Alaskanomics

Alaska and U.S. residential delinquency rates drop in first quarter; Alaska still third best in nation

The first quarter 2012 survey by the Mortgage Bankers Association shows a decline in housing delinquencies for 1-4 unit residential properties in the U.S. and Alaska. U.S. delinquencies declined from 8.2% to 6.9% while Alaska’s delinquencies declined from 4.3% to 3.7%. Alaska is still third best in the nation for delinquencies.

Foreclosures in progress were flat in the U.S., at 4.4%, and increased slightly for Alaska, from 1.1% to 1.2%. Alaska also retained its third place ranking in this category.

Alaska continues to have the lowest level of problematic subprime residential loans in the country. Subprime lending to traditionally non-qualified borrowers was a large contributing factor to the national mortgage problems. The rate of delinquencies and foreclosures on subprime loans is significantly higher. Subprime delinquencies in Alaska declined from 10% to 9.2%, while subprime foreclosures declined from 3.6% to 3.4%. The U.S. figures are much higher, with 19.4% of subprime mortgages delinquent and 14.1% of subprime loans in foreclosure.

The survey covers just over 95,000 mortgages in Alaska. Approximately 7,000 or 7% were considered subprime, compared to 9% nationally.

Federal spending in Alaska more than $10 billion annually; third highest per capita spending in the country

A new report by UAA's Institute of Social and Economic Research (ISER) analyzes federal spending in Alaska. For the last five years, base spending has been about $10 billion per year, but in 2009 and 2010 Alaska received additional funds from the stimulus package - the American Recovery and Reinvestment Act - that added $2.2 billion in additional federal funds.

Defense is the largest category of spending, at 36% of the total, followed by grants to state and local governments and nonprofits at 29%. Direct payments to individuals are about 22% of the total, and spending by civilian agencies was 13%.

• Defense spending was $3.42 billion, with just over half for procurement and just under half for wages.
• Alaska received $2.7 billion in federal grants, with just over half for formula grants (like Medicaid) and just under half for project grants.
• Direct payments to individuals totaled $2.04 bilion, with two-thirds for federal retirement programs and one-third for other direct payments (including Medicare, unemployment compensation and more).
• Civilian agency spending was $1.27 billion, with two-thirds for payroll and one-third for procurement.

In 2008, the year before the additional stimulus spending, per-capita federal spending in Alaska was $13,700 - the third highest in the U.S. and 52% higher than the U.S. average. The report notes that the Alaska differential in per capita spending was once as high as 82%.

Information from "Federal Spending in Alaska: Running Out of Steam?" by Scott Goldsmith. The report is part of ISER's "Investing for Alaska's Future" research initiative, funded by a grant from Northrim Bank.

Sixteen Alaska Resource Projects would Create Nearly 20,000 jobs; but AEDC "not optimistic" they will move forward

The Anchorage Economic Development Corporation's (AEDC) 2012 Resource Extraction 10-year Project Projection analyzes planned resource extraction projects in Alaska over the next ten years that have the potential to drive private investment and employment. Of the 16 projects, 11 are oil and gas projects and 5 are mining projects. The report also lists existing projects that support current investment and jobs as well as projects that are not as far along, but have potential for future development.

The report's executive summary lists a number of challenges facing resource projects in Alaska:

• Timely permitting reviews and awards
• Litigation
• Lack of key infrastructure such as roads, ports, communications and power
• Lack of social compacts with communities affected by proposed projects
• Taxation
• Commodity markets
• High costs
• Lack of agreement among Alaskans on a vision for Alaska’s economic future

The report notes "Alaskans have resource development opportunities that most other states, regions and even countries can only dream of..." but because of many challenges, success in developing the state's resources has been limited.

Alaska Tourism Study Released; numbers up slightly, but spending flat over summer of 2010

The State of Alaska recently released visitor statistics from the summer of 2011 (May 1 through September 30). The executive summary highlighted the following statistics:

• An estimated 1.56 million people visited Alaska last summer, with 57% arriving by cruise ship, 39% by air, and 4% by highway/ferry.
• Visitors spent a total of $1.5 billion, not including their transportation to and from Alaska, down 1% from 2006 (in inflation-adjusted dollars, the decline is 13%)
• The number of visitors was up 2% for 2010, but still below the 2007 peak of 1.71 million visitors.
• The air market appears to have recovered from the recession, but cruise visits are still well below peak levels.
• Southeast Alaska saw 68% of the total visitors; however because that region of the state attracts the majority of cruise ship passengers, only 10% of total visitors stayed overnight in Southeast
• Southcentral Alaska had 56% of overall visitors and 49% of overnight visitors
• Interior Alaska had about the same proportion of overall and overnight visitors, at about 33%
• 36% of visitors came from the Western U.S., 22% from the South, 14% from the Midwest and 11% from the East Coast - the rest came from Canada and other international locations
• Nearly three-quarters of Alaska visitors are over the age of 45

Tourism data was collected as part of the Alaska Visitors Statistics program, and includes a wide range of information about the type of people who visit Alaska as well as their spending habits, activity preferences, and satisfaction with their Alaska visit. Read the full report (4.6 mb) here.

Alaska's Oil Price Premium Can't Last; "Huge Arbitrage" will drive investment to displace ANS Crude

A blog posting by David Hackett examines the reasons behind the recent high prices of North Sea Brent Crude oil  relative to West Texas Intermediate Crude (WTI), noting that these two crudes historically traded at close to the same price. The huge increase in oil production from North Dakota has disrupted traditional oil transportation and supply patterns - there is no efficient way to transport oil south of Oklahoma to the refineries on the Gulf coast. North Sea Brent is trading at about $20 more per barrel.

Hackett also discusses the significant price difference between Alaska's North Slope (ANS) crude oil and "Western Canadian Select" (WCS) - a blend of 25 different oil streams from Western Canada marketed as a heavy oil benchmark.

On April 4, the ANS crude price was about $17 more per barrel than WTI, while WCS was priced at $23 below WTI - a difference of $40 per barrel. With this "huge arbitrage," Hackett predicts that the Canadian producers will work hard to move their oil to the West Coast, potentially displacing Alaska's crude.

Hackett is President of Stillwater Associates, a consulting firm in the petroleum, power and energy sectors.

Russia Approves Oil Tax Relief Package; could result in 2 million barrels per day in additional production

Reuters reported today that Russian Prime Minister Vladamir Putin has approved a package of stimulus measures to increase oil production. "We have to send a clear signal to both domestic and international companies, to stimulate them to work in such a difficult - but at the same time prospective - sector," Putin said. The tax relief measures include a sliding scale of tax breaks from 50% to 100% for production of unconventional resources in the mature oilfields of Western Siberia.

The United States Geological Survey (USGS), in it's Assessment of Potential Oil and Gas Resources in Source Rocks of the Alaska North Slope, 2012, estimates that Alaska's North Slope could have up to 2 billion barrels of technically recoverable shale oil and 80 trillion cubic feet of shale gas resources.