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Myers inherits good crew but must scramble to keep it that way Pay at Division of Oil and Gas low, demand for workers high; federal jobs pay more, juicy private sector jobs threaten brain drain, says new director Steve Sutherlin PNA Managing Editor
The new director of the state Division of Oil and Gas didn’t have time to learn the quirks of the division’s copy machine before he had to hit the ground running. Mark Myers first day on the job, Jan. 5, was just three days before the Alaska Legislature went into session.
In addition to the natural pressures of a legislative session, oil activity statewide was heating up as the industry prepared for the busiest exploration season in more than a decade. Serious discussions about a gas pipeline route — or routes — were under way and the division was losing qualified personnel who were accepting higher offers elsewhere.
Unfortunately, higher offers were not hard to come by because pay at the department hasn’t kept pace with the private sector. In fact it is substantially below federal Mineral Management Service jobs with essentially the same description and duties.
Myers said pay for engineers and other specialists at the department is 30 percent less than the federal government pays and 40 percent to 80 percent below the private sector.
“Right now we’re severely underpaying our staff and we’re starting to lose people due to attrition and the oil companies are hiring a lot of them,” Myers said.
“We’re losing key expertise internally and getting more and more people approached because we have such a good quality workforce,” he said. Budget, staff less than MMS “We have a budget that’s half of what the Mineral Management Service for example has for the state but we’ve got a billion dollars in royalty income coming in,” he said. “The bottom line is we do a lot more with nearly half the people and half the budget.”
“You can’t point to the state being bureaucratic and oversized; we’re very lean and that is by conscious choice, but being lean and paying people well under market value is problematic,” he said.
“Our key people, if they leave, we have no ability to replace them because our salaries are not competitive,” he said, adding, “They leave with such institutional knowledge, they’re really not replaceable.”
The Division of Oil and Gas has 54 positions with seven current vacancies, Bobbi Frisby, administrative manager, told PNA Jan. 18.
“We have had three people leave recently, but about a quarter of our staff has been approached or have interviewed for other jobs,” Frisby said, adding, “The biggest turnover has been in the last six months.”
Frisby said the division currently has a backlog of work, and that new activity such as 14 exploration wells in NPR-A and an increase in lease assignments will likely add to the backlog. Under funding expensive Myers said under funding the division could cost the state far more than it saves in division expenses.
“One of our responsibilities on a producing unit with varying royalty rates is to approve the allocation to tracts with those different royalty rates,” Myers said. At Alpine, for example, the royalty for the discovery tract is 5 percent, while nearby leases pay as much as 16 2/3 percent.
“Our interpretation of which tracts the oil underlies is important to the royalty rate the state can get. Subtle changes in royalty allocation can mean hundreds of millions of dollars to the state,” he said.
“It’s this division’s job to make sure those allocation factors are reasonable and to negotiate the agreements that determine that,” he said.
“We also have to determine that the wellhead value the state receives for the oil is fair,” Myers said.
Myers said these functions were nothing new but that recent oil and gas activity had accelerated the department’s workload.
“Every time the state has a new field come on line there’s a tremendous amount of work this division does,” he said.
“We have a great team and that team consists of land people, economists, financial analysts, engineers, geologists and geophysicists,” Myers said.
“We basically have one of these teams, the companies have a team like this for every single asset they produce,” he said. Leasing program brings in revenue “As well we have to run the leasing program, which brings in the revenue,” he said. “We have 302 applications for shallow gas leasing, a new program the Legislature created. We have exploration licenses, one approved and another large one pending.”
These are programs created by the Legislature to stimulate oil and gas in non-traditional areas and the programs are working, Myers said.
“But they also take management and oversight and there was no budget increment and no additional people assigned when these programs came of age,” he said.
“We have the regular resale program real active on the North Slope and areawide leasing active in Cook Inlet and the Beaufort Sea, and in the foothills this coming year,” he said.
“We’re seeing an increase in leasing overall, we’re seeing an increase in exploration wells — double the wells drilled this year than last year,” he said, Technological investment needed also “We also need to adapt to changing technology,” Myers said.
“There’s a huge increase in shooting 3D seismic and that’s a leveraging technology that’s changed the success rate on wells from one in 10 to one in three,” he said, adding, “It’s also a crucial tool used in determining the size and shape of oilfields.”
“After drilling it’s used in determining the amount of recoverable oil in the field and the plan of development well spacing,” Myers said.
“It’s used to see the movement of fluids in the fields over time. It’s a tool that’s used elsewhere in the world as a direct indicator of natural gas and I expect it to be used in the foothills for those purposes. It’s a crucial tool,” he said.
“The division, on state lands, has the right to receive the data at very nominal cost but we don’t have the capital budget right now to buy the data,” he said.
And, he said, “we’re not paying the kinds of salaries we need to get a fully qualified 3D interpreter. We have some capability in house but the technology has radically changed and the only place you learn this technology is within the industry.”
Myers said the division needs to periodically pull people from industry who are familiar with the latest technology. But the recent flow is the other way because of the pay scale: “Raises of 50 percent or more are not uncommon for our people who go to work in the private sector.”
“I just came in from Phillips and I’m used to having the resources to do the job; the contrast is quite stark,” Myers said.
“The good news is, the division’s done a good job of managing its programs and resources; it’s done remarkably well,” he said.
“I think there’s good teamwork within the division and the morale is fairly high within state government. However, as we start losing people as the workload has increased so dramatically I have definite concerns about morale: we’re working people too hard and paying them too little,” he said.
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