Legislature(2007 - 2008)HOUSE FINANCE 519

05/07/2007 01:30 PM FINANCE


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02:24:06 PM Start
02:25:36 PM HB177
03:40:57 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
= HB 177 NATURAL GAS PIPELINE PROJECT
Heard & Held
Fiscal Notes
HOUSE BILL NO. 177                                                                                                            
                                                                                                                                
     "An Act relating  to the Alaska Gasline  Inducement Act;                                                                   
     establishing the Alaska Gasline  Inducement Act matching                                                                   
     contribution  fund;  providing  for  an  Alaska  Gasline                                                                   
     Inducement    Act   coordinator;    making    conforming                                                                   
     amendments; and providing for an effective date."                                                                          
                                                                                                                                
Co-Chair  Chenault  drew attention  to  zero  fiscal note  #1                                                                   
prepared  by  Alaska  Oil  and  Gas  Conservation  Commission                                                                   
(AOGCC) for the Department of  Administration.  There were no                                                                   
comments or questions regarding the fiscal note.                                                                                
                                                                                                                                
Representative  Gara  requested  information about  the  AGIA                                                                   
schedule  for  the week.    Co-Chair Chenault  discussed  the                                                                   
upcoming schedule.                                                                                                              
                                                                                                                                
2:27:49 PM                                                                                                                    
                                                                                                                                
Co-Chair Chenault turned attention  to zero fiscal note #2 by                                                                   
the   Department   of  Commerce,   Community   and   Economic                                                                   
Development.   There were  no comments  or questions  on this                                                                   
fiscal note.                                                                                                                    
                                                                                                                                
Co-Chair Chenault  asked for discussion on fiscal  note #3 by                                                                   
the Department of Natural Resources.                                                                                            
                                                                                                                                
NICO  BUS,   ACTING  DIRECTOR,  DIVISION   OF  ADMINISTRATIVE                                                                   
SERVICES,  DEPARTMENT OF  NATURAL  RESOURCES, explained  that                                                                   
fiscal  note  #3  requests  $6,550.0   million,  appropriated                                                                   
earlier  as a  supplemental appropriation  and contingent  on                                                                   
this  legislation passing.    Co-Chair Chenault  requested  a                                                                   
breakdown of  the $6,550.0 million.   Mr. Bus  drew attention                                                                   
to the analysis at the bottom of the fiscal note.                                                                               
                                                                                                                                
2:30:41 PM                                                                                                                    
                                                                                                                                
Representative  Hawker   spoke  about  a  think   tank  which                                                                   
analyzes  the success  or failure  of a project.   He  opined                                                                   
that in studying  risk assessment, the sure  route to failure                                                                   
is to not dedicate enough funding  up front.  He thought $6.5                                                                   
million might  not be  enough for such  a large gas  pipeline                                                                   
project.                                                                                                                        
                                                                                                                                
Mr. Bus  related that fiscal note  #4 has been replaced  by a                                                                   
new fiscal note  by the Department of Natural  Resources.  He                                                                   
explained that  it went from $300,000  to a zero note  with a                                                                   
$500,000.0 million  appropriation.  The fiscal  note prepared                                                                   
by the governor's office will  take care of the expense for a                                                                   
state   gas   pipeline  coordinator.      Co-Chair   Chenault                                                                   
summarized  that the  fund was  being moved  from DNR to  the                                                                   
governor's office.                                                                                                              
                                                                                                                                
Representative  Hawker  maintained   that  the  $500  million                                                                   
fiscal note is  an issue in the bill and should  require more                                                                   
discussion.                                                                                                                     
                                                                                                                                
Co-Chair Chenault  asked about page  2, the last line  of the                                                                   
fiscal note, which states that  $300 million was appropriated                                                                   
last year  from the  general fund  to Alaska Housing  Finance                                                                   
Corporation for the purpose of  funding capital projects.  He                                                                   
questioned  where the  other $200  million  would come  from.                                                                   
Mr. Bus did not know.                                                                                                           
                                                                                                                                
Representative  Crawford called  the $500 million  inducement                                                                   
an investment for Alaska's future.                                                                                              
                                                                                                                                
2:35:43 PM                                                                                                                    
                                                                                                                                
Representative  Gara thought  the  fiscal note  should be  an                                                                   
indeterminate   note.    He   recalled  that  the   producers                                                                   
testified that  some of the $500 million  inducement probably                                                                   
would not  be needed if the  project proves successful.   Co-                                                                   
Chair Chenault said  he understands the issue  that the money                                                                   
might not be needed.                                                                                                            
                                                                                                                                
Representative  Hawker  referred to  last  year's attempt  at                                                                   
negotiation and  the cost to the  state.  He said he  has yet                                                                   
to see an analysis which he requested from DNR.                                                                                 
                                                                                                                                
ANTONY SCOTT,  COMMERCIAL ANALYST,  DIVISION OF OIL  AND GAS,                                                                   
DEPARTMENT  OF  NATURAL  RESOURCES, offered  to  provide  the                                                                   
analysis for  Representative Hawker.   He explained  that the                                                                   
analysis  was done  by the  legislature's consultant  EconOne                                                                   
explaining  the exact costs  to the  state from the  previous                                                                   
contract.                                                                                                                       
                                                                                                                                
2:39:47 PM                                                                                                                    
                                                                                                                                
Representative  Gara commented  that an  analysis of  the $10                                                                   
billion in under taxation was  summarized in a Petroleum News                                                                   
article.  He said he also requested  information from DNR, as                                                                   
well, regarding taxes relative to the world average.                                                                            
                                                                                                                                
Co-Chair Chenault turned attention to fiscal note #5.                                                                           
                                                                                                                                
JERRY   BURNETT,   DIRECTOR,   DIVISION   OF   ADMINISTRATIVE                                                                   
SERVICES,  DEPARTMENT OF  REVENUE, explained  that the  FY 07                                                                   
and FY 08  costs were funded in  SB 82.  The costs  shown are                                                                   
on-going for  FY 09  and beyond  for consulting services  and                                                                   
additional internal development of economists.                                                                                  
                                                                                                                                
Representative  Gara brought  up  the problem  of  attracting                                                                   
qualified  applicants.   Mr. Burnett  noted  that the  fiscal                                                                   
note would allow  for the hiring of a couple  economists at a                                                                   
market-based  salary,  but it  does  not address  any  global                                                                   
issues.                                                                                                                         
                                                                                                                                
Co-Chair  Chenault asked  when the two  positions would  end.                                                                   
Mr.  Burnett  said  that discussion  would  take  place  next                                                                   
session during  budget procedures.   Co-Chair Chenault  asked                                                                   
about the hiring of legal help  and whether the Department of                                                                   
Law would  also be requesting  money.  Mr. Burnett  responded                                                                   
that the money  is so that DOR can work through  the Attorney                                                                   
General's office to  hire legal help.  He did  not anticipate                                                                   
additional external costs.                                                                                                      
                                                                                                                                
2:44:37 PM                                                                                                                    
                                                                                                                                
Co-Chair Chenault brought up fiscal  note #6 by the Office of                                                                   
the  Governor.   He noted  that  the position  count was  not                                                                   
filled out on the fiscal note.                                                                                                  
                                                                                                                                
Mr. Bus  reported that three  full-time positions  are listed                                                                   
in the analysis section.                                                                                                        
                                                                                                                                
2:45:46 PM                                                                                                                    
                                                                                                                                
Co-Chair Chenault turned to fiscal  note #7 by the Department                                                                   
of Labor and Workforce Development.                                                                                             
                                                                                                                                
CLARK (CLICK)  BISHOP, COMMISSIONER, DEPARTMENT  OF LABOR AND                                                                   
WORKFORCE DEVELOPMENT,  explained that the fiscal  note is in                                                                   
response to Sec.  43.90.470 in the AGIA bill.   He offered to                                                                   
meet one-on-one with the committee members.                                                                                     
                                                                                                                                
GUY  BELL, ASSISTANT  COMMISSIONER, DEPARTMENT  OF LABOR  AND                                                                   
WORKFORCE DEVELOPMENT,  reported that  there is a  section of                                                                   
HB  177   that  requires  the   development  of   a  pipeline                                                                   
employment plan and training program.   The multi-year fiscal                                                                   
note addresses  that requirement.   The years after  year one                                                                   
will  be subject  to  the plan  itself.   He  noted that  the                                                                   
department  has  worked with  the  university  on the  fiscal                                                                   
note.   The  first  piece  of the  FY  08 request  of  $6.500                                                                   
million  is  for  $4.1  million for  the  completion  of  the                                                                   
pipeline  training center  in  Fairbanks.   This  would be  a                                                                   
grant to the Alaska Works Partnership  to build a facility in                                                                   
Fairbanks.  It is estimated that  up to 13,000 Alaskans would                                                                   
be trained.                                                                                                                     
                                                                                                                                
Representative Gara asked why  Fairbanks was selected for the                                                                   
site.    Commissioner  Bishop explained  that  Fairbanks  was                                                                   
chosen because  of location,  acreage, and equipment  assets.                                                                   
Representative Gara  wanted assurance that most  of the labor                                                                   
pool is  from that area.   Commissioner Bishop said  he would                                                                   
have better  figures later on.   He opined that  Fairbanks is                                                                   
the   best  place   and  the   most   cost  effective   site.                                                                   
Representative Gara  pointed out that many would  not be from                                                                   
the  area.    He  wondered  about  stipends  to  help  people                                                                   
relocate there.   Commissioner Bishop said in  the past, room                                                                   
and board has been provided.   Representative Gara summarized                                                                   
that he wants the most people possible trained.                                                                                 
                                                                                                                                
2:53:52 PM                                                                                                                    
                                                                                                                                
Vice Chair  Stoltze thought  it was  a political decision  to                                                                   
locate the center in Fairbanks.   Commissioner Bishop offered                                                                   
to meet with Vice-Chair Stoltz for further discussion.                                                                          
                                                                                                                                
Representative Crawford related  that there is a need for 600                                                                   
ironworkers  each  year.    The   plan  is  to  train  13,000                                                                   
construction  workers, 8,000  for the  pipeline.  He  related                                                                   
the  history of  employing pipeline  workers.   He noted  the                                                                   
time it  takes to train workers.   He wondered to  what level                                                                   
the workers would be trained.                                                                                                   
                                                                                                                                
Commissioner Bishop  envisioned that there would  a number of                                                                   
apprentices and  a number of  journey persons to  be trained.                                                                   
He expected  the number  of workers trained  to be  less than                                                                   
are  actually  needed.   He  said  he  wanted to  do  further                                                                   
research to find out how many  are really needed.  He thought                                                                   
it might take another  year to get those numbers.   He stated                                                                   
that he intends to provide a better  job of training than has                                                                   
happened  in the past.   Representative  Crawford hoped  that                                                                   
things improve  next time around.   He shared  his experience                                                                   
with the type of training needed.                                                                                               
                                                                                                                                
3:03:14 PM                                                                                                                    
                                                                                                                                
Commissioner  Bishop  agreed with  Representative  Crawford's                                                                   
comments.  He speculated on possible training ideas.                                                                            
                                                                                                                                
Representative Thomas  thought that by the time  the pipeline                                                                   
was  done, the  trained  workers  would already  be  employed                                                                   
otherwise.   He  expressed  frustration  with  those who  are                                                                   
trained but have no job experience.   He thought that current                                                                   
pipeline maintenance  workers would be ready  to retire soon.                                                                   
Commissioner Bishop  agreed.  He reported that  90 percent of                                                                   
workers  trained  in  Fairbanks  got  jobs.   He  shared  his                                                                   
experience with  training and  job placement.   He maintained                                                                   
that resident hire on the North Slope could be improved.                                                                        
                                                                                                                                
Representative   Thomas  suggested   leaving  off   the  word                                                                   
"trades"  in describing  training  so that  it includes  non-                                                                   
union workers.   He related  a personal experience  about the                                                                   
difficulty  of getting  into a  union.   Commissioner  Bishop                                                                   
said  that  his  daughter  was  not  accepted  into  a  union                                                                   
program.                                                                                                                        
                                                                                                                                
3:11:37 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer wondered if the  training should start in 2008                                                                   
or be delayed  until the producer  is known.  He  thought the                                                                   
producers  could train  their  own workforce.   He  suggested                                                                   
holding  off  on  the training  if  the  route  goes  through                                                                   
Canada,   due   to  conflicts   in   international   training                                                                   
requirements.  He  wondered if there was coordination  of all                                                                   
the various training programs.                                                                                                  
                                                                                                                                
Mr. Bell  addressed the first  question regarding  who trains                                                                   
and  delivers  the  work  force.   The  Department  of  Labor                                                                   
believes  that  it  is  the state's  job  to  invest  in  the                                                                   
training program.   Whether it is a Canadian/Alaskan  project                                                                   
or not,  Alaskan workers  would  still be needed.   There  is                                                                   
funding built  in for a more comprehensive  training program.                                                                   
This  is   a  capital   appropriation   so  work  can   begin                                                                   
immediately  before  the contract  is  entered  into.   Basic                                                                   
training can occur  and specialized workers can  be delivered                                                                   
to the sites.   He maintained that training  should begin now                                                                   
to meet the current and future demand.                                                                                          
                                                                                                                                
3:17:32 PM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer   recalled  past  "social   impact"  problems                                                                   
related  to  so   many  pipeline  workers  employed   on  the                                                                   
pipeline.  He wondered if anyone  was considering that aspect                                                                   
of a gas pipeline project.  Commissioner  Bishop replied that                                                                   
he has asked that question, but needs to follow up on it.                                                                       
                                                                                                                                
Mr. Bell showed  a graph that reflects a spike  in employment                                                                   
during  the first pipeline  project and  maintained that  the                                                                   
same spike would not happen this time.                                                                                          
                                                                                                                                
Co-Chair Meyer  requested information  about Canadian  hiring                                                                   
requirements.   Commissioner  Bishop  said he  does not  have                                                                   
that information yet.                                                                                                           
                                                                                                                                
Co-Chair Chenault  asked if it  was Alaskan workers  who made                                                                   
up the spike.   Mr. Bell  replied that the spike  depicts the                                                                   
total construction employment,  both Alaskan and non-Alaskan.                                                                   
He  said that  the permanent  fund  statistics could  provide                                                                   
information  about how  many of  the  workers were  Alaskans.                                                                   
Commissioner  Bishop informed the  committed that  43 percent                                                                   
were Alaska hire.                                                                                                               
                                                                                                                                
3:21:30 PM                                                                                                                    
                                                                                                                                
Representative   Gara  asked   if  Commissioner  Galvin   was                                                                   
committed   to  the  Fairbanks   training  center   location.                                                                   
Commissioner Bishop  replied that there are  five components;                                                                   
Fairbanks is only one.  There  will also be regional training                                                                   
centers,  high  school  programs,   university  systems,  and                                                                   
others.                                                                                                                         
                                                                                                                                
Representative  Gara  recalled   last  year's  discussion  on                                                                   
Alaska  hire.    He thought  there  would  be  a  "boom/bust"                                                                   
economy unless  there is Alaskan  hire.  He wanted  assurance                                                                   
that the  maximum number  of people  would use the  Fairbanks                                                                   
facility.      He  argued   for   relocating   that   center.                                                                   
Commissioner Bishop had no further comment.                                                                                     
                                                                                                                                
Co-Chair Chenault commented that  the training center is only                                                                   
one aspect of the training program.                                                                                             
                                                                                                                                
Representative   Thomas  noted   that  vocational   technical                                                                   
programs need  to start at the  high school level.   Mr. Bell                                                                   
replied that there  is funding for regional  training centers                                                                   
in the state.   There are  some really good models  shared by                                                                   
secondary and post-secondary students.                                                                                          
                                                                                                                                
3:27:28 PM                                                                                                                    
                                                                                                                                
Mr. Bell  returned to  the analysis  of fiscal  note #7.   He                                                                   
pointed out  that there is a  need for detailed  planning and                                                                   
to  look   at  workforce   strategies,  training   facilities                                                                   
assessments,  methods to improve  Alaska hire, evaluation  of                                                                   
what  should  be  included in  RFP's,  and  other  activities                                                                   
overseen by  the commissioner.   There needs  to be  a skills                                                                   
gap analysis  and improvements  made to  the web-based  labor                                                                   
exchange system.  There is an  investment for direct training                                                                   
and for engineering  and construction management  programs at                                                                   
the University of Alaska.                                                                                                       
                                                                                                                                
Representative Kelly asked if  there are Alaskans to fill the                                                                   
jobs and if the  training would be timed based  on need.  Mr.                                                                   
Bell reported that  the skills gap analysis would  be done to                                                                   
determine  what is  needed.   Alaska's  unemployment rate  is                                                                   
higher than the national average by 2%.                                                                                         
                                                                                                                                
Representative Kelly asked about  the breakdown between union                                                                   
and non-union.  Mr. Bell promised to provide data.                                                                              
                                                                                                                                
3:34:21 PM                                                                                                                    
                                                                                                                                
PAT PITNEY,  VICE PRESIDENT, BUDGET AND  PLANNING, UNIVERSITY                                                                   
OF  ALASKA,  ANCHORAGE,  noted   that  the  university  would                                                                   
provide  training for  the engineering  program expansion  at                                                                   
the University  of Anchorage.   Juneau  entry level  students                                                                   
would be  able to transfer to  Anchorage and Fairbanks.   The                                                                   
intent  is   to  train  individuals   for  jobs   beyond  the                                                                   
construction of the gas pipeline.                                                                                               
                                                                                                                                
In  response  to  a question  by  Representative  Kelly,  Ms.                                                                   
Pitney noted that their engineering  programs are bursting at                                                                   
the seams.   There are nearly 140 applicants  for the current                                                                   
fiscal year.  There  is a higher response rate  by the under-                                                                   
employed as well as from high  school students and transfers.                                                                   
Construction management  is industry led.  As  a state, there                                                                   
are  plenty  of people  looking  for  the  right jobs.    The                                                                   
availability of  training programs at the right  locations is                                                                   
the issue.                                                                                                                      
                                                                                                                                
3:38:49 PM                                                                                                                    
                                                                                                                                
ROBERT LANG, UNIVERSITY  OF ALASKA, ANCHORAGE,  noted that he                                                                   
was available for questions.                                                                                                    
                                                                                                                                
JANE GEHLER,  UNIVERSITY OF ALASKA, ANCHORAGE,  reported that                                                                   
between  50 - 70  graduates a  year would  be reached  by the                                                                   
programs over the next two years.                                                                                               
                                                                                                                                
JEFFERY   CALLAHAN,   PROFESSOR,  CONSTRUCTION   AND   DESIGN                                                                   
TECHNOLOGY,  UNIVERSITY OF  ALASKA,  ANCHORAGE, related  that                                                                   
the  construction  management  program  is a  relatively  new                                                                   
degree program.   He observed  that there is movement  out of                                                                   
the trades into management positions.                                                                                           
                                                                                                                                
3:40:57 PM                                                                                                                    
                                                                                                                                
Mr. Bell  concluded discussion of  fiscal note #7  by stating                                                                   
that  a purchase  of  a  rock  drill would  enhance  training                                                                   
delivery  in  Anchorage  at  the   Alaska  Laborers  Training                                                                   
School.                                                                                                                         
                                                                                                                                
Mr. Bell noted  that the out years are  somewhat speculative.                                                                   
It  would  involve  more  intense  review  in  investment  in                                                                   
training    infrastructure,     direct    training    program                                                                   
development,   and    continuation   of   the    university's                                                                   
engineering  and  construction   management  programs.    The                                                                   
estimation is in broad strokes.   Co-Chair Chenault requested                                                                   
that the department  return to the committee  if the pipeline                                                                   
is not funded.  Mr. Bell said they would.                                                                                       
                                                                                                                                
CSHB 177  (RES) was heard and  HELD in Committee  for further                                                                   
consideration.                                                                                                                  
                                                                                                                                

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