Tremors felt in the Alaska economy reverberate strongly in the state of Washington, especially among enterprises that earn their livelihood serving the business and consumer needs of the Last Frontier.
Any shaking during the past year, however, likely resulted from the added hustle of Alaska-Washington companies trying to capture the wave of new opportunities coming they way.
After several years in the doldrums, Alaska’s economic activity picked up across the major industries in 2012. The state also gained population, up 9,162 residents to a new total of 732,298 individuals.
Alaska’s payroll job count also jumped in 2012 by 5,300, up 1.6 percent from the previous year. Sectors that added jobs include health care (+4.8 percent), professional and business services (4.8 percent), and oil and gas extraction (+4.6 percent). The biggest surprise came from construction, which reported a 4.4 percent increase after declining for six consecutive years. Economists attribute the increase in construction jobs to the state’s hefty $3.4 billion capital budget, another $454 million in voter-approved bond packages, continued investment in older oil fields, and an uptick in residential housing construction.
The Anchorage Economic Development Corp. recently forecast as many as 14,362 jobs could be generated during peak construction, stemming from $24.6 billion of private sector investments in 18 resource extraction projects proposed for development in Alaska in the next decade.
In 2013, alone, construction spending in Alaska will jump 8 percent to $8.4 billion, with oil and gas activity accounting for 43 percent of the activity, while public projects will grab a 33 percent share and other private projects will comprise the remaining 24 percent, according to estimates by The Associated General Contractors.
Spending on transportation infrastructure also is projected to climb substantially in 2013 to about $1.3 billion, with investment in highway construction topping $824 million and $479 million on airports, harbors and ports.
The Alaska Department of Labor and Workforce Development expects 4,200 new jobs to be created in 2013, resulting in 1.2 percent employment growth in the state.
During the 12 months that ended in April, the state’s oil and gas industry added 800 new jobs, climbing to 14,100 positions; while minerals mining employment grew by 100 new jobs during the same period to 3,000 positions.
Transportation, warehousing and utilities added 600 jobs to total 21,100 positions; while construction added 1,100 jobs to reach 15,600. Education and health services gained 1,700 jobs, while professional and business services remained flat at 27,900 positions and information services lost ground with telecommunications shedding 200 jobs to total 3,900 positions. Most of the state’s other employment sectors shed jobs, including manufacturing which lost 1,900 positions to total 10,600.
Alaska-Washington companies, many of whom serve customers in the oil and gas, mining and construction sectors, have greeted these recent upticks in activity with considerable enthusiasm.
Busy Cook Inlet
Though the rate of oil production in Alaska continues to decline, oil and gas activity has picked up in Cook Inlet, on the North Slope and in the Beaufort and Chukchi seas.
Economists note that average earnings in the oil industry exceeded $122,000 in 2011, more than 2 1/2 times the average for all Alaska industries ($48,852 in 2011). Though it accounted for only 4 percent of Alaska’s jobs in 2012, the oil and gas industry paid $1.7 billion, or 10 percent, of the state’s wage and salary payroll.
Capital expenditures in Cook Inlet rose to nearly $500 million in 2012, and estimates for 2013 will top $600 million in potential new spending, according to observers who say this surge reflects “a renaissance in investment and activity.”
The uptick is being driven by both very favorable market conditions for crude oil and natural gas in the Railbelt region and extremely favorable tax policies by state lawmakers, according to AEDC.
“The last four years have been really busy in Cook Inlet, but everyday gets busier,” said Michael “Skeeter” Creighton, sales and business development representative for Kenai, Alaska-based MagTec Alaska, LLC. “Our mechanics are real busy keeping our equipment up and running.”
MagTec Alaska rents, leases, and sells a variety of equipment for long- or short-term projects, including light plants, portable camps, portable bathrooms and offices, rig mats, crew trucks and dirt-hauling equipment. The company specializes in 750,000 Btu – 1.5 million Btu flameless heaters and a Tier III generator line that ranges from 25-550 kilowatts.
Creighton said numerous oil and gas companies and their contractors working in the Cook Inlet Basin have called on MagTec in recent months for equipment and services. In addition, local construction companies also have sought the vendor’s services.
Its 20-employee office in Kenai, has five mechanics and four shop helpers as well as administrative and sales staffs. The company also operates a camp and service center in Deadhorse.
Creighton said another indicator of increased oil and gas activity in the area is ASRC Energy Services undertaking the upgrading and reopening of the Rig Tenders Dock in Nikiski, a project expected to be completed later this year.
Along with other improvements, the $9.4 million upgrade and expansion is ensuring the structural integrity of the dock which was built in the late 1960s; installing a new seawall that will add another 450 lineal feet of working face to the dock; and building new diesel storage and potable water facilities on the 31-acre property that will supply operators in Cook Inlet.
“Modernizing Rig Tenders Dock will provide us the opportunity to supply the services that are increasingly in demand in Cook Inlet. It’s an investment not only in the future of AES, but the future of Alaska’s oil and gas industry,” said ASRC Energy Services President and CEO Jeff Kinneeveauk in announcing the project last summer.
North Slope opportunities
On the North Slope, projects such as ExxonMobil’s construction of drill pads in Point Thomson field, are producing significant opportunities for Alaska-Washington companies.
Bowhead Transport Inc.’s joint venture with Crowley Marine Services Inc., for example, recently won a three-year contract to provide services such as shuttling freight between Prudhoe West Dock and Point Thomson for ExxonMobil.
Point Thomson is expected to provide about 10,000 barrels per day of gas condensate to the trans-Alaska oil pipeline.
Bruce Bridwell, general manager of Taiga Ventures, said his company provided temporary structures for oil and gas exploration companies at Milne Point as well as routine logistics procurement and delivery services to small and large projects throughout interior and remote Alaska.
The firm and its sister company, Pac West Drilling Supply, had a particularly busy year responding to the needs of Alaska’s large operating mines and some advanced mining exploration projects.
“We began the 2013 season providing a 75-man seismic exploration camp from January to May at Stevens Village on the Yukon River. That camp jumpstarted the whole year, and we are busy now with camps at Wainwright and Lonely Point on the arctic coasts, geology camps at Pogo Mine, portable fuel systems at several locations, and logistics support for MAN Alaska near Tangle Lakes,” said Bridwell. “We have a few other possibilities for this summer and are awaiting notice from clients. These include opportunities in Cook Inlet and Southeast Alaska.” Taiga Ventures also recently purchased a 6,000-square-foot warehouse in Anchorage for use with Taiga Logistics and PacWest retail opportunities in Southcentral Alaska.
“We plan to grow our presence in Anchorage, and compete for camps, logistics support and drilling sales in the state’s biggest market,” Bridwell added.
Favorable review
Gov. Sean Parnell signed oil tax reform legislation, Senate Bill 21, the “More Alaska Production Act,” into law May 23. Critics say the measure is a giveaway to the oil companies that will lead to large budget deficits for the state.
Parnell, however, defends the legislation, saying it “could very well move Alaska forward and spur new investment and production.”
Observers note that Exxon Mobil, ConocoPhillips Alaska and BP Exploration (Alaska) all made significant changes to their oil exploration plans immediately following passage of the new tax rules.
Many Alaska-Washington companies greeted the tax reform legislation with renewed optimism about the future.
“The Legislature did a good job this year of correcting a bunch of things that weren’t going so well,” said Jim Sherieble, general manager of Kenworth Alaska and immediate past-president of Alaska Trucking Association. “A lot of bills passed the Legislature that is starting to take effect, particularly SB 21. We’re already seeing orders for next winter,” Sherieble said in June.
