Legislature(1999 - 2000)
04/25/2000 01:09 PM WTR
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 273-OIL SPILL RESPONSE; NONTANK VESSELS & RR Number 0096 CHAIR BARNES announced that the committee would hear CS FOR SENATE BILL NO. 273(RLS)(title am), "An Act regarding oil discharge prevention, and relating to contingency plans and proof of financial responsibility for all self-propelled nontank vessels exceeding 400 gross registered tonnage and for railroad tank cars; authorizing inspection of nontank vessels and trains; and providing for an effective date." CHAIR BARNES explained that the purpose of the meeting was to hear from Senator Drue Pearce, sponsor, who was offering a new proposed committee substitute (CS). She noted that since SB 273 was last heard in the House Resources Standing Committee, the House had passed House CS for Senate Concurrent Resolution No. 1 (RUL) to the Senate. She called attention to a new fiscal note provided by the Department of Environmental Conservation (DEC). Number 0247 REPRESENTATIVE PHILLIPS moved to adopt proposed HCS for CSSB 273, Version Z [1-LS1464\Z, Chenoweth, 4/25/00], as the working document before the committee. There being no objection, it was so ordered. Number 0247 SENATOR PEARCE explained that Version Z makes a number of changes from [HCS CSSB 273(RES)], which was passed out of the House Resources Standing Committee. She told members: The financial responsibility portions of the bill are still there, so that both nontank vessels and the railroad would meet financial responsibility requirements on the effective date of the bill. However, while we lay out the planning standards in statute, the effective date of meeting those planning standards for nontank vessels and the railroad is not in the bill. Instead, we have [Senate] Concurrent Resolution No. 1. The Senate has failed to concur on the language because the financial responsibility piece is no longer needed in the resolution, but upon completion of a conference committee on that resolution, it is coming back over to you [the House] today [so that the House can] fail to recede and we can go to conference [committee]. Upon completion of that, SCR 1 would pass, which sets up a task force that this fall would meet to set the rules for how the contingency planning portion of the bill would be put into effect to meet the planning standards that are in the statute. Those would be brought back to us [the legislature] on or before the first day of the legislative session in 2001, at which time legislation would have to pass the next legislature that would put that rule making into law and "turn on" the contingency planning process for both the nontank vessels and the railroad. The resolution itself lays out the same planning standards, and that is what the task force would work toward meeting. Frankly, that is the big change. ... There is transition language in the [Z] version of 273 that you have before you, and it does speak in Section 7 about the task force, and that the task force is to deliver a report back to the legislature. So the concurrent resolution and the bill would now travel together, so to speak. SENATOR PEARCE explained that she had in hand a rough markup from Mr. Chenoweth of Legislative Legal Services, who had not yet had time to prepare a sectional analysis. She then reviewed for the committee what Mr. Chenoweth has done to the bill: Sections 1 and 2 of the Resource Committee version have been deleted. Section 3 has been renumbered. Subsection (1) of the previous Section 3, which said that effective April 1, 2002, the oil discharge prevention contingency plans go into effect, is no longer there. The word "only" has been changed to "predominantly" persistent product, a clarification that had been agreed upon. On the former page 3, the language that had been on lines 15-17 has been deleted. That had specified an effective date of April 1, 2001, for the contingency plan section that is no longer going into effect under the bill. The proof of financial responsibility remains the same. Another effective date has been dropped in relation to the railroad, but the standards [for the railroad] are laid out in the actual bill. The "innocent passage" language has been modified. All of subsection (f) was deleted, and everything following it has been renumbered. The transition language changes because of the new resolution regarding the task force. Number 0600 SENATOR PEARCE said this is virtually the same as what she had proposed last week. She concluded: We do financial responsibility now. We've put the planning standards for nontank vessels and the railroad into the statute, but we don't turn them on until the task force has a chance to report back to the legislature. That's it, in a nutshell. Number 0627 REPRESENTATIVE COWDERY asked if financial responsibility could be satisfied in bond form. SENATOR PEARCE said she would rather have the Department (DEC) answer that, and that Mr. Dietrick of DEC was present. Number 0674 LARRY V. DIETRICK, Director, Division of Spill Prevention and Response, Department of Environmental Conservation, rephrased the question as, "What forms may be accepted by the state?" He said it would be the same forms of insurance the state currently accepts; there is a menu of forms, "everything from P&I [protection and indemnity] clubs to self-insurance to financial guarantors to various forms of insurance." Number 0703 REPRESENTATIVE COWDERY asked about self-insurance in relation to the railroad, mentioning that the railroad is now having some problems. Number 0731 CHAIR BARNES directed attention to a letter [included in members' packets] she had received from the railroad regarding what the railroad has been doing and speaking to its support of Senator Pearce's initial legislation. Chair Barnes said she believes the railroad had testified before the House Resources Standing Committee that it has either insurance or an amount of money set aside. She read from the letter: Over the last several years, the Alaska Railroad Corporation has had in place two $10 million lines of credit, one to meet self-insurance requirements and one to meet operational requirements. These credit lines are [with] two separate national banks. They are currently for one year and are renewable annually. At this time, the lines of credit are whole and have not been drawn upon. CHAIR BARNES noted that it goes on to say how [the railroad] would lay out its portion of the contingency. REPRESENTATIVE COWDERY indicated that had answered his question. REPRESENTATIVE BERKOWITZ raised a question relating to language that states, "A person cannot cause or permit the operation unless the person has furnished to the Department certification ...." He said that frequently the vessel operator is not the same as the vessel owner, and the vessel operator might not be the individual who had supplied proof. SENATOR PEARCE said that language is the same as that presently in the laws pertaining to tanker vessels. She noted that this bill has not changed who is responsible to the department; that it is still the owner. Number 0899 BRECK TOSTEVIN, Assistant Attorney General, Environmental Section, Civil Division (Anchorage), Department of Law, testified via teleconference from Anchorage. He told members that as he understood the question, it related to the wording of who actually applies for the certificate of financial responsibility. He specified that this proposed legislation doesn't change who applies for the certificate. The prohibition in the law is that the vessel - or the railroad, in this case - cannot operate without having that certificate. Basically, one applies to the department, showing the proof of financial responsibility, and the certificate is issued. That certificate is then shown when loading fuel or otherwise operating, as proof of financial responsibility. CHAIR BARNES asked Representative Berkowitz whether that answered his question. REPRESENTATIVE BERKOWITZ replied that it explains the situation, and he understands what is going on. Number 0973 REPRESENTATIVE PHILLIPS referred to page 3, line 5, Section 3. She requested an explanation of Section 3, relating it back to the previous paragraph. SENATOR PEARCE deferred to Mr. Tostevin, noting that it is part of the financial responsibility section. MR. TOSTEVIN expressed confusion about that section. SENATOR PEARCE suggested that Mr. Tostevin probably didn't have a copy of the proposed CS [Version Z]. REPRESENTATIVE PHILLIPS [referring to an unspecified version of the bill] informed Mr. Tostevin that the language can be found under Section 1, [subsection] (d), and then the third [paragraph] under (d). Number 1029 MR. TOSTEVIN responded that this language has to do with the financial responsibility requirements. He indicated that the version from the House Resources Standing Committee [HCS CSSB 273(RES)] had provided an exemption from the existing requirements in Alaska law that an insurer agreed to be subject to direct action in Alaska courts with respect to the financial responsibility, and also to appoint an agent for service of process. This language carries forward that exemption, he said. Subsection (d) provides three exemptions under existing law. He stated: It says, "Notwithstanding the requirements of .040(e)," which is in the existing financial responsibility requirements, which (indisc.) direct action, (indisc.) service of process, ... (l) is a similar provision with respect to tank vessels, and .047 has a provision with nontank vessels. And then the section goes on to say that the applicant can provide evidence of financial responsibility through proof of entry in a P&I [protection and indemnity] [club] or other insurer, and then it goes on to say ... that the insurer has to be financially solvent, have a favorable history of claim handling. It provides coverage against exclusion risks in at least the amount required under (a) of this section, without any special enforcement. And these endorsements, requirements, [are] something that DEC currently has in its regulations for tank vessels. And then (3), ... doesn't have to agree to direct action in court or appointment of (indisc.) in a service of process; that has to do with the actual insurer. And then (4) is, again, a provision that's already allowed in existing law. A P&I club doesn't actually have to be registered to sell insurance in this state as long as they aren't ... on the "disapproved" list [of] the Department of Community & Economic Development. That's an overview of ... what that section does. Number 1156 CHAIR BARNES thanked Mr. Tostevin and asked whether there were additional questions. She then asked Senator Pearce how the economic impact on the businesses affected by this would be addressed. She further inquired about the overlap of federal and state laws. SENATOR PEARCE addressed the second question first. She said the resolution, in the form to be proposed, will say that one thing the task force needs to do - "as it does its rule making and then makes the recommendations of those rules to the legislature to make another statutory change" - is to make recommendations that concern Alaska Statutes and regulations which are not subject to preemption by federal law; those will be "layered" to work together, rather than just adding costs, state compliance being different from federal compliance. Turning attention to concerns about any financial obligations and potential costs, she stated: We don't have an effective date for the contingency planning portion, so that will have to come back. The task force, as a part of the process, will lay out what the actual rules would be for meeting contingency plans, and we will be able to cross those out, probably specifically, now that we have planning standards in the law, so you know what your plan [would fit]. So before anybody could come back with recommendations, those would be "costed out," and I would expect that you will see perhaps not a fiscal note to the state, but a clear understanding of what the costs would be to the railroad and the nontank vessels as that legislation is brought back to the legislature next year. Number 1300 CHAIR BARNES thanked Senator Pearce but asked that she add to the explanation. To her, she said, it is important what the financial effect is of adopting this type of legislation, including effects on the export of fish, timber and minerals. Those are affected by how this is implemented, and she believes the question must have an answer. SENATOR PEARCE answered: The task force will be, as a part of the process, putting the rules together. I think one of the intents, even, is that there not be ... an adverse cost to the different industries. ... So, those costs will be developed. We will figure out what it would be, and then we'll have to look at each industry and decide, "Is that going to be adverse to our resources on the worldwide market?" If the costs, frankly, Madame Chairman, end up being what I suspect they'll be, from just going through the rough drafts, I don't think that we're going to impact any single industry sufficiently to be able to say that it adversely impacts Alaska's resources on worldwide markets. But that's something that we'd be looking at. If any industry feels that they are being that adversely impacted, I would expect that they - all the industries will be a part of the task force already - ... will come back with either not agreeing with the recommendations of the task force, and come back to the legislature and say, "Here are the specific costs, and here is why this will adversely impact our ability to sell our resource in world markets," whatever that resource might be. So, we will be looking at those on the task force. Number 1398 CHAIR BARNES restated that she thinks it is crucial to know what those costs are. Noting that she had provided this example before, and that she believes it is pertinent, she stated: For example, you take a barge that's laden with barrels of fuel. That's affected by this legislation, those barrels of fuel, because if it were carried in a tanker, it would already be covered. But since it's being carried in barrels for home heating fuel or for cooking, for those sorts of things that are directly related to rural Alaska, ... you need to address what that impact would be on those types of fuels that are being carried to Western Alaska or wherever they might be. Number 1456 SENATOR PEARCE said she understood what Chair Barnes was saying. However, she was trying to figure out whether the bill, as written, would cover those anyway. It says "self-propelled," she indicated, so barges are not covered but a self-propelled ship carrying those would be included. Fuel delivery to the villages is already covered under present law, she added. CHAIR BARNES asked, "If it was a tanker-type?" SENATOR PEARCE responded, "In a fuel barge." She said she isn't sure what happens at the moment to onboard tanks, but onboard tanks on barges are not in this bill, so they won't be affected. "We took that out on the Senate side," she added. CHAIR BARNES said she was talking about self-propelled types such as boats that would carry home heating fuel. She restated that it does have an impact, "and we need to know what those things are." Number 1506 REPRESENTATIVE PHILLIPS pointed out that there is a weight factor also; some of those smaller landing craft, for example, wouldn't be covered under this. CHAIR BARNES said that [exclusion] is [for vessels] under 400 tons. SENATOR PEARCE agreed, saying the small ones are not covered by the bill. CHAIR BARNES reiterated that all of those things need to be looked at "because we can't afford to drive up the cost of living in Alaska, especially in the rural areas of the state." As for fish, if the cost of doing businesses is driven up, and [fishermen] cannot compete with the Norwegian salmon being pen- reared, "we need to know that too." CHAIR BARNES asked whether there were additional questions for Senator Pearce; none were offered. She announced that no further testimony would be taken that day, and she noted that [Mr. Tostevin] of the Department of Law and Michelle Brown, Commissioner, Department of Environmental Conservation, had been standing by to answer questions. She suggested that everyone needed an opportunity to study the proposed CS before the next hearing. Rather than adjourn, she would recess the meeting to the call of the chair in order to provide some time to study this and determine exactly what issues need to be brought forward to the sponsor. REPRESENTATIVE PHILLIPS requested that the committee be provided a copy of the sectional analysis as soon as it was done. Number 1589 CHAIR BARNES affirmed that her staff would distribute it to each member as soon as possible.