Legislature(1995 - 1996)
04/02/1996 01:35 PM House L&C
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
JOINT SENATE AND HOUSE LABOR AND COMMERCE COMMITTEE
April 2, 1996
1:35 p.m.
SENATE MEMBERS PRESENT
Senator Tim Kelly, Chairman
Senator John Torgerson, Vice Chairman
Senator Mike Miller
Senator Jim Duncan
Senator Judy Salo
SENATE MEMBERS ABSENT
All members present
HOUSE MEMBERS PRESENT
Representative Pete Kott, Chairman
Representative Jerry Sanders
Representative Gene Kubina
HOUSE MEMBERS ABSENT
Representative Norman Rokeberg, Vice Chairman
Representative Brian Porter
Representative Beverly Masek
Representative Kim Elton
COMMITTEE CALENDAR
Local hire by the oil industry
PREVIOUS ACTION
No previous action to record
WITNESS REGISTER
Ken Thompson
ARCO Alaska
P.O. Box 100360
Anchorage, Alaska 99510
Telephone: (907) 265-6132
Bill Cheek, Vice President
Alaska Petroleum Contractors
Ray Jakubczak
British Petroleum
P.O. Box 770056
Eagle River, Alaska 99577
Ken Langel
HC Price Company
ACTION NARRATIVE
TAPE 96-24, SIDE A
Number 001
CHAIRMAN TIM KELLY called the Joint Senate and House Labor and
Commerce Committee meeting to order at 1:35 p.m. He said they had
invited some members of the oil and gas industry to attend to
discuss local hire and out sourcing with the committee.
KEN THOMPSON, ARCO Alaska, said they had a booklet prepared through
an overall joint effort of ARCO, BP, and about 20 contractors who
work on the North Slope. The oil industry in Alaska has long held
a preference hire for Alaskans. As industry numbers from the
Department of Labor show that they are outperforming many other
natural resource industries in regard to percentages of their own
people who live in Alaska. However, they do realize there is room
for improvement and over the last several months, at the request of
Governor Knowles, various legislators, and Commissioner Cashen of
the Department of Labor, they have tried to look at ways of
improving Alaskan hire in their industry.
MR. THOMPSON noted that 21,000 nonresident individuals work in the
food processing industry in Alaska, 15,000 in the service sector,
10,000 in hotels, restaurants, and retail, 5,000 in the
transportation industry, and 5,000 in construction. In state and
local government there is currently 3,800 nonresidents being
employed. In oil and gas there's 3,100 nonresidents employed.
MR. THOMPSON informed the committee that he and John Morgan,
President of BP, got together about 20 contractors and looked at a
number of issues such as what were the success stories in their
industry, what were some of the hurdles they face for Alaska hire,
what are some of the problems that have occurred for Alaska hire,
and then they shared some ideas for improvement.
MR. THOMPSON said they are willing to have their improvements
measured. They considered union hire, nonunion hire, Native hire,
and regional hire.
Number 090
MR. THOMPSON said all the contractors voluntarily agreed to a
common commitment to, as an industry, maintain leadership and
improve Alaska employment while maintaining competitive costs.
Number 130
BILL CHEEK, Vice President, Alaska Petroleum Contractors, said they
separated this issue into three main areas of improvement -
training and development of recruitment and hiring, retention, and
the measurement of those two. They made recommendations for the
producers, the contractors, and for the state.
MR. CHEEK said under training and development, their goal was to
ensure an adequately trained and available Alaskan work force.
They could do this by working with producers to forecast jobs one
to three years ahead of time to determine what kind of skill levels
will be needed for the industry. They would determine what kinds
of skills are developed throughout the state that represent the
unemployment numbers they see every day. Then they could develop
a training curriculum that would ensure Alaskans would be used in
the future for the forecasted jobs.
MR. CHEEK said they would look to the state to help them identify
existing education programs and monies that are currently being
spent on those training programs.
MR. CHEEK explained under recruitment, hiring and retention. their
goal is to retain a safe, competitive, and long term work force; to
actively recruit and hire Alaska residents, and encourage non-
Alaskan hires to become Alaska residents. This boils down to a few
points. They have to get better at Alaska wide recruitment
throughout the state and in the rural communities.
MR. CHEEK pointed out they have to be able to post jobs that are
available and ensure that each one of their companies' policies
doesn't conflict with Alaska hire. These policies include rotation
schedules and compensation packages.
MR. CHEEK said they are looking for the state, especially for the
contractors, to improve infrastructures to support such things as
instate fabrication, the road systems, the dock facilities for
large module load outs, etc.
Number 180
MR. THOMPSON commented that they recommend that companies who pay
Alaska cost of living, whether or not the person lived in the state
or not, would have to stop. Cost of living would be appropriate
only for Alaska residents.
MR. THOMPSON explained certain companies pay transportation back
and forth for certain people to live outside of Alaska. There are
some inconsistencies and both producers and contractors have agreed
to review at all of their policies in regard to that and to develop
real incentive for workers to live in Alaska.
SENATOR KELLY asked how they got their people up to the North
Slope.
MR. THOMPSON replied that they fly shared service planes with ARCO
normally from Anchorage. They did have two stop overs, per week,
in Fairbanks which isn't enough flights for Fairbanks residents and
so on April 1, they added two more stops in Fairbanks. He said on
the average 73 percent of their workers in the oil and gas industry
reside in Alaska and are transported from Anchorage and Fairbanks,
not from out of state.
Number 210
RAY JAKUBCZAK, BP, said they think the measurement of the
performance is very important. Their specific commitment as an
industry is to track performance and to report so they know what
they are doing is having an effect and to see improvement in safety
and environmental performance.
MR. JAKUBCZAK said this recommendation recognizes that each
companies' situation is different and each companies' current
performance on local hire is different. On a company by company
and project by project basis they are committed to establish local
hire goals and report on them, he said.
MR. JAKUBCZAK said they would work specifically with the Department
of Labor to develop an improved methodology for measuring
everything. There is a two year lag in the nonresident data that
they currently compile. They want accuracy, consistency and
timeliness.
SENATOR KELLY asked how they define an "expatriate employee."
MR.JAKUBCZAK replied that would be a foreign national that's
working in the United States.
Number 258
KEN LANGEL, HC Price Company, said each company is committed to
reviewing their individual policies and procedures to see what
affect they may have on Alaska hire and see what can be done.
Training was a big issue that came up in the recommendations. A
training subgroup was created to work within the industry in
conjunction with the appropriate state agencies to see what was
available in the state and to ensure it was effective. Another
subgroup was created to deal with the Department of Labor issues
already mentioned.
MR. LANGEL said the group wholeheartedly endorsed the Alaska
employment agenda. There is a basic underlying requirement for the
industry to be competitive in a world market. A competitive
industry returns benefits to the state through an even greater
potential for job opportunities for Alaskans. To accomplish this,
they need a better understanding of the potential costs and
tradeoffs associated with their Alaskan hire stance and the
increasing need to compete, not just on a regional basis, but with
the lower 48 on a global basis.
Number 300
DWIGHT PERKINS, Department of Labor, said he was present to listen.
He said the industry has been talking with his commissioner.
SENATOR JUDY SALO said she hoped they were working in her district
with Dennis Stephie of the KPC.
MR. LANGEL said they are working with him and an industry group
toured the Kenai Peninsula and they like what they saw.
MR. JAKUBCZAK said they were surprised and impressed with the hands
on training and with the amount of real industry equipment they saw
in the laboratories. They were particularly impressed with the
instrumentation program and talked to some people about getting
ready for some jobs that might available in a year and a half down
the road. He said this skill is consistently in short supply.
SENATOR SALO remarked that she thought it would be wonderful if the
Northstar modules could be built in Alaska and asked if they would
be built with Alaskan workers.
MR. JAKUBCZAK replied that instrument training program was geared
toward that project.
Number 345
CHAIRMAN PETE KOTT commented that this is a relatively unique
process with the industry and it is an important one. He mentioned
a story he heard about how the industry brought in 25 welders for
a one day job and thought there were plenty of Alaskan who could
have done that job.
MR. CHEEK replied that he wasn't familiar with that story, but he
couldn't remember when they had a one day job. He said in the last
two years, they have had difficulty in the higher skilled trades
such as electricians and some pipe welders which they have had to
recruit from outside. He said they have a rigorous recruiting
program which is monitored by Arctic Slope Regional Corporation
(ASRC) and ensures that they give ASRC shareholders a first chance
to go to work, Alaskan Natives and then Alaskans. They have a very
vigorous monitoring program to make sure they are complying with
that.
MR. THOMPSON said as a result of some of this work they have looked
at the North Slope, ARCO, for example, in the Kuparuk field, one of
their construction projects is a large pipeline project and
pipeline modification. In that particular project they were able
to use APC and other companies - unions out of Fairbanks, 90
percent plus are Alaskans. Also BP at Milne Point and some other
projects have been able to increase Alaskan hire. However, they
are hearing loud and clear that this isn't enough and they are
going to try to follow through on these specific recommendations
they have outlined.
REPRESENTATIVE JERRY SANDERS applauded their efforts to increase
Alaska hire in the last couple of years and encouraged them to work
with the legislature to let them know how they could help.
Number 406
REPRESENTATIVE GENE KUBINA asked if ARCO was planning to out source
more of them.
MR. THOMPSON replied that currently they have about 1,550 employees
within ARCO and their long range plan calls for that into the
future. They did not plan at the time to have any major out
sourcing of ARCO employees work. Certain segments of their work
evolved in the 1990s when Alaskan contractors did certain types of
work for them, like construction and operational. Within those
contractors there were some subcontractors using 80 percent to 90
percent Alaska hire and some contractors were using about 50
percent Alaskan hire. Those contractors have agreed to improve and
they don't have plans to out source on ARCO work.
MR. THOMPSON explained that two years ago they had major
restructuring within their company and looked at out sourcing major
functions. They got bids from outside firms for those and it was
at a substantially lower cost. They challenged their own employees
to meet or beat those costs and streamline to improve efficiency.
Today they are at that lower cost.
REPRESENTATIVE KUBINA said it does appear when there are contract
agreements with the union, they seem to get a lot more Alaskans and
asked him if he was as restricted as the state government in terms
of giving preference to Alaskans.
MR. THOMPSON replied that they have had in many of their recent
contracts Alaska hire preference clauses. It is controversial
because under federal law people can travel and can work anywhere
in the U.S. and they do have out of state workers who like to work
in Alaska.
MR. THOMPSON explained the report shows that even though there are
Alaskan preference clauses in certain contracts, industry did not
make a commitment to be measured.
MR. THOMPSON said for the most part, union hire contractors are a
higher percentage Alaskans. Using the hiring at Kuparek as an
example, he said, they first found that the unions were not cost
competitive whatsoever. He said crafts people out of Fairbanks sat
down with their management personnel and shared numbers and the
need to be cost competitive and they came up with innovations where
they got to a competitive cost and they got the work. At the same
time there were some groups that were not willing and they did not
get the work. So it is important for everyone to be really serious
on the cost competitive issue.
Number 475
SENATOR SALO said she thought it would take about 20 cannery jobs
to equal one good oil industry job. So the figures might look
terrible for the seafood processing industry, the oil industry jobs
are good jobs for Alaskans that pay a living wage.
Number 482
REPRESENTATIVE KUBINA said he looked forward to working with
industry on the gas project coming in the future.
MR. THOMPSON said that for ARCO, North Slope gas is the single
largest potential resource their company has.
CHAIRMAN KELLY thanked everyone for their participation.
ADJOURNMENT
CHAIRMAN KELLY adjourned the meeting at 2:15 p.m.
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