Legislature(1999 - 2000)
03/03/2000 03:02 PM Senate RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE RESOURCES COMMITTEE
March 3, 2000
3:20 p.m.
MEMBERS PRESENT
Senator Rick Halford, Chairman
Senator Robin Taylor, Vice Chairman
Senator Pete Kelly
Senator Lyda Green
Senator Georgianna Lincoln
MEMBERS ABSENT
Senator Sean Parnell
Senator Jerry Mackie
COMMITTEE CALENDAR
SENATE BILL NO. 273
"An Act requiring oil discharge prevention and contingency plans
and proof of financial responsibility for nontank vessels and
railroad tank cars; authorizing inspection of nontank vessels and
trains; and providing for an effective date."
-HEARD AND HELD
PREVIOUS SENATE COMMITTEE ACTION
SB 273 - See Resources Committee minutes dated 2/21/00.
WITNESS REGISTER
Senator Drue Pearce
State Capitol Bldg.
Juneau, AK 99811
POSITION STATEMENT: Sponsor of SB 273.
Mr. Pat Carter
Aide to Senator Drue Pearce
State Capitol Bldg.
Juneau, AK 99811
POSITION STATEMENT: Commented on SB 273.
Mr. Larry Dietrick, Acting Director
Division of Spill Prevention and Response
Department of Environmental Conservation
410 Willoughby Ave.,Ste.10
Juneau, AK 99811
POSITION STATEMENT: Commented on SB 273.
Mr. Breck Tostevin, Assistant Attorney General
Department of Law
1031 W 4th Ave., Suite 200
Anchorage, AK 99501
POSITION STATEMENT: Commented on SB 273.
Mr. Jim Burns
16200 Luna
Anchorage, AK 99516
POSITION STATEMENT: Commented on SB 273.
Mr. Tom Rueter
North Star Maritime
790 Ocean Dock
Anchorage, AK 99501
POSITION STATEMENT: Commented on SB 273.
Mr. Doug Davis, Attorney
1029 W 3rd Ave.
Anchorage, AK 99501
907-279-9696
POSITION STATEMENT: Commented on SB 273.
Mr. Bert Ray, Maritime Attorney
1029 W 3rd Ave., 6th floor
Anchorage, AK 99501
POSITION STATEMENT: Commented on SB 273.
Mr. Jim Butler, Attorney
125 N. Willow #100
Kenai, AK 99611
POSITION STATEMENT: Commented on SB 273.
Mr. Rich Berkowitz
Transportation Institute
2200 Alaskan Way #110
Seattle, WA 98121
POSITION STATEMENT: Commented on SB 273.
Captain Norm Edwards, Operations Manager
Alaska Marine Highway System
3132 Channel Dr.
Juneau, AK 99801
POSITION STATEMENT: Commented on SB 273.
Ms. Stephanie Madsen
Pacific Seafood Processors Association
213 Third Ave., Suite 112
Juneau, AK 99801
POSITION STATEMENT: Commented on SB 273.
ACTION NARRATIVE
TAPE 00-06, SIDE A
Number 001
SB 273-OIL SPILL RESPONSE; NONTANK VESSELS & RR
CHAIRMAN HALFORD called the Senate Resources Committee meeting to
order at 3:20 p.m. and announced SB 273 to be up for consideration.
SENATOR TAYLOR moved to adopt draft D of SB 273 as the committee
substitute. There were no objections and it was so ordered.
SENATOR PEARCE, sponsor of SB 273, reviewed the changes in the
committee substitute. A new subsection was added to AS 46.04.055
on page 3, line 6. Currently, Alaska has a direct action provision
in its financial responsibility requirements. Direct action means
the State can pursue a claim directly from the insurance company in
state court to seek recovery if the policyholder goes bankrupt or
is otherwise unable to pay. The direct action provision gives the
State the greatest certainty of recovering for damages to state
resources. The financial responsibility requirements under the Oil
Pollution Act (OPA) of 1990 mandate direct action.
Alaska law also contains an exception provision to allow forms of
insurance without direct action, if it is not available. The
proposed amendment in the committee substitute was reviewed by the
working group for SB 273. It extends the exception provision to
marine vessels over 300 gross tons without requiring a
demonstration that it is not available. This allows P&I clubs and
other insurers who will not insure in direct action states to do so
in Alaska for marine vessels over 300 gross tons.
The working group also debated substituting the federal Certificate
of Financial Responsibility (COFR) under the federal OPA, in part
or in whole, for the state's financial responsibility requirement.
The levels of financial responsibility coverage are different under
state and federal law.
Alaska's financial responsibility law is based on the amount of
fuel that can be stored on a vessel and not on the vessel's
tonnage. It is, therefore, more directly related to the risk
actually posed by the vessel in our waters. It was suggested that
the Oil Spill Liability Trust Fund, a federal fund, could satisfy
the needs of a state claim. While this may be true for some costs,
it is not clear that the breadth of state damages would be allowed
under federal law.
Alaska statutes have unique provisions for compensating for damages
for which the eligibility for claims has not been tested under the
federal trust fund. That leaves the option ambiguous. It also was
not the purpose in introducing the legislation in the first place
to completely overhaul our financial responsibility requirements.
While they dealt with the direct action question, they didn't go
further and substitute COFR coverage for the state's coverage.
On page 3, line 10 they discussed "innocent passage" in our waters.
Language that has been added in subsection (e) allows vessels to
pass through our interstate waters for reasonable purposes. This
language is consistent with international convention. If you have
to bring a ship in to our waters in order to Medivac an individual
or, if the vessel itself is in distress, and comes in to find a
safe harbor, that would be innocent passage and there would be an
exemption.
In terms of contingency plans and the section for response planning
standards and co-op membership, on page 3, line 26 they added
section (c)(1) which makes sure the ability to alter the response
planning standard can be included in the negotiated rule making
process. They also added language to the end of the sentence on
page 3, line 29, that reads, "spill prevention and response,
including the use of fleet plans, membership in a nonprofit
corporation that is a primary response action contractor and a
contingency plan holder, and spill prevention measures." This
language will make it more apparent during the entire negotiated
regulation process that being a member of a co-op can satisfy the
contingency plan requirement as long as the co-op is a contingency
plan holder. This takes the burden away from each and every ship
to have to prepare its own C-plan for which there is a cost.
On page 5, lines 2, 3, 8 and 9, they have conformed the definition
of "persistent" definition to OPA 90 standards, and deleting the
original definitions for persistent and nonpersistent product. If
OPA '90 is changed in the future, Alaska statute does not have to
change with it. Vessel owners already know under federal law what
sort of product they are carrying and there is no reason to try to
change those definitions. Distinguishing between persistent and
nonpersistent product based on the federal definitions also has a
purpose in that it plays a part in determining financial
responsibility because it's based on the difference in damages that
can be caused by the products. Crude oil, for instance, is not as
toxic as some of the lighter products.
The definition of "nontank vessel" on page 5, line 4 was deleted
and substituted with just the words "nontank vessel." It now
refers to any self propelled water craft with 300 gross registered
tons. That will conform Alaska with Washington State and mean that
the Sampson tug and barges that come into Alaska waters, sometimes
out of the state of Washington, will not have to conform with all
the other regulations in this chapter. The 6,000 gallon threshold
was also deleted. On page 5, line 18, a provision requires the DEC
to provide the legislature with a comprehensive report following a
negotiated regulation process.
SENATOR PEARCE thanked DEC, in particular, for being so willing to
understand the difficulties of having the ability to respond to
spills throughout coastal Alaska, because of our vast distances.
They have already met that test and have contingency plans in place
for hauling fuel to coastal villages around the State and on the
river systems. They have assured her that they will use that same
sort of flexibility and are interested in a balance between
protecting the resource while also attempting to make sure they
don't have the burdens of costs so great that they put shipping
companies out of business.
CHAIRMAN HALFORD said some of the questions he has are about the
exception provisions with regard to direct action which he doesn't
fully understand. He would like to understand what the convention
says for what innocent passage is. To him the term "negotiated
regulation" is an oxymoron and he would like to know what that is
as well.
Number 901
SENATOR LINCOLN asked what other major questions arose that the
working group didn't address.
SENATOR PEARCE replied that regarding financial responsibility,
some of the folks would like them to just accept the federal COFR
as financial responsibility, not only for the federal government,
but also for the State of Alaska. But she thought during the
direct action provision she had come a long way toward making sure
the P&I's could still insure in the State of Alaska. She didn't
think the State should be rewriting the financial responsibility
laws at the moment, but she didn't see a reason to use the COFR
which is based on a different standard from which we base our
original financial responsibility laws. They go by tonnage in
federal law and we go by a vessel's capability for carrying fuel.
They left the inspection language as is, she said. There was a
question of what it meant. In present law, DEC has the right to
inspect a vessel to determine whether or not it has the equipment
its contingency plan says it has.
MR. PAT CARTER, aide to Senator Pearce, said the concern was raised
that inspections could be expanded upon the scope of this chapter.
If you look at page 4, line 7, it ensures compliance with the
provisions of this chapter, which already satisfies that concern.
Number 1052
SENATOR TAYLOR informed Senator Lincoln that nontank vessels and
trains are not presently in the law for inspections and part of the
concern is that they didn't want DEC to attempt to do mechanical
systems or structural integrity examinations in boats where they
might not have any expertise. The Coast Guard is required to do so
under federal law, both for safety at sea and all the other
aspects, too, like oil and lubricant that might be carried on the
boat.
SENATOR PEARCE commented that when the inspection provisions were
written in 1990, DEC felt it needed access to Coast Guard
inspections and if the Coast Guard wasn't inspecting a vessel the
state was concerned about, it needed to have the opportunity. But
it has to determine that federal and state agencies with
jurisdiction are performing timely and adequate inspections of the
covered entities. This would give DEC the same ability, but the
primary reason to put DEC in there is to make sure they can spot
check whether or not the vessels have on board the equipment their
contingency plans say they will have.
CHAIRMAN HALFORD asked regarding structure, if nontank vessels are
being treated the same as tank vessels, and asked why they didn't
just delete the definition of nontank vessel entirely.
SENATOR PEARCE said co-ops and other compliance provisions in the
law treat nontank vessels differently from tankers.
CHAIRMAN HALFORD said this takes it down to 300 tons with no fuel
capacity limitation except not being a tank vessel.
SENATOR PEARCE responded that they didn't have to keep the 6,000
gallons when they exempted the Thompson Tug and Barge folks.
CHAIRMAN HALFORD asked how they were exempted.
SENATOR PEARCE explained that they were self propelled.
CHAIRMAN HALFORD asked what the difference is if you're dealing
with a vessel above 300 tons that's carrying 100,000 gallons of
fuel versus a tug towing a barge that's carrying it.
SENATOR PEARCE explained that a barge that's carrying 100,000
gallons is a tank vessel (fuel barge), so it's already under the
law we presently have.
CHAIRMAN HALFORD said you could take the same barge that's no
longer approved for tankage and not use its tanks and put four
20,000 gallon tanks on its deck and use it.
SENATOR PEARCE responded, "Not if you're using it for commercial
purposes."
MR. CARTER added not if you're hauling it for cargo. One of the
differences between a nontank vessel versus a fuel barge (tanker
vessel) is that one of them is hauling the fuel for cargo for
commerce versus purposes of self propulsion.
Number 1052
CHAIRMAN HALFORD asked if deck tanks on a barge to Greens Creek are
the same thing.
MR. CARTER replied they were excluded from this legislation. If a
DOT tank falls overboard, it's not spilled; you just go and pick it
up.
CHAIRMAN HALFORD said if that tank is on a vessel, it has to be
covered; if it's on a barge, it doesn't have to be covered. If
it's integral to either one of them, it sounds like it's always
treated as a tank vessel. If you want to deliver fuel somewhere,
you don't hire a boat; you hire a tug and a barge - if you are
trying to figure out a way to avoid the liability exposure of cost.
He was talking about power scows 70 - 90 ft. by 24 ft. (self
propelled) that are used all over the place in the fisheries as
tenders and everything else.
SENATOR TAYLOR said they were carrying diapered tanks.
CHAIRMAN HALFORD said that those are not certified by the Coast
Guard so, when they carry fuel, it's in tanks on deck. He just
wanted to know if they are treated differently.
SENATOR PEARCE responded that the answer is yes. It's consistent
with Washington state law and we are trying to have consistency so
that folks who operate in both Alaska and Washington don't have two
different sets of rules.
CHAIRMAN HALFORD said he wanted to know what 300 gross tons means
in terms of the size of vessels.
SENATOR PEARCE said that depends on the vessel, because the marine
architect gets to decide that when designing the ship. If you have
a door instead of a wall or a door opening onto a deck, it can make
a big difference.
MR. CARTER said this was reviewed at length - deciding to use
international gross tons or some other threshold. What it came
down to is that the entire West Coast operates off of 300 gross
tons.
CHAIRMAN HALFORD said he was concerned about the basic
understanding regarding terms of length, depth, and beam of the
average vessel of 300 gross tons.
Number 1414
MR. CARTER answered that it would be about 150 ft.
SENATOR PEARCE added that ADF&G's boat, Medea, is only 246 gross
tons, the Stimson is 716 and the Wolstad is 305.
MR. LARRY DIETRICK, DEC, explained that currently Alaska has a
direct action provision (since the 80's) which allows Alaska to
take a direct action against the insurance company if the vessel
goes bankrupt or otherwise can't pay. That action takes place in
Alaska courts. There is an exception right now which says if for
some reason a vessel is not able to find an insurance company that
is willing to insure with that direct action provision, you can let
the State know, and they will accept a form of insurance from a
company that does not agree to a direct action provision. The
burden is on them to try.
CHAIRMAN HALFORD asked if the vessel or operation is so risky that
no one will take direct action and then it's O.K.?
MR. DIETRICK responded that's correct.
CHAIRMAN HALFORD said that sounded backwards.
MR. DIETRICK said the change includes the new category of marine
vessels over 300 gross tons in that exception so they can also
satisfy the State's requirements for financial responsibility
without a policy that has the direct action provision.
CHAIRMAN HALFORD asked if they are broadening the exception for
everybody and then including the new category in there. He asked
if everyone gets the exception.
MR. DIETRICK said under the statute, all non-crude vessels would
have that option.
CHAIRMAN HALFORD said it sounds like they are backing away from
direct action in terms of what the effect is going to be.
MR. DIETRICK agreed.
Number 1809
CHAIRMAN HALFORD asked what innocent passage is.
MR. BRECK TOSTEVIN, Department of Law, said regarding direct
action, current law has two exceptions; one applies to crude
carriers and the other provides to non-crude carriers. The
committee substitute proposes a third exception to the direct
action requirement by providing the coverage in a dollar amount.
CHAIRMAN HALFORD asked if that exemption applies to those who
aren't already covered in the law.
MR. TOSTEVIN said it creates a new exemption that applies to new
vessels over 300 gross tons.
CHAIRMAN HALFORD asked if it applies to those vessels that are
already covered.
MR. TOSTEVIN said that is correct. However, there are exceptions
in existing law that do apply to non-crude tank vessels and crude
oil tankers.
CHAIRMAN HALFORD commented that they are only backing away from
direct action for those that are being added into coverage (that
weren't previously covered).
SENATOR PEARCE said that they aren't requiring the same standard
for the new vessels.
CHAIRMAN HALFORD said right now they aren't covered at all.
SENATOR PEARCE said that is true, but the first draft would have
left them in the provisions.
SENATOR TAYLOR asked Mr. Dietrick how many people have provided
them with insurance policies that allow direct action.
MR. DIETRICK replied that the number without direct action has been
reduced from about 35 to 10. The market for providing insurance
with direct action has responded.
SENATOR TAYLOR said he liked direct action and thought we should
provide it to all citizens. They ought to be able to sue the
insurance company directly instead of having to sue the bad guy who
ran into them.
MR. TOSTEVIN explained that innocent passage under international
law basically pertains to foreign ships when they travel through a
state's waters to the territorial sea. The requirements are that
travel must be continuous and expeditious. The ship can stop to
anchor, but only if it's incidental to ordinary navigation or if
it's forced ashore or in distress. It does not allow you to come
into the internal waters to harbors and inside passages. The idea
is that the ship is just passing through.
MR. DIETRICK said the negotiated rule making will be a new
experience for them. The intent of the regulations is to convene a
work group of all interested stakeholders and try to adopt rules by
consensus. It allows DEC to invite the parties in and have a
convener and a facilitator who conduct the meetings, record the
notes, and prepare the draft; it then goes through the normal
Administrative Procedures Act.
CHAIRMAN HALFORD asked if there were the same notice requirements
for the nonparticipants in the working group.
MR. DIETRICK replied yes.
CHAIRMAN HALFORD said it looks like if you're going to eliminate
the exemption for nontank vessels, you can just eliminate the
definition and say vessels, because if they're tank or nontank,
they're covered. Senator Pearce's explanation is that there are
other provisions that apply only to tank vessels, therefore you
need the distinction.
MR. DIETRICK said that would be correct. The M/V Packson had
200,000 gallons of fuel, but not as cargo.
CHAIRMAN HALFORD asked if that applied equally to powered and non-
powered vessels.
MR. DIETRICK replied that there are two definitions that apply in
existing statute; one is a tank vessel and the other is an oil
barge. The existing oil barge definition means a vessel that is
not self propelled and which is constructed or converted to carry
oil as cargo in bulk.
SENATOR TAYLOR said they have specifically been excluded, because
they're already covered under tank vessel and oil barge. He asked
if public vessels were covered in some other area.
SENATOR PEARCE asked what he meant by "public."
SENATOR TAYLOR explained that it says a public vessel means a
vessel operated by the United States, a state, or a political
subdivision, except when the vessel is engaged in commerce.
SENATOR PEARCE said the exemption is consistent with OPA 90 which
exempts public vessels not engaged in commerce. That covers Navy,
NOAA, and Coast Guard vessels that routinely operate up here.
While they are in Alaska, they have a salvage response team at Fort
Richardson, but if vessels are engaged in commerce, i.e. the
ferries, they come under the bill.
SENATOR TAYLOR said our ADF&G vessels wouldn't even though they
exceed the tonnage.
MR. CARTER explained there are no ADF&G vessels over 300 gross
tons. A Public Safety vessel and a University boat do, however.
SENATOR PEARCE said the University vessel, Alpha Helix, is 297
gross tons and Public Safety's Wolstad is 305, the Stimpson is 716;
those are the two exemptions for state vessels.
SENATOR TAYLOR asked if the Coast Guard response team is at Fort
Rich.
SENATOR PEARCE explained that is where the supervisor of the
salvage response team and the offices for the statewide response
are located.
MR. JIM BURNS, Anchorage resident, said most of his concerns were
explained, but he is still concerned about financial responsibility
and that a lot of vessels in this class have the P&I club
insurance, but those clubs do not agree to direct action. The way
that's being handled is that Sherwin Williams is pledging their
refineries and taking responsibility for the vessel when a tanker
enters Alaska waters. Most tankers may not really have the right
coverage and don't have enough Alaska assets to sufficiently
provide the amount to meet the State's requirements.
TAPE 00-06, SIDE B
Number 2350
MR. TOM RUETER, North Star Maritime, said that a lot of his issues
had been addressed. What is of concern is how they can have a
contingency plan that is comprehensive enough to address all the
potential locations - fishing industry, in particular, with tramp
vessels following.
MR. DOUG DAVIS, Anchorage Attorney, said he practices maritime law
and has represented various ship owners over the past 20 years. He
said they had come a long way toward addressing the financial
responsibility concerns. With respect to this whole problem with
tank vessels and oil barges, the legislation has required financial
responsibility from these vessels. By and large the requirements
for the larger tank ships have been satisfied by adding them to
existing certificates held by oil companies or terminals with
sufficient assets to meet the financial responsibility requirement
under state law.
The insurance problem comes into play with vessels that don't have
the ability to call upon an oil company with sufficient assets.
Approximately 90 percent of the world's blue water tonnage ships
over 2,000 gross tons are covered by protection and indemnity
insurance, which is offered by a very limited number of PNI clubs,
which are basically mutual insurance associations comprised of the
membership owners pooled together to provide the coverage.
Presently, there is the International P&I Club that is comprised of
13 P&I associations, approximately 90 percent of the ocean going
tonnage of vessels exceeding 2,000 gross tons.
The International Group provides coverage for oil pollution
liability in the amount of $1 billion. When it comes to proof of
financial responsibility, the direct action feature and the
[indisc.] has been something the P&I associations have not wanted
to be subjected to because they would be subject to that
requirement in Alaska, in other states throughout the United
States, and in all the requirements of the countries who would wish
to put a separate requirement on them. They do agree to provide
direct action with respect to the International Convention,
although that's not what the United States decided to do with OPA
'90. Many states have accepted proof of coverage with the P&I
associations and proof of responsibility.
He was not sure the solution is adequate as presently drafted in
this bill. He suggested that they draft a separate provision in
this bill that applies to nontank vessels rather than try to bring
the tank vessels into the provisions of AS 46.04.040.
Unfortunately, not all vessels that would be affected by this
legislation are entered with P&I associations and he thought they
would be the smaller vessels. Those vessels (over 300 tons) have a
federal certificate of financial responsibility, which is required
under OPA'90. It's important for purposes of trying to regulate
these nontank vessels that the State not only allow crude with P&I
coverage to satisfy this requirement, but also allow proof of the
federal certificate to be accepted as well. Other states have done
this.
The State has said there might be other damages under state law
that are not provided for under these certificates, but OPA '90,
especially the provision in 33USC 27.01, talks about what damages
are recoverable under federal law. It is a very broad and
encompassing statute in terms of what damages are recoverable and
would apply as well to the types of damages that are recoverable
under state law. This is the concern Mr. Dietrick was talking
about. He thought these are the same types of damages.
He asked why is it important for the COFRs to be accepted as well
as P&I coverage and answered that this is an existing certificate
which owners of vessels over 300 gross tons will have. It's
already paid for and will cover damages they will be exposed to.
The insurance is there under the certificates. It is an added cost
for the smaller vessels that don't have P&I coverage.
Number 1915
MR. BERT RAY, maritime attorney, said he has practiced since 1988
and represents ship owners regarding OPA'90 and Alaska's oil
pollution laws. He will direct his comments toward the contingency
plan requirements in the proposed legislation. The goal of
improving the ability to respond to an oil spill is a good one and
is shared by everyone. Another common goal should be to approve
response preparations in a cost-efficient manner instead of overly
burdening Alaskan communities and industries that rely on shipping
to transport goods to foreign markets.
If the unintended effect of this legislation is that it causes a
significant increase in the cost of transporting Alaska's products
to market, it will have the unintended consequence of making
Alaska's industries less competitive. Unfortunately, in its
present form, this legislation is not good enough to guard against
the possibility that we will be significantly increasing the cost
to and from Alaska.
The proposed contingency plan requirement simply takes existing
requirements for tank vessels and imposes them on nontank vessels.
While it will allow DEC the discretion to use negotiated rule
making to develop alternative standards, it does not give DEC
enough time to do that job. The effective date is June 1, 2001.
Moreover, the proposed legislation gives DEC the discretion to
decide whether it should even engage in negotiated rule making. He
submits that a better approach would be to abandon the standards
set out for tankers and not apply them to nontank vessels. In
addition, DEC should be required to develop reasonable cost
effective regulations for nontank vessels and to conduct a cost
benefit analysis of those regulations, including an analysis of the
impact the regulations will have on the cost of shipping Alaskan
goods to market and the resulting impacts on the competitiveness of
Alaskan industries.
There are several reasons to take a more cautious approach to
contingency planning for nontank vessels. First, the harm imposed
by an oil spill from a nontank vessel dwarfs in comparison to harm
imposed by tankers carrying crude oil. Second, unlike tankers,
nontank vessels travel all along Alaska's 3,000 mile coast line
which the contingency plans do not adequately cover. Third, oil
companies are more able to absorb the recurring costs of
contingency planning.
He requested that the contingency planning section of this bill be
revisited. The incorporation of standards that require tanker
response should be deleted. Everyone is under the assumption that
the negotiated rule making process will be implemented rather than
eliminating standards. While DEC should be empowered to enact
regulations requiring nontank vessels to engage in contingency
planning, statutes should require, not just allow, DEC to study the
impacts of its proposed regulations. To allow DEC to conduct this
necessary and additional analysis, the effective date of the
proposal should be extended until at least June 2, 2002.
MR. RAY asked if the bill will require vessels to have a
contingency plan for each different region in the State they pass
through. Finally, he said, "and" on page 3, line 31 should be
replaced with "or" to allow the use of each client's membership in
a coop or other spill prevention measures.
Number 1402
SENATOR LINCOLN said he had talked about what the costs would be on
the requirements to the nontankers and asked if he had an estimate
of what the costs may be.
MR. RAY responded that he didn't have that. There wasn't a place
in Alaska one could use as a comparison.
SENATOR PEARCE said that she thought Mr. Ray was comparing apples
to oranges in a very unfair way. As he knows, there are five
response contractors around the State that have been approved by
the DEC as PRACs and typically have association members. They
presently cover all the fuel barges going throughout Alaska
including Western Alaska in the Aleutian Region. They meet the
planning standards and the Department has already worked through
alternative compliance plans for all of western Alaska where fuel
barges go and those plans are presently in place. The typical
association member at the moment in far Western Alaska pays about
$5,000 to join the co-op. Then there is an additional amount based
on total fuel capacity. The ships they are talking about bringing
into these organizations are most likely associate members.
In addition, the planning standards that are in this bill are not
the planning standards the tankers have to deal with in law. She
knows, because she wrote those standards. What we have here is
certainly less than what the tankers carrying crude in Prince
William Sound have to have.
MR. JIM BUTLER, P&I Attorney, thanked Senator Pearce, her staff,
Senator Taylor, and some of the members of DEC and said he
represented numerous contractors. One of them is actually a coop
and covers much of Alaska.
On page 3, subsection (f) provides an opportunity to consolidate
some of the overwhelming administrative costs and an opportunity to
see if a primary response action contractor can provide some
component of the response plan to some of the new people falling
under this legislation.
He thought he could work through the issues involved with existing
coops who would expose themselves to new liability beyond what's in
the primary response action contractor statute with the Senators
and staff.
Number 1100
SENATOR TAYLOR said regarding page 3, line 26, they are saying DEC
may adopt regulations in place of the requirements to provide for
alternative means to obtain equivalent levels of spill prevention
and response including use of fleet plans. When Mr. Berkowitz
talked with his membership today, he asked if they said they would
not be interested in incurring additional liability by doing that.
MR. BUTLER answered that he didn't speak with the membership at
large, but with the Board. Their concern is that the corporation
is registered as a primary response action contractor and that has
certain requirements in order to be registered with DEC. There is
a monitoring program to ensure that plan holders are in fact
reality based. Their concern is to provide assistance in
contingency planning and inadvertently be swept into a provision
that was intended for plan holders such as tank vessels or barge
operators.
SENATOR TAYLOR rephrased the question to mean that they didn't want
to become plan holders because they'd have additional civil and
criminal penalties that could be visited on a plan holder. He is
part of a group that today has some limitation on the level of
liability it would incur by operating a nonprofit or a limited
partnership. The liability is limited to the amount of assets they
have. The ultimate plan holder has additional deeper pocket
responsibility and they don't want to take that on.
SENATOR PEARCE said she was sure if the co-ops became plan holders,
per se, they would want to be indemnified by the owners of the
vessels for the criminal responsibility, because the vessel has the
accident, not the responder.
MR. BUTLER responded that he appreciated that they were trying to
distinguish indemnification, which is a contractual obligation
between parties of a contract. This is significantly new ground
for a co-op to consider and since the purpose of the bill is to
ensure there are opportunities to negotiate rule making, he wanted
to let them know that concern was raised. Indemnification rarely
works for criminal fines. Under the response action contractor
statutes there are actually immunities for certain things.
Number 900
SENATOR TAYLOR said he feared that when we get down to smaller
vessels (150 ft. in length), you could receive an indemnification
signature from the owner of the vessel and still not have anything
since it's only as deep as the pocket of the guy who owns the boat.
MR. BUTLER said he didn't think the issues were insurmountable and
he hopes they could provide some constructive input.
SENATOR TAYLOR asked how they would feel about indemnification by
the State once the plan is approved by DEC.
MR. BUTLER said he understands that the State can't provide
indemnification.
SENATOR TAYLOR said he disagrees and knows of instances where the
State has indemnified employees, specifically.
MR. BUTLER said he was just mentioning it as an issue and wanted to
reiterate that there was an interest in the co-op community to try
and be a part of the effort that's going on.
SENATOR TAYLOR said the previous person testified that the
standards that would be met would have to be the same as the
standards for tanker vessels. Senator Pearce indicated that wasn't
what was contemplated, but when he looked up the law, it says the
plan shall be for the purposes of AS 46.04.030 and then it goes to
(k) which talks about contingency plans, but he didn't think it
talked about a different group. It's talking about producers of
oil and gas and those kinds of things.
Number 681
MR. DIETRICK responded that the committee substitute proposes a
response planning standard for this group, but the relief valve in
here sets that as a goal. This goal has already been met or
exceeded greatly by the five co-ops. It still leaves the door open
through the negotiated rule making to provide alternatives to
meeting that as well for this group.
SENATOR TAYLOR said he thought the other fellow was saying they
were starting off on a "sheet of music" that was designed for oil
tankers and barges.
MR. DIETRICK said that was right.
SENATOR TAYLOR said it has provisions like 72 hours in it and
other's. Those are standards we are meeting in certain areas -
like where we have terminals. People testified during the work
session and said that we're not even coming close to meeting any of
these standards once you start getting out in the Aleutian Chain.
That's what has these people worried. They are working off a sheet
of music they know they can't comply with today and that nobody
can.
They told him, "Don't just pass a law, walk out of town, and leave
us in the same room with DEC."
MR. RICK BERKOWITZ, Pacific Coast Operations Director,
Transportation Institute, said he is not related to Minority Leader
Ethan Berkowitz. Industry remains committed to working through the
legislative process on some of the practical and economic concerns
that remain unknown to them. One of their concerns that has
already been addressed is the elimination of the direct action
provision language that would be overly burdensome and which no
other West Coast state presently requires.
Second is the ability to have the co-op be the contingency plan
holder. As background, his operators run a tight ship and are
extremely sensitive to the threat of an oil spill. They have been
plying these waters on a weekly basis through all four seasons of
Alaskan's weather and sea conditions. For TOTE this has meant up
to three vessels per week without a single oil spill incident in 25
years of transiting these waters. For CSX Sealand, the record is
nearly as good for the past 35 years with only a couple of minor
incidents. These vessels are built in the U.S. and owned by U.S.
corporations and are crewed with U.S. Merchant Mariners, including
Alaskan residents. They are inspected yearly by the U.S. Coast
Guard, employ state-of-the-art navigation systems, and I-spanned
holds to confront the worst of Alaskan winters.
CSX Lines contains vessels that have double bottoms and are
honeycombed to reduce the threat of environmental damage. TOTE
announced this winter that it is spending $300 million to replace
the current safe vessels with even safer vessels. These new ships
will have redundant navigational and propulsion systems similar to
the new ARCO millennium tankers. If there are steering or engine
failures on these vessels, the crew can switch to the full backup
system. In addition, TOTE has decided to give up revenue
generating cargo space to place its fuel or bunkers far from the
hull of the ship. This is being done voluntarily and is in
addition to all the other state, federal, international, and
industry initiatives that have taken place in the last 10 years.
Coast Guard reports say that spills from 1994 - 1997 have decreased
by 50 percent.
All this prevention comes at a cost. Some features of the bill
will also be costly, although they don't know exactly how high.
They might need to recapitalize existing spill responders in the
State for the potential use of their equipment in every region they
operate in or know whether a statewide responder is acceptable.
Given the requirement to have everything in order by September 1,
2000, would the existing response organizations hold out and demand
excessive fees due to their vulnerability? Is the negotiated rule
making process a form to adequately address our concerns? He is
not aware of another instance where this process has been used.
Will it adequately recognize the cost to Alaskan consumers and
resource developers. How many vessel transits would this
legislation affect in the different regions of the State and how
would the cost be spread out on those transits?
Would vessel operators who demonstrate a total commitment to
prevention get a discount on their contingency fees to further
encourage prevention of a risky response? Will a contingency plan
held by responders indemnify existing members as was discussed
earlier? Would a more thorough review of spill data give them
additional insights into other enhancements to reduce risks of
spills? They would like some time to identify these issues and
costs to the industry.
The costs will end up being a base-line addition to the tariffs
charged to shippers and consumers of Alaska, Mr. Berkowitz
concluded. For these and other reasons he urged the committee to
craft language that would provide for greater legislative oversight
of the DEC rule making process and recognize some of the
practicalities and the time limits in the current version of the
legislation.
CAPTAIN NORM EDWARDS, Operations Manager, Alaska Marine Highway
System, said he supported the legislature's efforts to prevent
pollution in the pristine waters of Alaska and to enact legislation
to keep these waters clean. The 37 years during the Alaska Marine
Highway System has served the communities of coastal Alaska, it has
an excellent safety record and has made numerous efforts to prevent
pollution.
DOTPF has an agreement with the DEC to operate vessels in support
of oil spill clean up activities and operations. The M/V Kennicott
has several features designed in to it, such as a satellite
communication system, command and control center facilities, a heli
pad, and small boat docking facility. These features enhance its
ability to support a response operation should an emergency be
declared under AS 46.030.865. They are currently members of the
Washington State Maritime Cooperative, an oil spill pollution clean
up organization covering Washington state waters. They have
shipboard oil pollution emergency plans that meet the requirements
of the State of Washington and should meet the requirements for
contingency plans under the proposed legislation. They have
summarized all costs of the oil spill response services necessary
to meet the requirements of this bill in a fiscal note submitted by
the DOTPF. In conclusion, he said they fully support the bill.
TAPE 00-07, SIDE A
Number 001
MS. STEPHANIE MADSEN, Vice President, Pacific Seafood Processors
Association, said she thought this is a good step forward in
ensuring that our waters are clean. In developing the regulations,
she thought they need to keep in mind what the intended results
are. On that point, she thought a few hings need to be worked on.
Previous speakers covered the COFR issue quite well. Fishing and
processing vessels are unique and more complex. For example, on a
processing vessel, you may have 100-200 people. In a crisis
situation, the first obligation is to take care of those people.
Tanker vessels don't carry that many people. Additionally,
processors are configured differently and carry different
equipment. There is not very much room on processing vessels for
anything else.
Third, the areas the processors travel are much different than
those traveled by tankers. Her last point, prior to the negotiated
rule making, gives them two options. One is to develop your own
spill response plan and, two, to join a coop. Her concern is the
effective date leaves them with only one option - to join a coop.
She is concerned right now with the coop's ability to respond and
what the cost would be. She supports looking at the effective date
as well as separating processing vessels and giving them different
standards.
She has worked with two other DEC working groups, both with waste
water and food safety. She believes that they are willing to
listen and looks forward to participating in that process.
CHAIRMAN HALFORD stated that they would carry this bill forward,
but had to adjourn at 5:00 p.m.
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