Legislature(1995 - 1996)
03/31/1995 08:11 AM House RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HRES - 03/31/95 HR 7 - OPPOSE COAL AS HAZARDOUS/NOXIOUS SUBSTANCE NOEL LOWE, LEGISLATIVE ASSISTANT, REPRESENTATIVE JERRY SANDERS, PRIME SPONSOR, stated if there are no immediate questions for him, he would like to go to teleconference since Mr. Sims has to leave shortly. JOHN SIMS, VICE PRESIDENT OF MARKETING, USIBELLI COAL MINE, INC., testified via teleconference and stated he is also a member of the Board of Directors of the U.S. Coal Exporters Association. He expressed support for HR 7. He said HR 7 pertains to an issue pending with the International Maritime Organization (IMO) which seeks to include coal as a hazardous and noxious material in the Hazardous and Noxious Substance (HNS) Convention, which has treaty status. He told committee members the U.S. coal industry, including the Alaska Coal Association and Usibelli Coal Mine, are strongly opposed to the inclusion of coal in the HNS Convention and the reasons are compelling. MR. SIMS said the first reason is the IMO HNS Convention on the Prevention of Pollution from Ships does not classify coal as a hazardous material subject to that particular treaty. Second, the IMO HNS Convention for the Safety of Life at Sea does not list coal as a hazardous material. Third, coal is excluded from the International Maritime Dangerous Goods Code. Fourth, the U.S. Coast Guard does not list coal in its schedule of hazardous maritime pollutants as published in the Federal Register of November 5, 1992. He stated there is no evidence that coal has created hazardous situations or pollution in the maritime environment and along coast lines. MR. SIMS stressed the message is quite clear--do not fix something which does not need fixing. To forge ahead and ignore that advice would be detrimental to the coal industry and unwarranted. He stated in passing HR 7, the legislature will be sending a strong message for the coal industry and the U.S. (indiscernible) currently involved in drafting the U.S. position and to the treaties. He said excluding coal is the ideal objective. He pointed out if eventually a hazardous and noxious convention emerges and comes before the U.S. Senate for ratification, Usibelli would continue to urge the U.S. Senate to reject such a treaty. Number 107 MR. SIMS stated in regard to the current status of agencies within the U.S. Administration which are involved in the framing of the U.S. position, the opinions seem to be divided. He said the Department of Justice, the U.S. Coast Guard, and the U.S. State Department are inclined to favor some form of inclusion of coal in the treaty. The U.S. Department of Commerce, the Department of Energy, and the Maritime Administration within the Department of Transportation favor exclusion of coal. He noted that reportedly, the U.S. Trade Office also favors exclusion of coal. He reiterated that the official U.S. position is currently being formulated. Therefore, the legislature's action through HR 7 could help sway the outcome of that position. He urged committee members to pass HR 7. CO-CHAIRMAN GREEN noted that Alaska's coal is good because its only real problem is water content and in some cases, high ash. He noted Alaska's coal is extremely low sulphur. He wondered if HR 7 will pick up a lot of extra baggage because of some of the high sulphur coal produced in other parts of the country, which is ultimately shipped through the Maritime Service. He asked if there was any merit in trying to exclude Alaska coal only or coals of that quality or is this a matter of all or nothing. MR. SIMS replied it is a matter of all or nothing. He said even with the more elevated concentrations of sulphur, the potential for slowly leaking sulphur or sulfuric acid into a maritime environment is minimal. He stated Representative Green makes a good observation that Alaska's coal is significantly more benign than others. He pointed out the Cook Inlet has a high concentration of coal in its sediments. CO-CHAIRMAN GREEN stated the committee would come back to HR 7. HRES - 03/31/95 HR 7 - OPPOSE COAL AS HAZARDOUS/NOXIOUS SUBSTANCE Number 500 CO-CHAIRMAN GREEN recalled his question to Mr. Sims regarding possible baggage to HR 7 because it would also be addressing poor quality coal. He wondered if Mr. Lowe thought there would be a problem. MR. LOWE replied he did not. He stated he would explain the tier structure the proposed IMO treaty would insert coal into. He thought with that explanation the committee would better understand why that is not a concern for any type of coal. He said the current structure was fashioned after an oil insurance-type of structure which is a post-disaster payment scheme. Currently, the insurance of materials shipped overseas fall into two tiers. The first tier is insurance carried by the ship owner or pilot which is up to a preset, at this time, undetermined level. The second tier is the tier which would be paid in an event or catastrophe were to exceed the first tier. MR. LOWE said the second tier is made up of two levels which include solid liquids or gases defined as noxious. The second level within the second tier contains coal, wood chips, ammonium nitrate, and other less or nontoxic, nonhazardous materials. He explained currently the first section within the second tier contributes to a fund that would kick in if a catastrophe exceeded the first tier. The second level within the second tier is designed to kick in if, and only if, one of the substances within that second group were to be involved in an incident which exceeded the first tier level of insurance coverage. MR. LOWE pointed out there has never been, in the history of the transport of coal, an incident which exceeded the first tier level of insurance. Number 556 CO-CHAIRMAN GREEN asked if the tiers are based on the materials likely to get into the environment rather than a dollar amount. MR. LOWE replied that is correct. He said the tier structure is post-incident insurance mechanisms to cover personal loss, property loss, or damage to the environment. He stated within the second tier, there are two sections and items are classified either in the first or second section based on their estimated potential damage and hazardous qualities. He explained the opposition brought forward in HR 7 is to the inclusion of coal within the second section of the second tier. REPRESENTATIVE DAVIES clarified coal would be included in the first structure of the second tier. MR. LOWE said within the second tier there are two levels. Coal is being proposed to be included in the second level of the second tier. CO-CHAIRMAN GREEN asked what part of the second level. MR. LOWE replied there is only one second level. He reiterated there are two tiers of insurance. The first tier is the liability of the ship owner. The ship owners are required to carry a certain amount of liability which as of yet has not been determined. The second tier includes all of the goods being transported and they are subdivided within the second tier into a group A and group B. He stated group A are more hazardous materials and group B are solid materials which are less toxic, less hazardous, less noxious. He noted it is proposed that coal be included in the IMO treaty to be in group B of the second tier. MR. LOWE reiterated there has never been, in the history of the transport of coal, an incident that exceeded the first tier. He felt there is no insurance-wise need at this point for coal to be included. He said the inclusion of coal is based on the HNS Hazardous Materials Commission's recommendations. For example, if there was an incident involving ammonium nitrate, which is in group B of the second tier, instantly all members of group B would be determined active and from that date forward, they would be required to contribute to a fund. Their contribution to the fund would be determined on a tonnage basis. MR. LOWE said should any future incidents happen, monies from that fund would be applied, in excess of the first tier, when the ship transporter's insurance did not cover it. He stated anything over tier one would be paid out of the fund. He noted it is believed that the purpose of the inclusion of coal in group B of the second tier is because of its large tonnage quantities. He pointed out this is somewhat of a tonnage-based tax on the coal industry because of the large amount of coal shipped. Number 600 REPRESENTATIVE DAVIES clarified once the requirement to contribute to the fund is activated, then the requirement is in place forever. MR. LOWE replied that is correct. REPRESENTATIVE DAVIES clarified the fund would not end no matter how much money is generated by the fund. MR. LOWE said there is no mechanism to shut off contributions to the fund if a certain monetary level is reached. He noted the contribution to the fund is a per tonnage rate every time the coal is handled. He stated when the U.S. Department of Energy became aware of this by Senator Stevens, they concluded there is no necessity to include coal as a hazardous and noxious material in group B of the second tier of the IMO treaty. CO-CHAIRMAN GREEN felt that while support would be gained from all the coal producing states, there would also be a drag down by the negativism of the high sulphur and other impurities in coals. He thought allowing the country to know that Alaska's coal is nonpolluting as opposed to some that might be would be a good idea. MR. LOWE said the IMO's Marine Environment Pollution Committee asked the GESAMP EHS Group (he did not know what the letters stood for) to evaluate the potential marine pollution hazards from the discharge of solid bulk cargoes in July 1992 and they evaluated the hazardous properties of coal. He stated coal was given a zero rating for bioaccumulation and tainting, hazard to human health (oral intake and skin contact) and for reduction in amenities. It was noted: Coal dust may cause mild skin irritation if it comes in contact with the skin; coal, with regard to damaging living resources, is not hazardous but it may blanket the bottom of the sea; and coal, with regard to the reduction of amenities, may be slightly objectionable but will not interfere with the use of beaches. MR. LOWE stated the basic determination for the inclusion of coal is the large tonnage amount, the personal injury potential in loading and off-loading that quantity of coal and the potential for a fire to be started on a ship. He noted it is not that the sulphur content of coal makes it a noxious mineral, but rather coal in bulk. CO-CHAIRMAN GREEN noted coal dust, because of rapid oxidation, could explode. REPRESENTATIVE OGAN asked if all countries in the world who ship coal would be subject to the treaty. He also asked where the money contributed goes. MR. LOWE replied all countries who transport coal would be required, under the IMO treaty, to contribute to the fund which would begin in the event a catastrophe exceeded the first tier of the liability. He stated he did not know what bank the money would be accumulating in. He said the money would go into an insurance fund that would be utilized if a substance within group B of the second tier was responsible for the accident that exceeded the first tier. He noted ammonium nitrate is very explosive and does present a hazard. Therefore, if ammonium nitrate was involved in an accident that exceeded the first tier, coal would automatically, because of its large tonnage, be taxed every time it is loaded and unloaded to pay for future incidents that will most likely not be as a result of coal but another substance being transported. MR. LOWE stressed there is international opposition to the IMO treaty. He stated there has been a couple of ideas proposed. One proposal would be to set up a separate appendix for nothing but coal and make that appendix have a zero rating until coal causes an accident exceeding the first tier. He noted coal producing countries, the Alaska Coal Association, and the Coal Export Association opposed that proposal because insurance rates for coal would go up due to coal's inclusion in a hazardous and noxious treaty. He said the cost of coal around the world is going to rise and the ability to market Alaska coal will be hindered. Number 682 REPRESENTATIVE OGAN stated it would be interesting to know who the players are in the proposal to include coal in the treaty and what their motivation is. TAPE 95-44, SIDE B Number 000 MR. LOWE indicated the oil industry does support the treaty as it currently is written. REPRESENTATIVE DAVIES recalled Mr. Lowe had stated the tier one insurance is paid by the ship owners, so presumably the coal industry contributes to the maintenance of that insurance through the tonnage paid to ship owners. MR. LOWE said that is correct. REPRESENTATIVE DAVIES said one might draw the conclusion that the industry is paying its fair share of the insurance currently. MR. LOWE agreed. He felt all people using carriers are contributing. He noted there is no other organization, worldwide, that classifies coal as noxious and hazardous. He said this will be the first time ever that coal has been classified as noxious and hazardous. CO-CHAIRMAN BILL WILLIAMS made a MOTION to MOVE HR 7 out of committee with individual recommendations. CO-CHAIRMAN GREEN asked if there were any objections. Hearing none, the MOTION PASSED.
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