Legislature(1995 - 1996)
03/23/1995 01:16 PM Senate RES
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SENATE RESOURCES SUBCOMMITTEE
March 23, 1995
1:16 p.m.
SUBCOMMITTEE MEMBERS PRESENT
Senator Drue Pearce, Chair
Senator Rick Halford
SUBCOMMITTEE MEMBERS ABSENT
Senator Lyman Hoffman
COMMITTEE CALENDAR
SENATE BILL NO. 130
"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."
PREVIOUS SENATE COMMITTEE ACTION
SB 130 - See Resources minutes dated 3/20/95.
WITNESS REGISTER
Brad Pierce, Policy Analyst
Offfice of Management & Budget
Office of the Governor
P.O. Box 110020
Juneau, AK 99811-0020
Randy Welker, Legislative Auditor
Legislative Audit Division
P.O. Box 113300
Juneau, AK 99811-3300
Jeff Bush, Deputy Commissioner
Department of Commerce & Economic Development
P.O. Box 110800
Juneau, AK 99811-0800
Dan Twohig
Division of Occupational Licensing
Department of Commerce & Economic Development
P.O. Box 110806
Juneau, AK 99811-0806
Benee Braden
Western Alaska Pilots Association
P.O. Box 792
Anchorage, AK 99508
Michael Spence
Alaska Coastwise Pilots Association
Box 6337
Ketchikan, AK 99901
Eric Eliason, President
Southwest Pilots
P.O. Box 977
Homer, AK 99603
Stuart Mork
Alaska Marine Pilots, Region 3
P.O. Box 730
Kodiak, AK 99615
Joe Kyle
Alaska Steamship Association
234 Gold St.
Juneau, AK 99801
Hans Antonsen
Southeastern Alaska Pilots Association
Box 6100
Ketchikan, AK 99901
Ron Lorensen, Attorney
One Sealaska Plaza, #300
Juneau, AK 99801
Mike O'Hara
Box 1443
Palmer, AK 99645
Bob Evans
Alaska Marine Pilots
2822 Iliamna Ave.
Anchorage, AK 99517
ACTION NARRATIVE
TAPE 95-25, SIDE A
SRES - 3/23/95
SB 130 MARINE PILOTS
SENATOR PEARCE called the meeting of the Senate Resources
Subcommittee on SB 130 to order at 1:16 p.m. She noted Senator
Hoffman was out of town, and that Senator Leman, chairman of the
full committee, was in attendance.
Number 055
BRAD PIERCE, a policy analyst with the Office of Management &
Budget, Office of the Governor, said he was appearing before the
committee to discuss a briefing paper he wrote for the incoming
commissioner of commerce on the two times the Alaska Marine
Piloting System was revisited. He stated he doesn't represent the
administration's position on either the Senate bill or the House
bill concerning marine pilots.
Mr. Pierce said his briefing paper, which was designed to give the
new administration a quick overview on the status of the marine
pilot system, focused on conflict of interest problems with board
members, difficulties in training of new pilots, movements of ships
without pilots, sunset of the board's authorities, tariff setting,
and the sunsetting of the board itself. The basic findings were
that the state and the board are having great difficulty in
governing the profession and the problems in it have potentially
catastrophic consequences, like the Exxon Valdez disaster.
Mr. Pierce said the economic interests of pilots and the shippers
have tended to usurp the state's basic public safety interest in
the political arena. He cited incidents of foreign flag ships
moving through state waters without pilots; a pilot abandoning his
ship in a storm with the tanker stalled to avoid having a grounding
on his record; and a pilot association refusing to dispatch a pilot
because the ship's agent had used another association. There have
been numerous lawsuits against the state and between pilots, as
well as multiple ethics complaints against the board members.
His overall conclusion is that the state is not meeting its
obligation to protect lives and property in the marine environment
here. He said these incidents and others are indicative of deeper
problems within the profession, and he believes they can be related
to the sort of quasi-competitive system set up in the Marine Pilot
Act of 1991.
Mr. Pierce said a system was created where the board was supposed
to set a maximum tariff and then allow pilots to compete under this
cap. However, the board failed miserably in setting maximum
tariffs and their tariff setting sunset last year, so there is no
oversight on the tariff. He said there are pilotage groups making
deals with shippers with no public oversight, and this is just not
allowed anywhere else that he is aware of.
Mr. Pierce believes that the independence of pilots from shippers
is of paramount importance. The pilot's decision to move a ship
should be based solely on safety considerations and not on the
shipper's schedule. The pressures of market competition allow
shippers to play off pilot's groups against each other, which is
the source of many of the problems, particularly in southeast and
the Aleutians where there are competing associations.
There is also the problem of competition for licenses. The group
with the most fully licensed pilots gets the largest market share,
so big money rides on licensing these aims. It is a recipe for
corruption and for lawsuits and there have been numerous lawsuits.
Virtually, every board decision on a license has been legally
challenged.
Speaking to training problems, Mr. Pierce said there are fully
licensed pilots unwilling to train their potential competitors.
There have been lawsuits over access to train, and there are
instructor pilots worried about lawsuits if they flunk somebody.
He said the state has lost quality control over the profession and
the ability to weed out people who just shouldn't pilot.
Mr. Pierce said the state's best interests are protected by high
quality standards, high qualification standards, a lengthy
apprenticeship program in local waters. Pressures of competition
have made license requirements in southeast and the Aleutians the
lowest in the state and, maybe, in the nation. Pilots are suing
the state to have their experience in other regions applied to the
region they want to be licensed in. These folks are hired for
their local knowledge and they should have extensive experience in
the region in which they are going to be licensed, he said.
Turning to the tariff issue, Mr. Pierce said the pressure of
competition has resulted in illegal actions, either to gain market
share or to gain on another group, and the tariff competition
between groups is the worst part of it. The tariff for moving a
ship is a minuscule part of a shipper's cost, and the purpose of a
standard published tariff is to prevent gouging by pilots and to
keep them independent from shippers. A published tariff schedule
and not having pilot groups negotiate the deals with shippers would
go a long ways towards solving these problems.
Mr. Pierce said SB 130 is a good start at reforming the system and
making the board more effective. HB 260 is similar except that it
contains a provision for binding arbitration between pilots and
shippers and tariff extremes. He believes this is bad policy
because it gives the foreign corporate greater control over Alaska
piloting.
In his concluding comments, Mr. Pierce said he thinks the state's
interest in safety must predominate over the economic interests of
both the pilots and the shippers, and that is the yardstick by
which all these decisions should be weighed.
Number 285
SENATOR HALFORD asked Mr. Pierce if he supports the pilotgage
regions, as well as one port licensing. BRAD PIERCE acknowledged
that he supports pilotage regions because of the importance of
local knowledge, but the pilotage regions are so large that he
thinks they eventually should be made smaller. Administratively,
it works better to restrict marine pilots to exclusive regions.
Number 363
RANDY WELKER, Legislative Auditor, referred to an audit report
prepared in late 1993, and commented that there have been some
changes since that report, and there may be some changes that he is
not aware of that may affect some of the statements in the report.
The overall conclusion of the report is that the Board of Marine
Pilots should be extended for four years.
One of the primary concerns addressed in the report and one of the
things that frustrates the operation of the board is the conflict
of interest issues that they have to deal with, both in terms of
having the profession represented on the board and then having to
deal with tariff issues, is having to deal with licensing matters
of their competitors. Also, another concern is the makeup of the
board and not having the expertise in a financial background to
efficiently deal with the tariff issue. The report recommends
removing the tariff setting function from the Board of Marine
Pilots, thereby letting them deal more with the matters that they
do have the expertise in.
Mr. Welker said it was felt that the board was spending time
promoting the non-competitive aspects of marine pilotage and that
it should be focusing more effort on some of the problems that are
out there in dealing in a competitive market. However, he pointed
out that the situation did change later on to a more neutral
position by the board.
Number 410
SENATOR HALFORD asked Mr. Welker where he would put the tariff
setting function. RANDY WELKER responded that it was felt that it
should not be in the Board of Marine Pilots and they did not
conclude where it would be more appropriately placed, but it was
recommended that an alternative should be explored as to where it
might be better placed.
Number 435
JEFF BUSH, Deputy Commissioner, Department of Commerce & Economic
Development, noted he served on the Board of Marine Pilots briefly
in 1989 when he was also deputy commissioner of the Department of
Commerce under a previous administration.
Deputy Commissioner Bush stated the department's strong support for
SB 130 and the continuation of the Board of Marine Pilots. He also
stated the administration agrees with Mr. Pierce's recognition of
the problems with the marine pilot system, but they do not agree
that the cause is the competitive structure of the Marine Pilot Act
at this point in time. In 1991 the legislature decided to
essentially adopt a semi-competitive system, which he believes is
getting better.
Deputy Commissioner Bush said the state's interest is two-fold:
safety for ship movements and maintaining availability of pilots.
The board needs to deal with safety concerns and training concerns,
if they exist. He said we need to accept the system we have now
and move on to trying to improve the current system to make it
work.
Number 500
SENATOR HALFORD asked if the administration has a position on
licensing in more than one region or the establishment of the
regions. JEFF BUSH responded that they support the system where an
individual can only hold a license in one region. However, when
a particular region is identified where there is a shortage of
pilots, the board should be able to essentially grant temporary
licenses to deal with these kind of emergency situations.
SENATOR HALFORD also asked if the administration supports a
provision that requires membership in an organization after
licensure to be able to operate under that license. JEFF BUSH
replied that at the present time that is a requirement, but he does
not know what the administration's position would be on that
provision.
Number 529
SENATOR PEARCE asked if the department has a position on the
conflict of interest of board members question. JEFF BUSH answered
that there has been no formal position taken on the question, but
he does not believe that this board has any more significant or
less significant problems than any other board.
Number 542
DAN TWOHIG, Division of Occupational Licensing, Department of
Commerce & Economic Development, explained his duties consist of:
assisting the board in administering and enforcing the Marine
Pilots Act; reviewing correspondence and qualifications of pilot
candidates before they go to the board; serving as executive
secretary of the board; and being the state's investigator on
maritime accidents. He said he was available to respond to
technical questions about the Marine Pilots Act or the amendments
to it as provided in the bill.
Number 560
BENEE BRADEN, representing the Western Alaska Pilots Association in
Region 3 and testifying from Anchorage, said that while she has few
problems with the amendments proposed in SB 130, she encourages the
committee to continue to look as the issues of whether or not
changing the composition of board would help provide better
representation across the state, and giving better direction to the
board. She stated the association is uncomfortable with binding
arbitration language and would be opposed to it being included in
the statute.
TAPE 95-25, SIDE B
Number 001
MICHAEL SPENCE, representing the Alaska Coastwise Pilots
Association, responding to earlier comments made in regard to
competition and the status of pilotage in Alaska, said the
competition was not created in this state in 1991. When he came to
the state in 1974, there was competitive pilotage in both regions
of the state at that time. There was competition again in the
middle eighties in the Southcentral Region, which later became
divided into two different regions, and there was in the late
eighties in Southeastern Alaska preceding the 1991. The impact of
the 1991 legislature was to support the continued existence of
competitive pilotage, it was not to cause it to happen at that
time.
Referring to Section 2 of SB 130, Mr. Spence asked that the
committee consider adding back the provision which provides for
three pilot members on the board.
Mr. Spence referred to Section 6 and said the basis for present
regulation that relates to cross-regional pilotage is based on the
reasonable limitation of competence that pilots may have in
geographical areas. It was not based on limiting competition.
However, his organization does not necessarily oppose the proposed
change in the language.
Speaking to Section 13, which authorizes the Board of Marine Pilots
to suspend or revoke the recognition of a pilot organization that
fails to comply with its articles, bylaws, and rules, Mr. Spence
said it is a reflection of what already exists in regulation. He
said his organization has always advocated and supported increased
accountability on the part of the pilots and pilot organizations,
but he thinks this particular rule is not particularly well
reasoned and will result in some problems in its implementation,
given that in two of the four regions of the state, there is only
one pilot organization. He requested that the committee consider
changes to the language in Section 13.
Mr. Spence said that although binding arbitration is not covered in
the SB 130, it is in the House bill. However, the Alaska Coastwise
Pilots Association is neutral on the issue of arbitration at this
time.
Mr. Spence pointed out that there are parties in the piloting
profession in the state who are not happy with the competitive
environment, who would like to disrupt the competitive process.
One way in which the process could be disrupted is in the
deliberate and many-fold increase in the tariff simply to make the
point that the competitive system, as it is, does not work. He
also pointed out that while there is competition in some of the
regions of Alaska, the competition is very limited and, in many
cases, during certain parts of the year, it practically has no
effect on the ability of shipowners to seek out competitive
alternatives.
Number 125
SENATOR HALFORD directed attention to Section 12 and pointed out
that the changes in the tariff setting basically take out the
provision that allows the board to set the maximum tariff and makes
it a violation for a member to charge a tariff that is different
from the amount set by the pilotage organization for which that
pilot is a member. He asked Mr. Spence if he supports that
section. MICHAEL SPENCE responded that they have no objection to
that section in that it does provide for an organized manner where
organizations can announce their tariffs, and they have not had a
problem adhering to that standard. However, he thinks the board
has not closely reviewed or scrutinized the tariffs that have been
set by pilot organizations.
Number 195
SENATOR HALFORD, speaking to Section 14 which relates to pilots not
being liable for damages in excess of $250,000, said his concern is
that when that liability limit is there, the liability for that
loss then passes through to the state because the state has, in
fact, protected somebody else from liability. MICHAEL SPENCE
commented he thinks there is an acceptance in historical maritime
law that pilots cannot be expected to be liable for the total
liability of a potential maritime accident.
Number 225
ERIC ELIASON, President of Southwest Pilots, voiced the
organization's support for SB 130. However, they do have some
concern with paragraphs (2) and (6) in Section 8, but it is his
understanding that the department will offer an amendment that will
address their concern.
Mr. Eliason said the Southwest Pilots strongly favor a
regionalization concept. On the liability issue, he said in trying
to promote a safe and efficient pilotage system, the best way to do
this is to have high increase in standards and high training
standards, which are in the state's best interest. He added the
fines, suspension or revocation of a license are already extremely
potent deterrents.
Number 315
STUART MORK, representing Alaska Marine Pilots, Region 3, said one
of the more important functions of the pilot organizations is a
pool of pilots that travel throughout the various ports collecting
current information relating to those ports which they then pass
along to the other pilots in their organization. If an individual
is on his own and does not belong to a group, then he does not have
access to that information. He referred to Section 6 which relates
to the conditions under which a pilot can be licensed in a second
region. His organization feels the state has already recognized
the importance of having distinct regions, and to allow a pilot to
go another region is a matter of safety and concern. As a safety
consideration, they would like to see the provision amended to
require that a pilot licensed in a second region under a temporary
condition be required to join one of the existing recognized marine
pilot organizations in the region so that he has access to all of
the up-to-date information.
Mr. Mork spoke to concerns with Section 15. He said this is the
first time the state is requiring two private parties, whether it
is the shipper and the pilot organization, to enter into agreement.
Also, the provision requires that the pilots who are regulated by
the state enter into an agreement with agents or operators who are
not regulated by the state which puts the pilots at a disadvantage.
Number 395
JOE KYLE, representing the Alaska Steamship Association, said in
terms of the number of pilot moves in the state that require the
services of a state licensed pilot, their membership, by far,
represents the vast majority of the moves that require the services
of a ship's pilot. He said their is an excellent group of pilots
in the state and the state of piloting in Alaska is very solid.
Mr. Kyle said they were looking for two things in the bill this
year to address corrections to the Marine Pilotage Act, but neither
one appears in SB 130 at this time. One is language that would
provide that the industry members be actively engaged in either the
management or the operation of a company in the steamship industry.
They would also like to see some form of conflict resolution or way
to resolve disputes so that they are not faced with a situation of
having a lapsed contract with a pilot association.
Number 545
HANS ANTONSEN, representing Southeastern Alaska Pilots Association,
stated they are highly in favor in maintaining the present
composition of the board and not diluting the public membership.
Mr. Antonsen, speaking to the liability issue, said contrary to
some professions where an airline pilot may be the sole man in
charge, pilots are advisors on board that vessel and do not in any
way supersede or eliminate the masters ultimate responsibility for
the conduct of his vessel.
Mr. Antonsen pointed out it is only the industry representatives
that create a chaotic situation of when a contract between the
shipping company and the pilots, or the agents that represent those
ships and pilots run out. The pilot associations try far in
advance to secure contracts, both with the cruise industry and the
cargo industry. He said they are very concerned with not having a
contract run out, as is the situation right now. They have
contracts that are expiring and they have not secured, even at this
late date, final contracts with cruise ship companies.
TAPE 95-26, SIDE A
Number 005
RON LORENSEN, an attorney in private practice in Juneau, testified
on behalf of a Canadian company, Northern Transportation Company
Limited (NTCL). He explained that in the last few years NTCL has
begun making shipments of petroleum products to a number of
communities on the North Slope. Last summer NTCL was informed by
the Board of Marine Pilots that they should be using a pilot at
least at the Point Hope location. There is a provision in the law
that exempts U.S. registered tugs from having to use a marine pilot
in Alaska. So although U.S. registered vessels performing exactly
the same services have never had to use a pilot, the Canadian
company has been told that it has to use a pilot. Mr. Lorensen has
filed a lawsuit on behalf of NTCL on the legality of exempting only
U.S. registered tugs and not foreign companies. However, he
suggested a better way to address this problem would be to amend
the law to extend the same exemption to Canadian vessels that
presently is enjoyed by U.S. vessels of the same class.
Number 095
SENATOR LEMAN asked if the U.S. has a reciprocal agreement with
Canada. RON LORENSEN responded that with respect to operations on
the North Slope or on the Canadian Arctic Slope, there are no
Canadian pilotage requirements so there is no reciprocity
necessary.
Number 155
MIKE O'HARA, a pilot in Region 2 and a member of the Board of
Marine Pilots, referred to Section 8 paragraphs (2) & (6) and said
he had two recommended changes to the section.
Mr. O'Hara said the Act, as written now, demands command experience
and paragraph (6) essentially eliminates the command experience for
initial entry into the training programs. He recommend that a form
of apprentiship be put into a training program.
In paragraph (2) of Section 8, Mr. O'Hara suggested it be changed
to read "two years of service as a master on inspected vessels"
because inspected vessels are more safety conscious and that is the
kind of master they are looking for.
Regarding single port regions, Mr. O'Hara said ideally the best
situation for a pilot is to work in only one port. He noted Region
3 is very large now, and Canadian tugs have to pay for a pilot to
go all the way from Dutch Harbor. He suggested that region could
be split into two regions.
Number 210
SENATOR PEARCE asked if the exemption Mr. Lorensen spoke to has
always been in the pilotage Act. MIKE O'HARA answered that as far
as he knows, it has. It came in because of the ferries running
between British Columbia and Southeast Alaska so that the Alaska
ferry wouldn't need a pilot, and similarly the Canadian ferry or
tug wouldn't need a pilot coming into Alaska.
SENATOR PEARCE asked for a definition of "command experience."
MIKE O'HARA said command experience is a master of a ship; the
captain has the responsibility of a ship.
Number 262
BOB EVANS, representing Alaska Marine Pilots, speaking to binding
arbitration which is not in SB 130, but is in the House bill,
observed that if it were to become law, it probably would be the
first time that the state has mandated that two private businesses
enter into binding arbitration. He said under Title 9, you either
petition the court for an arbitrator, or you go to a arbitrator as
a result of collective bargaining agreement, and that not being the
case here, he questioned who was going to pay for the binding
arbitration and if it is fair to compel the parties who are
mandated to go into binding arbitration, or should the state take
on that responsibility.
Number 285
SENATOR PEARCE announced that due to travel schedules of committee
members, it would possibly be two weeks before another meeting
would be scheduled on SB 130, but a draft committee substitute
would be worked on and circulated for comments before that meeting.
She then adjourned the meeting at 3:14 p.m.
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