Legislature(1999 - 2000)

03/03/2000 03:20 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
          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  PNI 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 whether  to substitute 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.                                                                                          
Our state  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                                                            
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 persistent                                                            
definition  to OPA 90 standards, 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.  They                                                            
figure 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                                                            
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 access  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  go all  the  way to  just                                                            
accepting  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  for  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.  This  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 normally  does that                                                            
and 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  they  needed  access  to  Coast  Guard                                                            
inspections  and if they weren'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 them the  same ability, but  the primary reason  to                                                            
put them  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, why  not just delete  the                                                            
definition of nontank vessel entirely.                                                                                          
SENATOR PEARCE  said coops  and other compliance  things 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                                                            
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                                                            
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 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                                                            
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  who 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                                                            
it must be continuous and  expeditious.  You can stop to anchor, but                                                            
only if it's incidental  to ordinary navigation or  if you're forced                                                            
ashore  or by 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 you  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 you are engaged  in commerce, i.e. the  ferries,                                                            
you 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                                                            
SENATOR  PEARCE  explained  that  is where  the  supervisor  of  the                                                            
salvage response team and  the offices for the statewide response is                                                            
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  Kenai  club                                                            
insurance, but  those clubs do not agree to direct  access.  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 PNI Club that is comprised of                                                            
13 PNI  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 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 PNI 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 trying  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 PNI  associations and he thought  they                                                            
would be the smaller vessels.   Those vessels (over 300 tons) have a                                                            
federal  certificate  of financial  responsibility,  required  under                                                            
OPA'90.   It's important  for purposes of  trying to regulate  these                                                            
nontank  vessels  that  the State  not  only  allow crude  with  PNI                                                            
coverage to  satisfy this requirement,  but also allow proof  of the                                                            
federal certificate to  be accepted as well.  Other states have done                                                            
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  and  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  in its 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  leaves it up to the  discretion                                                            
of DEC 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  we  are  going  to 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                                                            
deleted  and  "or" should  be  inserted  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 coop.  Then there  is an additional amount  that                                                            
is based on their  total fuel capacity.  The ships  they are talking                                                            
about bringing  into these organizations  most likely are  associate                                                            
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,  Kenai 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                                                            
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 it's the  vessel                                                            
that 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 could understand indemnification  agreements                                                            
working  where they  are being indemnified  by a  major oil  company                                                            
that has  sufficient resources  to take care  of whatever  liability                                                            
might occur on a spill.   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                                                            
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 things  like 72 hours  in it and  other                                                            
things.  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's  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                                                            
CAPTAIN  NORM EDWARDS,  Operations  Manager, Alaska  Marine  Highway                                                            
System,  said he  supported  the legislature's  efforts  to  prevent                                                            
pollution  in the  pristine waters  of the  State of  Alaska and  to                                                            
enact legislation  to keep  these waters clean.   Over the  37 years                                                            
that the Alaska Marine  Highway System has served the communities of                                                            
coastal Alaska, it has  an excellent safety record and 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  was a  good step  forward  in                                                            
ensuring that our waters  are clean.  In developing the regulations,                                                            
she thought  they need to  keep in mind that  they need the  results                                                            
that are intended by having  them.  On that point, she thought a few                                                            
things needed to be worked on.                                                                                                  
Previous   speakers    covered   the   certificate    of   financial                                                            
responsibility  issue quite  well.  Fishing  and processing  vessels                                                            
are unique  and the complexity of  these vessels doesn't  exist with                                                            
tank vessels.   For example,  on a processing  vessel, you  may have                                                            
100-200  people.   If you  are  in a  crisis situation,  your  first                                                            
obligation  is to take  care of those  people.   On a tanker  vessel                                                            
there  aren't  that many  people.   Additionally,  her  vessels  are                                                            
configured differently  and carry different equipment.  There is not                                                            
very much room on processing vessels for anything else.                                                                         
Third,  the areas  they  travel are  much  different  than those  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                                                            
She has worked  with two other DEC  working groups, both  with waste                                                            
water and food safety,  and believes that they are willing to listen                                                            
and  do work  well.   She looks  forward  to participating  in  that                                                            
CHAIRMAN  HALFORD stated that  they would  carry this bill  forward,                                                            
but had to adjourn at 5:00 p.m.                                                                                                 

Document Name Date/Time Subjects