Legislature(1995 - 1996)
04/02/1996 01:35 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.