Alaska unions, companies, labor officials mull worker shortage with major projects on horizon

How quickly things can change.

Alaska, still inching its way out of a three-year recession that cost the state more than 10,000 jobs, could soon be a facing a labor shortage in some of its trademark industries, according to state workforce development officials.

"We've got this sort of perfect storm of challenges where we have a downturn in our economy; we have an aging workforce, including oil and gas workers; we have stagnant wages in Alaska and there's a boom going on in the Lower 48 pulling a lot of our workers (away)," state Department of Labor and Workforce Development Commissioner Heidi Drygas said in an interview.

Most of the estimated 10,100 jobs the state has lost since 2015 were in the tightly connected construction and oil and industries, which together lost about 6,900 workers, according to state figures.

At the same time, workers in those industries are at a premium in the Lower 48, where the shale oil boom continues and has helped spur a generally robust economy.

Most oil companies in Alaska contracted some during the three-year price downturn and some delayed projects.

Others, however, focused on exploration on the belief the price would eventually rebound. Armstrong Energy and Repsol combined to make the large Nanushuk formation oil discovery on the central North Slope, which ConocoPhillips has parlayed into multiple other prospects.

The four recent discoveries made by those companies — two smaller prospects and the Nanushuk and Willow projects with potential for more than 100,000 barrels per day each — along with a couple other developments that have been in the works for years are expected to be the drivers of North Slope labor demand Drygas and others are concerned the Alaska workforce might not be able to meet.

ConocoPhillips expects to need up to 700 construction workers per winter for its $1.5 billion Greater Mooses Tooth-2 oil project in the National Petroleum Reserve-Alaska from late 2019 through early 2021. Initial work laying gravel will begin at GMT-2 this winter.

Hilcorp Energy also received federal regulatory approval Oct. 24 for its long-anticipated Liberty manmade island oil project, which will offer another 200 or more construction jobs per winter during the coming years.

But those two are just the start.

ConocoPhillips submitted a master development plan for its major Willow prospect in the NPR-A to the Bureau of Land Management last summer. While the company is still in the early planning stages on Willow, ConocoPhillips Alaska officials estimate it will generate "thousands of construction jobs" and hundreds of long-term operations positions once it is online — likely in the mid-2020s based on the company's current schedule.

The Nanushuk project, now led by Australian-based Oil Search after its acquisition of an operator stake in the Armstrong-Repsol discovery last fall, is expected to need a construction force of nearly 1,500 workers. Oil Search Alaska President Keiran Wulff said the company expects to make a final investment decision sometime in 2020.

Additionally, Donlin Gold is slowly compiling the remaining permits it needs to build the world-scale open-pit gold mine it has planned in the Kuskokwim drainage. That project, with a 315-mile natural gas pipeline, two port developments, and a road to go along with all the on-site infrastructure, is expected to generate upwards of 3,000 construction positions.

Finally, the far more controversial Pebble mine could add another 2,000 construction jobs to the state in the coming years if it is ever approved.

Drygas said she is already hearing from some union hall leaders that they are starting to run out of skilled laborers.

Doyon Associated President Warren Christian said Oct. 26 during the Labor Department's Rising to the Challenge: Preparing Alaska's Workforce forum that his pipeline development company was pretty much at full capacity last winter and already has at least as much work lined up on the North Slope for the next several years.

Donlin spokesman Kurt Parkan and others who spoke at the event emphasized that finding workers with soft skills, such as the ability to pass a drug test and show up on time, can be the biggest obstacle to filling open jobs.

Drygas said the state wants to encourage young people to look at careers in the trades, saying the "college for all" mantra espoused by many today is a "pervasive" problem in recruiting them.

"We're about to ramp up on some pretty significant projects in Alaska. We have all this work going on on the North Slope; we have a boom in military construction in the Interior and other Interior build out projects. We have an expansion of mining at Fort Knox and Kensington; Donlin Gold looks like it's going to come online and they're all happening at the same time," she said.

"It's going to be challenging but it's a pretty incredible opportunity too."

State economist Karinne Wiebold said strictly by the numbers, those jobs will be filled, but that could require recruiting Outside workers, something Drygas is constantly trying to avoid.

Wiebold noted that Alaska's construction sector has historically been comprised of upwards of 20 percent nonresident workers and in the oil and gas sector the figure rises to nearly 30 percent Outsiders.

How many Alaskans left those industries to find similar work in the Lower 48 is largely an unknown and would be a very difficult figure to calculate, according to Wiebold.

"It's definite that some folks have left and it's definite that some folks are still in Alaska but working in different industries," she said.

That forecast doesn't even include the $43 billion Alaska LNG Project and the nearly 12,000 construction jobs it could add to the state. It's largely understood that AK LNG would necessitate bringing in significant Outside labor help.

State budget cuts have also contributed to the worry of a future worker shortage. Drygas said the Labor Department budget, which was one of the hardest hit in the Legislature's effort to reduce the state's multibillion-dollar deficits, was reduced 38 percent in the first couple years of Gov. Bill Walker's administration. And many of those cut funds were meant for training programs, according to Drygas.

She said those training programs, such as the Alaska Construction Academies, can be expanded on relatively short notice, adding that the University of Alaska has already cut tuition on its career and technical education, or CTE, courses by 25 percent in hopes of attracting more students.

Fairbanks Central Labor Council President Doug Tansy said his union hall, part of the AFL-CIO, put all of its available laborers to work this year by April, largely due to the roughly $500 million worth of military construction projects being done at Interior installations.

Tansy added, however, that about 60 of the union's Alaska workers are on jobs in Seattle and Portland because they can simply make more money Outside which Drygas and Christian reiterated.

They said wages for trade jobs are currently about 20 percent more in the Lower 48 than they are in Alaska.

"Pretty much anyone who works in the Lower 48 in the pipeline industry has a job," Christian said, and it's expected to stay that way for at least another five years.

Tansy said the 2008 global recession, which mostly missed Alaska, led to less CTE training down south and has now "created a wildfire of opportunity" in a rejuvenated economy. He sees the same scenario playing out in Alaska, just a few years later.

A state capital budget plan — in addition to addressing deferred maintenance and basic infrastructure needs — could also spur Alaskans to return to the construction trades, Drygas stressed.

"If there was an infusion of money for projects right now we can ramp up fairly quickly but what it's going to take is everyone singing from the same sheet of music and that is we have to invest in this; we've got to invest in Alaska's infrastructure and we've got to invest in training programs and training opportunities," she added.

Drygas reiterated that her message to the next governor's administration would be to "invest in Alaska's future" through a somewhat larger capital budget and workforce training programs.

"We have to invest in young Alaskans and in training — ensuring that we have Alaskans first in line to work in these jobs," she said.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.