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When Congress passed the Alaska Statehood Act, it was concerned with Alaska’s ability to support itself due to a lack of industry. As passed, the Statehood Act provided for Alaska to select 104 million acres of federal land, including rights to all minerals underlying the selections, as its economic base. It specifically stated that the State of Alaska was to retain mineral rights when conveying surface rights. The Alaska Constitution encourages development of its resources, making them available for maximum use consistent with public interest.
As a result, oil and gas extraction facilities and processing plants have become a familiar part of the landscape in the KPB and statewide, providing economic growth with employment opportunities both in primary markets and support industries.
Economic impacts of the KPB hydrocarbon industry are positive and varied. Employment, one of the direct impacts, provides stable year-around employment where workers earn wages well above the KPB average.
Employment in Hydrocarbon lines of business include activity in both manufacturing and in extraction & production. During 1980 there were 1,233 employees in the combined industry sectors with nearly three-fourths in extraction & production. Employment in the two sectors ranged from 1,198 during 1983 to 1,690 during 1990. Peak employment of nearly 16% of the KPB total occurred in 1980. During 2006, there were 1,334 positions, accounting for 7.3% of KPB total employment, down from the 1980 high of 15.6%. During 2006, employees in the hydrocarbon industry earned a total of $659,388,044, which is 18.3% of KPB total earnings.
Industry taxable properties at 2006 year end are reported at $607,052,230. Sales have a lesser economic impact than property values due to exempt status on most hydrocarbon sales. While gross sales account for 11% of the KPB total, taxable sales account for less than 1% of the KPB total.
A variety of issues face the hydrocarbon industry in the coming years. Most producing oil and gas fields in the Cook Inlet basin are mature fields past their expected peak production volumes, but technological advances allow for revisitation of previously ignored fields that now have potential of economic viability. Other issues identified by the industry include problems with regulatory transparency, permitting and taxation issues, price stability, environmental concerns and reasonable access to the resource for development. These issues are being addressed because the products are important to the KPB economy for residential, industrial and utility use as well as providing employment to those who keep the plants functioning and in support industries.
Southcentral Alaska depends on Cook Inlet natural gas for almost all power generation in addition to heating homes and businesses. Equally significant is the need for reliable supplies of reasonably priced natural gas for industrial users such as the Agrium nitrogen plant, the Conoco Phillips LNG export plant and the BP Exploration GTL plant, each of which play significant roles in the KPB economy.
Tesoro, already using every barrel of oil produced in Cook Inlet, has expanded its operations so has need to import other oil supplies. Chevron and Shell also have entered the KPB hydrocarbon market place.
Supply and demand, reserves, storage, peak demand periods, natural gas pipeline, taxation - each of these issues is commonly discussed when the hydrocarbon industry is being evaluated.
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