Alaska Progress Report

Summer 2011 visitor study

The Alaska Visitors Statistics Program gives a window into Alaska's vital tourism industry. The latest in these periodical studies is for summer 2011. Visitation was 1.56 million out-of-state visitors, which is an increase over summer 2010, but less than the historical peak in 2007 of 1.71 million.

Of these:

• 57% arrived by cruise ship, 39% by air, and 4% by highway/ferry.
• 77% were here for vacation.
• 66% bought a multi-day package.
• 68% visited Southeast, 56% Southcentral, 33% Interior.
• Juneau was the top destination with 61% of visitors.
• 71% of visitors were very satisfied, 27% satisfied.
• 69% shopped, 52% viewed wildlife, 49% attended cultural activities, and 39% went on sightseeing tours.
• 36% were from the Western US, 22% from the South.
• 52% were age 55 plus.
• Visitors spent an average of $941 per person per trip, excluding transportation to/from Alaska and any cruise tours.

Spending has been flat since 2006, with inflation eroding the value of the total spent by visitors in Alaska by 11% in that time.

2012 Alaska salmon forecast lower

The Alaska Department of Fun & Games Fish & Game has released its 2012 salmon forecast, summarized by the Anchorage Daily News: "The total catch forecast by the Alaska Department of Fish and Game is 132 million salmon, down 25 percent from the 177 million fish taken in 2011.

"The statewide breakdown is 120,000 king salmon (in areas outside Southeast, where catches are dictated by treaty with Canada); 38.4 million sockeye salmon, a decline of 4 percent; 4.3 million coho (similar to last year); 19 million chums, 12 percent higher; and 70.2 million pinks, a 40 percent decrease.

"Each year's annual report on salmon harvest projections also includes a detailed review of the 2011 season for every Alaska region. In all, the fishery produced a catch valued at $603 million at the docks, the third-highest ever."

Economic impact of national park visitors in Alaska

The National Park Service released Economic Benefits to Local Communities from National Park Visitation and Payroll, 2010. Alaska received 2.3 million visitors in 2010 for a total economic impact of $208 million. The report notes the difficulty of estimating local spending in Alaska because most park visitors do their spending far from the actual park due to their remoteness.

The Anchorage Daily News has a more readable summary of the report. Various other reports and data are available at the Park Service website.

Construction spending to rise in 2012

The latest research from the Institute of Social and Economic Research predicts a sunny outlook for construction spending in 2012 in Alaska:

• The total value of construction spending “on the street” in Alaska in 2012 will be $7.7 billion, up 3% from 2011.
• Wage and salary employment in the construction industry will be stable at the same level as last year—15,800. This is down from a peak of 18,300 in 2005.
• Excluding the oil and gas sector—which accounts for 41% of the total—construction spending will be $4.6 billion, up 4% from 2011 and about the same rate of increase as last year.
• Oil and gas spending will be $3.2 billion, 1% higher than in 2011.

The report spotlights how important construction is to the economy: "Annual wage and salary employment in the construction industry in 2011 was about 16,000 workers, with average annual payroll of $70 thousand per worker, second only to mining (including petroleum). But that figure doesn’t include the “hidden”  construction workers employed in other industries like oil and gas, mining, utilities, and government (force account workers). In addition, it does not account for the large number of self-employed construction workers—estimated to be about 9,000 in 2011."

North Slope employment at all-time high, 35 percent nonresident

Alaska consultancy McDowell Group has released Oil and Gas Industry Employment on Alaska's North Slope. Findings from the executive summary are in three sections:

"Total Employment:

• On a monthly average basis, North Slope oil industry employment climbed to an all-time high in 2011. Employment averaged just under 9,000 jobs through November, about 500 jobs more than in 2010.
• North Slope oil and gas industry employment more than doubled over the past ten years, adding 5,000 jobs since 2000.
• Reports of declining North Slope employment in 2009 were accurate. Over an 11-month period beginning in December 2008, North Slope employment fell by 1,200 jobs, a 13 percent decline, before returning to a growth trend.

"Work Activity:

• Rapid growth in North Slope employment has occurred while oil production continues its steady long-term decline. Oil prices rising to record levels incentivized new development activity and projects aimed at enhancing recovery from mature fields. Historically high oil prices, coupled with necessary major investment in renewal of the aging Prudhoe Bay infrastructure, are primary drivers of the recent rise in North Slope employment.
• Reported North Slope-related spending totaled $4.9 billion in FY2011, marking at least the fourth consecutive year in spending growth (earlier comparable data is not available). Since FY2007, annual spending has increased by about $1.3 billion.
• Though North Slope industry-wide data is not available, North Slope oil producers report significant shifts in spending for maintenance at core fields. For example, one key firm (ConocoPhillips CPAI) reports that annual gross maintenance spending at Prudhoe Bay, Kuparuk, and Alpine is $800 million more per year than it was five years ago while development spending is unchanged.

"NONRESIDENTS IN THE NORTH SLOPE LABOR FORCE

• According to the most recent estimates, 35 percent of North Slope oil and gas industry workers are nonresidents. This percentage has been relatively steady over the past few years, and was at a four-year high of 37 percent in 2006.
• Nonresidents accounted for 56 percent of all North Slope oil and gas industry new-hires during the third quarter of 2010, the highest nonresident new-hire rate in any quarter in the 2004 to 2010 period. New-hire data reflects the number of job openings that occurred during the quarter, either through new job creation or turnover. It is not a measure of overall job growth.
• The 2010 annual nonresident new-hire rate was 44 percent, also the highest annual rate in the past seven years. The second highest rate was 40 percent in 2008.
• This nonresident new-hire data indicates an uptick in nonresident participation, but the overall increase is likely to be within historical norms. Nonresident new-hire rates are typically higher than overall nonresident participation rates because short-term, seasonal jobs are more often filled by nonresidents.
• Resident and nonresident oil and gas industry workers on the North Slope earn about equal wages."

Value of Alaska's fisheries underestimated, claims UFA

The United Fishermen of Alaska believes that the total value of Alaska's fisheries are routinely underestimated, and they have published a series of fact sheets to correct the record. According to UFA president Arni Thomson:

“The most commonly quoted number to gauge fishery economics, is ex-vessel value, the price paid to fishermen at the docks prior to the finfish and shellfish being processed. Quite often this value represents only fifty percent of the product value after it is processed, boxed and frozen. The value added processing (manufacturing) function then results in “the first wholesale value”, which approximates the export value of the product. At this point, it does not include the value of additional jobs and income for transportation, distribution, and wholesale and retail sales and restaurant sales. Alaska’s seafood exports are valued at $2.35 billion in 2010. This is important to all Alaskans in terms of tax revenue contributions. In fiscal year 2009, the industry contributed $79 million in state taxes and fees in addition to local fish taxes”

How will Alaska deal with the end of oil?

A cheery new paper from the ever-optimistic Scott Goldsmith at the University of Alaska Institute of Social and Economic Research looks at the end of peak oil in Alaska. Warning: explicit charts and graphs depict harrowing statistics! Not safe for work, especially if you work in the oil industry...

"Two-thirds of the economic growth since statehood, as measured by jobs and income, can be traced to petroleum production, petroleum revenues, and petroleum spinoffs that have given a boost to other industries and households throughout the state.1 Although these effects are most obvious in urban Alaska, they reach into every corner of the state—through generous public spending, low taxes, and the Permanent Fund dividend.

"This prosperity has come from giant, low-cost fields—the largest being Prudhoe Bay—that the state owns on the North Slope. But now, those fields are in serious decline. As Figure 2 shows, we’ve used 80% of this high-revenue oil, with only about 20% of the identified 23 billion barrels of reserves remaining. Still, despite this situation, two things are currently creating a sense of complacency among Alaskans. There’s a lot of petroleum employment right now, because more people are needed to squeeze the last reserves out of these fields. Also, high oil prices are bringing the state big revenues, even as production drops. Together, high employment and high prices have diverted our attention from the reality: when there is no oil left in the barrel, the associated jobs and revenues will also be gone.

"And although it’s impossible to predict how future events will unfold, Alaska’s experience in the late 1980s—when a crash in oil prices ended the first huge oil-revenue boom—provides a glimpse of what could happen. Virtually all Alaskans were affected—by losing jobs, seeing the value of their houses plummet, or watching friends leave the state."

Alaska ranks very low for oil and gas development

The Fraser Institute released its annual Global Petroleum Survey, which ranks 136 "jurisdictions" or places across the globe according to their "investment barriers," defined as, "high tax rates, costly regulatory schemes, and security threats." Alaska apparently is in the toilet:

"Alaska also remained in the third quintile but dropped in the global rankings from 68th position (of 133) to 83rd position (of 136) due to poorer scores on a number of issues including fiscal terms, environmental regulation, the cost of regulatory compliance, uncertainty around the interpretation of regulations, uncertainties about protected areas, and native land claims."

What's worrisome is that eight of the top ten slots went to other US states, topped by Mississippi.

New report says "relax the tax" on oil

From Commonwealth North: "Commonwealth North proudly announces our newest study 'Alaska's Oil Investment Tax Structure: Establishing A Competitive Alaska.' The Board of Directors and members engaged in a seventeen week targeted study that evaluated the primary public policy concerns associated with Alaska's oil tax structure. It was determined that the current oil production tax adversely affects investment in oil production on the North Slope and progressivity should be modified. Commonwealth North is hopeful that this report will be used as a source document for anyone who wishes to understand the issues and terminology surrounding oil taxes."

There are eight findings leading to three recommendations: reduce or cap the progressivity tax, incentivize new exploration through tax credits, and revise ACES this year even if it takes a special session. For those who need a reminder, oil revenues provide 80 to 90 percent of the state budget in any given year, the pipeline is running about half full and production is declining about 6 percent a year.

Social services and the private sector

The invaluable March 2011 Alaska Economic Trends is out, and it focuses on the impact of social assistance in Alaska: "Representing 3 percent of our workforce, private sector social assistance makes up a small but integral part of our economy. Additionally, a significant percentage of workers provide social assistance through the public sector.

"Social assistance, more commonly known as social services, provides a gamut of services including personal care assistance, day care for children and adults, foster care and adoption, and crisis intervention and counseling services. One major category is vocational rehabilitation, which includes job counseling and training, work experience, and on-the-job support such as coaching to help people with disabilities obtain and retain employment."

The report concludes: "The future of social assistance is uncertain. If we only consider the demographic outlook for Alaska, it appears the demand for these services could only grow. According to the department’s population projections, highlighted in the December 2010 issue of Alaska Economic Trends, Alaska’s senior population — a big consumer of these services — will be the fastest-growing age group in the state. By 2024, those age 65 and over are projected to more than double. The state’s younger population, also major recipients of social services, are also forecasted to grow faster than the overall population."