Legislature(1995 - 1996)
04/06/1995 04:12 PM Senate RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 happens. 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 industry. 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 tariff. 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.