The operator of Alaska's main oil pipeline will reduce its workforce by 10 percent as it reorganizes operations starting this fall, a move that will affect all activities statewide, according to a letter from the company's top executive to the governor and lawmakers.
Alyeska Pipeline Service Co., which manages the 800-mile trans-Alaska pipeline and the oil-loading terminal in Valdez, will restructure itself to operate more efficiently, said the letter from company president Tom Barrett dated Tuesday.
"Going into our fifth decade of service, we are simplifying the maintenance processes to better identify high-priority work and apply risk-based decision criteria to complete that urgent work, as well as other maintenance work, more quickly and efficiently," Barrett said in the letter.
Maintaining pipelines and other facilities is the company's top focus, Barrett said. Alyeska has moved more than 17 billions barrels of North Slope oil to markets, starting 41 years ago after oil first flowed from the giant Prudhoe Bay field.
Alyeska employs about 1,300 direct workers and contractors on the pipeline system, said spokeswoman Michelle Egan. About 130 jobs will be cut.
The reorganization will continue through early next year. Alyeska will notify employees in November about how the changes will affect them, the letter said.
It's not clear yet how the job cuts will be split between workers in the field and office positions like those in Anchorage.
"These changes will directly and indirectly impact most jobs on TAPS," Barrett wrote. "Many jobs will be modified, and some eliminated, at Alyeska and in some contractor companies. This will have negative impacts for some individuals and create new opportunities for others. It will affect personnel at all levels of the organization, and at Anchorage, Fairbanks, Valdez and field locations."
Alaska has the nation's highest unemployment rate at 6.9 percent in July, according to the Department of Labor.
"These are great jobs" that will be lost, some of the top-paying in the state, said Neal Fried, a state economist.
But the planned reductions come as oil industry employment has begun to stabilize in Alaska amid rebounding oil prices, after the North Slope industry shed almost 5,000 jobs from a record 13,500 in 2015, Fried said.
Also, year-over-year job losses have moderated statewide. There won't be a measurable, long-term impact from the reductions, Fried said.
"It's definitely a hit" the state's economy can weather, he said.
The recovering oil prices have bolstered earnings at Alyeska Pipeline owners BP, ConocoPhillips and ExxonMobil, the major oil producers in Alaska. The companies have worked to reduce costs as they streamlined operations and acquired new technology.
Alyeska has made similar efforts, taking steps to employ robots and drones for pipeline inspections. To improve operations in Prince William Sound, it hired a new contractor with sophisticated, new tug boats to oversee tanker escorts out of Valdez.
Barrett said that Alyeska Pipeline last year undertook a review focused on keeping the pipeline system "technically and economically viable" for the next 40 years.
That has led to plans to create a new maintenance department, enhance engineering and technical oversight, and centralize emergency planning and response involving the pipeline, terminal and the marine escort system, the letter says.
Also, managers in the field will have more authority in order to expedite decisions, as requested by workers.
"And we will continue expanding the use of modern technology," Barrett wrote. "The outcomes will be a more efficient and cost-effective system that can continue delivering operational excellence that meets our high standards of safety, reliability, environmental stewardship and legal compliance."
A different modernization effort by Alyeska — upgrading control systems and pump stations along the pipeline starting in 2003 — was marked by delays, cost-overruns and a 2015 decision by federal regulators that Alyeska could not recover costs by charging higher fees for moving oil.
Strategic configuration, as that project was known, is largely complete.
This new effort is aimed at changing how Alyeska prioritizes, plans, and executes maintenance and other work, Egan said.
Graham Smith, acting state pipeline coordinator, said Alyeska plans to continue prioritizing efforts involving regulatory obligations, including for worker safety and spill prevention.
"All indications at this point, and what we've heard from people involved, are that there will be no noticeable shift in how they interact with regulatory agencies," said Smith, co-executive director of the Joint Pipeline Office, a consortium of state and federal agencies overseeing the trans-Alaska pipeline.
"This is really an organizational change where they're looking at their corporate structure, figuring out how to consolidate roles and make things more efficient," Smith said.