Alaska News

Our View: We still run on oil

What's ahead in the next decade? As a practical matter, we assume tomorrow will look pretty much like today. Until tomorrow shocks us into a new kind of thinking. In a recent speech to the Resource Development Council, Dr. Scott Goldsmith explored the economic changes coming to Alaska, and those that have already arrived.

"For the first time in 22 years the (Alaska) economy did not grow this year and we will end it with fewer jobs than we had in January," Dr. Goldsmith noted. He also expects the Alaska economy to contract next year, with tourism facing the most obvious impediments to growth.

Government plays a major role in the economy: One-third of our dollars come from the federal government. But what can government, whether federal or state, do to create jobs and encourage diversification of the economy?

Many would say "lower taxes," but taxes on mining and tourism already are modest. Altering the oil-tax regime yet again presents dangers to make state lawmakers gulp. Would a tax reduction create more jobs soon? Maybe. Would it immediately diminish state revenue? Absolutely.

The proposed gas line illustrates all too vividly the limits of government intervention. For more than 30 years, governors, senators and state lawmakers have pursued a gas line. Men and women in union halls have watched their hair turn gray waiting for those jobs. Some have begun cashing retirement checks. Perhaps former Gov. Sarah Palin's AGIA process will deliver a pipeline. The skeptics say no, and some lawmakers voted for the law while sharing that skepticism.

It's now clear the development of the Prudhoe Bay oil field was a unique event in the history of both Alaska and the country. The biggest oil field in North America, on state land (not federal or private land), was developed at a time the nation was desperate for oil produced on home soil and had the technology to take on the Arctic. History has not repeated itself yet, and almost certainly will not.

"Nearly the entire state general fund operating budget ... has been financed by petroleum revenues for 30 years," notes Dr. Goldsmith. No other state has had an experience like this. A consequence of this is the fact that the Parnell administration's budget for next year is larger than this year's. Governors of other states, beset by declining revenue, can only stare at Alaska in wonder.

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The Parnell budget is all the more remarkable because Prudhoe production, Dr. Goldsmith says, "is now only one-third of its peak." Production has declined in all but one of the last 20 years, at about 5 percent per year.

The bumper-sticker phrase "Oil Feeds My Family" will continue to remain true for thousands of Alaskans in the next decade. We will remain an oil province. But just how much longer can we finance government to the tune of more than 80 percent through oil revenue? That's unknown. And it would be a big mistake for Alaskans to assume that tomorrow will look like today.

BOTTOM LINE: We Alaskans still count on oil -- and better count on change.

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