Legislature(1995 - 1996)

04/15/1996 03:55 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                   SENATE RESOURCES COMMITTEE                                  
                         April 15, 1996                                        
                           3:55 P.M.                                           
 MEMBERS PRESENT                                                               
 Senator Loren Leman, Chairman                                                 
 Senator Drue Pearce, Vice Chairman                                            
 Senator Robin Taylor                                                          
 Senator Georgianna Lincoln                                                    
 Senator Lyman Hoffman                                                         
  MEMBERS ABSENT                                                               
 Senator Rick Halford                                                          
 Senator Steve Frank                                                           
  COMMITTEE CALENDAR                                                           
 SENATE BILL NO. 318                                                           
 "An Act authorizing, approving, and ratifying the amendment of                
 Northstar Unit oil and gas leases between the State of Alaska and             
 BP Exploration (Alaska) Inc.; and providing for an effective date."           
 SENATE BILL NO. 180                                                           
 "An Act authorizing the commissioner of the Department of Natural             
 Resources to negotiate and enter into timber sale contracts that              
 provide for local manufacture of high value-added wood products;              
 and establishing an Alaska Forest Products Research and Marketing             
 Program within the Department of Commerce and Economic                        
 CS FOR HOUSE BILL NO. 447(RES)                                                
 "An Act relating to traditional means of access for traditional               
 outdoor uses and to the classification and the sale, lease, or                
 other disposal of state land, water, or land and water."                      
  PREVIOUS SENATE COMMITTEE ACTION                                             
 SB 318 -  See Resources minutes dated 3/29/96, 3/30/96, 4/3/96,               
           4/11/96, and 4/13/96.                                               
 SB 180 - See Resources minutes dated 4/10/96.                                 
 HB 447 - See Resources minutes dated 4/12/96.                                 
  WITNESS REGISTER                                                             
 Jerry Hood                                                                    
 Teamsters Local 959                                                           
 43000 Boniface Parkway                                                        
 Anchorage, AK 99510                                                           
  POSITION STATEMENT:   Commented on SB 318.                                   
 Jerry McCutchon                                                               
 121 W. 11th Ave.                                                              
 Anchorage, AK 99501                                                           
  POSITION STATEMENT:   Commented on SB 318.                                   
 Mike Bruner                                                                   
 341 E 23rd Street                                                             
 Anchorage, AK 99503                                                           
  POSITION STATEMENT:   Commented on SB 318.                                   
 Gary Ackerman                                                                 
 P.O. Box 72079                                                                
 Fairbanks, AK 99707                                                           
  POSITION STATEMENT:   Commented on SB 318.                                   
 Duane Anderson                                                                
 General Delivery                                                              
 Palmer, AK 99645                                                              
  POSITION STATEMENT:   Testified in opposition to SB 180                      
 Erik Holland                                                                  
 427 First Ave., #915                                                          
 Fairbanks, AK 99701                                                           
  POSITION STATEMENT:   Testified in opposition to SB 180                      
  ACTION NARRATIVE                                                             
  TAPE 96-55, SIDE A                                                           
 Number 001                                                                    
          SB 318 NORTH STAR OIL & GAS LEASE AMENDMENT                         
  CHAIRMAN LEMAN  called the Senate Resources Committee meeting to             
 order at 3:55 p.m. and announced that there wasn't yet a quorum.              
 However, he said they would continue to take public testimony on  SB
 318 .                                                                         
 The following is a verbatim transcript of the public testimony                
 taken on SB 318.                                                              
  JERRY HOOD:                                                                  
   Thank you, Mr. Chairman.  First of all I'd like to thank                    
 Senator Pearce, I believe, for reading a letter that I sent down              
 into the record on Saturday and I just wanted to make a few                   
 additional comments.  I'll be as brief as possible.                           
  Our main concern is in the AFLCIO and also my own                            
 organization, the Teamsters Union, is the issue of Alaskan hire.              
 And some reports over the weekend have indicated that the                     
 administration has formed a working group to help solve these                 
 problems with the industry.  We have heard from the industry for              
 years that it is going to strive to improve its local hire record.            
 The numbers coming out of the Department of Labor do not support              
 that record has in fact been improved and we would only request the           
 committee and the legislature that until we see those numbers go up           
 and we see the proof in the pudding that relief not be granted in             
 any further areas until we see Alaskans benefiting directly from              
 employment opportunities in the oil patch before the industry is              
 granted relief.                                                               
  In some hearings I have attended in the past two or three                    
 weeks with this committee and with Labor and Commerce we're hearing           
 some new buzz words called competitive hire - Alaskan competitive             
 hire.  Those of us in the labor community interpret that to mean              
 that if Alaskans are willing to work for less, then they will be              
 hired.  If they're not willing to work for less, then we will                 
 continue to go to Oklahoma, Louisiana, Mississippi, or Texas to               
 find employees that will.  That, to say the least in our opinion,             
 if our interpretation is correct, is repulsive.  We have heard                
 testimony in front of committees that says that while in some areas           
 we cannot find skilled employees to perform the duties that we need           
 to have performed and the two instances that were given were                  
 electrical workers and welders.  Well, we do have skilled                     
 electricians in this State that are more than competent to provide            
 the work that is needed and we have competent welders in this                 
 State.  They happen to be union electricians and union welders and            
 if that's the problem then the industry needs to sit down with the            
 respective unions and crafts and work out a deal where we can make            
 those people available on a "competitive basis."                              
  But competitive for Alaskan standards, not lower 48 standards.               
 That's the additional comments that I would have at this time.  And           
 just urge this committee and the legislature to weigh this very,              
 very carefully, because as we all know there is a lot at stake here           
 and I find myself in a very difficult position.  Because many of              
 people sitting behind me are my friends and on four different                 
 occasions those within the industry and I and the other                       
 representatives of organized labor have worked together to                    
 accommodate both sides.  So it's difficult for me to sit here and             
 take a rather hard line position with regard to relief being sought           
 on North Star, but we have no other choice until our concerns are             
 met and rather than bet on the come, if you will, we want to see              
 those concerns met and then we can support relief in that area.               
  CHAIRMAN LEMAN:                                                              
  I have a couple questions.  One is is labor willing to                       
 negotiate in good faith about those rates.  I mean, that's what I             
 heard in your testimony.  I mean if you're willing to do more than            
 just talk about Alaska hire and say well, these are our rates and             
 then if you're told you can't compete at those rates, you're                  
 actually willing to go with a package deal or however...                      
  MR. HOOD:                                                                    
   One, you've opened up and avenue here.  We have not used the                
 P word yet, and when I say that we're talking about project labor             
 agreements.  That is one avenue that we believe constitutionally              
 the legislature could require a PLA for Northstar and other leases            
 throughout the State which would enhance Alaska hire                          
 constitutionally.  You can put certain provisions in legislation              
 that calls for project labor agreement and then mandate through               
 that legislation that the project labor agreements call for certain           
  One of the things that I personally think needs to be                        
 contained in any project labor agreement that we negotiate in the             
 future is to enhance native recruitment and native hire and rural             
 hire and rural recruitment for jobs in the oil patch.  But I think            
 with regard to negotiating with employers, whether they be oil                
 related or not, I think the record speaks for itself.  In the last            
 North Slope agreement some great accommodations were reached with             
 regard to productivity efficiencies and safeties, namely in the               
 area of composite crews.  And we think that the productivity                  
 numbers since 1994 when that agreement was entered into have                  
 increased greatly.                                                            
  So, yes, I can say that organized labor is more than willing                 
 to sit down and negotiate with employers for a competitive labor              
 package.  Now that is not to say that we are going to crawl in the            
 gutter with nonunion and go to those rates.  Because if you want              
 skilled trades and craftsmen, you're going to have to pay for that            
 skill and ability.                                                            
  One of the things that I read in a press release by the                      
 administration when they formed this working group was that the               
 State was going to throw some money at training and the oil                   
 industry was going to throw some money at training and the question           
 I had with regard to that was we've got a tight budget now.  Why is           
 the State going to throw more money at it and why are the oil                 
 companies going to throw more money at it.  The pipefitters have a            
 training school, the electricians have a training school, the                 
 laborers have a training school, the Teamsters do and so do the               
 rest of the skilled crafts.  We can bring that avenue to the party            
 to help reduce costs and get skilled and trained craftsmen for                
 those jobs up there.  So, yes, to answer your question.  I'm sorry            
 to take so long, but yeah, we're willing to sit down and negotiate            
 a fair deal with the industry.                                                
  CHAIRMAN LEMAN:                                                              
  Do you have any informal agreements with this administration                 
 or with industry regarding PLA's on this project?                             
  MR. HOOD:                                                                    
   No.  Today?  There has been discussion that organized labor                 
 would receive about, we understand, 40 percent of the work with               
 regard to Northstar.  We have a written agreement in talking with             
 the AF of L president with regard to North Slope work for 50                  
 percent of new construction.  We're having some difficulty                    
 understanding whether this is new construction or because the                 
 number we've been quoted is lower than 50 percent because it's off            
 shore.  We don't know where we stand.  There was a meeting that               
 occurred in Anchorage today.  It did not go well in a discussion              
 with the industry and....We're attempting to make inroads as best             
 we can and we're not meeting with a lot of success.                           
  CHAIRMAN LEMAN:                                                              
  Commissioner Shively on Saturday just said that the                          
 administration hadn't taken a position on that and I was just                 
 wondering if you had had those discussions and if your                        
 understanding was any different from that with anybody else in the            
  MR. HOOD:                                                                    
   I'm sorry, what did Commissioner Shively say?                               
  CHAIRMAN LEMAN:                                                              
  He said that the administration had not taken a position on                  
  MR. HOOD:                                                                    
   I believe that to be true.                                                  
  CHAIRMAN LEMAN:                                                              
  That's consistent with your understanding?                                   
  MR. HOOD:                                                                    
  CHAIRMAN LEMAN:                                                              
  O.K. any further questions?  In Anchorage, Jerry McCutchon.                  
  JERRY MCCUTCHON:                                                             
  Thank you, Mr. Chairman.  For the record, my name is Jerry                   
  I have a lot of questions on this.  One was the labor and two                
 was the fact of what it does to the state's contracting.  It throws           
 everything in a trash basket.  It says, you know, a contract with             
 the state of Alaska is meaningless.  A guy can go throw an awful              
 lot work and get a bid, and somebody will make a crazy bid, then              
 somebody else will buy him out, and they'll negotiate something for           
 a lot less.  Thought that's kind of dumb                                      
  BP has refused to hand out or give out what the original oil                 
 in place is.  There's no reason for withholding that information.             
 That information should be available.  We should know the depth of            
 what the oil is in place. We should know the depth of the pay                 
 stream.  We should know where it's at.  We should know the GOR; I             
 understand it's around 4,100 - 4,200 cubic feet of gas per barrel             
 oil.  We should know how much gas is in the gas cap, but they want            
 to withhold that.  We should know the composition of the gas.  We             
 should know how much gas they're going to flare, but they want to             
 withhold that.  We want to know where the gas is going to go.  Is             
 it going to reinjected, and, if so, where, but they withhold that.            
 They have said that the oil is around 43 [indisc.] oil.  That's               
 like back up your truck and we'll pour it in straight.  Why do they           
 need 60 square miles for only 130,000,000 barrels of recovery.                
  There was a group shoot in the late 1970's and they found 12                 
 structures larger than Prudhoe Bay offshore Alaska.  Is the North             
 Star one of them?  Where are the 12 structures? We don't know.                
 Don't you think we ought to find out before we start giving things            
  And now BP hasn't been straight.  These are the people who                   
 lied and said there were 9.6 billion barrels of recoverable oil               
 when they told Congress it was 15 billion barrels of recoverable              
 oil, and the difference between the two was the gas line, so they             
 hid 5 billion barrels of recoverable.  You know, it's their                   
 corporate responsibility to lie to us, you know, and it's our                 
 responsibility to see that we don't get lied to, that we find out             
 what the facts are.                                                           
  This is the company that was going direct from Cold Bay when                 
 after they first started production, and except for a state                   
 contractor who had been hired through the president of the Senate,            
 at that time Chancy Croft, they wouldn't have done it.  But he blew           
 the whistle and said, "Hey, you've got to water flood it, and,                
 okay, so they water flooded.  We've could have got less than 5                
 billion barrels of oil, or around 5 billion barrels of oil.                   
 There's 17 billion barrels of recoverable oil in that reservoir,              
 right now 9 of it's gone by now, and somewhere somebody should say            
 "Hey, how come you guys are only telling us 13?"                              
  CHAIRMAN LEMAN:                                                              
  Does that complete your testimony?                                           
  MR. MCCUTCHON:                                                               
   No, I'd like to go on, if I might.                                          
  CHAIRMAN LEMAN:                                                              
  Please proceed.                                                              
  MR. MCCUTCHON:                                                               
  Well, I think this contracting business and what a contract                  
 means and doesn't mean is extremely important.  So is the labor               
 issue, and I don't know who you have down there, but you raised the           
 question about, you know -- they keep telling us over and over it's           
 going to be Alaska hire, but the most closest you get to it, they             
 hire somebody from outside, he's there 30 days and then they call             
 it Alaska hire.                                                               
  And we really do need to know:  where are those 12 structures                
 at, what are the size of the structures, was this area covered in             
 that group shoot?  We should know these things.  It seems very,               
 very strange that we would give this thing away and decrease the              
 amount of oil, but we show know what is the contract between                  
 Amerada Hess and BP. And if we do get to see a contract between               
 Amerada Hess, is that the only contract, or could there be another            
 somewhere else where Amerada Hess' large refinery in the Caribbean            
 will be fed by BP's oil coming out of Columbia, and we'll never               
 know what's going on.  There is just question after question that             
 is out there, and I'd like to know.                                           
  There was $1.6 billion worth of cost overruns on this                        
 pipeline. BP was owed more than 50 percent of Alyeska Pipeline                
 committed it.  They got cap cuts red-handed, you know, with letters           
 read and destroy in it, and we got stuck paying for it.  You know,            
 it's their corporate responsibility to get away with  whatever they           
 can, and they got away with a pipeline tariff, which the APUC staff           
 estimated that we had lost $5 billion by 1987 and would lose $40              
 billion by 2010.  Well, the Maynard, Bob Maynard, who negotiated              
 the deal for the State of Alaska said that's not true.  He said we            
 only lost $2.5 billion by 1987.  Well, that's still $20 billion by            
 the year 2010.  Now we keep giving this stuff away and we then we             
 can't say we can't afford this and we can't afford that.  It seems            
 life the first thing we can take money away from it is the people             
 who monitored the oil industry, both on the legal end, the tax end,           
 and from the people over in the Oil and Gas Conservation                      
  They've got brand new $500,000 3-dimensional model in probably               
 around 19 years, around that period of time.  And what do they do             
 with?  They've barely turned it on.  They never once bothered to              
 turn it on to find out how to maximize production on Prudhoe Bay.             
 They never once turned it on to confirm the $15 billion that BP and           
 Exxon admitted to Congress was principal.  They just didn't do any            
 of that.  We got had.                                                         
  And now they're out doing it and I understand another computer               
 model for Prudhoe Bay.  I don't know where it's at or what its                
 status is, but they've been going to do it now for about the last             
 year.  And that was a $900,000 model.  Nobody knows.  Did anybody             
 turn it on?  Did anybody turn it on to this particular reservoir?             
 How did we get the information on this reservoir.  BP won't talk              
 about it and we go to the Oil and Gas Commission and they say it's            
 privileged information.  BP doesn't want us to release it.                    
  I think I've made my point.  We've taken nothing but a beating               
 from these people and it's their corporate responsibility to beat             
 up on us.  We have got to sit back and say, hey, no.  We have to              
 know all the facts.                                                           
  Is Northstar, that 60 square miles of Northstar, is that one                 
 of those small structures that's larger than Prudhoe Bay?  If not,            
 then what happened to all structures and what's the size of the               
 structure that Northstar is sitting on.                                       
  Thank you, Mr. Chairman.                                                     
  CHAIRMAN LEMAN:                                                              
  Thank you, Mr. McCutchon, I'll note that we have been joined                 
 by Senator Pearce.                                                            
  MIKE BRUNER :                                                                
  I was doing some research at the library and I was wondering                 
 if people were aware that we're within the, say, one or 200,000               
 barrels a day of the same oil production as Kuwait?  I think theirs           
 is 1.8; ours is about 1.6 or .7 million barrels a day.  And another           
 interesting point like in the information on there - is that Kuwait           
 has like approximately 2 million population, but 39 percent are               
 international.  So that's 600,000 and that just coincides with the            
 population of Alaska.                                                         
  But then reading more information about Kuwait they all work                 
 for their government.  I they import people to do their blue collar           
 jobs and they free medical, free dental, free legal.  Their                   
 permanent fund, I think that's where Hammond got the concept for              
 ours with like 80,000.  Ours is like a 23,000.  They have free                
 college and all we ever hear about in our newspapers is that we               
 have to cut back the budget and we have to give up this, we have to           
 privatize Pioneer Homes, we have to raise the prices at the Pioneer           
 Homes to $6,000 a month and I just wanted to make people aware of             
  Thank you.                                                                   
  CHAIRMAN LEMAN:                                                              
  Thank you, Mr. Bruner.  Is there anyone else on the                          
 teleconference network who wishes to testify on SB 318?                       
  GARY ACKERMAN:                                                               
   This is Gary Ackerman from Fairbanks.  I'm in favor of this                 
 bill.  I've been a resident of Fairbanks since 1946 and a real                
 property tax payer since 1960.  The main thing I'm in favor of on             
 it is the construction of the modules in State and resident hire on           
 the work. I think we need these.  These are base jobs.  These are             
 the jobs that support the economy and the retail businesses and               
 food industry.  The money kind of circulates.  Our taxes just keep            
 going up and up and jobs like this, you know, it wouldn't be so bad           
 if we had a way to pay them.  I think it should be a requirement,             
 not just a willingness on BP's part, to do this work instate.                 
  CHAIRMAN LEMAN:                                                              
  Gary, does that complete your testimony?                                     
  MR. ACKERMAN:                                                                
   Those are most of the things...We did this in our right-of-way              
 leasing bill out at [indisc].  That was a provision on that, you              
 know, we use Alaska hire to the maximum extent possible.  It was              
 considered part of the lease regs. You know, jobs created within              
 the state.  This is something that a lot of states do on their                
 resource development.  They consider the value of the jobs as part            
 of the value received for the resources.  I think we should                   
 consider it.  Also, I don't have any objection to leases of this              
 type getting the same treatment.  I think we should develop and I             
 think it is a good concept.                                                   
  CHAIRMAN LEMAN:                                                              
  Thank you, is there anyone else in Fairbanks who wishes to                   
 testify on SB 318?                                                            
 [END OF VERBATIM TESTIMONY]                                                   
 There being no further testimony, CHAIRMAN LEMAN closed the hearing           
 on SB 318.                                                                    
 Number 350                                                                    
           SB 180 VALUE-ADDED TIMBER SALES; MARKETING                         
 CHAIRMAN LEMAN brought SB 180 before the committee as the next                
 order of business.  He noted there was a proposed Resources CS,               
 however, there were not enough committee members present to adopt             
 the committee substitute.                                                     
 DUANE ANDERSON, testifying from the Mat-Su Legislative Information            
 Office in opposition to SB 180, said part of continuing problem               
 the lack of boreal forest knowledge, expertise and experience                 
 within almost any level of state management of the timber industry.           
 When people are put into the upper levels of decision making and              
 regulatory creation, etc., that have almost no knowledge of this              
 area so things continue to go from bad to worse.  He commented that           
 Governor Knowles recently created a resource marketing group, and             
 the people on that group that had any timber experience were very             
 marginally capable or familiar with most of the industry.                     
 Mr. Anderson said the state timber sale program is not effective,             
 and, additionally, we are not very quick to realize what we can do            
 to close the gap.  He said the legislation is intended to provide             
 wood for the value-added industry within the state, but he believes           
 this proposal will accomplish exactly the opposite.                           
 He noted the legislation provides that a timber sale contract may             
 provide for a harvest of up to 20,000,000 board feet of timber,               
 which, he said, is a whopping big sale that requires a tremendous             
 amount of infrastructure expense for a logger or anybody proposing            
 to take on the sale.  He suggested there isn't more than maybe one            
 or two current operators in Alaska who could even handle a sale of            
 that size.                                                                    
 In closing, Mr. Anderson said he lauds what the governor is trying            
 to do, but this is not the way to go.  He sees very little of the             
 bill that he considers constructive, and he urged that it not be              
 passed out of committee.                                                      
 Number 526                                                                    
 CHAIRMAN LEMAN noted the committee adopted a version "c" committee            
 substitute in February, but a new version "g" was now before the              
 committee for its consideration.                                              
 Number 537                                                                    
 ERIK HOLLAND, testifying from Fairbanks, voiced his agreement with            
 the previous speaker's comments.  He said he conducted an informal            
 poll in Fairbanks which indicates that the public in Fairbanks is             
 not in support of a large scale timber harvest.  He  also suggested           
 that the export of raw logs should be stopped before increasing               
 timber harvest.                                                               
 There being no further testimony on SB 180, CHAIRMAN LEMAN closed             
 the public hearing on SB 180 and stated it would be set aside until           
 the committee had a quorum and could take action on it.                       
 Number 584                                                                    
 CHAIRMAN LEMAN brought CSHB 447(RES) before the committee.  He                
 pointed out that the legislation is similar to SB 230 (MANAGEMENT             
 OF PARKS & RECREATIONAL AREAS).  However, because the committee               
 lacked a quorum, he stated the bill would be held over for final              
 There being no further business to come before the committee,                 
 CHAIRMAN LEMAN adjourned the meeting at 4:55 p.m.                             

Document Name Date/Time Subjects