Legislature(1995 - 1996)

04/19/1995 03:10 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
 HB 260 - MARINE PILOTS                                                        
 Number 026                                                                    
 CHAIRMAN KOTT introduced Representative Gary Davis, prime sponsor             
 of HB 260.                                                                    
 REPRESENTATIVE GARY DAVIS, Sponsor and Chairman of the House                  
 Transportation Committee introduced HB 260.  He said the House                
 Transportation Committee had some rather extensive hearings on this           
 legislation and would briefly go over what they did in that                   
 committee concerning HB 260.                                                  
 REPRESENTATIVE DAVIS said HB 260 extends the Board of Marine Pilots           
 which will sunset June 30 and there is a portion of the existing              
 law that sunsetted earlier; that being the maximum tariff provision           
 which was Alaska Statute 08.62.045.  Representative Davis said in             
 the House Transportation Committee hearings, there was a list of              
 recommendations from the Administration to do a number of house               
 cleaning measures and those are all incorporated in the bill.                 
 There wasn't a lot of debate or contention among those house                  
 cleaning issues.  The sectional analysis is rather extensive; there           
 are 22 sections.  He said the bottom line is that after the House             
 Transportation Committee heard the debate, the contentious item is            
 unquestionably the provision that he had included in the                      
 legislation which referred to conflict resolution and was addressed           
 through binding arbitration.  The discussion in the committee and             
 the result of a committee vote, pulled that provision from the                
 legislation so there is currently no conflict resolution in the               
 legislation.  Representative Davis said it is felt, and there will            
 undoubtedly be discussion from the interested and involved parties            
 that some feel there is no need for it, others feel there is a                
 strong need for it, and others will probably remain neutral.                  
 Number 054                                                                    
 REPRESENTATIVE DAVIS pointed out that there may be a question on              
 Section 2.  One thing the House Transportation Committee did was              
 increase the size of the Marine Pilots Board.  They increased the             
 pilot organizations members by one and increased the industry                 
 representation by one on the board.  Some people question if that             
 isn't an increase in cost.  Representative Davis said it is, but              
 not to the state.  The dues and fees paid for by the organizations            
 pay for the activities of the board, so that is not a concern as              
 far as a fiscal note to the state.  Representative Davis commented            
 there wasn't a lot of debate on that; it was somewhat accepted, but           
 he wasn't exactly sure because it had been a couple of weeks since            
 the House Transportation Committee heard it and there's been                  
 opportunity for people to reconsider everything that has been done.           
 Number 067                                                                    
 REPRESENTATIVE DAVIS commented that he would leave the majority of            
 the debate up to the involved parties.  He said there was a maximum           
 tariff before.  There is some question in the Department of Law and           
 he indicated he would leave that up to the Department of Law to               
 discuss and explain the antitrust provisions and possible problems            
 from that area as it relates to what will be referred to as the               
 state action exemption.  If the state gets an exemption from the              
 federal antitrust laws, then there has to be some rate setting                
 scenario in the legislation.  Representative Davis said he would              
 probably lean toward the maximum tariff provision.  His whole                 
 argument in including a conflict resolution clause in the                     
 legislation is, since this is mandated by the state, is there an              
 opportunity or will there be an opportunity out there, for any                
 emergency provision to provide these services.  Is there or could             
 there be an opportunity for a vessel movement where a pilot would             
 not be provided.  If that could ever be the case, how is it going             
 to be handled?  What is the resolution to that conflict?  He                  
 commented that was his feeling and it still is that the best                  
 interest of the state should have something included in the                   
 legislation that would address that.  Most of the debate will be              
 centered around that issue.  He said since maximum tariff was a               
 provision and had been a provision previously, it would be a strong           
 contender for reinsertion to address that conflict resolution.                
 Representative Davis said he was available to answer any questions.           
 Number 095                                                                    
 CHAIRMAN KOTT said it was his understanding that under existing               
 law, there is a $250,000 liability limitation and he thought there            
 was an exception if the accident is based on incompetence.  He                
 didn't think that exception was there in the new bill, which would            
 indicate to him a problem as to who would pick up the bill if it              
 exceeded that $250,000 liability limitation.                                  
 REPRESENTATIVE DAVIS commented that issue wasn't debated                      
 extensively enough to where he could recollect exactly what the               
 debate was.  He said he would leave that up to the Department of              
 Law to respond.                                                               
 CHAIRMAN KOTT asked if there were any questions for the sponsor.              
 Hearing none, he asked Gayle Horetski to give the committee her               
 position.  Ms. Horetski responded that Jeff Bush from the                     
 Department of Commerce and Economic Development was present to                
 testify and said she was available to answer questions.                       
 Number 111                                                                    
 JEFF BUSH, Deputy Commissioner, Department of Commerce and Economic           
 Development; and the Commissioner's representative on the Board of            
 Marine Pilots, said he was present to testify that the department             
 is fully in support of this legislation.  He commented that the               
 bill before the committee is a bill that just about everybody here,           
 can agree is good.  The issue isn't what is here; it is what isn't            
 here and that is where the debate will go.  Mr. Bush pointed out              
 that the department does mildly disagree with the changes made in             
 Section 2 to increase the Board of Marine Pilot membership by                 
 adding an extra pilot member and an extra industry representative,            
 because that does in fact increase the cost.  He said as the                  
 legislature well knows, the cost for occupational licensing boards            
 has to be borne by the licensees, by statute, and the Board of                
 Marine Pilots licenses, for example, are $3200 a piece per year.              
 So, we're talking about a significant amount of money and the                 
 department is interested in trying to keep those costs down in                
 whatever way possible. Increasing a board0 from seven members to              
 nine members does a couple of things:  It increases the number of             
 people who have to attend the meetings, airfares, etc.; and it also           
 can make board meetings take longer in that every time you add more           
 people, it takes longer to complete business.  Mr. Bush said it was           
 a very mild objection, but it is something the department would               
 like to point out to the committee for consideration.                         
 Number 136                                                                    
 MR. BUSH referred to the conflict resolution issue and said the               
 department has and will continue to take a neutral position on this           
 issue of whether we have conflict resolution or dispute resolution,           
 binding arbitration or maximum tariff placed in the bill.  Whatever           
 device, or no device, that the legislature feels is appropriate,              
 the department does not take a position on any of those.  The                 
 department's interest is in maintaining enough pilots and                     
 maintaining safety in terms of quality pilots, out on the waters.             
 He didn't think the state should be in the middle of disputes over            
 what a particular pilot should be paid.  Mr. Bush said he would               
 entertain any questions from the committee.                                   
 Number 147                                                                    
 CHAIRMAN KOTT asked Mr. Bush what the state's primary                         
 responsibility was.                                                           
 MR. BUSH said, safety - no question.  He said we talk about two               
 things -- safety and availability of pilots, but he thought                   
 availability of pilots is actually a subgroup of safety.  Making              
 sure that you have enough pilots and quality pilots available so              
 that every ship gets a pilot.  He said in some sense they have                
 another interest which is commerce, which is raised in the                    
 availability of pilots issue and we certainly don't want commerce             
 to come to a halt because there is not enough pilots.                         
 Number 153                                                                    
 REPRESENTATIVE BRIAN PORTER asked (indisc.) the safety issue is               
 (indisc.) primarily by the qualifications and licensing of                    
 MR. BUSH said, "Yes, I do and the board has over the past several             
 years been making those qualifications tougher and has focused and            
 concentrated on safety issues in making sure the pilots are well              
 trained and keep up their training."                                          
 Number 158                                                                    
 REPRESENTATIVE GENE KUBINA asked why two of the groups were being             
 increased, but not the public person?                                         
 MR. BUSH responded that the groups must have come forward and                 
 recommended those changes.  The department's position was that                
 everything was fine before.  The argument was made in the earlier             
 committee that there are in fact three public representatives                 
 because there's two plus the Commissioner of the Department of                
 Commerce and Economic Development, and this is merely equalizing              
 it between industry and the pilots.  It is in fact a dilution of              
 the public representation on the board.  Even though he has never             
 talked to anyone about it, he thought the department would be                 
 concerned about that.  However, it's not a significant concern                
 because quite frankly, Mr. Bush said he has a lot of respect for              
 the people on the board and felt they did a good job.  Even though            
 you hear about issues like safety and concerns about safety, he               
 felt the primary interest of every one of the various interests               
 groups was safety.  The ship owners want to move their products at            
 a reasonable price, but the fact is, when you're dealing with ships           
 of that size and that value, any accident whatsoever is extremely             
 costly, so everybody is concerned about making sure accidents don't           
 Number 174                                                                    
 REPRESENTATIVE KIM ELTON said what he found unusual about the                 
 makeup of the board is that someone from the commissioner's office            
 is on period.  He asked how many occupational boards the department           
 has where the commissioner or the commissioner's designee serves              
 and why is it on this one?                                                    
 MR. BUSH responded this was the only one, and the why is -- Mr.               
 Bush said he wasn't around when this was done, but he thought it              
 essentially has been tradition.  He said quite frankly when he took           
 this job, originally one of the things he wanted look at was why              
 the deputy commissioner should be on this board.  He raised that              
 issue and everyone said it was important for that person to be                
 there because this board, at least in terms at the moment, there is           
 so much safety interest from the public's standpoint that there is            
 a need for someone who is in the government sector, who is also               
 concerned with the public interest, to sit on this particular board           
 until, at least, this board works more smoothly and has had a                 
 longer chance and more time as an occupational licensing                      
 organization to get used to regulating itself.  Mr. Bush said that            
 is the rationale.  He said it makes several things occur:  One is             
 that it makes him in an unusual situation where he has to build a             
 Chinese wall between his own staff on investigations and quasi-               
 judicial proceedings.  That doesn't occur in any other licensing              
 board.  On the other hand, the Department of Commerce and Economic            
 Development is much more active on this board than any other                  
 because of (indisc.).                                                         
 Number 199                                                                    
 CHAIRMAN KOTT said he had asked the sponsor of the bill about the             
 $250,000 limit regarding liability and wasn't sure if he dismissed            
 it or if it has been removed from the current version.  If so, what           
 would happen if that liability exceeded $250,000 if an act of                 
 negligence or incompetence...                                                 
 MR. BUSH responded that it was still in Section 15.  He said it               
 doesn't apply essentially in cases of gross negligence, willfulness           
 or, he believed, alcohol or drug abuse kinds of situations.                   
 Number 221                                                                    
 PAUL FUHS, Lobbyist, Southwest Alaska Pilots Association, said he             
 was representing Captain Eric Eliassen, who is the Chairman of the            
 Southwest Pilots Association, who pilots ships in Southcentral                
 Alaska -- Cook Inlet, Prince William Sound and Kodiak. Captain                
 Eliassen is also the chairman of the Alaska Statewide Pilots                  
 Alliance.  Mr. Fuhs said this issue has been very contentious, so             
 this was an effort to try to pull the pilots together and see if              
 the level of contention could be reduced and come up with                     
 recommendations for the legislature on marine pilotage that could             
 reduce some of the fees, the lawsuits, etc., and he thought this              
 legislation does that.  He said the Department of Law had some                
 concerns about level of litigation and this really helps solve many           
 of those problems.  One of the things the group agree to is they              
 would accept the competitive model that the legislature adopted in            
 1991, where you can have more than one pilot group per region.                
 Here is where the rub comes in terms of tariffs.  You have                    
 competing groups that are negotiating for contracts and yet, here             
 comes a proposal for the government to come in and set tariffs when           
 they are supposed to be competing.  It just doesn't add up, and               
 that's why there has been some friction on this.  You have one or             
 the other.  The Southwest Pilots Association said they would accept           
 binding arbitration and he thought they were the only group that              
 said that.  That would allow them to negotiate freely with                    
 industry, like any other industry, and have a method of conflict              
 resolution without the government being involved in the business of           
 setting tariffs.  Apparently, that was not acceptable.  He said the           
 Southwest Pilots Association would have gladly accepted that                  
 provision, but it's not in there.  In the absence of that, the                
 association does not support the government setting tariffs.  They            
 would like to see the bill go through as it is in its current form.           
 He commented that he wanted to explain that as to why this doesn't            
 seem to add up - the competitive position with also imposing                  
 tariffs by the government.                                                    
 Number 249                                                                    
 MR. FUHS referenced the other issue of liability and thought he               
 could answer Chairman Kott's question.  He said it was something              
 that the pilots agreed on.  The legislation says that you've got a            
 limit of your liability of $250,000 for what you can go after a               
 pilot for if they make a mistake and a ship runs aground.  You                
 would lose that limitation of the liability if you did it on                  
 purpose, if it was willful, if it was grossly negligent, or if you            
 were on alcohol or drugs.  That means that if you were drunk and              
 ran a ship aground, they could after your house, they could go                
 after any holdings that you had - unlimited.  They could take                 
 everything that you own.  So, it is unlimited liability.  He                  
 explained the previous law said if you are under board sanction,              
 you would lose the limitation of liability.  That could be for                
 something as small as the board wrote you a letter of reprimand               
 because you didn't file your paperwork properly.  It wasn't felt              
 that was justified - losing your limitation of liability.  It is              
 actually a double insurance because every ship is insured anyway,             
 but in addition to that, the pilot knows they could lose everything           
 they own if they willfully run a ship aground or are grossly                  
 negligent or on alcohol or drugs.  He felt that was a significant             
 incentive to make sure these pilots operate to the best of their              
 ability in a safe manner.                                                     
 CHAIRMAN KOTT interjected for clarification that for common                   
 negligence, the cap is $250,000.                                              
 MR. FUHS responded that was correct.                                          
 CHAIRMAN KOTT asked if beyond that, you would have to go after the            
 MR. FUHS said the shipper's insurance would cover any damage beyond           
 that.  The shipper could actually have a claim against the pilot,             
 if the pilot was on drugs or alcohol, or were willfully negligent,            
 also.  If the damage was $2 million, and the pilot had a $2 million           
 house, you could go after it if it was for those provisions, but              
 not if the pilot had a letter of reprimand in his file from the               
 board on paperwork.  It was felt that was just too wide open.  That           
 is why this issue was addressed.  It is the same limit of liability           
 that an airline pilot has also.  He said there have been other                
 issues raised, including the issue of cross regionalization.  It              
 was his understanding that would not be brought up at this meeting,           
 so he was not going to address it.  He expressed to the committee             
 that this bill is a substantial improvement, should help stabilize            
 the industry, and encouraged the committee to pass it out in its              
 current form.  He added that the Southwest Pilots Association did             
 not take a position on the composition of the board.  They did not            
 support it or testify against adding people to the board.                     
 Number 288                                                                    
 DAN TWOHIG, Marine Pilot Coordinator, Board of Marine Pilots,                 
 Department of Commerce and Economic Development, said his position            
 was created by the Marine Pilotage Act of 1991 and his job was to             
 oversee the day-to-day operations of the Board of Marine Pilots as            
 their executive secretary.  He works as a licensing examiner with             
 the Department of Commerce and Economic Development and acts as the           
 state's investigator for maritime matters.  He said he fully agreed           
 with Jeff Bush in that this is a good bill and most of the                    
 housekeeping measures that are contained in the bill were written             
 by Mr. Twohig.  He said he was available to answer questions from             
 the committee.                                                                
 Number 301                                                                    
 REPRESENTATIVE KUBINA asked where did adding board members come               
 MR. TWOHIG responded the adding of board members was an amendment             
 that was added from somewhere outside of the Department of Commerce           
 and Economic Development.  He was not sure who exactly wanted it              
 CHAIRMAN KOTT referred to page 3, line 9, relating to temporary               
 licenses for a period of not more than one year and asked if a                
 temporary license could be reissued or renewed, or are there                  
 additional requirements?                                                      
 MR. TWOHIG said the addition of that language was suggested by the            
 Alaska Pilots Alliance.  The original bill has a clause in                    
 08.62.080 that states, "A pilot may not be licensed in more than              
 one region at a time unless the board determines it is in the best            
 interest of the state to do so."  The Pilot Alliance wanted that              
 better defined.  In answer to Chairman Kott's question, he thought            
 a temporary license in this case, was designed to take care of a              
 specific problem of a shortage of pilots.  For instance, if there             
 is a plane crash and 20 pilots die, there is going to be an                   
 instantaneous shortage that has to be addressed somehow and in                
 order for the system to keep moving and to bring things in line               
 until the pilot associations in that area can cover the shortage,             
 there has to be a mechanism for the state to issue these licenses             
 on a temporary basis.                                                         
 CHAIRMAN KOTT asked if the license would be reissued or renewed if            
 after one year that shortage still existed.                                   
 MR. TWOHIG said it was his understanding that the license would be            
 renewable, at the discretion of the board, or in this case if the             
 commissioner makes a determination there is still a shortage.  If             
 the shortage still exists, the problem is still there and the                 
 license can be reissued.  He assumed that would need to be cleaned            
 up in regulation to decide exactly what that process would be.  The           
 current regulations do not address this.                                      
 CHAIRMAN KOTT asked what the process is for issuing the temporary             
 MR. TWOHIG said right now, there is no process.  Since the Marine             
 Pilot Act of 1991, there has only been one instance where the board           
 has determined that they needed endorsements to licenses for more             
 than one region.  That was a transitional regulation that was                 
 written that allowed pilots in region 2 to train pilots in the                
 newly created region 3 and to bring them up to speed in the Port of           
 Dutch Harbor.  Those endorsements to those licenses had their own             
 life; they had a cutoff date on them and what was discovered was              
 that the training problem had been taken care of before that time             
 period elapsed and the licenses went away by themselves, of their             
 own accord.  If there had continued to be a shortage, he was fairly           
 certain the board would have extended it through regulation.                  
 Number 350                                                                    
 REPRESENTATIVE ELTON referred to Chairman Kott's question on                  
 liability and said he thought it changes.  The new language in                
 Section 15 essentially means that the cap of $250,000 would apply             
 now even if a pilot is determined incompetent in the performance of           
 pilotage duties or is guilty of misconduct during the course of               
 employment.  He felt it was more than housekeeping to take that out           
 of the existing statute and apply the cap.  He thought that was               
 fairly substantive.                                                           
 MR. TWOHIG said this amendment to the law was also requested by the           
 Pilots Alliance.  The Department of Commerce and Economic                     
 Development had no problem with it.  The thing that needs to be               
 looked at closely is again the pilots now have a limitation of                
 liability of $250,000.  In a maritime accident, $250,000 goes very            
 fast.  By removing the portions of the law that say, for instance,            
 you are incompetent -- it's a legal question, but you can be                  
 incompetent for a moment, you can be incompetent for a long period            
 of time, you could be totally incompetent.  He felt the teeth was             
 still there in the law.  There's willful misconduct, there's gross            
 negligence which is something that is often tried to be proven in             
 maritime cases, and also there are the drug and alcohol provisions.           
 He said as Mr. Fuhs testified, the pilots were concerned that                 
 literally if they got a letter of reprimand from the board for                
 something very minor, they would lose this limitation of liability.           
 REPRESENTATIVE ELTON expressed concern about having a cap imposed             
 because a person is incompetent may not seem fair.                            
 MR. TWOHIG said that you have to look at the legal definition of              
 incompetent.  Because you could be incompetent for the moment. You            
 could have a heart attack and fall over so therefore you were                 
 incompetent to do that job.  If you are incompetent over a long               
 period of time, hopefully the licensing examination process would             
 have weeded you out and you would not have gotten that far.  He               
 felt the concern centered around the legal definition of                      
 incompetent.  It is a broadly defined term, which makes it                    
 difficult to put incompetent in this law and decide exactly what              
 that means in each and every case.                                            
 Number 400                                                                    
 MICHAEL SPENCE, Representative, Alaska Coastwise Pilots, stated he            
 had been a marine pilot in Southeastern Alaska for going on 19                
 years.  He also holds federal pilot licenses in Puget Sound, San              
 Francisco, and the common waters of New Jersey and New York and has           
 also worked as a marine pilot in those waters.  He supported the              
 legislation as written and wanted to comment on the issue of                  
 competition (indisc.).  From his firsthand observation in Alaska              
 and also in the other states that he had worked, competition is not           
 only widespread, it is increasing nationally.  There have been no             
 findings by any state agency or federal agency that this                      
 competition has adversely affected the public safety.  Since the              
 public safety is the primary objective of the regulation of                   
 pilotage, the Alaska Coastwise Pilots feel that the state of Alaska           
 is taking a wise course to neither promote nor  discourage                    
 competition in marine pilotage.  They feel this policy allows the             
 state to focus on the issues that are directly pertinent to public            
 safety, and that is competence of pilots, accountability to safe              
 standards of pilotage.                                                        
 MR. SPENCE referred to the issue of membership and the composition            
 of the board.  He said in the early 1970s when the present makeup             
 of the board was set up, there were two regions of pilotage in the            
 state in practice and there were approximately 30 pilots in the               
 entire state.  Now there are four regions, as defined in statute,             
 and there are approximately 80 plus licensed pilots.  Commerce has            
 increased dramatically in the Western region, also the Southeastern           
 region.  So, the situation that has evolved is that with two                  
 members on the board, inevitably one region is not represented with           
 any expertise on the board.  Questions come up to the board                   
 routinely that require the expertise of a pilot on the board in a             
 particular region.  As presently composed, there is a built-in                
 limitation that you are going to be represented in two of the                 
 regions.  Three of the four regions, he believed, should not go               
 without representation on the board for the simple reason that the            
 board cannot adequately address the issues that are unique to each            
 of these regions without having the additional member.  So the                
 intent was to add the additional expertise for an additional region           
 without disturbing the balance of power, as it might be referred to           
 on the board.  Therefore, the request was made by industry to also            
 increase their member on the board by the same number.                        
 Number 454                                                                    
 MR. SPENCE referred to the issue of the $250,000 limitation of                
 liability and said this is a feature that was added in the 1991               
 legislation as a result of the great difficulty that marine pilots            
 had in obtaining any insurance for any kind of civil liability.  He           
 explained they could get insurance for defense against license                
 actions, but no underwriter would touch the potential liabilities             
 that would arise in a marine disaster.  So, following the models              
 that had been set in other states where pilots have been bonded or            
 have been given statutory limits of liability, we asked for this              
 and it was granted in the 1991 legislation.  However, the wording             
 as it was written in that legislation, says that any kind of a                
 sanction issued by either the Coast Guard or the state, which could           
 be a very minor sanction, that exclusion or that limitation of                
 liability becomes invalid.  The changes made in this legislation              
 are to let it happen that the limitation of liability can be struck           
 in a case of gross negligence or involvement of drugs of alcohol,             
 but for more minor violations, that limitation of liability stands.           
 MR. SPENCE said the Alaska Coastwise Pilots are supporting this               
 legislation as written and encouraged the committee to pass it.               
 Number 480                                                                    
 REPRESENTATIVE KUBINA said he thought this board's main function is           
 obviously safety and he didn't care if the board was increased to             
 include a pilot from every region, but he personally wanted to see            
 a private person also on that board.  It was his understanding this           
 board is paid for by their fees and if they want to raise the fees            
 to do that, he didn't object but he wanted to see the private                 
 individual also on the board.                                                 
 MR. SPENCE commented that the point made by Mr. Bush is very well             
 taken that in practice now, you have two public members on the                
 board and you have the commissioner's designee, who also is, in               
 practice, a representative from the public sector.  He felt there             
 is a balance there now; although, Alaska Coastwise Pilots would not           
 oppose the addition of another member from the public if it was               
 felt that would preserve a balance.                                           
 MR. SPENCE said on the issue of tariffs, the Alaska Coastwise                 
 Pilots strongly urge the legislature to get away from the practice            
 of economic regulations of pilotage in the form of tariffs.  If it            
 is found to be necessary to satisfy other interests to have some              
 form of tariff regulation, they would hope that it would be a                 
 maximum tariff, not a fixed tariff.  Again, the reason for this is            
 that the primary purpose of the state's regulation of pilotage is             
 safety.  Tariff regulation has proven to be something that is very            
 burdensome, time consuming, and the board has lacked the expertise            
 to deal with it effectively.  He thought all parties involved have            
 agreed that tariff regulation is a dead loser for a state that has            
 limited resources with which to manage the board.                             
 Number 482                                                                    
 HANS ANTONSEN, Representative, Southeastern Alaska Pilots                     
 Association (SEAPA), said the association operates in region 1 from           
 Dixon Entrance as far west as Yakutat Bay and employs approximately           
 31 pilots, both full-time and part-time, to cover the needs of                
 ships in that region.  He referenced Section 2 and said that SEAPA            
 supports maintaining the seven person board.  The primary reason              
 for that is they believe that the public constituency on the board            
 should not be watered down.  The public is that representation on             
 the board that looks out primarily for safety and they would                  
 support a seven man board composed of all public members if there             
 was no need for pilots to be on the board for licensing, exams,               
 expertise for the licensing examination process.  As it is, SEAPA             
 supports the board in the form that it has worked fine for a number           
 of years.  SEAPA believes that a nine-man board gets cumbersome and           
 difficult to work with and there is too much chance of a balance              
 and quorum to shift representation unduly away from the public's              
 interest.  They don't see where having a representative from the              
 department constitutes public representation.  He felt that was the           
 state and the department representation, so he didn't believe that            
 there were three public members on the board.  SEAPA does not see             
 a need to increase the board and does not favor the increase.  He             
 said it was not important whether their association is represented            
 on the board or not, they think the most important thing is that              
 the board is able to, in an efficient and timely way, address the             
 matters before it and a seven man board works a lot better than a             
 nine man board.  A five man board works even better, but they                 
 support the seven man board.                                                  
 Number 499                                                                    
 MR. ANTONSEN wished to comment on the questions asked concerning              
 the limitation of liability.  At the hearings in the House                    
 Transportation Committee, it was stated that upon research, the               
 average limitation on pilot's liability is $5,000 in pilotage                 
 regions in the United States.  We have $250,000 and the reason that           
 number came to be was, in some cases it was chance but in other               
 cases it was a number they felt they could get; it was a number               
 they felt was a reasonable cap that they could actually get                   
 insurance for.  They have only two major carriers of insurance that           
 even provide coverage for pilots.  They are listed as high risk in            
 some regards as to the type of work they do, so it is difficult to            
 get any insurance, period.  That is  the highest limitation on                
 liability anywhere in the United States for marine pilots.  Marine            
 pilots are not like airline pilots.  A marine pilot when he is on             
 the bridge of a ship, does not have sole control over the handling            
 of the ship and the decisions being made and they get navigating              
 that ship through waters, transiting and also docking the ship.               
 The man who is ultimately responsible for that ship and the safety            
 of that ship and the crew is the master.  The pilot is an advisor             
 to the master, so the concern that a pilot may not have unlimited             
 liability in some cases where the ship may run aground and spill              
 oil, is addressed because there is also a master, through his sea-            
 going experience and knowledge must be able to look out after the             
 safety of his ship and recognize when his ship is heading into                
 danger.  There is a difference as far as marine pilots and airline            
 pilots go.  That is why SEAPA believes that limitation liability is           
 acceptable where they are able to get insurance for that amount.              
 MR. ANTONSEN said SEAPA believes the measure contained in the                 
 legislation to create temporary licenses in regions to address a              
 sudden need for pilots, addresses the concerns that some industry             
 people may have about running into a shortage of pilots and not               
 having pilots sufficient to move the volume of ships that come in             
 from year to year.  SEAPA also believes that if industry and pilots           
 were able to work a little closer together in communicating new               
 expected traffic in the future, pilots would then have a better               
 ability to address their present and future pilot needs and be able           
 to recruit and train pilots sufficiently to be able to serve the              
 pilot needs of that region.  But oftentimes, with a competitive               
 environment, they don't get firsthand information of new ships                
 coming on line because there is always the question of who is going           
 to do the piloting.  Is it going to be group A or is it going to be           
 group B.  So, SEAPA feels that with more communication they could             
 better address industry's and the state's concern in keeping                  
 qualified pilots aboard.                                                      
 MR. ANTONSEN said as far as the tariff issue is concerned, they               
 also concur that they would like to see tariff not addressed in               
 this legislation and not in the hands of the state, while we are in           
 TAPE 95-41, SIDE B                                                            
 Number 001                                                                    
 MR. ANTONSEN...addressed industry's concerns, our customer's                  
 concerns, including extending contracts if there is a dispute among           
 particulars of the contract, including conflict resolution in the             
 form of binding arbitration, including not having binding                     
 arbitration.  In each instance, we have addressed industry's                  
 concern and done our best that within the context of a contract to            
 give industry assurance or whatever we can to address the concerns            
 that they may not have pilots for ships.  We feel we have been very           
 successful in directly negotiating with industry, to private                  
 parties, and addressing all those concerns.  If there is anything             
 else we can do within the context of these contracts that were                
 signed, (indisc.) of industry that would address the state's                  
 further concerns, or the legislator's concerns, we would be more              
 than happy to take any suggestion and implement it to the best of             
 our ability.                                                                  
 REPRESENTATIVE PORTER wanted clarification on Mr. Antonsen's                  
 testimony that the average limit of liability requirement outside             
 is $5,000 or was that the average claim.                                      
 MR. ANTONSEN responded the average limitation on liability of                 
 pilots is $5,000 across the United States and that statement, he              
 believed, was made by Bob Evans at a previous hearing.  He checked            
 that out and that $5,000 compares with our limitation of $250,000.            
 Number 017                                                                    
 REPRESENTATIVE KUBINA apologized for having to leave the meeting.             
 Number 023                                                                    
 DAVE SANDERS, Vice President of Alaska Marine Pilots, one of the              
 pilot groups out in region 3, which is the Western Alaska region              
 including Dutch Harbor, Aleutian Islands, Bristol Bay and Alaska              
 Peninsula south and west of Kodiak Island.  He said Alaska Marine             
 Pilots supports HB 260 as written.  They like it just like they see           
 it.  They believe the board should stay as it is, with the                    
 exception they believe the board should stay as it is -- two                  
 members.  He commented that it is expensive.  The fees for the                
 licenses have gone up every year since he had started piloting and            
 now it is $3200 biennially.  Those are significant costs, and they            
 feel the board is working fine like it has with a seven man board.            
 Therefore, they do not see a need to increase the size of the board           
 to nine members.                                                              
 CHAIRMAN KOTT asked if they were not in support of the current                
 legislation, as it is written.                                                
 MR. SANDERS responded they were with the exception of the increase            
 to the board.  Mr. Sanders said the limitation of liability had               
 been addressed by other pilots, but added that insurance costs the            
 pilots around $3200 a piece per year.  It is another substantial              
 expense and it is quite high.  It's a redundant insurance - the               
 ships carry insurance as well.  He believed Captain Antonsen's                
 comments were succinct in that it's not the same with just the                
 pilot of the ship being in total control.  The master is there to             
 oversee his ship.  In reference to the tariff issues, Mr. Sanders             
 said they do not feel any tariff should be addressed in this                  
 legislation.  Things are working well for them in Western Alaska              
 with the absence of the maximum tariff.  They haven't been able to            
 get contracts previous to the lapse of the maximum tariff and in              
 the last 10 months they have been able to get contracts with one of           
 their main customers.  In those contracts, conflict resolution was            
 addressed.  They have three to five year contracts and they have              
 contracts on the table with the other customers in the region,                
 which they don't believe they would have been able to get with a              
 maximum tariff.  He reiterated they would like to see no tariff               
 language at all in the legislation.                                           
 CHAIRMAN KOTT asked Gayle Horetski to address the antitrust tariff            
 Number 056                                                                    
 GAYLE HORETSKI, Assistant Attorney General, Commercial Section,               
 Civil Division, Department of Law, said her present assignment is             
 to assist in occupational licensing matters, and the Board of                 
 Marine Pilots is one of the boards that she has been working on.              
 She said from the viewpoint of the Department of Law, this is a               
 very good bill.  There has been a lot of litigation since she                 
 began working with the Board of Marine Pilots on various aspects of           
 the present statute, license issues, examination issues, etc.  She            
 commented she had not seen a level of litigation regarding board              
 matters ever in her legal career, as she has seen in connection               
 with this Board of Marine Pilots.  Ms. Horetski commented that she            
 and Mr. Twohig had worked closely in drafting and reviewing this              
 bill, and obviously there are sections that were put in by the                
 Pilots Alliance and committees.  However, by and large from their             
 point of view the amendments in this bill clear up areas that have            
 lead to litigation in the past.  She said they have been trying to            
 calm the waters and make it clear, as best they can, based on her             
 approximate 18-months of experience in working with the board.                
 Number 072                                                                    
 MS. HORETSKI stated the board has expired.  She referred to                   
 previous testimony that indicated the board was going to expire.              
 She referred to Section 1, and said the board expired in 1994.  It            
 is in its wind down year.  If it is not extended, it is gone.  So,            
 from the Department of Law's point of view, this bill is extremely            
 important and the extension of the board is absolutely essential.             
 It has to occur during this legislative session because it is in              
 its wind down year.  It doesn't have a wind down year left, it is             
 in it right now.                                                              
 CHAIRMAN KOTT pointed out for the record that even though this                
 particular bill has the extension, there is another vehicle that is           
 currently in the House Rules Committee (indisc.) for a floor vote             
 (indisc.) the Board of Marine Pilots.                                         
 MS. HORETSKI said at one point that bill had had only a one year              
 extension in it.                                                              
 CHAIRMAN KOTT interjected that it had been changed.                           
 MS. HORETSKI said that would at least preserve the existence of the           
 board.  She felt that the changes in this bill, if it is adopted              
 this session, will vastly improve the board's ability to regulate             
 in this area in a manner that decreases this exposure to                      
 litigation, which is one of her goals on behalf of the state.                 
 Number 087                                                                    
 MS. HORETSKI referred to the antitrust/tariff issue and stated the            
 Board of Marine Pilots had the authority to set tariffs before and            
 what they had under the statute was a maximum tariff that was set             
 at a certain level and pilot associations were free to charge less            
 than that if they wanted, but that became a ceiling.  That tariff             
 provision expired by its own terms in June 1994.  Since that time,            
 there has been no tariff of any sort regarding marine pilotage                
 services in the state of Alaska -- maximum, fixed or nothing.  The            
 board has continued to operate and shipping has continued since the           
 expiration of that tariff.  The concern is basically a public                 
 policy concern.  The reason that these ships of a certain size, of            
 a certain type, have to have a pilot is because the state says they           
 have to have a pilot and safety, of course, is the reason for that.           
 Nonetheless, the reason they need a pilot at all is because the               
 state law says they have to.  So, if they are required to take a              
 pilot and in fact, face possible criminal sanctions and a                     
 substantial civil fine if they don't take a pilot, then right now             
 we have a situation where the law is absolutely silent about what             
 that pilot or that pilot association can charge for that service.             
 As the bill is presently structured, there is no fixed tariff                 
 provision, there is no maximum tariff provision, and there is no              
 dispute resolution mechanism.  So, if a shipper needs a pilot and             
 he calls up and asks for a pilot, and the pilot says it will be x             
 amount, if a dispute arises between the shipper and the pilot as to           
 the reasonableness of those quoted rates, there is no dispute                 
 mechanism right now specified.  So the shipper's choice is to move            
 the ship without a pilot, which causes safety concerns; to not                
 move, which causes commerce concerns; or to pay whatever rate the             
 pilot is asking.  She said there may be other options in addition             
 to those, but those are the three come to mind.  The shipper is               
 required by law to have a pilot, and that is what the law says.               
 She said the concern that has come up in other committee hearings             
 is that there is a state antitrust law pilot associations are                 
 immune by a specific exception in the state law from any antitrust            
 liability, so that's fine under state law.  There is also federal             
 antitrust law, generally it's the Sherman Act, and the U.S. Supreme           
 Court has said in a whole line of case law since the Sherman Act              
 was adopted, that if a state chooses to regulate in an area - fine,           
 the federal government won't fuss in that area.  The state                    
 basically preempts and regulates, then there is no antitrust                  
 liability on the part of the people who are regulated by the state.           
 That is a sensible policy, of course.  In a case that came out in             
 June 1992, which is after the 1991 act was adopted in Alaska, the             
 U.S. Supreme Court ruled in the TICORE Title Insurance case that --           
 what happened is the FTC had issued a complaint against the title             
 insurance companies in several states for basically fixing prices.            
 She explained what the title insurance companies were doing was               
 sending in rates to a rate setting bureau and the rate bureau set             
 the rates.  Those rates are the ones that applied in the states               
 unless the state disapproved within a certain period of time.  It             
 was kind of a negative option.  The rates were originally set by              
 the rate bureau, but then the state had some oversight authority              
 where they could review it, and approve it or disapprove it.  What            
 the evidence showed in that case in the hearing before the FTC was            
 that in essence, in those states that were concerned, there was no            
 active state supervision of that rate setting process.  It was more           
 or less a rubber stamp.  In fact, some of these provisions were not           
 even checked for accuracy, for arithmetic.  They were just sort of            
 filed and that was the rate that applied.  The U.S. Supreme Court             
 said for the antitrust immunity to be afforded to these people - in           
 that case, the title insurance companies - there must be two things           
 present:  There must be a clearly articulated state policy that               
 they are going to regulate in this area, and there was in that case           
 because there were statutes that were passed that established these           
 rate bureaus; but then the U.S. Supreme Court in the TICORE title             
 case said there also has to be active state supervision of that               
 particular area - whether it is utilities, title insurance, pilots            
 or whatever, and the U.S. Supreme Court ruled on the facts of that            
 case, that there was not sufficient state oversight in order to               
 allow the title insurance companies to avail themselves of the                
 immunity as it (indisc.).  She stated this is something the                   
 Department of Law has brought to the attention of the legislature             
 because the department's concern was possible antitrust liability             
 of the pilots or the pilot associations under federal law if the              
 state regulation was not sufficient under the TICORE title                    
 standards to (indisc.) this immunity upon them.  As it has                    
 developed in some of the hearings and based on testimony that Ms.             
 Horetski has heard, it appears the pilot associations don't want              
 tariff provisions and really don't want dispute resolution                    
 mechanisms that were in an earlier version of the bill.  So, it is            
 like they are saying, "We'll assume the risk of that possible                 
 liability under the federal law if and when we do anything that               
 would violate the federal law."  She said that is a policy call and           
 there are possible dangers presented to the associations under that           
 approach; however, she emphasized it was not a danger that the                
 state is facing, because the state would not be charged with                  
 anything under the federal antitrust.  It would be the associations           
 and the members of the associations that are possibly at risk.                
 Number 162                                                                    
 REPRESENTATIVE PORTER asked what kinds of behavior would the pilots           
 typically do to get themselves in trouble with federal antitrust,             
 assuming that they lost their state exemption?                                
 MS. HORETSKI said in the past, there have been some concerns about            
 associations, by their actions, keeping pilots out of the                     
 profession, whether out of the particular association or out of the           
 profession, in general, through not giving the training and                   
 experience and the ability to qualify for the licenses.  Price                
 fixing is another thing, but federal antitrust laws (indisc.), but            
 whether or not a pilot association would be liable under the                  
 federal law for something like that is not clear under the present            
 committee substitute that is proposed because there are two things            
 in that bill:  One, it says the pilot associations may enter into             
 agreements with shippers to provide these services; and then it               
 also says that pilots may not charge rates that are different than            
 the one set by their association.  So, the bill contains authority            
 for the associations basically to set their own tariff.  They don't           
 call it a tariff, but to set their own price.  Ms. Horetski said              
 she wasn't saying that anybody is going to do anything that would             
 violate federal antitrust law, but collusive behavior that                    
 establishes a monopoly -- that either goes to getting all the                 
 business or setting the price at which services are offered --                
 collusive activity of that sort is the kind of thing that                     
 ordinarily, absent state intervention, would most likely violate              
 federal antitrust laws.                                                       
 Number 184                                                                    
 REPRESENTATIVE PORTER commented that in an area that is serviced by           
 one association, this bill provides that that association will                
 negotiate with shippers.                                                      
 MS. HORETSKI interjected "may."  Section 12 says, "The board shall            
 impose a sanction on the person licensed under chapter when the               
 board finds that the person....." and on page 5, line 25, says "...           
 collects, charges or receives an amount of services that is                   
 different from the amount set by the organization."  That is the              
 language that says a pilot has to abide by the rate that the                  
 organization has set.  She referred to page 7, subsection F, says,            
 "A pilot organization recognized by the board may enter into                  
 agreements with the master, owner or agent of a vessel concerning             
 the terms and conditions."   It doesn't say negotiate, it says                
 "may" enter into agreements.  Negotiate is clearly implied in                 
 there, because an agreement will never reached if you don't talk              
 about it.                                                                     
 REPRESENTATIVE PORTER said he wasn't all that familiar with federal           
 antitrust laws.  He asked Ms. Horetski if she would say that if an            
 association that represents one district, that has no competition,            
 that sets its own price, is price fixing and that would be a                  
 MS. HORETSKI responded that she would not say that, because the law           
 gives the association the authority to do that.  She said the                 
 antitrust law is odd in that it allows private parties to enforce             
 it.  So, one association can sue another association and seek                 
 treble damages under the antitrust law, and the state is not                  
 involved at all, the FTC is not at all; nobody is charging that               
 association in an official sense, with any conduct, but yet you               
 have an antitrust lawsuit...                                                  
 REPRESENTATIVE DAVIS asked if under the antitrust laws, was the               
 TICORE case related to the prices of employees or was it                      
 contractors?  Because in this case where an organization, and the             
 pilots are contractors to the organization, not employees, does               
 that have any bearing or any relation to the antitrust case that              
 Ms. Horetski cited.                                                           
 MS. HORETSKI said the facts of the TICORE title insurance case were           
 that the title insurance companies in the states involved put in              
 their request for rates and the rates were those that were charged            
 by the title insurance company to members of the public for things            
 like title search fees and that kind of thing in connection with a            
 house or checking out who owns land, so it was a fee charged by the           
 companies to members of the public that were trying to sell and               
 purchase real property.  She commented that if pilot associations             
 were business entities and the people who work for them were                  
 employees, then she thought you would get away from the antitrust             
 issue because one company can't conspire with itself.  For example,           
 General Motors can't conspire with itself, it has to conspire with            
 someone else, and that's where you get the collusive activity.  She           
 explained the pilots are independent contractors, not employees, so           
 then you have the question of all the pilots coming together, as              
 independent contractors in this association, and what are the                 
 possible liabilities of the pilots or the possible liabilities of             
 the association.  The pilots are required by state law to be a                
 member of an association.  It's an offense if they are not.                   
 Number 246                                                                    
 GINNY FAY, testified on behalf of Bill Walker, President, Prince              
 William Sound Regional Citizens Advisory Council (RCAC).  She said            
 RCAC's work is guided by its contract with the Alyeska Pipeline               
 Service Company and sanctioned under the Oil Pollution Act of 1990.           
 The residents of Prince William Sound and Southcentral Alaska are             
 acutely aware of issues regarding marine pilotage and what can                
 happen when there are oversights or minor adjustments in pilotage             
 areas, as happened with the Exxon Valdez oil spill.  Safety is                
 RCAC's primary concern.  They have no economic interest; all they             
 care about is safe pilotage.  They appreciate the work done by the            
 Department of Commerce and Development during recent years in                 
 improving safety, licensing and examination.  She commented there             
 has been a great deal of improvement made to the system; however,             
 RCAC questions whether or not a competitive system is really the              
 safest system.  Alaska is somewhat unique in that it is the state             
 in the country that has competition the way that we do, because we            
 require pilots and require shippers to use pilots, but then pilot             
 associations can compete against each other based on fees.  While             
 Prince William Sound has had a very good piloting system and has              
 not been affected by it, they question whether or not the                     
 competitive system is a threat to safety in that area.  They've had           
 pilots express that they do not feel that they can openly say what            
 some of their safety concerns are because of the threat of                    
 competition.  RCAC's primarily concerned about this because it                
 doesn't appear that the legislature really is interested in                   
 addressing the issues of competition, which is probably one of                
 their greatest concerns.                                                      
 Number 280                                                                    
 MS. FAY said the most significant problem RCAC has with the bill              
 right now is the change in the board makeup.  The Marine Pilot                
 Board is a safety board, it's a licensing board.  The reason                  
 industry traditionally has sat on the board was because the board             
 was setting tariffs, and so it made sense to have the pilots and              
 the industry when the tariffs were being set, sit there along with            
 the public, who is interested in safety.  If they are not going to            
 be setting tariffs, then the questions arises, why not just have              
 the pilots and the public on the board.  She commented that is                
 unlikely to happen, but she thought the changes that were made in             
 the composition was that the public is really not highly                      
 represented in these hearings, and so the pilots wanted another               
 member on the board, industry wanted another member on the board              
 and there really wasn't anyone to say, "wait a minute, this is                
 supposed to be a public safety issue."  Ms. Fay did not think there           
 was another board in the state that calls an employee of the state            
 agency, a public member.  Technically, any public members on any              
 boards are public members, not agency members.  She concluded that            
 RCAC's position is that they would like the board either left alone           
 or they would like a public member added along with the additional            
 pilot and industry member, because they think the public interest             
 is diluted with that change.                                                  
 Number 300                                                                    
 REPRESENTATIVE NORMAN ROKEBERG asked Ms. Fay if she had testified             
 that the legislature wasn't interested in competition or what?                
 MS. FAY responded that she has been under the impression from the             
 hearings to date that the issue of competition to going to a fixed            
 tariff and being a much more regulated system, as it was prior to             
 1991.  She said she may be mistaken, but it was her impression that           
 the legislature is unlikely to do that.                                       
 REPRESENTATIVE DAVIS clarified that the legislation put together              
 here was an attempt to deal with the issues that the pilots and               
 industry were dealing with and that was not something that was                
 brought forth.  The regulated monopoly question was not something             
 that was proposed by anyone and we wanted to deal with the involved           
 parties.  It came up in discussions, but it was never formulated as           
 to being included in the bill.                                                
 Number 322                                                                    
 JOE KYLE, Representative, Alaska Steamship Association (ASA),                 
 testified he was the only person before the committee testifying on           
 behalf of the shipping industry.  He said their membership includes           
 everybody in the state that is required to use state pilots with              
 the exception of Prince William Sound and the agencies that work              
 there are in their association, but not ARCO, BP or Deep River.               
 That may sound like a huge exception; however, if you look at how             
 many state pilot moves are required throughout the state over the             
 course of a year, their membership represents about 80 to 90                  
 percent of the revenue that is paid out to pilot associations                 
 because of all the moves in Southeast with cruise ships, Cook Inlet           
 oil and the tramper trade in the Bering Sea, Sea-Land and APL.  So,           
 they are the most significant user of state pilots in the state.              
 MR. KYLE said as far as the bill that was before the committee,               
 much as Deputy Commissioner Bush said, ASA thinks it is a great               
 bill, with one major glaring deficiency; that is there is nothing             
 in this act that addresses dispute resolution or conflict                     
 resolution or maximum tariff between industry and pilots.  He said            
 it is just polyanna, pie-in-the-sky to think that pilots and                  
 industry are not going to fuss over what it costs to move a ship.             
 It is somewhat simplistic to say, "you've got competition, why do             
 you need somebody to help you adjust price, if you can't agree."              
 He explained they have a very limited number of service providers.            
 They can't go shop around for another service provider if they                
 reach an impasse with a pilot association over price.  There were             
 over 120 licenses in the state a couple of years ago, there is                
 about 80 right now.  At the same time that over 40 licensed pilots            
 have been lost in the state, the number of ships and vessel traffic           
 is moving up, so there is a greater demand for pilot services at              
 the  same time the number of licensed pilots in the state is going            
 down.  Likewise, through regulatory action taken by the board,                
 there are significant impediments to entry into this profession.              
 And they are legitimate impediments; we want a rigorous training              
 program and certification program.  So what he was saying, is that            
 it is really wrong to push somebody through the pipeline to make              
 that number that is around 80 right now, move to a higher number.             
 The state said they are very concerned about safety and                       
 availability of pilots, and Mr. Kyle said he could tell the                   
 committee today, that it is possible that we will run short of                
 pilots in Southeast Alaska this summer with the increased cruise              
 traffic and it is almost a certainty that we will be short of                 
 pilots in Southeast Alaska in 1996.  He said under that scenario,             
 it is just not possible that we are going to get in a situation               
 with pilots where we've got a new ship, there is no existing                  
 contract, what's the number to move this ship and we feel the                 
 number that is going to be presented to us is way too high, and               
 we're going to say that we can't live with that number - can we               
 negotiate, and we really don't have anybody to negotiate with.                
 Even where we have competition, there is two associations in                  
 Southeast Alaska right now.  They used to all be the same.  They              
 were the same group and they splintered and next week they can go             
 back together.  Then we've really got nobody to negotiate with.               
 Mr. Kyle explained the same situation exists out west.  There are             
 two associations out west; they splintered.  You can't go grow a              
 third very quickly.  They are just going to come from who they are,           
 and next week they could join back together and be one pilot                  
 association.  It is all up to them as to whether there is                     
 competition or not.  And yet we've got to bargain with them and               
 deal with them on rates.  Mr. Kyle said he supposed they could take           
 care of themselves under that scenario, however, they run a great             
 risk of moving a ship without a pilot, but there is also a state              
 interest involved here and we are required to use their services -            
 the state requires that we use their services and we want to use              
 their services - but what do we do when we can't agree on price.              
 Personally, he didn't understand how the state can walk away from             
 that and say that's not an issue they are concerned about, because            
 when it happens that we do move a ship into state waters without a            
 pilot, God forbid an accident would occur on that same ship that              
 didn't have a pilot aboard, the industry is going to pay no matter            
 what, but he felt the state is going to pay a severe price for not            
 having some mechanism in its Marine Piloting Act to resolve                   
 MR. KYLE commented they have tried everything they could to get the           
 pilots to like something.  For various and sundry reasons, they               
 oppose it.  In their judgment, the (indisc.) to all this is                   
 regulated monopoly versus free and open competition.  There are               
 certain, very strong pilot associations that just desperately want            
 a regulated monopoly and there are legitimate reasons for them to             
 feel that way.  They definitely want that and they are going to do            
 anything they can to prove competition doesn't work.  Mr. Kyle                
 mentioned that the committee had heard the argument this afternoon            
 that we've got competition, why do we need conflict resolution if             
 you can't agree on rates.  The state shouldn't be involved in                 
 setting a tariff.  Mr. Kyle said we don't have competition in the             
 sense of there is a half a dozen vendors we can go shop with if we            
 don't like dealing with this hardware store.  We've only got two.             
 It's just like when we had Exxon and Union 76 here in town.  We had           
 competition in gasoline stations, but the price was $1.65 and $1.66           
 and every month or two they flip flopped around.  Then Mapco came             
 to town, and prices dropped 30 or 40 cents a gallon for gas.                  
 That's the kind of competitive situation we live with right now.              
 He stated we have two and they all came from the same group, they             
 all trained each other, they are professional colleagues, and he              
 fully expects they will go back together one day, probably.  Mr.              
 Kyle emphasized they think it is poor public policy if this act               
 cannot, if in some way, get a conflict resolution section in it.              
 He said the maximum tariff was tried and it worked for three years.           
 They tried desperately to get the maximum tariff extended last                
 session, but they were fought by the same pilot associations this             
 year.  So we said, "fine, you don't like the maximum tariff, how              
 about binding arbitration.  Most public employees/public service-             
 type occupations like binding arbitration.  We ran that up the                
 flagpole.  Nope, they don't want binding arbitration.  So, we said            
 how about conflict mediation.  Let's go through a mediation process           
 so that if you and me disagree over price, you'll still provide the           
 state's mission by moving my ship, and I'll pay into an escrow                
 account someplace, while a third party figures out what the right             
 price should be.  No, we don't want that.  You've got a comparative           
 environment, we're not going to deal with that either."  Mr. Kyle             
 said they don't know where to go.  They've pulled all the rabbits             
 out of the hat they have - binding arbitration, conflict resolution           
 and they tried to get the maximum tariff last session.  He                    
 commented they were willing to give you anything you might want               
 that will help get us out of this box, but the pilots - there are             
 some pilots that are philosophically opposed to competition - are             
 going to oppose anything that might help it work.  That gets us               
 back to conflict resolution, maximum tariff, or binding                       
 arbitration.  Mr. Kyle said they were not going to be happy or be             
 able to support this bill if there isn't something in there - be it           
 binding arbitration or conflict resolution mediation or maximum               
 tariff that provides them some rate protection when they have a               
 very limited market to deal with and a compulsory service to use.             
 Number 440                                                                    
 CHAIRMAN KOTT asked Mr. Kyle what they did right now when they                
 transverse a ship to an area that only has one pilot group in that            
 region and they establish the rate and it's a rate that you can't             
 live with?                                                                    
 MR. KYLE said, "The reality of where we have that right now is in             
 Prince William Sound, Cook Inlet and the Kodiak area and we                   
 negotiated a contract with that single service provider, I want to            
 say in the summer of 1993, that was a three year deal, that would             
 take us past the maximum tariff expiring last summer and the board            
 maybe this summer, so when we negotiated a contract with them, that           
 contract would take us through to some certainty in the                       
 legislature.   Right now we have a good contract with them, we deal           
 very professionally with them, they deal very professionally with             
 us, and we've got a good relationship and I think that will                   
 continue.  When we do have new business with them they sit down and           
 negotiate with us in a very respectful and professional manner and            
 we've been able to reach an agreement with them up to this point.             
 One thing that induces them, of course, to deal with us that way is           
 that there is always the threat of competition in their area.  It             
 would be easy for a group, say to splinter off and form a Cook                
 Inlet Pilot Association or a Kodiak Pilot Association, so they want           
 to do business well with us and they'd like to stay intact and not            
 have disgruntled members and form a new association.  So, the                 
 threat of competition in that region, I think, helps bring them to            
 the table with us and they do a hell of a job for us and they                 
 provide a great service and so that's what brings us to the table             
 to want to negotiate with them."  He said the relationships in the            
 other regions aren't as harmonious.  They weren't before - there              
 was a splintering off and they haven't been since.                            
 CHAIRMAN KOTT referenced the makeup of the board and asked Mr. Kyle           
 if it was safe to assume that industry supports the bill as it is             
 written with the additional member from industry on the board.                
 MR. KYLE said from an intellectual point of view, the region out              
 west should be represented on the board by both pilots and                    
 industry.  It is a totally different business out there, a totally            
 different trade.  It is mostly Pacific Rim shipping companies in              
 the fishing business bringing trampers that are Korean, Japanese or           
 Chinese into the Bering Sea.  They hit the Western Alaska ports and           
 go back to the Far East.  It's a very different shipping trade than           
 what's in Southeast, Prince William Sound or Cook Inlet.  There is            
 Sea-Land and APL out there that somewhat are more Cook Inlet and              
 Southeast in their make up.  So academically, there should be a               
 pilot from the Western Alaska area on the board.  The industry                
 problems are unique out there.  He commented that the gentleman               
 from out there who testified, said they have never had signed                 
 contracts with industry out West.  Mr. Kyle said he would disagree            
 with him as to why they do have a few now.  He reiterated that the            
 trade is totally different.  It's oriented around the fishing                 
 industry, it's very seasonal, it's nonpredictable, the ships come             
 over when the herring, salmon or crab come in.  With cruise ships,            
 they know years in advance how many will be coming in.  Cook Inlet            
 oil runs are very predictable.  So, from an academic point of view,           
 absolutely that representation should be on the board.  He said               
 they were concerned about the public input as well.  They feel the            
 department is on the board to represent the public.  They don't               
 divorce the state from the public.  It comes down to money.  In his           
 opinion, the board has been very generous about letting the Western           
 region pilots come up and speak to their problems in front of the             
 board.  They've let the industry do that as well.                             
 Number 499                                                                    
 CHAIRMAN KOTT referred to Ms. Fay's testimony that the state is               
 really responsible for safety.  He said based on his understanding            
 of what the board does and albeit that this provision does not                
 establish a fixed tariff or a maximum tariff, what would the role             
 of industry be on that board?                                                 
 MR. KYLE explained that he objected strongly with several things              
 that Ms. Fay said.  First of all, she said Alaska is the only state           
 in the country with competition.  He said that is a gross                     
 misrepresentation or inaccurate statement.  It is rare on the East            
 Coast and he thought Connecticut and maybe either Maryland or                 
 Virginia is about it.  However, on the West Coast, the way piloting           
 is done is all over the board.  Hawaii has got a competitive                  
 system, the Port of San Diego does not require state pilots if you            
 come into the Port more than 10 times a year, San Francisco has a             
 regulated monopoly, Long Beach has a private company but contract             
 pilots that the city hires, in the Port of Los Angeles, they are              
 municipal employees of the city of Los Angeles, so it is all over             
 the board on the West Coast.  In terms of industry's interest on              
 the board, he felt Ms. Fay's statement was cynical.  He explained             
 that we need pilots to help us around waters that ships don't come            
 into that often.  Mr. Kyle stressed they are very interested in the           
 level of training that pilots get, what the training program is,              
 what the recertification program is, what the licensing program is.           
 He said, "We pay their ticket, if you will and as long as we're               
 paying that tariff and we're paying their ticket and they're going            
 to be advising our masters on how to move ships in and out of state           
 waters, we want to be part of that process.  We're a stake holder             
 in this."  He said it is a significant financial issue for them in            
 terms of whether they make money or lose money operating in Alaska.           
 They want pilots that are well-trained and they want to have a hand           
 in that training program.                                                     
 CHAIRMAN KOTT said in Ms. Fay's defense, he wasn't sure that she              
 said there shouldn't be industry on the board.  That was what he              
 was leading into.                                                             
 MR. KYLE said in that case, he would apologize to Ms. Fay.                    
 CHAIRMAN KOTT closed public testimony on HB 260 and the bill was              
 held over until Friday at 3:00 p.m.                                           

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