Legislature(1995 - 1996)

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

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
       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                                                
 Representative Brian Porter                                                   
 Representative Beverly Masek                                                  
 Representative Kim Elton                                                      
                                                                               
  COMMITTEE CALENDAR                                                           
                                                                               
 Local hire                                                                    
                                                                               
    WITNESS REGISTER                                                           
                                                                               
 Ken Thompson                                                                  
 ARCO Alaska                                                                   
 P.O. Box 100260                                                               
 Anchorage, AK                                                                 
                                                                               
 Bill Cheek, Vice President                                                    
 Alaska Petroleum Contractors                                                  
                                                                               
 Ray Jakubczak                                                                 
 British Petroleum                                                             
 P.O. Box 770056                                                               
 Eagle River, AK 99577                                                         
                                                                               
 Ken Langel                                                                    
 HC Price Co.                                                                  
                                                                               
  ACTION NARRATIVE                                                             
                                                                               
  TAPE 96-24, SIDE A                                                           
 Number 001                                                                    
                                                                               
 CHAIRMAN KELLY called the Joint Senate and House Labor and Commerce           
 Committee meeting to order at 1:35 p.m. and said they had invited             
 some members of the oil and gas industry to attend today to discuss           
 local hire and outsourcing 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 here, 15,000 in the service sector, 10,000           
 in hotels, restaurants, and retail, 5,000 in the transportation               
 industry, 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.                                      
                                                                               
 He and John Morgan, President of BP, got together about 20                    
 contractors and looked at a number of issues like 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 90                                                                     
                                                                               
 He 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 one for the State.                            
                                                                               
 Under training and development their goal was to insure 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 insure 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.                                             
                                                                               
 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.                                                 
                                                                               
 They have to be able to post jobs that are available and insure               
 that each one of their companies' policies doesn't conflict with              
 Alaska hire.  These policies include rotation schedules and                   
 compensation packages.                                                        
                                                                               
 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.                                                    
                                                                               
 Certain companies pay transportation back and forth for certain               
 people to live outside of Alaska, he said. There are some                     
 inconsistencies and both producers and contractors have agreed to             
 relook 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.                                                
                                                                               
 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 they             
 now 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 Co., 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 insure it was effective.                        
                                                                               
 Another subgroup was created to deal with the Department of Labor             
 issues already mentioned.                                                     
                                                                               
 In summary, 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 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                                                                    
                                                                               
 REPRESENTATIVE 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 outside.  He said they have a rigorous recruiting program             
 which is monitored by Arctic Slope Regional Corporation and insures           
 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 Kuparek 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 outsource            
 more.  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 do not plan at the time to have any major                   
 outsourcing of ARCO employees work.  Certain segments of their work           
 evolved in the '90's when Alaskan contractors did certain types of            
 work for them, like construction and operational.  Within those               
 contractors there were some subcontractors using 80 - 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 outsource on ARCO work.                                   
                                                                               
 Two years ago they had major restructuring within their company and           
 looked at outsourcing 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.                                     
                                                                               
 This report shows that even though there are Alaskan preference               
 clauses in certain contracts, industry did not make a commitment to           
 be measured.                                                                  
                                                                               
 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.                                 
                                                                               
 SENATOR KELLY thanked everyone for their participation and                    
 adjourned the meeting at 2:15 p.m.                                            
                                                                               

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