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Alaska’s prospects are brighter than they look at the moment

  • Author: Tim Bradner
    | Opinion
  • Updated: August 19, 2017
  • Published August 19, 2017

Members of the Copper River commercial fishing fleet head out onto the delta at sunrise in preparation of the opener on May 16, 2016. This view looks upriver with Flag Point on the Copper River Highway on the left side of the picture. (Bob Martinson / Photoshelter.com)

The economy is down and many Alaskans are feeling a little dispirited, even though it's a mild recession and there are signs that things are leveling out. That doesn't make it feel any better for those who are affected.

It's worth noting, however,  that a lot of things are going pretty well, or at least relatively well.

Oil

Let's start, surprisingly, with our state's oil industry. Oil supports about a third of our economy and pays most of the bills for state government, which allows Alaskans to pay no state taxes. This industry sputtered big time when oil prices crashed in late 2015 and the ripple effects basically caused the recession.

Although the job losses in oil appear to have bottomed out, faces are still glum because oil prices seem stuck in the $50-per-barrel range. The flip side is that many appreciate lower oil and fuel prices.

Even with static prices, some surprising things are happening in this industry.

For one, it appears that oil production may stay even for a third year in a row. Production was actually up a small amount through the 12 months of the state's fiscal year 2017, which ended June 30, compared to the previous 12-month period, and there are signs this may continue.

Based on the first six months of 2017, BP, which operates the big Prudhoe Bay field, believes it might hold Prudhoe production level for the year, or perhaps see only a slight decrease.

ConocoPhillips has similarly done pretty well at its Kuparuk River and Alpine fields. This is good news because we've usually seen steady 5 percent to 6 percent declines in oil output from the Slope.

But how can this be? Oil prices crash, drill rigs and workers are laid off, and production increases?

There are two parts to the answer. First, while the natural underlying decline from the older large fields remains, a number of new projects started in the last three to four years are now bringing new oil into the pipeline, keeping up the total.

Secondly, new technologies — horizontal drilling  for example — allow companies to reach oil that couldn't be tapped before. The companies are also making smart use of data and analytical techniques that allow infrastructure to be more efficiently used.

A few percentage points of increased capacity in a processing plant is like having more oil.

All this could still be short term, of course. Efficiency gains are tough to match year after year, and many projects now boosting production were planned after the state reformed its oil tax structure in 2013. Oil prices in the $100-per-barrel range didn't hurt, either.

What's worrisome now is that oil prices are still down and legislators are back to fighting about oil taxes. Because of both, we're seeing a slowdown in development of some recent new discoveries.

Still, companies are busy. ConocoPhillips is moving ahead with new projects in the National Petroleum Reserve-Alaska and a viscous oil, sometimes called heavy oil, project. Exxon Mobil and BP are planning a big expansion at the Point Thomson field east of Prudhoe.

Mining

Mining is a sleeper industry which isn't noticed a lot, except for the controversial Pebble project near Iliamna. Good things are happening, however.

Alaska's producing mines, from Southeast to the Interior and Northwest Alaska, are all doing well. These mines are good employers, with high-paying jobs, and are good taxpayers to local municipalities.

More mines are in development. Donlin Gold, on the Kuskokwim River west of Anchorage, will complete a lengthy regulatory process next year. If its owners, Barrick Gold and NovaGold Resources, proceed with construction, it will be one of the world's largest gold mines.

Donlin Gold, like the Red Dog Mine in Northwest Alaska, is on lands owned by Alaska Native corporations, so thousands of Alaskans have a financial stake in these projects.

At Livengood, north of Fairbanks, International Tower Hills has confirmed a major gold deposit but is still optimizing development plans because the ore grade is low and gold prices are volatile.

Fisheries

Here are two other sleepers: fisheries and our ocean industries. Seafood is an old, traditional industry that still anchors the economies of coastal communities and provides incomes, often good incomes, to thousands of Alaskans.

As long as fisheries are well-managed, and Alaska is famous for having done that, they are sustainable.

Challenges loom, however. This industry pays taxes to the state and municipalities sufficient to cover its costs, but the Legislature must take care to ensure fisheries management is adequately funded — and particularly that there are enough field biologists.

Alaska's Constitution requires that resources be managed for sustainability, and for fisheries that takes biologists. Without them, no fisheries.

There are other problems, such as the aging workforce for harvesters and processors, and competition from farmed fish's increasing market. Still, seafood is an anchor industry that does have potential for growth.

To focus attention on this, a new "Oceans Cluster" initiative formed by the Bering Sea Fishermens' Association is promoting further development of maritime resources by communities. Southeast Conference, the economic development group for Southeast communities, has also worked to spotlight growth in maritime.

The most dramatic examples of this are in shipbuilding and repair, seen in Ketchikan and Seward with Vigor Industrial, and in Sitka with Allen Marine. Much of this is related to fisheries support.

Tourism, military

I'd be remiss if I didn't mention two other bright spots: tourism and our military. Aside from the threat of another national recession, tourism seems, like fisheries, infinitely sustainable as long as it is managed well. We're seeing record tourism this year.

The military, for its part, provides a solid economic base for Southcentral and Interior Alaska. I hate to say this, but as long as North Korea's Kim Jong-un rattles rockets and Russia's Vladimir Putin glowers at us across the Bering Strait, our big military bases seem secure.

Alaskans have a lot to work with. Oil is still down and we do need to get our state finances restructured. It's not that we don't have money – we're not broke – but we have to muster the will to make changes in how we use it.

Doing this would restore confidence in our state. Failure to do so is a self-inflicted wound. Fortunately, it's quite doable.

Tim Bradner is co-publisher of Alaska Legislative Digest.

The views expressed here are the writer's and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary@alaskadispatch.com. Send submissions shorter than 200 words to letters@alaskadispatch.com. 

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