Oil industry biggest source of AK jobs

Report finds that the industry directly and indirectly created 44,800 jobs and $2.65 billion in payroll for Alaska residents in 2010

Alan Bailey

Petroleum News

The McDowell Group, in a report prepared for the Alaska Oil and Gas Association, or AOGA, has found that the oil and gas industry is directly and indirectly responsible for nearly 45,000 jobs for Alaska residents. That amounts to about 13 percent of all private sector jobs in Alaska and 10 percent of all employment in the state, the report says.

Proprietary data

Rather than using U.S. Department of Labor employment data, which categorizes employment in ways that only provide a partial view of the industry’s impact, the McDowell Group relied heavily on detailed proprietary data from individual companies when preparing its report, Jim Calvin, a managing principal in the McDowell group, told people attending AOGA’s annual lunch on Oct. 27.

By thus gaining insights into where companies spend money and what they spend the money on, it is possible to develop a model of how the oil industry money moves through the Alaska economy, creating the financial multiplier effect of a cascading chain of company and employee spending, Calvin explained.

Looking at data for 2010, the McDowell Group analysts assessed the employment of Alaska residents in terms of employment by “primary companies” and employment by oil industry service companies. The analysts then proceed to assess what they referred to as “induced employment,” jobs that result from spending by the employees of primary and service companies and from spending by the service companies themselves.

Primary companies, at the front end of the oil industry cash flow, consist of oil and gas producers, partners in exploration projects, refineries and the operating company for the trans-Alaska pipeline. In addition to companies providing traditional oilfield services, service companies operating directly in support of the primary companies include companies providing professional, technical and management services; construction companies; and transportation companies.

60% traditional services

In 2010 primary companies in the oil and gas industry employed 4,000 Alaska residents, Calvin said. Traditional oilfield service companies employed 7,700 Alaskans, while other companies providing services to the oil industry employed 7,100 people in state. Spending by these employees and by service companies spawned another 26,000 Alaska jobs.

Adding up all of the figures leads to a conclusion that in 2010 the oil and gas industry ultimately filled the pay packets of 44,800 Alaskans to the tune of a total of $2.65 billion in payroll. Of those jobs, 25,400 were located in the Municipality of Anchorage. And for every job in a primary oil industry company, there are nine other oil industry related jobs, Calvin said.

Government revenues

A report from the University of Alaska Anchorage Institute of Social and Economic Research has indicated that oil industry related state government revenues generate as many as 60,000 jobs, Calvin said. That would suggest a total of more than 100,000 oil industry generated jobs in the state, a figure that is nearly one quarter of the total number of full- and part-time in-state job positions, he said.

And the oil and gas industry accounts for nearly 25 percent of Alaska’s state gross product, the measure of the overall value of economic activity in the state, Calvin said.

“There’s no other industry in state that comes anywhere near oil and gas in terms of its contribution to our gross state product,” Calvin said.

Alaska needs nonresident workers

In highly seasonal industries, such as seafood processing and visitor-related industries, the proportion of out-of-state workers is particularly high. But in the oil and gas industry, the relative number of non-resident workers varies considerably between different industry sectors.

Using data from the Alaska Department of Labor, the McDowell Group found that 20 to 30 percent of the people employed in the oil and gas production components of the industry live out of state, a proportion somewhat similar to that in the mining industry, Calvin said. Resource extraction activities tend to be characterized by high labor mobility and have work rotas convenient for people traveling long distances from home, either from out of state or from many different parts of the state, Calvin said.

By contrast, refineries and the operator of the trans-Alaska pipeline have work forces consisting of more than 90 percent state residents, he said.

And over the past 10 years, the relative numbers of resident and nonresident oil and gas workers have tended to remain somewhat consistent, trending up and down in parallel, he said.

However, Calvin cautioned that the Department of Labor data used for the McDowell Group report may somewhat overstate the number of nonresident workers. The data comes from Alaska permanent fund dividend applications that require a person to live in state for nearly two years before being considered a state resident, he said.

—Alan Bailey