Alaskanomics

Alaska energy use per capita second in nation, behind Wyoming; Alaska ranks fourth in total electricity produced by petroleum

The Energy Information Administration (EIA) has launched a beta site with energy production and consumption profiles for Alaska and other U.S. states. Their 2010 shows Alaska with the second highest per-capita energy consumption in the United States, behind Wyoming, at 899 million btus of energy equivalent. Total consumption in Alaska includes:

• 14.5 trillion btus of coal
• 335 trillion btus of natural gas
• 276.8 trillion btus of petroleum
• 21.3 trillion btus of retail electricity sales

Alaska ranks fourth in the nation in total electricity produced by petroleum. The EIA explains:

Alaska's electricity infrastructure differs from that of the Lower 48 states in that most consumers are not linked to large interconnected grids through transmission and distribution lines; rural communities in Alaska rely primarily on diesel electric generators for power.

 

Alaska Airlines 10th busiest in nation for first half of 2012; Anchorage Ted Stevens International ranks 59th

The U.S. Department of Transportation Bureau of Transportation Statistics (BTS) released airport and airline statistics for the first seven months of 2012.

Alaska Airlines ranked 10th among U.S. airlines, with 9.7 million enplaned passengers, up 5% from the previous year. Alaska Airlines had a 64% share of departing and arriving passengers at Anchorage's Ted Stevens International Airport from January through July 2012.

Of the 849 airports the BTS tracks, 300 are in Alaska. Alaska's top airports, with rankings by passenger enplanements for January through July, 2012, include:

• Anchorage Ted Stevens International Airport, 59 in arrivals and departures
• Fairbanks International Airport, 120 in arrivals and 121 in departures
• Juneau International Airport, 150 in arrivals and 151 in departures
• Ketchikan, 212 in arrivals and 215 in departures
• Kenai, 222 in arrivals and departures
• Sitka, 240 in arrivals and departures
• Nome, 255 in arrivals and 256 in departures
• Kotzebue, 257 in arrivals and 255 in departures
• Barrow, 277 in arrivals and departures
• Deadhorse, 280 in arrivals and 279 in departures

Alaska Senate oil tax reasoning "problematic," says petroleum economist; assumed tax changes would not impact oil production

In an article published in the Oil & Gas Financial Journal, economist Roger Marks examines the decisions made by the Alaska Senate's leadership when they considered the governor's ACES legislation last year, and concludes that the decision was made using "problematic" reasoning he calls "DIRE" - Different Inputs, Results Equal:

• Assuming production decline rates are not affected by tax policy, based on past production decline rates in a period of relatively lower taxes under ELF. Marks notes that no one knows what the production decline would have been with higher taxes - and that oil prices averaged $18 per barrel during the ELF era.
• Assuming production in existing fields would not increase with additional investment. Senate leaders believed that if unfunded projects were profitable, tax reform was not needed. However, Marks notes that when corporations have a finite amount of capital to invest, not all profitable projects get financed, only the most profitable.
• Assuming that Alaska's tax regime was competitive based on a list of global fiscal regimes that Marks argues is not Alaska's peer group. Among regimes with comparable risks and rewards, Marks believes Alaska is the fourth highest out of 24.
• Assuming the same number of barrels would be produced under all tax plans. Under this reasoning, any tax reduction would automatically result in a revenue reduction. But Marks points out that the Department of Revenue forecasts do not consider the economics or relative profitability of production from the fields it includes in its forecast. This flaw in reasoning, according to Marks, is the source of the "giveaway" language used by opponents of tax reform. Marks believes that even a modest increase in production (reduction of the decline rate) would generate more long-term total petroleum revenue compared to the current tax structure.

Read the full article here.

 

Alaska's overall tax burden 4th lowest in the nation; but ranking reflects a great tax climate for individuals, not for business

In the Tax Foundation's 2013 State Business Tax Climate Index, Alaska was ranked 4th best overall based heavily on its lack of an individual income tax or statewide sales tax. The index represents the tax climate of each state as of July 1, 2012, typically the start of the fiscal year.

States without a tax ranked equally as a 1. Alaska's ranking for each tax component for 2013, compared to higher ranking states, is shown below:

The three states that rank ahead of Alaska have low corporate tax rates and individual income tax rates, but do have a sales tax component in their revenue stream. Alaska does not have a statewide sales tax; it's 5th place ranking is based on a weighted average of local sales taxes.

The Tax Foundation utilizes individual income taxes in its ranking because many types of businesses report their income through the individual income tax code. Thus, this favorable ranking for Alaska is not likely to influence investment decisions for corporations where Alaska is ranked in the lower half of all states. Alaska's corporate tax rank dropped two places from 2012.

The report notes "Taxes matter to business. Business taxes affect business decisions, job creation and retention, plant location, competitiveness, the transparency of the tax system, and the long-term health of a state's economy....a state with lower tax costs will be more attractive to business investment, and more likely to experience economic growth."

Read the full report here.

October 12 summary of recent economic news for Alaska

In energy news, Alaska Governor Sean Parnell issued a press release October 3 outlining progress by Alaska's three major oil producers in advancing an Alaska LNG project. The letter from the producers and TransCanada estimates total project costs at $45 to $65 million. The news received extensive coverage, from Bloomberg, Reuters and others. Meanwhile, Cheniere Energy in Louisiana made a deal to sell LNG at Henry Hub pricing, which undercuts potential long term LNG contracts based on the price of oil. Shell, which started drilling in the Chukchi Sea in early September, began drilling in the Beaufort Sea on October 3. Baker Hughes released September rig count data showing Alaska with 6 land rigs and 1 offshore rigs working, one more than the August count. Golden Valley Electric (GVEA) and the EPA signed a consent decree to allow GVEA to restart the Healy Clean Coal Plant. GVEA's timeline to restart the plant is 18-24 months. On October 4, Alaskans received a total of $567 million in Alaska Permanent Fund dividends. Yesterday, Alaska Airlines ordered 50 new Boeing aircraft worth $5 billion.

Alaska Department of Labor projects 13,000 new health care jobs by 2020; one-third of all new jobs in the state

In the October issue of Alaska Trends, the Alaska Department of Labor forecasts job growth in Alaska's industries from 2010 to 2020. Health care and social assistance jobs lead the forecast, with 13,000 new jobs in the coming decade. This is one-third of all new jobs that will be created, growing health care jobs from about 13% of Alaska's jobs in 2010 to 15% in 2020.

The department forecasts total job growth in Alaska of 38,749 jobs, or 12%, from 2010 to 2020. These numbers exclude self-employed workers, fishermen and domestic workers.

Forecasts for the next five industries with the largest growth in absolute jobs include:

• Retail trade - 4,038 jobs
• Educational services, public and private (includes local and state government education employees) - 3,582
• Accommodation and food services - 3,395
• Financial activities, including real estate - 1,966
• Professional, scientific & technical - 1,915

The complete forecast is available here.