Legislature(1999 - 2000)
03/03/2000 03:20 PM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 273-OIL SPILL RESPONSE; NONTANK VESSELS & RR 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 exemption. In terms of contingency plans and the section for response planning standards and co-op membership, on page 3, line 26 they added section (c)(1) which makes sure the ability to alter the response planning standard can be included in the negotiated rule making process. They also added language to the end of the sentence on page 3, line 29, that reads, "spill prevention and response, including the use of fleet plans, membership in a nonprofit corporation that is a primary response action contractor and a contingency plan holder, and spill prevention measures." This language will make it more apparent during the entire negotiated regulation process that being a member of a co-op can satisfy the contingency plan requirement as long as the co-op is a contingency plan holder. This takes the burden away from each and every ship to have to prepare its own C-plan for which there is a cost. On page 5, lines 2, 3, 8 and 9, they have conformed the 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 products. The definition of "nontank vessel" on page 5, line 4 was deleted and substituted with just the words "nontank vessel." It now refers to any self propelled water craft with 300 gross registered tons. That will conform Alaska with Washington State and mean that the Sampson Tug and Barges that come into Alaska waters, sometimes out of the state of Washington, will not have to conform with all the other regulations in this chapter. The 6,000 gallon threshold was also deleted. On page 5, line 18, a provision requires the DEC to provide the legislature with a comprehensive report following a negotiated regulation process. SENATOR PEARCE thanked DEC, in particular, for being so willing to understand the difficulties of having the ability to respond to spills throughout coastal Alaska, because of our vast distances. They have already met that test and have contingency plans in place for hauling fuel to coastal villages around the State and on the river systems. They have assured her that they will use that same sort of flexibility and are interested in a balance between protecting the resource while also attempting to make sure they don't have the burdens of costs so great that they put shipping companies out of business. CHAIRMAN HALFORD said some of the questions he has are about the exception provisions with regard to direct 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 purposes. MR. CARTER added not if you're hauling it for cargo. One of the differences between a nontank vessel versus a fuel barge (tanker vessel) is that one of them is hauling the fuel for cargo for commerce versus purposes of self propulsion. Number 1052 CHAIRMAN HALFORD asked if deck tanks on a barge to Greens Creek are the same thing. MR. CARTER replied they were excluded from this legislation. If a DOT tank falls overboard, it's not spilled; you just go and pick it up. CHAIRMAN HALFORD said if that tank is on a vessel, it has to be covered; if it's on a barge, it doesn't have to be covered. If it's integral to either one of them, it sounds like it's always treated as a tank vessel. If you want to deliver fuel somewhere, you don't hire a boat; you hire a tug and a barge - if you are trying to figure out a way to avoid the liability exposure of cost. He was talking about power scows 70 - 90 ft. by 24 ft. (self propelled) that are all over the place in the fisheries as tenders and everything else. SENATOR TAYLOR said they were carrying diapered tanks. CHAIRMAN HALFORD said that those are not certified by the Coast Guard so, when they carry fuel, it's in tanks on deck. He just wanted to know if they are treated differently. SENATOR PEARCE responded that the answer is yes. It's consistent with Washington state law and we are trying to have consistency so that folks who operate in both Alaska and Washington don't have two different sets of rules. CHAIRMAN HALFORD said he wanted to know what 300 gross tons means in terms of the size of vessels. SENATOR PEARCE said that depends on the vessel, because the marine architect gets to decide that when designing the ship. If you have a door instead of a wall or a door opening onto a deck, it can make a big difference. MR. CARTER said this was reviewed at length - deciding to use international gross tons or some other threshold. What it came down to is that the entire West Coast operates off of 300 gross tons. CHAIRMAN HALFORD said he was concerned about the basic understanding regarding terms of length, depth, and beam of the average vessel of 300 gross tons. Number 1414 MR. CARTER answered that it would be about 150 ft. SENATOR PEARCE added that ADF&G's boat, Medea, is only 246 gross tons, the Stimson is 716 and the Wolstad is 305. MR. LARRY DIETRICK, DEC, explained that currently Alaska has a direct action provision (since the 80's) which allows Alaska to take a direct action against the insurance company if the vessel goes bankrupt or otherwise can't pay. That action takes place in Alaska courts. There is an exception right now which says if for some reason a vessel is not able to find an insurance company that is willing to insure with that direct action provision, you can let the State know, and they will accept a form of insurance from a company 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 Rich. SENATOR PEARCE explained that is where the supervisor of the salvage response team and the offices for the statewide response is located. MR. JIM BURNS, Anchorage resident, said most of his concerns were explained, but he is still concerned about financial responsibility and that a lot of vessels in this class have the 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 this. The State has said there might be other damages under state law that are not provided for under these certificates, but OPA '90, especially the provision in 33USC 27.01, talks about what damages are recoverable under federal law 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 members. In addition, the planning standards that are in this bill are not the planning standards the tankers have to deal with in law. She knows, because she wrote those standards. What we have here is certainly less than what the tankers carrying crude in Prince William Sound have to have. MR. JIM BUTLER, 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 operators. SENATOR TAYLOR rephrased the question to mean that they didn't want to become plan holders because they'd have additional civil and criminal penalties that could be visited on a plan holder. He is part of a group that today has some limitation on the level of liability it would incur by operating a nonprofit or a limited partnership. The liability is limited to the amount of assets they have. The ultimate plan holder has additional deeper pocket responsibility and they don't want to take that on. SENATOR PEARCE said she was sure if the co-ops became plan holders, per se, they would want to be indemnified by the owners of the vessels for the criminal responsibility, because 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 indemnification. SENATOR TAYLOR said he disagrees and knows of instances where the State has indemnified employees, specifically. MR. BUTLER said he was just mentioning it as an issue and wanted to reiterate that there was an interest in the co-op community to try and be a part of the effort that's going on. SENATOR TAYLOR said the previous person testified that the standards that would be met would have to be the same as the standards for tanker vessels. Senator Pearce indicated that wasn't what was contemplated, but when he looked up the law, it says the plan shall be for the purposes of AS 46.04.030 and then it goes to (k) which talks about contingency plans, but he didn't think it talked about a different group. It's talking about producers of oil and gas and those kinds of things. Number 681 MR. DIETRICK responded that the committee substitute proposes a response planning standard for this group, but the relief valve in here sets that as a goal. This goal has already been met or exceeded greatly by the five co-ops. It still leaves the door open through the negotiated rule making to provide alternatives to meeting that as well for this group. SENATOR TAYLOR said he thought the other fellow was saying they were starting off on a "sheet of music" that was designed for oil tankers and barges. MR. DIETRICK said that was right. SENATOR TAYLOR said it has 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 legislation. CAPTAIN NORM EDWARDS, Operations Manager, Alaska Marine Highway System, said he supported the legislature's efforts to prevent pollution in the pristine waters of 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 standards. 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 process. CHAIRMAN HALFORD stated that they would carry this bill forward, but had to adjourn at 5:00 p.m.