CS FOR HOUSE BILL NO. 548(WTR) An Act authorizing 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. Co-chairman Halford noted a request by members that CSHB 548 (WTR) be brought on for hearing prior to HB 325 (North Slope Heavy Oil Royalty Modification). JOHN SHIVELY, Commissioner, Dept. of Natural Resources, came before committee to provide an overview of the bill. He explained that Northstar is an offshore field in northern Alaska. Five state and two federal leases are involved. Four of the state leases were part of a 1979 lease sale in which the net profit was the bid variable. Money is usually used as the variable. These four leases reflect the only sale which utilized net profits as a bid variable. The fifth lease was made in 1983. It involved an established net profit of 40%, and the bid variable was money. The field was originally operated by Amarada Hess which conducted initial analysis. As a result of that and other work, an independent 1993 Department of Energy study concluded that the field was uneconomic based on findings that: 1. Reserves had not yet been confirmed. 2. Net profit provisions made the field uneconomic. Amarada Hess ultimately reached the same conclusion. The company believed that development costs could total over $1 billion, and it subsequently offered the leases for sale. Two companies bid: one was BP. The state allowed the leases to be transferred to BP in January of 1995. The net profit concept was discussed (for potential inclusion in HB 207) in the spring of 1995. A decision was subsequently made not to do so. Commissioner Shively said he agreed to "take a look at it" but advised that he did not have legal authority to change the net profit provision. He further advised that if agreement in this area could be reached, it would require legislative confirmation. As further background information, the Commissioner explained that four of the five 1979 leases had a 20% base royalty. For the fifth lease the base royalty was 12.5%. That lease has been raised to 20%. Northstar would be the only field on the North Slope with a royalty rate of 20%. The Northstar agreement also drops net profit provisions and substitutes a "supplemental royalty" based on the price of oil. That could ultimately allow the state an additional 7.5% on top of the base 20%. Further provisions state that if BP does not obtain sanction or approval from its board of directors within a year of approval by the legislature, the leases will be returned to the state for re-lease. The department performed a series of economic analyses in reviewing the agreement and progression of the bill through the legislature. The department has the ability to provide both 1996 dollars and net present value dollars for all analyses. Commissioner Shively said he chose to "think" in 1996 dollars. The department used 130 million barrels of recoverable oil as the base case. That is approximately half of what is believed to be in the field. Five wells have been drilled. State geologists and geophysicists have had more time to review the field than has BP because information from Amarada Hess was available to the state, and BP received the information only after it bought the leases. The department is comfortable with base numbers. The department ultimately determined that if net profits remain in place and the field is developed immediately, the state would receive $85 million from the lease. If the supplemental royalty is used and the field is developed immediately, the state would receive $37 million. That is a significant difference. However, BP is not likely to immediately develop the lease with net profit provisions in place. Due to the manner in which the development account was established, the longer BP delays, the less net profits the state will receive. The earliest the state could order BP into production would be 1998. Under that scenario, oil would begin to flow in 2002 rather than 1999. A review of net profits at that time indicates $41 million. Commissioner Shively explained that under net profits all operational costs (seismic exploration, engineering, drilling, construction, and operating) accrue to the development account. That account is not paid down until production occurs and revenues begin to accrue. A judicial decision determined that the development account "goes with the lease" and not with the company that made the expenditures. BP thus receives the benefit of "over $200 million which Amarada Hess spent," and the development account bears interest at prime rate (slightly over 8.5%, today). That is a large asset. The longer the development account builds up, the less the net profits are. The proposed agreement changes the incentive. Under the supplemental royalty, the longer it takes to develop the field, the more BP pays to the state. Co-chairman Halford noted that the leases were scheduled to expire and asked that the Commissioner describe the circumstances which led to extension when the leases were taken over by BP. The Commissioner explained that in January of last year, the department granted BP authority to take over the leases plus a two-year development plan. BP subsequently asked for several months in which to prepare a more complete plan. It then returned with a three-year plan which the department approved in April of last year. Co- chairman Halford voiced his understanding that three years were added. Commissioner Shively clarified that an additional year was added. The department previously agreed to a two-year development plan when it "agreed to the extension of the leases," in January. In response to a comment by Co-chairman Halford that the state did not "get anything" for the extension, Commissioner Shively noted that it is customary for the department to try to "make leases work." This is not the first time the department has granted a change in ownership. The department was aware of the Amarada Hess figure of "over $1 billion to develop this field." It was not unreasonable to "take a company that's one of the best in the Arctic and give them some time to look at it." Everyone recognized that an 89% net profit was a potential hindrance to development. Co-chairman Halford agreed. Commissioner Shively stressed the importance of legislative involvement in review of the Northstar agreement, saying that it has enabled legislative leadership and the administration to send a unified message to BP, and others in the industry, regarding local hire and use of contractors. In development of Badami, BP was "looking at doing . . . all their construction in Canada." The department used the proposed bill to "get them to rethink how they can use Alaska and Alaskans." The Commissioner noted that, for him personally, the foregoing was not a "critical piece of the pie." If the proposal did not made economic sense, it would not be recommended, regardless of Alaska hire. Senator Rieger asked how the Commissioner could characterize a lease value lower than either the 1998 start or a present start (under net profit provisions) as making sense economically. Commissioner Shively said he could not guarantee that BP would start in 1998 if net profit provisions are not removed. The state has never ordered an oil field into development or threatened to take back leases. The focus has been on cooperation toward development. Under net profits, it is to BP's benefit not to speed up development. That model is "fairly sensitive." Effecting a small interest-rate change for one year would move the projected number even lower. The Commissioner stressed that that is the smallest piece of the pie, saying, "We're looking at a total take, for the state, of over $435 million." The supplemental royalty and the net profit royalty are only a small piece. In terms of total potential, there is approximately a $9 million difference. Obtaining certainty and "real money" from the supplemental royalty versus uncertainty of development and good potential that nothing would ever be paid from net profits represents a "good economic deal for the state." Senator Rieger asked if there was a ground rule, at the start, regarding present value or "money of the day" equivalency that provided guidance to the direction of negotiations. Commissioner Shively responded negatively, saying that he ultimately settled on 1996 dollars. When viewed from the perspective of net present value dollars, it looks better from the state's perspective. If viewed from the perspective of "money of the day," it looks better from BP's perspective. Part of the bottom line was that if BP did not "do this, they were going to lose the leases." The Commissioner stressed that part of the consideration was a belief that the state would "get real money out of the supplemental royalty." The state was not going to give up net profits for nothing. Co-chairman Frank inquired concerning what the rate of return on the supplemental royalty would have to be to achieve the 20% return under net profits. The Commissioner described the method of projecting supplemental royalty revenues from a base of $17.35. If the base is driven to $17.15, with a 7.5% cap, it would be "about equal." Senator Zharoff voiced support for local hire provisions of the agreement and referenced correspondence from Teamsters Union 959. Co-chairman Frank cited the broad range of activity on the North Slope and the high number of nonresidents involved. He voiced need for greater emphasis on Alaska hire, particularly Fairbanks hire. He stressed need to "bring BP back to Alaska for development of their modules" and questioned why the construction was originally to have occurred in Canada. He suggested that with as much public exposure and emphasis on local hire over the past ten years, it is difficult to understand why it is an item of discussion at this time. Commissioner Shively attested to positive aspects of legislative debate focusing on what is meant by Alaskan and Alaska hire. He pointed specifically to intent included within CSHB 548 (WTR) and noted that what is constitutionally an Alaskan may not be what the state intends to count as Alaska hire. Co-chairman Halford commented that Alaska hire should apply to "somebody who got a dividend the year before they got hired." Senator Randy Phillips referenced information from a constituent working for BP at the Endicott field who indicates that 50 of the 125 jobs are filled by out-of-state individuals. The history on this issue is not good. Local hire is of concern for the Northstar project because of what has happened in other fields. Commissioner Shively agreed that Northstar would be a proving time for BP. While BP's local hire record is not the worst of any industry, it has been declining. How the company recruits and trains for new jobs will be critical. If BP does not change its current system of rotation, it will not be able to meet commitments. Organized labor, because of its training and recruitment practices, can also assist. The Commissioner acknowledged that "It's not going to happen if we're not vigilant." Co-chairman Frank voiced his preference for structuring the agreement so that the reduction in the net profit share of the royalty is "an after-the-fact thing so that we'll know that they've met the commitments." He said he was unconvinced that intent would make a change. The House Resources bill was stronger in that regard. The definition of a resident contained within CSHB 548 (WTR) is not strong enough. Commissioner Shively emphasized that Alaska cannot legally enforce the issue of local hire. The state can encourage that activity, but constitutional problems are involved. The House World Trade Committee was forceful in making the point that this would be a voluntary commitment. Co-chairman Halford voiced his understanding that there is a difference between the commitment on local hire and the commitment on local module construction. Commissioner Shively agreed. The Co-chairman noted testimony before Senate Resources Committee indicating that the state could "absolutely enforce local module construction" while it cannot enforce local hire. The Commissioner concurred. Senator Rieger raised a question concerning the nature of the competitive bid process on the original competitive oil and gas bids. Commissioner Shively indicated that the problem with net profit bidding is that it encourages the bidder to go beyond the comfort level "because there's nothing on the table." Some feel the process is flawed from the beginning. While the state has, in the past, changed terms of leases, it has not before changed the bid variable. He advised that it would have been easier for the state to do nothing--"to say 'no,' not to take a look at this." The Commissioner further advised that he did not believe other companies would want to develop the field under original bid provisions. There has been no outcry from those involved in the bidding process that the proposed agreement is not proper. Several approaches could have been taken. One would have been to attempt "to get the leases back and to rebid them." The department feels the current approach is the most expeditious means of developing the fields. The Commissioner stressed that a 20% base royalty is a good royalty. The state is not giving the field away. Senator Rieger next inquired regarding the impact of the probability of later modification on the initial bidding process. Commissioner Shively acknowledged that it "ups the bid potential." It limits "somebody's risk." Most leases are based on base royalties and a bonus bid. If net profits are used as a variable, there is real danger that costs will reduce the royalty. The proposed agreement sends the signal that the state will "look at things on a case-by-case basis," and, if it makes sense, try to work toward development of an oil field. Commissioner Shively acknowledged that some might say that is wrong, and the appropriate means is competitive bid. He suggested that had the state declined to deal with BP, taken the leases back, and put them out to bid, all that would have been known is that it is not a "very big field," and development costs would be over $1 billion. The state would probably not have set a base 20% royalty. It would have been lower. BP may have gotten one, some, or none of the leases. The unit would have had to be redone and engineering commenced again. Commissioner Shively admitted that if leases were returned, today, with as much public scrutiny and information from BP (particularly relating to significantly less development costs), the state could probably get more bonus money. He noted, however, risks associated with the first off-shore development on the North Slope. Senator Rieger suggested that "someone who assesses that they don't have the probability of getting a modification, later, is not going to bother bidding." He expressed concern over the practice of providing after-the-fact modification of leases, saying that it is "extremely anti- competitive" in the long run. Only those who believe they have the "political stroke" to get a modification will be bidding in Alaska. Commissioner Shively cited historical precedent for modifications and listed the companies receiving them. He reiterated that the proposed agreement had to stand on its own economics. It was not merely acceptable because BP was involved. Co-chairman Halford referenced debate at the time net profit leases were offered. Majors in the industry objected to that approach, saying that one of the problems with that method was that there would be pressure for small companies that received leases to try to get the terms changed, after the fact. He noted irony in the fact that those opposed to net profit leasing are nor the owners of the leases. REPRESENTATIVE RAMONA BARNES next came before committee. She referenced Page 2 of the original HB 548 (Sects. 8, 9, and 10) and quoted language relating to BP's commitment to hire Alaska residents and to fabricate module units in Alaska. She further attested to action on the bill within House Resources Committee and told members that a subsequent legal opinion deemed the House Resources version of the bill unconstitutional. Representative Barnes directed attention to a March 26, 1996, memorandum from Assistant Attorney General James Baldwin to Commissioner Shively and noted that in changing the terms of the leases, it is important that the state make clear what it is getting in exchange for lease modifications. She then quoted the following from page 6 of the memorandum: We believe that a compelling case can be made that there is adequate consideration to support a finding of a direct and substantial public benefit flowing from the reduction of the net profit share. We assign a low probability to the possibility of a successful challenge based on the public purpose doctrine. One of the issues raised by the public purpose doctrine is whether leases should be amended in exchange for early development of the field, local hire, and module construction in Alaska. Representative Barnes pointed to past legislation relating to local hire and the fact that it was deemed unconstitutional by the Alaska Supreme Court. Since there is presently no way to constitutionally enforce Alaska hire, a way must be found to induce industry to do so voluntarily. Representative Barnes next directed attention to a document entitled "First Amendment to the Northstar Unit Leases Between the State of Alaska and BP Exploration (Alaska) Inc." END: SFC-96, #113, Side 1 BEGIN: SFC-96, #113, Side 2 Language at Page 5, paragraph 10, consists of replacement language for that within Section 41 of the original lease. Replacement language speaks to "Employment of Alaskan Residents." It is included in the document voluntarily signed by both the state and BP. Representative Barnes referenced Page 5, commencing with line 27, of CSHB 548 (WTR) and explained that "Employment of Alaskan Residents" language from the voluntarily signed agreement was incorporated within the bill. CSHB 548 (WTR) not only sets forth provisions of the lease (in law sections of the bill), it also references signatures voluntarily affixed. The bill includes provisions requiring that BP report to the Commissioner of Alaska's Dept. of Labor, every six months, and that the reports be given to the legislature. A less formal report will be provided to the Dept. of Labor every three months, in order to evidence that provisions of the voluntarily signed lease are carried out. To ensure a correct understanding between the state and BP, Representative Barnes said she asked the President of BP Alaska to provide correspondence acknowledging provisions and requirements of the lease agreement. She then directed attention of April 29, 1996, correspondence from John Morgan, President of BP Exploration. She reiterated that the key to Alaska hire and hiring of Alaskans is not something that can be mandated. It is, however, something "We can get someone to voluntarily agree to do." In her concluding remarks, Representative Barnes noted that the legislature had no knowledge of the contents of the leases until they were submitted for consideration. The legislature cannot be accused of coercing participants to "voluntarily" incorporate language that will employ Alaskans, put Alaskans to work, and establish a business in Alaska to build modules. It is hoped that technology developed in building the modules can be imported to other places, such as the Russian Far East. Representative Barnes voiced her belief that everything that can constitutionally be done has been incorporated within the legislation to ensure Alaskans will be hired, and the modules will be built in Alaska. In response to a question from Co-chairman Halford regarding reports to the Dept. of Labor and enforcement of both Alaska hire and in-state module construction, Representative Barnes stressed the importance of narrowing module construction and Alaska hire to language within the lease itself. The proposed bill does that. Senator Sharp advised that he would be closely reviewing reports to ensure true Alaska hire. He then suggested that adjustments in many areas could be made to "get the money back because Alaska hires weren't done." Representative Barnes expressed concurrence and directed attention to Page 3 of the bill where legislative intent is spelled out. She again stressed the voluntary nature of signature by participants, prior to legislative review and ratification. Representative Barnes pointed out that under previously passed SB 207, there is no legal authority for the Commissioner to make the changes set forth in the agreement and recited in CSHB 548 (WTR). Beyond that, under the Alaska Lands Act itself, the Commissioner could not have made the changes without presentation to the legislature for ratification. Co-chairman Frank noted that the language in the House Resources version was stronger. He then asked how the executive branch should enforce the terms of the agreement relative to Alaska hire and Alaska fabrication. Representative Barnes alluded to comments that she had extracted the teeth from the Resources version. She countered those comments by advising that she gave CSHB 548 (WTR) constitutional teeth. She said she would have preferred the stronger language, but she again referenced legal opinions indicating the bill was unconstitutional. She stressed the importance of keeping oil flowing through the pipeline. When the flow reaches approximately 600,000 barrels a day, the pipeline becomes non-economical. The narrow language, voluntarily placed in law, is as far as the state can go toward enforcement. ERIC LUTTRELL, Vice-president of Exploration and New Developments for BPX, Alaska, came before committee. He told members that Northstar legislation relates to development, alignment of interests, and public commitment. Development would put $1 billion into the state economy. It is hoped it will be the first of a new generation of smaller, economic fields on the North Slope. It also involves development of a new industry to fabricate modules, in Alaska, for those oil fields. Development of Northstar is in the best interest of Alaska and its citizens. The Northstar agreement is a win/win agreement that unlocks the potential of a field that has lain undeveloped for sixteen years. It also ensures optimal development. The agreement aligns the interest of BP and the state through a partnership. Normal commercial actions to be undertaken would benefit both the company and the state, equitably. That is how all other fields in Alaska operate. That is the relationship that has led to continuing investment and reserve growth in those fields. The alignment embodied by agreement ratification ensures two things: 1. If the oil price or field reserves were to exceed expectations, state revenues would increase significantly. 2. The state always receives substantially more revenues than BP, regardless of the price on reserves. Because of the alignment of interests, BP will continue to make capital investments, and the field will continue to produce during deep decline. The opposite of the foregoing is true of net profits. Net profits occurring late in field life, when the field is in deep decline, are likely to have the opposite effect--a significant reduction of midlife investments and a real potential for premature abandonment. The would put the state at risk of realizing neither the $41 million of net profit share, nor the $19 million in royalty and taxes from that period of net profit production. Mr. Luttrell acknowledged that much has been said about non- binding commitment to Alaska hire and Alaska fabrication. He then advised, Let me be clear. We take our public commitment to the citizens of Alaska very seriously. BP worked with the department to ensure that Alaska hire and Alaska fabrication was as strong as possible, without raising an immediate constitutional challenge. The company has made a very public commitment to hire Alaskans and help establish a new industry by building large modules in Alaska. Mr. Luttrell referenced the letter from the President of BP (referred to earlier by Representative Barnes). BP's reputation depends upon honoring its commitments and reporting the results to the people of Alaska. Mr. Luttrell urged support and passage of CSHB 548 (WTR). Co-chairman Frank asked what BP could do to increase Alaska hire in Fairbanks. Mr. Luttrell attested to industry, operators, and main contractors working together in an attempt to improve the record of Alaska hire. The group is focusing on three main thrusts: 1. Training 2. Advertising 3. Reporting He attested to the benefits of Doyon Drilling, saying, "They set out, effectively, to make sure that their shareholders were trained and available to work on the North Slope." Ultimately, the focus must be upon training to ensure that residents of local communities have the skills to qualify for jobs. Senator Randy Phillips again referenced out-of-state hire at Endicott. Mr. Luttrell said he would inquire about specifics and report back to committee. Co-chairman Halford voiced his understanding that in the course of consideration of the Senate version (SB 318), the Senate Resources bill was deemed unacceptable because it would require reopening of negotiations. He then directed attention to legislative findings and intent relating to specific resident requirements and noted that they are not part of the agreement. Mr. Luttrell concurred that findings, within the bill, are supplemental to the original bill. Co-chairman Halford then asked if addition of language to clarify that a resident is someone who was present in the state, last year, would be considered an amendment to the agreement. Mr. Luttrell acknowledged it would not be an amendment to the agreement. Co-chairman Halford next asked if there would be objection if reporting provisions (compliance on both local hire and local contracting) included receipt by the Legislative Budget and Audit Committee. Mr. Luttrell voiced his understanding that the legislation requires reports to the legislature. In response to questions from Mr. Luttrell, Co-chairman Halford clarified his intent that reporting to LB&A include both local hire and local module construction. Mr. Luttrell said he could see no reason why that would not be possible. KEITH BURKE, General Manager, Support Industry Alliance Organization, next came before committee. He advised that the organization has chapters in Fairbanks, Anchorage, Kenai, and an environmental chapter at Prudhoe Bay. Membership consists of approximately 350 support industry contractors who will gain advantage from the project, should it go forward. Mr. Burke attested to the shrinking work force and layoffs associated with decline in production and through-put. Workers attempting to anticipate layoff in a declining industry often put their homes up for sale to avoid inability to meet mortgage payments if they are out of work. That is one cause of the percentage of non-resident people working within the industry remaining flat or increasing. That trend will continue unless the decline in the industry is turned around and growth begins. Unless that happens there will be reluctance on the part of specialists (technicians) to move, from their present residence, to a state that is not on the growth line. The proposed legislation evidences a desire to reverse the present trend. Mr. Burke urged support and passage. Senator Rieger asked if the organization would turn out as strongly in support of a lease modification (before the legislature) next year as it has for the current modification. Mr. Burke said that if the modification involves jobs, the economics are in place, and revenues would benefit the state, the organization would support modification of a lease that was previously uneconomical and would not have been developed. He reiterated that the industry is in decline rather than increase. Oil is the largest single revenue source to the state. Co-chairman Frank noted that information indicates union hire is generally local to Fairbanks while non-union hire is not. He then asked what is happening in the support industry to increase resident hire generally, and in Fairbanks in particular. Mr. Burke said he was part of the original committee established to study Alaska hire with ARCO and BP. One of the recommendations from a non-union perspective is to ensure that advertisement is placed in all papers, not just Fairbanks, when non-union jobs are available. The workforce is there. Industry was not communicating with the community regarding opportunities. There is an agreement that advertisements will be made to all areas of Alaska. That is one thing the non-union contracting force can do. Mr. Burke further acknowledged that a "certain amount of courting" of local hire needs to occur. He recommended that Fairbanks be more aggressive in marketing what is available in the local market. He pointed to previous construction of small modules in Fairbanks. The transportation for small modules is more flexible from Fairbanks than Anchorage. Fairbanks must sell its capabilities to the industry. Co-chairman Halford asked at what point Mr. Burke feels the state should leave oil in the ground for the next generations because its value is not sufficient for use in this generation. Mr. Burke acknowledged the difficulty of the question. He then referenced other state resources that do not generate significant state revenues but which create jobs and keep individuals off the welfare system. Co- chairman Halford noted a significant difference between renewable resources and oil. SENATOR LOREN LEMAN next came before committee to speak to action when the companion bill (SB 318) was in Senate Resources. Referencing three proposed amendment, he told members the committee held five hearings and elicited information to develop substantial findings. He then referenced findings of fact printed in the Senate Journal Supplement. Conclusions of those findings are contained within CSHB 548 (WTR). Senator Leman recommended incorporation of findings from CSSB 318 (RES) as well. END: SFC-96, #113, Side 2 BEGIN: SFC-96, #114-A, Side 1 The Senator acknowledged that the Senate Resources approach met with resistance in that it proposed changes to the language of the agreement. The House bill contains language, relating to Alaska hire and Alaska contracting, lifted directly from the lease agreement. It has no practical effect in terms of changing the bill submitted by the administration. The Senate Resources Committee made effective date changes proposing that agreement ratification occur the day after the legislature receives a letter saying that the project has been sanctioned. This is different than allowing the bill to become effective immediately and then waiting for BP sanction. There are practical benefits, to the state, associated with the change. Senator Leman attested to interest by some Resources members to capture the upside potential--either the initial production rate, if it is substantially higher, or if the field were substantially larger than projected. The committee ultimately decided not to address that. Co-chairman Frank asked if Senate Resources explored the constitutional question of local hire. Senator Leman said the committee received advice from legislative attorneys who believe CSSB 318 (RES) language is forceful and does not violate the constitution. The Resources committee revised wording saying that Alaska hire would occur "to the extent economically feasible" and replaced it with, "To the extent allowed by law, BP will construct in Alaska and will hire Alaskans." That became a stumbling point. Co-chairman Frank asked that Senator Leman provide information from legislative attorneys on the constitutionality of language within CSSB 318 (RES). GERALD HOOD, Chief Executive Officer, Teamsters Union for the State of Alaska, and Vice-president of the state AFL/CIO, next came before committee. He referenced his May 3, 1996, correspondence (copy on file in the original Senate Finance Committee file for HB 548) in support of CSHB 548 (WTR) and asked that the letter become part of the record. Co-chairman Frank inquired concerning how the industry chooses contractors and how that relates to "who winds up working." Mr. Hood deferred comment to the industry. He referenced earlier discussion of Alaska hire as an issue much broader then Northstar and acknowledged that one of the benefits of discussion of the issue, with industry, has been a broader union rule in areas where unions have not made significant inroads, such as "core maintenance work." There is now a "relatively strong commitment from British Petroleum to, for the first time, sit down and discuss ways that union contractors can become involved. Creativity on the part of both unions and BP will be necessary. The unions are encouraged by this step. Mr. Hood acknowledged there is no firm commitment that unions will receive certain amounts of work in the industry. He attested to need for trust and voiced his belief it would occur. Recent discussions pertaining to Northstar indicate that union hire will enjoy 79 to 80 percent. Union local hire numbers are better than non-union competitors. The unions will employ Alaskans. Mr. Hood advised that the union he represents is statewide. Calls will come from the Fairbanks hall first. Other local unions are also Fairbanks based. All union North Slope work derives from those halls. The interior will benefit from agreements reached with subcontractors. Co-chairman Halford inquired concerning the union versus non-union ratio of local hire. Mr. Hood advised that he did not have the information. The Co-chairman referenced pipeline construction and noted that at times union hire appeared to be working against local hire. The Tulsa Pipeline Union seemed to be in control of "an awful lot of things against Alaskans for a while." Co-chairman Frank directed attention to pie charts from the Dept. of Labor and noted allocation of hire. Mr. Hood applauded committee comments regarding Alaskan hire. He suggested that CSHB 548 (WTR) comes as close as possible to laying a foundation and track record for that to occur. He acknowledged that BP would be closely monitored and would have to perform or the tide of both legislative and public opinion would change dramatically with regard to "the business that they do here." ADJOURNMENT The meeting was adjourned for floor session attendance at approximately 6:20 p.m.