Legislature(1993 - 1994)

03/10/1994 03:35 PM TRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                SENATE TRANSPORTATION COMMITTEE                                
                         March 10, 1994                                        
                           3:35 p.m.                                           
  MEMBERS PRESENT                                                              
 Senator Bert Sharp, Chair                                                     
 Senator Randy Phillips, Vice Chair                                            
 Senator Tim Kelly                                                             
 Senator Jay Kerttula                                                          
 Senator Georgianna Lincoln                                                    
  MEMBERS ABSENT                                                               
 All Members Present                                                           
  COMMITTEE CALENDAR                                                           
 CS FOR HOUSE BILL NO. 61(FIN) am                                              
 "An Act relating to the offense of operating a commercial motor               
 vehicle while intoxicated and the offense of operating a motor                
 vehicle, aircraft, or watercraft while intoxicated; relating to               
 presumptions arising from the amount of alcohol in a person's                 
 breath or blood; relating to chemical testing of a person's breath;           
 and providing for an effective date."                                         
 SENATE BILL NO. 327                                                           
 "An Act amending the motor fuel tax to establish a different tax              
 levy on residual fuel oil used in and on watercraft; and providing            
 for an effective date."                                                       
  PREVIOUS SENATE COMMITTEE ACTION                                             
 HB 61 - No previous senate committee action.                                  
 SB 327 - No previous senate committee action.                                 
  WITNESS REGISTER                                                             
 Representative Jim Nordlund                                                   
 State Capitol, Juneau, AK 99801-1182¶465-4968                                 
  POSITION STATEMENT:  prime sponsor of HB 61                                  
 Margot Knuth, Assistant Attorney General                                      
 Criminal Division                                                             
 Department of Law                                                             
 P.O. Box 110300, Juneau, AK 99811-0300¶465-3428                               
  POSITION STATEMENT:  in favor of HB 61                                       
 Juanita Hensley, Chief, Driver Services                                       
 Division of Motor Vehicles                                                    
 Department of Public Safety                                                   
 P.O. Box 20020, Juneau, AK 99811-0020¶465-4335                                
  POSITION STATEMENT:  testified on HB 61                                      
 Larry J. Hackenmiller                                                         
 Alaska Cabaret, Hotel, and Restaurant Retailers                               
 518 Farmer's Loop Road, Fairbanks, AK 99712¶457-1327                          
  POSITION STATEMENT:  opposed to HB 61                                        
 Rick Solie, Aide                                                              
 Senate Finance Committee                                                      
 State Capitol, Juneau, AK 99801-1182¶465-3709                                 
  POSITION STATEMENT:  prime sponsor of SB 327                                 
 Senator Suzanne Little                                                        
 State Capitol, Juneau, AK 99801-1182¶465-2828                                 
  POSITION STATEMENT:  in favor of SB 327                                      
 James Burns, Senior Vice President of Marketing                               
 Petro Marine Services                                                         
 3111 C St., Anchorage, AK 99503¶562-5000 or 345-4145                          
  POSITION STATEMENT:  in favor of SB 327                                      
 Gene Burden                                                                   
 Tesoro Alaska                                                                 
 3230 C St., Anchorage, AK 99503¶561-5521                                      
  POSITION STATEMENT:  in favor of SB 327                                      
 Chris Gates, Director                                                         
 Division of Economic Development                                              
 Department of Commerce & Economic Development                                 
 P.O. Box 110804, Juneau, AK 99811-0804¶465-2017                               
  POSITION STATEMENT:  in favor of SB 327                                      
 Robert Erickson                                                               
 Teamsters Local 959                                                           
 306 Willoughby Ave., Juneau, AK 99801¶586-3225                                
  POSITION STATEMENT:  in favor of SB 327                                      
 Larry Meyers, Director                                                        
 Income & Excise Audit Division                                                
 Department of Revenue                                                         
 P.O. Box 110420, Juneau, AK 99811-0420¶465-2320                               
  POSITION STATEMENT:  testified on SB 327                                     
  ACTION NARRATIVE                                                             
 TAPE 94-8, SIDE A                                                             
 Number 001                                                                    
 CHAIRMAN SHARP calls the Senate Transportation Committee meeting to           
 order at 3:35 p.m.                                                            
 Number 018                                                                    
 CHAIRMAN SHARP brings up HB  61 (LOWER ALCOHOL LIMIT TO 0.08 FOR              
 OMVI'S) as the first order of business before the committee.  The             
 chairman calls the prime sponsor to testify.                                  
 Number 034                                                                    
 REPRESENTATIVE NORDLUND thanks the chairman and the committee for             
 scheduling HB 61.  The representative states HB 61 would lower the            
 blood alcohol limit by which a person is considered legally drunk             
 to drive.  HB 61 would lower that limit from 0.10 to 0.08.  Most              
 experts agree that driving at 0.08 blood alcohol level and above,             
 is a level at which a person is significantly impaired.                       
 Number 078                                                                    
 REPRESENTATIVE NORDLUND cites statistics on accidents and blood               
 alcohol levels from information in the committee bill file.                   
 Representative Nordlund states he has been known to have a few                
 drinks, and he knows there is no way someone who has had five                 
 drinks in the space of an hour should be allowed to get behind the            
 wheel of an automobile.  He states his objective in HB 61 is not to           
 encourage people to quit drinking, but to make sure that if people            
 do drink, they do not get behind the wheel of an automobile and               
 compromise the safety of others and themselves.                               
 REPRESENTATIVE NORDLUND states as of 1993, ten states have passed             
 0.08 blood alcohol level laws.  All European countries have a legal           
 limit at 0.08 or less.  Three-year-average statistics from                    
 California, Utah, Oregon, and Maine, states which have 0.08 blood             
 alcohol level limit, indicate that there are 15.5% fewer                      
 fatalities, while the arrest rate for Driving While Intoxicated               
 (DWI) only went up about 4%.  Representative Nordlund notes that              
 names of organizations which support HB 61 and studies that support           
 HB 61 are named in his sponsor statement for HB 61.                           
 Number 114                                                                    
 CHAIRMAN SHARP thanks Representative Nordlund for his testimony and           
 asks if there are any questions for the representative.  Hearing              
 none, the chairman calls Margot Knuth from the Department of Law to           
 Number 122                                                                    
 MARGOT KNUTH, Assistant Attorney General, Department of Law (LAW),            
 Criminal Division, states the department supports HB 61.  Ms. Knuth           
 states there is no crime that kills more people in Alaska than                
 drunk driving.  She thinks this legislation will have better and              
 more consequences for the State of Alaska than many other bills               
 that are being considered.                                                    
 MS. KNUTH states that one of the legal aspects the Department of              
 Law is up against is that anyone with a prior conviction for DWI              
 from a state with 0.08 blood alcohol level, cannot have that                  
 conviction counted as a previous conviction in Alaska.  The courts            
 of the State of Alaska have ruled that a conviction from a 0.08               
 state, even if the person was found to have a blood alcohol level             
 of 0.15 for that conviction, is substantially dissimilar from                 
 Alaska's law governing DWI offenses.  So anyone with a record of              
 convictions for DWI from any of the states, such as Oregon,                   
 California and the others, get treated as a first offender under              
 Alaska law.  Ms. Knuth states that is inappropriate.  This is an              
 instance where parity with other states is needed.                            
 Most of those arrested for DWI are at about .10 blood alcohol                 
 level.  There are not a lot of people pulled over who are at .07 or           
 even .08.  But if a person is very close to 0.10, it becomes worth            
 it for the defendant to go to trial and contest the charge.  By               
 dropping to a 0.08 level, many people at 0.10 will plead out,                 
 rather than going to trial.                                                   
 MS. KNUTH states the Department of Law does not expect to see very            
 many more arrests, but they do expect to see more convictions as a            
 result of HB 61.                                                              
 Number 163                                                                    
 SENATOR LINCOLN asks Ms. Knuth how many people plead out with a               
 MS. KNUTH says she does not have that information with her, but she           
 could get back to Senator Lincoln with the answer.  She does not              
 know how many DWI cases there are statewide, and how many are                 
 prosecuted by troopers rather than by municipalities.  Ms. Knuth              
 points out that the City & Borough of Juneau (CBJ) is looking at              
 passing an ordinance instituting 0.08 blood alcohol level law.  She           
 believes it is better not to have two different standards, one at             
 the state level and one at the local level.                                   
 Number 176                                                                    
 SENATOR LINCOLN asks if Ms. Knuth has statistics showing the number           
 of people who are stopped for DWI whose blood alcohol level is                
 between 0.08 and 0.10.                                                        
 MS. KNUTH replies the Department of Public Safety (DPS) has those             
 Number 183                                                                    
 CHAIRMAN SHARP says he has read of instances where a person went to           
 trial, was not convicted of DWI, but still had their license                  
 suspended under administrative revocation procedures.  He asks Ms.            
 Knuth if administrative revocation is proper in those                         
 MS. KNUTH responds DPS may do better in answering that question,              
 but she believes in instances of administrative revocation, the               
 person whose license is revoked has an opportunity to contest that            
 revocation.  If the person whose license is suspended forgoes that            
 opportunity, there may be no recourse.                                        
 Number 201                                                                    
 CHAIRMAN SHARP thanks Ms. Knuth for her testimony and calls Juanita           
 Hensley from the Division of Motor Vehicles.                                  
 Number 204                                                                    
 JUANITA HENSLEY, Chief, Driver's Services, Division of Motor                  
 Vehicles (DMV), Department of Public Safety (DPS) states DPS                  
 supports HB 61 and feels it is a tragedy to lose lives as the                 
 result of drunken driving.  To answer Senator Lincoln's question,             
 DPS uses an intoximeter 3000 is used to determine the blood alcohol           
 level in a person's blood.  Ms. Hensley states she has been advised           
 from the State Crime Lab that there was a total of 174 breath tests           
 given in 1993 that resulted in a level of 0.08 to 0.099.  Unless              
 those individuals were in an accident which resulted in aggravating           
 injuries, they are not charged with DWI.                                      
 Number 222                                                                    
 SENATOR LINCOLN asks why the DPS fiscal note is zero.                         
 MS. HENSLEY states the fiscal note is zero because HB 61 is not an            
 enforcement bill, so DPS does not anticipate very many additional             
 arrests due to the legislation.  DPS does plan to apply for federal           
 highway safety grants for public education.                                   
 Number 234                                                                    
 SENATOR LINCOLN asks Ms. Hensley to clarify that there would not be           
 additional expense in arresting persons with a blood alcohol level            
 between 0.08 and 0.099.                                                       
 MS. HENSLEY replies that in 1993 there were in excess of 5,500                
 arrests for DWI statewide, and she does not see the small number of           
 people with blood alcohol levels between 0.08 and 0.099 having much           
 of a fiscal impact on the department.  Of the arrests made for DWI,           
 approximately 4,000 of those arrests were made by municipal police            
 departments.  DPS does not feel that the approximately 173 persons            
 with a blood alcohol level between 0.08 and 0.099 would have much             
 of a fiscal impact on the department.                                         
 Number 259                                                                    
 CHAIRMAN SHARP asks what the purpose of section 4 is in HB 61.                
 Number 275                                                                    
 MS. HENSLEY replies section 4 would set the legal blood alcohol               
 level at 0.04 for commercial drivers and at 0.08 for all other                
 drivers.  Right now, a person can be charged with DWI at a 0.05               
 level if they are in an accident involving serious injury to                  
 someone.  Section 4 would also reduce this level to 0.04.                     
 CHAIRMAN SHARP thanks Ms. Hensley for her testimony and calls Mr.             
 Hackenmiller to testify.                                                      
 Number 377                                                                    
 LARRY HACKENMILLER, Alaska Cabaret, Hotel, and Restaurant                     
 Retailer's Association (CHARR) says he is from Fairbanks, where he            
 owns a tavern.  Mr. Hackenmiller states he has some statistical               
 data which was not taken into consideration regarding HB 61.  Mr.             
 Hackenmiller submitted a letter to the committee which he wrote to            
 the editor of the Fairbanks newspaper in April of 1993.  He cites             
 information from this letter.  Mr. Hackenmiller believes the state            
 should look at improving other aspects of highway safety, not just            
 lowering the allowable blood alcohol content (BAC).  The experts              
 Mr. Hackenmiller has talked to state lowering the BAC will have no            
 bearing at all on highway safety.                                             
 MR. HACKENMILLER states 79% of the fatalities on highways involve             
 a person who has a BAC level over 0.15.  Half the people involved             
 in fatal accidents have a BAC level of 0.20.  We should deal with             
 these offenders.  The state also needs to enhance enforcement for             
 speeding, failure to yield, and so on.                                        
 Number 364                                                                    
 SENATOR LINCOLN asks how the lowering of the allowable BAC will               
 affect restaurants and bars.  Will employees have to be trained to            
 recognize the difference between a 0.10 BAC and a 0.08 BAC?  Will             
 bars and restaurants be legally liable for patrons driving.                   
 Number 377                                                                    
 MR. HACKENMILLER replies that title 4 indicates that bars and                 
 restaurants cannot serve a visibly intoxicated person.  The BAC               
 level is not applicable with regards to 0.08 or 0.10.  In server              
 training, servers are taught to recognize the various stages of               
 drinking and intoxication.  Mr. Hackenmiller says his bar no longer           
 takes the keys from intoxicated persons to keep them from driving:            
 it is that persons responsibility to not drive if they are                    
 intoxicated.  However, his bar will call the cops if an intoxicated           
 person intends to drive.  Mr. Hackenmiller says he bought his bar             
 at about the same time MADD (Mothers Against Drunk Drivers) was               
 being organized, and he is a supporter of MADD.                               
 MR. HACKENMILLER says the state needs to address the problem of               
 repeat offenders of DWI, and they need to address offenders whose             
 BAC is over 0.15.  Those offenders are the ones who are going to              
 kill people.                                                                  
 Number 395                                                                    
 REPRESENTATIVE NORDLUND states perhaps he can help answer some of             
 Senator Lincoln's questions.  There was a section of HB 61 that was           
 adopted on the house floor that would prevent the results from the            
 intoximeter or any sort of other breathalyzer tests from being used           
 as evidence in civil litigation against a bar or restaurant.  Right           
 now, if a person tests at over 0.10 on a test, it can be used in              
 evidence in civil litigation against a bar or restaurant.  HB 61              
 would disallow that linkage.                                                  
 REPRESENTATIVE NORDLUND says, in response to several of Mr.                   
 Hackenmiller's statements, that there are a number of things we can           
 do to make our roads safer, and he is correct that the bulk of the            
 DWI problem is caused by people who are over 0.15 BAC.  We can                
 attack this problem from both ends, however.  If you have had five            
 drinks in one hour, you are impaired and should not be operating a            
 motor vehicle.  This is a modest step to set the BAC at a correct             
 limit.  0.10 is too high.                                                     
 Number 416                                                                    
 CHAIRMAN SHARP thanks Mr. Hackenmiller and Representative Nordlund            
 and asks if anyone else wishes to testify.  The chairman asks if              
 there is anyone in the room from the Public Defenders Office.  The            
 chairman asks if there is anyone in the room from the Department of           
 Apparently, there is no one in the room from either the Public                
 Defenders Office or the Department of Corrections.                            
 REPRESENTATIVE NORDLUND states he is not prepared to talk about the           
 Public Defenders fiscal notes.                                                
 CHAIRMAN SHARP says the Senate Finance Committee can address the              
 bill's fiscal notes when the bill reaches that committee.                     
 Number 427                                                                    
 REPRESENTATIVE NORDLUND mentions that HB 61 will enable the state             
 to take advantage of some federal highway safety planning funds.              
 Passage of HB 61 will enable the state to capture more federal                
 Number 432                                                                    
 CHAIRMAN SHARP says the fiscal notes he has in front of him appear            
 to total about 225,000 dollars.                                               
 Number 434                                                                    
 SENATOR RANDY PHILLIPS says there are general fund receipts which             
 would pay for part of the cost of the fiscal notes.                           
 Number 442                                                                    
 MS. HENSLEY says, for the state to keep 192,000 dollars in federal            
 alcohol incentive grants, a 0.08 BAC law must be passed within                
 three years.  With the passage of HB 61 the state will get an                 
 additional 5% grant.  This money will be available for a three to             
 eight year period.  This money would pay for alcohol server                   
 training, administrative hearing officer training, overtime for               
 holiday alcohol programs, education, and enforcement.                         
 Number 462                                                                    
 SENATOR LINCOLN asks Ms. Hensley to clarify that the state would              
 receive 200,000 dollars each year for eight years if HB 61 is                 
 passed and how much the total cost of HB 61 would be to the state.            
 MS. HENSLEY replies there would be no cost to the state.                      
 SENATOR LINCOLN says her concern is that there will be additional             
 DWI offenders having to wait to serve their sentences.  She asks if           
 the state will have to build an additional facility to serve these            
 offenders.  The senator states she is solidly in favor of keeping             
 people from driving while intoxicated, but asks if there is a way             
 to perhaps prevent people from driving while intoxicated.                     
 Number 483                                                                    
 MS. HENSLEY states that a bill passed in 1993 that helped the                 
 Department of Corrections by specifying that a DWI offender has to            
 pay for their time in jail.  The fee paid can be up to 1,000                  
 dollars.  In addition, the time served does not have to be served             
 in a prison, but can be served in a halfway house.                            
 Number 493                                                                    
 CHAIRMAN SHARP asks if there are any other questions and what the             
 pleasure of the committee is.                                                 
 Number 496                                                                    
 SENATOR RANDY PHILLIPS makes a motion to release HB 61 from the               
 Senate Transportation Committee with individual recommendations.              
 Senator Phillips notes that he would like the Senate Finance                  
 Committee to pay particular attention to the fiscal notes from the            
 Public Defenders Office and the Department of Corrections.                    
 Number 502                                                                    
 CHAIRMAN SHARP, hearing objection from Senator Kelly, orders a role           
 call vote on whether to release HB 61 from committee with                     
 individual recommendations.                                                   
 The vote was taken and the motion passes by three yeas, one nay,              
 and one absent.  Voting in favor of releasing HB 61 from the Senate           
 Transportation Committee are Senators Sharp, Phillips, and                    
 Kerttula.  Voting against releasing HB 61 from committee is Senator           
 Kelly.  Senator Lincoln is absent.                                            
 SENATOR RANDY PHILLIPS, after hearing the secretary announce the              
 vote, makes an off-hand, disparaging remark about the committee               
 secretary being able to count.                                                
 Number 518                                                                    
 as the next order of business before the Senate Transportation                
 Committee.  The chairman calls the first witness.                             
 Number 522                                                                    
 RICK SOLIE, Aide, Senate Finance Committee, prime sponsor of SB 327           
 thanks the committee for hearing the bill.  Mr. Solie states the              
 Finance Committee introduced SB 327 to try to create an industry              
 where currently one does not exist.  We hope to make this a                   
 treasury neutral bill by increasing residual fuel sales.  This bill           
 will create jobs through the marketing and sale of this fuel, in              
 addition to refinery jobs.  Mr. Solie says he would be happy to               
 take questions.                                                               
 CHAIRMAN SHARP asks if there are any questions.  Hearing none, he             
 calls Senator Little to testify.                                              
 Number 537                                                                    
 SENATOR LITTLE states SB 327 relates to bunker fuel, the residual,            
 thick stuff that is left over after refining.  Cruise ships use               
 this type of fuel, and changing the tax rate on this fuel could               
 open the market up for possible sales to cruise ships coming into             
 Seward.  Over 90 cruise ships will dock in Seward this summer, and            
 they all currently purchase their fuel from Vancouver, B.C.  The              
 cruise ships have expressed an interest in purchasing their fuel in           
 SENATOR LITTLE says there are many incentives for the passage of SB
 327.  Not only will refueling in Seward require the cruise ships to           
 remain in Seward longer, but it will also create an industry in               
 transporting the fuel from the refinery to storage in Seward.  It             
 is anticipated that ten to twenty jobs will be created if SB 327 is           
 passed.  It is definitely a case where the tax policy dictates the            
 SENATOR LITTLE states the proposed committee substitute (cs) before           
 the committee would change the bill in two ways to allow a revenue            
 neutral or a revenue positive situation.  Those two changes are the           
 lessening of the tax reduction from 1 cent to 1.5 cents and the               
 restriction that the reduction of the tax would apply only to                 
 passenger vessels.  Senator Little states she would be happy to               
 take questions.                                                               
 Number 565                                                                    
 CHAIRMAN SHARP asks if there are any questions.                               
 SENATOR RANDY PHILLIPS states SB 327 is basically a tax reduction.            
 CHAIRMAN SHARP calls James Burns to testify.                                  
 Number 568                                                                    
 JAMES BURNS, Senior Vice President of Marketing, Petro Marine                 
 Services (PMS) says there is not a facility in the state to handle            
 residual fuel.  The fuel has to be handled carefully.  If stored              
 below 90 degrees fahrenheit, it solidifies.  Princess Tours asked             
 us if we would sell them residual fuel.  We told them we would need           
 to sell a certain amount of residual fuel to amortize our                     
 investment over a three-year period.  Princess Tours agreed to                
 that, so PMS spent about 500,000 dollars on a pumping system and a            
 computer system.  PMS completely re-did the pipes under the Alaska            
 Railroad dock.  We signed a two-year contract with Princess Tours             
 and hired two additional dock workers.  In addition, Weaver                   
 Brothers purchased two trucks and hired four drivers last summer.             
 The treasury received 205,000 dollars revenue.  Mr. Burns states              
 residual fuel is a product that is difficult to handle.  He does              
 not think it is a product anyone would volunteer to sell in the               
 state of Alaska.                                                              
 SENATOR KERTTULA asks what residual fuel is typically used for.               
 MR. BURNS replies it is typically used in cruise ships, tankers,              
 and cargo vessels for propulsion fuel.  This product was sold in              
 Alaska prior to 1972.  The only instances in which this fuel is               
 sold in the state currently, is on Princess Tours' ships, Tesoro's            
 vessels, or if a freighter has an emergency fuel need.                        
 MR. BURNS says the impact to the state of SB 327, is to some                  
 degree, based on his figures.  His figures are based on meetings              
 with four of the cruise ship operators...                                     
 TAPE 94-8, SIDE B                                                             
 Number 594                                                                    
 ...they have expressed interest in buying additional fuel in Seward           
 if PMS is close in price to Vancouver.  Mr. Burns states he cannot            
 give a definition on what is "close", but he will get to that if he           
 can establish a framework where the tax is reduced to a livable               
 point.  No other state taxes residual fuel at all.  Vancouver does            
 put a sales tax on a portion of the sale.  Mr. Burns says his                 
 selling price in Seward is about 40 cents per gallon.  Vancouver's            
 selling price is about 34 cents per gallon.  Mr. Burns shows the              
 committee some graphs he has prepared.                                        
 Number 580                                                                    
 SENATOR RANDY PHILLIPS asks if the figures Mr. Burns is referring             
 to are in Canadian or U.S. funds.                                             
 MR. BURNS responds his numbers are in U.S funds.                              
 MR. BURNS continues to explain the graphs he is showing the                   
 committee.  Mr. Burns states the tax change in SB 327 would bring             
 PMS's price close to Vancouver's price.  PMS's fuel is a better               
 quality fuel than the cruise ship companies get anywhere else.  In            
 fact, a cruise ship operator in Florida is encouraging PMS to sell            
 fuel in Florida.  Mr. Burns says he has no chance of entering the             
 market without this tax reduction.                                            
 Number 564                                                                    
 SENATOR KELLY asks if Mr. Burns could make up the difference in               
 price between PMS's price and Vancouver's price by simply cutting             
 PMS's price by 13%.                                                           
 Number 562                                                                    
 MR. BURNS says if there was a way to reduce PMS's costs, he could             
 cut the price charged for residual fuel.                                      
 Number 552                                                                    
 SENATOR KELLY does not think the 5 cent per gallon tax is not the             
 only reason PMS's price is not competitive with Vancouver.                    
 Number 551                                                                    
 MR. BURNS states his major costs are his environmental                        
 considerations, the cost of the improvements PMS's has made,                  
 trucking costs, and the wholesale price of the fuel.                          
 SENATOR KELLY asks if Tesoro couldn't drop their wholesale price to           
 make this project work.  Senator Kelly asks what Tesoro's position            
 on that would be.                                                             
 Number 544                                                                    
 GENE BURDEN, Tesoro Alaska, testifying from Anchorage replies                 
 Tesoro had hoped that the tax reduction would apply to all vessels            
 using residual fuel.  The value that Tesoro receives on residual              
 fuel is very low.  It ranges as low, and sometimes lower than 50%             
 of what Tesoro pays for the crude oil.  Tesoro cannot sell the fuel           
 at a lower price.  Tesoro exports 98.5% of the residual fuel that             
 it manufactures.  The remaining 1.5% is used in Tesoro's tankers,             
 with the exception of the 80,000 barrels sold to Petro Marine                 
 Number 524                                                                    
 SENATOR KELLY asks if the 205,000 dollars the state received in               
 taxes on residual fuel was just from PMS.  (Someone in the audience           
 answers "Yes".)  Senator Kelly asks what the sales tax in Vancouver           
 MR. BURNS responds it is 7%.                                                  
 SENATOR KELLY says if Alaska reduces its' tax, what is to keep                
 Vancouver from reducing their tax.                                            
 MR. BURNS replies the market place is always going to be dynamic,             
 and he cannot control that.  He can only reiterate what the cruise            
 ships have told him: that if PMS is close in price to Vancouver,              
 they will consider Seward as their bunker port.  If they view                 
 Seward as their primary bunker port, there are other sales, namely            
 marine diesel, which would net additional revenue for the state.              
 Number 509                                                                    
 SENATOR LITTLE adds that SB 327 would sunset in five years, which             
 may allay some of the concerns being expressed.                               
 Number 506                                                                    
 SENATOR KELLY states his initial concern is the loss of 200,000               
 dollars to the state treasury this year.  If he felt confident that           
 this tax reduction would create a new industry, and bring in other            
 taxes, then he would not be concerned.   But he is not convinced              
 this will happen.  He has read the letters of support, and they are           
 all pretty vague.  There are no commitments to buy fuel in Seward             
 if we pass this legislation.  There are other factors involved that           
 would enable PMS to get to a lower price than just reducing this              
 tax.  If Sitka also sells fuel under this legislation, then these             
 cruise ships might not need fuel when they reach Seward.                      
 Number 486                                                                    
 MR. BURNS says his feasibility study involves cruise ships that go            
 to Seward.  There are many other ships that go to Sitka, but do not           
 go to Seward.  Holland America has made a commitment to extend                
 their time in Sitka by three or four hours to refuel.  The                    
 estimated volume in Sitka is 15 million to 18 million gallons.                
 That will only occur if the tax can be lowered.                               
 MR. BURNS states Los Angeles was the third largest bunker port in             
 the world, next to Singapore and Rotterdam.  After an 8.25% tax was           
 imposed, LA fell to 22nd in the world.  California then removed the           
 tax, but the market in LA has never rebounded.  The market is very,           
 very sensitive to tax policy.  Once the tax is lowered, there are             
 other issues we can use to encourage the cruise ships to fuel in              
 Seward.  The quality of our fuel is better than Vancouver's.  Also,           
 the cruise industry will make a big deal of the fact that they're             
 supporting an Alaskan industry.  Mr. Burns states that no one can             
 guarantee anything.  He is just asking to have the chance to try.             
 Number 456                                                                    
 SENATOR KELLY states he thinks Seward is doing a lot of good                  
 things, and he supports Sea-Wally World; he thinks Seward is a                
 perfect tourism location.  It is right on the sea with a connection           
 to the Alaska Railroad, and he likes what they are trying to do,              
 but he would feel a lot more comfortable if the state did not stand           
 to lose 200,000 dollars.  Why can't we work out an incentive deal,            
 whereby the state maintains 200,000 a year, but PMS keeps anything            
 above that.                                                                   
 SENATOR RANDY PHILLIPS says he has the same concerns, and Senator             
 Kelly is simply expressing them better than he could.                         
 SENATOR KELLY says it is not just the 200,000 dollars, but is also            
 a matter of principal.  If, in these times of declining oil                   
 revenues, we start giving back taxes, in order to make things more            
 competitive, that argument could be made for every tax there is.              
 Number 436                                                                    
 SENATOR LITTLE states the Department of Revenue said it would cost            
 too much to figure two different tax rates on residual fuel.                  
 CHAIRMAN SHARP says the committee will hear from a representative             
 of the Department of Revenue later.                                           
 Number 430                                                                    
 MR. BURNS states he is willing to be creative to find a solution.             
 Number 424                                                                    
 CHRIS GATES, Director, Division of Economic Development, Department           
 of Commerce & Economic Development (DCED) says DCED has been                  
 working on this issue for about eight months and has been trying              
 hard to come up with some creative solutions to create a market,              
 and yet at the same time not hurt the state's revenues.  Mr. Gates            
 is testifying primarily to inform the committee how important SB
 327 is to Sitka.  It is hoped this will help mitigate the affects             
 of the Alaska Pulp Company's (APC) closure in Sitka.  This is one             
 of the items on the agenda to try to create a new industry in                 
 Sitka.  This will also keep tourists in Sitka longer.  This is an             
 important source of local revenue and local sales tax revenue.  SB
 327 would mean possibly 15 to 12 jobs.                                        
 MR. GATES states there are major refinery changes occurring in                
 Vancouver.  One refinery is shutting down, and another one will               
 possibly also shut down.  He would like to see Alaska begin                   
 positioning itself to serve as a major refueling port.  There also            
 will be added passenger and crew spending in communities where                
 refueling occurs.                                                             
 MR. GATES makes a point that the air quality problems that are                
 occurring in Juneau as a result of the stack emissions from the               
 Princess Lines will be diminished as a result of burning Tesoro's             
 residual fuel.  So there is also a small air quality benefit to the           
 state, if we can manage this switch.                                          
 MR. GATES states Tesoro can only sell this product for 50% of what            
 it costs them to purchase the crude.  For Tesoro to only get 46% or           
 48% of what they buy it for is putting them in a bad position.                
 Tesoro has no margins on bunker fuel.  It is a loss for them.  They           
 have to subsidize 40% of all they produce with their gasoline and             
 jet fuel sales.  Tesoro is not extremely healthy; they made                   
 commitments to the State of Alaska many years ago that they have              
 been fulfilling.  We have been trying to support in-state                     
 manufacturers; this could be a way to help them a little bit as               
 Number 390                                                                    
 SENATOR KELLY asks how the refineries in Vancouver closing would              
 affect the situation.                                                         
 Number 387                                                                    
 MR. GATES replies Alaska would like to force its' way into the                
 market and be the major supplier of bunker fuel if we can.  This is           
 an extremely cost sensitive product, and we will not ever be lower-           
 priced than Vancouver.  However, the closer we can get, the more              
 likely we will be to be a major supplier for the cruise ships.  As            
 those refineries go down, Alaska's position relative to Vancouver             
 improves.  It is a matter of pennies and increments.                          
 CHAIRMAN SHARP asks if there are any questions.  Hearing none, he             
 thanks Mr. Gates for his testimony and calls the next witness.                
 Number 376                                                                    
 ROBERT ERICKSON, Representative of Teamsters Local 959 states the             
 teamsters have a real interest in SB 327.  If this program goes               
 through, and if it works and we capture the bunker fuel market from           
 Vancouver, it would create, just in full-time driving jobs, eight             
 to ten positions.  This does not include any added positions in               
 Nikiski and Seward.  The Kenai Peninsula has had the highest                  
 unemployment rate for quite a while.  Eight, ten, twelve, fourteen            
 jobs does not seem like much, but it sure is in Kenai.  We support            
 SB 327.                                                                       
 CHAIRMAN SHARP asks if there are any questions.  Hearing none, he             
 thanks Mr. Erickson for his testimony and calls the next witness.             
 Number 354                                                                    
 LARRY MEYERS, Director, Income & Excise Audit Division, Department            
 of Revenue says he has a few points of clarification.  One,                   
 currently the state collects 5 cents per gallon on residual fuel.             
 The departments current forms do not break down what type of                  
 residual fuel it is.  Any numbers that have been mentioned so far             
 have been provided by the industry.                                           
 Number 345                                                                    
 CHAIRMAN SHARP asks what the difficulty would be with a J rate tax,           
 which would guarantee the state 200,000 dollars, then drop the tax            
 down to 1.5 cents after that.  The chairman also asks if this tax             
 can be collected at the refinery.                                             
 MR. MEYERS responds the department would prefer to deal with as few           
 distributors as possible, and it would be preferable for the                  
 department to collect the tax from the refinery.  The way the motor           
 fuel tax report works right now, is the Department of Revenue is              
 geared up to give refunds.  The form could be modified.                       
 Number 332                                                                    
 SENATOR KELLY asks Mr. Burns that since Petro Marine Services                 
 capitalized their infrastructure for 500,000 dollars on a three               
 year contract, if they made enough revenue to be able to amortize             
 that investment over three years.                                             
 MR. BURNS replies that is correct.  PMS sold 4,106,000 gallons of             
 residual fuel in 1993.  Revenue from sales was about 1.2 million              
 SENATOR RANDY PHILLIPS asks if there is a federal tax on residual             
 MR. BURNS responds there is no federal tax on residual fuel.  PMS             
 pays 0.6 cents per gallon to the Alaska Railroad Corporation                  
 because they own the dock, 1.5 cents for labor costs, and 5.2 cents           
 for trucking costs per gallon.  The fuel is trucked from the                  
 refinery in Nikiski.  It comes from the refinery at about 140                 
 degrees fahrenheit.  The temperature cannot drop below 110 degrees            
 by the time it gets to Seward.  PMS's tank is kept heated.  PMS               
 pays over a penny per gallon in heating and electric costs.  The              
 residual fuel must be kept heated, or it will solidify.                       
 SENATOR KELLY asks if Sitka has infrastructure in place to handle             
 this type of fuel.                                                            
 MR. GATES replies they do not, but they would like to build it                
 using Alaska Pulp Corporation tanks.                                          
 SENATOR KELLY asks if there will be competition between Sitka and             
 MR. BURNS says there will not be competition because the two ports            
 will be servicing different ships.  Mr. Burns states he supports              
 the project in Sitka.  He thinks it is a win-win-win situation for            
 Sitka, Seward, and the State of Alaska.  The only advantage Sitka             
 has that PMS does not have is the free APC tanks in Sitka.  That is           
 the only way that project would fly, is from the free use of those            
 tanks.  Sitka has added costs, so the free use of those tanks makes           
 Sitka's cost about equal with those of Petro Marine Services.                 
 Number 236                                                                    
 SENATOR KERTTULA states the problem is we do not want to raise                
 taxes, yet we must balance the budget.                                        
 Number 181                                                                    
 MR. BURNS says he understands the concerns being voiced.                      
 Number 180                                                                    
 SENATOR RANDY PHILLIPS shares the concerns being voiced and is                
 worried about the future of state taxing policies.  What the state            
 does for one, we have to do for all.  What other groups will ask              
 for similar tax breaks if we pass SB 327?                                     
 Number 155                                                                    
 SENATOR KELLY says a sunset date of 2000 seems to long to him.  He            
 says there ought to be a way to make the bill revenue neutral to              
 the state.                                                                    
 Number 145                                                                    
 CHAIRMAN SHARP also thinks there are some ways to make the bills              
 revenue neutral, and he would like to talk to Mr. Burden about                
 Number 140                                                                    
 MR. BURDEN says Tesoro shares some of the same concerns that have             
 been voiced.  He says Tesoro wanted to demonstrate that additional            
 sales would make SB 327 revenue neutral.  There is a concern that             
 an alternative approach would generate a tax rate that is still to            
 high for Petro Marine Services to capture the market.  He suggests            
 possibly having PMS pay the same amount of taxes paid last year,              
 and then not being taxed after that amount is reached.                        
 Number 092                                                                    
 CHAIRMAN SHARP says he would like to keep things simple.  Perhaps             
 the tax could drop down after current levels of tax have been                 
 collected.  That would at least give the advantage of letting PMS             
 try to get additional business.  The revenue on other residual fuel           
 sales would not be jeopardized, since this tax break would only go            
 to cruise ships.                                                              
 CHAIRMAN SHARP says perhaps if we can guarantee that the present              
 level of tax would be collected, we could then give a break on                
 future sales.  The chairman says he is inclined to hold SB 327 in             
 committee to work on a solution.                                              
 Number 026                                                                    
 SENATOR KELLY says he is also concerned with the length of the                
 sunset date, and would like to look at changing it.                           
 Number 016                                                                    
 SENATOR SHARP says he would like to look at amendments to SB 327              
 and see if the committee can't release the bill as a revenue                  
 neutral bill.                                                                 
 TAPE 94-9, SIDE A                                                             
 Number 001                                                                    
 SENATOR RANDY PHILLIPS asks if Sitka has docking facilities.                  
 Number 015                                                                    
 MR. GATES says the tanks are located so far from the main town,               
 that Sitka plans to use a shuttle barge to fuel the cruise ships.             
 Number 020                                                                    
 SENATOR RANDY PHILLIPS asks if Sitka will then come to the state to           
 ask for money to fund this project.                                           
 Number 025                                                                    
 MR. GATES replies Sitka is hustling as hard as it can to mitigate             
 the loss of the pulp company.                                                 
 SENATOR RANDY PHILLIPS says he has a feeling Sitka is going to come           
 to the state asking for more money.                                           
 Number 031                                                                    
 CHAIRMAN SHARP asks the Department of Revenue, Mr. Burns of Petro             
 Marine Services, and the Department of Commerce & Economic                    
 Development to work with the committee staff to come up with                  
 something doable.  The chairman states he would like to schedule SB
 327 in a week to ten days.                                                    
 Number 042                                                                    
 CHAIRMAN SHARP adjourns the Senate Transportation Committee meeting           
 at 5:10 p.m.                                                                  

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