Legislature(1999 - 2000)
03/24/2000 09:09 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 273(RES) "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." SENATOR PEARCE outlined background information regarding the drafting of HB 567, legislation that resulted from the aftermath of the Exxon Valdez oil spill. She summarized that this bill set up contingency plan requirements for crude and non-crude oil tankers and carriers. She stated that the legislature, at this time, neglected to add "non- tanker" vessels to this legislation. She noted that in the past year, the Alaska Railroad has had three spills, but that they are not presently required by law to have contingency plans in place for such incidents. She added that SB 273 requires non-tanker vessels and the railroad to provide oil discharge prevention and contingency plans for the Department of Environmental Conservation consistent with the requirements currently under law. She related that these carriers were to provide proof of financial responsibility to meet planning requirements to respond to spills by containment, including cleanup in the most expeditious manner. She outlined spill statistics for regulated, as versus non-regulated carriers, and stressed exactly what types of carriers would come under this new legislation. Senator Pearce detailed that the inspection criteria of this legislation went to the spill drill component only. She then outlined specifically what these inspections would entail. She noted that contingency plans are already in place for all of the barges that take fuel to rural communities and that they come under alternative compliance regulations generated by the Department of Environmental Conservation via oil spill co-op auspices. She then outlined the financial responsibility criterion for this legislation and the effective dates that it would go into affect. Senator Phillips stated that he was concerned with the legislation's fiscal note, allowing for three additional positions to implement this program. Senator Pearce outlined those numbers of vessels currently plying waters in the state which would be affected by this legislation. She continued that the funding source for this legislation would be from the same one established as a result of the Exxon Valdez incident. Senator Pearce added that the classification of those vessels affected by this legislation were established, based on what requirements are currently in place. She noted that the 300 gross ton vessel size was an existing threshold. Senator Green asked about the current federal Coast Guard related requirements in lieu of this legislation, which affects current operators in Alaska. Senator Pearce stated that the Coast Guard does not require contingency plans for these vessels in question, but noted that this would be a state requirement. She then outlined those vessels, which would be affected by this legislation and noted that Oregon, Washington and California's requirements were also considered when drafting this legislation. Senator Green responded that she would like to see this information. She wondered what the economic impact of this legislation would have on current users. Senator Pearce countered that she had received various responses about this legislation, mostly from the fishing community. She then outlined other specific users that would be affected by this legislation. She continued that the fishing industry has been the most vocal about related costs and added that her offices did research these cost ramifications. She outlined some of these, including co-op member services. She specified that the actual carriers would only be required to contain and control 15 percent of a spill under ideal conditions, along with a speedy cleanup once the spill was contained. She affirmed that by including non-tanker vessels into regulation that this should bring the cost of compliance down for every member. Senator Green stated that she was concerned this legislation would generate inspection fees that no one can afford to pay, once these regulation powers are handed over to the Department of Environmental Conservation. Senator Pearce responded that this legislation does not authorize the charging of fees and that this was not a present practice now under contingency plan requirements. She stated that the vessels transporting petroleum products to Togiak come under present law jurisdiction. She noted that this present law has a higher planning standard than that of the draft legislation. She continued to outline how this proposed legislation would affect the industry, those carriers that are currently in compliance and those that have yet to come under the state's jurisdiction. She noted that these new carriers would come under less strict requirements than those attributed to Prince William Sound. PAT CARTER, Committee Aide to Senator Pearce responded to the cost issues raised. He noted that cost concerns are always addressed when negotiating these types of spill response regulations. He pointed out that this was new ground for the oil spill response cooperatives and that they are considering fee schedules, which would take into consideration all vessels navigating Alaskan waters. He used an example of cargo ships transiting Cook Inlet. LARRY DIETRICK, Acting Director, Division of Spill Prevention & Response, Department of Environmental Conservation gave an overview of costs outlined in the related fiscal note. He stated that the department supports this legislation. Co-Chair Torgerson asked if the department planned to do all the enforcement of this bill, including the boarding of vessels if necessary. Mr. Dietrick responded affirmatively, but noted that the current number of inspections conducted is small, from five to ten per year. He continued that the department conducts this work in conjunction with the Coast Guard to keep costs down. Co-Chair Torgerson asked if Mr. Dietrick would anticipate seizing a vessel that neglected to carry a contingency plan. Mr. Dietrick noted that an inspection is conducted as a prevention measure, but that a shore based, oil spill response facility such as the existing co-ops would be equipped with the bulk of equipment necessary to respond to a spill. He continued that inspections are conducted to make sure a vessel has adequate equipment to contain a spill in its initial stages. Co-Chair Torgerson asked what the penalty for those without a contingency plan would be. Mr. Dietrick stated that the normal remedies would include a request for correction in 30 days through a notice of violation. He continued to outline other penalty possibilities as well. Co-Chair Torgerson asked if the dept thought the fiscal note would cover the amount of necessary inspections anticipated by this legislation in years to come. Mr. Dietrick asserted that he did not see the number of necessary positions changing in years to come. Co-Chair Torgerson asked why the environmental experts noted in this legislation would be situated in Anchorage. Tape: SFC - 00 #63, Side B, 9:56 a.m. Mr. Dietrick commented that the department anticipates positioning two of these employees situated in Anchorage and one in Juneau. He continued that the Anchorage employees would travel to Alaskan locations as necessary. He noted that it is necessary for these employees to travel to various locations around the state and the placement of these individuals in Anchorage would be most cost effective. Co-Chair Torgerson asked what type of interaction the department would have with the existing advisory committees. Mr. Dietrick stated that the department's relationship with the Citizen's Advisory Committee would not be changed by this legislation. He noted that these two agencies were established under the Oil Pollution Act to provide oversight for the crude oil industry and that he did not anticipate a change with this existing relationship. TOM RUETER, NorthStar Maritime Agency testified via teleconference from Anchorage on behalf of various shipping tramps and vessels operating in the fisheries trade, as well as the bulk cargo trade in Alaska. He noted that his agency has had input into this draft legislation, but pointed out that his agency is concerned about the financial ramifications involved. He declared that the related costs of this legislation were still unclear at this point, particularly for individually owned tramp vessels. He gave specific details of this legislation's cost requirements. DOUG DAVIS, maritime attorney, [firm name inaudible] testified via teleconference from Anchorage. He gave an overview of the insurance system in place to cover large ship transits in Alaska for a total of $1 billion dollars for spill prevention. He noted that the proposed legislation would require non-tank vessels exceeding 400 gross tons to demonstrate financial responsibility for possible spills to the state, including an oil spill contingency plan approved by Department of Environmental Conservation. He felt as though the committee substitute went far to fix one big problem, which is to allow non-tank ship owners to use the funds as outlined above as proof of financial ability. He pointed out though that this bill attempts to place the non-tank vessel owners under existing state law, more specifically AS 46.04.040. He felt as though this was a "bad fit" for these non-tank vessels and explained why in specific detail. He suggested that a separate financial responsibility statute should be drafted clearly stating that Alaska will accept coverage with a member of the international group of insurers to meet financial responsibility in the event of an oil spill. He then outlined what would happen with non-tank ship oil spills if this legislation were not passed in its present form. BRECK TOSTEVIN, Assistant Attorney General, Department of Law testified via teleconference from Anchorage. He stated that the department supports this legislation. SUSAN HARVEY, Spill Prevention Response Section, Department of Environmental Conservation testified via teleconference from Anchorage. She stated that she was available to answer any questions, which might be forthcoming. MIKE SYMANSKI, Fishing Company of Alaska testified via teleconference from Anchorage representing fishing vessels, which would be affected by this legislation. He stated that his main concern with this legislation was the uncertainty of the oil spill requirements for 50 percent containment and the related costs. He felt as though this was an unattainable standard, with unknown financial ramifications. JIM CARTER, Executive Director, (RCAC) Cook Inlet Regional Citizens Advisory Council testified via teleconference from Kenai. He disagreed with the analysis about the RCAC not participating in the OPA 90 (Oil Pollution Act of 1990) program. He referenced a previous related conference in Homer regarding safety issues and gave an overview of issues discussed there. He clarified that as long as the oil industry money is not expended on unrelated activities, the RCAC can participate in other programs. JOSEPH LABEAU, Director, Alaska Center for the Environment, testified via teleconference from Ketchikan. He encouraged the passage of this legislation, along with increased financial responsibility requirements for the railroads. He specified that contingency planning for hazardous substances, in conjunction with the railroad, was in order as well. JOHN SUND, Representative, Northwest Seafoods testified via teleconference from Petersburgh. He stated that this legislation would increase the cost of doing business, although this figure was nebulous. He noted that passing this cost onto the consumer was improbable. He outlined the present cost of doing business under the existing regulations, not to mention the cost of spill prevention equipment on hand for any operators beyond that provided by the co-ops. He noted that this legislation would create a third set of regulations to consider, not to mention, the cost of membership to a co-op organization. He pointed out that fishing opportunities usually take place in remote locations, making it difficult for spill response efforts. JOHN HANSEN, Northwest Cruise Ship Association testified via teleconference from Vancouver. He explained that this association consisted of eight cruise lines that operate in Alaska. He spoke to the nature of the response capabilities of these cruise lines and suggested that he send some written comments to this effect. He specifically spoke to a response plan, which the association is currently drafting, in conjunction with SEAPRO. He noted that the association has committed to instituting response barges as part of this response plan at the cost of $1.3 million dollars. He clarified that the association has no dispute with the objectives of this legislation, but that they did have some concerns with specific aspects in its present form, namely, to financial responsibility and the contingency plan requirements. He then spoke to the relationship between the ship owners and the response organizations, specifically the difficulty of reaching term agreements regarding response capabilities and the delineation of responsibilities. PAUL FUHS, Representative, CSX Lines, formally known as Sealand stated that this legislation would result in additional costs which would be passed onto consumers. He noted that the company was concerned about the requirement for different sea plans depending on the region of operation, not to mention the added cost to implement. He wondered about the ramifications of spreading the cost of spill response by requiring additional vessels to comply, as well as the amount of equipment necessary for response. He voiced a concern about specific co-op member liability for any spill incident and the possibility of being sued for other member mishaps. SUSAN MCGARRIGAN, Senior Analyst, Greens Creek Mining, testified that the company supports the concepts of this legislation, yet they are concerned that in its current form it will not adequately cover the charter vessels that Greens Creek uses to transport their ore into international markets. She referenced similar Washington State law which allows for charter vessels to meet contingency plan and spill response requirements through a per trip fee paid to a Washington State spill response organization. She continued that Greens Creek has received no assurances from SEAPRO what the cost of coverage for similar services would be and whether or not the proposed legislation explicitly requires that SEAPRO provide these services to independent vessel operators. CHARLIE BUDDY, Vice President, Governmental Relations, Usibelli Coal Mine, stated the same concerns as the Greens Creek Mine. He pointed out that of the 1.6 million tons of ore that their mine produces a year, 600,000 - 800,000 tons is shipped via the Alaska Railroad. He continued that once this cargo reaches Seward, they contract with 10 to 12 ships per year for transport to South Korea. He pointed out that these ships would be required to pay a much higher rate of fees per shipload. He asserted that these additional fees could contribute to an already fragile contract for product with South Korea. He concluded that Usibelli could not support this legislation in its current form. Senator Pearce countered that currently petroleum charter ships are required to provide contingency plans for review by the Department of Environmental Conservation. She noted that independent spill prevention companies cover these ships. Mr. Buddy agreed with this assessment but pointed out that the financial feasibility of Usibelli mines being able to conduct business per usual would hang in the balance. He continued that the cost of spill prevention services should be ascertained and provided to the mine, in order to determine additional business costs. Senator Pearce pointed out that Seward is a high-risk area for possible mishaps. She remarked that over the years she has supported a number of initiatives, which end up being, direct subsidies to Usibelli Mine. She stated that she found it unacceptable that these shippers transit Alaska waters, but are not willing to comply with regulations that are reasonably drafted. Co-Chair Parnell noted that somewhere short of absolute assurances for economic certainty, he asked for suggestions. Mr. Buddy stressed that the independent spill response companies should come forward to explain how they intend to handle the costs of services provided. A discussion regarding tonnage and frequency of transport from these mining endeavors ensued. JOE KYLE, Alaska Steamship Association, and Trident Seafood stated that 24 Trident vessels would be affected by this legislation. He stressed that this bill was a major concern to the corporation. He added that Alaska Steamship would be greatly affected and reiterated the unknown cost concerns presented by previous testifiers. He also wondered if the spill response co-ops had adequate equipment to respond to possible mishaps. Senator Pearce stated that she understood all the concerns presented, but noted that there should be a cost of "doing business" in Alaska for these companies, while the state does all it can to protect Alaskan waters. Senator Phillips raised the issue of instituting a delayed effective date to this legislation in order to work out some of the necessary details and concerns as raised. A discussion regarding the dynamics of this issue ensued between Senator Pearce, Senator Phillips, Co-Chair Torgerson and Senator Green. Co-Chair Torgerson decided, with the input of Mr. Dietrick, that March 1, 2001 would be the effective date for this legislation. Co-Chair Torgerson stated that he would also draft an amendment regarding page 6, line 4 to delete the word "interpret" from this section. The bill was HELD in committee. Senator Pearce summarized the issue of financial responsibility of responding to an oil spill and noted that in prior committee hearings the members had already made concessions regarding these concerns. She pointed out that there was $1 billion dollars in a federal OPA 90 money fund, but the state is unsure whether they could be reimbursed for spill efforts through this avenue. She stated that Alaska should not have to bear this responsibility of cost reimbursement.