Thousands of Alaskans have rejoined the workforce and oil prices are surging. But Alaska’s oil industry, which has powered the state’s economy in the past, isn’t seeing job growth like other trades are.
Oil and gas companies cut more than 3,000 workers during the COVID-19 pandemic, close to one-third of the workforce.
Other sectors in Alaska also had huge losses. But most of them are now experiencing year-over-year job growth, while the oil industry isn’t, according to state figures released Friday.
Observers say oil producers took a heavy hit last spring in the early days of the pandemic. With oil prices falling to record lows and concerns for worker safety, companies slammed the brakes on projects.
Also last year, Hilcorp took over BP’s assets in Alaska, including operation of the state’s biggest oil fields at Prudhoe Bay. But hundreds of BP workers didn’t move over to Hilcorp, contributing to the losses, observers said.
A year and half later, oil prices have shot past $80 a barrel for the first time in three years.
But people knowledgeable about the industry say the jobs recovery in the oil patch has been hobbled in part by pandemic-related disruptions like worker shortages and inflation.
There are multiple other factors. They include resistance from the Biden administration, restricting drilling opportunities on federal land in Alaska; legal attacks from conservation groups, halting ConocoPhillips’ Willow and Hilcorp’s Liberty projects in the Arctic; and banks that won’t finance new Arctic projects amid growing concerns about climate change, a factor in the uncertainty surrounding Oil Search’s large Pikka project.
Neal Fried, an economist with the Alaska Department of Labor and Workforce Development, said the industry’s job numbers typically follow the price of oil up or down. But it can take time for them to respond.
Still, economists had expected that the oil industry’s job count would have recovered more by now, he said.
The slow growth in those jobs is helping hold back the state’s overall economic rebound, he said.
Oil and gas workers make $170,000 annually on average, nearly three times the average for all other jobs, he said.
Even with one-third of the industry’s workers living out of state, the limited hiring in the industry means a lot of money isn’t being spent at stores and restaurants in the state.
Alaska is one of only five states that have not recovered more than half the jobs lost during the pandemic, Fried said.
Three of those other states are also top oil producers: Wyoming, New Mexico and Louisiana. When industry jobs were shed there, they also lost the powerful “multiplier effect” of oil workers spending their money in the economy.
“It is a real weight on the recovery of all our COVID losses,” Fried said.
Job numbers in Alaska’s oil industry are at their lowest levels in at least 15 years, Fried said.
The companies employed 6,700 people in September.
That’s up a bit from lows set late last year. But it’s still down 200 from a year ago, and down 3,100 from two years ago.
Most other trades have seen positive growth over the last year. Still, the Alaska workforce remains 25,000 jobs below pre-pandemic levels.
Industry observers say they aren’t expecting to see much growth in oil and gas jobs until at least next year, if oil prices remain high.
Two ConocoPhillips projects, Fiord West and Greater Mooses Tooth 2, are expected to produce first oil in the coming months. They will potentially add 50,000 barrels, boosting Alaska oil production about 12%.
But those projects are already built out, so they won’t employ the large numbers of construction workers who often boost oil field numbers, said Dave Cruz, owner of Cruz Construction, which supports oil field exploration and development.
Cruz said there may not be much work this winter at two giant exploration projects, ConocoPhillips’ Willow field and Oil Search’s Pikka field. Many hundreds of jobs won’t be available because of the lack of work at the projects, he said.
“It’s going to be lean times, which affects the state in the long-term,” he said. “People who have jobs out there should take care of them. There’s not much out there this winter.”
The $6 billion Willow project must undergo additional federal reviews, after the courts decided that previous approval from the Trump administration did not meet environmental standards.
ConocoPhillips and the federal government this week chose not to appeal the case, which had originally been brought by Sovereign Iñupiat for a Living Arctic and other conservation groups.
At a separate major North Slope project, Oil Search is having trouble rounding up the $3 billion it needs to start development at Pikka.
Banks that won’t invest in the Arctic are contributing to the challenge, an Oil Search official told the Alaska Support Industry Alliance last month.
Oil Search plans to employ about 120 people on the North Slope, said Amy Burnett, a spokeswoman for the company. That’s up from last winter, when there was no winter program. But it’s about 1,000 fewer workers than two winters ago.
Oil jobs could grow next year
The pace of drilling in Alaska this year won’t match 2019, before the pandemic dramatically slowed oil field activity, state officials said.
The drilling could reach levels seen last year, said Sean Clifton, a policy and program specialist at the Alaska Division of Oil and Gas.
Hilcorp, the operator of the giant Prudhoe Bay oil field, halted drilling in April 2020 as oil prices crashed in the pandemic’s early days.
The company, with partners ConocoPhillips and ExxonMobil, had initially planned no drilling program early this year, as pandemic uncertainty continued to ripple through the industry.
But this summer the company resumed plans for drilling several wells, including in the western fields in Prudhoe Bay.
Hilcorp, which also operates in Cook Inlet in Southcentral Alaska, has grown its workforce over the last year, said Luke Miller, a spokesman with the company. It’s added 60 employees from a year ago, boosting Hilcorp numbers to 1,530, he said.
About 90% of the new hires are Alaska residents, he said.
Roger Marks, a former petroleum economist for the state, said more oil field work would likely be underway, if not for the labor and supply shortages that are contributing to inflation, he said.
As those problems slow, maybe late next spring, the oil companies will likely begin hiring more, he said.
“I think there is a lot of projects up there the companies would like to do now that they aren’t,” he said. “Once the bottlenecks clear up, then employment up and production will go up.”
Alaska has the oil and gas resources for additional investment, but hurdles remain, said Kara Moriarty, head of the Alaska Oil and Gas Association.
The challenges include policies from the Biden administration and rising operating costs, she said.
The Biden administration has taken steps to limit oil development in Alaska and elsewhere amid concerns about climate change. It has halted proposed exploration in the Arctic National Wildlife Refuge. It is reconsidering a Trump-era plan that expanded drilling opportunities in the National Petroleum Reserve-Alaska. And it is fighting in court to protect a moratorium on new oil and gas leases on federal lands, although plans for a Cook Inlet lease sale in federal waters are moving forward again for now.
“I wish it was possible for me to predict exactly when investment and jobs will return to pre-pandemic levels,” Moriarty said in an email. “But for Alaska’s short-term and long-term future, recovery is imperative.”