Legislature(2009 - 2010)
04/02/2009 03:06 PM House JUD
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| Start | |
| Overview(s): Review of the 2004 Consent Decree Entered into by the State of Alaska and Crowley Marine Service, Inc., Et Al. | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
April 2, 2009
3:06 p.m.
MEMBERS PRESENT
Representative Jay Ramras, Chair
Representative John Coghill
Representative Carl Gatto
Representative Max Gruenberg
MEMBERS ABSENT
Representative Nancy Dahlstrom, Vice Chair
Representative Bob Lynn
Representative Lindsey Holmes
COMMITTEE CALENDAR
OVERVIEW(S): REVIEW OF THE 2004 CONSENT DECREE ENTERED INTO BY
THE STATE OF ALASKA AND CROWLEY MARINE SERVICE, INC., ET AL.
- HEARD
PREVIOUS COMMITTEE ACTION
No Previous Action to Report
WITNESS REGISTER
DAN LEINBERGER, Member
City Council
City of Bethel
Bethel, Alaska
POSITION STATEMENT: Provided comments during a review of the
2004 consent decree entered into by the State of Alaska and
Crowley Marine Service, Inc., et al.
CLYDE (ED) SNIFFEN, JR., Senior Assistant Attorney General
Commercial/Fair Business Section
Civil Division (Anchorage)
Department of Law (DOL)
Anchorage, Alaska
POSITION STATEMENT: Provided comments and responded to
questions during a review of the 2004 consent decree entered
into by the State of Alaska and Crowley Marine Service, Inc.,
et al.
REPRESENTATIVE BOB HERRON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Asked questions and provided comments
during a review of the 2004 consent decree entered into by the
State of Alaska and Crowley Marine Service, Inc., et al.
MEERA KOHLER, President & CEO
Alaska Village Electric Cooperative, Inc. (AVEC)
Anchorage, Alaska
POSITION STATEMENT: Provided comments during a review of the
2004 consent decree entered into by the State of Alaska and
Crowley Marine Service, Inc., et al.
MYRON P. NANENG, SR., President
Association of Village Council Presidents (AVCP)
Bethel, Alaska
POSITION STATEMENT: Provided comments during a review of the
2004 consent decree entered into by the State of Alaska and
Crowley Marine Service, Inc., et al.
BOB CHARLES, Energy Development Coordinator
Association of Village Council Presidents (AVCP);
President
Nuvista Light and Electric Cooperative, Inc.
Calista Corporation
(No address provided)
POSITION STATEMENT: Provided comments and responded to
questions during a review of the 2004 consent decree entered
into by the State of Alaska and Crowley Marine Service, Inc.,
et al.
RAYMOND THOR WILLIAMS, Member
City Council
City of Bethel;
Member
District 9
Board of Directors
Alaska Municipal League (AML)
Bethel, Alaska
POSITION STATEMENT: Provided comments and responded to
questions during a review of the 2004 consent decree entered
into by the State of Alaska and Crowley Marine Service, Inc.,
et al.
REPRESENTATIVE BRYCE EDGMON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided comments and asked questions
during a review of the 2004 consent decree entered into by the
State of Alaska and Crowley Marine Service, Inc., et al.
ACTION NARRATIVE
3:06:19 PM
CHAIR JAY RAMRAS called the House Judiciary Standing Committee
meeting to order at 3:06 p.m. Representatives Ramras, Coghill,
and Gatto were present at the call to order. Representative
Gruenberg arrived as the meeting was in progress.
^Overview(s): Review of the 2004 Consent Decree Entered into by
the State of Alaska and Crowley Marine Service, Inc., et al.
3:06:47 PM
CHAIR RAMRAS announced that the only order of business would be
a review of the 2004 consent decree entered into by the State of
Alaska and Crowley Marine Service, Inc., et al.
3:10:39 PM
DAN LEINBERGER, Member, City Council, City of Bethel, explained
that approximately five or six years ago, Yukon Fuel Company
("Yukon") was purchased by Crowley Marine Services, Inc.
("Crowley"), and a consent decree was negotiated by the attorney
general's office. Now that some time has passed, the City of
Bethel feels it would be prudent to review the consent decree
regarding its effectiveness and whether competitive conditions
within the Western Alaska fuel market still exist. Market
capacity in Bethel for fuel is approximately 14 million gallons,
and the decree mandates that 29 percent of that capacity be
allocated to another competitor; in this instance, that would be
Delta Western, Inc. ("Delta"). He mentioned that section XI of
the decree addresses compliance inspections.
3:14:52 PM
CLYDE (ED) SNIFFEN, JR., Senior Assistant Attorney General,
Commercial/Fair Business Section, Civil Division (Anchorage),
Department of Law (DOL), noted that he was largely responsible
for drafting the consent decree, that he'd investigated the
purchase of Yukon by Crowley, and that in looking at the
economic issues when crafting the decree, the DOL had assistance
from Barry Pulliam of Econ One Research, Inc. ("Econ One"). He
mentioned that the decree was reviewed by the court, and that
there had been a considerable amount of opposition to the decree
by residents of Bethel and "the Western Alaska fuel group." The
court ultimately found that the decree was in the public
interest and was subsequently court ordered.
MR. SNIFFEN explained that the purpose of the decree was to
[maintain a competitive marketplace for delivery of fuel
consistent with Alaska's antitrust laws], and that to effect
that, the decree required Crowley to sell two sets of barges and
tugs to Delta; to divest itself of 4 million gallons' worth of
storage space in Bethel; and to make storage capacity available
at its Nome, Kotzebue, and Saint Michael terminals.
Additionally, other actions on the part of Crowley were also
required by the decree. He explained that section XI of the
consent decree serves to ensure compliance with the
aforementioned requirements, and that Delta would be the primary
beneficiary of a lot of those requirements. He pointed out that
neither Delta nor any other competitor has complained to the DOL
regarding a lack of compliance by Crowley - which is also
required by the consent decree to submit reports to the DOL -
and thus there doesn't appear to be any problem at this time.
3:21:37 PM
REPRESENTATIVE BOB HERRON, Alaska State Legislature, asked
whether there was any consideration given to including in the
consent decree "an automatic reopener" or a scheduled
independent review.
MR. SNIFFEN said there was not, and remarked that such is not
typically done in the antitrust realm when resolving issues
pertaining to asset acquisition; instead, finality in the
process and a reliance on the marketplace are preferable over
providing any lingering authority to "overturn the applecart."
Again, the consent decree requires Crowley to provide the DOL
with compliance reports; furthermore, should it be determined at
some point that Crowley is engaging in conduct inconsistent with
the decree requirements, the DOL could act at that time.
REPRESENTATIVE HERRON asked whether those reports would be
public documents.
MR. SNIFFEN said it would depend on what information Crowley
provided in those reports, though the DOL prefers to keep as
much information public as possible; for example, if the DOL
requested proprietary information from Crowley, the DOL would
make public as much of the ensuing information as it could that
was not proprietary. In response to comments and questions, he
said that regardless that folks in Western Alaska are
dissatisfied with the amount of competition, unless something
illegal is actually going on, the DOL is not in a position to
take any action, and so would only be investigating allegations
of illegal activity such as collusion or price fixing or other
types of illegal conduct. A simple lack of competition - which
wasn't much even before the decree was ordered - and rising fuel
prices - which are rising everywhere, he noted - won't warrant
an investigation, and there isn't a lot that the DOL could do
about those things anyway.
REPRESENTATIVE HERRON, referring to the City of Bethel's
Resolution 09-16, said he doesn't believe that there is any
actual collusion occurring; instead, the concern is that there
is a sort of "lazy collusion" or "indifferent collusion"
occurring.
MR. SNIFFEN said it can be difficult to find violations of state
law in instances where a company simply isn't actively
attempting to keep prices down. He then offered his
understanding of some of the effects of and responses to the
"bidding markets."
3:34:34 PM
MEERA KOHLER, President & CEO, Alaska Village Electric
Cooperative, Inc. (AVEC), relayed that the AVEC provides
electric service to 53 villages, the bulk of which are in the
Yukon-Kuskokwim Delta (Y-K Delta) area, and buys about 5-5.5
million gallons of fuel per year.
[Chair Ramras turned the gavel over to Representative Gatto.]
MS. KOHLER, recounting the steps that the AVEC took once it got
wind of the proposed [purchase of Yukon by Crowley] and the
steps it's since taken, explained that what the AVEC has noticed
is that the fuel transportation costs appear to have doubled
what they once were before Crowley purchased Yukon, adding that
this dramatic increase seems quite excessive and will have a
significant impact on the area's villages. In conclusion, she
elaborated, "It is clear that there have been some very
significant increases in the cost of transporting fuel; to what
extent those are because of lack of competition, and to what
extent they are because costs have gone up, I don't know and I
can't speculate, but it's certainly ... a huge burden in Western
Alaska."
[Representative Gatto returned the gavel to Chair Ramras.]
3:39:33 PM
MYRON P. NANENG, SR., President, Association of Village Council
Presidents (AVCP), after mentioning that the AVCP represents 56
villages in the Y-K Delta, explained that these villages have
seen a dramatic increase in the price of fuel and are affected
by it, some to the point of having to choose between buying food
and buying fuel. He also recounted an incident to illustrate
that in Bethel, the [amount of storage space] the consent decree
requires Crowley to provide its competitor is insufficient to
meet the demand of those who wish to pay a lower price than
Crowley is charging. Last fall, for example, a lack of
competition in the area resulted in Kwethluk and Napaskiak on
the Kuskokwim River, and Emmonak on the Yukon, running out of
fuel even before "freeze up" occurred. Something has to be
done, he concluded, to reduce the cost of fuel in Bethel. The
AVCP, therefore, supports a review of the consent decree.
3:44:14 PM
BOB CHARLES, Energy Development Coordinator, Association of
Village Council Presidents (AVCP); President, Nuvista Light and
Electric Cooperative, Inc., Calista Corporation, explained that
the local, small, individual utility companies in the region
have seen their fuel prices skyrocket well over 100 percent from
2007, and this in turn has resulted in increased costs to the
communities as well as to the State of Alaska. The people,
utilities, and fuel operators and buyers in the region,
therefore, have been asking questions regarding whether the
consent decree has had the desired effect on fuel prices; these
questions - several of which he listed - deserve some
consideration because the effectiveness, or lack thereof, of the
consent decree is having an impact on both Western Alaska and
the state economy. In response to questions, he concurred that
it would be worthwhile for the DOL to investigate the
effectiveness of the consent decree, particularly with regard to
whether there is sufficient competition in the market.
3:52:19 PM
RAYMOND THOR WILLIAMS, Member, City Council, City of Bethel;
Member, District 9, Board of Directors, Alaska Municipal League
(AML), noting that the AML's District 9 includes a lot of small,
Native communities that are very much impacted by the consent
decree and the cost of the energy they must purchase in order to
heat, feed, and educate their children, surmised that because of
a lack of competition in the Bethel area, the costs for State
services are increasing extremely quickly, and that if this
continues, things will soon get to the point where some of the
villages won't be able to keep going. He asked the committee to
request that the DOL investigate these issues and evaluate
whether the consent decree is still in everyone's best interest.
He suggested that the consent decree was agreed upon because it
would make it easier for some corporations to make money rather
than because it would ensure sufficient competition. In
response to questions, he agreed that fair trade practices in
Bethel and surrounding communities have become an issue; offered
a comparison between fuel prices in Bethel and fuel prices in
Nome; and surmised that the higher prices in Bethel are the
result of a lack of competition.
REPRESENTATIVE HERRON disclosed that up until 1998, he owned a
gas station in Bethel, that he was the city manager in Bethel
when the consent decree was proposed, and that his son works for
Delta.
MR. SNIFFEN, in response to a question, said it would be helpful
to receive specific examples of insufficient competition, and
acknowledged that the issue of whether sufficient storage
capacity has been provided for via the consent decree is one
that the DOL could look into.
4:05:18 PM
REPRESENTATIVE BRYCE EDGMON, Alaska State Legislature,
questioned whether the terms "unfair practices" and "legitimate
business practices" have been defined specifically to address
today's [fuel pricing] environments.
MR. SNIFFEN explained that those are terms of art that encompass
a broad range of potential activities, both obvious and subtle,
and that investigating such issues is a broad charge for both
regulators and the courts. In response to a question, he
outlined the steps the DOL might take and the questions it might
ask in investigating the effectiveness of the consent decree,
noting that the DOL has broad investigatory authority under
Alaska's antitrust and consumer protection statutes. In
response to a further question, he explained that the term
"market power" is generally defined as the power of an entity to
control prices or restrict competition, but pointed out that
having market power isn't against the law in and of itself - at
issue instead is whether such market power is obtained via
illegal behavior. Some costs are just very high, and fuel
companies have to pass those costs on, and they are not
necessarily making a large profit, though collusion among
companies to keep prices high is something that would be of
concern to the DOL and could engender an investigation.
REPRESENTATIVE HERRON made some suggestions for questions the
DOL could ask during an investigation, offered his understanding
of how Crowley and Delta conduct their businesses in various
locations around the state, and relayed that people want the DOL
to conduct an investigation in order to determine whether the
consent decree is still functioning as intended.
CHAIR RAMRAS suggested that both the DOL and the Regulatory
Commission of Alaska (RCA) ought to investigate these issues
further.
REPRESENTATIVE EDGMON, in conclusion, surmised that people in
Western Alaska are simply questioning what factors are causing
their fuel costs to be so high.
REPRESENTATIVE HERRON, in conclusion, characterized the price of
fuel products in Western Alaska as volatile, and reiterated his
understanding of how Crowley and Delta conduct their businesses,
surmising that some people are concerned that Crowley has a
competitive advantage in Bethel.
CHAIR RAMRAS, in conclusion, indicated that the committee would
be issuing a formal request for the DOL to undertake an
investigation into this matter.
4:25:21 PM
ADJOURNMENT
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 4:25 p.m.
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