What would Alaska look like if we had no oil and gas industry? That's the question UAA economist Scott Goldsmith posed to the Anchorage Chamber of Commerce Monday.
For most of us, it's hard to imagine Alaska without oil and the profound changes it has wrought. It's like asking what Florida would be like without sunny weather and beaches.
But Prof. Goldsmith offered an impressive array of numbers to help guide the audience through his interesting thought experiment.
Oil accounts for one-third of all economic production in the state. One-third of all jobs depend on the oil patch and on state spending driven by oil.
Without oil, our economy would be only half its current size and 300,000 fewer people would live here. In 2006, oil supplied each Alaskan with $13,150 worth of public services and government aid.
Long story short: Without oil, Goldsmith said, Alaska might well look like Maine.
Like Alaska, Maine is a big, scenic, sparsely populated rural state, heavily dependent on resource development, fishing, tourism and federal spending. As in Alaska, its manufacturing industries have shrunk.
But without oil, Maine is way down the economic ladder from us.
Maine's economy ranks 43rd in the nation, measured by output per resident. Alaska ranks 7th. In Maine, the median paycheck is only 77 percent of what Alaskans collect. Tote up Alaska's higher wages, lower taxes, generous government services and permanent fund dividends, Goldsmith said, and the typical Alaska family enjoys a $50,000 advantage over a family in Maine.
The lesson from all this, according to Goldsmith:
Nothing pays off for the Alaska economy like oil. Alaskans should worry less about diversifying the economy away from oil and worry more about pursuing the abundant oil that is almost certainly on the North Slope and offshore.
Fair enough -- encouraging responsible oil development is the state's best economic bet. But that doesn't mean that the interests of the state and the interests of the industry are exactly the same. Ours is a business relationship, and that assumes Alaska will advocate strongly for the interests of current and future Alaskans where they diverge from the industry's.
One reason oil has done so much for Alaska is that the state has insisted on receiving a healthy share of the profits.
We were lucky that Prudhoe Bay was found after Alaska became a state, on state land. State ownership of the huge oil deposit enabled Alaskans to get a generous share of the development benefits.
As original owners of the oil, Alaskans collect a royalty, typically one-eighth, on each barrel produced from state-owned land. Alaska also charges a tax on oil industry property (like the trans-Alaska pipeline), a tax on oil and gas production income, and a tax on other oil and gas company profits.
That sounds like a lot of taxes, but by international standards, Alaska's share of oil profits is fairly moderate. Any oil produced more than three miles off Alaska's shores, in federal waters, bypasses state taxes and royalties altogether.
Oil has definitely blessed Alaska with enviable prosperity. Goldsmith estimates the industry has produced state revenue of $141 billion (that's billion with a B), measured in today's purchasing power.
That didn't come about because Alaska's oil companies volunteered to make such a large contribution to the public good. It came about because state leaders did not confuse the interests of Alaskans with the self-interest of the industry. And as a result, both have benefitted handsomely.
BOTTOM LINE: Oil has brought prosperity to Alaska, and state ownership of the oil lands is a key reason.