get a different one at a different price. MR. BUSH stated they do not have true competition. He explained what they have is essentially a quasi-competitive system, where currently there are six pilot associations covering four regions. In two of those regions they only have one pilot association. To assume that competition exists in this area would be erroneous. He mentioned in the other two regions there are two pilot associations in a competitive situation. On the other hand, he felt it was important to recognize even when there are only two competitors in a closed market such as this, the level of competition is less than perfect. REPRESENTATIVE SANDERS suggested perhaps it should be changed so where there is no competition, the pilots are compelled to provide service; however, where there is competition, they should not be. CHAIRMAN DAVIS stated that often, even in an area where there is competition, there are still agreements and contracts signed. This would come into play even in cases such as the one mentioned. MR. BUSH stated that was correct. He added it is obvious that we have a system that is not perfect. He said it was difficult for him to dictate what exactly is the best way to solve the myriad positions of the various parties. Number 303 REPRESENTATIVE MACLEAN made reference to amendment three, which would delete parts of Section 14, and add a new Section (c). She said she did not understand the difference between this amendment and Representative Sanders' amendment. CHAIRMAN DAVIS suggested that the amendments should be discussed in an orderly manner and the issues should focus mainly on the concerns of the department. He indicated he did understand the connection with the section under that amendment, but commented that it could get complicated because different amendments seem to affect similar areas. REPRESENTATIVE MACLEAN stated since Section 14 was being discussed she was requesting clarification on the amendments. CHAIRMAN DAVIS indicated that would be fine because Mr. Bush had concerns with amendment three, as well. Chairman Davis asked Mr. Bush if he would address Representative MacLean's question. MR. BUSH said with respect to that particular change in amendment 3 as it relates to Section 14, as he understood it, the existing Section (c) in the work draft is being removed and what is currently subsection (d) in the work draft will be made the new subsection (c). From a substantive standpoint, subsection (c) in the work draft is being deleted at the request of the department. He explained that subsection relates to "a person licensed under this chapter, who is not a member of a pilot organization, and in fact, it is a requirement of the chapter to be a member of a pilot organization in order to obtain a license." He indicated there was no reason for that particular subsection; that is why they requested subsection (c) be deleted. CHAIRMAN DAVIS suggested rolling amendment three up into an area of "nonobjection" by the department. MR. BUSH stated this was true, but noted just the first part of amendment three. The rest of amendment three relates to the dispute resolution provisions. He indicated rather than comment directly on these provisions, which appear to be technical changes to the proposed work draft dispute resolution sections covered in Section 18, he said he would speak on behalf of the Administration, but would defer responsibility for his testimony to the Department of Law and have them available to answer any legal questions. He explained lawyers in the Attorney General's Office, particularly Mr. Forbes, who is the state's antitrust attorney, are raising issues on dispute resolution systems proposed in this bill. These systems more than likely will not survive scrutiny under the federal antitrust law, under the Sherman Act. He said he would try to simplify this issue because he did not understand it particularly well either. He explained the way that the associations have in the past avoided antitrust concerns at the federal level, is by designing a so-called "state action exemption." He gave an example with public utilities, whereby if the state determines a price through state action, then the Sherman Anti Trust Act does not apply for federal antitrust purposes. However, if the state does not set a price, then they're subject to antitrust considerations. He explained in this particular case, the associations would then be subject to antitrust considerations, at the federal level, because there is no federal exemption for marine pilots. He indicated there is a state antitrust exemption for marine pilots, but not a federal exemption. MR. BUSH said we come back to the state then, at least according to the Department of Law, being required to either set price or a maximum tariff, similar to what was imposed up until last summer when it sunsetted, may be sufficient to overcome the Sherman Act considerations. He explained this was the argument when there was a maximum tariff and the Department of Law is still prepared to stand by that argument; that a maximum tariff may be enough to overcome federal antitrust concerns. But there has to be state action when setting a price. Then it becomes a question of whether or not a maximum tariff becomes a state action in setting the price or not. He said that was something they could certainly argue. ME. BUSH continued that a set tariff becomes even more of a clear case issue where antitrust considerations would not come in to play. He remarked from the state's perspective, quite honestly, this issue is not particularly a concern because as he testified earlier, he and the state are not concerned with the pricing issues with respect to the pilot organizations. He stated his concerns were with making sure pilots were available, making sure they're well-trained and that there is a safety factor involved. Those are the state's interests. He added when it comes to pricing that was a matter, in his opinion, between the industry and the pilots. He noted he was raising this concern because the state's antitrust specialists have said the associations may be subject to antitrust litigation and penalties, if a price is not set at the state level in some way. CHAIRMAN DAVIS said it was his understanding that the remaining sections of amendment three deleted references to Section 14 (c). He added this is currently in the dispute resolution section in conjunction with a few minor word changes that have come up as being problematic during past debates. Number 403 REPRESENTATIVE MACLEAN inquired as to why Section 18 was not deleted, on the issue of dispute resolution? CHAIRMAN DAVIS explained there had been some other discussion as to possible changes to it. He indicated this would be discussed with the Department of Law. Chairman Davis then introduced Mr. Mike O'Hara. MIKE O'HARA, Member, Board of Marine Pilots; and ship pilot from Region 2, stated both as a member of the board and the Southwestern Alaska Pilots Association (SWAPA) they support all the amendments to the work draft. He referred to the "inspected" part of amendment 1, and said the reason that's important is because from a 1,000 to 1,600 gross ton uninspected vessel is essentially a large fishing boat Whereas, if it is inspected, it could be a ferry. He added it is U.S. Coast Guard inspected and includes all the safety requirements taken care of by the Coast Guard as opposed to a fishing vessel which does not have the same criteria for safety. He indicated he was in agreement with the terms "chronic" and "concurrence." CHAIRMAN DAVIS asked for clarification with the word "inspected" inserted, would this include the fishing vessels? MR. O'HARA said it would include fishing vessels over 1,600 tons. Those would be classified as ships, such as the larger trawlers. The smaller ones are considered boats and all are uninspected with minimal licensing and safety requirements. CHAIRMAN DAVIS asked if the purpose of adding the word "inspected" is to broaden the area of ships that would be included. MR. O'HARA stated Chairman Davis was correct. It would broaden the area of the ships included, as well as the licenses for the people on those ships. It would ensure that those ships are Coast Guard inspected; for example the ferry boats in Southeast Alaska. He indicated there was a letter to the board regarding regionalization and cross regionalization and commented that the whole issue of regionalization is safety. He mentioned that Mr. Tex Edwards will testify on this subject and will indicate that it is a safety issue and local knowledge of a particular area. He referred to the letter recommending cross regionalization, and said in his opinion it is bravado and "we just don't need cowboys driving tankers." Number 455 REPRESENTATIVE JEANNETTE JAMES stated she understood the safety issue of cross regionalization and asked if there was some sort of testing procedure for a pilot to take to indicate their familiarity with a specific area. MR. O'HARA indicated there were a number of examinations that a pilot must take in order for them to obtain a license. He explained a federal license is the first step, which is a minimum entry requirement for licensing. The federal pilotage test is strictly a memorization of numerous books, coast pilot charts, a light list, etc., but it does not take into account the things that a pilot has to know for a particular area, because that is mostly local knowledge; it is the entry level. He explained he had been a pilot in Region 2 and Region 3, but he gave up his license in Region 3 because he had not been out in the area for a number of years, and no longer felt he was familiar with that area. He had the license, but he felt he was just not up to speed in that particular area. He stated he could at anytime go to Region 3 and say, "I want to be a pilot in a different region" and he would refamiliarize himself with that region. Any pilot who has a license for another region may go and join that region. All they have to do is become familiar with the particular region. He asked Representative James if she was asking if it was possible for some one to know exactly where all the reefs are, to which he answered no, and not stay current. He stated in his opinion it could not be done. REPRESENTATIVE JAMES asked if they had maps and charts. MR. O'HARA said yes, they have charts which are, in most cases accurate, and in many cases they are not. For example, he referred to Region 3, the Togiak area, where the charts are very poor. This is also the case with the Upper Cook Inlet Region where often, the shoals have a tendency to shift. He remarked on a situation where a federal ship pilot was surprised that the shoal had shifted, but it was not a surprise to the pilots who frequented the area with tankers. He explained that is why there is a mechanism for "shifting regions," but that local knowledge has to be maintained. REPRESENTATIVE JAMES asked for confirmation on whether or not there is a test for pilots, insofar as their knowledge of that particular region, or was this more of an honor system. MR. O'HARA stated the minimal license is a federal license, then the pilot must pass a state licensing examination. The state license is a more detailed examination and covers the actual "real life" job of piloting, such as the location of the shoals and where they have shifted to, and the direction of that shift. He explained it is information that the coast pilot is unable to keep current on. Local knowledge and information that the local pilots have acquired over the years is information not found in books, such as natural ranges, things to watch out for in the fog, snow and ice, and how to handle a ship in the ice. He explained these were things that were region specific. A person can't come from Ketchikan, which is essentially ice free, and go to Anchorage and expect to know how to handle a ship in ice. He said it just can not be done. He added the ice changes and within a week the conditions can be entirely different. He exemplified the fact that just a couple of weeks ago there was a cold spell, and within a weeks time the sea ice was six feet thick. A person coming from another area, cannot be familiar with that. He stated he lives in the Anchorage area and knows what it is like. REPRESENTATIVE JAMES asked for confirmation on the existence of a test that presents all these aspects that would test the pilot on their familiarity with a particular area. She asked Mr. O'Hara if he chose to go back to Region 3, would he have to pass a test for that area. Number 515 MR. O'HARA said yes, he would. He would have to go and familiarize himself with the area and pass an examination. REPRESENTATIVE MACLEAN asked Mr. O'Hara how he felt about Sections 17 and 18, regarding arbitration dispute resolution. MR. O'HARA explained as a member of Region 2, the official position of SWAPA is that in regions having only one group, some sort of conflict resolution would be appropriate. As a board member, he felt there was a need for a conflict resolution, but could not say this was the solution. He indicated he did not know what the solution would be, but there has to be a way to enforce the compulsory pilotage. He referred to Section 14 (c), stating "a person licensed under this chapter who is not a member of a pilot organization shall provide pilotage services..." and indicated if a pilot goes to a ship and refuses to provide pilotage service based on safety, he is still providing pilotage services. The pilot is obligated to use his best judgment as to whether or not it would be unsafe to move the ship due to a possible grounding or for whatever reasons and said those are pilotage services; even if the pilot doesn't work - he's working by saying "no, we're not going to do it today, we'll wait for a couple hours." He felt as a board member, he would like to see some legislation for enforcing the compulsory pilotage. REPRESENTATIVE MACLEAN asked how dispute resolutions were currently handled. MR. O'HARA indicated the board has not done a good job at handling dispute resolutions. He noted that approximately two years ago, they had to appear in court over what they thought was a dispute resolution, and the judge dismissed the case. What the board declared as an emergency, the judge said it was not. He added they had no mechanism. Number 543 REPRESENTATIVE JAMES stated in her opinion there were only two solutions. One is to have true competition, which there is not; the other is to set a tariff and not have competition. MR. O'HARA explained Alaska is unique in that it is breaking ground. Other states are looking at the progress that Alaska has made. Other states have tried it, but have backed down. For example, Connecticut re-instituted the regulated pilotage. He mentioned from a safety standpoint, which is where their concerns lie, it is currently working. He indicated there were high standards for entry, and even though there is a lot of concern over the cost, basically the safety aspect is working. He felt that the 1991 act has done the job, and whatever is done to this particular legislation, whether it is kept quasi-competitive or goes to a regulated or open market, that is the basis of whatever decision is made. He reiterated his comments on safety issues and that the safety aspect, as far as he was concerned, is currently working. Number 566 REPRESENTATIVE JAMES asked if we still had the regions and did not have competition and had only tariffs in the regions, would this not work from a safety perspective as well? MR. O'HARA said yes, it would work if..... REPRESENTATIVE JAMES interjected that if safety is the issue, then it would seem like the other problems would go away and the safety issue is addressed to a greater extent. MR. O'HARA indicated this was true and if there were fixed tariffs in place or there were maximum tariffs as there was before, the competition would be based on service. REPRESENTATIVE JAMES asked if this was something Mr. O'Hara was opposed to. MR. O'HARA said as a board member or as a Region 2 pilot, he was not opposed to it. He indicated he was not sure how this fit in with the political attitude of the state for competition, but safety-wise there was no conflict. CHAIRMAN DAVIS asked for testimony from Benee Braden. BENEE BRADEN indicated she would pass. Number 586 CHAIRMAN DAVIS stated he would now take testimony via teleconference from Valdez. TEX EDWARDS, Executive Committee Member, Prince William Sound Regional Citizens' Advisory Council (RCAC); and also representing the city of Homer on that council, stated the RCAC's mission is citizens promoting environmentally safe operations of the Alyeska terminal and associated tankers. He said they are certified as an alternative council under Section 5002 of the Oil Pollution Act of 1990. Their work is guided by their contract with Alyeska Pipeline Service Company and with the Oil Pollution Act of 1990. MR. EDWARDS indicated RCAC is an 18-member organization representing communities and boroughs impacted by the 1989 Exxon Valdez Oil Spill. Other areas include commercial fishing groups, Alaska Native interest groups, environmental, aquaculture and business organizations. He stated that safety, as Mr. O'Hara has indicated, is RCAC's primary concern and should be the primary concern regulating marine pilotage. Safe marine pilotage is of critical importance to the residents of Prince William Sound. RCAC has experienced the impact of minor adjustments to marine pilotage with the Exxon Valdez oil spill. He indicated as stated in legislative intent and findings, marine pilotage is to assure the protection of lives, property and the marine environment of the state. MR. EDWARDS continued to explain that RCAC feels the licensed marine pilots should have extensive local knowledge to pilot certain vessels on inland and coastal waters. The safety concern is the primary issue for the public and should be for the state of Alaska. RCAC has no vested economic interest in pilotage. RCAC urges the legislature to remain focused on the impacts dealing with safety issues regarding the bill under consideration. During recent years the Department of Commerce and Economic Development, Division of Occupational Licensing, and the Marine Coordinator have made significant improvements toward making licensing examination and training more objective. MR. EDWARDS agreed with Mr. O'Hara's statement. RCAC applauds and supports the progress. However, the department has also been hampered in their efforts to improve marine pilotage by the constant litigation. RCAC hopes that the housekeeping portions of this legislation will reduce the conflicts in the system and allow the state to focus more clearly on the important issues affecting safety. RCAC looks forward to constructive interaction and continued improvement. He indicated RCAC is very appreciative of the excellent safety record of SWAPA, which has avoided many of the growing pains and accompanying problems occurring in Southeast and Western Alaska. He stated he believed this is accredited to the members and the training program of SWAPA and not so much how the program is regulated by the state. MR. EDWARDS commented that SWAPA has maintained high professional standards in recruiting, training and licensing pilots. He added Alyeska has also evaluated the qualifications of new pilots calling at the Trans Alaska Pipeline System (TAPS) terminal, and the combination of these two influences have helped to maintain rigorous, professional standards for pilot services on TAPS trade tankers. Introducing competition or cross regional pilotage in the Prince William Sound area would be a gross error. The competition that Holland American Line helped to create in Southeastern Alaska may have contributed to the grounding of the New Amsterdam. He indicated this situation is not what they want to achieve in Prince William Sound or anywhere else. The state needs to be proactive in ensuring the training, examinations, licensing and safe operating standards are rigorously regulated. The state has usually taken a "hands-off" approach toward regulating some of these areas and has not intervened unless there was a problem. He said proponents of competition advocating regulating safety directly into the public needs to be assured that this will happen, whether it is within a competition system or within a regulated monopoly. MR. EDWARDS continued to explain that by allowing training and licensing standards to be eroded decreases public confidence. The Board of Marine Pilots should set high professional training, licensing and safety standards that cannot be lowered by shippers or by competing pilot groups. He indicated in some of the hearings there has been debate regarding competition and whether competition exists. He explained true economic competition cannot exist in an industry where the use of pilotage services are mandatory. Pilots must belong to a pilot association and that association must provide services. He said arguing over whether competition exists is of little use. The larger issue is whether competition between pilot groups and between pilots and shippers has a detrimental impact on safety. More important, is the question of whether or not competition would compromise the ability of pilots to make professional decisions unencumbered by reprisal or the fear of reprisal, either in the form of loss of market share to competing pilot groups or reduction in negotiated fees. MR. EDWARDS said RCAC questions whether there is sufficient measures in state law to protect Prince William Sound and the states' resources from the problems that appear to be the result of competition. He stated RCAC believes that the pilot associations should not be able to reduce training and licensing standards in order to increase membership. He indicated it appeared to them that the affect on safety by competition is negative and it seems relevant that Alaska is one of the few states that provides for the setting of pilot fees based on competition. He added it appears to be a purely economic issue that continues to detract attention from the more important issues of recruiting, licensing, training and safety. In addition, because the supporters of competition are advocating binding arbitration, one would question whether the quasi-competition system for setting pilotage fees has worked. MR. EDWARDS said competition has been used as leverage for the shippers to keep pilotage rates at a minimum. It is understandable that the shippers would seek reasonable pilot rates, but the ultimate concerns should be safety assured by maintaining professional standards and not balancing economic issues. TAPE 95-13, SIDE B Number 000 MR. EDWARDS addressed Section 2 pertaining to board membership. If the board is not setting tariffs, RCAC questions the continued requirement for industry representation. He indicated maybe the board should be a safety, training and licensing board with pilot and public members from the pilot regions. Currently, there are only two members each for public, pilots and industry representing Southeast and Southcentral Alaska. He suggested the purpose of the marine board is to protect the public's interest. He stated RCAC opposes any reduction in public members by number or by percentage of the board. Number 023 MR. EDWARDS referenced Section 8 regarding qualifications for the deputy pilots license, and said RCAC supports the Department of Commerce and Economic Development and Mr. O'Hara's amendments to avoid reduction in training and entry standards. He then referred to Section 13, regarding the rotation of recognition of a pilot association where periods about the technical problem if a membership in an association is required, and questioned what happens if recognition is revoked and there is no legal mechanism for pilots to offer services. Mr. Edwards then referred to Section 15 regarding sanctions against pilots for drug or alcohol use. He indicated in previous hearings there was testimony that this new section allows a pilot's liability to be unlimited in any situation for which the board can sanction a pilot and is thus arbitrary and too harsh. He stated if, in fact, the section provides for unlimited liability in situations in which the pilot could be sanctioned for drug or alcohol use, RCAC supports that because it is a safety issue. He said he would be happy to answer any questions. Number 045 REPRESENTATIVE SANDERS strongly agreed with Mr. Edwards. Representative Sanders indicated a mistake must have been made in 1991 and questioned the fact of ever getting it resolved. He asked Mr. Edwards how he felt about amendment ten, regarding the deletion of Section 17 (d) and Section 18 in their entirety. MR. EDWARDS declined to answer Representative Sanders' question because he was not familiar with that section and did not understand the ramifications of the amendment. CHAIRMAN DAVIS stated Section 18 is the dispute resolution and as currently written is the binding arbitration language. MR. EDWARDS said if we have a regulated monopoly, or like a utility, or if we have the competition, either way it appears there will be the need to take care of some of the disputes. He indicated there does need to be a source of arbitration either way, and agreed that the pilot board may not be the place to accomplish this. Mr. Edwards suggested a single individual arbitrator, perhaps a retired admiralty lawyer or someone with a marine background. He also suggested the possibility of a separate three person panel that would meet on rare occasions when needed; perhaps a retired pilot or someone from the shipping community that is retired, or a public member. He said if we are operating this from a safety standpoint, then sooner or later these issues will resolve themselves as far as fees. He hoped that there will be more talk of a cost of living adjustment. He indicated the need for an independent arbitrator, whether it be a three person panel or an individual. Number 112 HANS ANTONSEN, Member, Southeastern Alaskan Pilots Association (SEAPA) in Region 1, commended Mr. Edwards on his insight towards this issue. Mr. Antonsen stated he disagreed with Mr. O'Hara's comments regarding a fixed or maximum tariff satisfying their needs as well as the state's for protection from antitrust issues. He felt SEAPA is the more appropriate association to speak on antitrust issues because they have previously dealt with a couple of lawsuits regarding antitrust issues; lawsuits that were involved with the act as it was pre '91 and when we had even a stronger degree of oversight, as we do now. MR. ANTONSEN said he did not believe there was anything within the state act that can provide the state or pilot associations with protection from antitrust concerns. He stated they have been involved to the extent of asking the state to do a amicus brief for a case that was in federal court. He felt the department can speak in regards to the lawsuit that was brought against them as well. He noted the game plan, when it comes to antitrust and pilotage issues, is to remove it to a federal court where there are triple damages, antitrust, and no protection or specific language in federal law that grants pilot organizations protection from antitrust. Mr. Antonsen said we have that in state, but not in federal. He indicated there is a conflict, and referred to either Mr. Bush or Mr. O'Hara who stated Mr. Forbes did testify that a maximum tariff may give some protection, a fixed tariff would give better protection; but either way, "may" or "better" did not get the lawsuit off their case when they applied to those grounds. He explained they ended up having to deal with it on their own and were let down by the state. The state indicated yes, this is what pilots have as far as protection in the state ground (indisc.). Mr. Antonsen indicated their attorney is present to address these issues in more detail regarding antitrust. MR. ANTONSEN agreed with the deletion of Section 17 and 18, and remarked that we keep trying to solve hypothetical problems and not real issues. He said there has been no tariffs since last year, and since then, his association has been involved in negotiations with various shipping companies and have negotiated contracts, some dealing with conflict resolution and some that do not. He said he found it interesting that on some occasions it was industry that requested the omittance of binding arbitration or conflict resolution on the grounds it was testified previously. He said we have the courts, and if there is disagreement, we should be able to resolve our differences that way. He said if they think there has been some price fixing, the pilots by this time are scared to death of the specter of antitrust with triple damages and with no support from the state - no offense intended to this body. MR. ANTONSEN said in response to Representative James' question regarding the answer to their problem that either they have competition or they go to a fixed tariff, perhaps committee members were not familiar with the act that the Florida Legislature enacted and signed into law sometime last year. He explained the state of Florida was wrestling with the competition problem and finally determined that competition was not the answer. Mr. Antonsen asked to read into the record a brief preamble from the Journal of House of Representatives dated April 4, 1994. This is stated in the Florida statutes, which provides what he believes is a clearly articulated position of a state that has dealt with competition and perhaps had reached the point where Alaska is currently, as far as where to go from here and how to solve these problems. MR. ANTONSEN read into the record: "Under piloting regulation, general provisions 310.0015, piloting is an essential service of such paramount importance that its continued existence must be secured by the state and may not be left opened to market forces. Because safety is the primary objective in the regulation of piloting by the state and because of the significant economies of scale in delivering the service, the requirement of a large capital investment in order to provide required service and the fact that pilots are supplying services that are considered to be essential to the economy and the public welfare, it is determined that economic regulation, rather than competition in the market place will better serve to protect the public health, safety, and welfare. The rate setting process and the issuance of licenses only in numbers deemed necessary or prudent by the board and other aspects of the economic regulation of piloting established in this chapter are intended to protect the public from the adverse effects of unrestricted competition which would result from an unlimited number of licensed pilots being allowed to market their services on the basis of lower prices rather than safety concerns. This system of regulation benefits and protects the public interest by maximizing safety, avoiding uneconomic duplication of capital expenses and facilities, and enhancing state regulatory oversight. The system seeks to provide pilots with reasonable revenues, taking into consideration the normal uncertainties of vessel traffic and port usage sufficient to maintain reliable, stable piloting operations. Pilots of certain restrictions and obligations under this system including but not limited to the following; pilots may not refuse to provide piloting services to any person or entity that may lawfully request such services except for justifiable concerns related to safety or in the case of a vessel planning a departure, for nonpayment of piloting. Pilots may not unilaterally determine the pilotage rates they charge, such pilotage rates shall instead be determined by the pilotage rate review board in the public interest as set forth in Section 310.151. Pilots shall maintain or secure adequate pilot boats, office facilities, equipment, dispatch systems, communication equipment and other facilities and equipment in support services necessary for a modern dependable piloting operation. The pilot or pilots in a port shall train and compensate all member deputy pilots in that port. Failure to train or compensate such deputy pilots shall constitute a ground for disciplinary action under Section 310.101. Nothing in this subsection shall be deemed to create an agency or employment relationship between a pilot or deputy pilot in a pilot or pilots in a port." MR. ANTONSEN summarized this report by stating the public is determined that competition will not serve the state's needs. This is what the state needs out of piloting to ensure that commerce does not stop, training is not degraded and the job gets done. He added what he keeps hearing from pilots and industry is that people keep saying we are 90 percent there. He believed going the remaining 10 percent will give the state what it needs for security from antitrust concerns. Number 259 CHAIRMAN DAVIS asked if there was any questions. He then announced Ms. Gayle Horetski. GAYLE HORETSKI, Assistant Attorney General, Civil Division, Department of Law, said she was available for questions. CHAIRMAN DAVIS referred to a comment made by Mr. Bush regarding the question of the state action exemption in that "we could not escape antitrust problems with the current language until we have the ability to set a rate." He asked Ms. Horetski if this was correct. MS. HORETSKI explained this issue has been looked at by the Department of Law and by the Department of Commerce and Economic Development. There have been some developments in this area since the 1991 act was adopted. She explained one of the developments is the U.S. Supreme Court decision dated June 1992. The name of that particular case is the Federal Trade Commission v. TICOR Title Insurance Company. Basically, the Federal Trade Commission (FTC) filed a complaint against title insurance companies alleging that they were price fixing such items as title searches. She explained the states that were involved in this case went before the Supreme Court, and had a mechanism where title insurance companies had a rate bureau and would submit rates to the state. The state legislature had 60 days or some period of time to accept or reject those rates. She added there was state oversight of these rates. MS. HORETSKI continued to explain the title insurance company received this complaint from the FTC, they said "wait, we are regulated by the state and are under the state action exemption to federal antitrust liability." In the TICOR Title Insurance Company case, the Supreme Court said "okay, we understand that there is a state articulated policy in your state that allows for the setting of these rates -- (indisc.) articulated rates, it was a statute is what it was -- and we understand there is a mechanism that would allow state oversight of these rates." However, the decision of the Supreme Court was that in those cases, the state was "rubber stamping" these rates and not checking them for any substantive analysis as to whether or not it would be reasonable. She added it benefitted the title insurance companies because they would set the rates wherever they wanted. She explained the U.S. Supreme Court said there was not sufficient active state regulation of that industry to bring these companies under antitrust liability under the state action exemption. She expressed concerns from the Departments of Law and Commerce and Economic Development that the state will not be liable for antitrust action under federal law. She explained the pilots and the pilot associations have very real potential liability if there is no mechanism for state oversight of the provision of the services provided. MS. HORETSKI stated there is some oversight in terms of licensing; but the issue is, who sets the rates that the public pays and that was the issue that was in the FTC v. TICOR case. She commented if it is not being done by the state through a careful, rigorous, thoughtful process, then the companies do not receive antitrust protection. She added this was the concern of the pilot associations. They are going to end up having this litigation if there is no rate setting mechanism, whether that is accomplished with a fixed tariff or a maximum tariff. MS. HORETSKI continued to explain if there is no mechanism at all then it would create serious concerns regarding possible liability. She indicated under federal antitrust law, a private party may file an action. If that action is successful the private party may recover double damages; that is in the federal law. She said it does not have to be the state attorney general or the FTC or somebody pursuing the pilot associations. She felt this would not happen, but one group can sue another or one person could sue the association creating numerous lawsuits. She concluded that these were their concerns. Number 317 REPRESENTATIVE SANDERS stated "lets just throw this into Alaska Public Utilities (APUC), they never have any problems over there." MS. HORETSKI explained in the past there was some discussion of having someone other than the board set the tariffs and theoretically that would be acceptable. It does not have to be the board. She commented it does make sense to have it be the board in terms of expertise; however, it would be a perfectly legal option, so long as the legislation was drafted that way. She noted there was a maximum tariff that did expire. She said she had sample language from the old maximum tariff language in existing statutes. She indicated how this is drafted was as a fixed tariff. She indicated it appears in descending order of protection, in that where there is a fixed tariff, clearly there is state oversight of the rates because the state, the board, the APUC or whoever, has set these rates. She explained to go a step lower with the maximum tariff issue, then it becomes unclear due to the possibilities of private parties arguing with each other. She remarked there is still some state oversight in the sense that the price cannot rise above a certain level. Presumably, there would not be any gouging of shipping companies because these rates would be set fairly. She explained in further descending order, there is a proposal of an alternate dispute mechanism, whether that be arbitration, mediation or whatever. She noted it begins to resemble the issues that were struck down in the FTC v. TICOR case. She added it is not oversight in the sense of setting the rates ahead of time; it is if there is argument over these issues and eventually reaching some sort of conclusion. She added this was not good state control over the prices. Number 352 REPRESENTATIVE BRICE asked if arbitration could lead to a situation similar to TICOR. MS. HORETSKI stated their concern is that a dispute mechanism that does not set a tariff would not provide the pilot associations with the protection under federal antitrust law. She added under state law it is acceptable because there is a specific exemption in AS 45, but that is not true under federal law. Number 370 DOUG MACPHERSON, President, Alaska Coastal Pilots Association, stated they are in support the bill and the amendments presented. He said they were particularly supportive of the notion, primarily of the additional pilots and industry members on this board. He referred to the question of cost which had been brought up and submitted that adding a pilot and industry member to this board will not cost, rather it will pay. He explained the major costs of this board have resulted from lopsided representation from pilots and industry members, who are not represented on the board. He indicated the pilots have had their interests trampled on and subjected the board to litigation in defense of their rights. He noted if they were represented, this would stop. He asked the committee to take this into account. MR. MACPHERSON referred to Mr. Edwards' comments and stated Mr. Edwards seemed to know more than the National Transportation Safety Board (NTSB) and the Coast Guard put together regarding how accidents are generated and what causes them. Mr. MacPherson said this distressed him greatly, since the New Amsterdam grounding was mentioned prominently by Brad Pearce while he was working in the Department of Management and Budget. Mr. MacPherson said it bothered him to see these types of conclusions drawn when reports have not yet been generated. He suggested a lot of money could be saved by resorting to Mr. Edwards' methods and not have the NTSB or the Coast Guard involved; he could do all the investigations for us. MR. MACPHERSON indicated that fixed tariffs would put an end to competition and piloting, and would probably return us to the situations in the past, which was not a good situation; it was an unsafe situation. He said "if you were well connected and had all your political ducks in a row, you could have all the accidents you wanted and somehow no one would ever mention them, or if they did get mentioned, it was in the most mild mannered sense." He stated with competition, the pilots are under a microscope and the competitors are not necessarily anxious to see an accident occur, but they are anxious to see a person answer for one when one does. MR. MACPHERSON indicated the Federal Trade Commission (FTC) has concluded, on a nationwide study that there is no correlation between competition and safety. He commented this was stated in a report by Charles Harwood which has been distributed locally. He indicated there is a fairly scholarly body of work from the NTSB that suggests that there is no way to tell if a competitive pilot is a unsafe pilot. He added with regards to the dispute resolution issue, they are going to continue to take a neutral stance on that issue because he felt there is a better way to solve the problems at hand than to have the state intervene. He stated that pilot organizations are joint ventures by nature, and it is not clear at this time that any pilot organization has ever had an antitrust action brought against the organization regarding tariffs. MR. MACPHERSON explained when 20 people decide to join an organization, they do so to lower prices to benefit the consumer. Otherwise they would need to have 20 people with 20 pilot boats, 20 phone numbers, 20 offices and 20 secretaries and the prices would increase. He said these joint ventures are usually not subjected to antitrust action, the state exemption notwithstanding. He indicated with regards to competition, it does exist in other states. Alaska is not breaking any ground in that area. Competition is widely held, throughout the Eastern Seaboard as well as Honolulu and Oregon with state pilots. To say otherwise is not true. He mentioned they were dealing with the issue of dispute resolution. He suggested that since the idea of fixed tariffs has been mentioned repeatedly, the standard could be easily accepted by the industry. He commented he could not speak for industry, it might be the maximum tariff but cautioned his suggestion. He explained a fixed tariff is unacceptable to his organization and would end competition which would result in the previous situation. Number 477 REPRESENTATIVE JAMES asked Mr. MacPherson for clarification regarding his statement on competition improving safety. She asked if there was another mechanism that could guarantee safety. MR. MACPHERSON explained safety is improved in a competitive situation, because it is unacceptable to do unsafe things to a ship, in other words shortcuts cannot be made. The consequences of a minor accident are so severe, that for a person to compromise their position, if someone agrees to do something unsafe because he might say "I'm a competitor and do not want to lose any business." This situation he stated is beyond his knowledge. REPRESENTATIVE JAMES stated it appeared to her that with competition, there would be more of an inclination to take action than not, because competition establishes a relationship with the pilot and industry that is different than what anyone else has. She stated it was her belief that every marine pilot in the state would not be of such a mind to do those things. She stated she trusted them and believed their integrity is great. It appeared to her that with competition, one would be depleting the ability to ensure maximum safety because of the relationship with the industry because of the competition. MR. MACPHERSON said from a competitive stance and being in a client relationship with a company, he could not see how that would degrade a safety position. He explained a client cannot be placed in an unsafe position; in fact, if you even make them feel uncomfortable, they will look around for someone else to do the work that won't make them feel uncomfortable. He said the facts are not there to bear that out. He stated he has been faced with this situation on a couple of occasions, and the client was relieved not to take the chance. He gave an example where he had requested not to sail the ship and the pilots would say "God, we were hoping you would say that." to which he would reply "of course I would say that if it is a bad situation." He analogized the situation of a doctor telling a patient that he/she would operate on the patient, but would do it some shortcut way, and the patient responding that they wanted only the best and finest practices employed on their body. The client's ships are the client's body, and a doctor is as mandatory as a pilot. REPRESENTATIVE JAMES asked for clarification on the fact, if we got out of the competition area and went with fixed tariffs, would this eliminate the pilot associations and the need for them. She stated she saw a purpose for them because who then would do....... MR. MACPHERSON interjected there would be one pilot association in each region, ultimately. REPRESENTATIVE JAMES indicated they would have to do the dispatching. MR. MACPHERSON said yes, they would. Number 480 REPRESENTATIVE WILLIAMS asked Mr. MacPherson to elaborate on the issue of maximum tariffs. MR. MACPHERSON said he could not speak for whether the maximum tariff is the answer or not, but it is preferable to a fixed tariff. He explained a fixed tariff would "kill off" what we stand for. He prefers the competitive situation as it is currently where there is no maximum tariff. He stated the board may waste a lot of time trying to work with the issues of maximum tariffs. It takes an enormous amount of time and their attention away from more important issues such as licensing and professional standards, as well as enforcement of those standards. He indicated setting a tariff can be an all-consuming proposition. He remarked that he wished he could retract that statement because he only meant it as a suggestion that was "out in left field," from his point of view. He stated he was hoping to keep the tariff sunsetted and let the parties work it out among themselves. Number 510 LARRY COTTER, Representative, Alaska Steamship Association (ASA), explained they represent virtually every shipping entity that employs marine pilots in Alaska, with the exception of the Prince William Sound area. He added ASA supports all of the amendments, with the exception of Representative Sanders' amendments. He felt it was inevitable that there will be discussion on the issues of binding arbitration and competition. He stated the number one priority is safety. He suggested although everyone that has testified has indicated the importance of safety, it may be a higher priority for ASA because in the event of a grounding, their association members will end up incurring millions and millions of dollars of expenses as a result. MR. COTTER continued to explain aside from the public policy perspective resulting from a safety problem, there is an enormous economic incentive to ASA's companies to ensure that all the vessels move as safely as possible. With regards to that issue, he referred to Mr. O'Hara's comment on his belief that the safety record in Alaska has been excellent. He felt that the Board of Marine Pilots has improved training requirements and other aspects that are designed to improve the safety of the pilots that are licensed to operate in Alaska. ASA has been supportive of those improvements and activities. He indicated the safety issues are indeed paramount and that people are satisfied with safety procedures. If they are not, then that should be worked at through the training programs, licensing requirements and the skill levels of the pilots. He stated along with all these issues, service is also very important to ASA. He indicated ASA needs to be able to provide excellent service to the state, the industry and the public. This is the only way they survive in a competitive atmosphere. He explained when service is considered, then the dollar plays a role. He stated in this case the dollar bill is called "the cost." MR. COTTER referred to a previous question regarding whether or not the shipping companies would absorb some of the cost associated with adding a couple of new pilot board members; the answer is, yes. He suggested the answer lies with the industry generally paying for everything that is associated with pilot associations. He referred to the language under the expired act, and said the maximum tariff can take into account dispatch expenses, transportation expenses and other associated expenses directly related to the provision of pilotage services. He explained these costs that result from whatever tariff is applied, ASA absorbs those costs and to some extent, will pass them on to their customer. He indicated with their competitive atmosphere, they cannot pass them on to the consumer because they have to compete and essentially swallow the expenses themselves. He stated it seems only fair to them that to the extent that the number one issue--safety--is addressed to everyone's satisfaction, they then have some latitude to deal with the issue of cost. This should allow it to be affordable in the sense that if there is more than one pilot association, they are free to compete with each other as long as they can meet the safety and public service standards. CHAIRMAN DAVIS said his question would be in relation to the Department of Law's comments relating the antitrust regulations and the existing language under conflict resolution. MR. COTTER stated they were supportive of conflict resolution. This was not their first choice, but they were willing to support it. If conflict resolution is not going to pass muster in the event that it can't satisfy antitrust concerns that the associations have, then their fall back position will be to support the continuation of the maximum tariff language that was in the bill which expired a year ago. He noted that the assistant attorney general said for the occurrence of state oversight activity, substantive analysis needs to be undertaken as regards to the setting of the tariff. He referred to the old statute and stated it does require a number of findings regarding costs and how those costs are directly related to providing various services. He stated if the Board of Marine Pilots has reviewed the required analysis relative to those requirements, then substantive analysis has occurred. Number 584 REPRESENTATIVE BRICE asked who would be paying for the dispute resolution. Would it be the person bringing the dispute to the table asking for binding arbitration or would it be decided during the resolution or an even split? MR. COTTER indicated it was his opinion, there would be a 50/50 split. This was typical in arbitration disputes or dispute resolution where both parties absorb half the cost associated with the arbitration. REPRESENTATIVE BRICE expressed concern for pilot associations that are very small, and if they went to arbitration, this would result in taking all possible profits that the associated people might have been able to receive. He then questioned the cost regarding the fact that if pilot associations are going to have costs hanging over their heads, he felt it would have a "chilling effect" on their ability to address disputes in an economical and reasonable manner. MR. COTTER remarked the idea is that you do not get to arbitration. He added "good efforts by good people result in good agreements." He hoped dispute resolution is a rare case, and noted in the past he was the president of a labor union in Alaska. It was a small union but they did not hesitate to pay for their half of arbitration, if that was necessary. He suspected this was true of the pilot associations. Number 618 PETER GARAY, Alaska Marine Pilot in Region 3, which encompasses everything west of Kodiak, the Aleutians, the peninsula, and Bristol Bay and northward to the Canadian Arctic. He supported Section 2, line 4, regarding the regions being represented on the board versus judicial districts. He noted pilots on the board should be from the particular area they are working in. He said in their situation in Region 3, and the judicial district of Region 2, which canvasses the entire area, so if there is only one pilot from the judicial district and two as it is currently with the Southwest pilots, when there is an opening on the board they would not, at this time be able to take advantage of that opening due to the fact there is already a judicial seat taken. MR. GARAY explained there should be pilots from their particular region who can bring the problems that are affecting their region to the attention of the state. He felt they would be able to articulate the arguments best to the people involved, rather than sitting out in the audience, lobbying the particular board members regarding what is right or wrong with the various problems in that particular region. Region 3 is a large region and there are a number of problems in Region 3 that they ultimately come back to the state with, and attempt to resolve. MR. GARAY disagreed with Mr. O'Hara's statement regarding his perspective on safety issues with the system of pilotage and how it is working. He noted he had examples to show from a safety standpoint, it is not working and stated it was "dirty laundry." He stated he was prepared to give examples on why safety is not being served out there well. He said several concerns regarding safety were brought up to the Board of Marine Pilots last year and from a board member's point of view, things appeared fine out in this region. Mr. Garay emphasized the fact this was not true. MR. GARAY asked to address some of the tools of the competitive system of pilotage. He sees it as service and price. He explained last year they had their first victory when the maximum tariff "went away," in that they finally had a tool they could use where they could go with a price. He noted if they did not feel they were getting their fair share of the work or were asked to perform some service out in the Aleutians that would not be profitable, they would have the option to charge whatever they had to in order to make it profitable. He emphasized it was a tool and indicated he did not think that anyone could point to an Alaska marine pilot and say they have used that tool irresponsibly. TAPE 95-14, SIDE, A Number 000 MR. GARAY continued to explain, there is fair amount of allocation of the work in this competitive environment to ensure his group of pilots can cover the entire region. He stated they would like to hang on to that tool, and if not, then the next step would be to go to a fixed tariff. He agreed that a fixed tariff is a step in the right direction, as long as they continue to economically regulate the entire system of pilots. He indicated there were other steps necessary, because if just the tariff is fixed, particularly in Region 2, then we are competing for service. He noted this was a "gray" area because of service/safety, and when they say they are not going to do a job or they can't do a job for whatever reason, somewhere incorporated, is the issue of safety. He indicated if they don't do it, the option will be given to the other group. They may or may not elect to do it, but the option is there. He said the next step to be addressed would be the need for service. He indicated there was testimony given on the issue of competition. He stated this was interesting because someone earlier spoke of having a "quasi-competitive" situation and if we truly want to break new ground in this state of Alaska, then there should be a competitive system that is completely unregulated. He said this would be a real experiment and indicated he would hate to see it go that way, but he would do okay. He added there would definitely be different prices charged for different customers. He stated he would just as soon continue to go toward regulation. There often is an analogy drawn that they are like doctors and lawyers. They compete and everyone gets band-aids put on their kids' thumbs and indicated pilots should be like doctors and lawyers and when it suits people, they make the argument that we are like fireman and policeman. He asked the committee if they would like to have a fireman or policeman come to your house who is the low ball bidder. He suggested the pilots were like fireman or policeman because they are a necessary service. He asked the committee to consider the question of the pilots being doctors or lawyers or fireman and policeman and if we are doctors and lawyers, then we should compete like doctors and lawyers and get rid of all the regulation and let us fight it out. If we are to be like fireman and policeman, then regulate us. Mr. Garay asked for questions. Number 075 CHAIRMAN DAVIS indicated that was all the people signed up to testify. He asked Dan Twohig to approach the table for further questioning as the amendments are addressed. He asked for a motion to move amendment one. REPRESENTATIVE JAMES made a motion to move amendment one, and asked for unanimous consent. CHAIRMAN DAVIS asked if there was any objection. He asked Mr. Twohig to comment on this amendment. Number 095 DAN TWOHIG, Marine Pilot Coordinator, stated that he and Mr. O'Hara constructed amendment one. After having consulted with the Department of Law, he suggested inserting "Coast Guard" in front of the word "inspected." CHAIRMAN DAVIS indicated this would be regarded as a friendly amendment. He noted the friendly amendment would read "Coast Guard inspected." He asked if there was any objection to amendment one. Hearing none, amendment one passed. REPRESENTATIVE MACLEAN made a motion to move amendment two and asked for unanimous consent CHAIRMAN DAVIS asked if there was objection to amendment two. He indicated there was discussion and debate as far as the deletion of the word "chronic" on page 2, lines 30 and 31. Hearing no objection, amendment two passed. REPRESENTATIVE MACLEAN made a motion to divide amendment three. She explained lines 1 through 6 would be amendment three (a). Lines 7 through 20 would be amendment three (b). CHAIRMAN DAVIS asked if there was objection to dividing the amendment. Hearing none, the motion passed. REPRESENTATIVE MACLEAN made a motion to move amendment three (a). CHAIRMAN DAVIS stated amendment three (a) deletes subsection (c) of Section 14, on page 6. Chairman Davis asked if there was objection. Hearing none, amendment three (a) passed. Number 142 CHAIRMAN DAVIS indicated amendment three (b) which would also be deleted along with Section 14, but noted the substance of amendment three (b) is further discussed. He stated with the concurrence of the committee, amendment three (b) would be held as opposed to discarding it completely at this time. He announced amendment four, on page 7, line 6. REPRESENTATIVE MACLEAN made a motion to move amendment four. CHAIRMAN DAVIS asked if there was objection. Representative James objected. REPRESENTATIVE JAMES asked for clarification on amendment four. MR. TWOHIG explained that Section 8 of CSHB 260 adds a new subsection (6) which creates the opportunity for pilot associations to develop an apprenticeship program. He stated a concern that some of the pilot associations had is that the apprenticeship program would be mandatory upon them. He referred to AS 08.62.175 (d)(3)(C), adds a section under....175 has to do with regional marine pilot organizations and it creates a clause stating these training programs "may" include deputy marine pilot apprenticeship programs; thus making it not mandatory upon each pilot association. He explained if they don't need this program because of the way their training program currently operates, then they should not be mandated to have one because there are other methods of entering the program. REPRESENTATIVE JAMES asked if some of the pilot organizations would be without a training program by doing this. MR. TWOHIG stated no, it would not. Number 193 REPRESENTATIVE MACLEAN asked for unanimous consent for amendment four, because it was a good amendment for the inclusion of training programs for the marine pilot apprenticeship program. REPRESENTATIVE JAMES stated she would withdraw her objection. CHAIRMAN DAVIS asked if there was objection. Hearing none, amendment four passed. He announced amendment five. REPRESENTATIVE MACLEAN asked to move amendment five, which again deals with the apprenticeship program. She indicated the amendment does not require the pilot organizations to establish an apprenticeship program, but suggests they may establish a deputy marine pilot apprenticeship program. CHAIRMAN DAVIS asked if there was objection to amendment five. Hearing none, amendment five passed. REPRESENTATIVE MACLEAN asked to move amendment six and strongly recommended the amendment be passed. She explained the purpose of this amendment was that it makes allowances for the vessels to travel to the destination closest to Point Hope. CHAIRMAN DAVIS explained it limits the authorization in statute. He asked if Mr. Twohig would care to comment. Number 221 MR. TWOHIG stated he "drew those lines" and the actual boundary is a place called Cape Thompson, which is up to and including Point Hope. He noted the line was drawn for safety reasons, considering the local knowledge involved in different parts of that region. REPRESENTATIVE BRICE asked if the area is north of Red Dog MR. TWOHIG stated yes, it was north of Red Dog. CHAIRMAN DAVIS asked if there was objection to amendment six. Hearing none, amendment six passed. REPRESENTATIVE MACLEAN asked to divide the question on amendment seven. Lines 1 through 6, would be amendment seven (a) and lines 7 through 16 would be amendment seven (b). She explained the reason for this was because she did not understand why there are three industry representatives. She inquired as to the marine pilot representatives. She said lines 7 through 16 do not deal with lines 1 through 6. She stated this was why she divided the question. CHAIRMAN DAVIS suggested before we act on a motion to divide the question, he asked Mr. Utermohle to explain the inclusions in line 7 through 16. It appeared to him that this was strictly relating to the selection of the additional members. MR. UTERMOHLE explained the second half of amendment seven, provides for the initial terms of the appointment of the new members. In order to maintain a staggered system whereby a new member will be appointed each year, this provides that the first pilot member be appointed for a three year term in order that he may fit into a gap between the two members currently sitting on the board. He explained one member is currently on the board for another two years, and the other one is on the board for four years. This would put another member's term to expire in three years. Regarding the industry representative, he said this would provide for an initial term of four years. He referred to the language on lines 4 through 6 of the amendment and stated this provides that the board would consist of three industry representatives. He noted they were replacing the agent and manager members of the board with industry representatives, and would provide there be three of them, which would be an increase over the two. REPRESENTATIVE MACLEAN said the reason for her concern was the creation of membership on the board. Under this particular work draft, there are two pilots licensed under this chapter who may be on the board, but the industry representatives are being increased to three. She indicated there would be three industry representatives and two pilots. CHAIRMAN DAVIS corrected Representative MacLean's comments and referred to page 1, line 9, which provides for three pilot representatives and the other part gives the selection times to continue the proper rotation of the appointments. REPRESENTATIVE MACLEAN withdrew her motion to divide the amendment. She added she was just concerned about the possibility of creating an uneven board. CHAIRMAN DAVIS stated currently there are two pilots, two industry representatives and two public members. This amendment would establish provisions for three pilots, three industry members and maintain the two public members. He indicated there has been discussion regarding this issue from the alliance group that attempted to come to terms with a lot of this legislation. He said this amendment was strongly considered, but a consensus was not reached. He stated it was his understanding there was not a lot of strong objection to these issues. REPRESENTATIVE WILLIAMS made a motion to move amendment seven. CHAIRMAN DAVIS asked if there was objection. REPRESENTATIVE JAMES objected for discussion. She stated with her experience with boards, a nine member board is verging on an unworkable board. She expressed concern for the larger these boards get, the more chance there is for misrepresentation when there is not a full board and there is only a quorum, because the quorum is not identified as to who has to be present. She expressed there being an imbalance of people as far as the representation to a certain degree of influence. She noted if they're not getting the proper recognition on the board, it would be her personal opinion to make it smaller, rather than bigger. She added cost is not the issue. She reiterated her concerns that the bigger the board, the more problems there are. The smaller the board, the better opportunity and less chance for one side to have a stronger input, especially if there are specifically designated seats. Representative James withdrew her objection. CHAIRMAN DAVIS asked if there was objection on amendment seven. Hearing none, amendment seven passed. REPRESENTATIVE JERRY SANDERS made a motion to move amendment eight. REPRESENTATIVE MACLEAN objected. She said the reason was because we just adopted amendment three (a) and we incorporated subsection (d) to (c) and stated she was satisfied with this. It recognizes that a person licensed under this chapter is a member of a pilot organization. She indicated the amendment seemed harmless and would maintain her objection. CHAIRMAN DAVIS stated he, too, would speak against the deletion of subsection (d). As indicated, amendment three (a) did delete Section 14 (c) and (d) is now (c). REPRESENTATIVE MACLEAN explained the language of the new subsection (c), under Section 14, states "a person licensed under this chapter, who is a member of a pilot organization shall provide pilotage services to a vessel upon being dispatched by the pilot organization of which is a member." She indicated this was Representative Sanders' amendment. CHAIRMAN DAVIS explained that on page 6, currently in Section 14 (d) remains in the bill; it has just been re-lettered (c), since (c) was deleted. REPRESENTATIVE SANDERS asked if (c) was deleted. CHAIRMAN DAVIS stated "if you take (d) and make it a (c) that is what we currently have." REPRESENTATIVE MACLEAN said the original (c) was deleted, so (d) became a (c) and the new (c) reads "a person licensed under this chapter shall provide pilotage services to a vessel upon being dispatch by the pilot organization of which is a member." Number 380 REPRESENTATIVE BRICE explained that Representative Sanders' amendment is still necessary, because we are still mandating that a pilot has to go out regardless of the standards or the situation in which the negotiation between industry and the pilot organization exists. He thought this caused some concern in that it is neither fish nor fowl as far as whether or not it is going to be fixed rate versus some other type of maximum tariff rate. REPRESENTATIVE MACLEAN referred to amendment ten which deletes Section 17 (d) and 18 in their entirety, which she supports. She added there should be some guidelines for the pilots and this is the lesser of the sections. CHAIRMAN DAVIS indicated this just falls under the entire act regarding that the state wants to mandate that pilotage services be provided. He indicated this is what amendment ten is stating. REPRESENTATIVE BRICE disagreed with Chairman Davis, and indicated it was stating that the pilot would be mandated to serve. CHAIRMAN DAVIS asked Representative Brice what would be the problem with that. He added we are mandating that pilotage services will be provided. REPRESENTATIVE BRICE said no, and explained what we are mandating is that, regardless of the situation relating to contracts and negotiations, we would compel a pilot to possibly go without a contract, without knowing the limits of the tariff, and regardless of the payment situation. REPRESENTATIVE SANDERS asked if the pilot's organization would dispatch him under those conditions? MR. TWOHIG stated in order to make Sections 17 and 18 work, there has to be a requirement of a pilot to accept the job when he's called. He explained from the state's perspective, it is a policy call as to whether or not the legislature wants to have competition or not. He noted the requirement of the pilot to respond when dispatched also is dependent on if the pilot looks out the window and say "hey, the weather is bad, we're not going." He indicated there has been testimony presented today where Captain MacPherson said this would not happen. Mr. Twohig stated unfortunately it has happened. He explained a pilot organization was requested to move a vessel, the wind was blowing 40 to 60 knots, the pilot looked out the window and made the decision not to provide service because it was not safe. The industry went to the other pilot organization and asked for their opinion; the guy flipped a coin and said okay I will do it.... CHAIRMAN DAVIS interjected that was hearsay. REPRESENTATIVE SANDERS acknowledged there was a pilot that wanted to testify on this particular amendment. Number 451 MR. ANTONSEN, pilot, Southeast Alaska Pilots Association explained they were not being asked...that when the association is requested that they have to dispatch, I think the (indisc.) of the amendment has already been addressed and currently reads, when an association is dispatching to a ship, a pilot will be dispatched. He said they were not talking about industry saying "we want to use your services, even though we do not have a contract, you have to go." He stated this has been amended to clarify that if an association is providing dispatch to that particular ship, the pilot when dispatched shall serve. CHAIRMAN DAVIS asked to clarify that Mr. Antonsen had no objection to the inclusion of subsection (d) that is now (c). MR. ANTONSEN stated that was correct. Number 463 REPRESENTATIVE BRICE asked if this is what the new Section 14 states? MR. UTERMOHLE explained the amendment would delete the requirement that a pilot has to provide pilotage services when dispatched by his pilot organization. He thought the larger issue is whether or not the pilot organization is required to dispatch a pilot regardless of whether or not they have an agreement with the vessel. He explained as this bill is currently drafted, it is envisioned that such a situation may arise. This is why the binding arbitration requirements are there, to ensure once the services are provided in the absence of an agreement, arbitration will occur and the pilots do get paid, if there is not a previous agreement. Number 479 REPRESENTATIVE SANDERS made a motion to withdraw amendment eight. REPRESENTATIVE JAMES questioned whether the state should be telling an association what their association members should do. CHAIRMAN DAVIS asked if there was objection on the withdrawal of amendment eight. Hearing none, amendment eight was withdrawn. REPRESENTATIVE SANDERS made a motion to move amendment nine. CHAIRMAN DAVIS asked if there was objection. REPRESENTATIVE MACLEAN objected for discussion and asked for clarification regarding the deletion of subparagraph (3), lines 26-30, on page 6. Then moving it to page 7, with the same language and insert paragraph (d). She asked if shouldn't it read (7)? CHAIRMAN DAVIS asked Mr. Utermohle to respond to Representative MacLean's comment. He indicated currently it reads (c) (3). Number 491 REPRESENTATIVE MACLEAN suggested that the amendments needed to be renumbered accordingly. She explained amendment three is now deleted, amendment four would become amendment three and amendment five would become amendment four, and amendment six would become amendment five. CHAIRMAN DAVIS asked for clarification on these issues from Ms. Horetski. Number 509 MS. HORETSKI said she would just explain what the amendment did and the reason for moving it from paragraph 3 to (d) and the operative language is "shall" versus "may." She referred to the lead in language on page 6, line 21, Section 16 (c) states, "a pilot organization recognized by the Board shall...." Ms. Horetski emphasized this implied it is mandatory and existing law. She stated there was concern that paragraph (3) as proposed to be amended, required the association to enter into agreements. She indicated if it is moved to subsection (d) then there is going to be different lead in language where it states "may" instead of "shall" and indicated this was the operative changes. CHAIRMAN DAVIS asked for clarification that the intent was to have a paragraph (d). Number 561 REPRESENTATIVE MACLEAN withdrew her objection, but requested to renumber the amendments accordingly. MR. UTERMOHLE explained this amendment will require some restructuring of the language of the bill. He commented the appropriate changes will be made as a new subsection. CHAIRMAN DAVIS withdrew his objection as well. He stated without any objection, amendment nine passed. REPRESENTATIVE SANDERS made a motion to move amendment ten and stated the following sections need to be renumbered. CHAIRMAN DAVIS objected for discussion. He expressed concern for the section regarding binding arbitration. He felt it necessary that there should be some sort of procedure in statute to indicate an "emergency situation" because the state is concerned most with safety issues. He stated part of the concerns have been the legality of the approach taken. He stated he would not object to the amendment. He noted through the debate and discussion today, additional complications have arisen. He stated because of the need for legislation and because of additional committees where specific items can be addressed and further expounded upon, it was not his intent to pass anything on to another committee at this time. He stated it was his intent to complete the groundwork here and hopefully come to some sort of consensus. He felt the committee did what it could. He asked if there was objection to amendment ten. REPRESENTATIVE MACLEAN supported amendment ten and the deletion of Section 17 (d) and 18 in their entirety. She explained that currently, the state laws indicate that the courts are the entities that decide the disputes between the marine pilots association and any other disputes that may arise. REPRESENTATIVE WILLIAMS stated he also supported amendment ten. REPRESENTATIVE JAMES stated she supported the amendment as well. She believed there was language that could be incorporated into the bill that would meet the desired effect without having this particular language. CHAIRMAN DAVIS asked if there was objection. Hearing none, amendment ten passed. MR. TWOHIG stated from the turmoil he created a moment ago, he misunderstood amendment eight; he thought it was tied into amendment ten and misspoke. CHAIRMAN DAVIS announced without objection, amendment three (b) will be withdrawn. REPRESENTATIVE JAMES made a motion to move CSHB 260(TRA) as amended out of the House Transportation Committee with individual recommendations and attached fiscal notes. CHAIRMAN DAVIS asked for objection. Hearing none, CSHB 260(TRA) as amended, is passed out of the House Transportation Committee. ADJOURNMENT There being no further business to come before the House Transportation Committee, Representative Davis adjourned the meeting at 3:26 p.m.