Legislature(2017 - 2018)BUTROVICH 205
03/27/2017 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearing: Board of Game | |
| Confirmation Hearing: Alaska Gasline Development Corporation | |
| SB92 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | SB 92 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
March 27, 2017
3:30 p.m.
MEMBERS PRESENT
Senator Cathy Giessel, Chair
Senator John Coghill, Vice Chair
Senator Bert Stedman
Senator Shelley Hughes
Senator Kevin Meyer
Senator Bill Wielechowski
MEMBERS ABSENT
Senator Natasha von Imhof
COMMITTEE CALENDAR
CONFIRMATION HEARING: BOARD OF GAME
- HEARD
CONFIRMATION HEARING: ALASKA GASLINE DEVELOPMENT CORPORATION
- HEARD
SENATE BILL NO. 92
"An Act relating to abandoned and derelict vessels; relating to
the registration of vessels; relating to certificates of title
for vessels; relating to the duties of the Department of
Administration; relating to the duties of the Department of
Natural Resources; establishing the derelict vessel prevention
program; establishing the derelict vessel prevention program
fund; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 92
SHORT TITLE: VESSELS: REGISTRATION/TITLES; DERELICTS
SPONSOR(s): SENATOR(s) MICCICHE
03/10/17 (S) READ THE FIRST TIME - REFERRALS
03/10/17 (S) RES, FIN
03/27/17 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
STANLEY "STOSH" HOFFMAN
Bethel, Alaska
POSITION STATEMENT: Appointee to the Board of Game.
SAM ROHRER, President
Alaska Professional Hunters Association (APHA)
Kodiak, Alaska
POSITION STATEMENT: Supported Mr. Hoffman's appointment to the
Board of Game.
NICOLE BORROMEO, Executive Vice President and General Counsel
Alaska Federation of Natives
Anchorage, Alaska
POSITION STATEMENT: Supported Mr. Hoffman's appointment to the
Board of Game.
WARREN CHRISTIAN
North Pole, Alaska
POSITION STATEMENT: Appointee to the Alaska Gasline Development
Corporation (AGDC) Board.
DAVID WIGHT
Anchorage, Alaska
POSITION STATEMENT: Appointee to the Alaska Gasline Development
Corporation (AGDC) Board.
HUGH SHORT, Vice Chair
Alaska Gasline Development Corporation (AGDC) Board
Girdwood, Alaska
POSITION STATEMENT: Re-appointee to the Alaska Gasline
Development Corporation (AGDC) Board.
PAUL KENDALL, representing himself
Anchorage, Alaska
POSITION STATEMENT: Asked question of AGDC appointees.
SENATOR MICCICHE
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 92.
RACHEL LORD, Coordinator
Statewide Alaska Clean Harbors Program
Department of Natural Resources (DNR)
Homer, Alaska
POSITION STATEMENT: Provided supportive background for SB 92.
RACHEL HANKE, staff to Senator Micciche
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided a sectional analysis of SB 92.
LINDA BRUCE, Attorney
Legislative Legal
Alaska State Legislature
POSITION STATEMENT: Answered questions related to SB 92.
BRYAN HAWKINS, Harbormaster
Alaska Association of Harbormasters & Port Administrators
City of Homer, Alaska
POSITION STATEMENT: Commented on SB 92.
JOE MCCULLOUGH
Office of Boating Safety
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: Commented on SB 92.
ACTION NARRATIVE
3:30:30 PM
CHAIR CATHY GIESSEL called the Senate Resources Standing
Committee meeting to order at 3:30 p.m. Present at the call to
order were Senators Meyer, Stedman, Hughes, Wielechowski, and
Chair Giessel.
^Confirmation Hearing: Board of Game
Confirmation Hearing: Board of Game
CHAIR GIESSEL announced the confirmation hearing for the Board
of Game (BOG) and invited Mr. Hoffman, who is being reappointed
to a third term, to tell the committee why he would like to
remain on the board.
3:31:46 PM
STANLEY "STOSH" HOFFMAN, Bethel, Alaska, said he works for the
Yukon Kuskokwim Health Corporation and has been raising a family
in Bethel for the last 20 years. Prior to that, he lived in
McGrath for about 20 years. Both towns are on the Kuskokwim
River in western Alaska.
MR. HOFFMAN said he was first appointed to the BOG in 2008 by
Governor Palin and is happy to be part of the process that
ensures that Alaska has fish and game forever. He enjoys the
work and appreciates the opportunity to serve again.
CHAIR GIESSEL asked what big issues the BOG is facing.
MR. HOFFMAN answered they are currently dealing with "Unit 13"
issues in the Ahtna area on the highway system; the caribou in
northern Alaska and Dall sheep issue is also hot on the agenda.
Locally, the board has received a lot of testimony about an
escalating bear population.
3:34:42 PM
CHAIR GIESSEL found no questions from committee members and
opened public comment.
SAM ROHRER, President, Alaska Professional Hunters Association
(APHA), Kodiak, Alaska, supported Mr. Hoffman's confirmation to
the Board of Game. He brings a unique perspective from western
Alaska, and while he is extremely knowledgeable on subsistence
issues, that one issue does not define him. He supports wide
uses of the resources provided they can be done in a sustainable
way. He approaches issues with an open mind and is always
willing to consider other viewpoints. He is widely respected,
knowledgeable on the issues, and most importantly, he is willing
to serve.
3:36:15 PM
NICOLE BORROMEO, Executive Vice President and General Counsel,
Alaska Federation of Natives, Anchorage, Alaska, offered "full
support" for Mr. Hoffman's confirmation. He is knowledgeable
about subsistence and commercial issues and brings a balanced
approach to game management.
CHAIR GIESSEL, finding no further comments, closed public
testimony.
SENATOR HUGHES said it didn't relate to his appointment, but she
was looking at some pictures from the mid-80s when her family
lived in Bethel and realized he was about the age of her son,
and asked if he went to high school with him.
MR. HOFFMAN answered no; he attended McGrath High School and
didn't leave McGrath until 1992.
SENATOR HUGHES thanked him for serving.
^Confirmation Hearing: Alaska Gasline Development Corporation
Confirmation Hearing: Alaska Gasline Development Corporation
3:39:36 PM
CHAIR GIESSEL announced the confirmation hearings for three
appointments to the Alaska Gasline Development Corporation
(AGDC). She said this board was formed in 2014 because of SB
138. In the years since, the project personnel and board
composition have experienced some dynamic turnover. So, they
have the latest two new individuals up for confirmation and one
who is up for reappointment. She welcomed Mr. Christian to the
table to tell them why he is interested in serving on this
board.
3:40:21 PM
WARREN CHRISTIAN, appointee to the Alaska Gasline Development
Corporation (AGDC) Board, North Pole, Alaska, said he has lived
in Alaska for over 40 years and worked in the oil and gas
industry for over 30 years, specializing in Arctic pipeline
construction. He started as a welder helper and worked his way
through the company and finally became president. For the last
10 years he has been president of Doyon, Associated, a
partnership between Doyon Limited and Associated Pipeline
Company. Over the years he has had the great opportunity to be
part of the planning and development of many pipeline projects
including Alpine, Badami, Northstar, Tarn, Melt Water,
ExxonMobil's Point Thomson project, and ConocoPhillips CD-5
project.
MR. CHRISTIAN said he is currently president of the North Slope
Contractors Association, president of the Mechanical Contractors
of Fairbanks, and past president of the TAPS Contractors
Association. He is familiar with negotiating labor agreements
with the unions and construction agreements with the majors. He
has also been involved in the training of Alaskans and is a
trustee of the Joint Apprenticeship Training Committee for the
Plumbers and Pipefitters. He is also a trustee for the Fairbanks
Pipeline Training Center. He is a member of the Alliance, the
RDC, and the Fairbanks Chamber of Commerce; he is a certified
project management professional and a certified welding
inspector. He serves on the AGDC Technical Committee where he
has been actively engaged with the management team.
MR. CHRISTIAN said he believes his experience and history will
help and bring some valuable Alaska Arctic knowledge to the team
and he is very willing to serve.
CHAIR GIESSEL thanked him and asked when he was first appointed.
MR. CHRISTIAN answered he was appointed in September and his
first meeting was in October.
CHAIR GIESSEL asked how he feels the project is progressing.
MR. CHRISTIAN replied that they had just received the update and
he has had to go through a "massive amount" of information. He
believes the project is heading in the direction that the Wood-
MacKenzie reported when the majors figured the project wasn't
commercial with the way it was structured. It recommended a
possibility of making it commercial and those were the third-
party tolling and third-party finance, along with the federal
tax exemption. Now the project is heading in that direction and
is progressing the FERC process. He is very involved, because it
could add costs to the project by adding stipulations to the
permits. They will file for FERC ahead of the June scheduling.
CHAIR GIESSEL asked if he had ever been involved in a FERC
permit process before.
MR. CHRISTIAN answered that he had been involved in certain
aspects of it and had to provide information such as air quality
and construction information, but he has not dealt directly with
the FERC agency. It's always been through the producers.
3:44:51 PM
CHAIR GIESSEL noted that he projects that the application
process will be completed in the next three months.
MR. CHRISTIAN responded that they will start by filing a formal
application to FERC.
CHAIR GIESSEL asked how many questions he had to answer related
to the initial filing.
MR. CHRISTIAN replied about 3,000 questions, but they won't all
be answered at that point. The questions have been separated
into different categories: questions that can't be answered
until FEED (front end engineering and design), questions that
will be answered during the 18-month FERC process, and some
questions that will be answered in the beginning.
CHAIR GIESSEL asked who is answering those questions.
MR. CHRISTIAN replied that a technical team within AGDC and some
third-party contractors are answering those questions.
CHAIR GIESSEL asked if he had ever worked with any of those
third-parties before.
MR. CHRISTIAN answered that he hadn't worked with the third-
party contractor, but he had worked with some of the members of
the AGDC team in the past.
CHAIR GIESSEL asked if he knows how firm the plans are to
purchase the ConocoPhillips export facility in Nikiski.
MR. CHRISTIAN answered at this point the AGDC is not going to
put a bid in for the ConocoPhillips' AKLNG plant.
3:46:37 PM
SENATOR COGHILL joined the committee.
CHAIR GIESSEL asked Mr. Christian if he had looked over the
"bullet line" (ASAP) plans.
MR. CHRISTIAN answered yes; he had looked at the design basis,
the cost estimates, and the assumptions around that line, along
with the AKLNG project.
CHAIR GIESSEL asked Mr. Christian if, based on his experience
with gas pipelines, he thinks it is a viable project.
MR. CHRISTIAN replied that he believes that only one pipeline
will be built. They have looked at the evaluation of the
different size pipes - the 48-inch pipe, the 42-inch pipe, and
the ASAP 36-inch pipe with multiple trains - to see which would
bring the most return. In doing so, they had to normalize some
things from the ASAP pipeline to the AKLNG pipeline, such as its
termination point, and looked at additional demands above what
Cook Inlet can supply. He didn't believe those demands are high
at this point, because infrastructure is not in place, but if
they built the ASAP line as currently designed that project
would have to be subsidized. He added that both projects
complement each other. The Supplemental Environmental Impact
Statement (SEIS) for the ASAP will also benefit the AKLNG
project, so the market will determine the final pipe size.
3:49:53 PM
DAVID WIGHT, Alaska Gasline Development Corporation (AGDC) Board
appointee, Anchorage, Alaska, related that he had lived in
Alaska since 2000 and he has a 41-year background in petroleum
engineering and management for two major companies: Amoco and
BP. He has some Alaska experience involving Amoco engineering
activities in the Cook Inlet between 1975 and 1979. From 2000
until the end of 2005 he had responsibility for Alyeska Pipeline
Service Company as the CEO and president. About half of his
industry career has been involved in gas, gas development, gas
processing, and facilitating development of LNG and pipelines to
monetize gas resources.
MR. WIGHT said he feels his most pertinent experience relative
to what they are doing in Alaska now is his eight years in
Trinidad and Tobago where he was one of two parties that
initiated discussions with the government and market for LNG
development. He led the team that negotiated the commercial
terms, both with the government and with the market, and lead
the team that developed and built the first LNG plant in
Trinidad and Tobago. He also managed and led the team for the
second and third LNG trains in Trinidad and Tobago before he
moved to Alaska to be involved with the TAPS pipeline.
The reason he wants to be involved in this project is because he
has a life-long interest in resource development. He thinks gas
development comes with its own challenges and his experience and
interest is there. And as an Alaskan, he truly believes the gas
resources need to be monetized while we still have the benefit
of substantial infrastructure related to the oil production.
3:53:36 PM
CHAIR GIESSEL asked if he thinks this is a viable project.
MR. WIGHT answered that the project can be viable, but it's not
a given. It has significant market and cost challenges, but the
state and the AGDC has put together the right group of people
with the benefit of years of study and technical and engineering
work by the major companies. He said the cost structure of this
project will be a challenge as well as finding the market and
the financing, but there are possibilities.
CHAIR GIESSEL asked if the state project and the three producer
projects are competing with each other.
MR. WIGHT replied that is an interesting question, and the four
participants will have to figure out how to work together. All
of the gas has to be sold in the marketplace together and there
are several dozen other projects trying to get to the same
market.
3:57:28 PM
CHAIR GIESSEL said in the original legislation that created this
project AGDC named the Department of Natural Resources (DNR) as
the marketing lead and asked how much interaction he, as a board
member, has had with a marketing team from the DNR.
MR. WIGHT replied that he is fairly new to the board and hasn't
personally had any interaction with a DNR marketing team and
can't address the status of that interface.
CHAIR GIESSEL thanked him and invited Mr. Short to the table.
She said it is his third appointment to the board.
3:58:37 PM
HUGH SHORT, Vice Chair, Alaska Gasline Development Corporation
(AGDC) Board, Girdwood, Alaska, said it is an honor to serve in
this role. He related that he had attended ME school in Bethel,
referencing Senator Hughes earlier remark. He has worked in
finance for most of his career. He was at Alaska Growth Capital
for seven years, five of which he was president and CEO. He made
investments across the four major sectors in the economy in
Alaska. He spent three years as chairman of the board for the
Alaska Industrial Development and Export Authority (AIDEA) and
the Alaska Energy Authority (AEA). In 2013, he left Alaska
Growth Capital and started PT Capital and raised an initial $125
million in private equity funding. Currently PT Capital has
investments in Alaska, as well as Iceland, and is very
interested in furthering the deployment of their capital.
He said his role on the board for the last couple of years has
been somewhat of a moving target. When he first arrived, there
was a whole slew of new board members, save for Dave Cruz, who
was from the initial board, and they worked closely to maintain
the continuity both of the project and the personnel, ensuring
that they abide by SB 138 and move the project forward.
MR. SHORT speculated that no one in 2015 expected the extended
period of low commodity prices. Over that period of time, the
project partners - ExxonMobil, ConocoPhillips, and BP - made
decisions based on their own financial and strategic direction
to not move forward with a FEED decision.
At that point, AGDC and the state started a conversation with
each of the three parties to be able to put together transition
agreements and started taking a "hard look" at the third-party
tolling approach in the Wood MacKenzie study. It is a different
approach than the equity model that had previously been
implemented. The major difference between the two is the equity
model generally has each equity participant finance their
portion of the project and contribute that money to the project.
This means they may have debt or may have all equity, but it's
essentially their contribution. In a third-party tolling
situation, the whole project bears the cost of the debt and the
cost of the overall structure. The one benefit with a third-
party model is that with the entrance of infrastructure
investors, a reduced hurdle rate on the return on equity, as
well as any potential benefits that may occur from tax exempt
status reduces the overall tariff and makes the project more
economic for the long term. As they move through 2017, probably
the biggest question he has to answer as a board member is the
economic feasibility of that model.
4:04:13 PM
On the other side of the deal is the cost of project. It is not
feasible at a $45-65 billion build; that cost must come down
substantially. The team has been working very diligently to try
to do that.
The other piece of this is the FERC filing. For background he
said, in 2011 he was appointed to the Alaska Energy Authority
Board (AEA) and became chairman. At that point, Governor Parnell
and the legislature supported the FERC filing and the
construction of the Susitna Watana hydroelectric project. Over
the course of three years, $170 million was spent in that
process. A new governor came and the project was defunded and
they stopped just short of a FERC filing. If a license would
have been issued, it would have been a marketable asset that the
state could have recouped some expenses on. It was shortsighted
to not complete the process and get the value out of that FERC
license. He hopes that AGDC is successful in finding buyers
working with the project partners in building this, but at the
very least the FERC license is a piece of paper and a document
that is a very important asset for the project.
4:06:07 PM
SENATOR COGHILL asked with the major oil companies stepping back
and the state taking the lead, if he thought the state has the
capacity to look at it like a big buyer would for an LNG
facility and get good numbers for the cost of money for both
sides, or: "Are we going to fool ourselves with hardware costs,
basically?"
MR. SHORT answered those numbers could be squeezed into
something unrealistic, and that would affect the financing plan.
AGDC's strategy is twofold: one is in order to get the best cost
estimate and to move this project towards a feasible build size,
bringing on board an Engineering, Procurement, and Construction
(EPC) contractor who has experience in the construction of these
types of projects and sitting alongside is an important role.
They are currently working on identifying an EPC contractor to
play that role to ensure they are looking at realistic numbers,
focused on reducing costs but without being foolhardy.
He believes there is a strategy for ASAP, but the issue there is
the less gas you put through the more expensive it is per unit,
and it's highly likely that at 42-inch pipe is the most
feasible. The question then becomes is there a way to scale into
a 42-inch build that reduces your costs but as you get more gas
increases the flow. Creative solutions are being considered such
as starting the LNG facility with one train, very little
compression, and being able to somehow get the Gas Treatment
Plant (GTP) to a more efficient and less cumbersome build. A lot
more work needs to be done on that to come up with the correct
answer.
4:09:38 PM
SENATOR COGHILL said it's important to watch that, but it also
looks like one of the cornerstones is the ability to get federal
tax relief for the project. It's a commercial project performed
by a government and he wanted to know how they would explain to
the public that this is for state use but we're really selling
it commercially (which would void that tax exemption). And is
the tax exemption something that is even realistic?
MR. SHORT replied that there are two key levers in the financing
strategy. The first lever gets more bang for your buck and is
the third-party tolling infrastructure financing. That allows
you to bring down the overall hurdle rate for an investor. That
is where you will get most of your drive versus an equity model
where one partner may have a 13 percent hurdle rate, another
partner may have a 15 percent hurdle rate, and another partner
might have a 12 percent hurdle rate, but at the end of the day
those have to be blended together to get to a feasible project
where everyone hits the green light.
He explained further that one gets the most bang by being able
to finance this project from those various hurdle rates down to
a hurdle rate where investors want to invest and get an
infrastructure rate of return.
The second driver, which is less of a reduction in tariff is the
tax exempt status on federal income. That requires an IRS
(Internal Revenue Service) private letter ruling, which requires
a finance plan to be fully baked and fully put together, and
that has not occurred yet. So, it's very important to get the
project infrastructure financing. It's secondarily important for
them to achieve a tax-exempt status if feasible, but if it is
not possible to qualify, we need to take that into account on
the finance package side. They don't have a clear answer on that
right now, but hopefully they will soon.
4:12:41 PM
CHAIR GIESSEL said she heard that they will be applying for a
FERC license in June and the AGDC president said by the end of
this year the economics and viability of this project will be
known, and yet Mr. Short hadn't applied for the IRS private
letter ruling yet, because the financial plan is not in place.
She asked what the chances are of achieving that end-of-year
deadline for project viability.
MR. SHORT replied that the submission date for the FERC permit
is actually April. It has been moved up, and there is some
optimism about the focus on infrastructure and energy of the new
administration in D.C. The private letter ruling for the tax-
exempt status is important for the project financing. If it
doesn't happen, it increases the tariff and that has to be dealt
with somehow. If they had to choose between the two, they could
probably live without the tax-exempt status.
4:15:20 PM
CHAIR GIESSEL said her district wants to know how much the
citizens of Alaska will have to pay to see this pipeline come to
fruition.
MR. SHORT said that answer is being put together now. There are
two options to consider:
1. Establish an amount of equity necessary to be able to finance
the project out of the state's accounts. Where that is has not
been determined, and it is premature to answer that.
2. The state of Alaska could bond for an equity portion of the
pipeline construction, but that scenario is not ready to roll
out to the legislature.
MR. SHORT said the board had spent eight months negotiating
transition agreements from point A to point B and it's been a
frustrating process, because a lot of the work has been done in
executive session. They are now at point B and the team is
working long hours to come up with good answers to these
questions.
4:17:21 PM
SENATOR MEYER asked if it wouldn't make sense to have a
legislator on the board, even as an ex-officio member, to help
sell the project to the legislature.
MR. SHORT noted that he had appreciated Senator Giessel
attending all or most their meetings; it has been very helpful
from a communication standpoint. But he, as a board member and
appointee of the governor, has a specific job to do and didn't
have an opinion as to whether it is good or bad idea to do that.
CHAIR GIESSEL, finding no further questions, opened public
comment on the three AGDC appointees.
4:20:24 PM
PAUL KENDALL, representing himself, Anchorage, Alaska, said he
called to ask one of the appointees where he could find the main
line data that includes material and labor. He wanted to look at
those numbers, because he just didn't see this gas pipeline
going forward. The first thing that comes to his mind is will
that pipeline carry hydrogen, and if it won't, the whole project
will have to be reconsidered.
CHAIR GIESSEL, finding no further comments, closed public
testimony and said in accordance with AS 39.05.080, the
Resources Committee reviewed the following and recommends the
appointments be forwarded to a joint session for consideration:
Board of Game - Stosh Hoffman, Bethel; Alaska Gasline
Development Corporation - David Wight, Anchorage; Hugh Short,
Girdwood; and Warren Christian, North Pole. This does not
reflect an intent by any of the members to vote for or against
the confirmation of the individuals during any further sessions.
4:25:04 PM
At ease
SB 92-VESSELS: REGISTRATION/TITLES; DERELICTS
4:25:29 PM
CHAIR GIESSEL announced consideration of SB 92 offered by
Senator Micciche. She said Alaska's coastal highways have
turnouts that have become ship graveyards, and hundreds of
derelict vessels pose public safety, environmental, and economic
burdens. Finding the right balance between the public interest,
rights of property owners, and the balance sheets of communities
in the state are addressed by this legislation.
SENATOR MICCICHE, Alaska State Legislature, Juneau, Alaska, said
SB 92 is really that simple. He said his staff would provide an
overview and Ms. Lord would provide a presentation that would
reveal the reason for this legislation.
4:26:32 PM
RACHEL LORD, Coordinator, Statewide Alaska Clean Harbors
Program, Homer, Alaska, provided supportive background for SB
92. She said that this program is now run through the Marine
Exchange in Juneau and through it, she worked for years with
harbormasters around the state and with the Alaska Association
of Harbormasters and Port Administrators.
She started off with a story about two vessels - the F/V Leading
Lady and the F/V Kupreanof - that had been kicked out of Kodiak
and denied entrance to several other ports. This led to both
vessels sinking in Kachemak Bay on state tideland waters where
they were anchored, which left a sheen of oil in close proximity
to commercial oyster farms.
On January 18, the Coast Guard raised the vessels and removed
pollutants with their authority ending at that point. When it
became clear that the owner and responsible party was not going
to remove the vessels themselves, DNR impounded the vessels and
moved them to Homer. One was demolished; the other was returned
to the owner after payment of $11,500 to DNR even though the
price tag was at least $40,000 for DNR and $400,000 for the
Coast Guard; and she didn't know the cost for DEC.
This is not a singular story, Ms. Lord said. Alaska has an aging
fleet of vessels and outdated statutes. By 2025 the Alaska fleet
will include roughly 3,100 vessels between 28 and 59 feet that
are more than 45 years old. The Alaska fleet also includes 75
passenger vessels, tugs, and barges over 50 years old. A 2014
McDowell Group Report on trends and opportunities in the
maritime sector considered it a positive highlight for ship
building opportunities, but an excerpt from the executive
summary paints a different picture of derelict vessels.
MS. LORD said the F/V Leading Lady and F/V Kupreanof are classic
examples of boats across Alaska. The current reality is one in
which it is all too easy to pass on an expensive and aging boat.
And the cost of maintaining a boat only increases over time.
With the help from the Derelict Vessel Task Force, DNR has begun
a derelict vessel data base of 200 vessels, but it isn't
complete. Case studies have shown that agencies and
municipalities are hamstrung to effectively prevent and manage
derelict vessel, and the public ultimately pays the price in
money, environmental damage, navigational hazards and loss of
aesthetics. Alaska's waters are too often a default dumping
ground.
An incident in 2012 catalyzed the formation of an ad hoc
Abandoned Ad Derelict Vessel Task Force for the state that
identified major barriers and solutions to improving derelict
vessel prevention and management in Alaska and these are all
captured within SB 92. Participation in the Derelict Vessel Task
Force was open to anyone interested she said and presented a
list of agencies at the table. The municipal law firm of Birch,
Horton, Bitner, and Cherot provided pro bono legal assistance
for this effort. They represent Kodiak, Cordova, Homer, and
other communities and have spent significant time on derelict
vessel cases and ordinances to protect their communities. Their
help, along with the work of all the other people at the table,
and substantial research from other states was instrumental to
navigating potential solutions for the myriad of problems raised
by derelict vessels around Alaska.
MS. LORD said it was an honor to work with these people and
facilitate their work. The task force met for nine full-day
meetings over the course of two years and identified major
problems that were addressed by SB 92.
4:32:48 PM
A major barrier to effectively dealing with derelict vessels is
a lack of clarity in current law. The course of action is
different if one declares a vessel derelict versus abandoned and
the impoundment hearing processes are not clear nor are the
notice requirements. The definition of the vessel owner also
leaves ambiguity. SB 92 addresses these issues and provides much
more clarity in AS 30.30, the derelict vessel statutes.
Current statutes restrict enforcement of derelict vessel laws.
One of DNR's biggest tools is to write trespass notices and
those are clearly not enough enforcement. The current penalty of
$500 is both not enough and not enforceable.
MS. LORD said she has noticed news articles on derelict vessel
cases and that the comments are resoundingly in support of
response efforts and often ask why state laws aren't more
stringent and they clamor for owner liability.
In 2015 representatives from DNR and DEC participated in a
nationwide derelict vessel workshop held by National Oceanic and
Atmospheric Administration (NOAA). They noted that everyone
around the country agreed: there is never going to be enough
money to remove all derelict vessels. The investment in a point
person or program alone is proving to be instrumental in making
progress on preventing and better managing derelicts. As a
facilitator, every few months she gets a phone call from a
community or village somewhere in Alaska asking for advice and
assistance on a derelict vessel case. Alaska agency employees
are doing this work in different offices around the state with
varying levels of familiarity with derelict vessel laws and
background. SB 92 proposes establishing a derelict vessel
program at DNR allowing for the streamlining of derelict vessel
work around the state to improve efficacy and reduce overall
costs. She believes this will be a big step forward for Alaska
to curb the dumping of vessels in our waters.
Vessel disposal must be addressed at some point, Ms. Lord said,
and while this isn't necessarily the job of the state it would
be beneficial to start looking for vessel disposal options and
solutions including conversations with the private sector and
municipalities. In other states, people are seeing that it is
far cheaper to remove a vessel from the water before it sinks.
This could be different in Alaska; however, any sunken and
abandoned vessel in Alaska is going to be enormously costly.
MS. LORD explained that under the proposed derelict vessel
prevention program, the state will have some opportunity to
begin asking these questions and considering a suite of possible
solutions. Without insurance, when a vessel is abandoned or left
to sink on state waters, it can be impossible to find a
responsible party. A few harbors around the state are beginning
to require insurance of some kind and many others are
considering it.
Under SB 92, a vessel over 30 feet that is engaged in commercial
activity and on the water for more than 90 days would be
required to carry a marine insurance policy. If someone is
considering a long-term commercial venture on the water and
insurance policy will protect the public in the event the
commercial endeavor does not work out as planned. This happens
often unfortunately.
Finally, one of the hurdles to holding vessel owners responsible
is establishing ownership. With the Challenger, a 70-year old
96-foot long tugboat that sank in Gastineau Channel in 2015 the
bill of sale was written up, but the current and former owners
disagreed on who actually owned the vessel. While that will be
up to the Coast Guard to deal with, they carried a nearly $2
million bill for dealing with that case. Our agencies and
harbors face this run-around on a regular basis. SB 92 proposes
establishing more universal registration requirements and a
titling system for vessels similar to motor vehicles. Done in
other states, these are some common-sense solutions to help
improve accountability.
4:37:05 PM
MS. LORD said just looking at the Challenger case that happened
in Juneau, an excerpt from an Empire indicated that "gosh we
really need to do something." It went through some ideas like
requiring vessel registration and insurance. At the very least
DNR could be granted the simple authority to levy fines on those
who pollute Alaska's waters. SB 92 proposes addressing these
matters.
She said in 2013 a Washington State official said, "We need to
find a way to keep these vessels from being abandoned in our
waterways, and that means holding owners accountable. Too many
people get in over their heads, and their dreams of ship
renovation or making money from scrap become a nightmare of the
citizens of this state and the marine environment."
The quote concludes saying. "A hole in the water into which you
pour your money is a famous definition of a boat. To the maximum
extent possible, we must ensure the taxpayers are not the ones
doing the pouring."
4:38:18 PM
MS. LORD said the 16th Legislature knew this was a problem and
passed HCR 53 in 1990 saying that many abandoned vessels are
grounded on the coast of Alaska and they are a problem that the
state doesn't have the financial or statutory resources to deal
with, and that communities around the state are also suffering
from widespread abandoned vessels. The resolution concludes by
requesting that the problems posed by abandoned vessels be
studied with recommendations brought forth to the 17th
Legislature for legislation necessary to remedy existing
problems and prevent future ones.
Today she finds herself with the 30th Legislature and SB 92 is
necessary to move forward on better managing and preventing
derelict vessels around Alaska and she looks forward to their
conversation and forward movement on this bill.
4:39:50 PM
RACHEL HANKE, staff to Senator Micciche, Alaska State
Legislature, Juneau, Alaska, provided a sectional analysis of SB
92.
Section 1 requires that a boat placed on state waters must be
titled as well as registered and numbered as required in this
chapter.
Section 2 removes Coast Guard certificate exception and adds
language that requires certificate of number on a barge that
operated on water for more than 60 consecutive days.
SENATOR STEDMAN asked how a documented and an undocumented
vessel are going to be treated differently, referring to
language on page 1, line 8.
MS. HANKE said some vessels are documented with the Coast Guard
and it is the intention that those be documented with the state
as well.
MS. LORD added that was true and that 26 other states require
all documented vessels to be registered with the state DMV, as
well. Washington is one of those states. Given the size of the
problem they suggest expanding the registration requirement to
include documented boats, because that will help the state
better identify ownership when a boat is abandoned on state
lands or municipal harbors.
SENATOR STEDMAN said that documentation database is already
available and suggested getting more information before
increasing regulatory burdens unnecessarily.
4:43:18 PM
MS. HANKE said section 3 states that a boat is exempt from this
title if it operates in the state for less than 90 consecutive
days and has a valid certificate of number; barges that operate
for less than 60 days with a valid certificate of number are
also exempt.
Section 4 adds a new section which directs the Department of
Administration (DOA) to adopt regulations and create a system
for certification of titles. An individual who purchases an
undocumented boat is required to apply for a certificate of
title within 30 days.
Section 5 adds cross-references.
Section 6 increases motorized boat registration for a three-year
period from $24 to $30, adds a barge registration fee of $75 for
a three-year period, and adds a boat title fee of $20.
Sections 7 & 8 add definitions.
SENATOR STEDMAN remarked that this bill has some issues.
CHAIR GIESSEL agreed and added that they would be addressing it
for quite a while.
SENATOR STEDMAN said language on page 4, line 6, talks about a
barge and asked if that is a freight barge and if it would
include a fuel barge.
MS. LORD said the intention is to include all barges.
MS. HANKE said sections 9 & 10 clarify and simplify existing
statute.
4:45:15 PM
Section 11 provides that a person found guilty of abandoning a
vessel is guilty of a class B misdemeanor that is punishable by
one or more of the following: a fine of no less than $5,000 and
no more than $10,000, up to 90 days in jail, or forfeiture of
the vessel.
SENATOR STEDMAN asked her to elaborate on who would be exposed
to the classification of misdemeanor and the fine.
MS. LORD replied it would expose the person who violates the
statute.
4:47:30 PM
LINDA BRUCE, Legislative Legal, Alaska State Legislature,
clarified that a person could be found guilty of violating this
section if they store or leave a derelict vessel on the waters
of the state (section 9) without the consent of the state agency
or municipality or dock at any private property without consent
of the owner.
SENATOR STEDMAN said all submerged lands are owned by the state
and are its navigable waters. He said the curious issue is that
some people own derelict vessels and let them sink in the harbor
or take them out and let them sink on the beach, and they don't
have $5,000. One of the biggest challenges is that a boat ends
up going to the lowest economic common denominator in its final
days.
SENATOR MICCICHE said reminded the committee that this section
is amended, but it was always a misdemeanor that was punishable
by a fine of not less than $500 or more than six months, or by
both. It was changed to a higher fine, but a lower time. They
don't want to be the heavy hand of law, but the spirit of the
bill is to make someone accountable other than the municipality
or state for a vessel sinking in one of our harbors.
MS. HANKE said section 12 allows the department or a
municipality to report violations to the Attorney General for
enforcement.
Section 13 adds new a section which allows an aggrieved person
to file a civil injunction. Civil penalties of not more than
$1,000 can be imposed for each violation. Each day a violation
occurs constitutes a separate violation.
Section 14 allows the department to provide written
authorization for a vessel to be left within 30 days and
clarifies language.
Section 15 states that at least 30 days before impounding a
vessel, the impounding authority shall post a notice on the
vessel, and on the state's or municipality's website. It adds
language to allow use of an address on file with the Coast Guard
or Department of Administration and moves notice specifications
to section (b).
Section 16 adds new subsections that establish notice
specifications and defines the procedure for pre-impoundment
hearings. The owner can file within 15 days after the post-
marked date of the notice.
Section 17 adds a new section to establish notice of a
disposition procedure.
Section 18 provides clear guidelines for dealing with a vessel
after being impounded by the state or a municipality.
Section 19 removes the requirement that an interested party
taking possession of a vessel pay expenses incurred and post
security.
4:48:00 PM
SENATOR STEDMAN said the 30-day notification in Section 18 seems
short for finding someone, and asked why it is so short.
SENATOR MICCICHE answered that this bill was processed by a
large stakeholder group that deals with these issues all the
time, and if those timelines are not appropriate it's in the
members' hands, but he hoped they would allow a stakeholder
explanation.
BRYAN HAWKINS, Harbormaster, Alaska Association of Harbormasters
& Port Administrators, City of Homer, Alaska, said the timeline
for impoundment was thoroughly researched by the attorneys that
provided the pro bono help for this task force. It's a 30-day
notice of intent of impoundment and then another 30 days takes
place before the second notice of impoundment is delivered.
4:53:35 PM
MS. HANKE said section 20 establishes the procedure for the
immediate impoundment of derelict vessels that pose an imminent
threat to safety.
Section 21 adds new a section that states the individual who
owns an impounded vessel is responsible for all costs incurred
in the process.
4:53:59 PM
Section 22 adds a section that will require insurance for
commercial vessels over 30 feet in length and are operating on
state waters or docked at state or municipal harbors for more
than 90 days.
SENATOR STEDMAN said in trying to deal with the expense of
derelict vessels in the harbor, harbormasters have indicated
that insurance companies require a survey every few years to get
coverage. If the boat can't pass the survey, the insurance
company won't insure it. All that's required is a requirement
that the vessel in the harbor has to show proof of insurance.
The issue then becomes where they go when they go out of the
harbor.
The requirement for the insurance policy to show cost of removal
needs to be looked at, he said, because that could possibly
start incurring additional insurance costs to the boat owners.
For instance, the Juneau Harbor Department requires him to have
insurance, and if he doesn't it would put him into another fee
structure. If the boat isn't insurable that would tip them off
to a problem.
SENATOR MICCICHE said one can look at the bill as a snapshot in
time today or one can look at it as a comprehensive plan for
vessels that are 100 percent shiny off-the-line with the thought
of when they become derelict vessels, which is where the
exposure lies for municipalities and the state. That is when
they want them dealt with.
4:58:39 PM
MS. HANKE said section 23 simplifies the guidelines for
identifying a derelict vessel.
Section 24 directs the department to establish and administer a
derelict vessel prevention program. It establishes the duties
and powers of the department and establishes a program fund.
Section 25 adds "floating facility" to the definition of vessel.
Section 26 adds definitions.
Section 27 names this chapter the "Derelict Vessels Act."
Sections 28 & 29 add sections to Title 37, which allow for
registration and titling receipts, civil penalties, money
received from sales, donations, and other receipts to be
deposited into the Derelict Vessels Program Fund.
Section 30 removes repealed sections, which will allow the fund
to remain without federal funding.
Section 31 repeals sections.
Section 32 directs the Department of Natural Resources and the
Department of Administration to adopt necessary regulations, and
these regulations take affect under the Administrative Procedure
Act.
4:59:52 PM
Section 33 requests the revisor of statutes to change two
headings.
Sections 34-37 establishes effective dates.
SENATOR STEDMAN asked if "floating facilities" on page 14, line
15, include float houses.
5:00:23 PM
MS. BRUCE answered that "floating facility" is broad enough to
encompass float houses.
5:00:59 PM
MS. LORD commented that the term "floating facility" is used in
DNR's management area plans. Those plans include float houses,
float camps, floating structures within that floating facility.
It is important that float houses are explicitly covered under
this bill and if the definition of floating facility does not
fully cover that, then an expanded definition should be found.
SENATOR STEDMAN asked how section 22 requiring insurance
interplays with float houses.
5:02:28 PM
JOE MCCULLOUGH, Office of Boating Safety, Department of Natural
Resources (DNR), Anchorage, Alaska, answered the didn't know how
they intersect, but the definition of "vessel" is anything used
for transportation on the water. He didn't know that a float
house would necessarily meet that unless it was moving around on
the water. If it's anchored up and people are just living in it,
and it's not used for transportation, it's not going to be a
boat or a vessel.
SENATOR STEDMAN said line 15 on page 14 changes the definition
of "vessel."
CHAIR GIESSEL said she was certain that the bill sponsor and
Senator Stedman would be in touch with him.
SENATOR MICCICHE said the numbering and registration provisions
have an exemption for a boat that is not equipped with
mechanical propulsion and then it would have to be 30 feet or
longer to be in the insurance section. It would have to be
engaged in commercial activity. So, he thinks there are a couple
of ways that float houses are left out of the bill, but that
could be clarified.
5:05:21 PM
SENATOR HUGHES said she lives in a district where one might
think derelict vessels are not an issue: Chugiak and Palmer.
However, a ship built in 1912 in Seattle was brought up to
Ketchikan and used as a fish tender there and in Port Graham.
After the earthquake, it was used to rescue 43 individuals on
Kodiak Island when there was concern about a tsunami. Then
sometime in the 80s, Till Wallace from Chugiak saw it in Homer.
Even though it was quite old at the time, he brought it into
Chugiak where it now resides along the old Glenn Highway between
the Birch Wood exists. It's become somewhat of an icon and a
place where folks take photographs. She asked if they should be
concerned about if a community really wants a derelict vessel or
will someone be fined $5,000.
SENATOR MICCICHE said it sounds like that vessel is on private
property and this bill does not deal with vessels on private
property.
SENATOR HUGHES responded that it was recently moved to property
owned by the volunteer fire and rescue department, and therefore
may be on public land. If it is, would it then apply?
SENATOR MICCICHE said he would do further research, although he
was comfortable with "no." The intent is to protect our
waterways from state and municipal expense in removing derelict
vessels.
SENATOR HUGHES said she would like to reassure her community.
CHAIR GIESSEL found no further questions for the bill's sponsor
and held SB 92 in committee.
5:08:27 PM
CHAIR GIESSEL adjourned the Senate Resources Committee meeting
at 5:08 p.m.