Legislature(2011 - 2012)BELTZ 105 (TSBldg)

01/24/2012 01:30 PM LABOR & COMMERCE

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01:31:41 PM Start
01:34:29 PM Presentation: Oil and Gas Industry Employment on Alaska's North Slope by Jim Calvin, President, Mcdowell Group
02:26:39 PM SB156
02:41:41 PM HB146
02:45:28 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: Jim Calvin, McDowell Group, Oil and TELECONFERENCED
Gas Industry Employment on Alaska's North Slope
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                        January 24, 2012                                                                                        
                           1:31 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Dennis Egan, Chair                                                                                                      
Senator Joe Paskvan, Vice Chair                                                                                                 
Senator Linda Menard                                                                                                            
Senator Bettye Davis                                                                                                            
Senator Cathy Giessel                                                                                                           
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
PRESENTATION: Oil and Gas Industry Employment on Alaska's North                                                                 
Slope by Jim Calvin, President, McDowell Group                                                                                  
     - HEARD                                                                                                                    
SENATE BILL NO. 156                                                                                                             
"An Act extending the time period for which the Alaska Railroad                                                                 
Corporation may lease land without reserving the right to                                                                       
terminate the lease."                                                                                                           
     - HEARD & HELD                                                                                                             
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 146(RES)                                                                                
"An  Act authorizing  the  transfer  of land  from  the State  of                                                               
Alaska  and the  Alaska Railroad  Corporation to  property owners                                                               
along  the Eielson  Spur  Line; and  providing  for an  effective                                                               
     - HEARD & HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: SB 156                                                                                                                  
SHORT TITLE: ALASKA RAILROAD LAND LEASES                                                                                        
SPONSOR(s): LABOR & COMMERCE                                                                                                    
01/17/12       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/17/12       (S)       L&C, CRA                                                                                               
01/24/12       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
BILL: HB 146                                                                                                                  
SHORT TITLE: LAND TRANSFER FROM STATE AND ALASKA RR                                                                             
SPONSOR(s): T.WILSON                                                                                                            
02/09/11       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/09/11       (H)       RES, FIN                                                                                               
03/21/11       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/21/11       (H)       Heard & Held                                                                                           
03/21/11       (H)       MINUTE(RES)                                                                                            
03/28/11       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/28/11       (H)       Moved CSHB 146(RES) Out of Committee                                                                   
03/28/11       (H)       MINUTE(RES)                                                                                            
03/29/11       (H)       RES RPT CS(RES) 8DP                                                                                    
03/29/11       (H)       DP: GARDNER, FOSTER, MUNOZ, P.WILSON,                                                                  
                         HERRON, DICK, FEIGE, SEATON                                                                            
04/06/11       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
04/06/11       (H)       Moved CSHB 146(FIN) Out of Committee                                                                   
04/06/11       (H)       MINUTE(FIN)                                                                                            
04/07/11       (H)       FIN RPT CS(FIN) NT 10DP 1AM                                                                            
04/07/11       (H)       DP:   FAIRCLOUGH,    GUTTENBERG,   GARA,                                                               
                         JOULE,    HAWKER,   COSTELLO,    EDGMON,                                                               
04/07/11       (H)       STOLTZE, THOMAS                                                                                        
04/07/11       (H)       AM: T.WILSON                                                                                           
04/08/11       (H)       RLS AT 5:00 PM CAPITOL 120                                                                             
04/08/11       (H)       Moved CSHB 146(RES) Out of Committee                                                                   
04/08/11       (H)       MINUTE(RLS)                                                                                            
04/11/11       (H)       RLS RPT CS(RES) 1DP 6NR                                                                                
04/11/11       (H)       DP: AUSTERMAN                                                                                          
04/11/11       (H)       NR: TUCK, GRUENBERG, OLSON, CHENAULT,                                                                  
                         GATTO, JOHNSON                                                                                         
04/11/11       (H)       TRANSMITTED TO (S)                                                                                     
04/11/11       (H)       VERSION: CSHB 146(RES)                                                                                 
04/12/11       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/12/11       (S)       L&C, FIN                                                                                               
01/24/12       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
WITNESS REGISTER                                                                                                              
JIM CALVIN, President                                                                                                           
McDowell Group                                                                                                                  
Anchorage, AK                                                                                                                   
POSITION STATEMENT: Gave presentation on Oil and Gas Industry                                                                 
Employment on Alaska's North Slope.                                                                                             
DANA OWEN                                                                                                                       
Staff to the Senate Labor and Commerce Committee                                                                                
Alaska State Legislature                                                                                                        
Juneau, AK                                                                                                                      
POSITION STATEMENT: Presented SB 156 to the committee.                                                                        
TIM SULLIVAN, Manager                                                                                                           
External Affairs                                                                                                                
Alaska Railroad Corporation (ARRC)                                                                                              
Anchorage, AK                                                                                                                   
POSITION STATEMENT: Available to answer questions on SB 156.                                                                  
JIM KUBITZ, Director                                                                                                            
Project Planning                                                                                                                
Alaska Railroad Corporation (ARRC)                                                                                              
POSITION STATEMENT: Supported SB 156.                                                                                         
JON COOK, member                                                                                                                
ARRC Board of Directors                                                                                                         
Anchorage, AK                                                                                                                   
POSITION STATEMENT: Supported SB 156.                                                                                         
REPRESENTATIVE TAMMY WILSON                                                                                                     
Alaska State Legislature                                                                                                        
Juneau, AK                                                                                                                      
POSITION STATEMENT: Sponsor of HB 146.                                                                                        
BILL HUPRICH, general counsel                                                                                                   
Alaska Railroad Corporation (ARRC)                                                                                              
Anchorage, AK                                                                                                                   
POSITION STATEMENT: Supported HB 146.                                                                                         
BONNE' WOLDSTAD, representing herself                                                                                           
North Pole, AK                                                                                                                  
POSITION STATEMENT: Supported HB 146.                                                                                         
ACTION NARRATIVE                                                                                                              
1:31:41 PM                                                                                                                    
CHAIR DENNIS EGAN called the Senate Labor and Commerce Standing                                                               
Committee meeting to order at 1:31 p.m. Present at the call to                                                                  
order were Senators Davis, Paskvan, Giessel and Egan.                                                                           
1:34:29 PM                                                                                                                    
^Presentation: Oil and Gas Industry Employment on Alaska's North                                                                
Slope by Jim Calvin, President, McDowell Group                                                                                  
        Presentation: Oil and Gas Industry Employment on                                                                    
                      Alaska's North Slope                                                                                  
1:34:53 PM                                                                                                                    
CHAIR EGAN announced  a presentation by the  McDowell Group's Jim                                                               
Calvin on  employment in the  oil and  gas industry on  the North                                                               
JIM  CALVIN, President,  McDowell  Group, said  key points  their                                                               
research found in  industry employment trends over  the last four                                                               
or  five  years  were  possible   with  the  cooperation  of  the                                                               
Department of  Labor and Workforce  Development (DOLWD),  and new                                                               
hire data  from earlier in  the year suggested a  marked increase                                                               
in  non-resident participation  in the  oil and  gas industry  in                                                               
Alaska. He  said he also  had data on  non-resident participation                                                               
in the oil and gas industry by occupation.                                                                                      
He showed  a graph of  total oil  and gas industry  employment in                                                               
the state over  the last eight years split in  two by North Slope                                                               
employment  and all  other employment  in the  state. About  two-                                                               
thirds of  all oil and  gas industry  employment in Alaska  is on                                                               
the  North  Slope.  The  graph   also  indicates  the  remarkable                                                               
increase in  oil and gas employment  in Alaska over the  last six                                                               
or seven years, a gain of  about 5,000 jobs since 2004, making it                                                               
one  of the  fastest growing  sectors  in the  economy over  that                                                               
period  of time.  Most  of that  growth was  from  2004 to  2008;                                                               
employment leveled off  and took a dip in 2009.  Most recently it                                                               
has  seen another  uptick with  preliminary estimates  suggesting                                                               
about  500 new  jobs in  2011, which  puts oil  and gas  industry                                                               
employment in Alaska at near record levels.                                                                                     
1:38:55 PM                                                                                                                    
SENATOR PASKVAN  asked him which  categories are not  included in                                                               
the  North  Slope employment  figures.  He  understood that  some                                                               
construction  categories  had  100  percent  of  their  workforce                                                               
working on the North Slope, but  they are not included in the oil                                                               
and gas employment figures.                                                                                                     
MR. CALVIN  responded that these employment  numbers, the roughly                                                               
13,000  jobs in  the  oil and  gas industry  in  Alaska, are  the                                                               
numbers  the  Department  of   Labor  and  Workforce  Development                                                               
(DOLWD) and  the federal government  published; they  include the                                                               
areas  of oil  and gas  extraction,  oil drilling  and oil  field                                                               
support  services. They  don't include  the TransAlaska  Pipeline                                                               
System  (TAPS),  Alyeska   employment,  refining,  indirect  jobs                                                               
associated  with the  industry, nor  do they  capture any  of the                                                               
induced jobs. These numbers are  useful, though, because they are                                                               
published regularly  and therefore it's  easy to track  trends in                                                               
the industry.                                                                                                                   
He  showed  two graphs  (using  published  data) of  Prudhoe  Bay                                                               
employment over  the same  time period  (2004-2010) split  by the                                                               
typical  oil and  gas industry  employment and  jobs also  on the                                                               
North  Slope that  are due  completely  to oil  and gas  industry                                                               
activity  that   aren't  reported:  construction,   camp  support                                                               
services, transportation, security and  so forth. About 8,000 oil                                                               
and gas  industry jobs are reported  as such on the  North Slope.                                                               
But about  2,000 jobs aren't.  So, he advised whenever  they hear                                                               
published data about  employment on the North  Slope, they should                                                               
remember it's only 80 percent of the picture.                                                                                   
Another graph  showed the same  basic trends for North  Slope oil                                                               
and gas  industry employment  over the last  six or  seven years:                                                               
sharp  growth of  about 4,000  new  jobs (but  leveling off  most                                                               
recently). The  latest data for  2011 shows a  significant uptick                                                               
in employment as well.                                                                                                          
1:41:37 PM                                                                                                                    
SENATOR GIESSEL  said she was  surprised that he  used Department                                                               
of Labor  and Workforce Development  (DOLWD) data,  because there                                                               
has been some  question about its validity. She  pointed out that                                                               
a caveat  that says "don't  think these are  absolutely accurate"                                                               
and that sometimes  an employee gets counted twice.  She asked if                                                               
he had another source for the data  or if he had validated any of                                                               
MR. CALVIN replied they had spent  many hours looking at the data                                                               
and found that  it is the best available.  Their only alternative                                                               
would  have been  to  develop employment  and  payroll data  from                                                               
virtually every  employer (in the  hundreds) on the  North Slope.                                                               
These are private businesses and  don't necessarily see any value                                                               
in providing  detailed data. He said  the data they rely  on from                                                               
the DOLWD is very accurate and  based on forms that all employers                                                               
are  required  to  submit  to  the  department  for  purposes  of                                                               
employment security payments.                                                                                                   
But is the data they see  published a 100 percent perfect picture                                                               
of all  the jobs  on the  North Slope? No;  Mr. Calvin  said they                                                               
found a  few businesses that  are active  on the North  Slope but                                                               
are  reporting   their  employment  in  Anchorage.   However,  he                                                               
explained that  their primary challenge is  to understand trends,                                                               
and  the department's  data is  really useful  in terms  of trend                                                               
analysis. It is  better than anything they could  hope to develop                                                               
over the  course of  a three-month study  given the  diversity of                                                               
the industry and number of different players engaged in it.                                                                     
MR. CALVIN went  to another graph that narrowed the  focus to the                                                               
last three years  or so and to monthly employment  in the oil and                                                               
gas industry.  He said  it illustrates that  while overall  on an                                                               
annual  average basis  there is  a fair  amount of  stability and                                                               
some general  growth in the oil  and gas industry, over  the last                                                               
few years  it has been a  roller coaster in terms  of employment.                                                               
In 2009  through 2010, no  one seemed to  be quite sure  what was                                                               
going on. You  would hear reports of people losing  their jobs on                                                               
the North Slope, that employers  were no longer active and people                                                               
weren't sure why. On the other  hand, you would hear reports that                                                               
employment was growing to the highest level ever.                                                                               
1:44:22 PM                                                                                                                    
SENATOR MENARD joined the committee.                                                                                            
1:44:28 PM                                                                                                                    
MR. CALVIN said all those views  are right, because it was a very                                                               
dynamic environment. Industry employment  peaked in December 2008                                                               
and over the next 12  months rather precipitously lost 1,700 jobs                                                               
(about  14  percent  of  its total  employment  base).  That  was                                                               
related  primarily   to  the   global  recession   when  everyone                                                               
tightened up the  pocket book including the  oil industry. Almost                                                               
just as  quickly the employment bounced  back up, and in  2010 it                                                               
gained about 1,400 jobs. It's  not surprising that there was some                                                               
uncertainty about  just what was  going on  up there in  terms of                                                               
Recently  industry employment  climbed back  to its  peak levels;                                                               
the peak  in late 2008  was about 13,600  jobs and that  peak was                                                               
hit again in September.                                                                                                         
MR. CALVIN  showed another graph  of North Slope  employment with                                                               
the  same  kind of  roller  coaster  and  stated that  even  more                                                               
noteworthy is that department data  through November and December                                                               
shows it is at an all-time high of 9,000 jobs.                                                                                  
SENATOR  PASKVAN said  because the  price of  ANS crude  was over                                                               
$140/barrel in  July 2008 and  cratered a number of  months after                                                               
that  to less  than $50/barrel  is  consistent with  the loss  of                                                               
employment seen in  the North Slope oil and  gas industry monthly                                                               
MR.  CALVIN   responded  that  those  events   are  happening  in                                                               
parallel, but  the cause  and effect  is a  complicated question.                                                               
But, yes, employment  peaked at the same time  oil prices peaked,                                                               
and there is a relationship in the recovery as well.                                                                            
SENATOR PASKVAN  asked if it  is more  probable that the  drop is                                                               
the result  of the global  and US recession  and the drop  in oil                                                               
price as compared to oil taxation issues.                                                                                       
MR. CALVIN answered that they  didn't investigate taxation issues                                                               
at all,  but a  big part  of the run-up  in employment  from 2004                                                               
through  2008  related  to  sustained  high  and  increasing  oil                                                               
prices. Some  of the  variability since then  has related  to oil                                                               
prices, too,  but he didn't want  to hazard a guess  on what role                                                               
taxation played in that.                                                                                                        
SENATOR PASKVAN  asked if a corresponding  increase in employment                                                               
is  consistent with  an increase  in price  of North  Slope crude                                                               
going from less than $50/barrel to $110/barrel.                                                                                 
MR. CALVIN replied  yes; clearly there is  a relationship between                                                               
price and  an increased interest  in exploration.  An interesting                                                               
graph illustrates  the number  of barrels  produced on  the North                                                               
Slope  each year  per  job.  In 1994,  reasonably  close to  peak                                                               
production, for every worker on  the North Slope, 200,000 barrels                                                               
were being produced.  That has changed dramatically  and they are                                                               
now  down to  27,000  barrels per  worker. This  is  a result  of                                                               
sharply  increasing employment  at  the same  time production  is                                                               
1:49:36 PM                                                                                                                    
SENATOR PASKVAN  said this  graph intrigued  him, because  if the                                                               
North  Slope reaches  approximately  2 million  barrels/day on  a                                                               
yearly  average,  he   is  trying  to  factor   what  the  actual                                                               
calculation is. Is it based on barrels per year?                                                                                
MR.  CALVIN replied  it is  based on  the total  North Slope  oil                                                               
production over the course of a  year divided by the total number                                                               
of  workers.   The  DOLWD's   methodology  for   calculating  the                                                               
residency  of the  workforce is  based on  PFD applications,  Mr.                                                               
Calvin said; it's not perfect,  but it provides a really valuable                                                               
tool  for tracking  trends. And  unlike any  other state,  it's a                                                               
tool that  Alaska alone  has that allows  them to  understand the                                                               
residency  of  the  workforce. It  does  slightly  overstate  the                                                               
percentage of  nonresidents, because one  has to live here  for a                                                               
year  in order  to  qualify.   But  the  department  did its  own                                                               
calculations of non-resident participation  labor force and found                                                               
in the  year it  examined about  14 percent  of workers  that are                                                               
classified as  non-resident in one year  ultimately become Alaska                                                               
residents.  The   study  used   published  2009  data,   but  the                                                               
department would come out with its 2010 report soon.                                                                            
MR. CALVIN said  they found that one in six  oil and gas industry                                                               
workers who  are classified as  non-residents were at  some point                                                               
over  the last  five years  Alaska residents.  So, in  looking at                                                               
Alaska workforce  data, one needs  to keep these points  in mind.                                                               
If they  looked back  over 10  years they  would see  more Alaska                                                               
residents in that mix. This  illustrates the mobile nature of the                                                               
oil and gas industry workforce.                                                                                                 
1:52:51 PM                                                                                                                    
MR. CALVIN  said that statewide non-resident  workers account for                                                               
about one in  five jobs, a very important part  of Alaska's labor                                                               
force,  and it  varies  from industry  to  industry with  seafood                                                               
processing  having  a  very  large  non-resident  component.  The                                                               
accommodations  sector  is  41 percent  non-resident  labor;  oil                                                               
field services  about 30  percent; metal  mining 28  percent; and                                                               
food services  also has  a fair  amount of  seasonal non-resident                                                               
activity.  He pointed  out  that the  oil and  gas  sector -  oil                                                               
extraction (BP and  ConocoPhillips and a few others)  - has about                                                               
23  percent  non-resident  workers, not  significantly  different                                                               
than the statewide average across all industries.                                                                               
MR. CALVIN  said that non-resident  participation in the  oil and                                                               
gas  industry  (extractions  plus  all  the  oil  field  services                                                               
companies) on a  statewide basis over the last 12  to 13 years is                                                               
pretty steady from year to year.                                                                                                
SENATOR  PASKVAN   said  a  DOLWD  publication   from  last  year                                                               
indicated that contractors on the  North Slope that aren't in the                                                               
direct category of  oil and gas related were  in the construction                                                               
industry, but 100  percent of their workforce was  located on the                                                               
North Slope  and were  identified as  non-resident. He  said that                                                               
was his focus  and asked what Mr. Calvin had  found out from that                                                               
MR. CALVIN replied that while  they can get ranges of information                                                               
from the DOLWD,  they can't get employment  data about individual                                                               
businesses. When they get the 2010  and 2011 data, they will look                                                               
at   non-resident  participation   in  firms   like  construction                                                               
companies  that are  active on  the North  Slope; right  now they                                                               
just have 2009 data.                                                                                                            
1:56:34 PM                                                                                                                    
SENATOR  PASKVAN asked  if in  his investigation  of non-resident                                                               
hire  in  the  construction  industry   he  found  any  anecdotal                                                               
information that  there has been  a significant increase  in that                                                               
type of employment (construction  companies reporting 100 percent                                                               
non-resident hire for 2010/11).                                                                                                 
MR. CALVIN  replied that they have  seen a general uptick  in the                                                               
data when  industry is growing at  its most rapid pace,  and they                                                               
see  the   greatest  non-resident  participation   in  short-term                                                               
employment assignments when rapid mobilization is used.                                                                         
SENATOR PASKVAN went back to  the 1,700 figure drop in employment                                                               
that followed  the world economic  recession and asked  why there                                                               
wasn't backfilling with residents,  because most of those workers                                                               
would have been Alaskans.                                                                                                       
MR. CALVIN replied that the  latest trends don't show a departure                                                               
from  the  overall statewide  trend  of  28-30 percent  for  non-                                                               
resident hire,  but that 2010  data would probably show  a little                                                               
CHAIR  EGAN said  he knew  Mr. Calvin  contacted major  companies                                                               
with employment on the North Slope  and asked how many refused to                                                               
provide information.                                                                                                            
MR.  CALVIN  replied  that  they  targeted  about  30  oil  field                                                               
services companies and some elected  not to participate, but they                                                               
got good  cooperation from  21 of them.  They asked  for detailed                                                               
information  and  he  was  pleased  with  the  response;  BP  and                                                               
ConocoPhillips were very helpful.                                                                                               
2:00:52 PM                                                                                                                    
He indicated that  around 35 percent of the workers  on the North                                                               
Slope are non-residents and that  a pretty steady figure that may                                                               
go back  up to  36 percent  in 2010. He  explained that  new hire                                                               
data,  which is  different than  DOLWD data  that tells  how many                                                               
jobs there are on the North  Slope, is anyone that hasn't been on                                                               
the payroll of a particular  company over the past four quarters.                                                               
It includes  new jobs  and new  people in the  new jobs  but also                                                               
includes replacement for  turnover. It showed that  about half of                                                               
the new  hires in the  oil and gas  industry in Alaska  were non-                                                               
residents. They asked the DOLWD to  go back several years and run                                                               
the same analysis  to see if it was much  different than previous                                                               
years, and sure  enough it was up over 50  percent. In the fourth                                                               
quarter 2010  when typically  the non-resident  new hire  rate is                                                               
between  30 and  40 percent  (that  matches the  35 percent  non-                                                               
resident participation  in the previous  graph), it went  down to                                                               
normal ranges. That  anomalous quarter is even more  so when just                                                               
looking at the North Slope  where all non-resident new hires were                                                               
over 56 percent.                                                                                                                
MR. CALVIN remarked  that kind of spike would take  only one firm                                                               
coming into the North Slope  for even a one-month assignment with                                                               
a pool of 80 or 100  non-resident workers to get some specialized                                                               
job done, and they  hope to be able to discern  that from the new                                                               
DOLWD data that will come out soon.                                                                                             
Another   graph  showed   46   percent   non-resident  hire   for                                                               
occupations on  the North  Slope where more  than 100  people are                                                               
employed in  first line positions like  supervisors and managers.                                                               
Welders,  cutters,  solderers   were  45  percent  non-residents;                                                               
construction  managers  were  44  percent;  and  electricians  43                                                               
percent on down  to trucker drivers at 35 percent.  So, there are                                                               
a few positions  where the industry finds it  challenging to find                                                               
suitably skilled Alaskans.                                                                                                      
2:06:51 PM                                                                                                                    
SENATOR MENARD asked if he  had compared those figures with North                                                               
Dakota non-resident  hire, because  the shale industry  there has                                                               
unique requirements, too.                                                                                                       
MR. CALVIN replied  that most states are focused on  new jobs and                                                               
don't  even think  about non-resident/resident  hire issues  much                                                               
less have a  way to measure it. Interestingly  enough, this issue                                                               
is unique to Alaska.                                                                                                            
SENATOR MENARD  said 87  percent of  Alaska's revenue  comes from                                                               
the oil  industry and  asked what  North Dakota's  percentage is.                                                               
She  thought  the data  was  available  and  a method  should  be                                                               
developed to run  the numbers. She thought it would  become a big                                                               
issue in North Dakota as well.                                                                                                  
MR. CALVIN  responded that looking  at those  relationships would                                                               
be an exceptionally interesting analysis.                                                                                       
2:11:01 PM                                                                                                                    
SENATOR  PASKVAN asked  if the  correlation might  be that  North                                                               
Dakota  has  a  personal  income  tax,  so  whether  workers  are                                                               
resident  or non-resident  there is  participation in  paying for                                                               
the infrastructure of government.                                                                                               
MR.  CALVIN  replied that  he  thought  that  would be  a  likely                                                               
SENATOR GIESSEL noted  that in May 2011, Alberta  (about the size                                                               
of  Montana), that  has oil  sands,  created 22,000  jobs in  one                                                               
month. They currently have 60,000  openings and she said it would                                                               
be interesting to know where  their workforce comes from since it                                                               
all can't come from Alberta.                                                                                                    
2:12:35 PM                                                                                                                    
CHAIR  EGAN  asked  him  to  talk  about  training  programs  for                                                               
Alaskans for these jobs or the lack of.                                                                                         
MR. CALVIN  replied that they  looked at recruiting  practices in                                                               
the industry  and found that workforce  capacity becomes relevant                                                               
pretty  quickly. They  didn't  attempt to  inventory  all of  the                                                               
various training programs, and there are a lot of them here.                                                                    
CHAIR EGAN asked if there are enough.                                                                                           
MR. CALVIN  replied that he  couldn't answer that. The  report is                                                               
not a comprehensive assessment of  the training infrastructure in                                                               
Alaska and  just has a  case study that  looked at one  firm that                                                               
has  been  quite proactive  in  doing  all  it  can to  get  more                                                               
Alaskans into its workforce.                                                                                                    
CHAIR EGAN  remarked that the  report talked about  retention and                                                               
how  when you  train an  Alaskan they  have a  tendency to  stick                                                               
around. He then thanked Mr. Calvin for his presentation.                                                                        
2:16:17 PM                                                                                                                    
SENATOR PASKVAN  asked when the 2011  data would be added  to his                                                               
presentation. They are  looking for trends, and one  more year of                                                               
data would be good.                                                                                                             
MR. CALVIN  replied that he  would have to  talk to the  folks in                                                               
research  and analysis  about their  timeframe.  He expected  the                                                               
2010 residency report  would be released soon. Much  of the other                                                               
data in  the report is  not routinely published, but  the process                                                               
of updating the report can  start immediately as new data becomes                                                               
CHAIR EGAN  said as  long as  they have  all this  information in                                                               
their data base, he assumed that  updating it would be a lot less                                                               
expensive than doing the original report.                                                                                       
MR. CALVIN agreed.                                                                                                              
SENATOR GIESSEL asked the cost of this study.                                                                                   
CHAIR EGAN  answered $175,000  and it  was funded  through Senate                                                               
Finance. He then thanked Mr. Calvin again for his presentation.                                                                 
2:18:16 PM                                                                                                                    
Recess from 2:18 to 2:26 p.m.                                                                                                   
               SB 156-ALASKA RAILROAD LAND LEASES                                                                           
2:26:39 PM                                                                                                                    
CHAIR EGAN announced SB 156 to be up for consideration.                                                                         
2:26:54 PM                                                                                                                    
DANA OWEN, staff to Senate  Labor and Commerce Committee, sponsor                                                               
of SB  156, said they were  approached by the Alaska  Railroad to                                                               
amend the  statutes to allow  them to be  able to lease  land for                                                               
more than the current statutory limit  of 55 years. He said it is                                                               
common in  the development industry  to lease land for  95 years,                                                               
and that is how long they  want. They believe this will result in                                                               
higher quality  development that retains  its value for  a longer                                                               
period of  time; this benefit will  flow through to the  State of                                                               
Alaska and the  leaseholders. SB 156 has letters  of support from                                                               
both the Railroad and potential  leaseholders; they have received                                                               
no letters or phone calls in opposition to the bill.                                                                            
2:28:14 PM                                                                                                                    
TIM   SULLIVAN,  Manager,   External  Affairs,   Alaska  Railroad                                                               
Corporation (ARRC), said he was happy to answer questions.                                                                      
2:29:05 PM                                                                                                                    
JIM   KUBITZ,  Director,   Project   Planning,  Alaska   Railroad                                                               
Corporation  (ARRC),  also  said  he would  be  happy  to  answer                                                               
SENATOR MENARD  said she is  proud of this corporation  and asked                                                               
what would be considered a  sizeable investment that wouldn't fit                                                               
into 55 year lease.                                                                                                             
MR.   KUBITZ  replied   with  a   hypothetical:  some   Anchorage                                                               
developers could  be interested  in doing a  multi-phased project                                                               
if they  could control some  of the land  for a longer  period of                                                               
time. If you  add a couple of projects together  you could get up                                                               
$20-25  million  pretty  quickly,   and  the  Railroad  would  be                                                               
interested in doing that. A standard  ARRC leased is 35 years and                                                               
with a few 55 year leases.  The board has instructed them that to                                                               
get  up  to  the  95  year  lease a  project  would  have  to  be                                                               
SENATOR  MENARD  asked if  leases  are  typically for  100  years                                                               
MR.  KUBITZ said  he hadn't  researched that,  but Hong  Kong was                                                               
leased for  99 years to Great  Britain a long time  ago. It's not                                                               
uncommon for a developer  to go in on a long  term lease and want                                                               
to  flip  the  property  to  another  developer  who  would  need                                                               
certainty that  in fact the  investment is worth  that. Sometimes                                                               
properties get flipped a couple of  times through the life of the                                                               
project,  and  investors  all  want  certainty.  They  have  been                                                               
specifically told that  55 years isn't enough and  the longer the                                                               
SENATOR  MENARD said  she can  understand if  they are  trying to                                                               
flip the leases.                                                                                                                
SENATOR PASKVAN  asked what  additional considerations  have been                                                               
addressed  by the  ARRC based  upon commercial  reasonableness in                                                               
the future, say two or three decades from now.                                                                                  
MR.  KUBITZ replied  that they  are all  professionals and  would                                                               
look at whether, for instance, a  building was built 20 years ago                                                               
and someone  is buying it from  a current tenant, but  they won't                                                               
buy it  unless they  can get at  least one and  a half  times the                                                               
term of  their loan  out of it.  So, they may  come back  and say                                                               
they would  like a 35 year  lease. They would analyze  it and see                                                               
if it makes  sense. The issue would then go  to their real estate                                                               
committee on  their board of  directors, and the  committee would                                                               
make  a recommendation  to  the board.  It's on  a  case by  case                                                               
He explained  that new  construction is  different; in  that case                                                               
you have  a bank that  is very  anxious to have  their collateral                                                               
protected when  they are lending  money. The bank would  tell the                                                               
ARRC  how  long  the  lease  term  should  be.  The  real  estate                                                               
committee under the  chairmanship of Jon Cook talks  about this a                                                               
lot. Since this is a big  extension of their existing lease, they                                                               
would come up with some  definite parameters, which would have to                                                               
be adjusted  and inflation-proofed,  as to  when they  would ever                                                               
allow a 95 year lease.                                                                                                          
2:34:53 PM                                                                                                                    
SENATOR MENARD  asked how the IRS  depreciates construction costs                                                               
with a long lease.                                                                                                              
MR. KUBITZ replied that when people  do a development, they put a                                                               
whole case together and he didn't know the tax ramifications.                                                                   
SENATOR MENARD said she was certain  that the IRS has solid rules                                                               
on this  that would make a  longer time more advantageous  to the                                                               
bottom line.                                                                                                                    
SENATOR PASKVAN  asked if  an improvement  upon property  under a                                                               
commercial lease is subject to taxation by local governments.                                                                   
MR. KUBITZ answered yes.                                                                                                        
2:37:29 PM                                                                                                                    
JON  COOK, member,  ARRC Board  of  Directors, said  he has  also                                                               
served on the real estate committee.  During the day he works for                                                               
the largest  developers in Fairbanks,  and this issue  is "pretty                                                               
near and dear"  to him. He said it arose  out of various contacts                                                               
with  their  leaseholders  and other  outside  professionals  and                                                               
developers over  the course of the  past year. They have  had two                                                               
open  houses with  tenants in  Anchorage and  Fairbanks, meetings                                                               
with  ARRC   leaseholders  Association  and  meetings   with  the                                                               
Leaseholder  Advisory Group,  and this  topic has  come up.  They                                                               
have all  recommended increasing the  lease term to 95  years for                                                               
all the reasons outlined.                                                                                                       
He  explained that  what brought  this  to the  forefront is  the                                                               
tightening  of credit  markets and  underwriting standards  since                                                               
2008, and that  the Railroad wants to make sure  its existing and                                                               
future  tenants  have  access  to the  lowest  cost  of  capital.                                                               
Frankly, 55 year leases won't  obtain favorable financing on very                                                               
large  projects  whether they  are  existing  facilities or  new.                                                               
These 95  year leases requiring  substantial amounts  of capital,                                                               
at least  north of $10 million  at a minimum, would  be looked at                                                               
on a case  by case basis. They  want to do this  to help existing                                                               
leaseholders  who want  to know  that they  can sell  or transfer                                                               
property  to family  members, to  increase the  highest and  best                                                               
value of  their land and  to bring  more money into  the Railroad                                                               
and its  shareholder, which  is the  state. It's  the way  of the                                                               
future and the way things work in other areas.                                                                                  
CHAIR  EGAN found  no further  comments or  questions and  closed                                                               
public testimony saying SB 156 would be held.                                                                                   
2:41:20 PM                                                                                                                    
At ease from 2:41:20 to 2:41:41 p.m.                                                                                            
         HB 146-LAND TRANSFER FROM STATE AND ALASKA RR                                                                      
2:41:41 PM                                                                                                                    
CHAIR  EGAN announced  HB 146  to be  up for  consideration [CSHB                                                               
146(RES) was before the committee].                                                                                             
2:41:51 PM                                                                                                                    
REPRESENTATIVE TAMMY  WILSON, sponsor  of HB 146,  explained that                                                               
it restores  a revisionary  property right  to those  affected by                                                               
the repeal of  Section 12.09 of the Alaska  Railroad Transfer Act                                                               
(ARTA) in  2003. The repeal was  done to address title  issues of                                                               
concern. However, in the process,  the reversionary rights of the                                                               
property  owners,   the  right  that  allowed   them  to  receive                                                               
ownership of  their property once  the right-of-way is  no longer                                                               
in use, was  also repealed. It's important to  remember that this                                                               
bill  only restores  a right  that was  taken away.  It does  not                                                               
grant anyone  special privileges beyond  what was in ARTA  and it                                                               
only applies to the homesteads  along the Eielson Spur. It's also                                                               
important to  know that  all affected  parties, the  Railroad and                                                               
the constituent, are in agreement with this bill.                                                                               
2:43:20 PM                                                                                                                    
BILL  HUPRICH,  general   counsel,  Alaska  Railroad  Corporation                                                               
(ARRC), said he  was available to answer questions on  HB 146 and                                                               
that they support this bill.                                                                                                    
2:44:13 PM                                                                                                                    
BONNE' WOLDSTAD,  representing herself,  North Pole, said  HB 146                                                               
gives them back their rights and that she supported it.                                                                         
CHAIR  EGAN found  no further  comments or  questions and  closed                                                               
public testimony saying HB 146 would be held.                                                                                   
2:45:28 PM                                                                                                                    
There  being no  further business  to come  before the  committee                                                               
Chair  Egan  adjourned the  Senate  Labor  and Commerce  Standing                                                               
Committee meeting at 2:45 p.m.                                                                                                  

Document Name Date/Time Subjects
McDowell Group Oil Industry Labor Report FINAL.pdf SL&C 1/24/2012 1:30:00 PM
HB 110
McDowell Group North Slope OIl Jobs Study PPT.pptx SL&C 1/24/2012 1:30:00 PM
HB 110
McDowell Group North Slope OIl Jobs Study PPT.pdf SL&C 1/24/2012 1:30:00 PM
HB 110
McDowell Group Oil Industry Labor Report FINAL CORRECTED.pdf SL&C 1/24/2012 1:30:00 PM
HB 110
SB 156 Sponsor Statement.pdf SL&C 1/24/2012 1:30:00 PM
SB 156
SB156-DCCED-ARRC-01-20-12.pdf SL&C 1/24/2012 1:30:00 PM
SB 156
SB156-DNR-MLW-1-23-12.pdf SL&C 1/24/2012 1:30:00 PM
SB 156
SB 156 95 Year Lease - ARRLA Support.pdf SL&C 1/24/2012 1:30:00 PM
SB 156
SB 156 95 Year Lease - ASG Support.pdf SL&C 1/24/2012 1:30:00 PM
SB 156
SB 156 95 Year Lease - City of Whittier.pdf SL&C 1/24/2012 1:30:00 PM
SB 156
SB 156 95 Year Lease Board Support.pdf SL&C 1/24/2012 1:30:00 PM
SB 156
SB 156 95YL Support Letter - Seward.pdf SL&C 1/24/2012 1:30:00 PM
SB 156
SB 156 Suppport Letter - Trapline.pdf SL&C 1/24/2012 1:30:00 PM
SB 156