Legislature(1995 - 1996)
04/15/1996 03:55 PM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 Development." 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 things. 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 administration. MR. HOOD: I'm sorry, what did Commissioner Shively say? CHAIRMAN LEMAN: He said that the administration had not taken a position on PLA's. MR. HOOD: I believe that to be true. CHAIRMAN LEMAN: That's consistent with your understanding? MR. HOOD: Yes. CHAIRMAN LEMAN: O.K. any further questions? In Anchorage, Jerry McCutchon. JERRY MCCUTCHON: Thank you, Mr. Chairman. For the record, my name is Jerry Mccutchon. 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 away. 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 Commission. 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 that. 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 CSHB 447(RES) PROTECT ACCESS FOR TRADIT'NL OUTDOOR USES 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 action. There being no further business to come before the committee, CHAIRMAN LEMAN adjourned the meeting at 4:55 p.m.