Legislature(1995 - 1996)

04/21/1995 03:10 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
 HB 260 - MARINE PILOTS                                                      
 Number 030                                                                    
 CHAIRMAN PETE KOTT announced the first order of business would be             
 HB 260, "An Act relating to marine pilots and the Board of Marine             
 Pilots; extending the termination date of the Board of Marine                 
 Pilots; and providing for an effective date."                                 
 DAN TWOHIG, Coordinator, Board of Marine Pilots, Department of                
 Commerce and Economic Development (DCED), testified via                       
 teleconference.  He said he supports the bill as it is currently              
 written.  He referred to Amendment 0.1, which deals with pilotage             
 tariffs and establishing a maximum tariff, and said the DCED takes            
 no position on the tariff issue.                                              
 MR. TWOHIG referred to Amendment 0.2, relating to Section 2, which            
 removes the extra seats on the board, and said the DCED supports              
 the amendment.                                                                
 MR. TWOHIG referred to Amendment 3, which will add additional                 
 language to the cross regional licensing temporary license issue,             
 and said the department supports it.                                          
 Number 078                                                                    
 PAUL FUHS, Lobbyist, Southwest Alaska Pilots Association, was next            
 to testify.  He stated his organization hasn't taken a position on            
 the composition of the board.  He said it was probably an oversight           
 to include the ability to relicense someone the next year if the              
 shortage continues and if the commissioner finds there is a                   
 continuing shortage.  Mr. Fuhs showed the committee a map showing             
 the sizes of the three regions that currently exist.  He said he              
 doesn't support cross regionalization.  The regions are very large            
 and if you could keep up with what is going on within the regions,            
 you would be doing well.                                                      
 Number 100                                                                    
 CAPTAIN RICHARD GURRY, President, Southeastern Alaska Pilots                  
 Association, was next to come before the committee.  He noted the             
 Southeastern Alaska Pilots Association is headquartered in                    
 Ketchikan, Alaska.  Captain Gurry read his statement into the                 
 "I appreciate the opportunity to testify before this committee                
 today.  While we have several concerns about HB 260, which amends             
 the Marine Pilot Act, I am going to focus only briefly on two                 
 aspects under consideration by this committee.                                
 "First, cross regionalization; second, composition of the Board of            
 Marine Pilots; and, correct myself there is a third, the third is             
 a request by shipping companies to impose a maximum tariff on pilot           
 service fees.                                                                 
 "First, cross regionalization.  We oppose cross regionalization.              
 We oppose cross regional licensing and support the Department of              
 Commerce's position on this issue.                                            
 "Second, composition of the Board of Marine Pilots.  We support the           
 current composition of the board and no additions of industry                 
 representatives on the board.  The board should be comprised                  
 primarily of pilots who are regulated by the board; and public                
 members because it is the public's interest that should be overseen           
 by the board.  We oppose adding additional industry members on this           
 board.  Industry agents are not restricted to working in regions as           
 pilots are and, therefore, cannot offer specific expertise that a             
 pilot can whose expertise lies only within a particular region.               
 Larger boards are more cumbersome, more costly and less effective.            
 Perhaps the best board make up would have three pilots, one from              
 each region, three public members and one state representative.               
 The board should be maintained as a Board of Marine Pilots and not            
 a Board of Marine Agents.                                                     
 "Third, the maximum tariff.  The State Board of Marine Pilots                 
 wrestled with a maximum tariff for several years.  We spent                   
 countless hours on this matter taking up valuable board time which            
 could have been used on more pertinent issues such as safety and              
 training.  Since last year, there has been no tariff for marine               
 pilots, there have been no pilot shortages and no price gouging.              
 We now hear from industry that a mechanism is needed for price                
 disputes and to prevent work stoppages.  SEAPA pilots have                    
 addressed both of these concerns in our contracts with cruise ship            
 companies. Dispute resolution and automatic contract extensions               
 have been suggested in every contract with vessel companies.  Some            
 companies have opted for these and some have not.  Pilotage rates             
 are below the tariffs set by the board in 1991.  The reason why               
 they are below is because pilots offered to discount their rates in           
 exchange for long-term commitments.  These commitments are needed             
 in order for us to project our future pilotage requirements.  In              
 testimony before this committee on Wednesday, industry                        
 representatives suggested that there would be pilot shortage this             
 year.  The SEAPA pilots currently have 31 pilots on our roster.               
 Not all of our members have renewed their license at this time.               
 Many of our members would like to work a fuller schedule this                 
 summer, but because of lack of projected work, they have chosen to            
 only work part-time.  Industry has never specified a single blaring           
 problem that now actually exists, in fact, as a consequence of the            
 repealed maximum tariff.  If industry is worried about the price              
 and availability of pilots then it is incumbent upon the state to             
 heavily regulate pilots to ensure that they are available and                 
 highly trained.  A maximum tariff undercuts the system that the               
 legislature has tried to enact, which is a competitive pilotage               
 "Historically, under a state set maximum tariff, the board set the            
 maximum tariff that could be charged but had no oversight over the            
 actual amounts charged between pilots and vessels under private               
 contracts.  Maximum tariff does not either actively regulate                  
 pilotage or let pilots freely compete and this has serious                    
 repercussions.  When there is competition, the market place decides           
 the price and the Sherman Antitrust Act Law enforces competition              
 and punishes those who conspired to restrain trade.  When there is            
 active state supervision of a private party, there is immunity from           
 antitrust laws.  However, under a maximum tariff true market forces           
 are thwarted by establishing an artificial price ceiling and                  
 pilotage associations cannot enjoy antitrust immunity under a                 
 maximum tariff provision because there is not active supervision of           
 pilotage prices actually charged.  Therefore, we support leaving              
 the bill as is - without a maximum tariff.  Thank you.                        
 Number 197                                                                    
 REPRESENTATIVE ELTON asked Captain Gurry how much of the work that            
 his organization does is provided to shippers that are under                  
 contract.  He also asked how much of the pilotage work is done                
 through people that they don't have contracts for.                            
 CAPTAIN GURRY said very close to 100 percent is done under                    
 contract.  They have contracts that are through agents, and the               
 scope of the vessels that they cover, the ships can come from                 
 anywhere.  They represent such a broad scope of ships - different             
 companies from different companies.  He said it would be very                 
 cumbersome for them to get individual contracts from all the                  
 different freighter companies throughout the world, so they                   
 contract out with the agent that represents all those companies.              
 REPRESENTATIVE ELTON said the contract with the agent would set a             
 price for an individual (indisc.)                                             
 CAPTAIN GURRY said that is correct.  He noted it would cover any              
 vessel that came in under the agent's authority.                              
 REPRESENTATIVE ELTON said any vessel that comes in probably has an            
 agent.  CAPTAIN GURRY responded in the affirmative.                           
 Number 224                                                                    
 BOB EVANS, Lobbyist, Alaska Marine Pilots, explained he was in                
 attendance to speak to the maximum tariff.  He said he has heard              
 some concerns that the maximum tariff is necessary in order to                
 avoid antitrust concerns on a federal level.  Mr. Evans said he has           
 given committee members a letter from Mark Ashburn, with Ashburn              
 and Mason, which speaks to the fact that Sections 12 and 16 of the            
 bill takes care of any concern about a maximum tariff.  It provides           
 the level of regulation, according to them, that is at least as               
 good as a maximum tariff.  Additionally, if that is a concern, his            
 comments in the past have indicated a fixed tariff would make more            
 sense.  Mr. Evans said they are not asking for that at this time.             
 This view is not only shared by Mr. Ashburn, who is formally the              
 head of the Antitrust Section of the Attorney Generals Office, but            
 it is shared by Dick Monkman, who is now the head of the Antitrust            
 Section, and Mr. Weyhrauch who is with Faulkner Banfield.                     
 MR. EVANS said it has been suggested that this is a concern as a              
 result of FTC versus TICORE.  That case does not fall on all fours            
 with the context - the facts of this case.  That case is                      
 distinguishable from the facts in Alaska.  TICORE involves the                
 independent businesses that operate as title companies.  Each of              
 them independent of one another that come together as independent             
 businesses, set a price and then offer that to some state authority           
 which, in turn, will have to take some negative action to prevent             
 that from becoming the price.  If they fail to reject the price               
 then the price goes forward as the price for the title companies.             
 These are independent businesses.  The factual context of Alaska is           
 that these organizations, which are independent entities, will fix            
 a price, set an amount, within the organization.  Mr. Evans said              
 there is nothing in the statute that says the Southeast Alaska                
 Pilots Association (SEAPA) is supposed to sit down with Alaska                
 Coastwise Pilots (ACP) and set a price or another organization.               
 There is no price setting from one business entity to another which           
 makes FTC versus TICORE not applicable to the facts of this case.             
 MR. EVANS said there are two reasons off the top.  The statutory              
 provisions in the bill before the committee takes care of the                 
 concern of a maximum tariff for antitrust problems.  The FTC versus           
 TICORE is not applicable based upon the different factual context.            
 Mr. Evans said he would point out that the people at risk are the             
 individual businesses.  They are not industry, it is not the state,           
 is not anybody but themselves with the advice of their counsel and            
 their own independent business decisions, they are prepared to take           
 that risk.  Public safety is not an issue here.  This is a                    
 business/legal decision of these organizations.  Mr. Evans said               
 there is no good reason why the state ought to involve themselves             
 in that kind of a decision.                                                   
 MR. EVANS referred to the maximum tariff and said if it is put in             
 place, it will give a negotiating tool to one side that is not                
 available to the pilots.  In the past when the maximum tariff                 
 existed, there were no contracts.  The individual pilot groups had            
 to take what came whenever it came.  There is no market share.                
 They serviced the industry at the whim at getting a call or not               
 getting a call.  The maximum tariff that went away last year has              
 brought more stability in the shipping lanes of the state of Alaska           
 than anything that has occurred since 1991.  He urged the committee           
 to reject the amendment which establishes a maximum tariff.                   
 Number 293                                                                    
 REPRESENTATIVE ROKEBERG asked what the length of time has been that           
 there hasn't been a maximum tariff.  MR. EVANS said since June,               
 REPRESENTATIVE ROKEBERG asked how many contracts have been entered            
 into since that time.  He also asked what the atmosphere has been             
 between industry and the pilots.                                              
 MR. EVANS said he could only speak for the organization he                    
 represents.  He said they have signed one contract which amounts to           
 about 21 percent of the work in their region.  They are currently             
 going through active negotiations with several others.  He said his           
 organization has been told that there is probably not much reason             
 in negotiating until the legislature decides whether there is going           
 to be a maximum tariff.  He said other representatives could                  
 probably give a better answer to the number of contracts that have            
 been signed.                                                                  
 Number 310                                                                    
 BRUCE WEYHRAUCH, Representative, Southeast Alaska Pilots                      
 Association, was next to come before the committee to testify.  He            
 said in their capacity as attorneys representing the individuals              
 who are working for pilot associations, the Southeast Alaska Pilots           
 Association is not recommending that they would enjoy antitrust               
 immunity under a maximum tariff provision.  If the Department of              
 Law suggests that it is better than nothing, then his organization            
 would like an indemnity provision from the Department of Law that             
 they will reimburse SEAPA for their legal fees and any damages they           
 have to pay for an antitrust judgement.  Currently, the                       
 negotiations between the pilot associations and the companies                 
 involved are at arm's length with transactions between two private            
 parties over the terms of a contract, and that is what the                    
 legislature deemed which should take place in 1991 -- a competitive           
 system of pilotage.                                                           
 MR. WEYHRAUCH said unless the state actively and aggressively                 
 supervises marine pilots, they will always face this antitrust                
 threat.  So it is active supervision by the state of every aspect,            
 not just price.  It includes training, entry, discipline,                     
 everything, and clearly articulating that policy to displace                  
 competition in the statue.  That is what it will take before they             
 recommend that they have antitrust immunity.                                  
 MR. WEYHRAUCH said if a maximum tariff is imposed, why not a                  
 minimum tariff on the industry.  He referred to the industry side             
 of the issue and asked why the pilots should take all the heat.               
 Number 337                                                                    
 GAYLE HORETSKI, Assistant Attorney General, Commercial Section,               
 Civil Division, Department of Law, came forward to testify.  She              
 said the Department of Law would decline to accept Mr. Weyhrauch's            
 invitation to indemnify them for their legal expenses.  Ms.                   
 Horetski said she has personally spoken with Mr. Robert Schoder,              
 Attorney, Federal Trade Commission (FTC), in Seattle.  She informed           
 the committee the FTC issued a generalized report about competition           
 in the pilotage industry in Alaska.  Mr. Schoder told her that the            
 FTC agrees with the Department of Law's interpretation of the                 
 TICORE case as it applies to antitrust immunity, under federal law,           
 for pilot associations.  She said she did invite representatives of           
 pilot associations to share with her any letters or memorandums               
 that they received from Mr. Ashburn on this issue.  She noted that            
 several days ago the issue about Mr. Ashburn having a contrary                
 opinion was first brought up in the Senate.  To date, she hasn't              
 seen anything in writing on that.  She said she can't really                  
 respond to what Mr. Ashburn has allegedly said since she hasn't               
 seen any documentation.                                                       
 There being no questions of Ms. Horetski, Mr. Kyle was next to                
 JOE KYLE, Alaska Steamship Association, said he would like to                 
 clarify a couple of things.  He referred to the maximum tariff and            
 said he would like to remind the committee that what industry is              
 concerned about is not a maximum tariff so much as an impasse where           
 pilots and shippers cannot agree on a price.  Mr. Kyle referred to            
 Captain Gurry's testimony and said he thinks that he gave a great             
 example of how likely it is that they are not going to be able to             
 agree all the time when he suggested that the industry be                     
 disenfranchised from the process of the Marine Pilot Board.  Mr.              
 Kyle said they are a major stakeholder in this entire process.                
 They have hugh capital investments that they entrust to the care of           
 pilots when they move into state waters.  They want to be a player            
 in the process that regulates those pilots.                                   
 MR. KYLE referred to the issue of maximum tariffs being before the            
 committee and said it is because the industry has already tried               
 binding arbitration with the pilots as a dispute resolution                   
 mechanism.  The pilots shot that down.  They then tried a mediation           
 process with the legislature.  The pilots shot that down.  Now                
 we're back where we were before which is maximum tariffs.  Mr. Kyle           
 said different people will give different versions as to how well             
 the maximum tariff worked since 1991.  The reason it is back before           
 the legislature is because they knew where they were with the                 
 maximum tariff.                                                               
 MR. KYLE said he doesn't know how binding arbitration, competition            
 and mediation hurts pilots.  He referred to the experience they had           
 with the maximum tariffs over the last three years and said he                
 doesn't know how that hurts pilots.  Mr. Kyle said he would like to           
 remind the committee that there needs to be some kind of mechanism            
 in the Marine Pilot Act to get a handle on tariffs so the industry            
 has some protection.                                                          
 MR. KYLE referred to Mr. Weyhrauch's comment about pilot                      
 associations and the companies involved are at arm's length and               
 said that isn't accurate when the companies are required, by law,             
 to engage the services of pilots.  He said they are open to                   
 mediation and arbitration.  Since that hasn't been satisfactory to            
 the pilots, they are at the maximum tariff and that is what his               
 association currently supports.                                               
 Number 397                                                                    
 MR. WEYHRAUCH said, for the record, the pilot's have asked in their           
 contracts for arbitration provisions.  The companies have rejected            
 those in contracts.  The pilots are out there, they want to work on           
 their own and they don't need the paternalistic attitude of                   
 industry trying to look out for their interests.  He said they are            
 ready to compete if that is what the legislature wants them to do.            
 Number 410                                                                    
 There being no further witnesses to testify on the measure,                   
 CHAIRMAN KOTT closed public testimony.  He said the committee has             
 three proposed amendments before them 01, 02 and 03, Utermohle,               
 dated 4/20/95.  Chairman Kott moved Amendment 1.  He noted the                
 amendment was requested by bill's prime sponsor.  The suggestion              
 was that maximum tariff be established.  Amendment 1 restores the             
 language that existed prior to the exploration of the maximum                 
 REPRESENTATIVE KUBINA put a call on the committee.  CHAIRMAN KOTT             
 announced the committee would take an at ease at 3:35 p.m.  The               
 House Labor and Commerce Committee was called back to order at 3:37           
 CHAIRMAN KOTT said the call has been satisfied.  He said Amendment            
 1 has been moved.  He asked if there was an objection.                        
 REPRESENTATIVE KUBINA objected for the purpose of discussion.  He             
 said it seems like a maximum tariff would give a half of a                    
 solution.  He indicated it doesn't seem like there is open                    
 competition.  Representative Kubina said he would be very                     
 supportive of binding arbitration and the board could be the                  
 arbitrator.  At least somebody is making a decision and they are              
 hearing both sides of the story.  To put a cap on it seems like the           
 legislature is taking one side's point of view.  He said he would             
 support binding arbitration, total competition or mediation.                  
 Representative Kubina said the amendment appears to take one side             
 over the other.                                                               
 CHAIRMAN KOTT said the state has essentially mandated that                    
 shippers/transporters are going to have to have pilots on board.              
 The board will determine the maximum tariff.  He noted the board              
 consists of public members, shippers and pilots.  Between the three           
 of those groups, they should come up with a rational approach.                
 Chairman Kott said Representative Kubina is right to a degree that            
 they are somewhat curbing free and open market competition by                 
 establishing a maximum ceiling on what can be charged.  Currently,            
 as it stands in some of the regions there is not competition                  
 anyway.  So what would prevent those individual groups from                   
 establishing whatever tariff they want to establish within reason.            
 Number 456                                                                    
 REPRESENTATIVE KUBINA referred to his region, Prince William Sound,           
 Region 2, and said there is no competition for tanker traffic                 
 coming in and out of the sound.  He noted it is very substantive.             
 It doesn't appear they're having a problem there.  Representative             
 Kubina said he would be more in support of the board deciding.  He            
 suggested not setting a cap, but let the board set the rate.                  
 CHAIRMAN KOTT said there may be some severe problems with letting             
 the board set a rate as there may be problems in agreeing to that             
 REPRESENTATIVE KUBINA referred to the amendment and said they're              
 setting a maximum rate.                                                       
 REPRESENTATIVE PORTER commented that he has been all over the board           
 regarding the issue between safety, competition, etc.  The state              
 initiated this quandary by saying, "You will, shippers, have                  
 pilots.  We will establish standards for their experience and                 
 training and (indisc.--coughing) and you will put them on your                
 ships."  So the state has interjected itself once and said if you             
 don't, it's a crime.  That is a pretty heavy sanction.                        
 Representative Porter said, "To me, then saying, `But we're not               
 going to give you shippers any assistance in trying to reasonably             
 meet our expectation of being able to reasonably compensate pilots'           
 isn't there.  So from that standpoint, and I have some labor                  
 management experience in my background, I was taken (indisc.) when            
 I heard the representative of -- in effect management if this is              
 one of those kinds of issues saying, `Please give me binding                  
 arbitration.'  Wow!  Binding arbitration generally does not favor             
 management and my personal philosophy is such that unless employee            
 who has the right to strike, which obviously pilots have the right            
 to say `I'm not going,' binding arbitration seems to be                       
 inappropriate.  So to hear the industry saying give us binding                
 arbitration makes me believe that they're really in a vulnerable              
 position."  Representative Porter said he doesn't know that this is           
 appropriate answer but it is an answer and he is willing to give it           
 shot since it seems to have generated the contracts that are                  
 currently in existence.                                                       
 Number 501                                                                    
 REPRESENTATIVE ELTON said it is hard for him to think of this in              
 terms of labor management -- talking about two different types of             
 business groups.  He said he isn't as concerned about the major               
 shipping companies.  They're going to be operating under a                    
 contract.  It seems to him that the value of a maximum rate for an            
 agent that's bringing in a ship that might come in once a year or             
 once every three years seems to be the area in which there are                
 REPRESENTATIVE ROKEBERG said if the committee were not to adopt               
 Amendment 1 and leave the status quo as it currently is, there is             
 the threat of the FTC finding there is some antitrust violations.             
 He asked who would be penalized and what would be the corrective              
 REPRESENTATIVE KUBINA said he believes the answer would be the                
 pilot organizations who don't want this.                                      
 REPRESENTATIVE ROKEBERG said they don't want it but they would be             
 the ones to answer to it.                                                     
 REPRESENTATIVE PORTER said he thinks that there is substantial                
 concern and this would go towards ameliorating that problem.                  
 Number 538                                                                    
 A roll call vote was taken on Amendment 1.  Voting in favor of the            
 amendment were Representatives Kott, Porter and Elton.   Voting               
 against Amendment 1 were Representatives Sanders, Kubina, Rokeberg            
 and Masek.  So Amendment 1 failed to be adopted.                              
 Number 547                                                                    
 CHAIRMAN KOTT moved Amendment 2 which restores the board back to              
 the existing composition as it currently exists.  Hearing no                  
 objection, Amendment 2 was adopted.                                           
 Number 550                                                                    
 CHAIRMAN KOTT stated Amendment 3 addresses the renewal of a license           
 by the commissioner in times of immanent shortage.  It makes it               
 simpler for him/her to continue with business under a shortage                
 condition.  He moved Amendment 3 be adopted.  He asked if there was           
 an objection.  Hearing none, Amendment 3 was adopted.                         
 Number 554                                                                    
 REPRESENTATIVE KUBINA asked for a brief at ease at 4:50 p.m.                  
 CHAIRMAN KOTT called the meeting back to order at 4:55 p.m.  He               
 handed the committee members Amendment 4 which deals with dispute             
 resolution.  Do to the extensive nature of the amendment, he said             
 he will hold the bill over pending the committees review of it.  He           
 said it would be brought up at another time.                                  
 At this point an at ease was taken.  The meeting was called back to           
 order at 3:58 p.m.                                                            

Document Name Date/Time Subjects