Legislature(2011 - 2012)BUTROVICH 205

04/11/2011 06:00 PM LABOR & COMMERCE

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06:07:15 PM Start
06:08:55 PM HB110
07:32:58 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Testimony <Invitation Only> --
              HB 110-PRODUCTION TAX ON OIL AND GAS                                                                          
CHAIR  EGAN announced  HB 110  to be  up for  consideration [CSHB                                                               
110(FIN) was before  the committee]. He said  they would continue                                                               
Friday's  meeting  with Commissioner  Bishop  and  Mr. Fried  and                                                               
would  start on  page 2  of the  Labor and  Workforce Development                                                               
6:08:55 PM                                                                                                                    
CLICK  BISHOP, Commissioner,  Department of  Labor and  Workforce                                                               
Development (DOLWD),  introduced Mr.  Fried an economist  for the                                                               
6:09:31 PM                                                                                                                    
NEIL  FRIED,   Economist,  Department  of  Labor   and  Workforce                                                               
Development  (DOLWD), said  Table 2  represents the  unemployment                                                               
claimants whose most  recent earnings came from  the oil industry                                                               
from 2000  to 2010. He said  the categories are total  claims for                                                               
oil industry intra-state claims (people  who are living in Alaska                                                               
are  receiving) and  inter-state claims  (people who  are outside                                                               
whose last  earnings were in  Alaska working in the  oil industry                                                               
who are receiving their benefits outside of the state).                                                                         
Further down, oil  and gas extraction and  support activities for                                                               
drilling and oil and gas wells  is just dividing the oil industry                                                               
up  into   separate  categories.  The  oil   and  gas  extraction                                                               
basically  covers  the  producers; the  support  activities,  the                                                               
largest  group,   covers  everybody   else  (oil   field  service                                                               
6:10:44 PM                                                                                                                    
MR. FRIED explained  that the total numbers moved  along at about                                                               
1,000 per  year and  then increased  a little  in 2008  to almost                                                               
1,400. There  was a significant  jump in  2009 to 2,700.  Then it                                                               
sort of leveled off and actually  dropped off slightly in 2010 at                                                               
2,500. That is the experience over  the past four years of people                                                               
whose last  major earnings  were in the  oil industry  who became                                                               
unemployment claimants.                                                                                                         
SENATOR PASKVAN  said many people  are struggling with  the first                                                               
slide that  shows statewide in  2009 an all-time  high employment                                                               
in the oil  industry and in 2010 it's within  100 employees. What                                                               
explains,  potentially,   increases  in  unemployment   when  the                                                               
average employment is at an all-time high?                                                                                      
MR. FRIED replied  that Alaska has an employment  increase and an                                                               
unemployment  benefits increase,  as well.  It does  look strange                                                               
and contradictory. A  couple of explanations are  when looking at                                                               
the annual industry data that went  from 12,800 in 2008 to 12,900                                                               
in 2009 is that they are  looking at averages; they don't see the                                                               
monthly changes. The monthly change  in the first quarter of 2009                                                               
almost  reached  a  peak  as  high as  13,500  for  oil  industry                                                               
employment. By  November 2009, employment  had dropped  by 1,500.                                                               
So, 2009 started  out really strong and then dropped  off, and he                                                               
assumed much of the increase  in the number of claimants occurred                                                               
during the  latter part of  the year;  and that contributed  to a                                                               
big increase in the number  of unemployment insurance claims that                                                               
were tied previously to the oil industry.                                                                                       
One other big thing happened in  2009 that might help explain it,                                                               
the big  macro picture, and that  was the first year  in Alaska's                                                               
economy in  21 years where  overall employment actually  fell and                                                               
unemployment increased  significantly. The  job market  changed a                                                               
lot in  the broad sense. Alaska  went from a job  market where it                                                               
was  difficult  for  employers  to find  enough  workers  to  now                                                               
workers having  a very  difficult time finding  work. If  you had                                                               
lost  your  job (with  transferable  skills  to the  construction                                                               
industry)  in  the  oil  industry  at any  time  during  2009  it                                                               
probably was more  difficult to be rehired somewhere,  but if the                                                               
labor   market  in   general  got   significantly  worse,   those                                                               
alternatives had also declined.                                                                                                 
In the first  quarter of 2010, oil  industry employment recovered                                                               
nicely  and stayed  relatively  strong through  the  next two  to                                                               
three  quarters; the  number  of claimants  in  the oil  industry                                                               
actually  declined slightly.  But  all  other industry  claimants                                                               
continued to increase.                                                                                                          
6:16:00 PM                                                                                                                    
SENATOR  PASKVAN   said  America  has  had   two  major  economic                                                               
downturns and  asked if there  is any correlation in  his numbers                                                               
that fit into those patterns.                                                                                                   
MR. FRIED  replied yes;  but Alaska didn't  go into  recession in                                                               
those  periods while  the  rest of  the  country did.  Employment                                                               
managed to  grow in  2001 to  2003. What  happens each  time that                                                               
occurs  is  that  fewer  Alaskans leave  the  state  because  the                                                               
pastures  do not  look very  green elsewhere  in the  country and                                                               
more people  probably head north looking  for opportunities. That                                                               
effectively pushes  up the number  of people who are  looking for                                                               
work and then our unemployment  rate increased. "That happens all                                                               
the time."                                                                                                                      
SENATOR  PASKVAN asked  if it's  an  accurate understanding  that                                                               
Alaska appears to be at or near all-time employment.                                                                            
MR. FRIED answered yes.                                                                                                         
SENATOR GIESSEL asked how long a person can be on unemployment.                                                                 
COMMISSIONER BISHOP replied up to a maximum of 99 weeks.                                                                        
SENATOR  GIESSEL  asked   if  the  2,780  people   that  were  on                                                               
unemployment in 2009 were also reflected in the 2010 numbers.                                                                   
MR.  FRIED replied  that  it could  be  a combination;  certainly                                                               
there were claimants who were new as well as others from 2009.                                                                  
SENATOR PASKVAN  asked if there  has been  a base wage  growth in                                                               
the oil and gas industry parallel  with the all-time high rate of                                                               
MR.  FRIED replied  in  2007  the total  payroll  was about  $1.3                                                               
billion; by  2009 it was  close to  $1.6 billion. So,  yes, there                                                               
was a commensurate increase in payroll as in employment.                                                                        
6:20:36 PM                                                                                                                    
COMMISSIONER  BISHOP said  he wanted  to take  members' questions                                                               
now  and started  by  saying that  he  wanted to  put  a face  on                                                               
unemployment numbers.  A week ago he  talked to some of  the same                                                               
people  who  talked to  Senator  Paskvan's  office from  Flowline                                                               
Alaska, with  whom he  had a working  relationship in  his former                                                               
career. They are  probably the only pipe coating  facility in the                                                               
state  that  does fusion  bonded  epoxy  coating, steel  jacketed                                                               
coating  and  insulated  pipe  coating for  the  North  Slope  of                                                               
Alaska. His  figures are from  construction season 2008  to 2010.                                                               
He  reminded them  that  the normal  construction  season on  the                                                               
North Slope is  December through April. In 2008,  Flowline had 71                                                               
full-time employees and in 2010  they had 31 full-time employees.                                                               
Since  they have  a  niche  market, they  work  closely with  the                                                               
industry and  get long lead  time on  projects so they  can order                                                               
materials and plan their work  around the industry's work, but he                                                               
has been told  that the next three or four  years looks very grim                                                               
for them.                                                                                                                       
Another North Slope contractor he  talked to has the specialty of                                                               
doing well tie-ins. After the well  is drilled, they will come in                                                               
and tie  it in to  an existing pipeline to  get the oil  into the                                                               
TransAlaska  Pipeline  System  (TAPS). They  reported  employment                                                               
down  by  50  percent;  their engineering  division  is  down  60                                                               
percent and  they are selling  off some of their  assets. Another                                                               
pipeline contractor  Commissioner Bishop  said he talked  to last                                                               
week is  down 50 percent  on their pipeline work  and forecasting                                                               
going  down another  50 percent.  Their  Alaska hire  rate is  95                                                               
6:26:01 PM                                                                                                                    
SENATOR PASKVAN  said when they  are hearing that  the employment                                                               
numbers are  at all-time  highs, it's hard  to rectify  that. The                                                               
January 2011 Trends report specifically  says that "the number of                                                               
non-resident  workers employed  in Alaska  provides an  excellent                                                               
indicator of labor  shortage in the state." But  according to the                                                               
commissioner, Alaska  doesn't have a  labor shortage. How  do you                                                               
explain this? Who is hiring these people if those people aren't?                                                                
6:27:00 PM                                                                                                                    
COMMISSIONER  BISHOP replied  that  he recognizes  the fact  that                                                               
some Alaskan employers  have non-resident hire rates of  25 to 54                                                               
percent. He  has made numerous  visits with industry  leaders and                                                               
oil company executives to see how  the state can work better them                                                               
to get more Alaskans into those jobs.                                                                                           
SENATOR PASKVAN responded  that everyone wants to  make sure that                                                               
Alaska has  a trained  workforce, but  the troubling  thing right                                                               
now is  how to account  for the  fact that these  seasoned highly                                                               
qualified employees  aren't working  when Alaska  is at  all time                                                               
high numbers of total employment.                                                                                               
COMMISSIONER BISHOP  replied this  group of North  Slope pipeline                                                               
and pipe  coating contractors  are "out there  on the  front end"                                                               
right after the  exploration wells have been  drilled. They might                                                               
not have  the skill  set the  other jobs  would require  and need                                                               
more training; and  he has written letters asking  what the state                                                               
can  do better  to train  more Alaskans  to get  them into  these                                                               
SENATOR PASKVAN  said, then, it  seems that the question  is what                                                               
are the  jobs of now  and in the  near future that  Alaskans need                                                               
training in, so  that they can be employed when  the oil industry                                                               
as a total is at all-time high employment.                                                                                      
COMMISSIONER BISHOP  responded by referring  them to a copy  of a                                                               
letter in their packets that he wrote.                                                                                          
6:31:22 PM                                                                                                                    
SENATOR PASKVAN asked if he  has historical employment trends for                                                               
these private companies. Did  they experience employment declines                                                               
in past economic downturns?                                                                                                     
MR. FRIED replied  yes; the department has  employment data going                                                               
back  for  almost all  employers,  but  the data  for  individual                                                               
companies is confidential.                                                                                                      
SENATOR  GIESSEL said  one  of  the things  she  became aware  of                                                               
working with  the Department of  Labor and  Workforce Development                                                               
(DOLWD) and the  Department of Health and  Social Services (DHSS)                                                               
statistics  is that  a lot  of times  the identifier  numbers for                                                               
different  professions aren't  real specific.  When she  looks at                                                               
the various  economic trends,  the categories  are very  broad in                                                               
oil and  gas; it doesn't  say whether these  jobs are on  a drill                                                               
rig or whatever.  Is it possible to drill down  to those kinds of                                                               
specifics or are they just broad-brush numbers?                                                                                 
MR. FRIED replied  the definition of the oil and  gas industry is                                                               
fairly  narrow. For  example, Alyeska  Pipeline Service  Company;                                                               
it's usually thought  to be an integral part of  the oil industry                                                               
and it  is, but it's  defined as  a transportation company.  Or a                                                               
catering  company   or  security  company   or  even  a   lot  of                                                               
construction  companies  will  be  defined  under  those  various                                                               
industries.   The  biggest   breakdown  they   have  is   between                                                               
producers, the  Exxons and ConocoPhillips  of the world,  and the                                                               
oil  field service  companies like  the Doyon  Drillings and  the                                                               
CH2MHills. That breakout is actually in Table 2.                                                                                
SENATOR GIESSEL asked if the  companies that the commissioner was                                                               
just  citing are  considered oil  and gas  or support  industries                                                               
that wouldn't necessarily be reflected in these categories.                                                                     
MR.  FRIED  replied that  some  of  them  are  in the  oil  field                                                               
services, but he wasn't sure if they all are.                                                                                   
SENATOR PASKVAN  asked if the  commissioner knows  whether Repcon                                                               
works up North.                                                                                                                 
COMMISSIONER BISHOP replied yes, it does.                                                                                       
SENATOR PASKVAN said the January  2011 Trends publication on page                                                               
5  says that  Repcon reports  100 percent  non-resident hire.  Is                                                               
that accurate?                                                                                                                  
MR. FRIED replied, "It's in the book; I guess it's accurate."                                                                   
SENATOR  PASKVAN   said  it  seems   like  they  are   under  the                                                               
construction industry,  but it  appears they  are working  in the                                                               
oil industry.  Is that accurate?                                                                                                
COMMISSIONER BISHOP  replied yes;  they are  on the  North Slope,                                                               
but  they are  categorized in  the construction  industry. That's                                                               
just the way they are counted by the Bureau of Labor Statistics.                                                                
SENATOR PASKVAN asked if another  contractor like Matrix Service,                                                               
Inc. is working  at Prudhoe. That's another  company that reports                                                               
100 percent non-resident hire. Is that accurate?                                                                                
MR. FRIED replied yes to both questions.                                                                                        
SENATOR PASKVAN asked  what type of construction  work within the                                                               
oil industry does Matrix and Repcon do at Prudhoe?                                                                              
COMMISSIONER BISHOP replied to his  knowledge they do tank repair                                                               
and clean on vessels.                                                                                                           
6:37:51 PM                                                                                                                    
SENATOR PASKVAN went  to page 11 of April 2011  Trends that has a                                                               
new  hires by  industry chart  that breaks  out the  oil and  gas                                                               
industry. Third quarter 2009 saw  636 new hires and third quarter                                                               
2010 saw  1,420, for an increase  in the oil and  gas industry in                                                               
Alaska of  123.3 percent. "It  seems pretty  amazing if we  got a                                                               
lot of Alaskans that aren't working."                                                                                           
COMMISSIONER BISHOP pointed out that  47 percent of residents are                                                               
SENATOR PASKVAN said  he understands that to say  47.7 percent of                                                               
the new  hires are residents,  but that  infers to him  that more                                                               
than 50 percent were non-Alaskans.                                                                                              
COMMISSIONER BISHOP remarked, "That's what it says."                                                                            
SENATOR PASKVAN said  that is troubling to him when  he knows his                                                               
folks at home aren't working. Is that a hiring choice?                                                                          
COMMISSIONER BISHOP replied yes; it's  a hiring choice. The state                                                               
has  "been around  the  Horn"  for 35  years  trying to  maximize                                                               
Alaskan  hire,  he said,  and  at  his confirmation  hearing  for                                                               
commissioner he was asked what he  would do about Alaska hire. He                                                               
had replied that issue had  faced every other commissioner before                                                               
him since statehood and he obviously  isn't doing a very good job                                                               
SENATOR  PASKVAN  asked  if  he  believed  there  are  competent,                                                               
experienced qualified  Alaskans who could  do the work  that went                                                               
to non-residents.                                                                                                               
COMMISSIONER BISHOP replied if he  knew what skill sets they were                                                               
hired in he  could say, but at  this point he wanted  to read his                                                               
letter to the industry into the  record so the people watching on                                                               
TV could hear it.                                                                                                               
     Dear Sir:                                                                                                                  
     Thank you  for choosing  to do  business in  Alaska and                                                                    
     for hiring  Alaska workers. While I  recognize that you                                                                    
     hire resident  workers, I would  like to work  with you                                                                    
     to identify additional qualified  Alaskans to fill your                                                                    
     hiring needs.  The mission of the  Alaska Department of                                                                    
     Labor and  Workforce Development  is to provide  a safe                                                                    
     and    legal    working   environment    and    advance                                                                    
     opportunities  for employing  our residents.  More than                                                                    
     $1.8 billion  leaves this state  annually each  year in                                                                    
     non-resident wages. As critical,  those jobs are sorely                                                                    
     needed  in our  communities where  unemployment reaches                                                                    
     hirer than 50 percent.                                                                                                     
     When you hire trained  and experienced workers locally,                                                                    
     you  can   reduce  the  high  cost   of  importing  and                                                                    
     retaining  your labor  workforce.  Hiring locally  also                                                                    
     means  you can  more readily  access state  and federal                                                                    
     training   and   employment  resources   and   services                                                                    
     designed to benefit your company directly.                                                                                 
     I  look forward  to meeting  with  you so  that we  can                                                                    
     understand  your specific  workforce  needs first  hand                                                                    
     and how  to best customize  our services to  meet those                                                                    
     needs. Please  do not hesitate  to call. Along  with my                                                                    
     senior training team,  I'll meet with you  at your shop                                                                    
     or mine.                                                                                                                   
     Click Bishop                                                                                                               
6:40:49 PM                                                                                                                    
CHAIR  EGAN said  he appreciated  that  letter and  asked him  to                                                               
discuss any  replies he  had received  from any  of the  firms he                                                               
sent the letter to.                                                                                                             
COMMISSIONER BISHOP responded that he  got two verbal replies and                                                               
one written  reply. Two of the  majors have called on  the phone;                                                               
he has  met with one  already and  is meeting with  another major                                                               
producer this week.  He got one Email reply  from another service                                                               
contractor on the North Slope.                                                                                                  
SENATOR PASKVAN  said it's a great  letter and that it  needed to                                                               
be sent because it's calling on  the line some people who need to                                                               
COMMISSIONER  BISHOP said  the Supreme  Court has  said requiring                                                               
Alaska hire is  unconstitutional and the department  "works it as                                                               
hard as  we can  work it with  the tools that  we have."  He said                                                               
they  spend a  lot  of effort  advancing  apprenticeship in  this                                                               
state by industry  and occupation. When you  commit to instilling                                                               
a  registered apprenticeship  program  in  your business,  you're                                                               
drawing your workforce from Alaskan schools and the University.                                                                 
Two years ago as  a result of looking forward at  the gaps in the                                                               
gas line  training plan, they know  the state will need  X number                                                               
of truck drivers, X number of  heavy duty mechanics to keep those                                                               
trucks  running,  and  the   department  started  developing  and                                                               
building a  curriculum and  setting it up.  It took  funding, but                                                               
they started a truck apprenticeship program through AVTEC.                                                                      
6:44:51 PM                                                                                                                    
Carlisle  Trucking  Company  has   signed  on  for  a  registered                                                               
apprenticeship  heavy duty  mechanic truck  program. Carlisle  is                                                               
also becoming  a 100 percent  Alaska-hire employer  and requiring                                                               
that  employees  become  Alaska  residents.  Commissioner  Bishop                                                               
said, "I know I don't have the force  of law. All's I have is one                                                               
on one,  face to face,  one industry and  one employer at  a time                                                               
building a relationship and there is an example."                                                                               
He also  cited Lynden Transport  as another example of  a company                                                               
he  got  to  commit  to  an apprenticeship  for  the  heavy  duty                                                               
mechanic program and they are  also the first trucking company to                                                               
launch an over  the road line haul  driver apprenticeship program                                                               
- taking apprentices - Alaska kids  - to Prudhoe. He said, "We're                                                               
building our workforce in our gaps right now."                                                                                  
CHAIR EGAN said they would like to hear about them.                                                                             
COMMISSIONER BISHOP  said he  couldn't do it  all by  himself. He                                                               
needs help  "from every one  of you." If  they are all  saying it                                                               
and he is saying it, it is  resonating. In the last two years, he                                                               
has instituted 52  new apprenticeship programs in  the state. The                                                               
last one  is directly tied  to corrosion  repair, non-destructive                                                               
testing (NDT), on the North Slope.                                                                                              
6:48:43 PM                                                                                                                    
He added  that one pipeline  company he  worked for on  TAPS that                                                               
did Section  3 from  the Yukon  River down  past Salcha,  for the                                                               
first  time in  37 years  doesn't have  a project  booked in  the                                                               
SENATOR  PASKVAN  asked  if  the  apparent  trend  to  hire  non-                                                               
residents appears to be increasing in recent years.                                                                             
COMMISSIONER BISHOP  replied that Alaska is  "trending the needle                                                               
in the right direction" down by five-tenths of a percent.                                                                       
SENATOR  PASKVAN  asked  if  he  said $1.8  billion  is  lost  in                                                               
earnings to non-residents.                                                                                                      
COMMISSIONER   BISHOP  replied   that   figure   is  across   all                                                               
SENATOR PASKVAN  said he was  looking on  page 20 and  asked what                                                               
percentage of that  $1.8 billion is lost to  non-residents in the                                                               
oil and gas industry.                                                                                                           
MR. FRIED responded that it was about $420 million in 2009.                                                                     
SENATOR PASKVAN said the next  column has a non-resident earnings                                                               
figure  and   then  "direct  effect"  followed   by  $914,490,000                                                               
million;  it  talks  about  a 1.87  multiplier.  Is  the  "direct                                                               
effect" of the $420 million likely also at that 1.87 multiplier?                                                                
6:51:54 PM                                                                                                                    
MR. FRIED replied yes.                                                                                                          
SENATOR PASKVAN remarked, "It's a lot of money."                                                                                
SENATOR GIESSEL said  she wanted to segue way back  to the amount                                                               
of work on the Slope regardless of  who is doing it. She asked if                                                               
the non-destructive  testing is  considered oil  and gas  jobs or                                                               
oil field support jobs.                                                                                                         
MR. FRIED replied  that it depends on the  employer, because some                                                               
employers  might  be  doing non-destructive  testing  along  with                                                               
other things.  If they were just  doing NDT he didn't  think they                                                               
would be counted in the oil industry.                                                                                           
SENATOR GIESSEL  said this is  a job category  that has a  lot of                                                               
Alaskans working  in it, but  it might not  be showing up  in our                                                               
oil and gas employment numbers.                                                                                                 
She said on  Friday the commissioner gave them an  Email that had                                                               
the number of  pipe net pounds being transported  north by Alaska                                                               
Railroad and it dropped in half  between 2009 and 2010. Clearly a                                                               
lot of different  work is going on on the  North Slope other than                                                               
putting  down pipe  casings.  Is that  accurate?  What does  this                                                               
decrease in pipe headed north mean?                                                                                             
COMMISSIONER BISHOP  replied it means  less drilling. One  of his                                                               
points  last Friday  was that  in 2009,  109 million  pounds went                                                               
north, but in  2010 it was 42 million. They  all agree that there                                                               
is only  one exploratory  well being drilled  there this  year by                                                               
Brooks Range, and  that is one conclusion he has  about why there                                                               
is  less in-field  drilling  being  done. He  wants  to get  more                                                               
exploratory work to  develop new fields to get  more pipelines so                                                               
flow lines can get back up to 71 FTEs.                                                                                          
6:55:52 PM                                                                                                                    
SENATOR  GIESSEL  said  she  appreciated   the  examples  of  the                                                               
companies  he had  talked to,  because in  her area  she actually                                                               
knocks on  doors of folks  that have lost  their jobs in  the oil                                                               
field,  but they  are in  the oil  field support  industries. And                                                               
they  hear about  Anchorage companies  laying off  50 percent  of                                                               
their employees, also.  So, if they could get drilling  up on the                                                               
North Slope, then  resident employment would rise  also. What are                                                               
these new  employees actually doing  on the Slope if  they aren't                                                               
drilling more wells?                                                                                                            
COMMISSIONER BISHOP  agreed and  said they  could find  that out,                                                               
but it  would take time.  He doesn't  have that expertise  in the                                                               
department  now,  but that  doesn't  mean  you can't  find  those                                                               
people.  They already  have identified  113 occupations  directly                                                               
related to  building a gas  line. This  type of debate  has never                                                               
come before  the department. He  said just from  their discussion                                                               
tonight it  can be seen  that there is work  that goes on  on the                                                               
Slope  that falls  outside of  one of  the three  categories that                                                               
comes  in under  construction. "We  can data  mine 'til  the cows                                                               
come  home," he  said,  but there  is no  denying  the uptick  in                                                               
6:58:39 PM                                                                                                                    
COMMISSIONER BISHOP said  he goes back to the 2006  oil spill and                                                               
the fact  that the  increase in these  numbers could  be directly                                                               
tied to maintenance and repair on the corroded pipelines.                                                                       
SENATOR PASKVAN asked  if well casing is needed to  do well work-                                                               
COMMISSIONER BISHOP  replied that is  not his area  of expertise,                                                               
but it depends  on what they are doing to  the well. Cleaning and                                                               
scaling wouldn't need a work-over rig.                                                                                          
SENATOR  PASKVAN   said  they  had  a   presentation  in  another                                                               
committee  that showed  the  number of  well  work-overs is  very                                                               
substantial in Alaska. Also, the  presentation by AOGCC explained                                                               
it as  part of a normal  cyclical pattern in Alaska  looking back                                                               
through a number of decades. Does that sound realistic?                                                                         
COMMISSIONER BISHOP said he wasn't the best guy to ask.                                                                         
SENATOR PASKVAN said the September  2008 issue of Alaska Economic                                                               
Trends indicates:                                                                                                               
     Dramatic improvements in technology  in the last decade                                                                    
     have  had a  powerful effect  on employment  levels. An                                                                    
     example  of  those  include   the  wide-spread  use  of                                                                    
     horizontal drilling, alter-extended reach drilling, 3-                                                                     
     D and 4-D seismic surveys, drill bit sensors and other                                                                     
     advancements that reduce the number of wells that need                                                                     
     to be drilled.                                                                                                             
In  other words,  they  say the  oil industry  has  been able  to                                                               
perform more work using fewer  workers. Does that technology have                                                               
an effect  in Alaska where  they need  to drill fewer  wells, but                                                               
they're finding out the information from other sources.                                                                         
MR. FRIED  replied that those were  his words and it  was related                                                               
to a report  that the Federal Reserve of Dallas  wrote in the 90s                                                               
that  the oil  and  gas industry  had  the greatest  productivity                                                               
gains of  all industries. It  slowed down somewhat in  the 2000s,                                                               
although  predictably they  continued to  increase. If  they were                                                               
looking at it  from sort of an accounting point  of view, if they                                                               
would do the  very same work today you probably  would need fewer                                                               
workers; although, in  the long run, an  increase in productivity                                                               
should lead ultimately to an increase in employment.                                                                            
7:03:21 PM                                                                                                                    
SENATOR PASKVAN followed up from  the same September 2008 article                                                               
that  compares   Alaska  to  other  oil   producing  states  that                                                               
indicates Prudhoe Bay  "doesn't need a huge  workforce to produce                                                               
oil." They then compared that  to Texas, Oklahoma and Wyoming and                                                               
talked about 400,000  stripper wells, because those  are the type                                                               
of  wells that  one would  have in  small fields  like Texas  has                                                               
where oil  is found all  across the state; different  than Alaska                                                               
where it  is concentrated in  one region.  Is it accurate  to say                                                               
that Prudhoe  Bay doesn't  need a  large workforce  whereas other                                                               
states need a lot of well drilling to access their oil?                                                                         
MR.  FRIED replied  that was  said in  context sort  of comparing                                                               
Alaska to  the rest of the  country, and while he  didn't know if                                                               
it was  a benefit, but  Alaska's oil  fields on average  are much                                                               
larger  than  the oil  fields  found  elsewhere in  the  country.                                                               
Fourteen of  the largest oil  fields in  the country are  here in                                                               
Alaska.  For economic  reasons, Alaska  tends to  choose to  only                                                               
develop  those larger  fields. So,  Alaska has  the economies  of                                                               
scale when it comes to developing its oil fields.                                                                               
He said there are a couple of  other reasons for that; one is the                                                               
structure  of our  oil and  gas industry.  Many of  the companies                                                               
that operate in  other states' headquarters are  in those states,                                                               
so  they   have  additional  staff;  whereas   most  of  Alaska's                                                               
employment  is tied  very specifically  to producing  the oil  in                                                               
both the Kenai  Peninsula and the North Slope. The  last point in                                                               
looking at  that is you  have to remember  these are oil  and gas                                                               
numbers, which  in Alaska means  basically oil  industry numbers.                                                               
But  comparing  those numbers  to  elsewhere  in the  country  is                                                               
comparing them  with oil and gas;  but in some those  states, gas                                                               
is a  bigger employer  than oil.  In that  sense, we're  mixing a                                                               
little bit  of apples and  oranges, especially nowadays  with the                                                               
boom in gas exploration and production.                                                                                         
SENATOR MENARD  said they  were trying to  grapple with  just how                                                               
much  is going  on  with the  increase on  the  North Slope.  She                                                               
thinks the increase  is not from oil production  and research and                                                               
exploratory  development,  but  a  lot  of  these  jobs  are  for                                                               
refurbishment of  pipeline and repairs in  the infrastructure. Is                                                               
that a true statement?                                                                                                          
7:06:12 PM                                                                                                                    
COMMISSIONER BISHOP replied  yes; that is what  his comments have                                                               
been "framing."                                                                                                                 
SENATOR  PASKVAN said  the AOGCC  presentation last  Friday shows                                                               
development, service  wells and well  bores being drilled  on the                                                               
central North  Slope only  for the  years 1996  to 2010  where in                                                               
2010 the number of wells that  reflected are at a high going back                                                               
to 2005.  That seems to  contradict the well casing  numbers from                                                               
the Railroad.                                                                                                                   
COMMISSIONER BISHOP responded  that he didn't have  that slide in                                                               
front of him.                                                                                                                   
SENATOR GIESSEL said the DNR might be able to answer it.                                                                        
CHAIR EGAN  said he  had invited the  DOLWD commissioner  and Mr.                                                               
Fried here today and he hesitated  to ask someone else to come up                                                               
and present anything. They would get an answer, though.                                                                         
SENATOR PASKVAN  said one of  the concerns that many  people have                                                               
is  that there  is a  claim  that 2,000  jobs have  been lost  in                                                               
Alaska.  When one  looks  at the  average  annual employment,  it                                                               
seems like it is at or near an all-time high. What is the truth?                                                                
MR. FRIED  replied that he didn't  know the source of  that data,                                                               
so he really didn't know.                                                                                                       
SENATOR  PASKVAN asked  if  he found  that in  the  data that  he                                                               
reviews as part of his activities as an economist.                                                                              
MR. FRIED replied no.                                                                                                           
COMMISSIONER BISHOP  said he does know  a lot of the  same things                                                               
and gets the  same reports that many of those  in the legislature                                                               
have received.                                                                                                                  
SENATOR GIESSEL said  she was looking at the  January 2011 Trends                                                               
employment  forecast  for  2011  and  page 6  has  a  chart  that                                                               
provides 2009  and 2010 monthly  average employment  figures. The                                                               
category  is oil  and gas  and the  change from  2009 to  2010 is                                                               
negative  by 1,000,  a drop  of  7.8 percent.  The department  is                                                               
forecasting an  average monthly  decrease of  100 more  jobs from                                                               
2010 to 2011.  There are  a lot of different data points counting                                                               
different things. How would you explain the difference?                                                                         
MR. FRIED  replied this  series, in  theory, represents  the same                                                               
series  as the  other numbers  they discussed.  The 2010  numbers                                                               
were  a preliminary  estimate  for 2010.  He  explained that  the                                                               
department  goes  through  a  four-stage  process  in  estimating                                                               
employment  each year;  they produce  a  preliminary estimate,  a                                                               
revised  estimate  (based on  a  sample  that they  receive  from                                                               
employers),  and  then  when  they   get  the  actual  data  from                                                               
employers on  their ESC reports.  The actual  administrative data                                                               
gets overlaid on  top of their sample based  estimates. When they                                                               
revised the  numbers for 2010,  in fact, they did  not experience                                                               
the decline that the sample-based  estimates said were happening.                                                               
Those numbers actually became the 12,800 - in exhibit 1.                                                                        
SENATOR GIESSEL  said in column one  the 12,800 is 2009  and then                                                               
it drops  down to 11,800 in  2010. A thousand jobs  were actually                                                               
lost. Is that what you're saying?                                                                                               
MR.  FRIED said  no;  he  is saying  that  when  the numbers  are                                                               
revised and the actual numbers  were overlaid, that number became                                                               
12,800. Their numbers were revised in March of this year.                                                                       
SENATOR GIESSEL  said the data  is confusing.  On page 10  of the                                                               
January 2011  Trends, chart  13 shows  Anchorage wage  and salary                                                               
employment forecasts. There's oil and  gas, which is "dandy," but                                                               
then she  turns to her hometown,  Fairbanks, on page 14,  and oil                                                               
and gas isn't  even listed. Yet, she knows there  are oil and gas                                                               
jobs there. Why did it get left off of that chart?                                                                              
MR. FRIEID  agreed that  the data  is confusing;  oil and  gas is                                                               
part of  mining and logging like  it is in the  other tables, but                                                               
they are  a subcategory of mining  and logging. The size  of that                                                               
workforce  is relatively  small and  because of  its size,  it is                                                               
very difficult to estimate.                                                                                                     
SENATOR PASKVAN recapped  that slide 1 indicates  that the 12,800                                                               
employed  in  the  Alaska  oil  industry is  a  figure  that  was                                                               
released as of April 8, 2011.                                                                                                   
MR. FRIED agreed and said that the revised figure is now 12,900.                                                                
SENATOR PASKVAN asked if that was released last week.                                                                           
MR.  FRIED said  correct.  He  added that  the  revisions in  the                                                               
previous years  are usually  very small,  because when  that 2009                                                               
number was produced,  they had three quarters of  actual data and                                                               
only had one quarter of  "estimated" data; whereas all the months                                                               
in 2010 were based on sample estimates.                                                                                         
SENATOR PASKVAN referred to the  April 2011 Trends that indicates                                                               
that  more workers  are being  hired in  Alaska from  the state's                                                               
unemployment insurance  numbers. Then  it says the  oil industry,                                                               
in  particular, has  shown a  strong  uptick in  hiring. Is  that                                                               
MR. FRIED  replied it is  accurate. However, what  is interesting                                                               
about  the new-hire  data is  it's not  always representative  of                                                               
growth in the  industry; it represents the churning  that goes on                                                               
in the labor  market. Looking at the first three  quarters of new                                                               
hire data  for 2007 when  employment was  smaller than it  was in                                                               
2010 by  a thousand  or so,  there were still  more new  hires in                                                               
2007  than  there  were  in   2010.  It's  another  labor  market                                                               
indicator,  in this  case, of  hiring, because  at the  same time                                                               
this is going  on, you could have people being  laid off as well.                                                               
For  example,  if a  contractor  finished  a job,  those  numbers                                                               
wouldn't show up  in the new-hire data, and if  someone else took                                                               
over  that very  same contract  and hired  people -  and not  the                                                               
people who were laid off - then they would show up as new hires.                                                                
7:18:09 PM                                                                                                                    
SENATOR PASKVAN said again the  April 2011 Trend indicates in the                                                               
oil and  gas section  that "the  biggest jumps  in new  hires and                                                               
continuous workers  were in  the oil  and gas  related industries                                                               
both of  which reached a four-year  peak in 2010." Then  it says,                                                               
"The  region new  hires increased  the  most on  the North  Slope                                                               
primarily due  to the spike  in the  oil and gas  industry." This                                                               
seems to indicate that things were  "pretty darn good" in the oil                                                               
and gas industry based on numbers.                                                                                              
MR. FRIED replied that they had  looked at those numbers and 2009                                                               
and 2010 are record high.                                                                                                       
SENATOR  GIESSEL  said  that  same  paragraph  goes  on  to  say,                                                               
"However,  because it  is not  possible to  differentiate between                                                               
workers hired  to maintain  the current fields  and those  in new                                                               
exploration,  it's  unclear  if   the  jump  in  employment  will                                                               
continue." So,  interpreting these statistics is  not always "cut                                                               
and dried." Nevertheless, she said  she appreciates the work that                                                               
goes into it.                                                                                                                   
CHAIR  EGAN  asked  if  he tracks  availability  of  housing  and                                                               
vacancy rates on the North Slope.                                                                                               
MR. FRIED answered no, but it would be interesting.                                                                             
COMMISSIONER BISHOP  added that  he knows  of several  camps that                                                               
are at capacity.                                                                                                                
SENATOR  PASKVAN said  it is  troubling that  camps are  full and                                                               
employment  is  at  an  all-time  high,  but  at  the  same  time                                                               
experienced workers  are asking why  they are not working  and it                                                               
appears that  someone from outside  Alaska is  working. Following                                                               
in that  line, he understands  that residency of the  North Slope                                                               
workers is based upon who has applied  for PFDs, but on page 2 of                                                               
the January  2011 Trends seems  to indicate that 14.5  percent of                                                               
the  people that  apply  for their  PFD were  at  one point  non-                                                               
residents. What does that mean?                                                                                                 
MR. FRIED  answered that it  means they  have looked at  the data                                                               
and  at the  people  that were  categorized  as non-residents  in                                                               
2008, and  then they looked at  the same group of  people in 2009                                                               
and found that 14.5 percent of those that were counted as non-                                                                  
residents in 2008 became residents in 2009.                                                                                     
SENATOR PASKVAN asked  if that rate were to  continue, would that                                                               
be  an ever-growing  population of  non-residents working  on the                                                               
North Slope.                                                                                                                    
MR. FRIED replied  he didn't think; it depends  on other factors.                                                               
That number is pretty consistent year in and year out.                                                                          
CHAIR EGAN  asked if he was  willing to discuss the  legal issues                                                               
of  local hire  and possible  solutions to  adding more  resident                                                               
employment opportunities.                                                                                                       
COMMISSIONER BISHOP  replied that is  why he has been  working so                                                               
hard  to get  employers  engaged with  getting  Alaska kids  into                                                               
apprenticeships. "Those  are Alaska kids  coming out of  our high                                                               
schools,  coming  out of  our  universities.  It takes  the  non-                                                               
resident piece out of the equation  when you are using our kids."                                                               
He  added "it  took no  law to  get there."  That is  why he  has                                                               
challenged everybody  in this  room and has  said it  every year,                                                               
"Help me."                                                                                                                      
CHAIR  EGAN said  he appreciated  that, but  he was  wondering if                                                               
there were any other possibilities.                                                                                             
COMMISSIONER  BISHOP said  he went  through  the book  he had  on                                                               
Friday and found  some good stuff, but when he  asked DNR and DOL                                                               
about it, it was all unconstitutional.                                                                                          
SENATOR  PASKVAN asked  if he  had seen  the capital  budget with                                                               
respect  to the  pipeline training  center and  if he  could talk                                                               
about what it is designed to do.                                                                                                
COMMISSIONER BISHOP  replied that  Pump Station  One had  a small                                                               
spill this winter.  Over 19 individuals fixing that  leak went to                                                               
that  Pipeline  Training  Center.   The  training  center  is  in                                                               
Fairbanks, but the students come  from statewide. Over 27 percent                                                               
come from rural Alaska. That's how fast the state can respond.                                                                  
7:28:26 PM                                                                                                                    
CHAIR EGAN  asked if  those people were  called out  or permanent                                                               
full-time employees.                                                                                                            
COMMISSIONER BISHOP replied  that they were called  out and about                                                               
550 people were associated with that whole event.                                                                               
SENATOR PASKVAN  said probably a  lot of Alaskans are  asking who                                                               
makes the decisions to hire the non-residents.                                                                                  
COMMISSIONER  BISHOP  answered that  it's  up  to the  individual                                                               
service companies.                                                                                                              
CHAIR EGAN said  even if Alaskans are getting  trained, there are                                                               
no guarantees that these companies will hire them.                                                                              
COMMISSIONER   BISHOP  responded   that  there   would  be   some                                                               
guarantees that  some of  the companies would  hire them.  One of                                                               
the things he  does with his job is look  forward five years down                                                               
the road. He wants the tech  jobs at the facilities to be Alaskan                                                               
jobs. He went  to Pt. Thomson and Prudhoe  and brought ExxonMobil                                                               
back to the  University Tech Training Program, because  it is co-                                                               
located at the  Pipeline Training Center that  is integrated from                                                               
top to bottom.  Other contractors that support it  know its value                                                               
and  that it's  in their  vested interested  to hire  as many  of                                                               
those people  as they  can. However, some  people don't  fit with                                                               
what that training center does and  that is some of the reason he                                                               
wrote  the letters  to these  companies  the way  he did  saying,                                                               
"What more can we do working together?"                                                                                         
7:32:58 PM                                                                                                                    
CHAIR  EGAN thanked  the commissioner  and Mr.  Fried for  making                                                               
themselves  available to  the committee  to answer  questions and                                                               
adjourned the meeting at 7:32 p.m.                                                                                              

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