Legislature(1995 - 1996)

04/02/1996 01:35 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                         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                 
 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                  
 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              
 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.                      
 CHAIRMAN KELLY adjourned the meeting at 2:15 p.m.                             

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