Legislature(1995 - 1996)

04/06/1995 04:12 PM Senate RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     SB 130 MARINE PILOTS                                    
  Number 001                                                                   
 SENATOR PEARCE called the meeting of the Senate Resources                     
 Subcommittee on SB 130 to order at 4:12 p.m.  She directed                    
 attention to a proposed committee substitute and asked for a motion           
 to adopt the committee substitute as a working document                       
 SENATOR HALFORD moved that CSSB 130(RES) be adopted as a working              
 document.  Hearing no objection, it was so ordered.                           
 Number 025                                                                    
 SENATOR PEARCE requested staff to outline the differences between             
 the committee substitute and the original bill.                               
 STEPHANIE SZYMANSKI, Legislative Aide to Senator Pearce, outlined             
 the following differences in the committee substitute:                        
 Page 1, Section 2:  Addresses concerns from industry that the two             
 seats they hold on the Board of Marine Pilots, that those agents be           
 registered active agents actually involved in obtaining pilotage              
 services.  Also, it addresses a concern that not more than one                
 agent or manager may be employed by, be a contractor for, or hold             
 a financial interest in the same marine industry.                             
 Page 2, Section 6:  On line 31 the word "chronic" was deleted to              
 address a concern by the department that the word would limit their           
 ability to possibly address an emergency situation before it                  
 Page 3, Section 8:  Line 19 addresses a concern relating to                   
 requirements for a deputy marine pilot license.  Paragraph (2)                
 requires two years of service as a master on a United States Coast            
 Guard inspected vessel, which clarifies the vessel.                           
 Page 6, Section 15:  Lines 27 - 29 does not mandate but allows a              
 pilot organization to implement an apprenticeship program.                    
 Page 7:  A new Section 16 is added which was previously in Section            
 15 and amends the paragraph by changing the "shall" to "may."                 
 Section 16 now provides that a pilot organization recognized by the           
 board may enter into agreements, etc.                                       
 Number 075                                                                    
 DAN TWOHIG, the marine pilot coordinator in the Department of                 
 Commerce & Economic Development, stated the department has no                 
 problem with the committee substitute.  However, he pointed out               
 that in conversations with the Department of Law, concern was                 
 voiced about the pilotage act and whether or not measures within              
 the pilotage act will create an exemption from federal antitrust              
 problems for pilot associations under the Sherman Antitrust Act.              
 Number 100                                                                    
 GAYLE HORETSKI, Assistant Attorney General, Civil Division,                   
 Department of Law, stated the Department of Law also is in favor of           
 the committee substitute in the sense that the bill, as presently             
 drafted, addresses many of the legal issues which have been present           
 in the marine pilotage industry in Alaska since the adoption of the           
 1991 Act.  She stressed the bill is badly needed and it would                 
 definitely improve the provision of pilotage services throughout              
 the state mainly by clearing up some areas of uncertainty or have             
 given rise to litigation since the 1991 Act was adopted.                      
 However, Ms. Horetski cautioned about a potential omission in the             
 bill that should be addressed, which is some kind of provision that           
 would specify the agency or entity responsible for establishing               
 what is to be charged for the providing of these pilotage services.           
 Due to an automatic sunset provision in the statute last year,                
 there is no either fixed or maximum tariff established in the State           
 of Alaska, which basically means that each individual pilot                   
 association is able to set its own rate and charge different rates            
 for different companies, etc.  Two reasons why that is of concern             
 are:  (1) whether it makes good sense as a public policy matter to            
 require the use of pilots, but then be completely silent on what              
 they can charge; and (2) the Sherman Antitrust Act, which is a                
 federal statute that applies in the state as it does nationwide, as           
 well a state antitrust law.                                                   
 Ms. Horetski explained that state law has a specific exception for            
 pilot associations, so there is no liability under the state for              
 pilot associations acting in compliance with the state statute.               
 However, the U.S. Supreme has said that in order for individual               
 companies or people to be able to assert a defense under the                  
 federal antitrust law, there must be state supervision.  This has             
 troubling implications for the antitrust liability under federal              
 law for the pilot associations if there is not sufficient active              
 state supervision of the tariff being charged by these associations           
 and their members to industry.                                                
 Ms. Horetski suggested to remedy the potential federal antitrust              
 problem a fixed tariff could be set by the board, or by the APUC,             
 or by the commissioner, etc., or, instead, a maximum tariff could             
 be set, below which pilot associations could compete, but their               
 rates could not go above that amount.  As a third option, she said            
 there could be some type of dispute resolution mechanism, but she             
 didn't think that would really be sufficient.                                 
 Number 248                                                                    
 SENATOR HOFFMAN asked how oversight would be accomplished if a                
 maximum tariff was adopted.  GAYLE HORESTKI answered that the                 
 board, or some mechanism, sets the maximum tariff and then the                
 associations would be able to argue if they were sued under federal           
 antitrust law that there is sufficient supervision of their rates,            
 that they should be immune from federal antitrust.                            
 Number 310                                                                    
 SENATOR PEARCE asked which of the three options, a fixed tariff, a            
 maximum tariff, or a dispute resolution mechanism, the Department             
 of Law feels would be most defensible and would most reach the                
 findings of even having pilots, which is the safety of the waters             
 of the state.  GAYLE HORETSKI responded that if the question was              
 directed to maximizing the antitrust protection of the pilot                  
 associations, in her opinion, the fixed tariff would give the                 
 maximum protection.                                                           
 Number 340                                                                    
 MIKE O'HARA, a board member on the Board of Marine Pilots and a               
 member of the Southwest Alaska Pilots Association, stated the                 
 committee substitute was a good bill, but he does have a concern              
 with the five-year apprenticeship program on page 4 because it                
 doesn't demand command experience for entry level qualification.              
 Mr. O'Hara pointed out that in Region 2 there is only one state               
 pilot association, and they have gone on record as supporting some            
 sort of arbitration or maximum tariff because of the federal                  
 antitrust implications.  He added that in other regions the                   
 implications of antitrust may not be as significant because there             
 is a competitive nature.  He stressed that SAPA would like to see             
 some sort of protection from federal antitrust and they would                 
 support whatever is necessary.                                                
 Number 363                                                                    
 HANS ANTONSEN, Southeast Alaska Pilots Association, voiced his                
 support for the committee substitute.                                         
 Mr. Antonsen said he doesn't see how the state is taking an active            
 participation in an oversight of a tariff setting process by                  
 setting a hypothetical cap which isn't based on anything.  If the             
 state's concern is to give pilotage some protection from federal              
 antitrust law, a maximum tariff doesn't do that.  There could still           
 be price fixing underneath a maximum cap in industry or by any                
 third party.  Further, he doesn't believe a maximum tariff                    
 encourages shippers to negotiate contracts with pilots as does not            
 having a tariff stated.                                                       
 GAYLE HORETSKI in responding to Mr. Antonen's remarks said the                
 protection for the associations under a maximum tariff is not as              
 clear cut as under a fixed tariff, but it certainly provides more             
 protection for the pilot associations, in the opinion of the                  
 Department of Law, than nothing.                                              
 Number 420                                                                    
 BENEE BRADEN, representing Western Alaska Pilots Association,                 
 voiced a concern with the makeup of the board.  They strongly feel            
 that there needs to be representation of all three of the regions             
 because there are a lot of differences amongst the three regions              
 and the pilot expertise that is needed from each of those regions.            
 She emphasized that Region 3 needs to have membership on the board            
 as well as the other two regions.  While the current language                 
 doesn't exclude Region 3, it does put a limitation of the pilot               
 expertise that can be on the board.                                           
 Number 442                                                                    
 LARRY COTTER, testifying on behalf of the Alaska Steamship                    
 Association, said in looking at this whole issue there are three              
 issues that are critically important:  safety, service and cost.              
 He stated their support for a maximum tariff.  They were willing to           
 support binding arbitration or some other form of dispute                     
 resolution, but given the Department of Law's opinion, that doesn't           
 seem possible.  Their fallback recommendation would be to support             
 a maximum tariff.                                                             
 Number 462                                                                    
 SENATOR HOFFMAN inquired how a maximum rate would be determined.              
 LARRY COTTER responded that in the legislation that sunsetted last            
 year, there is a section that talks about pilotage tariffs.  That             
 section has a host of criteria of what the board needs to take into           
 account in determining what a maximum tariff should be.  The board            
 looks at the proposals for a maximum tariff and weighs those                  
 proposals against the criteria to try to determine what is a fair             
 and equitable level for a maximum tariff.                                     
 Number 485                                                                    
 TEX EDWARDS, executive committee member, Prince William Sound RCAC,           
 testifying from Valdez, stated RCAC's concern is safety and                   
 protecting the environment.  RCAC supports the thrust of the bill,            
 and they urge the legislature and the committee to remain focused             
 on the impacts on all of the areas that are being debated.                    
 Mr. Edwards voiced concern with the makeup of the board.  He said             
 if the board is not going to set tariffs, they question if the                
 industry representation needs to be as great.  He suggested perhaps           
 the board should be seen as a safety, training and licensing board,           
 and the issue of tariffs can be handled by a separate professional            
 group.  He added that they would be opposed to any reduction in               
 public membership on the board.                                               
 Mr. Edwards stated support for service requirements for a deputy              
 marine pilot license, as well as the sanctions against pilots for             
 drug and alcohol use.                                                         
 Number 530                                                                    
 DOUG MACPHERSON, President, Alaska Coastwise Pilots Association,              
 stated support for the legislation, but on the composition of the             
 board, they would like to see each region represented by pilots and           
 Speaking to antitrust concerns, Mr. MacPherson said right now it is           
 not entirely clear that pilots forming voluntary organizations to             
 conduct their dispatch expense services are committing violations             
 of antitrust laws.                                                            
 Mr. MacPherson said the fact is pilot organizations do form                   
 together to lower prices for the consumer; they do this to become             
 more efficient.                                                               
 In his closing comments, Mr. MacPherson again stressed the                    
 importance of regional representation on the board.                           
 TAPE 95-37, SIDE B                                                            
 Number 020                                                                    
 PETER GARAY, Alaska Marine Pilots, Region 3, stated support for the           
 change in Section 2, which changes judicial district to regional              
 representation on the pilot board.                                            
 Mr. Garay said if the choice is fixed tariff versus maximum tariff,           
 his group would support the fixed tariff, as they do not believe it           
 is in the state's best interest for the mandatory service of                  
 piloting to be left to the market forces.                                     
 Number 050                                                                    
 BOB EVANS, Alaska Marine Pilots Association, Anchorage, said he had           
 been in consultation with Mark Ashburn who was formerly the head of           
 the antitrust section in the Attorney General's Office and  Mr.               
 Ashburn believes that the language contained in paragraph (8) of              
 Section 12, read in conjunction with the provision which says  the            
 pilot organization may enter into an agreement, that those two                
 provisions alone provide at least as much protection as a maximum             
 Mr. Evans also spoke in favor of a fixed tariff.                              
 Number 090                                                                    
 SENATOR HOFFMAN moved the adoption of the following amendment  to             
 CSSB 130(RES):                                                                
 Amendment No. 1                                                             
 Page 7, line 18: After "west" insert "or north"                             
 Page 7, line 19:  Delete ", Hawaii, and British Columbia, Canada"             
 and insert "and" [,] Hawaii, and including British Columbia, Yuko        
 Territory, and Northwest Territories, Canada"                                
 Page 7:  Delete lines 20 - 23 and insert it its place:                        
  "(5)  vessels of Canada, built in Canada and manned by                       
 Canadian citizens [INCLUDING CANADIAN CRUISE SHIPS], engaged in               
 frequent trade between                                                        
   (A)  British Columbia and Southeastern Alaska south of 58              
 degrees, 10 minutes North latitude, if reciprocal  exemptions are            
 granted by Canada to vessels owned by the State of Alaska and those           
 of United States registry; or                                               
   B  northern Alaska north of 68 degrees, 7 minutes North                    
 latitude and Yukon Territory or Northwest Territories; [AND]"                
 Number 110                                                                    
 ALAN WALKER, representing Northern Transportation, a Canadian                 
 corporation, speaking to the amendment, explained the corporation             
 for the last two seasons has been delivering products to several              
 North Slope villages.  Under the present statutes, U.S. tugs and              
 barges are exempted from pilotage requirements, but Northern                  
 Transportation, being a Canadian company, is not allowed under that           
 exemption to operate without a pilot.  The amendment would level              
 that playing field from a competitive standpoint so that the                  
 regulations would not be inhibiting foreign commerce.                         
 Number 130                                                                    
 Hearing no objection, the amendment was adopted.                              
 Number 140                                                                    
 There being no further amendments or discussion on the committee              
 substitute, SENATOR PEARCE said it was her intent to move the                 
 legislation out of the subcommittee and that it would be back                 
 before the full committee the following week.                                 
 SENATOR HALFORD moved that CSSB 130(RES) be moved out of the                  
 subcommittee to the full Resources Committee.  Hearing no                     
 objection, the motion carried.                                                
 There being no further business to come before the committee, the             
 meeting was adjourned at 5:12 p.m.                                            

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