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california legislation > AB 907

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Bill No: AB
907

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Staff Analysis

AB 907 Author: Ma
As Amended: June 8, 2011
Hearing Date: June 14, 2011
Consultant: Art Terzakis

SUBJECT
Bays of Monterey, San Francisco, San Pablo & Suisun:
pilotage rates

DESCRIPTION

AB 907 makes the following changes to various provisions of
the Harbors and Navigation Code relating to bar pilotage
rates for Monterey Bay and the Bays of San Francisco, San
Pablo and Suisun:

1. Establishes a fuel surcharge for all vessel moves
using pilot services that shall be determined by the
Board of Pilot Commissioner's (Board) executive
director according to specified criteria. Also,
requires the amount of any fuel surcharge to be posted
on the Board's Internet Web site.

2. Increases the draft foot and mill rates in effect
under Harbors and Navigation Code Section 1190(a)(1)
as follows: those rates that are in effect on
December 31, 2011, shall be increased by 1.5% on
January 1, 2012; those that are in effect on December
31, 2012, shall be increased by 1.5% on January 1,
2013; those that are in effect on December 31, 2013,
shall be increased by 1.5% on January 1, 2014; and
those that are in effect on December 31, 2014, shall
be increased by 1.5% on January 1, 2015.

3. Provides that effective January 1, 2012, the
schedule of pilotage rates for ship movements and
special operations in effect under Section 1191 of the
Harbors and Navigation Code shall be those in the




AB 907 (Ma) continued
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Appendix to the Board's findings and Recommendations
to the Legislature, dated May 25, 2011, with
additional increases of 1.5% effective January 1,
2013, January 1, 2014, and January 1, 2015. Also,
requires the Board to post the schedule of rates on
its Internet Web site.

4. Increases the current charge against the owner,
operator, or agent of any vessel that carries a pilot
to sea against his will or unnecessarily detains a
pilot when a pilot vessel is standing by to receive to
$2,058 per day with additional increases of 1.5%
effective January 1, 2013, January 1, 2014, and
January 1, 2015.

5. Makes other minor, technical and conforming
changes.

EXISTING LAW

Existing law establishes in state government the Board of
Pilot Commissioners, with jurisdiction over Monterey Bay
and the Bays of San Francisco, San Pablo, and Suisun.
Existing law directs the Board to regulate pilotage and
provides for the licensing, regulation, and management of
pilots in these Bays. The Board consists of 7 members
appointed by the Governor, with the consent of the Senate,
as follows: (1) two members must be licensed pilots; (2)
two members must represent the industry and be substantial
users of Monterey Bay and any of the waters of the Bays of
San Francisco, San Pablo, or Suisun; and, (3) three must be
"public" members.

Existing law prescribes pilotage rates for vessels and
requires vessels spoken inward or outward bound to pay a
specified rate of bar pilotage through the Golden Gate and
into or out of the Bays of San Francisco, San Pablo and
Suisun and vessels navigating the waters of Monterey Bay
are also required to pay a specified rate.

Existing law requires the Board to adopt a schedule of
pilotage rates applicable to pilots and inland pilots for
those operations that are not otherwise provided for under
existing law. Existing law also requires the board to
establish a surcharge for each movement of a vessel using
pilot services to be used for the pilot and inland pilot




AB 907 (Ma) continued
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continuing education program established by the board.

Under existing law, whenever suspected safety standard
violations concerning pilot hoists, pilot ladders, or the
proper rigging of pilot hoists or pilot ladders are
reported to the Board, the Board's executive director is
required to assign a commission investigator to personally
inspect the equipment for its compliance with specified
safety standards. This requirement applies to vessels in
certain defined pilotage grounds.

Existing law makes the owner, operator, and agents of a
vessel jointly and severally liable for $600 per day when a
pilot is unwillingly carried out to sea or unnecessarily
detained on board a vessel.

BACKGROUND

Brief Historical Perspective: Bar pilots have been guiding
ships into San Francisco Bay, one of the most treacherous
passages in the world, since at least 1835. The work that
bar pilots performed was so important that one of the first
legislative enactments by the newly formed California
Legislature that met in San Jose in 1850 was to address the
regulation of bar pilots.

California's history of piloting parallels to a large
extent the history of pilotage throughout the United
States. Prior to the American Revolution, pilotage was
regulated by colonial legislatures. They generally
provided for the commissioning of pilots, apprenticeship
requirements to become a pilot, specified the type and size
of pilot boats used in the service, and established fees to
be charged. When the United States Constitution was
adopted, it recognized that pilotage fell within the domain
of the federal government because it involved regulation of
instruments of foreign commerce. One of the first acts of
the newly formed Congress in 1789 was to recognize the
existing state laws regulating pilots and delegate to the
states the authority to continue to regulate pilotage
because of its unique character.

Bar pilots are responsible for steering an arriving vessel
through the Golden Gate of San Francisco Bay, the Bay
waters and adjoining navigable waters, which include San
Pablo Bay, Suisun Bay, the Sacramento River and its




AB 907 (Ma) continued
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tributaries. When a vessel approaches the "SF" buoy
several miles west of the Golden Gate Bridge, a bar pilot
boards the ship and takes navigational control. (Pilots in
San Francisco are called "Bar Pilots" because they board
and disembark ships just beyond a treacherous sand bar
which provides a natural obstacle to shipping.) It becomes
the pilot's responsibility to guide the ship to its berth.
The bar pilots provide service to all types of vessels,
from 100-foot tugs to 1000-foot supertankers.

Purpose of AB 907: Pilots are generally mandatory in every
major port throughout the world and their pilotage service
is paid for by the vessel owner/agent. As noted above, the
San Francisco Bar Pilots (SFBP) have been state regulated
and licensed since 1850 to pilot vessels to various ports
in the Bay Area such as San Francisco, Oakland, Redwood
City, Martinez, Richmond, Pittsburgh, Vallejo, Rodeo,
Antioch, Stockton, Sacramento and more recently including
Monterey.

According to the author's office, this measure is intended
to implement pilotage rate recommendations issued by the
Board of Pilot Commissioners (Board) for Monterey Bay and
the Bays of San Francisco, San Pablo and Suisun. The SFBP
estimate that for bulk cargo, the increase proposed by this
measure will result in $0.08 per ton; for tankers, $0.04
per barrel; for containers, $0.16-$0.18 per container.

On February 11, 2011, the Pacific Merchant Shipping
Association (PMSA) and the SFBP filed separate petitions
for adjustment of pilotage rates under Chapter 6, Sections
1200-1203 of the Harbors and Navigation Code. In early
April 2011, in response to the petitions from the PMSA and
the SFBP, the Board held a hearing to consider possible
recommendations to the legislature concerning adjustments
in pilotage rates. Such hearings are authorized by
Sections 1991 and 1200-1203 of the Harbors and Navigation
Code. In summary, the Board recommended:

Adoption of a quarterly fuel surcharge that would
be implemented if and when average per-gallon fuel
costs to the pilots in a preceding three-month period
have exceeded a benchmark level. The surcharge would
be a flat amount for each vessel move during the
following quarter.





AB 907 (Ma) continued
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Adoption of four new charges in the rate schedule
authorized by Harbors and Navigation Code Section
1191. Three of the charges involve use of an
additional pilot in situations where safety requires
it. The fourth charge is for late cancellation of
pilot services for vessel departures from the Ports of
Sacramento and Stockton. The Board recommended that
these four new charges be incorporated in a restated
Schedule of Pilotage Rates for Ship Movements or
Special Operations, in furtherance of Harbors and
Navigation Code Section 1191(a) which provides that
the Board "shall recommend that the Legislature, by
statute, adopt a schedule of pilotage rates providing
fair and reasonable return to pilots and inland pilots
engaged in ship movements or special operations where
rates for those movements or operations are not
specified in Section 1190." There is currently no
such schedule that sets forth current rates.

Adoption of four successive annual increases of
1.5% each year in the rates provided for in Sections
1190 and 1191 of the Harbors and Navigation Code. The
first increase would be effective January 1, 2012 and
the last would be effective January 1, 2015. Please
note that the pilotage fees currently set forth in
Harbors and Navigation Code Sections 1122 and 1190 are
not the current fees. The current fees are higher,
reflecting intervening legislative increases.

Arguments in Support: Proponents point out that the SFBP
move $1.2 billion in cargo every day and help sustain over
44,000 jobs in Northern California. Proponents note that
state pilotage is fundamental to the safe and efficient
flow of commerce in Northern California and in order to
ensure the region has the best qualified pilots to fulfill
this mission it is critical that California remain
competitive with comparable ports. Proponents also contend
that this measure is not about pilot income, which rises
and falls based on shipping traffic calling at various Bay
area ports.

Proponents emphasize that the Board has carefully reviewed
all of the evidence and economic factors and has concluded
that a modest increase in rates is necessary. Proponents
claim that the proposed pilotage service increases are
insignificant (approximately $0.16-$0.18 per container) -




AB 907 (Ma) continued
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particularly at a time when shipping companies are reaping
average profits of approximately $560 per container.

Arguments in Opposition:
According to PMSA, this measure
would impose higher pilot rates on vessels, create new
surcharges and allow for levies of arbitrary additional
charges of 50% to 100% on large vessels calling the Ports
in San Francisco Bay and River system. PMSA believes these
pilot rate increases are "unjustified, ill-timed and, in
the context of the greater economy, state budget and
existing pilot incomes, outrageous giveaways to the extent
of being oppressive and confiscatory." PMSA also claims
that AB 907 does not reflect the Board's "full and
unadulterated recommendation - rather this bill has
selectively incorporated the recommended language and seeks
to hide the language that highlights the newest and most
controversial surcharges."

PMSA points out that in 2010 the average net income per San
Francisco Bar Pilot was $393,207 - that figure was down
from the average net income of $427,153 per pilot in 2009
because of the overall decline in ship traffic using the
San Francisco Bay system as a result of the ongoing
recession. PMSA states that "overall tonnage is up 16.5
percent already in 2011, and it is anticipated that pilots'
salaries will, once again, exceed $400,000 without any
benefit of a rate increase, since the rate increase
proposed by this measure will not go into effect until
January 1, 2012."

PMSA notes that the continuing economic recession,
additional regulations, emissions controls, taxes, and fees
have proven significant challenges to the health of the
industry and that increasing fees makes it more expensive
for every ship arriving or departing. This measure could in
fact give shippers further incentive to use port facilities
elsewhere.

PMSA also points out that ultimately, all of the additional
costs of doing business in California are not paid by ocean
carriers, but rather by their customers. This will impact
the agricultural industry in particular which has few
choices in how they transport their goods to market for
export. Their costs will rise making California produce
more expensive and less desirable overseas. To remain
viable in international trade, PMSA believes our ports must




AB 907 (Ma) continued
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remain cost competitive - and while the many different
costs that go into shipping may each seem individually
insignificant, considering the massive size of these ships,
and on a per ton basis, they all add up. In addition,
PMSA argues that these rate increases will also exacerbate
the current situation facing the pilot pension program,
which currently is facing an unfunded liability of over
$250 million.

Furthermore, PMSA states that "since the rate portions of
this measure are so highly charged and controversial, the
non-controversial and non-rate related portions which refer
exclusively to Board operations and licensing issues should
be removed by this Committee (the Senate G.O. Committee)
and placed in AB 1025 (Skinner) - a consensus good
government bill supported by the Board, the SFBP and PMSA."


Staff Comments: As noted above, vessels entering the San
Francisco Bay are required by law to utilize the services
of a licensed SFBP and are charged fees for those services.
The Board regulates and contracts for the services of the
bar pilots who are independent contractors, not state
employees. The San Francisco Bar Pilots Association is
essentially a "regulated monopoly," with membership and
rates fixed by statute. There are no competitive options
for ship-owners who use San Francisco Bay ports other than
to employ the services of this legal monopoly. The SFBP
are the only coastal pilots that have their rates set in
statute by the Legislature. For example, the Los Angeles
Pilot Service, which dates back to 1907, and ensures a safe
flow of ship traffic to and from Los Angeles Harbor,
consists of pilots who are employees of the City of Los
Angeles. Additionally, the Port of Long Beach contracts
with a private pilot service.

In 2014, the new Panama Canal, with a modified series of
locks capable of handling the world's largest ships is
expected to open. With the opening of this new system of
locks that will allow ships that exceed 1,200 feet in
length and carry three times the cargo of current "Panamax"
ships, a greater share of Asian mega container-ships may
very well sail directly to the eastern United States,
bypassing California ports entirely.

PRIOR/RELATED LEGISLATION




AB 907 (Ma) continued
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AB 1025 (Skinner) 2011-12 Session. Among other things,
would authorize the Board of Pilot Commissioners to charge
an examination fee, as specified, to each applicant to the
pilot trainee training program to cover administrative
costs. Also, would require the executive director of the
Board to be responsible for safety investigations and
authorizes the executive director to personally inspect
equipment involved in the injury of a bar pilot.
Additionally, would require that the board's assistant
director be appointed by the Secretary of Business,
Transportation and Housing, instead of being appointed by
the governor, and serve at the pleasure of the secretary.
(Pending in this Committee)

AB 656 (Huber) 2011-12 Session. Would sunset, as of
January 1, 2011, the Board of Pilot Commissioners and
transfer, as of that date, the board's duties to the
Secretary of Business, Transportation and Housing.
(Pending in this Committee)

AB 1888 (Ma) Chapter 455, Statutes of 2010.
Among other
things, revised the terms for members of the board who are
licensed pilots and members who represent the industry and
exempted from those pilotage fees and surcharges
noncommercial vessels that are maritime academy training
vessels and vessels owned and operated by nonprofit museums
or foundations. These vessels would be subject to the board
operations surcharge.

SB 300 (Yee) Chapter 497, Statutes of 2009.
Established a
surcharge for payment of navigational aids for bar pilots
and revised the pilotage rate based upon the current number
of bar pilots.

SB 1627 (Wiggins) Chapter 567, Statutes of 2008.
Made
numerous substantive, clarifying and technical changes to
the body of law relating to the Board of Pilot
Commissioners. Specifically, injected ongoing and
continuous legislative oversight and administrative
responsibility within the existing pilot licensing
framework, without altering the Board, its charge, or
composition and without changing current pilotage rates,
pilot pension benefits, or duties and responsibilities of
current, past or future licensed pilots. Also, directed
the Bureau of State Audits to conduct a comprehensive




AB 907 (Ma) continued
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performance and financial audit of the Board.

SB 1217 (Yee) Chapter 568, Statutes of 2008. Required the
Board of Pilot Commissioners to appoint a physician or
physicians who are qualified to determine the suitability
of a person to perform his or her duties as a pilot, an
inland pilot, or a pilot trainee in accordance with
specified requirements. Also, required the Board to
terminate a pilot trainee or suspend or revoke the license
of a pilot or an inland pilot who fails to submit the
prescribed medication information required by these
provisions.

AB 852 (Leno) Chapter 129, Statutes of 2005. Among other
things, authorized revenue generated by the pilot boat
surcharge to be used to pay for pilot boat design and
engineering modifications intended to extend the service
life of existing boats, in addition to the existing purpose
of purchasing new pilot boats.

SB 1303 (Torlakson) Chapter 560, Statutes of 2004.
Made a
minor change to an existing provision of law relative to
representation on the Board of Pilot Commissioners by
clarifying that the Board's two industry members must be
substantial users of any of the waters of the Bays of San
Francisco, San Pablo, Suisun, or Monterey.

SB 1353 (Perata) Chapter 765, Statutes of 2002.
Established a schedule of incremental changes (through
January 1, 2006) to the rates and special surcharges that
bar pilots may impose on vessels that move in and out of
the Bays of San Francisco, San Pablo and Suisun.

SB 637 (McPherson) Chapter 177, Statutes of 2001.
Allowed
San Francisco bar pilots to pilot commercial vessels
calling on ports in "Monterey Bay" by including Monterey
Bay within the system of state regulated pilotage for the
Bays of San Francisco, San Pablo and Suisun.

SB 2177 (McPherson) 1999-2000 Session.
Would have applied
existing provisions of law relative to the regulation,
licensing, and management of pilots for the Bays of San
Francisco, San Pablo and Suisun to persons who pilot
vessels into or out of the waters of Monterey Bay. (Held
in Assembly policy committee at author's request)
SB 2144 (Perata) Chapter 394, Statutes of 2000. Made




AB 907 (Ma) continued
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various modifications to provisions of law governing the
licensing of bar pilots.

SB 1109 (Burton) Chapter 786, Statutes of 2000. Among
other things, required a vessel owner and its operators to
defend, indemnify, and hold harmless, a bar pilot from any
liability and expenses in connection with any civil claim
suit as action arising out of the pilot's performance of
the pilotage services, except for acts of willful
misconduct.

AB 951 (Wiggins) Chapter 261, Statutes of 1999.
Codified
the agreement on bar pilot rate increases reached between
the San Francisco Bar Pilots and the Pacific Merchant
Shipping Association.

SB 1741 (Johnston) Chapter 1115, Statutes of 1996.
Among
other things, established a schedule of bar pilotage rate
increases that were phased in over a three-year period
(1997-99).

SB 496 (M. Thompson) Chapter 711, Statutes of 1995.
Revised the formula the fiduciary uses to calculate the
quarterly adjustment for pilotage rates. Also, changed the
schedule of pilotage fees for ship movements and internal
operations, as specified.

SB 2068 (Johnston) Chapter 385, Statutes of 1994.

Increased the pilotage rate from 60.70 mills to 64.88 mills
and required the board to temporarily reduce the additional
charge, as specified, if maintenance and repair costs of
two pilot boats are less than $200,000.

SB 238 (Lockyer) Chapter 1192, Statutes of 1993.
Increased
the rate of the additional pilotage charge from 60.56 mills
per high gross registered ton to 60.70 mills. Also,
included inland pilots, as defined, in the pension benefit
program.

AB 1768 (Papan) Chapter 1653, Statutes of 1984. Among
other things, established a unified system of state
regulated pilotage whereby inland pilots became members of
the San Francisco Bar Pilots Association and the combined
group assumed joint responsibility for all pilotage moves
on the pilotage grounds (e.g., San Francisco, San Pablo,
and Suisun Bays and all other ports included therein.)




AB 907 (Ma) continued
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SUPPORT: As of June 10, 2011:

American Maritime Officers
California Labor Federation
International Boatmen's Union
International Longshore and Warehouse Union
International Organization of Masters, Mates & Pilot
Marine Engineers Beneficial Association
Marine Firemen and Oilers Union
Masters, Mates and Pilots
San Francisco Bar Pilots
Sailors' Union of the Pacific
Seafarers International Union


OPPOSE:
As of June 10, 2011:

Pacific Merchant Shipping Association
California Chamber of Commerce
California Citrus Mutual
California Cotton Ginners and Growers Associations
California Farm Bureau Federation
California Grape and Tree Fruit League
California Grocers Association
California Manufacturers & Technology Association
California Rice Industry Association
California Trade Coalition
Cruise Lines International Association
Nisei Farmers League
Western Agricultural Processors Association

FISCAL COMMITTEE: Senate Appropriations Committee

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