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New study finds oil and gas spending in state tops $2.1 billion annually Even with retail operations excluded, industry largest private-sector employer in state Kristen Nelson PNA Editor-in-Chief
A study released in January shows that Alaska’s oil and gas industry spends $2.1 billion annually in the state — about the same amount as the state’s general fund spending. The study, “The Economic Impact of the Oil and Gas Industry on Alaska,” was commissioned by the Alaska Oil and Gas Association and The Alaska Support Industry Alliance and was done by Information Insights of Fairbanks and The McDowell Group of Juneau.
Brian Rogers, principal consultant and CFO of Information Insights, told The Alliance “Meet Alaska” conference Jan. 26 that the primary conclusion of the study is that the oil and gas industry is the state’s largest private-sector industry. Various industries claim the title of the state’s largest industry, he said: “But where we look at year-round jobs, where we look at the total payroll, it’s a slam dunk. The oil and gas industry is the largest non-governmental industry in Alaska.”
The study is based on payroll and purchasing information for 1999 from the state’s primary producers — production companies, refiners and chemical companies and Alyeska Pipeline Service Co., and excludes retail operations. Rogers said that exclusion was based on the fact that whether or not Alaska had an oil and gas industry, it would still have retail oil and gas businesses.
The $2.1 billion, Rogers said, is a combination of the $422 million in payroll paid in 1999 to some 4,500 individuals employed directly by the primary producing group in the state, plus $1.7 billion that primary producing group spent with suppliers and vendors in the state.
In addition to excluding retail operations, the study also excluded retirement pay and state and local government spending of oil and gas revenues.
The $422 million in payroll, excluding taxes, meant some $339 million was spent by employees in the state for housing, food, vehicles, etc. That, Rogers said, generates another 4,700 jobs and $133 million in payroll in the state — the induced impacts.
Then there is the indirect impact from that $1.7 billion in purchasing which generates another 24,000 jobs in Alaska as it goes through the economy, another $880 million in payroll, Rogers said. Some 13,000 jobs and $527 million in payroll is direct contractors and vendors; another 11,000 jobs are created as the contractor-vendor payroll rolls through the economy. Jobs created throughout state The study looked at payroll by where employees live, Rogers said, because that is where the money gets spent. He said the study found that not only does the oil and gas industry generate more private-sector jobs in the state than any other industry, it also “generates more jobs in Anchorage, more jobs in Fairbanks, more jobs in Kenai and more jobs in Valdez than any other industry.”
Even though the industry itself has little presence there, it also, Rogers said, generates the largest number of jobs for Matanuska-Susitna Borough residents.
Just over half the industry jobs and 57 percent of direct payroll are in Anchorage followed by the Kenai peninsula, Fairbanks, the Matanuska-Susitna Borough and Valdez.
In Anchorage, just under 2,400 jobs come directly from the primary producers, with the addition of induced and indirect impacts, the total is just over 16,000 jobs, Rogers said, or one out of eight jobs and one out of six payroll dollars coming into the Municipality of Anchorage.
The Kenai Peninsula has 675 direct jobs — $63 million in payroll — and a total of 4,300 jobs with induced and indirect impacts.
“This is really significant on the Kenai Peninsula,” Rogers said. “It’s a quarter of the jobs, it’s a third of the payroll.”
Fairbanks has 565 direct jobs, $40 million in payroll and a total of 4,200 jobs with induced and indirect impacts, or one out of eight jobs and one out of six payroll dollars in the Fairbanks area.
The numbers for the Matanuska-Susitna Borough didn’t seem right at first, he said, because the industry has so little direct presence there. But people with jobs in Anchorage or on the North Slope live in the borough. Another recent study showed 38 percent of jobs held by residents of the borough aren’t in the borough, Rogers said.
The total job impact in the Matanuska-Susitna Borough is 4,000 and the total dollar impact of $158 million is the same impact the industry has on Fairbanks, as is the proportional impact: one of eight jobs, one of six payroll dollars.
Cordova is included in the study with Valdez because they are in the same census area, but the 300 jobs and total impact of 800 jobs are primarily in Valdez — representing one out of every six jobs and over of quarter of payroll. Different ways to look at the numbers A study by the Institute for Social and Economic Research looked at a total impact of $7 billion in the Alaska economy — roughly one-third of the gross state product — but that, Rogers said, is because ISER included governmental and other impacts.
Looking at just the private sector oil and gas industry impacts, 12 percent of wages are attributable to oil and gas — including direct, induced and indirect. Rogers noted that a breakout of industry by wages excludes fishing because, he said, that industry is largely sole proprietor and not wage income.
In 1999, a year of low oil prices, $1.5 billion in royalties and taxes were paid to the state of Alaska, Rogers said. State spending of oil and gas tax revenues creates nearly another 11,000 jobs in the public and private sector, adding to the 33,500 jobs created by the private oil and gas spend.
In addition, he said, the industry pays $223 million in property taxes, nearly $196 million of that to the North Slope Borough.
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