Monthly Archives: November 2009

Alaska’s economic future is at stake

The centerpiece of next year’s political debate, beginning with the legislative session in January, needs to be Alaska’s economic future. To those who have studied Alaska’s economic fundamentals, that future is bleak. If the next Governor and legislators do not alter Alaska’s present course, the second fifty years of statehood will be much, much more difficult than the first.

The future currently is bleak because of the trajectory of Alaska’s oil industry. Oil accounts for 90 percent of state general fund revenues and one-third of Alaska jobs. No other industry comes close to having the capability to generate the same level of wealth for Alaskans. As James Carville – who repeatedly reminded the Clinton team during the 1992 election that “it’s the economy, stupid” – would say if he looked at Alaska today, “it’s the oil, stupid.”

The future of Alaska’s oil industry is in significant doubt. From a high of over 2 million barrels per day, North Slope oil production – the lifeblood of the Alaska economy – is down to 700,000 barrels per day. Absent continued investment, the existing sources of production (and oil’s contribution to state government revenue and jobs) will decline at a rate approaching 10 percent per year in the coming years. Because the trans-Alaska oil pipeline is not designed to handle low flow, knowledgeable people talk about the need to shut down the trans-Alaska oil pipeline when production reaches roughly 300,000 barrels per day. Continue reading

James Carville on Alaska, “Its the oil, stupid”

That’s my guess, anyway, if he looked at Alaska politics today. The following article quotes Alaska Revenue Commissioner Pat Galvin, as saying “A large-capacity natural gas pipeline is the single-most important project to the economic future of Alaska.” Even the State’s own numbers show that gas doesn’t replace oil as a state revenue source. While the Commissioner is off fiddling with the State’s increasingly long shot bet on AGIA, oil production is declining at an increasingly rapid rate due to ACES. It would seem a significantly better use of the Commissioner’s (and the state’s) resources to think about what is going wrong with oil, and fixing that while the opportunity exists. That is what is truly “the single-most important project to the economic future of Alaska.”