HB 32 - EXTEND BOARD OF MARINE PILOTS Number 0049 CHAIRMAN ROKEBERG announced the committee's first order of business was HB 32, "An Act extending the termination date of the Board of Marine Pilots." JOE BALASH, Legislative Researcher to Representative Gene Therriault, Alaska State Legislature, came forward to present HB 32. He apologized for Representative Therriault's absence, indicating it had been necessary for Representative Therriault to travel back to the Fairbanks area because of the extremely cold weather that area had been experiencing. Mr. Balash read the sponsor statement into the record: "Under current statutes the Board of Marine Pilots (BMP) will terminate on June 30 of this year. A report released by the Legislative Budget and Audit Committee recommended that the Legislature extend the board's termination date to June 30, 2004. House Bill 32 does just that. "Controversies surrounding the board during the previous review period have substantially improved. Issues relating to competition, training, and tariff-setting have not been totally resolved, but there is a great deal more consensus between the board, the pilots and shippers that are subject to the board's oversight. Amendments made to the Pilots Statutes in 1995 have created a semi-competitive environment in which the board only intervenes when there are objections to rate changes. Resolution of these issues has enabled the board to concentrate more on the public safety aspects of its mission rather than legal confrontations that hampered its activities from 1990 to 1994. "The regulation and licensing of qualified marine pilots benefit the public's safety and welfare. The steady increase in tourist passenger ships in recent years has made the board's role increasingly more important. The board provides reasonable assurance that the individuals licensed to pilot passenger and cargo ships in Alaskan waters are qualified to do so." MR. BALASH noted he believed the bill packets included letters from three of the marine pilot associations in support of HB 32's passage. Number 0237 CHAIRMAN ROKEBERG asked if there were any questions of Mr. Balash. There being none, he invited the next witness forward. Number 0269 CAPTAIN TOM DUNDAS, President, Alaska Marine Pilots, came forward to testify in support of HB 32. He stated his organization served in Western Alaska: the Aleutian Islands, Bristol Bay and the Arctic. He offered his organization's support for the bill as it was written, and complimented the chairman of the pilot board and its members, as well as the marine pilot coordinator, for the job they had done over the past four years. He mentioned regulations, and indicated he thought the board was working in the public interest. Number 0342 CAPTAIN JEFF BAKEN, President, Alaska Coastwise Pilots Association, came forward next to testify in support of HB 32. He stated they were one of the two groups competing in Southeast Alaska, and they had been closely involved in many of the contentious board issues in the early 1990s. He indicated the board had mainly resolved those issues, commenting that the board had improved its function "quite to our satisfaction." He said his organization thought the board provided a valuable service to the state, the environment, and the safety of shipping. He spoke in support of HB 32 to renew the board. Number 0391 CHAIRMAN ROKEBERG mentioned the protracted 1995 legislative hearings in that committee and in the Senate, recalling the excellent leadership of the then Senate President in bringing the issue to closure. He asked Captain Baken if he could tell the committee how the resulting change in policy and statute had worked out and if it was working well. CAPTAIN BAKEN replied it was working very well. He indicated the board's function now appeared to be one of overseeing compliance to those regulations and maintaining knowledge of the issues involved. Captain Baken said a lot of the hard feelings had been resolved and things were working much better. Number 0485 PAUL FUHS, representing the Southwest Alaska Pilots Association, came forward next to testify in support of HB 32. He stated they were the group that brought the tankers into Prince William Sound and Cook Inlet, and also operated in Kodiak. He spoke in support of HB 32, noting he thought the last legislation passed had struck a good balance. Mr. Fuhs said, "The state requires marine pilots but yet it's a commercial activity that helps facilitate commerce in the state, so it's important that the negotiations be fair, the ability for groups to compete, and also the board's ability to take an appeal from industry if they feel that ... proposed pilot rates are out of line - put some 'box ends' on this that creates a fair negotiating system - and I think that's what's really made it work." Mr. Fuhs indicated he thought they would also see reduced expenditures, even though the program was funded through program receipts, because every time the pilots' board had to spend more due to lawsuits, et cetera, those expenditures showed up on the state's budget as a plus. He said this made it harder for the legislators to show a reduction in the budget. Mr. Fuhs said he thought it had worked all around to everyone's benefit and reiterated his organization's support for the legislation. Number 0574 [THERE WAS SOME DISCUSSION REGARDING WITNESS ORDER.] Number 0613 JOE KYLE, Executive Director, Alaska Steamship Association, came forward next to testify in support of HB 32. He commented his organization had submitted a letter indicating their support of the legislation. Mr. Kyle paraphrased the last paragraph of that letter, stating, "Since 1995, the public, pilots, and industry are being well served by the board and the marine pilot statutes. It's our view that stability and cooperative working relationships are the norm .... Any amendments that would change any aspect of the current marine pilots statutes or ... House Bill 32 would likely disrupt the current harmony we enjoy." Mr. Kyle commented he was not referring to an amendment that would change the extension date; he indicated all sides agreed the law and board were working very well in their current forms. He indicated the situation in the industry was much better than it had been prior to 1995. He said the primary difficulty had been how money issues were to be resolved and the Act had done a great job of enacting a process that kept the money issues more or less out of the board, but gave the board the opportunity to adjudicate money issues if they were not resolved by the parties. He mentioned the board did have to get involved in two early test cases after 1995, but since then they had been able to amicably to resolve money issues between the pilots and industry. He referred to a situation as recent as that Wednesday between his organization and the Southwest Alaska Pilots Association. Mr. Kyle noted the vocalism of the rather small constituency base and encouraged the committee to move the legislation in its current very succinct form. CHAIRMAN ROKEBERG commented he took Mr. Kyle's comments to heart, inferring he well remembered the 1995 hearings. Number 0800 REPRESENTATIVE MURKOWSKI observed it appeared everyone had reached this tentative peace at least for the purpose of addressing the board's sunset. She asked if there was anyone opposed. MR. KYLE said he didn't think so, noting that although the public was not represented at the hearing, a Mr. Ken Kastner (ph) attended the board meetings and very much looked out for the public interest in front of the board. He commented he thought the public supported the board extension, reiterating that he thought the board was working extremely well and indicating he felt the board chairman, Jeff Bush, was largely responsible for the board's good performance. Mr. Kyle commented there had been good appointees from the public, pilot, and industry sides, and the chairman had been doing an excellent job of making them all work well together. Number 0875 CHAIRMAN ROKEBERG asked if the number of incoming pilots was sufficient to meet the potential demands of the growing cruise industry in Southeast Alaska. MR. KYLE replied that the short answer was yes, noting there was some lost traffic volume in general cargo in the state primarily related to timber and fishing. He agreed there had been increases in cruise traffic, but said that had been somewhat ameliorated by the replacement of more smaller ships by a few large ships. He indicated, therefore, the demand for pilots had stayed fairly constant but said it was always an area which had to be watched. Mr. Kyle commented a dramatic growth in shipping or a dramatic downturn would both really impact the pilots. CHAIRMAN ROKEBERG commented a dramatic growth and the inability of the pilots to service it could have a negative impact on the economy. MR. KYLE agreed, noting the pilot training program was very extensive, stating, "It's just hard to grow pilots overnight." CHAIRMAN ROKEBERG said it was unfortunate the near-demise of timber in Southeast Alaska was offsetting any other further demand. He indicated the committee would now hear testimony from the Department of Commerce and Economic Development (DCED). Number 0972 CATHERINE REARDON, Director, Division of Occupational Licensing, Department of Commerce and Economic Development, came forward next to testify in support of HB 32. She introduced Peter Christensen, a division employee and the marine pilot coordinator. She explained this meant Mr. Christensen was the staff person to the Board of Marine Pilots. Ms. Reardon noted, for the new committee members' information, that boards did not have their own offices, staffs or budgets. Instead, in Alaska, the Division of Occupational Licensing provided all administrative and staff support to the state's approximately 21 licensing boards. She said they were strongly in support of the board's extension and HB 32. Ms. Reardon indicated one of a board's essential roles was to provide expertise in the subject area; without a board the department would be responsible for licensing, regulating, and governing a subject area without the necessary expertise. She stated the role of the board was to write the regulations, make ultimate licensing decisions, and make disciplinary decisions when the division had investigated and believed a pilot had violated the licensing law or was incompetent in some manner. She emphasized that the boards were essential to the licensing program. As the statute mandated, like all licensing programs, the department set licensing fees for marine pilots so that the fees approximately equaled the regulatory costs of the profession. Ms. Reardon said occupational licensing did not contribute to the budget gap; when costs went down for a profession, the licensing fees were lowered and vice versa, all through regulation by the department. She noted marine pilot licensing fees had decreased significantly that year, primarily because the amount of legal activity - resulting Department of Law billings, court appeals, investigations, et cetera - had greatly declined. She stated she would be happy to answer the committee's questions, referring any questions about the details of marine pilotage to Mr. Christensen. Number 1113 CHAIRMAN ROKEBERG confirmed the licensing fees were biennial, as for other licenses; he asked the fee cycle and current amount. MS. REARDON replied a two-year license was currently $2,000 and the fee had been $4,500 the previous licensing cycle. She indicated they licensed approximately 80 pilots and 6 agents, noting it was a very small licensing program with a fair amount of resources dedicated to it, hence the high fees. CHAIRMAN ROKEBERG indicated he had a question about amount of allocation to department overhead but would save it for another day. The chairman asked if Mr. Christensen had anything to add. Number 1176 PETER CHRISTENSEN, Marine Pilot Coordinator, Division of Occupational Licensing, Department of Commerce and Economic Development, testified that the board had discussed the sunset audit and also the legislation at its last meeting. He stated that the board supported the legislation. Mr. Christensen emphasized the board was in favor of the legislation without amendments. CHAIRMAN ROKEBERG referred to information in the audit regarding the implementation and establishment of a database, asking Mr. Christensen to tell the committee something about that and how it would be funded. Number 1202 MR. CHRISTENSEN replied it would not really present any additional costs, noting there were two different databases described in the audit. The first one was a vessel traffic database; the board needed that information in order to make good choices when it set training requirements and similar things. Mr. Christensen said that information had always been gathered through quarterly reports submitted by the pilots' associations. He indicated regulations had gone into effect January 23 to allow those reports to be submitted electronically, rather than in differing paper formats, and inserted into a database, which would allow much greater ease-of-use. He said the second type of database was one of human factors involved in piloting. Mr. Christensen commented this was something which did not really exist anywhere; the audit noted that the "Alaska Oil Spill Commission" following the Exxon Valdez [oil spill], when chaired by Mr. Parker, had not been able to find anything regarding human factors for piloting, or even for mariners. Number 1274 Mr. Christensen stated they had a program and legislative money to develop and implement a simulator-based evaluation program for pilots. He noted this was "kind of leading-edge in the industry," indicating no such thing currently existed. He said there were many simulator facilities but none offered this kind of program. Mr. Christensen stated they had let a contract with a simulator facility. He indicated he believed during the development of their program, the simulator facility was going to have to determine some of the human factors involved in piloting; they were going to have to determine exactly which factors were involved in the pilots' decision-making process and performance. Mr. Christensen continued, "So, the development of that contract and the use ... - as the pilots go through that - the database I think we build there may eventually build a database of human factors that we can work on in the future, or from." CHAIRMAN ROKEBERG asked if part of the goal or objective there was the findings or recommendations [of the audit] to develop a database "against which the competency of both the trainees and the licensed pilots can be better measured." Number 1343 MR. CHRISTENSEN stated the objective of the simulator facility was a simulator evaluation that had to be passed for license renewal. He noted this was certainly their intent, but had not been put into regulation yet because they did not have a facility. He confirmed for the chairman that the appropriation was a capital appropriation made by a previous legislature and no additional costs or impacts were anticipated. CHAIRMAN ROKEBERG asked Mr. Christensen to inform the committee about what seemed like one of the more problematic areas they were having in the state: large luxury yachts. Number 1388 MR. CHRISTENSEN responded that there were increasing numbers of large yachts coming to the Alaska to cruise the state's waters. He mentioned Southeast Alaska and Prince William Sound, commenting that there were lots of beautiful places for cruising and that was what brought the cruise ships. Mr. Christensen indicated privately-owned yachts were also attracted. In 1995, the legislature amended the statute, requiring pilots for foreign-registered yachts over 300 gross tons. Prior to that all pleasure vessels had been exempt from pilotage. Mr. Christensen indicated there were several problems with making that piloting requirement a practical reality. He commented part of the problem was that the yachts did not check in with anyone, including the United States Coast Guard (USCG) or the Board of Marine Pilots. He said many countries were like this, the yachts could just sail in. Mr. Christensen noted sometimes checking in with customs was required, but he commented that nobody was tied into customs very well. Mr. Christensen stated, "So, we don't know when they get here. They often do use ship agents, which the larger vessels use, and ship agents are familiar with the law and keep the vessels in compliance, but since the yachts aren't touching base with them, they don't receive that information." Mr. Christensen indicated one of their solutions was getting the information regarding the piloting requirement into the general cruising publications; the first real problem was that the owners of these yachts didn't know pilots were required, and the second problem was that they were not very happy when they found out. Number 1479 MR. CHRISTENSEN said there were several issues there, noting piloting was expensive even for the large ships. He said that was why the associations published their rates and industry had a chance to complain, inferring that piloting was a cost of doing business for the large ships. Mr. Christensen indicated the piloting requirement could be anything from a nuisance to a real financial problem for the yachts, adding that all of Southeast Alaska was pilotage waters. This meant that if a yacht wanted to cruise Southeast Alaska waters the pilot would have to live on the vessel as it cruised through. He indicated this could be very expensive, and the yacht owners did not like that, whether or not they could afford it. He indicated it was also a privacy issue. Mr. Christensen noted, therefore, the yachts were very resistant to taking a pilot even after being informed one was required. He described that these boats often surreptitiously sailed away after being informed of the piloting requirement. Number 1556 MR. CHRISTENSEN said this led to the third part of the problem: enforcement. As far as he had been able to determine, he had no authority under state law to board these vessels, unlike in his days as a USCG officer. He commented, "They're little pieces of foreign soil floating at our docks, and you can't just barge on there without specific legal authority." He described some experiences with these yachts, how they met him on the dock. He noted the first step in enforcement, identifying the targets, was becoming increasingly difficult. He said, "The second problem with enforcement is that they're gone and enforcement of the statute becomes a criminal misdemeanor, and it's very hard to drag these people back into court for a criminal misdemeanor charge." Mr. Christensen additionally noted he worked in the State Office Building in Juneau and his enforcement area was the view from his window. He had no way of knowing what was happening in Ketchikan, Sitka or Prince William Sound unless someone reported these people. He commented, "And then the long arm of the law isn't quite that long." Mr. Christensen related a situation where he had a very detailed discussion with a gentleman in Prince William Sound; he said he thought the distance encouraged the man to ignore him. Number 1634 REPRESENTATIVE HARRIS asked if there had ever been an accident concerning one of these large pleasure boats due to the lack of a pilot on board familiar with the waters. MR. CHRISTENSEN replied the only yacht casualty he was aware of was the motor vessel Bon Aire (ph) in the late 1980s or early 1990s. Mr. Christensen related that the yacht had ran aground somewhere in Southeast Alaska and the vessel ended up being a total loss. He indicated that vessel had been owned by the original owner and creator of the "Super 8" motels who now had another yacht he brought to Alaskan waters. REPRESENTATIVE HARRIS asked if insurance companies for these large vessels were possibly looking at that as a default of the insurance policy, if state law was violated. MR. CHRISTENSEN responded he thought United States (U.S.) insurance companies would examine that, but he commented most of these vessels were foreign-flagged, with full, licensed (but not U.S.-licensed) crews. He indicated he didn't know the exact terms of these vessels' insurance, but he doubted their insurance companies were likely to learn that Alaskan law had been violated. He commented it was an excellent question. Number 1720 CHAIRMAN ROKEBERG asked Mr. Christensen, to the amusement of many present, if it was his testimony that pleasure boats had a better safety record in the state than pilots. MR. CHRISTENSEN answered in the negative. Number 1732 CHAIRMAN ROKEBERG referred comments on the fiscal note to Ms. Reardon, stating, "I'm just looking at the fiscal note just make sure I have a full understanding of it, and looking in the back it indicates columns for FY [fiscal year] 97 and 98, and this is the average annual cost column of 112,000 referring to page 1 as the amount for FY 99. Does that mean that the biennial cycle is 99-double aught [1999-2000] ...?" MS. REARDON replied that was the licensing cycle for that profession, but said she had really been trying to indicate what the costs were for the two most recent fiscal years, rather than what the license fees were based on, so the committee would have a sense of what the savings to the state might be if [the board of] marine pilots was eliminated. She added that the fees that went with it would also be lost. Ms. Reardon explained the reason this had been included, stating, "We have switched, by legislative request, to presenting zero fiscal notes for board sunset extensions, and I wanted to make sure that it wasn't misleading ... yes, it does cost money to run this program, but the money is part of our base ongoing budget - it's not an increment." CHAIRMAN ROKEBERG indicated the reason he had asked the question was because the FY 2000 had not been pointed out, mentioning the 112,000. Number 1799 MS. REARDON responded that there wasn't a specific year 2000 budget appropriation because division did not receive separate appropriations for the separate programs; the division received one lump sum to run all of its programs. She said she estimated they would probably spend the average of what had been spent the last two years, so that would be her year 2000 estimate of how much of the total division budget would probably be spent on marine pilotage. In response to questions from Chairman Rokeberg, Ms. Reardon noted the division had spent $224,000 in direct costs on the Board of Marine Pilots over the last two years, the average was $112,000 a year. She indicated they were guessing the per year expenditures would be the same in 1999 and in 2000, and this was the basis for the current fees. Ms. Reardon indicated she thought they had probably received a little bit more than $224,000 for the past two years, commenting she thought they had a small surplus for marine pilotage. Number 1862 CHAIRMAN ROKEBERG asked if there were any further questions of the Administration, noting they regretted Mr. Bush [Jeff Bush, Deputy Commissioner, Department Of Commerce and Economic Development] had been unable to be present. The chairman asked if there was anyone else who wished to testify on HB 32. There being no one, he announced the public hearing was closed and asked the will of the committee. Number 1880 REPRESENTATIVE HALCRO made a motion to move HB 32 out of committee with individual recommendations and attached zero fiscal note. Number 1894 CHAIRMAN ROKEBERG asked if there were any objections. There being none, HB 32 moved out of the House Labor and Commerce Standing Committee.