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Oil & gas still underpins AK economy McDowell Group report underlines continuing importance of the industry to the state despite low oil prices & declining production Alan Bailey Petroleum News
The oil and gas industry continues to be a major and vital player in Alaska’s economy, according to the latest edition of the McDowell Group’s annual report on the role of the industry in the state. The new report, which presents data from 2016, indicates that in that year the industry created directly and indirectly more than 103,000 jobs and $6 billion in wages in the state.
“No other private sector comes close to generating more economic impact in Alaska than Alaska’s oil and gas industry,” the report says.
Income of $1.2 billion from oil and gas royalties and taxes accounted for 72 percent of payments into the state government’s unrestricted general fund, with an additional $518 million going into restricted funds. That 72 percent of unrestricted funding represents a drop from a peak of 93 percent in 2013, primarily as a consequence of the fall in the price of oil in conjunction with changes in the state’s tax structure, the McDowell Group report says.
The report says that Alaska saw a net loss of 6,500 jobs and $680 million in wages between 2015 and 2016, almost entirely as a result of a drop in the amount of money flowing through the Alaska economy from the oil industry. However, North Slope oil production did tick up by 2.8 percent in 2016, the first increase seen for 14 years. Alaska crude oil production amounted to 6 percent of the U.S. total in 2016, the report says.
Private employment In doing their analysis, the McDowell Group researchers identified 14 primary companies as providing direct impacts to the economy in terms of employment and wage income. These primary companies include oil and gas production and exploration companies; oil refineries; and Alyeska Pipeline Service Co.
In 2016 these primary companies employed 4,275 Alaska residents, who earned $749 million in wages. Total employees, including state residents and non-residents, amounted to 5,035. The companies spent $4.6 billion on services obtained from some 1,000 Alaska vendors, with those vendors in turn employing 6,095 Alaska residents in the service sector. Also taking into account additional jobs created by employees spending money in the state, oil industry spending in Alaska in 2016 created a total of 45,575 jobs and total wages of $3.1 billion. That amounted to about one in 10 of the total jobs and one in six of the private sector jobs in the state.
Taxes and royalties Oil industry taxes and royalties create government jobs in the state as well as indirectly creating jobs and wages in the private sector. Also taking into account further employment induced by this economic activity, the tax and royalty payments generated 58,300 jobs and $2.9 billion in wages in the state in 2016.
In 2016 local governments in Alaska also benefited from the receipt of $559 million in oil and gas property taxes. These property taxes provide an especially high percentage of local government revenues on the North Slope and in Valdez.
Totting up the jobs and wages associated with primary companies, service companies, state and local government - and the induced or indirect impacts of these various jobs - leads to that total job figure of more than 103,000, about one third of the total wage and salary jobs in Alaska. For every primary company job there are nine additional jobs supported by primary company activity and 13 more jobs that derive from oil taxes and royalties, the McDowell Group report says.
Regional differences Most of the employment and payroll impacts take place in six regions of the state: the Municipality of Anchorage, the Fairbanks North Star Borough, the Kenai Peninsula Borough, the Mat-Su Borough, the North Slope Borough and the city of Valdez. The biggest impact is in Anchorage, where the oil industry directly and indirectly generated more than 28,000 jobs and nearly $1.9 billion in wages in 2016. These figures do not include jobs and wages relating to government spending of oil and gas royalties and taxes, the McDowell Group report says.
The corresponding figures for Fairbanks were 2,961 jobs and $208 million in wages; for the Kenai Peninsula 5,045 jobs and $400 million in wages; for the Mat-Su Borough 3,270 jobs and $287 million in wages; for the North Slope Borough 1,845 jobs and $105 million in wages; and for Valdez 680 jobs and $71 million in wages.
Funding of state programs State oil and gas revenues fund a significant percentage of the activity of state government departments and of the state Legislature. Unrestricted oil revenue related funds account for 45 percent of all state government agency job positions. About $3.30 out of every $10 spent by the state and federal governments on the Medicaid program in Alaska can be attributed to oil and gas revenues. And $9 out of every $10 that the state spends on programs that earn a federal funding match come from these revenues. State oil and gas dollars also flow into various other government assisted programs in the state, including the public school system, the University of Alaska system and the Community Assistance Program.
Oil and gas money has also fed through into some capital projects in the state, including the refurbishment of the Loussac Library in Anchorage.
And a portion of oil and gas royalties goes into the state’s Permanent Fund, the source of Permanent Fund dividends for Alaska residents, the McDowell Group report says.
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