Legislature(1999 - 2000)

03/24/2000 09:09 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
MINUTES                                                                                                                         
SENATE FINANCE COMMITTEE                                                                                                        
March 24, 2000                                                                                                                  
9:09 AM                                                                                                                         
                                                                                                                                
TAPES                                                                                                                           
                                                                                                                                
SFC-00 # 63, Side A & B                                                                                                         
SFC-00 # 64, Side A                                                                                                             
                                                                                                                                
CALL TO ORDER                                                                                                                   
                                                                                                                                
Co-Chair John Torgerson convened the meeting at                                                                                 
approximately 9:09 AM                                                                                                           
                                                                                                                                
PRESENT Co-Chair John Torgerson, Co-Chair Sean Parnell,                                                                         
Senator Al Adams, Senator Lyda Green, Senator Randy                                                                             
Phillips, Senator Donley, Senator P. Kelly                                                                                      
                                                                                                                                
Also Attending: SENATOR PEARCE; PAT CARTER, Staff to                                                                            
Senator Pearce; LARRY DIETRICK, Acting Director, Division                                                                       
of Spill Prevention & Response, Department of Environmental                                                                     
Conservation; PAUL FUHS, Representative, CSX Lines; SUSAN                                                                       
MCGARRIGAN, Senior Analyst, Greens Creek Mine; CHARLIE                                                                          
BUDDY, Vice President, Governmental Relations, Usibelli                                                                         
Coal Mine; JOE KYLE, Alaska Steamship Association, and                                                                          
Trident Seafood.                                                                                                                
                                                                                                                                
Attending via Teleconference: From Anchorage: TOM RUETER,                                                                       
NorthStar Maritime Agency; DOUG DAVIS, maritime attorney,                                                                       
[firm name inaudible]; BRECK TOSTEVIN, Assistant Attorney                                                                       
General, Department of Law; SUSAN HARVEY, Spill Prevention                                                                      
Response Section, Department of Environmental Conservation;                                                                     
MIKE SYMANSKI, Fishing Company of Alaska; From Kenai: JIM                                                                       
CARTER, Executive Director, Cook Inlet Regional Citizens                                                                        
Advisory Council; From Ketchikan: JOSEPH LABEAU, Director,                                                                      
Alaska Center for the Environment; From Petersburg: JOHN                                                                        
SUND, Representative, Northwest Seafoods; From Vancouver:                                                                       
JOHN HANSEN, Northwest Cruise Ship Association;                                                                                 
                                                                                                                                
                                                                                                                                
SUMMARY INFORMATION                                                                                                             
                                                                                                                                
SB 273-OIL SPILL RESPONSE; NONTANK VESSELS & RR                                                                                 
                                                                                                                                
Larry Dietrick, Acting Director, Division of Spill                                                                              
Prevention & Response, Department of Environmental                                                                              
Conservation, along with industry representatives                                                                               
testified.  The bill was held in committee.                                                                                     
                                                                                                                                
CS FOR SENATE BILL NO. 273(RES)                                                                                                 
                                                                                                                                
"An Act requiring oil discharge prevention and                                                                                  
contingency plans and proof of financial                                                                                        
responsibility for nontank vessels and railroad tank                                                                            
cars; authorizing inspection of nontank vessels and                                                                             
trains; and providing for an effective date."                                                                                   
                                                                                                                                
                                                                                                                                
SENATOR PEARCE outlined background information regarding                                                                        
the drafting of HB 567, legislation that resulted from the                                                                      
aftermath of the Exxon Valdez oil spill.  She summarized                                                                        
that this bill set up contingency plan requirements for                                                                         
crude and non-crude oil tankers and carriers.  She stated                                                                       
that the legislature, at this time, neglected to add "non-                                                                      
tanker" vessels to this legislation.  She noted that in the                                                                     
past year, the Alaska Railroad has had three spills, but                                                                        
that they are not presently required by law to have                                                                             
contingency plans in place for such incidents.  She added                                                                       
that SB 273 requires non-tanker vessels and the railroad to                                                                     
provide oil discharge prevention and contingency plans for                                                                      
the Department of Environmental Conservation consistent                                                                         
with the requirements currently under law.  She related                                                                         
that these carriers were to provide proof of financial                                                                          
responsibility to meet planning requirements to respond to                                                                      
spills by containment, including cleanup in the most                                                                            
expeditious manner.  She outlined spill statistics for                                                                          
regulated, as versus non-regulated carriers, and stressed                                                                       
exactly what types of carriers would come under this new                                                                        
legislation.                                                                                                                    
                                                                                                                                
Senator Pearce detailed that the inspection criteria of                                                                         
this legislation went to the spill drill component only.                                                                        
She then outlined specifically what these inspections would                                                                     
entail.  She noted that contingency plans are already in                                                                        
place for all of the barges that take fuel to rural                                                                             
communities and that they come under alternative compliance                                                                     
regulations generated by the Department of Environmental                                                                        
Conservation via oil spill co-op auspices.  She then                                                                            
outlined the financial responsibility criterion for this                                                                        
legislation and the effective dates that it would go into                                                                       
affect.                                                                                                                         
                                                                                                                                
Senator Phillips stated that he was concerned with the                                                                          
legislation's fiscal note, allowing for three additional                                                                        
positions to implement this program.                                                                                            
                                                                                                                                
Senator Pearce outlined those numbers of vessels currently                                                                      
plying waters in the state which would be affected by this                                                                      
legislation.  She continued that the funding source for                                                                         
this legislation would be from the same one established as                                                                      
a result of the Exxon Valdez incident.  Senator Pearce                                                                          
added that the classification of those vessels affected by                                                                      
this legislation were established, based on what                                                                                
requirements are currently in place.  She noted that the                                                                        
300 gross ton vessel size was an existing threshold.                                                                            
                                                                                                                                
Senator Green asked about the current federal Coast Guard                                                                       
related requirements in lieu of this legislation, which                                                                         
affects current operators in Alaska.                                                                                            
                                                                                                                                
Senator Pearce stated that the Coast Guard does not require                                                                     
contingency plans for these vessels in question, but noted                                                                      
that this would be a state requirement.  She then outlined                                                                      
those vessels, which would be affected by this legislation                                                                      
and noted that Oregon, Washington and California's                                                                              
requirements were also considered when drafting this                                                                            
legislation.                                                                                                                    
                                                                                                                                
Senator Green responded that she would like to see this                                                                         
information.  She wondered what the economic impact of this                                                                     
legislation would have on current users.                                                                                        
                                                                                                                                
Senator Pearce countered that she had received various                                                                          
responses about this legislation, mostly from the fishing                                                                       
community.  She then outlined other specific users that                                                                         
would be affected by this legislation.  She continued that                                                                      
the fishing industry has been the most vocal about related                                                                      
costs and added that her offices did research these cost                                                                        
ramifications.  She outlined some of these, including co-op                                                                     
member services.  She specified that the actual carriers                                                                        
would only be required to contain and control 15 percent of                                                                     
a spill under ideal conditions, along with a speedy cleanup                                                                     
once the spill was contained.  She affirmed that by                                                                             
including non-tanker vessels into regulation that this                                                                          
should bring the cost of compliance down for every member.                                                                      
                                                                                                                                
Senator Green stated that she was concerned this                                                                                
legislation would generate inspection fees that no one can                                                                      
afford to pay, once these regulation powers are handed over                                                                     
to the Department of Environmental Conservation.                                                                                
                                                                                                                                
Senator Pearce responded that this legislation does not                                                                         
authorize the charging of fees and that this was not a                                                                          
present practice now under contingency plan requirements.                                                                       
She stated that the vessels transporting petroleum products                                                                     
to Togiak come under present law jurisdiction.  She noted                                                                       
that this present law has a higher planning standard than                                                                       
that of the draft legislation.  She continued to outline                                                                        
how this proposed legislation would affect the industry,                                                                        
those carriers that are currently in compliance and those                                                                       
that have yet to come under the state's jurisdiction.  She                                                                      
noted that these new carriers would come under less strict                                                                      
requirements than those attributed to Prince William Sound.                                                                     
                                                                                                                                
PAT CARTER, Committee Aide to Senator Pearce responded to                                                                       
the cost issues raised.  He noted that cost concerns are                                                                        
always addressed when negotiating these types of spill                                                                          
response regulations.  He pointed out that this was new                                                                         
ground for the oil spill response cooperatives and that                                                                         
they are considering fee schedules, which would take into                                                                       
consideration all vessels navigating Alaskan waters.  He                                                                        
used an example of cargo ships transiting Cook Inlet.                                                                           
                                                                                                                                
LARRY DIETRICK, Acting Director, Division of Spill                                                                              
Prevention & Response, Department of Environmental                                                                              
Conservation gave an overview of costs outlined in the                                                                          
related fiscal note.  He stated that the department                                                                             
supports this legislation.                                                                                                      
                                                                                                                                
Co-Chair Torgerson asked if the department planned to do                                                                        
all the enforcement of this bill, including the boarding of                                                                     
vessels if necessary.                                                                                                           
                                                                                                                                
Mr. Dietrick responded affirmatively, but noted that the                                                                        
current number of inspections conducted is small, from five                                                                     
to ten per year.  He continued that the department conducts                                                                     
this work in conjunction with the Coast Guard to keep costs                                                                     
down.                                                                                                                           
                                                                                                                                
Co-Chair Torgerson asked if Mr. Dietrick would anticipate                                                                       
seizing a vessel that neglected to carry a contingency                                                                          
plan.                                                                                                                           
                                                                                                                                
Mr. Dietrick noted that an inspection is conducted as a                                                                         
prevention measure, but that a shore based, oil spill                                                                           
response facility such as the existing co-ops would be                                                                          
equipped with the bulk of equipment necessary to respond to                                                                     
a spill.  He continued that inspections are conducted to                                                                        
make sure a vessel has adequate equipment to contain a                                                                          
spill in its initial stages.                                                                                                    
                                                                                                                                
Co-Chair Torgerson asked what the penalty for those without                                                                     
a contingency plan would be.                                                                                                    
                                                                                                                                
Mr. Dietrick stated that the normal remedies would include                                                                      
a request for correction in 30 days through a notice of                                                                         
violation.  He continued to outline other penalty                                                                               
possibilities as well.                                                                                                          
                                                                                                                                
Co-Chair Torgerson asked if the dept thought the fiscal                                                                         
note would cover the amount of necessary inspections                                                                            
anticipated by this legislation in years to come.                                                                               
                                                                                                                                
Mr. Dietrick asserted that he did not see the number of                                                                         
necessary positions changing in years to come.                                                                                  
                                                                                                                                
Co-Chair Torgerson asked why the environmental experts                                                                          
noted in this legislation would be situated in Anchorage.                                                                       
                                                                                                                                
                                                                                                                                
Tape: SFC - 00 #63, Side B, 9:56 a.m.                                                                                           
                                                                                                                                
                                                                                                                                
Mr. Dietrick commented that the department anticipates                                                                          
positioning two of these employees situated in Anchorage                                                                        
and one in Juneau.  He continued that the Anchorage                                                                             
employees would travel to Alaskan locations as necessary.                                                                       
He noted that it is necessary for these employees to travel                                                                     
to various locations around the state and the placement of                                                                      
these individuals in Anchorage would be most cost                                                                               
effective.                                                                                                                      
                                                                                                                                
Co-Chair Torgerson asked what type of interaction the                                                                           
department would have with the existing advisory                                                                                
committees.                                                                                                                     
                                                                                                                                
Mr. Dietrick stated that the department's relationship with                                                                     
the Citizen's Advisory Committee would not be changed by                                                                        
this legislation.  He noted that these two agencies were                                                                        
established under the Oil Pollution Act to provide                                                                              
oversight for the crude oil industry and that he did not                                                                        
anticipate a change with this existing relationship.                                                                            
                                                                                                                                
TOM RUETER, NorthStar Maritime Agency testified via                                                                             
teleconference from Anchorage on behalf of various shipping                                                                     
tramps and vessels operating in the fisheries trade, as                                                                         
well as the bulk cargo trade in Alaska.  He noted that his                                                                      
agency has had input into this draft legislation, but                                                                           
pointed out that his agency is concerned about the                                                                              
financial ramifications involved.  He declared that the                                                                         
related costs of this legislation were still unclear at                                                                         
this point, particularly for individually owned tramp                                                                           
vessels.  He gave specific details of this legislation's                                                                        
cost requirements.                                                                                                              
                                                                                                                                
DOUG DAVIS, maritime attorney, [firm name inaudible]                                                                            
testified via teleconference from Anchorage.  He gave an                                                                        
overview of the insurance system in place to cover large                                                                        
ship transits in Alaska for a total of $1 billion dollars                                                                       
for spill prevention.  He noted that the proposed                                                                               
legislation would require non-tank vessels exceeding 400                                                                        
gross tons to demonstrate financial responsibility for                                                                          
possible spills to the state, including an oil spill                                                                            
contingency plan approved by Department of Environmental                                                                        
Conservation.  He felt as though the committee substitute                                                                       
went far to fix one big problem, which is to allow non-tank                                                                     
ship owners to use the funds as outlined above as proof of                                                                      
financial ability.  He pointed out though that this bill                                                                        
attempts to place the non-tank vessel owners under existing                                                                     
state law, more specifically AS 46.04.040. He felt as                                                                           
though this was a "bad fit" for these non-tank vessels and                                                                      
explained why in specific detail.  He suggested that a                                                                          
separate financial responsibility statute should be drafted                                                                     
clearly stating that Alaska will accept coverage with a                                                                         
member of the international group of insurers to meet                                                                           
financial responsibility in the event of an oil spill.  He                                                                      
then outlined what would happen with non-tank ship oil                                                                          
spills if this legislation were not passed in its present                                                                       
form.                                                                                                                           
                                                                                                                                
BRECK TOSTEVIN, Assistant Attorney General, Department of                                                                       
Law testified via teleconference from Anchorage.  He stated                                                                     
that the department supports this legislation.                                                                                  
                                                                                                                                
SUSAN HARVEY, Spill Prevention Response Section, Department                                                                     
of Environmental Conservation testified via teleconference                                                                      
from Anchorage.  She stated that she was available to                                                                           
answer any questions, which might be forthcoming.                                                                               
                                                                                                                                
MIKE SYMANSKI, Fishing Company of Alaska testified via                                                                          
teleconference from Anchorage representing fishing vessels,                                                                     
which would be affected by this legislation.  He stated                                                                         
that his main concern with this legislation was the                                                                             
uncertainty of the oil spill requirements for 50 percent                                                                        
containment and the related costs.  He felt as though this                                                                      
was an unattainable standard, with unknown financial                                                                            
ramifications.                                                                                                                  
                                                                                                                                
JIM CARTER, Executive Director, (RCAC) Cook Inlet Regional                                                                      
Citizens Advisory Council testified via teleconference from                                                                     
Kenai.  He disagreed with the analysis about the RCAC not                                                                       
participating in the OPA 90 (Oil Pollution Act of 1990)                                                                         
program.  He referenced a previous related conference in                                                                        
Homer regarding safety issues and gave an overview of                                                                           
issues discussed there.  He clarified that as long as the                                                                       
oil industry money is not expended on unrelated activities,                                                                     
the RCAC can participate in other programs.                                                                                     
                                                                                                                                
JOSEPH LABEAU, Director, Alaska Center for the Environment,                                                                     
testified via teleconference from Ketchikan.  He encouraged                                                                     
the passage of this legislation, along with increased                                                                           
financial responsibility requirements for the railroads.                                                                        
He specified that contingency planning for hazardous                                                                            
substances, in conjunction with the railroad, was in order                                                                      
as well.                                                                                                                        
                                                                                                                                
JOHN SUND, Representative, Northwest Seafoods testified via                                                                     
teleconference from Petersburgh.  He stated that this                                                                           
legislation would increase the cost of doing business,                                                                          
although this figure was nebulous.  He noted that passing                                                                       
this cost onto the consumer was improbable.  He outlined                                                                        
the present cost of doing business under the existing                                                                           
regulations, not to mention the cost of spill prevention                                                                        
equipment on hand for any operators beyond that provided by                                                                     
the co-ops.  He noted that this legislation would create a                                                                      
third set of regulations to consider, not to mention, the                                                                       
cost of membership to a co-op organization.  He pointed out                                                                     
that fishing opportunities usually take place in remote                                                                         
locations, making it difficult for spill response efforts.                                                                      
                                                                                                                                
JOHN HANSEN, Northwest Cruise Ship Association testified                                                                        
via teleconference from Vancouver.  He explained that this                                                                      
association consisted of eight cruise lines that operate in                                                                     
Alaska.  He spoke to the nature of the response                                                                                 
capabilities of these cruise lines and suggested that he                                                                        
send some written comments to this effect.  He specifically                                                                     
spoke to a response plan, which the association is                                                                              
currently drafting, in conjunction with SEAPRO.  He noted                                                                       
that the association has committed to instituting response                                                                      
barges as part of this response plan at the cost of $1.3                                                                        
million dollars.  He clarified that the association has no                                                                      
dispute with the objectives of this legislation, but that                                                                       
they did have some concerns with specific aspects in its                                                                        
present form, namely, to financial responsibility and the                                                                       
contingency plan requirements.  He then spoke to the                                                                            
relationship between the ship owners and the response                                                                           
organizations, specifically the difficulty of reaching term                                                                     
agreements regarding response capabilities and the                                                                              
delineation of responsibilities.                                                                                                
                                                                                                                                
PAUL FUHS, Representative, CSX Lines, formally known as                                                                         
Sealand stated that this legislation would result in                                                                            
additional costs which would be passed onto consumers.  He                                                                      
noted that the company was concerned about the requirement                                                                      
for different sea plans depending on the region of                                                                              
operation, not to mention the added cost to implement.  He                                                                      
wondered about the ramifications of spreading the cost of                                                                       
spill response by requiring additional vessels to comply,                                                                       
as well as the amount of equipment necessary for response.                                                                      
He voiced a concern about specific co-op member liability                                                                       
for any spill incident and the possibility of being sued                                                                        
for other member mishaps.                                                                                                       
                                                                                                                                
SUSAN MCGARRIGAN, Senior Analyst, Greens Creek Mining,                                                                          
testified that the company supports the concepts of this                                                                        
legislation, yet they are concerned that in its current                                                                         
form it will not adequately cover the charter vessels that                                                                      
Greens Creek uses to transport their ore into international                                                                     
markets.  She referenced similar Washington State law which                                                                     
allows for charter vessels to meet contingency plan and                                                                         
spill response requirements through a per trip fee paid to                                                                      
a Washington State spill response organization.  She                                                                            
continued that Greens Creek has received no assurances from                                                                     
SEAPRO what the cost of coverage for similar services would                                                                     
be and whether or not the proposed legislation explicitly                                                                       
requires that SEAPRO provide these services to independent                                                                      
vessel operators.                                                                                                               
                                                                                                                                
CHARLIE BUDDY, Vice President, Governmental Relations,                                                                          
Usibelli Coal Mine, stated the same concerns as the Greens                                                                      
Creek Mine.  He pointed out that of the 1.6 million tons of                                                                     
ore that their mine produces a year, 600,000 - 800,000 tons                                                                     
is shipped via the Alaska Railroad.  He continued that once                                                                     
this cargo reaches Seward, they contract with 10 to 12                                                                          
ships per year for transport to South Korea.  He pointed                                                                        
out that these ships would be required to pay a much higher                                                                     
rate of fees per shipload.  He asserted that these                                                                              
additional fees could contribute to an already fragile                                                                          
contract for product with South Korea.  He concluded that                                                                       
Usibelli could not support this legislation in its current                                                                      
form.                                                                                                                           
                                                                                                                                
Senator Pearce countered that currently petroleum charter                                                                       
ships are required to provide contingency plans for review                                                                      
by the Department of Environmental Conservation.  She noted                                                                     
that independent spill prevention companies cover these                                                                         
ships.                                                                                                                          
                                                                                                                                
Mr. Buddy agreed with this assessment but pointed out that                                                                      
the financial feasibility of Usibelli mines being able to                                                                       
conduct business per usual would hang in the balance.  He                                                                       
continued that the cost of spill prevention services should                                                                     
be ascertained and provided to the mine, in order to                                                                            
determine additional business costs.                                                                                            
                                                                                                                                
Senator Pearce pointed out that Seward is a high-risk area                                                                      
for possible mishaps.  She remarked that over the years she                                                                     
has supported a number of initiatives, which end up being,                                                                      
direct subsidies to Usibelli Mine.  She stated that she                                                                         
found it unacceptable that these shippers transit Alaska                                                                        
waters, but are not willing to comply with regulations that                                                                     
are reasonably drafted.                                                                                                         
                                                                                                                                
Co-Chair Parnell noted that somewhere short of absolute                                                                         
assurances for economic certainty, he asked for                                                                                 
suggestions.                                                                                                                    
                                                                                                                                
Mr. Buddy stressed that the independent spill response                                                                          
companies should come forward to explain how they intend to                                                                     
handle the costs of services provided.  A discussion                                                                            
regarding tonnage and frequency of transport from these                                                                         
mining endeavors ensued.                                                                                                        
                                                                                                                                
JOE KYLE, Alaska Steamship Association, and Trident Seafood                                                                     
stated that 24 Trident vessels would be affected by this                                                                        
legislation.  He stressed that this bill was a major                                                                            
concern to the corporation.  He added that Alaska Steamship                                                                     
would be greatly affected and reiterated the unknown cost                                                                       
concerns presented by previous testifiers.  He also                                                                             
wondered if the spill response co-ops had adequate                                                                              
equipment to respond to possible mishaps.                                                                                       
                                                                                                                                
Senator Pearce stated that she understood all the concerns                                                                      
presented, but noted that there should be a cost of "doing                                                                      
business" in Alaska for these companies, while the state                                                                        
does all it can to protect Alaskan waters.                                                                                      
                                                                                                                                
Senator Phillips raised the issue of instituting a delayed                                                                      
effective date to this legislation in order to work out                                                                         
some of the necessary details and concerns as raised.  A                                                                        
discussion regarding the dynamics of this issue ensued                                                                          
between Senator Pearce, Senator Phillips, Co-Chair                                                                              
Torgerson and Senator Green.                                                                                                    
                                                                                                                                
Co-Chair Torgerson decided, with the input of Mr. Dietrick,                                                                     
that March 1, 2001 would be the effective date for this                                                                         
legislation.  Co-Chair Torgerson stated that he would also                                                                      
draft an amendment regarding page 6, line 4 to delete the                                                                       
word "interpret" from this section.  The bill was HELD in                                                                       
committee.                                                                                                                      
                                                                                                                                
Senator Pearce summarized the issue of financial                                                                                
responsibility of responding to an oil spill and noted that                                                                     
in prior committee hearings the members had already made                                                                        
concessions regarding these concerns.  She pointed out that                                                                     
there was $1 billion dollars in a federal OPA 90 money                                                                          
fund, but the state is unsure whether they could be                                                                             
reimbursed for spill efforts through this avenue.  She                                                                          
stated that Alaska should not have to bear this                                                                                 
responsibility of cost reimbursement.                                                                                           
ADJOURNED                                                                                                                       
                                                                                                                                
Senator Torgerson adjourned the meeting at 11:08 AM.                                                                            
SFC-00 (10) 03/24/00                                                                                                            

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