Alaskanomics

Alaska's Unemployment Rate Below National Average

In an Associated Press article appearing in the August 27 Anchorage Daily News, state labor economist Neil Fried noted that Alaska's unemployment rate, at 7.7% in July, was much lower than the US average of 9.5%. Fried credits Alaska's fishing, oil, government and mining sectors for the difference because the recession has hit the manufacturing and construction sections the hardest. Read the ADN article here.

Business Organizations Rate Legislators

Five statewide business organizations - The Alaska State Chamber of Commerce, Alaska Support Industry Alliance, Associated Builders and Contractors, Inc., Prosperity Alaska and Resource Development Council for Alaska, Inc. - released their 2010 Alaska Business Report Card, rating members of the 2010 Alaska Legislature based on their positions on government spending, regulatory streamlining, tort reform, business taxes, open and transparent government, energy policy and leadership. One legislator received an A rating - Representative Craig Johnson - while nine received an F rating from the business groups.

Need for Leadership is Clear

Alaska’s current state budget is based on an average Alaska North Slope crude oil price of $77 per barrel.  So far this fiscal year, prices have stayed within a few dollars of that target. Production, however, is well below the 619,000 barrels per day (bpd) in the state’s forecast – with an average of 540,000 bpd in July and 459,000 bpd so far in August. These numbers highlight serious problems with our State government policies.

• The oil price required to balance the state’s budget gets higher each year because Alaska’s state budget has ballooned out of control and is not sustainable. The oil industry is carrying the primary burden of supporting state government, but government’s appetite for money is unlimited. When the oil industry can no longer feed that appetite, or is unwilling to continue investing in our state, state government will look to the Alaska’s businesses and its citizens to fill the gap.
• The administration and the legislature are not doing enough to stem the decline in oil production. Alaska’s state budget, and our economy, benefits not by high taxes on low production, but by the highest flow of oil through the pipeline. We have billions of dollars in assets lying dormant in the ground, yet our leaders continue to support policies that stifle investment in exploration and production. A barrel left in the ground gives us nothing – every barrel that is produced generates revenue for the State. ACES is a tax policy that is designed to harvest as much money as possible for state government in the short term without regard for the long term harm it does to the economy.
• The administration’s single-minded focus on the gasline, and AGIA, ignores reality. Oil is still the key to our economic future, and will be for many years to come. If and when a natural gas pipeline to the Lower 48 is built, natural gas revenues will not come close to replacing the declining revenues from oil.
• The administration’s adversarial relationship with the state’s largest industry is not productive. While this posturing may have populist appeal, it creates a negative investment climate that not only hurts the oil industry, but every small business and every citizen in Alaska that benefits from petroleum dollars circulating in the economy.

Alaska can’t afford the leadership vacuum that keeps these failing policies in place. We need to elect leaders who understand Alaska’s “Economics 101” and are willing to work with industry on a tax and regulation strategy that maximizes oil production.

Perfect Storm may Drive Off New Industry Investment

In a recent article in the August 2010 issues of Alaska Business Monthly, Mike Bradner notes that the combination of high taxes - some of the world's highest - high cost of working in remote areas, modest prospects for discovery onshore, and one of the nation's toughest regulatory regimes may have created the "perfect storm" in driving off new petroleum industry investment. Since oil pays for about 90 percent of the state's budget, Alaskans would be faced with "steep reductions in public services, ruinous taxes and a likely end to the popular Permanent Fund Dividend" if oil production continues to decline. In his article, Bradner reviews oil industry projects in Alaska and highlights concerns about declining throughput in the Trans-Alaska oil pipeline.

Bradner writes "One can't change the facts of geography and high costs, but some of the biggest impediments to new oil development are government-made." Read the full article below.

Download ABM Exploration and Development

AOGA Launches new Website

The Alaska Oil and Gas Association (AOGA) has launched a new website, www.aoga.org, with the latest news and updates about Alaska's largest industry. The site features the daily price of Alaska North Slope crude (ANS) and natural gas (Henry Hub), and Alaska's daily production figures on the home page.