Legislature(1995 - 1996)
04/27/1995 09:25 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 130
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.
Senate President Drue Pearce explained that, following the
Exxon Valdez oil spill, one of the recommendations of the
Oil Spill Commission was that pilotage statutes and
regulations be completely rewritten. In 1991, considerable
energy was devoted to that effort. SB 130 extends the board
of marine pilots, now in its sunset year, and makes changes
that eliminate problems associated with the 1991 rewrite.
Senator Pearce referenced a letter of support from the Dept
of Commerce and Economic Development and advised that the
fiscal note covers a self-sustaining board. Pilots
presently pay a $3.0 annual license fee.
A new apprenticeship program, introduced by the Knowles
administration, will provide an opportunity for more
Alaskans to break into piloting. It will enable individuals
in Western Alaska who qualify for the program to be trained.
This is particularly important for the Pribilof Islands
where pilotage is compulsory. There are no resident marine
pilots in the area, and a pilot must be flown to the region.
Senator Rieger asked Senator Pearce to comment on an article
by the Federal Trade Commission regarding monopoly in marine
pilotage. Senator Pearce responded that the system in Alaska
is much less a monopoly than elsewhere in the country.
Mississippi pilots must be a family member to break into the
industry. There are other areas of the country where
pilotage is a monopoly. Alaska has competing pilots.
Agreements between industry groups and piloting
organizations are "free wheeling" with regard to terms and
conditions. American flag carriers, such as Sealand, have
their own pilotage arrangement. Alaska does not have fixed
tariffs. They were eliminated in 1991. There is nothing to
keep a separate association from forming in the one area
that has only one association, other than the economies of
scale associated with organized dispatch of existing
members.
Joe Kyle, Alaska Steamship Association, came before
committee, representing customers of state-licensed pilots.
He said that customers do not support the bill. While it is
supported by pilots and the Dept of Commerce and Economic
Development, the Dept of Law has the same understanding as
the ASA with regard to opposition to the bill. SB 130 is
not supported because it affords no tariff protection. The
ASA is required to use the services of state pilots. There
are few within the state, and their number is decreasing.
At the same time, in certain parts of Alaska, shipping
volume is increasing. Pilot organizations will not be able
to meet the needs of existing contracts with the foreseeable
shortage of pilots. Arguments against tariff protection
advocate that there is already a competitive pilot system,
and it is not necessary for the state to set rates. The ASA
wants tariff protection included in the bill. Provisions for
piloting mediation seem to pose the least amount of
difficulty for industry and the state. If that is not
attainable, Mr. Kyle expressed support for the situation
prior to 1991 when a maximum tariff was in place. Failing
that, Mr. Kyle voiced support for cross regionalization.
Considerable discussion followed regarding limitation of
Alaskan pilots to one or two regions. Mr. Kyle suggested
that cross regionalization would help reduce the upcoming
pilot shortage. He addressed the safety issue associated
with cross regionalization by advising that during his 20
years as a Coast Guard Officer, he was heavily involved in
federal pilotage. The United States Coast Guard pilots
vessels from the coast of Maine to Point Barrow. The
criteria is that Coast Guard regulations must be met.
Today, federal pilots take ships from Ketchikan to Point
Barrow without the assistance of state pilots. Mr. Kyle
suggested that there is no safety issue involved in cross
regionalization as long as pilots who cross regionalize are
required to pass both a Coast Guard and state certification
process. That resolves the safety issue. He stressed that
there is no empirical data anywhere that suggests that
federal piloting is less safe than state piloting.
Jeff Bush, Deputy Commissioner, Dept of Commerce and
Economic Development, testified that the department supports
the bill as written. The department is neutral on issues
presented by Mr. Kyle. Mr. Bush said the state does not
wish to be the arbitrator or mediator on those issues. If
the process of arbitration or mediation is kept out of the
hands of the state and placed in the private sector, the
department does not oppose changes that would incorporate
arbitration or mediation.
Speaking to cross regionalization, Mr Bush voiced department
opposition, citing safety as the issue. Logic infers that
it is safer for a pilot to be licensed to practice and
demonstrate experience in a smaller area. He acknowledged
that the issue also relates to availability of pilots.
Alaska has an extensive coastline, and it is difficult to
get to many areas, such as the Pribilofs, where a pilot may
be required. If there is a system for cross
regionalization, pilot associations may deny service to
harder to reach areas due to economics. Mr. Bush noted that
the bill allows the board to permit limited cross
regionalization if there is a shortage of pilots in a
particular region. Senator Pearce said that in 1991 cross
regionalization was looked at carefully because the cruise
ship industry wanted to put pilots aboard in Southeast and
keep them aboard across the Gulf of Alaska and into Prince
William Sound. The tanker association was against that
arrangement because the cruise ship industry is seasonal.
There was fear of a lack of currency on the bridge,
particularly in Prince William Sound. The state gave the
board the ability to cross regionalize on an individual
basis. Senator Pearce concurred in comments by Mr. Bush
regarding safety.
Co-chair Halford asked if there was a requirement for
pilots to serve hard-to-reach areas such as the Pribilofs.
Senator Pearce suggested that cross regionalization would
cause prices to substantially increase. Where there is low
volume, there will be a higher cost. Pilotage was discussed
with regard to difficulty in piloting and the remoteness of
some areas. In emergency situations, where there is a
pilotage shortage, the board can send pilots from one area
to another.
Senator Rieger asked if a tariff was imposed by the board.
Mr. Bush responded that tariffs are not set by the board.
The maximum tariff was repealed in the summer of 1994. This
bill does not establish a maximum tariff. He explained that,
under the current system, if an association in a particular
region is contacted, the association must dispatch a pilot.
There is nothing in the bill that sets the rate the pilot
will charge. That is negotiable between the pilot and the
association. Negotiations will have to take place between
areas and associations in order to get the most desirable
price. Cross regionalization eliminates the requirement the
association demanded. There was further discussion of cross
regionalization.
Mr. Bush noted that apprenticeship is included in the bill.
Senator Zharoff commented on the difficulty associated with
becoming licensed as a marine pilot, even though an
individual may know an area extremely well. Mr. Bush
acknowledged that the apprenticeship program does not solve
the problem, now. However, it offers a means by which
Alaskans with local knowledge can, in a particular region,
become licensed marine pilots without having to go through
the formalities that are otherwise required. It is not
something to be taken lightly. It requires a lengthy period
of apprenticeship to become a pilot.
Mr. Bush restated his position on cross regionalization. He
noted that other areas of the country support "port-
specific" pilot licensing. A pilot has a license for a
particular area, and once out of that area, another pilot
comes aboard. It has been determined that, from a safety
perspective, it is better to have experience in as small a
region as possible. That is not feasible in Alaska where
there are only four pilot regions. Mr. Bush said he would
support "port-specific" licensing if there were an unlimited
number of pilots in Alaska. He emphasized that it is
impossible for a pilot to be an expert in all areas of any
one region. Expanding the area of coverage does not take
safety into account.
Dan Twohig, Marine Pilot Coordinator, Dept of Commerce and
Economic Development, responded to Senator Zharoff's
concerns regarding the apprenticeship program. He explained
that in Southeast Alaska, pilot organizations argue that a
minimum of three to five years is required to get through
the program. In the Western region (region 3), no one has
ever been licensed, so the time to qualify is unknown. In
general, pilots sell two things: 1) intimate local
knowledge and 2) ship handling skills. A person usually
comes into the training process with one of those assets.
Alaska has 47,000 miles of navigable coastline, It is
inconceivable to think that a person can have intimate local
knowledge of more than one region at one time. It is not
unreasonable to believe that one can gain local knowledge if
he or she goes to one place many times. In a situation
where a pilot organization is working a particular region,
it would probably not be inclined to take someone from
another region and train him or her to partake in the profit
of the second region as well. That would not make sense.
There are currently 68 marine pilots in the state. They
cover all four regions. Half the pilots are Alaskan
residents. Mr. Twohig said that state compulsory pilotage
law requires state-licensed pilots on foreign flag vessels
as well as U.S. vessels under register--those that sail to
foreign ports. Federal pilots can go anywhere on "enrolled"
vessels (U.S. vessels and U.S. cruise ships). The state
pilot law is designed to protect lives and property in the
marine environment. A state pilot is the one person the
state can count on to look out for the state's interest. If
piloting involves a ship from a Far Eastern country, where
nobody speaks English, there is at least one person on board
with the necessary local knowledge and ship handling skills
to talk to other ships, understand what the other pilots are
doing, and make appropriate decisions to keep things safe.
That is the basis of the program. There was considerable
further discussion relating to training and the
apprenticeship program.
Co-chairman Halford voiced his understanding that the
administration opposes cross regionalization. Yet, it also
opposes single-port licensing. Mr. Bush responded that
single-port licensing is impossible with a group of only 68
to 88 pilots. If single-port licensing were utilized in
addition to regionalizing, and a pilot licensed in Southeast
could also be permitted to go to Prince William Sound, the
issue may be different. The department is opposed to
single-port licensing. Mr. Twohig stressed that
regionalization is necessary because the state is so large
that there must be a group of people to count on to service
outports. Since pilot associations do the needed training,
there must be pilot organizations. It is of great benefit
to take someone out of a village and train him or her to be
a pilot. That training, however, is for the region, not
just one small area. Pilots must be able to serve from one
outport to another within the region, so that commerce can
flow within one region to another. Mr. Twohig advised that
the current proposal for an apprentice program is bare
bones. It will take a year to implement the regulations to
make it work in the state's best interest. Pilot
organizations, especially in the Western region, have
trouble finding people that have the sea-time experience to
meet entry level requirements presently in law. This
apprenticeship program will allow a local person to get into
the program although he or she may not have the needed time
as a master on a vessel over 1600 gross tons because that
shipping is not available to him or her since it involves
foreign flag shipping. Entry into the program is there for
people who have not had the required employment
opportunities to enter the program under existing law. When
the regulations are completed, pilot organizations will
utilize an application process to select trainees. Mr. Bush
interjected that there is a five-year experience requirement
in a board approved deputy marine pilot apprenticeship
program. That program would have to be provided through a
pilot organization.
Senator Pearce reiterated that the Knowles administration
proposed inclusion of an apprenticeship program in the bill.
It cannot preclude entry from qualified people from other
parts of the country. Under the interstate commerce act,
Alaska cannot close entry to qualified people from the
"Lower 48." The board will have to strive to develop an
apprenticeship program that allows more Alaskans living in
rural areas into training and pilot organizations instead of
setting up a program whereby Alaska will be overrun by
outside pilots.
Mr. Bush suggested that if port-specific licensing could be
created whereby every pilot had to be port specific and live
200 days a year in that particular port, the state would not
oppose the effort. However, from a practical point of view,
it is not possible. The impracticality of changing pilots in
Southeast for every port would be incredible. Further,
guaranteeing that a pilot would live in some of the small
villages where pilotage services are required is not
realistic. The current system is a compromise between
necessary economic regulation for safety purposes and
allowing a large enough region so people can make a living.
Mr. Twohig explained that a tariff is a base number for a
ship movement. Variables are associated with what it
actually costs to move a ship. There is a tonnage multiple,
travel and standby time, and travel expenses. He then
explained that under the maximum tariff set by the board,
the maximum for Ketchikan was $821, travel inside and
outside Glacier Bay was $2345, and charges for Cook Inlet
and Prince William Sound were $645 to $1500. Base maximum
numbers are figured on a tonnage multiple. The highest
charge was for Glacier Bay. It is an all-day trip. The
most difficult is Wrangell Narrows. Rates are proportional
to the time involved in the pilotage. The rates described
are maximums, not the rates actually set by pilot
organizations with shippers.
Dale Collins, Southeast Alaska Pilots Association,
testified that he sits on the Board of Marine Pilots, and is
an advocate of amending the 20-year old state statute on
marine pilotage. He said he was born in Kodiak, Alaska, and
raised in Kodiak and Ketchikan. He has lived in Alaska his
whole life. He is one of five or ten pilots that were
actually raised in state. There are many reasons why the
number of local pilots is so few. The federal government
requires licenses that require ocean-going sea time not
really available to Alaskans. State law usually parallels
federal law, so that one of the requirements, both federal
and state, is that a state pilot be federally licensed.
State law also requires local knowledge and ship handling
ability. Mr. Collins voice support for regionalization and
opposition to cross regionalization and port-specific
licenses. He said that were it not absolutely necessary for
a pilot to belong to an organization, to fulfill state
requirements, he would not belong to one. However, an
individual pilot cannot be available 24 hours a day. Thus,
he is part of an association that provides what the state
requires of a pilot: 24-hour availability, 365 days a year.
That is difficult for a small group of people to do.
Organizations are thus asking legislators to buy the
regional concept. He said he supports the concept because
the state needs pilots who will be available 24 hours a day,
365 days a year. Mr. Collins described how piloting works
and what it means to him. He advocated a fixed tariff and
told members that competition is resulting in a lack of
pilots.
End Tape #46, Side 2
Begin Tape #48, Side 1
Senator Rieger inquired regarding maximum tariffs when they
were in effect. Mr. Collins explained that they were 50%
over the fixed rate. In region 1 (Southeast Alaska) the
tariff for cargo ships has come up 35%. Prior to the
maximum tariff, the same rate existed for 11 years. Cruise
ships have gone from 8% to 20% over the last 4 years.
Competition has meant higher prices, suspicion, fear, and
fewer pilots being trained. He said he does not support
competition in the piloting business. Senator Rieger asked
if maximum tariffs reflect cross subsidization. Mr.
Collins suggested that use of the word anomalies would be
more accurate than subsidization. Wrangell Narrows, which
Mr. Collins described as 21 miles of shear terror, is
essentially a blasted out ditch with 63 aids to navigation.
The risks are high and the pay is low. Glacier Bay, until
the vessel gets into ice, is wide open. While piloting
there takes a long time, it is a nice trip and costs $1200.
There are many considerations in setting rates which have
just increased 50-100%.
Co-chair Halford cited existing law which allows for
pilotage in more than one region, if it is found to be in
the best interest of the state. Mr. Collins responded that
the board found only one area for which that was true. Co-
chairman Halford noted that testimony indicates no one wants
cross regionalization. However, the board has authority to
allow it. He then asked why the legislature should create a
statute prohibiting it. Mr. Collins acknowledged there are
counter statements in the law which work at cross purposes.
One statute says that one could be cross regionalized. The
other says, "not unless it is in the best interest of the
state." The board has been unable to determine what is in
the best interest of the state, without getting into the
economic conditions of the times. The department and the
Board of Marine Pilots want to clean up the language. A
decision has thus been made. If it is in error, it is on
the side of safety.
Mr. Collins referenced creation of region 3 which includes
transport via large box ships (Sealand). Pilots in the
region are used to the fish boats and ships of less tonnage.
Southwest region 2 pilots historically did this work. At
the request of ship owners, region 2 pilots were left in
place for almost two years to train pilots in region 3 to
handle that type of ship. That arrangement worked
successfully. That is the only case where cross
regionalization happened. If a shortage of pilots occurred
in Southeast, Mr. Collins questioned whether it would be
good to bring in pilots from Western Alaska or elsewhere.
Co-chairman Halford read the following language:
A pilot may not be licensed in more than one
piloting region at a time, unless the
commissioner determines that an actual or
imminent shortage of licensed pilots exists in a
pilotage region.
He then noted that if the commissioner makes that
determination, the board may, after consultation with the
pilot organizations, "do something about it." He suggested
that there is a two-tier process. Even after the
commissioner has made a determination, the board does not
have to take action. Existing law leaves it to the board.
Changes in the proposed bill appear to be one step further
away from any potential for cross regionalization, even in
emergency situations.
Co-chairman Halford directed that SB 130 be held in
committee for continued discussion at the afternoon meeting.
RECESS
Meeting was recessed at approximately 11:15 a.m. for
attendance at the Senate Floor Session.
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