THE ROLE OF THE Oil and Gas Industry in Alaska’s Economy

May 2017

PREPARED BY PREPARED FOR

The Role of the Oil and Gas Industry In Alaska’s Economy

Prepared for: Alaska Oil and Gas Association

Prepared by:

McDowell Group Anchorage Office 1400 W. Benson Blvd., Suite 510 Anchorage, Alaska 99503

McDowell Group Juneau Office 9360 Glacier Highway, Suite 201 Juneau, Alaska 99801 May 2017 Website: www.mcdowellgroup.net Table of Contents

Executive Summary ...... 3 Statewide Impacts ...... 4 Key Regional Impacts of Oil and Gas Industry Private Sector Spending ...... 5 Economic Benefits Related to Oil and Gas Industry Payments of Taxes and Royalties ...... 5 In Summary ...... 7 Introduction ...... 8 Study Scope ...... 8 Methodology ...... 8 Chapter 1. Defining Alaska’s Oil and Gas Industry and its Economic Impact ...... 10 Primary Companies in Alaska’s Oil and Gas Industry...... 11 Primary Company Spending on Goods and Services ...... 13 Other Indirect and Induced Economic Linkages to the Oil and Gas Industry ...... 15 Economic Effects of Taxes and Royalties Paid by the Oil and Gas Industry ...... 16 Chapter 2. Statewide Impacts of the Oil and Gas Industry ...... 17 Primary Company Employment and Wages ...... 17 Indirect and Induced Employment and Income ...... 17 Chapter 3. Local/Regional Impact Profiles ...... 19 Municipality of Anchorage ...... 19 Fairbanks North Star Borough ...... 20 Kenai Peninsula Borough ...... 21 Matanuska-Susitna Borough ...... 22 North Slope Borough ...... 23 Valdez ...... 24 Summary of Localized Impacts ...... 25 Chapter 4. Oil Revenue Impacts on State and Local Governments ...... 26 Oil and Gas Revenue Impacts on State Government ...... 26 Local Government Revenue ...... 41 Employment Impact of State and Local Oil Revenue ...... 43 Combined Economic Impact of Oil Industry Private Sector Spending and Public Sector Payments ...... 44 Chapter 5. Alaska’s Production in the U.S. and World Market...... 45 Alaska Oil Production and Prices ...... 45 Alaska and the Domestic Petroleum Industry ...... 46 World Oil Production ...... 48 U.S. Petroleum Consumption ...... 49 Petroleum Imports and Exports ...... 50 U.S. Natural Gas Production ...... 51 Chapter 6. Economic Impact Comparisons of Alaska’s Other Key Sectors ...... 53 Economic Impact Analyses ...... 53 Gross State Product ...... 55 Appendix A. Published Trends in Alaska’s Oil and Gas Industry ...... 56

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 1 List of Tables

Table ES1. Alaska Resident Employment and Wages in the Oil and Gas Industry, By Region, 2016 ...... 3 Table ES2. Economic Impact of the Oil and Gas Industry in Alaska, 2016 ...... 5 Table 1. Primary Company Employment and Wages in Alaska’s Oil and Gas Industry, 2016...... 17 Table 2. Alaska Oil and Gas Industry Employment and Wages, 2016 ...... 18 Table 3. Oil and Gas Industry Employment and Wages in Anchorage, 2016 ...... 19 Table 4. Oil and Gas Industry Employment and Wages in Fairbanks North Star Borough, 2016 ...... 20 Table 5. Oil and Gas Industry Employment and Wages in Kenai Peninsula Borough, 2016 ...... 21 Table 6. Oil and Gas Industry Employment and Wages in Matanuska-Susitna Borough, 2016 ...... 22 Table 7. Oil and Gas Industry Employment and Wages in North Slope Borough, 2016 ...... 23 Table 8. Oil and Gas Industry Employment and Wages in Valdez, 2016 ...... 24 Table 9. Alaska Resident Employment and Wages in the Oil and Gas Industry, By Region, 2016...... 25 Table 10. Summary of Oil-Related Payments to State and Local Governments in Alaska, FY2016 ...... 26 Table 11. Sources of State of Alaska Revenue ($million), by Type, SFY2010-SFY2016 ...... 31 Table 12. Sources of State of Alaska Department Revenue, By Source ($thousands), SFY2016 ...... 33 Table 13. State of Alaska Department Employment, By Type, SFY2016 ...... 34 Table 14. Oil & Gas Infrastructure Assessed Value ($million), 2010-2016 ...... 42 Table 15. Local Revenues from Oil & Gas Property Taxes ($million), 2010-2016 ...... 42 Table 16. Comparison of Tax Revenue by Source, 2016 ...... 43 Table 17. Estimated Employment and Wages Related to Oil Industry Taxes and Royalties in Alaska, 2016 ...... 43 Table 18. U.S. Oil Production Change, 2008-2016 ...... 47 Table 19. Proportion of Global Crude Oil Supply, 2015 ...... 48 Table 20. United States Natural Gas Production by State, 2008-2016 ...... 52 Table 21. Alaska Oil & Gas Industry Employment, Published Data, 2001-2016 ...... 57 Table 22. Alaska Residents in the Oil & Gas Industry Workforce, 2015 ...... 59

List of Figures

Figure ES1. Estimated Economic Impact of Alaska’s Oil and Gas Industry on Alaska’s Employment, 2016 ...... 2 Figure 1. Economic Impact of Oil and Gas Industry Spending in Alaska’s Economy ...... 10 Figure 2. Primary Company Alaska Vendor Spending, by Industry Sector, by Percent, 2016 ...... 14 Figure 3. Annual Unrestricted Petroleum Revenue ($2016), SFY1959-SFY2016 ...... 26 Figure 4. Sources of State of Alaska Unrestricted General Funds, SFY2016 ...... 27 Figure 5. State of Alaska Total Oil and Gas-Related Revenue ($billion) and Average Annual ANS Price per Barrel, SFY2010-SFY2016 ...... 32 Figure 6. Annual PFD Disbursed Amount ($2016), 1982-2016 ...... 36 Figure 7. Estimated Proportion of Budget Supported by Oil and Gas Revenue by Campus, 2016 ...... 39 Figure 8. Local Government Tax Revenue by Category ($million), SFY2016 ...... 41 Figure 9. Alaska Crude Oil Production* and Alaska North Slope Oil Price, SFY2001-SFY2016 ...... 45 Figure 10. United States and Alaska Average Daily Oil Production (1,000 Barrels), 1900-2016 ...... 46 Figure 11. United States Oil Production, by Key Production Regions, 2000-2016 ...... 47 Figure 12. Alaska's Contribution to U.S. Oil Production, 1972-2016 ...... 48 Figure 13. Global Oil Production by Region, 2000-2015 ...... 49 Figure 14. United States Refined Products Consumption, 1991-2016 ...... 50 Figure 15. United States Imports/Exports of Oil and Refined Products, 1992-2016 ...... 51 Figure 16. United States Natural Gas Production, 1990-2016 ...... 51 Figure 17. United States Annual Natural Gas Production by Key Producing States, 2000-2016...... 52 Figure 18. Top Five Industries Contributors to Alaska’s Gross State Product, 2016 ...... 55 Figure 19. Alaska Oil & Gas Industry Employment, Published Data, 2001-2016 ...... 56 Figure 20. Annual Oil and Gas Wages, ($million) 2007-2016 ...... 57 Figure 21. Percent of Positions Held by Nonresidents, by Sector, 2015 ...... 58

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 2 Executive Summary

Alaska’s oil and gas industry started with the discovery of the Swanson River oil field on the Kenai Peninsula in 1959, followed by the Sterling gas field in 1961, the Beluga River gas field in 1962, and the Beaver Creek gas field in 1967. Prudhoe Bay, one of the largest oil fields in North America, was discovered on the North Slope in 1968. In 2017, Prudhoe Bay production and Trans-Alaska Pipeline (TAPS) operations celebrate a 40-year anniversary. Since pipeline operations commenced, 17.5 billion barrels of oil have been transported through TAPS from the North Slope to the Valdez Marine Terminal.

Alaska’s production of crude oil represented approximately 6 percent of the U.S.’s total production in 2016, and approximately 0.6 percent of total global production in 2015. Between 2015 and 2016, Alaska’s economy experienced a net loss of 6,500 jobs and $680 million in wages. Virtually all of the decline can be attributed to fewer oil and gas industry-generated dollars flowing through Alaska’s economy. Yet for the first time in 14 years, North Slope production increased slightly in 2016, growing 2.8 percent, or an average of nearly 14,000 barrels per day. Alaska’s oil and gas industry remains the single most important economic engine in Alaska from both its legacy fields and new developments.

The Alaska Oil and Gas Association (AOGA) contracted with McDowell Group to assess the role of the oil and gas industry in Alaska’s private and public sector economy, and in six geographic locations, including: Municipality of Anchorage; Fairbanks North Star Borough; Kenai Peninsula Borough; Matanuska-Susitna Borough; North Slope Borough; and the City of Valdez.

The economic impact analysis was based on detailed 2016 employment, payroll, and spending data provided by 14 “Primary Companies” in Alaska’s oil and gas industry; these companies include production and exploration companies, refineries, and Alyeska Pipeline Service Company, operator of TAPS.1

The economic impact of the Primary Companies occurs at three levels in the economy (also termed the multiplier effect):

• Direct impacts, including the Primary Companies’ own employment and payroll • Indirect impacts, including jobs and income in businesses providing goods and services to the Primary Companies • Induced impacts, including jobs and income created when Primary Company employees and their vendor employees spend their payroll dollars in the local economy

Further, this economic impact analysis also captures the impact of Primary Company payments to the State of Alaska in the form of taxes, royalties, and other charges. These payments are used to fund state operating and capital budgets. Additionally, oil and gas revenue is disbursed directly to Alaska residents in the form of transfer payments, including the Permanent Fund Dividend. Key findings are summarized below.

1 Primary Companies include Alyeska Pipeline Service Company, BlueCrest Energy Inc., BP Alaska, Caelus Energy, LLC, Chevron Corporation, ConocoPhillips, ExxonMobil, Furie Operating Alaska, Glacier Oil & Gas Corporation, Great Bear Petroleum, Hilcorp Energy Company, Petro Star Inc., Shell Exploration & Production Company, and Tesoro Alaska. The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 3 Statewide Impacts

Oil and Gas Industry-Related Jobs and Wages

• In 2016, the Primary Companies employed 4,275 Alaska residents earning $749 million in wages. Alaska residents represent 85 percent of “Primary Company” total hire in Alaska (total: 5,035). • Primary Companies spent $4.6 billion with approximately 1,000 Alaska vendors in 2016. • Including all direct, indirect, and induced employment and wages, oil and gas industry spending in Alaska accounted for 45,575 jobs and $3.1 billion in total wages in Alaska. This included: o 6,095 Alaska resident jobs in the oil and gas support services sector. o 35,205 other Alaska resident indirect and induced jobs in other private and public sectors. • State and local government spending of taxes and royalties paid by the oil and gas industry directly creates jobs in Alaska’s public sector and indirectly creates jobs and income throughout the private sector. Government spending (including use of the oil-industry-funded Constitutional Budget Reserve) accounted for 58,300 jobs and $2.9 billion in wages (direct, indirect, and induced impacts) in Alaska’s economy. • Combined, the employment and wage impacts of Primary Company spending in the private sector and funding support to Alaska’s state and local governments totals: • 103,875 jobs in Alaska, representing nearly a third of all wage and salary jobs in Alaska. • $6.0 billion paid in wages in Alaska (including all multiplier impacts and jobs related to taxes and royalties).

Figure ES1. Estimated Economic Impact of Alaska’s Oil and Gas Industry on Alaska’s Employment, 2016

4,275 Primary Company Resident Jobs

+ 6,095 Oil & Gas Support Services Resident Jobs 6,095 + 35,205 Other Indirect and Induced Jobs 32,205 + 58,300 Jobs Related to Oil and Gas Taxes and Royalties 58,300 = 103,875 Total Jobs

Source: Primary Company data and McDowell Group estimates.

• For every Primary Company job, there are 9 more jobs supported by Primary Company activity in Alaska, and 13 more jobs are supported by oil-related taxes and royalties. • For each dollar earned by employees of the Primary Companies, a total of $8 in additional wages are generated in Alaska.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 4 Key Regional Impacts of Oil and Gas Industry Private Sector Spending

The impacts in six local areas, including Municipality of Anchorage, Fairbanks North Star Borough, Kenai Peninsula Borough, Mat-Su Borough, North Slope Borough, and the City of Valdez, capture most of the employment and payroll impacts generated by the oil and gas industry in Alaska. A small portion is allocated to an “Unattributed” category representing jobs not attributable to a specific area. The table below summarizes these local impacts. (The table does not include jobs and wages related to state government spending of oil and gas industry taxes and royalties.)

Table ES1. Alaska Resident Employment and Wages in the Oil and Gas Industry, By Region, 2016 (Excludes jobs & wages related to state government spending of oil & gas related taxes and royalties) Fairbanks Municipality Kenai North North Mat-Su City of Category Alaska of Peninsula Slope Unattributed Star Borough Valdez Anchorage Borough Borough Borough Employment Primary 4,275 2,265 300 810 515 <5 290 90 Companies Oil & Gas Support 6,095 2,025 545 1,615 1,580 50 150 125 Services Other Indirect & 35,205 24,050 2,115 2,620 1,175 1,790 240 3,220 Induced Total 45,575 28,340 2,960 5,045 3,270 1,845 680 3,435 Wages

($million) Primary $749 $409 $52 $142 $89 <$1 $41 $15 Companies Oil & Gas Support $598 $220 $51 $153 $144 $3 $14 $13 Services Other Indirect & $1,783 $1,235 $105 $105 $54 $101 $16 $167 Induced Total $3,130 $1,864 $208 $400 $287 $105 $71 $195 Note: Due to rounding some rows or columns may not add to total. Source: Alaska Department of Labor and Workforce Development, Primary Companies data, and McDowell Group estimates.

Economic Benefits Related to Oil and Gas Industry Payments of Taxes and Royalties

The oil and gas industry paid over $2 billion in taxes and royalties in SFY2016, including $1.6 billion to state government, and $447 million to local governments.

State Taxes and Royalties

• Alaska is the only state in the U.S. that does not have either a state sales tax or personal income tax, as revenues from Alaska’s oil and gas industry have largely funded state government for several decades.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 5 • In State Fiscal Year (SFY) 2016, the oil and gas industry paid: o $1.6 billion in taxes and royalties to state government. o $1.1 billion in Unrestricted General Fund (UGF) revenue, or 72 percent of all UGF (unrestricted revenue available for appropriation by the state legislature, subject to a governor’s veto). o $518 million in Restricted revenue, including: ▪ $391 million deposited into the Alaska Permanent Fund ▪ $119.1 in the Constitutional Budget Reserve Fund ▪ $6.4 million in royalties to the Public School Trust Fund ▪ $1.8 million in NPR-A royalties, rents, and bonuses • In SFY2016, $3.0 billion was transferred from the Constitutional Budget Reserve Fund (funded almost entirely by oil and gas activity) to help close the fiscal gap needed to support the State’s operating budget ($8.5 billion) and capital budget ($1.5 billion). • State government agency operations are highly dependent on oil revenue funding. Oil-revenue- related UGF represented the majority of total operating budgets for the departments listed below: o Departments of Judiciary (88 percent), Office of the Governor (87 percent), Public Safety (80 percent), Corrections (80 percent), Education and Early Development (74 percent), Law (56 percent), and Natural Resources (51 percent). o 45 percent of all state government agency positions (9,934 out of a total 22,251 positions) can be attributed to oil-revenue-related UGF. • Several statewide government programs are largely dependent on oil-related revenue, including: o Alaska Permanent Fund Dividends paid to 635,997 Alaskans totaled $650 million in 2016. Virtually all of the Fund’s principal comes from Alaska’s oil and gas production royalties. o Of the $1.3 billion in UGF supporting Alaska Department of Education and Early Development’s budget, an estimated 90 percent ($1.1 billion) originated from oil and gas revenue or $8,654 per student enrolled in K-12 public schools in Alaska. ▪ Approximately $5,292 out of the $5,880 per student in Base Student Allocation was funded with oil and gas-related revenue. o In 2016, 182,925 individuals received medical benefits under the Medicaid Program, of which 149,967 individuals were covered by state funding match required to leverage federal Medicaid dollars. (The remaining 32,958 individuals were covered under the 2015 Medicaid expansion funded entirely by the federal government.) ▪ Approximately $3.30 out of every $10 spent on Medicaid in Alaska (both state and federal funds) is related to oil and gas revenue ($575 million out of $1.7 billion). ▪ Approximately $9 out of every $10 of Alaska’s state match of federal dollars is related to oil and gas revenue ($575 million out of $639 million total). o In SFY2016, $57 million was distributed to about 229 municipalities, boroughs, and unincorporated communities throughout Alaska through the Community Assistance Program.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 6 ▪ Approximately $9 out of every $10 distributed from this Program came from oil and gas revenue.

Local Oil and Gas Property Taxes

• In addition to property taxes collected by the State of Alaska, local governments generate revenue from taxation of oil and gas property assets, providing unrestricted revenue to communities. In 2016, local governments received $447 million from taxation of oil and gas properties, approximately 26 percent of total tax revenue ($1.8 billion) and 32 percent of total property tax revenue ($1.4 billion).

In Summary

While there is no single study that compares the economic impact of Alaska’s oil and gas industry to other important sectors in Alaska’s economy, other recent McDowell Group studies estimate the seafood industry generates ~60,000 jobs and $2.1 billion in labor income, the visitor industry generates ~40,000 jobs and $1.4 billion in labor income, and the mining industry generates ~9,000 jobs and $700 million in labor income. No other private sector comes close to generating more economic impact in Alaska than Alaska’s oil and gas industry.

Table ES2. Economic Impact of the Oil and Gas Industry in Alaska, 2016

Estimated Impacts Primary Company employment in Alaska 5,033 Primary Company employment of Alaska residents 4,275 Primary Company wages paid to Alaska residents $749 million Primary Company spending with Alaska vendors $4.6 billion Number of Alaska vendors providing goods and services to Primary Companies ~1,000 Total jobs related to Primary Company spending* $45,575 Total wages related to Primary Company spending* $3.1 billion Total taxes and royalties paid by the oil & gas industry (SFY2016) $1.6 billion Oil and gas industry taxes and royalties as a % of total state revenue (SFY2016) 28% Oil and gas industry taxes and royalties as a % of total Unrestricted General Funds (SFY2016) 72% Jobs related to oil and gas industry taxes and royalties 58,300 Wages related to oil and gas industry taxes and royalties $2.9 billion Total jobs related to Alaska’s oil and gas industry* 103,875 Percent of total Alaska wage and salary jobs 32% Total wage related to Alaska’s oil and gas industry* $6.0 billion Percent of total Alaska wages 35% *Includes direct, indirect, and induced impacts. Sources: Primary Company data, McDowell Group estimates, Alaska Department of Revenue, and Alaska Department of Labor and Workforce Development.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 7 Introduction

Study Scope

The Alaska Oil and Gas Association (AOGA) contracted with McDowell Group to assess the role of the oil and gas industry in Alaska’s economy and in the economies of the Municipality of Anchorage, the Kenai Peninsula Borough, the Matanuska-Susitna Borough, the Fairbanks North Star Borough, the City of Valdez, and the North Slope Borough. To accomplish this task, the McDowell Group study team collected data from a variety of sources, including spending and payroll data from the 14 “Primary Companies” listed below.

• BP Exploration (Alaska) Inc.

• Chevron

• Petro Star Inc.

• Shell Exploration & Production Company

• Alyeska Pipeline Service Company

• BlueCrest Energy Inc.

• Caelus Energy, LLC

• ConocoPhillips Alaska, Inc.

• ExxonMobil Production Company

• Furie Operating Alaska

• Glacier Oil & Gas

• Great Bear Petroleum

• Hilcorp Energy Company

• Tesoro Alaska Company

Methodology

Each of these “Primary Companies” provided confidential data on spending in support of their Alaska operations, including payroll, purchases of goods and services from oilfield support and other types of firms, payments to local and state governments, and other information pertinent to spending in Alaska.

In addition to the data collected directly from the Primary Companies and others that are the major direct recipients of their spending, the study team collected data and information from a variety of published and unpublished sources. These include the Alaska Department of Labor and Workforce Development (ADOLWD), the Alaska Department of Revenue, the Alaska Department of Commerce, Community and Economic

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 8 Development, the U.S. Bureau of Labor Statistics, the U.S. Bureau of Economic Analysis (BEA), and the U.S. Department of Energy’s Energy Information Administration, among others.

To measure multiplier effects (secondary economic impacts) produced by the Primary Companies’ spending with Alaska businesses and from the wages they paid to Alaska residents, the study team used the IMPLAN™ (IMpact Analysis for PLANning) input-output modeling system to build custom models for Alaska and each of the regions studied. The task of the models was to quantify the jobs and payroll added to the Alaska economy statewide and regionally, as spending by the Primary Companies was subsequently re-spent within the state.

Funding associated with the State of Alaska are described in a state fiscal year (SFY) which runs from July 1, 2015 to June 30, 2016.

All inflation adjustments have used the Anchorage Consumer Price Information data from the Bureau of Economic Analysis.

North American Industry Classification System (NAICS) codes were used to understand the type of business activity vendors were engaged in. Vendor data provided to McDowell Group was linked with the State of Alaska Business License Database to identify company-specific NAICS codes.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 9 Chapter 1. Defining Alaska’s Oil and Gas Industry and its Economic Impact

To understand the true impact of oil and gas activity on Alaska’s economy requires a broader definition of the industry than the one typically used for government employment statistics. Government-published statistics for oil and gas employment in Alaska include jobs in companies classified under “oil & gas extraction,” “drilling oil and gas wells,” and “support activities for oil and gas operations.”2 However, they do not include approximately 800 Trans-Alaska Pipeline System (TAPS) jobs, which are classified as transportation, nor refinery employment of about 360 workers. They also exclude several thousand jobs directly connected to North Slope and Cook Inlet oil and gas production activity, but reported in other sectors such as construction, transportation, camp- support services, engineering services, etc.

This chapter discusses the primary investors (labeled as Primary Companies) in Alaska’s oil and gas industry infrastructure, including production, transportation, and refining of oil and gas. These companies play a pivotal role in the development of Alaska’s oil and gas resources. The spending by these Primary Companies is termed a “direct impact” on Alaska’s economy.

In addition to its direct impact, Primary Company spending filters through the state’s economy in what is often labeled the “multiplier effect” or “indirect and induced impact.” Oil dollars move through the economy in the form of spending on goods and services, payroll to Alaskan employees, taxes paid to local governments, and taxes and royalties paid to state government.

Figure 1. Economic Impact of Oil and Gas Industry Spending in Alaska’s Economy

Oil and gas production companies, pipelines, and refineries (14 Primary Companies)

Spending with Employment Taxes and Alaska and Payroll in Royalties Businesses Alaska

Indirect Induced Local State Employment Employment Government Government and Payroll and Payroll

Wages, Capital Wages, Capital Projects, Projects, Programs Programs

2 Alaska Department of Labor and Workforce Development (ADOLWD) estimated an annual average of 14,235 jobs in Alaska’s oil and gas sector in 2016, including employment in NAICS Sectors 211000 (oil and gas extraction), 213111 (drilling oil and gas wells), and 213112 (support activities for oil and gas operations). The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 10 The chapter also describes briefly the types of private sector firms affected by oil and gas spending, including oilfield support and other types of businesses actively engaged in Alaska’s oil and gas industry.

Primary Companies in Alaska’s Oil and Gas Industry

The following companies (in alphabetical order) are defined as Primary Companies in Alaska’s oil and gas industry for purposes of this analysis. They include 14 oil and gas production companies, pipeline operators, and refineries. All but two, ConocoPhillips and Great Bear, are members of the Alaska Oil and Gas Association (AOGA).

Alyeska Pipeline Service Company operates and maintains the 800-mile TAPS, including the pump stations and the Valdez Marine Terminal. All North Slope crude oil brought to market is transported through TAPS. Alyeska, which celebrates its 40- year anniversary in 2017, is the largest employer and taxpayer in Valdez. It is owned by four oil companies: BP Alaska, ConocoPhillips, Exxon Mobil, and Chevron.

BlueCrest Energy Inc. owns the Cosmopolitan project, an undeveloped offshore oil and gas field located in Cook Inlet close to Anchor Point. The company plans to drill up to five wells in 2017.

BP Alaska operates nine North Slope fields, including Prudhoe Bay. It also owns a portion of four North Slope pipelines and significant interest in six other producing fields. BP is the largest partner in TAPS with a 48 percent stake. BP’s net production rate in Alaska in 2016 was 108,000 barrels of oil-equivalent per day.3 BP holds a 32 percent and 40 percent stake in the Point Thompson and Liberty developments, respectively.

Caelus Energy, LLC operates the Oooguruk field on the North Slope and recently announced the Smith Bay oil discovery, which may have potential to produce 200,000 barrels per day. The company is actively exploring 350,000 acres west of Point Thompson and has plans to develop its Nuna project, an onshore development project located just east of the Colville River and close to the Oooguruk field.

Chevron Corporation has ownership interests across the North Slope, including Endicott (11 percent), Kuparuk (5 percent), West Sak (5 percent), Tabasco (5 percent), Tarn (5 percent), Meltwater (5 percent), Greater Prudhoe Bay (1 percent), and Greater Point McIntyre (1 percent) fields, among others. The company holds a 1 percent interest in TAPS.

3 A “barrel of oil-equivalent” is a unit of measurement representing the energy contained in 42 gallons of crude oil. This unit allows oil and natural gas production to be combined for simplicity. The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 11 ConocoPhillips is the largest oil producer in Alaska with a net production rate of 179,000 barrels per day of oil equivalent in 2015. On the North Slope, the company owns and operates Kuparuk (55 percent) and Alpine (78 percent), in addition to ownership in Prudhoe Bay (36 percent). ConocoPhillips owns the Kenai Liquefied Natural Gas Plant, and is a 29 percent owner of TAPS. The company owns and operates Polar Tankers, a five-vessel fleet that transports crude oil from the terminus of TAPS to domestic refineries.

ExxonMobil has a 36 percent ownership stake in Prudhoe Bay, Midnight Sun, Aurora, Orion, Polaris, Borealis, Point McIntyre, Niakuk, and Lisburne fields. The

company has smaller owner ship stakes in several other fields, in addition to being the operator of Point Thompson with a 62 percent ownership stake. ExxonMobil owns 21 percent of TAPS. The company’s net production for 2016 averaged 92,000 barrels of oil-equivalent per day.

Furie Operating Alaska is active in Cook Inlet. In 2011, the company brought the first jack-up rig (Spartan 151) to Cook Inlet in 20 years. It installed an offshore platform, pipeline, and onshore production facility that started producing gas in 2015. Furie continues its exploration in Cook Inlet, primarily in the Kitchen Lights Unit.

Glacier Oil & Gas Corporation is focused solely on Alaska – operating oil assets in the Redoubt and W. MacArthur River Unit in the Cook Inlet and at the Badami Unit on the North Slope. Additionally, Glacier owns gas assets at the North Fork Unit on the Kenai Peninsula as well as drilling, production and transportation infrastructure associated with these fields

Great Bear Petroleum is conducting exploration on 570,000 acres the company leases south of Prudhoe Bay and Kuparuk oilfields.

Hilcorp Energy Company operates the Endicott and Northstar units, located on offshore gravel islands north of Prudhoe Bay. The company is obtaining permitting

for the offshore Liberty project and operates the Milne Point unit with a 50 percent ownership stake. The company also operates 20 oil and gas fields in Cook Inlet, including 14 offshore platforms.

Petro Star Inc. is an Alaskan-owned refining and fuel-marketing company that operates refineries in North Pole and Valdez. Petro Star refineries draw crude supply from TAPS to produce off-road and marine diesel, commercial and military jet fuel, and home heating oil. The company operates retail outlets across Alaska, including seven locations in the Fairbanks area, two locations in Kodiak, and one store in Dutch Harbor.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 12 Shell Exploration & Production Company has a long history in Alaska’s oil and gas industry, including oil production in Cook Inlet dating back to the 1960s. Following the end of exploration efforts in the Chukchi Sea in 2015, the company maintains a small presence in Anchorage.

Tesoro Alaska operates a refinery in Kenai. The refinery manufactures jet fuel, diesel, gasoline, propane, asphalt and heavy oils. The company also owns and operates several gas stations in the state.

Primary Company Spending on Goods and Services

Primary Companies reported approximately $4.7 billion in Alaska vendor and inter-company spending in 2016. For purposes of calculating economic impact, inter-company spending was subtracted, leaving approximately $4.6 billion in operating and capital expenditures with Alaska vendors who provide goods and services in support of the companies’ Alaska operations.

Approximately 1,000 Alaska businesses provided goods and services to the oil and gas sector; some based in Alaska with resident and nonresident employees and some based outside Alaska but with satellite offices and employees in-state. In addition, these firms (both Alaska- and Lower-48 based) spend non-payroll money in and outside of Alaska, in support of their operations.

OIL AND GAS SUPPORT SERVICE COMPANIES

Slightly more than one-quarter (26 percent) of vendor spending went to oil and gas-support service companies, for example: Doyon Drilling; Schlumberger Technology Corporation; Nabors Alaska Drilling; Parker Drilling Arctic Operating; Halliburton Energy Services; Baker Hughes Oilfield Operations; Peak Oilfield Service Company; Little Red Services; Nordic-Calista Services; M-I LLC; and Udelhoven Oilfield System Services.4

Oil and gas support-service companies offer a wide array of oil and gas goods and services, including (but not limited to) regulatory, permitting and technical support, engineering, construction, construction management and project management, module fabrication and installation, infrastructure, facility, and pipeline maintenance, well logging, drilling, drilling engineering and exploration operations support, fleet services, operations support, oil spill response management and equipment, procurement management, wireline, coil tubing, drilling fluids, rig moving, rig operation, and decommissioning services.

4 Note: Many companies are active in multiple sectors, such as construction services and oil and gas support services. The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 13 CONSTRUCTION COMPANIES

Another 25 percent of vendor spending went to firms engaged in construction activity, primarily on the North Slope, Cook Inlet, and TAPS corridor. Those firms include: Cruz Construction; CH; Alaska Frontier Constructors; Ahtna Construction; Conam Construction; Cornerstone General Contractors; and ASRC Energy Services.

Construction services required by the oil and gas industry include project management, industrial construction, pipeline construction, electrical contracting, welding and metal fabrication, road construction, bridge building, roofing, painting and coverage contracting, and plumbing, among many others.

OTHER SUPPLIERS OF GOODS AND SERVICES TO THE OIL AND GAS INDUSTRY

The remaining approximately one-half of vendor spending goes to a wide variety of firms providing essential goods and services, including professional and technical services (12 percent), transportation (air, ground, and marine) and warehousing (8 percent), retail/wholesale trade (7 percent), accommodations and food service (3 percent), and all others (including communications, insurance, fuel, utilities computer and IT support, manufacturing, administration support, education services, etc.) (19 percent).

Figure 2. Primary Company Alaska Vendor Spending, by Industry Sector, by Percent, 2016

Accommodation and Food Services 3% Other 19% Trade 7% Transportation & Oil & Gas Support Warehousing Services 8% 26%

Construction Professional, 25% Scientific & Technical Services 12%

Source: Primary Companies data and McDowell Group Estimates.

Examples of larger firms (typically more than 50 employees) directly engaged in oil and gas activity in Alaska, but not reported in government employment statistics as part of the oilfield support sector include:

• Construction: CONAM Construction Company, based in Anchorage, is a general construction contractor specializing in oil and gas facilities (NAICS 237000 “heavy construction”). ASRC Energy Services provides construction and project management, module fabrication and installation, infrastructure, facility, and pipeline maintenance, and other services (NAICS 236000 “construction of Buildings”). Cruz Construction, based in Palmer and Anchorage, provides heavy civil contractor and other services (NAICS 237000 “heavy construction”). Flowline Alaska, Inc., based in Fairbanks provides corrosion coatings, insulation, and fabrication of pipe and structure items (NAICS 237000 “heavy construction”).

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 14 • Professional, Scientific, and Technical Services: aeSolutions, based in Anchorage, is a process safety consulting, engineering, and automation company (NAICS 541330 “engineering services”). CH2M Hill Inc., based in Anchorage, provides project development, technological expertise and program management, and other services (NAICS 541330 “engineering services”). Dowland-Bach Corporation, based in Anchorage, performs engineering of wellhead control panels and chemical injection systems (NAICS 541490 “other specialized design services”). Fairweather LLC, based in Anchorage, provides occupational and remote medical support, drug & alcohol testing, HSE support, and other services (NAICS 541618 “other management consulting services”). Hawk Consultants LLC, based in Anchorage, provides project and construction management services, project controls, supply change support and dispute resolution (NAICS 541690 “other scientific and technical consulting”). • Transportation and Warehousing: Colville, Inc., based in Prudhoe Bay and Anchorage, provides fuel distribution, delivery, and bulk storage services (NAICS 484000 “specialized freight”). Advanced Supply Chain International, based in Anchorage, provides materials management services, purchasing administration, warehouse operations, supply chain management/supplier management, and e- commerce web tools. All of the firm’s business is with the oil and gas sector (NAICS 493 “warehousing and storage”). • Trade: Delta Western Petroleum, based in Anchorage, is a distributor of petroleum products and lubricants (NAICS 424000 “merchant wholesalers, nondurable goods”). Puget Sound Pipe & Supply is a supplier of pipe and other products such as valves, fittings, flanges, and accessories (NAICS 423 “merchant wholesalers, durable goods”). • Services: GLM Corporation, based in Kenai, services and repairs gas turbines, compressors, pumps, gearboxes, generators and other industry related machinery (NAICS 811000 “repair and maintenance”). Alaska Roteq Corporation, based in Wasilla, services and repairs rotating equipment (NAICS 811000 “repair and maintenance”). Team Industrial Services, based in Kenai, provides inspection services (NAICS 811000 “repair and maintenance”).

Other businesses with substantial interest in Alaska’s oil and gas industry include NANA Management Services and Doyon Universal Services (NAICS 561000), AHTNA Construction (NAICS 237000), Crowley Marine Services (NAICS 483), Alaska Interstate Construction (NAICS 237000), and various transportation firms, such as ERA Helicopters (NAICS 481000), and Lynden Transport (NAICS 484000). These firms are active in other sectors of the Alaska economy, but the revenue generated in the oil and gas industry is important, if not essential, to business sustainability.

Other Indirect and Induced Economic Linkages to the Oil and Gas Industry

The 1,000-plus businesses described above that provide goods and services to the Primary Companies also purchase goods and services in support of their operations in Alaska, which creates additional jobs and wages. Those employment impacts are collectively described as part of the “indirect” impact of Primary Company activity in Alaska.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 15 The impact of the Primary Companies also includes the economic activity that occurs when their own employees spend their wages in the Alaska economy. Jobs and wages that are the result of primary-company wages being spent are termed “induced” economic impacts.

Together, indirect and induced impacts are termed “multiplier effects” by economists because they increase the impact of Primary Company spending by factors that vary depending on the type and location of the spending. In Chapters 2 and 3 of this report the direct and multiplier effects of Primary Company spending is described from a statewide perspective as well as for several local areas.

Economic Effects of Taxes and Royalties Paid by the Oil and Gas Industry

The jobs and wages associated with vendor and employee spending are largely in the private sector. Oil and gas businesses also generate taxes and royalties, paid to state government, that fund a wide variety of public services, programs, and capital projects. Similarly, property taxes paid by the oil and gas industry to local governments help support local services, programs, and projects. Alaska’s dependence on oil and gas industry revenues, and the employment and wages generated when those revenues are spent is described in Chapter 4.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 16 Chapter 2. Statewide Impacts of the Oil and Gas Industry

Primary Company Employment and Wages

The 14 firms that comprise the group of Primary Companies directly employed 5,035 workers in Alaska in 2016, including 4,275 Alaska residents (or 85 percent of Primary Company employees). These employees received $936 million in wages; Alaska residents received $749 million of this total, or 80 percent. Spending by Primary Companies and their employees then generate significant additional employment and wages, as described below.

Table 1. Primary Company Employment and Wages in Alaska’s Oil and Gas Industry, 2016 Total and Alaska Resident Employment and Wages Average Annual Percent of Total Wages Percent of Category Employment Total ($million) Total Alaska Resident Workers 4,275 85% $749 80% Non-Alaska-Resident Workers 760 15% $187 20% All Workers in Alaska 5,035 100% $936 100% Source: Alaska Department of Workforce Development and Labor, Primary Companies data and McDowell Group estimates.

Indirect and Induced Employment and Income

Relying exclusively on government employment statistics under-counts the broad oil and gas impact on the Alaska economy. For example, ADOLWD statistics indicate that an average of approximately 11,400 workers were employed in Alaska’s oil and gas industry sector in 2016.5

However, this accounts for approximately one- quarter of all employment connected with the oil and gas industry in Alaska (and less still when including jobs created by oil and gas industry taxes and royalties). Not included in the published data are a variety of support services companies providing goods and services to the Primary Companies but classified in government statistics in several other sectors, such as transportation, construction, and professional and technical services.

5Alaska Department of Workforce Development and Labor, QCEW, 2016. The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 17 In addition, as support services companies purchase goods and services in support of their business operations (indirect impacts), and as Alaska resident employees of both Primary Companies and support services companies spend their payroll dollars in-state (induced impacts), additional jobs and income are created.

Economic impact modeling conducted for purposes of this study indicates these subsequent cycles of spending supported just under 35,205 indirect and induced jobs in Alaska. Combining direct, indirect, and induced impacts, the oil and gas industry in Alaska supported 45,575 jobs and $3.1 billion in annual payroll in 2016. This estimate does not include jobs and income in Alaska stemming from the expenditure of state and local government oil-related taxes and royalties paid by the oil industry.

Table 2. Alaska Oil and Gas Industry Employment and Wages, 2016 (excluding non-resident oil production and oil field services workers) Category Employment Wages ($million) Primary Companies (Alaska residents only) 4,275 $749 Oil & Gas Support Services (Alaska residents only)* 6,095 $598 All Other Indirect and Induced 35,205 $1,783 Grand Total (Direct, Indirect, and Induced) 45,575 $3,130 *Includes ADOLWD Oil and Gas Support Services Sector 213111 and 213112. Note: Excludes non-resident employment. Source: Alaska Department of Labor and Workforce Development, McDowell Group Estimates, and Primary Companies data.

According to Bureau of Economic Analysis (BEA) employment data (which includes people who are self- employed and active-duty military personnel), there were 465,780 jobs in the Alaska economy in 2015.6 Based on that figure, the oil industry’s total employment of 45,575 workers accounts for about 1 in 10 jobs in Alaska, not including additional impacts on Alaska’s employment associated with taxes and royalties paid by the oil industry to state and local governments.

In terms of private sector employment, Alaska had an average of 252,600 private sector wage and salary jobs in Alaska in 2016 which accounted for $13.2 billion in total wages.7 All told, the oil and gas industry accounted for 1 in 6 private sector jobs.

Based on ADOLWD wage and salary employment data (excluding the self-employed and active duty military personnel), the oil and gas industry accounts for 15 percent of all employment and 20 percent of all wages (again not including jobs associated with taxes and royalties paid by the oil industry to state and local governments).

6 BEA 7 Ibid. The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 18 Chapter 3. Local/Regional Impact Profiles

This chapter provides an overview of the 2016 oil and gas industry employment and wage impacts in six geographic areas: Municipality of Anchorage, Fairbanks North Star Borough, Kenai Peninsula Borough, Matanuska-Susitna Borough, North Slope Borough, and City of Valdez. Municipality of Anchorage

More than half the jobs (62 percent) created in Alaska as a direct or indirect result of oil industry activity affect the Anchorage economy. Anchorage is Alaska’s service and supply hub. Many Alaska business, including oil producers, oil industry support services and supply businesses, and other businesses serving the oil and gas industry and its workforce are headquartered in Anchorage. As a result, much of the spending by Alaska’s oil and gas industry funnels through the Anchorage economy, creating additional jobs and wages.

• Approximately 2,265 employees of the 14 Primary Companies reside in Anchorage, accounting for $409 million in annual wages. In addition, an estimated 2,025 oil and gas support services employees reside in Anchorage, with annual wages of $220 million. • An additional 24,050 jobs in Anchorage are also connected to the oil and gas industry in Alaska. This includes indirect jobs, such as those with professional and technical services firms, transportation providers, and a variety of other companies that provide services to oil and gas firms. Wages spent by employees supporting the oil and gas industry create even more jobs and income in Anchorage (induced impacts). In total, these indirect and induced jobs accounted for approximately $1.2 billion in annual wages in Anchorage. • Including all direct, indirect, and induced effects, the oil and gas industry accounted for an annual average of 28,340 jobs and total annual wages of nearly $1.9 billion in Anchorage. • The oil and gas industry accounts for about 15 percent of Anchorage resident employment and 16 percent of Anchorage resident wages.8 • In 2016, the oil and gas industry accounted for approximately 17 percent of all private sector jobs and about 20 percent of private sector wages for Anchorage residents.9

Table 3. Oil and Gas Industry Employment and Wages in Anchorage, 2016 Category Employment Wages ($million) Primary Companies (Alaska residents only)* 2,265 $409 Oil & Gas Support Services (Alaska residents only)* 2,025 $220 All Other Indirect and Induced 24,050 $1,235 Grand Total (Direct, Indirect, and Induced) 28,340 $1,864 *Includes workers who are employed statewide but reside in Anchorage, as well as workers who live and work in Anchorage. Source: Alaska Department of Labor and Workforce Development, Primary Companies data, and McDowell Group estimates.

8 McDowell Group estimates based on BEA and AKDOWDL data. 9 Alaska Department of Labor QCEW, 2016. The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 19 Fairbanks North Star Borough

The oil and gas industry in the Fairbanks North Star Borough (FNSB) includes Petro-Star refinery operations, TAPS operations, and oil industry support services-related activity. The borough is also home to North Slope workers.

• Approximately 300 Primary Company employees reside in the FNSB, accounting for $52 million in annual wages and benefits. • Approximately 545 oil and gas support services employees reside in the FNSB, with annual wages of $51 million. • An additional 2,115 jobs in the FNSB are also connected to Primary Company spending in Alaska, including jobs with construction, trade, transportation, professional and technical services, and a variety of other companies, generating approximately $105 million in annual wages. • Including all direct, indirect, and induced effects, the oil and gas industry accounted for an annual average of 2,960 jobs and total annual wages of $208 million in the FNSB. • The oil and gas industry (including all multiplier effects) accounts for approximately 7 percent of all resident wages in the FNSB.10 • The oil and gas industry accounts for approximately 13 percent of all resident private sector jobs and wages earned by residents in the FNSB.11 • The oil and gas industry paid $12 million in property taxes to the FNSB in 2016, or 11 percent of total Borough property tax revenue. The industry also paid $300,000 in property taxes to the City of Fairbanks. • Alyeska Pipeline Service Company is the single largest contributor of property-tax revenues in the borough.12

Table 4. Oil and Gas Industry Employment and Wages in Fairbanks North Star Borough, 2016 Wages Category Employment ($million) Primary Companies (Alaska residents only)* 300 $52 Oil & Gas Support Services (Alaska residents only)* 545 $51 All Other Indirect and Induced 2,115 $105 Grand Total (Direct, Indirect, and Induced) 2,960 $208 *Includes workers who are employed statewide but reside in the FNSB, as well as workers who live and work in FNSB. Source: Alaska Department of Labor and Workforce Development, Primary Companies data, and McDowell Group estimates.

10 McDowell Group estimates based on BEA and AKDOWDL data. 11 Alaska Department of Labor QCEW, 2016. 12 Fairbanks North Star Borough, Comprehensive Annual Financial Report, FY16, http://www.co.fairbanks.ak.us/fs/Comprehensive%20Annual%20Financial%20Reports/FY15%20FNSB%20CAFR%20FINAL%202-9- 16%20OPTIMIZED.pdf The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 20 Kenai Peninsula Borough

The oil and gas industry has a substantial presence in the Kenai Peninsula Borough (KPB). Oil and gas production in Cook Inlet creates jobs and income for borough residents, as does operation of Tesoro’s refinery. Additional economic activity was generated from preparation for the Alaska LNG project, which would terminate in KPB. The region also enjoys economic benefits from wages spent in the local economy by North Slope workers who reside in the borough.

• Approximately 810 Primary Company employees reside in the KPB, accounting for $142 million in total annual wages. • Approximately 1,615 oil and gas support services employees reside in the KPB, with total annual wages of $153 million. • An additional 2,620 jobs in the KPB are also connected to Primary Company spending in Alaska, including jobs with the service sector, professional and technical services, trade, transportation, construction, and a variety of other companies, generating approximately $105 million in annual wages. • Including all direct, indirect, and induced effects, the oil and gas industry accounted for an annual average of 5,045 jobs and total annual payroll of $400 million in the KPB. • Economic activity related to the oil and gas industry accounts for approximately 20 percent of total KPB resident employment, and 25 percent of wages.13 • The oil and gas industry paid $11.6 million in property taxes to the KPB in 2016, or 19 percent of total property tax revenues for the Borough. The industry also paid $300,000 in property taxes to the City of Kenai. • Six of the top 10 property tax payers in the KPB are oil and gas companies. In order of taxable assessed value, Hilcorp Alaska LLC is #1; followed by ConocoPhilips Inc. (#2), Tesoro Alaska (#3), Cook Inlet Energy, LLC (#5), Alaska Pipeline (#7), and XTO Energy (#8).14 Together, these six companies account for 17 percent of KPB’s total assessed value.

Table 5. Oil and Gas Industry Employment and Wages in Kenai Peninsula Borough, 2016 Category Employment Wages ($million) Primary Companies (Alaska residents only)* 810 $142 Oil & Gas Support Services (Alaska residents only)* 1,615 $153 All Other Indirect and Induced 2,620 $105 Grand Total (Direct, Indirect, and Induced) 5,045 $400 *Includes workers who are employed statewide but reside in the KPB, as well as workers who live and work in KPB. Source: Alaska Department of Labor and Workforce Development, Primary Companies data, and McDowell Group estimates.

13 McDowell Group estimates based on BEA and AKDOWDL data. 14 Kenai Peninsula Borough, Comprehensive Annual Financial Report, FY16, http://www.kpb.us/images/KPB/FIN/Finance_Documents/Financial_Statements/FY2016/KPBFINAL_WEBFY16.pdf The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 21 Matanuska-Susitna Borough

The oil and gas industry’s economic impact on the Matanuska-Susitna Borough (Mat-Su) is primarily the result of oil and gas industry workers residing in the area and spending their wages in the local economy.

• Approximately 515 Primary Company employees reside in Mat-Su, accounting for $89 million in annual wages. • A larger number (1,580) of oil and gas support services employees reside in Mat-Su, with annual wages of $144 million. • An additional 1,175 jobs in Mat-Su are also directly connected to Primary Company spending in Alaska, including jobs with construction, trade, professional and technical services, other services, and a variety of other companies, generating approximately $54 million in total annual wages. • Including all direct, indirect, and induced effects, the oil and gas industry accounted for an annual average of 3,270 jobs in Mat-Su and total annual payroll of $287 million. • While few oil and gas industry-related jobs are located in Mat-Su (as many workers commute to Anchorage and some commute to work on the North Slope or in Cook Inlet), oil and gas industry- related wages account for approximately 8 percent of employment and wages earned by local residents.15

Table 6. Oil and Gas Industry Employment and Wages in Matanuska-Susitna Borough, 2016 Wages Category Employment ($million) Primary Companies (Alaska residents only)* 515 $89 Oil & Gas Support Services (Alaska residents only)* 1,580 $144 All Other Indirect and Induced 1,175 $54 Grand Total (Direct, Indirect, and Induced) 3,270 $287 *Includes workers who are employed statewide but reside in the Mat-Su Borough, as well as workers who live and work in Mat-Su. Source: Alaska Department of Labor and Workforce Development, Primary Companies data, and McDowell Group estimates.

15 McDowell Group estimates based on BEA and AKDOWDL data. The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 22 North Slope Borough

There were approximately 14,000 jobs reported in the North Slope Borough in 2016. Approximately 75 percent of those jobs (10,500) were in the Prudhoe Bay area. While a very large number of oil and gas industry jobs are based in the North Slope Borough (NSB), very few of these workers reside in the borough. The North Slope oil industry infrastructure and work sites are self-contained and hundreds of miles away from most of the borough’s resident population. The oil industry’s greatest economic impact on the NSB residents are through oil and gas-related property-tax revenues.

• By place of work, Primary Companies in the NSB provided approximately 1,845 jobs and accounted for $399 million in annual wages. • By place of work, oil and gas support services companies with operations in the NSB provided 5,590 jobs and accounted for $512 million in annual wages.16 Alaska residents held an estimated 3,410 (61 percent) of these positions and earned $315 million (62 percent) in wages. • By place of residence, Primary Companies and oil and gas support services companies supported employment for approximately 55 residents with about $4 million in wages. • An additional 1,790 jobs in the NSB are also connected to oil and gas industry activity in Alaska, generating approximately $101 million in annual wages. These jobs and wages are linked with property taxes paid by the industry that support borough government operations. It also includes high-level estimates of the economic impact of Arctic Slope Regional Corporation (ASRC), which has important interests in the oil and gas industry. • Including all direct, indirect, and induced effects, the oil and gas industry accounted for an annual average 1,845 jobs in the NSB and total annual wages of $105 million. • The oil and gas industry paid $347.5 million in property taxes to the NSB, or 96.7 percent of total Borough tax revenues. • Due to the significant number of individuals traveling to the region for work, the number of jobs outnumbers residents. BEA data indicates the area is home to approximately 10,000 residents and nearly 16,500 jobs.17

Table 7. Oil and Gas Industry Employment and Wages in North Slope Borough, 2016 Wages Category Employment ($million) Primary Companies (Alaska residents only) <5 <$1 Oil & Gas Support Services (Alaska residents only) 50 $3 All Other Indirect and Induced 1,790 $101 Grand Total (Direct, Indirect, and Induced) 1,845 $105 Source: Alaska Department of Labor and Workforce Development, Primary Companies data, and McDowell Group estimates.

16 Alaska Department of Labor QCEW, 2016. 17 Ibid. The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 23 Valdez

Valdez is the terminus of the 800-mile TAPS and the Alyeska marine terminal, where oil is loaded for marine transport to market. The marine terminal, Petro Star’s Valdez refinery, and other TAPS pipeline facilities within the city typically account for 90 percent of all local property-tax revenues.

An additional source of revenue dates back to the 1970s when the owners of TAPS paid the city $13.6 million in exchange for use of the city’s bonding authority to issue tax-exempt bonds. That money was used to create the Valdez Permanent Fund; at the end of 2016, the fund held approximately $175 million.18

• Approximately 290 Primary Company employees reside in Valdez, accounting for $41 million in annual wages. • Approximately 150 Oil and Gas Support Services company employees reside in Valdez, with annual wages of $14 million. • An additional 240 jobs in Valdez are also connected to Primary Company spending and employee spending in Valdez, accounting for approximately $16 million in annual wages. • Including all direct, indirect, and induced effects, the oil and gas industry accounted for an annual average of 680 jobs and total annual wages of $71 million in Valdez. • The oil and gas industry paid $43.4 million in property taxes to the City of Valdez in 2016, or 88 percent of total City tax revenues.

Table 8. Oil and Gas Industry Employment and Wages in Valdez, 2016 Wages Category Employment ($million) Primary Companies (Alaska residents only) 290 $41 Oil & Gas Support Services (Alaska residents only) 150 $14 All Other Indirect and Induced 240 $16 Grand Total (Direct, Indirect, and Induced) 680 $71 Source: Alaska Department of Labor and Workforce Development, Primary Companies data, and McDowell Group estimates.

18 City of Valdez, 2016 budget, http://www.ci.valdez.ak.us/DocumentCenter/View/2720 The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 24 Summary of Localized Impacts

The impacts for the six geographic areas described in this section capture most of the employment and payroll impacts generated by the oil and gas industry in Alaska. However, other regions of Alaska (such as Southeast, Southwest, and rural Interior) are home to a number of North Slope workers. These workers spend their wages in their local economies.

Some economic activity related to oil and gas industry spending in Alaska is difficult to attribute to any particular community. For example, spending by the oil and gas industry and their workers in Fairbanks, Mat-Su, or Kenai Peninsula is likely to funnel eventually through service and supply hubs in Anchorage. Local-level modeling conducted for this study does not capture this inter-regional effect and therefore understates local employment and payroll (especially in Anchorage).

The following table summarizes local-level employment and payroll impacts of the oil and gas industry. The “Unattributed” category is an accounting of jobs created in areas other than the six locations considered in this study and captures all the jobs created by inter-regional flow of oil and gas industry-related dollars.

Table 9. Alaska Resident Employment and Wages in the Oil and Gas Industry, By Region, 2016 Fairbanks Municipality Kenai North North Mat-Su City of Category Alaska of Peninsula Slope Unattributed Star Borough Valdez Anchorage Borough Borough Borough Employment Primary 4,275 2,265 300 810 515 <5 290 90 Companies Oil & Gas Support 6,095 2,025 545 1,615 1,580 50 150 125 Services Other Indirect & 35,205 24,050 2,115 2,620 1,175 1,790 240 3,220 Induced Total 45,575 28,340 2,960 5,045 3,270 1,845 680 3,435 Wages

($million) Primary $749 $409 $52 $142 $89 <$1 $41 $15 Companies Oil & Gas Support $598 $220 $51 $153 $144 $3 $14 $13 Services Other Indirect & $1,783 $1,235 $105 $105 $54 $101 $16 $167 Induced Total $3,130 $1,864 $208 $400 $287 $105 $71 $195 Note: Due to rounding some rows or columns may not add to total. Source: Alaska Department of Labor and Workforce Development, Primary Companies data, and McDowell Group estimates.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 25 Chapter 4. Oil Revenue Impacts on State and Local Governments

Alaska relies on revenue generated from oil and gas resources to fund state operating and capital budgets. Municipal governments also directly or indirectly depend on oil and gas-related revenue. Further, oil and gas revenue is also disbursed directly to Alaska residents in the form of transfer payments, including the Permanent Fund Dividend. In summary, oil and gas industry payments to state and local governments totaled $2.1 billion. This chapter details the economic impact of this state and local government revenue.

Table 10. Summary of Oil-Related Payments to State and Local Governments in Alaska, FY2016 Amount ($million) Local government payments (Oil and Gas Property Taxes) $446.8 State government payments (Royalties, Production Tax, Oil and Gas Property Tax, and $1,627.3 other payments) Total oil and gas-related revenue paid to local and state governments $2,074.1 Source: Alaska Department of Revenue.

Oil and Gas Revenue Impacts on State Government

Oil and gas revenue flows to the State of Alaska by means of a variety of taxes, royalties, and other charges related to oil and gas development and production. Between statehood in 1959 and state fiscal year (SFY)2016, oil-related unrestricted revenues totaled $177.7 billion ($2016), in addition to billions more in restricted revenue (See discussion of restricted and unrestricted revenue below.) In SFY2016, Alaska received $1.6 billion in total oil and gas revenue or 28 percent of all restricted and unrestricted state revenue ($5.8 billion).

Figure 3. Annual Unrestricted Petroleum Revenue ($2016), SFY1959-SFY2016

$14,000

$12,000

$10,000

$8,000

($million) $6,000

$4,000

Real Unrestructed Petroleum Revenue Petroleum Unrestructed Real $2,000

$0 1959 1978 1997 2016

Source: State of Alaska Department of Revenue; adjusted for inflation by McDowell Group.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 26 State revenue is categorized into two distinct pools of funding – unrestricted and restricted funds. Below is a brief description of the sources of oil and gas revenue payments to the State of Alaska in each category.19

Unrestricted Revenues

Unrestricted revenues are paid into the General Fund (GF) and may be appropriated for any purpose by the legislature (subject to the Governor’s veto). Most revenue generated from petroleum activity is unrestricted. In SFY2016, of the $1.6 billion in total petroleum revenue, $1.1 billion (or 69 percent) was unrestricted.

Alaska’s oil and gas industry revenue provided 72 percent of unrestricted revenue from all sources, in SFY2016. Non-petroleum corporate income tax accounted for the second largest component at just 6 percent.

Figure 4. Sources of State of Alaska Unrestricted General Funds, SFY2016

Corporate Income Tax (All Corporations), 6%

Fuel Tax, 3%

Cigarette Tax, 2% Fisheries Tax, 1% Petroleum Revenue, Non-petroleum Alcohol Tax, 1% 72% Revenue, 28% ($1,109.5 Million) ($430.3 Million)

Other Revenue, 14%

Source: Alaska Department of Revenue

ROYALTIES – OIL AND GAS BONUSES, RENTS, AND INTEREST

Royalty agreements allow the state to share the risk of oil and gas development with the industry (11 ACC 04.010-199, 11 AAC 83.201-295) in return for a portion of the profits. When a company purchases a lease from the state it pays various “fees” and promises the state a portion of revenue (usually 12.5 percent, although some newer leases have a higher royalty rate) if and when the oil and gas are marketed. Royalty payments are based on the value and volume of the oil and gas removed from the state-leased land and the lease’s royalty rate.

19 More detailed descriptions can be found in the Alaska Department of Revenue, 2016 Annual Report. http://www.tax.alaska.gov/programs/documentviewer/viewer.aspx?1038r The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 27 Large lease-owners have agreements with the state about what expenses can be deducted from the sales value to calculate royalty due.20

In SFY2016, royalties—including bonuses, rents, and interest—on petroleum production totaled $840.3 million. This revenue represented:

• 76 percent of unrestricted oil and gas-related revenue • 52 percent of all oil-related revenue (both restricted and unrestricted) • 15 percent of all state revenue (including payments from the federal government and other sources) • 12 percent of all restricted revenue (including payments from the federal government and other sources)

OIL AND GAS PRODUCTION TAX

Since January 1, 2014, the state has levied an annual tax on the value of oil and gas production in Alaska (AS 43.55) per Senate Bill 21, or the More Alaska Production Act (MAPA). Oil and gas production is taxed at its “production tax value” (PTV) which is gross value at the point of production minus lease expenditures.

For North Slope producers, the base tax rate is 35 percent with lower tax rates occurring when prices fall below $25 per barrel. An additional alternative minimum tax of between 0 and 4 percent is levied upon the gross value when the average annual ANS price is above $25 per barrel. A Per-Taxable-Barrel Credit is activated at $8 per barrel when prices are less than $80 per barrel and decreases to $0 per barrel as the price reaches $150 per barrel.

Cook Inlet producers operate under a tax structure similar to that of the North Slope, including the 35 percent tax rate on the production tax value of oil and gas. However, the effective rate cannot exceed $1 a barrel for oil and $0.177 per thousand cubic feet of natural gas. The Qualified Capital Expenditures Credit, Well Lease Expenditures Credit, and Net Operating Loss Credit are available to Cook Inlet producers until January 1, 2018. A Small-Producer Credit is gradually being phased out for the region; no new companies can claim the credit.

In SFY2016, the production tax generated $176.8 million in state revenue.

PROPERTY TAX

A total of $559 million in oil and gas property taxes were paid to both state and local governments. Alaska levies an oil and gas property tax on the value of taxable exploration, production, and pipeline transportation property

20 More detailed description can be found on the Alaska Department of Natural Resources’ website: http://dog.dnr.alaska.gov/Royalty/Accounting.htm The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 28 (AS 43.56) at a rate of 20 mills, or 2 percent of the assessed value. In SFY2016, this tax generated $112 million for the state with the remaining $447 million paid to local governments, which represented:

• 10 percent of unrestricted oil and gas-related revenue • 7 percent of all oil-related revenue (both restricted and unrestricted) • 2 percent of all state revenue (including federal government and other sources)

OIL CONSERVATION SURCHARGE

The Oil and Hazardous Substance Release Prevention and Response Fund (AS43.55.201/300) is maintained through a per-barrel tax to fund mitigation of oil spills or other hazardous releases. The fund is separated into two accounts: one supporting response to a hazardous release and another that supports the prevention of hazardous releases (primarily funding a division at the Alaska Department of Environmental Conservation).

The surcharge can total up to $0.05 per barrel, with $0.04 per barrel allocated to the prevention account with no limit. However, when the response account totals more than $50 million, a $0.01 per barrel surcharge is suspended. As of September 2016, the response fund held $49 million. Commonly referred to as the “470 Fund”, the Alaska oil and gas industry paid $9.3 million into the fund in in SFY2016. This surcharge is added to the Oil and Gas Production Tax.

PETROLEUM CORPORATE INCOME TAX

Alaska levies a corporate income tax on Alaska businesses (AS 43.20). According to the Alaska Department of Revenue (DOR), in SFY2016, corporate income tax revenue was negative (-$58.8 million) due to: “[L]arge refunds of prior-year estimated taxes and low estimated taxes for [S]FY 2016.”21 However, the negative tax balance is an outlier since the tax generated annual average revenue was nearly $390 million over the previous five years. DOR estimates SFY2017 and SFY2018 corporate income tax revenue will be positive.

Corporate income tax on oil companies is based on a “modified apportionment formula” of property, sales, and extraction. The extraction factor is the production of oil and gas in Alaska divided by worldwide production. Alaska taxes corporate income at graduated rates ranging from 0 to 9.4 percent spread across more than 10 tax brackets. Credits, such as the Gas Exploration and Development Credit, Gas Storage Facility Tax Credit, and the, LNG Storage Facility Tax Credit, apply.

Restricted Revenues

While most oil and gas revenue is unrestricted, a portion is considered restricted and is designated for specific uses. In SFY2016, of the $1.6 billion generated from oil and gas activity, $518 million (or 24 percent) was

21 Alaska Department of Revenue, Revenue Sources Book Fall 2016, http://www.tax.alaska.gov/programs/documentviewer/viewer.aspx?1295r The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 29 restricted revenue.22 This component represented 8.9 percent of all state revenue. This revenue is placed in several funds described below.

ALASKA PERMANENT FUND

The Alaska Permanent Fund receives between 25 to 50 percent of oil and gas royalties, depending on the royalty agreement for the specific property. As of May 8, 2017, the fund held $58.8 billion.23 A more detailed discussion of the Alaska Permanent Fund may be found later in this report.

PUBLIC SCHOOL TRUST FUND

The Public School Trust Fund is funded by a 0.5 percent royalty on receipts connected with the management of State of Alaska Lands (AS 37.14.150), including revenue generated through royalties, mineral lease rentals, the sale of surface rights, and other activity. Revenues associated with oil and gas development and production fund most of the trust.

Income generated from the Public School Trust Fund can only be used to support the Alaska public school system. On April 30, 2017, the fund’s market value was $619.7 million. In SFY2016, $13.0 million was distributed to school districts throughout the state.

CONSTITUTIONAL BUDGET RESERVE FUND

The Constitutional Budget Reserve Fund (CBRF) receives settlements associated with mineral-related disputes. At the discretion of the state legislature, GF revenue can also be added to the CBRF.

Established in 1990, the CBRF is funded almost entirely by oil and gas activity; mining-related settlements contributed a small amount.

On April 30, 2017, the fund had a market value of $4.7. billion.24 In SFY2016, $119.1 million was placed in the CBRF, and the fund generated $138.3 from investment activities.25 In the same year, $3.0 billion was transferred from the CBRF to the GF.

NPR-A ROYALTIES, RENTS, AND BONUSES

The State of Alaska is entitled to 50 percent of bonuses, rents, and royalties associated with leasing of federal lands in the National Petroleum Reserve-Alaska (NPR-A). This restricted revenue first goes to municipalities in the form of grants to minimize impacts associated with NPRA development. Any remaining funds are treated like other State of Alaska royalty revenue.

22 State of Alaska Department of Revenue, Revenue Sources Book Fall 2016, accessed 3/15/2017, http://tax.alaska.gov/programs/documentviewer/viewer.aspx?1321r. 23http://www.apfc.org/home/Content/home/index.cfm 24 http://treasury.dor.alaska.gov/Investments/ConstitutionalBudgetReserve.aspx 25 State of Alaska Department of Revenue, Revenue Sources Book Fall 2016, accessed 3/15/2017, http://tax.alaska.gov/programs/documentviewer/viewer.aspx?1321r. The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 30 In SFY2016, $1.8 million was collected for activity on NPR-A lands, supporting local government operations, youth programs, and infrastructure projects in Utqiaġjik (formerly Barrow), Wainwright, Anaktuvuk Pass, Nuiqsut, and Atqasuk.26

Oil and Gas Revenue Trends

The following tables summarizes State oil and gas revenue and other revenue from SFY2010 to SFY2016.

Table 11. Sources of State of Alaska Revenue ($million), by Type, SFY2010-SFY2016

Category SFY2010 SFY2011 SFY2012 SFY2013 SFY2014 SFY2015 SFY2016 Unrestricted Revenue Oil and Gas Royalties $1,469.0 $1,821.3 $2,022.8 $1,748.4 $1,685.0 $1,052.1 $840.3 Production Tax 2,860.7 4,543.2 6,136.7 4,042.5 2,605.9 381.6 176.8 Property Tax 118.8 110.6 111.2 99.3 128.1 125.2 111.7 Petroleum Corporate 446.1 542.1 568.8 434.6 307.6 94.8 -58.8 Income Tax Other Oil & Gas Revenue1 18.3 31.7 18.3 27.2 36.2 34.2 39.5 Total Oil & Gas-Related $4,912.9 $7,048.9 $8,857.8 $6,352.0 $4,762.8 $1,687.9 $1,109.5 Revenue Non-Oil & Gas Revenue 600.4 624.0 627.4 576.5 627.3 568.4 430.3 Total Unrestricted Revenue $5,513.3 $7,672.9 $9,485.2 $6,928.5 $5,390.1 $2,256.3 $1,539.8 % from Oil & Gas Revenue 89% 92% 93% 92% 88% 75% 72% Restricted Revenue Royalties to Permanent $696.1 $857.3 $904.9 $842.1 $773.7 $510.4 $390.5 Fund Tax Settlements to CBRF 552.7 167.3 102.1 176.6 114.4 149.0 119.1 Royalties to Public School 11.1 13.6 14.7 13.8 12.5 7.9 6.4 Trust Fund NPR-A Royalties, Rents, and 21.3 3.0 4.8 3.6 6.8 3.2 1.8 Bonuses Total Oil & Gas-Related $1,281.2 $1,041.2 $1,026.5 $1,036.1 $907.4 $670.5 $517.8 Revenue Non-Oil & Gas Revenue 7,150.4 10,809.8 3,017.2 7,762.7 10,861.3 5,537.4 3,708.8 Total Restricted Revenue $8,431.6 $11,851.0 $4,043.7 $8,798.8 $11,768.7 $6,207.9 $4,226.6 % from Oil & Gas Revenue 15% 9% 25% 12% 8% 11% 12% Combined Unrestricted and Restricted Revenue Total Oil & Gas-Related Unrestricted and Restricted $6,194.1 $8,090.1 $9,884.3 $7,388.1 $5,670.2 $2,358.4 $1,627.3 Revenue Average Alaska North Slope $79 $110 $111 $108 $98 $52 $43 (ANS) Price per Barrel 1Includes hazardous release revenue. Source: Alaska Department of Revenue.

26 https://www.omb.alaska.gov/ombfiles/16_budget/PDFs/FY16_by_House_District_w_Funding_Detail_6-30-15.pdf, p. 13. The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 31 Recent changes in oil and gas-related revenue have been driven primarily by the price of oil and Alaska’s tax structure. Peak average prices of $111 per barrel in SFY2012 saw associated revenue of $9.9 billion, but as prices began to slide in the following two years, oil and gas revenue began to decline. By SFY2016, oil prices had declined more than 60 percent from SFY2012, and oil and gas revenue slid more than 80 percent.

Figure 5. State of Alaska Total Oil and Gas-Related Revenue ($billion) and Average Annual ANS Price per Barrel, SFY2010-SFY2016

$12.0 $110 $111 $120 $108 $9.9 $98 $10.0 $100 $79 $8.1 $8.0 $7.4 $80

$6.2 $6.0 ANS Crude Oil Average $5.7 $52 $60 Price $4.0 $43 $40 $2.4 $2.0 $1.6 $20

$0.0 $0 2010 2011 2012 2013 2014 2015 2016

Total Oil and Gas Revenue Average Price Per Barrel

Source: Alaska Department of Revenue.

Oil and Gas Revenue-Related Impacts on State Government Funding and Employment

As a critical source of unrestricted funding, the oil and gas industry supports thousands of state government jobs and millions of dollars in annual wages. Recognizing that the impact of oil and gas related-revenue on state government employment and payroll is greater than the UGF spending alone due to leveraging of additional federal dollars (for example, transportation projects and Medicaid funding). The following analysis focuses on the impacts of oil and gas revenue-related UGF on state department operations and programs.

In SFY2016, the state’s combined operating ($8.5 billion) and capital ($1.5 billion) budget was $10.0 billion. UGF accounted for 52 percent of these budgets ($5.2 billion). Federal funding accounted for 33 percent ($3.3 billion) and designated and other funds totaled the remainder ($1.4 billion).

In SFY2016, the proportion of Alaska department budgets funded with oil and gas revenue from the UGF, including the Constitutional Budget Reserve funds, ranged from 89 percent (for the Alaska State Legislature) to 8 percent (Alaska Department of Revenue). In absolute terms, the Alaska Department of Education and Early Development received the most oil and gas revenue-related UGF ($1.2 billion).

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 32 Table 12. Sources of State of Alaska Department Revenue, By Source ($thousands), SFY2016 Percent of UGF Department Undesignated Designated Funding State Federal Total Budget General General Other Funds Attributable Departments Funds Funding Attributable Funds Funds to Oil & Gas to Oil & Gas Revenue Revenue Legislature $65,798 $62 $355 $0 $66,215 $59,219 89% Judiciary 110,142 518 1,656 443 112,759 99,128.0 88 Office of the 21,688 0 630 201 22,519 19,519.4 87 Governor Public Safety 157,595 3,956 9,624 5,898 177,072 141,835.3 80 Corrections 274,822 6,450 22,263 6,404 309,939 247,340.2 80 Education and Early 1,299,093 24,512 49,448 210,843 1,583,896 1,169,184.0 74 Development Law 55,696 2,723 30,638 1,020 90,077 50,126.2 56 Natural 115,349 22,099 31,383 34,480 203,311 103,814.0 51 Resources Health and 1,179,724 60,912 87,802 1,324,614 2,653,052 1,061,751.2 40 Social Services University of 350,787 284,967 72,461 126,055 834,270 315,708.1 38 Alaska Transportation & Public 237,684 63,422 280,625 916 582,647 213,915.9 37 Facilities Fish and Game 64,616 11,829 49,871 54,366 180,682 58,154.1 32 Military and Veterans 16,268 0 11,866 18,627 46,761 14,640.8 31 Affairs Environmental 19,904 25,451 10,722 19,977 76,053 17,913.2 24 Conservation Administration 75,941 26,847 205,672 995 309,455 68,347.2 22 Labor and Workforce 25,536 33,151 18,948 69,161 146,797 22,982.1 16 Development Commerce, Community, & 27,836 69,582 48,564 27,047 173,030 25,052.5 14 Economic Development Revenue 28,313 1,807 212,262 72,036 314,419 25,481.8 8 Total $4,126,792 $638,288 $1,144,789 $1,973,085 $7,882,953 $3,714,113 48%* *Indicates an average value. Note: Assumes 90 percent of UGF originates with oil and gas revenue, including CBR revenue. Source: Governor’s Office of Budget and Management, Alaska Legislative Finance, Department of Revenue, and McDowell Group estimates.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 33 Depending on their reliance on UGF, some departments are more dependent upon oil and gas-related revenue for operations. The departments with the most jobs supported by this revenue included the University of Alaska (1,793 jobs), Alaska Department of Corrections (1,444), and Alaska Department of Health and Social Services (1,381). Total positions supported by oil and gas-related revenue across all departments is nearly 10,000.

Table 13. State of Alaska Department Employment, By Type, SFY2016 # Positions % of Positions Full- Part- Temporary All Supported by Supported by State Departments Time Time Positions Positions Petroleum- Petroleum Positions Positions Related UGF Related UGF Legislature 373 57 0 430 384 89% Judiciary 627 41 133 801 704 88 Office of the Governor 127 1 56 184 160 87 Public Safety 796 3 154 953 763 80 Corrections 1,776 0 33 1,809 1,444 80 Education and Early 294 3 68 366 270 74 Development Law 485 1 2 488 272 56 Natural Resources 826 6 91 922 471 51 Health and Social 3,167 53 232 3,452 1,381 40 Services University of Alaska 4,518 221 - 4,739 1,793 38 Transportation & Public 3,145 22 114 3,281 1,205 37 Facilities Fish and Game 1,236 108 70 1,414 455 32 Military and Veterans 233 1 3 236 74 31 Affairs Environmental 475 1 9 485 114 24 Conservation Administration 946 12 49 1,006 222 22 Labor and Workforce 675 4 48 727 114 16 Development Commerce, Community, & Economic 451 2 11 463 67 14 Development Revenue 487 0 6 493 40 8 Total 20,637 535 1,079 22,251 9,934 45%* *Indicates an average value. Note: Assumes 90 percent of UGF originates with oil and gas revenue, including CBR revenue. Source: Governor’s Office of Budget and Management, Alaska Legislative Finance, Department of Revenue, and McDowell Group estimates.

STATE OF ALASKA CAPITAL BUDGET

The economic impact of capital projects may be spread out over several years, as construction can take time to ramp up (and ramp down). Capital projects supported by oil and gas-related revenue GF allocations covered a wide variety of infrastructure between SFY2014 to SFY2016. A sample of this spending on large and small projects includes:

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 34 SFY2014

• Southeast Inter-Island Ferry Authority, $500,000 (of which $440,000 was supported by oil and gas- related GF revenue) • Ouzinkie Emergency Repairs for Mahoona Dam, $300,000 ($264,000 supported by oil and gas-related GF revenue) • Fairbanks UAF Heat and Power Plant, $50,000,000 ($44,000,000 supported by oil and gas-related GF revenue) • Chugiak Volunteer Fire Department Engine Replacement, $450,000 ($396,000 supported by oil and gas- related GF revenue) • Big Lake Lions Club Community and Recreational Center, $500,000 ($440,000 supported by oil and gas- related GF revenue)

SFY2015

• Dalton Highway Emergency Repairs, $5,000,000 ($3,750,000 supported by oil and gas-related GF revenue) • Juneau Capitol Building Seismic and Restoration Project, $7,385,700 ($5,539,275 supported by oil and gas-related GF revenue) • Koyukuk Power House and Distribution System Improvements, $250,000 ($1875,000 supported by oil and gas-related GF revenue) • Anchorage Campbell Airstrip Road Pedestrian/Bike Trail, $140,000 ($105,000 supported by oil and gas- related GF revenue)

SFY2016

• North Pole Sewer Improvements, $2,018,800 ($1,816,920 supported by oil and gas-related GF revenue) • Juneau Water Treatment Improvements, $3,090,000 ($2,781,000 supported by oil and gas-related GF revenue) • Homer Water Storage and Distribution Improvements, $1,980,254 ($1,782,228 supported by oil and gas-related GF revenue)

Statewide Impacts of Oil-related Revenue on Selected State Government Programs

Following are some key examples of programs funded by oil and gas-related revenue in SFY2016 that have far- reaching, statewide benefits:

• Alaska Permanent Fund Dividends (PFD), paid to 635,997 individuals. • Education funding, supporting nearly 130,000 K-12 and 35,000 University of Alaska students. • Medicaid payments, affecting approximately 182,925 recipients of health care services in 2016. • Community Assistance Program, affecting about 230 municipalities, boroughs, cities, and unincorporated communities throughout Alaska.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 35 THE ALASKA PERMANENT FUND AND THE PERMANENT FUND DIVIDEND

In 1976, as TAPS neared completion, Alaska voters approved a constitutional amendment to establish the Alaska Permanent Fund. The Fund is an account to help cover future State needs in the event of volatility or decline in oil revenues. The principal of the fund represents at least 25 percent of all mineral lease rents, royalties, royalty sales proceeds, federal mineral revenue-sharing payments and bonuses. The Alaska Constitution says the principal of the Fund may not be spent. However, the earnings may be spent by the Alaska State Legislature for any public purpose, including Permanent Fund Dividend (PFD) distribution. Perhaps the most recognizable impact the oil industry has had on the average Alaska resident is the PFD.

• Most of the Fund’s principal comes from Alaska’s oil and gas production royalty payments (a relatively small amount comes from mining activity). In SFY2016, $390.5 million in oil and gas production royalty payments went to the Alaska Permanent Fund.27 • As of May 24, 2017, the fund was valued at $59.3 billion.28 • An Alaskan resident who has received an annual dividend since 1982 has received $40,121 (or $56,830 measured in 2016 dollars) in PFDs. • The Alaska Permanent Fund has paid a cumulative total of $23.1 billion (or $32.1 billion in 2016 dollars) in PFDs since 1982. • The PFD distribution in 2016 ($650 million) represented slightly more than 10 percent of all government transfer payments ($6.2 billion) to Alaska residents.29

Figure 6. Annual PFD Disbursed Amount ($2016), 1982-2016 $1,800

$1,600

$1,400

$1,200

$1,000

$800

$600

Annual Amount Disbursed Annual $400

$200

$0 1982 1999 2016

Note: Does not include a $1,200 “energy rebate” payment which accompanied the 2008 PFD disbursement. Oil and gas-related revenue funded more than 90 percent of this rebate payment. Source: Alaska Permanent Fund Corporation, inflation-adjusted by McDowell Group.

27 http://www.tax.alaska.gov/programs/documentviewer/viewer.aspx?1331r 28 http://www.apfc.org/home/Content/home/index.cfm 29 Bureau of Economic Analysis, Personal Income data,2015. The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 36 Each fall, every Alaska resident – adults and children alike – receives a PFD check in an amount that has ranged from about $400 to more than $2,000. The initial legislation creating the dividend in 1980 was invalidated by the U.S. Supreme Court because it based the size of payments to recipients on their years of residency in Alaska. After adjustments were made to the legislation to authorize equal dividend payments to all residents, the first dividend of $1,000 was distributed to Alaskans in 1982.

PFD payments serve an especially important role in rural Alaska where opportunities to earn cash income are often limited. To illustrate, the 2015 median family household income in Kusilvak Census Area was an estimated $39,375.30 The average family household included five people. Assuming each member of the family received a $2,072 PFD in 2015 (totaling $10,360), the combined PFD income would represent 26 percent of that family’s total household income. Research conducted by Berman & Reamey in 2016 estimates these annual payments lift between 15,000 and 25,000 Alaskans above the federal poverty line.31

A statewide survey conducted by McDowell Group in 2008 showed that 62 percent of Alaskans used a portion of their PFD to pay for household expenses (such as maintenance, rent, utility bills), 58 percent saved or invested a portion of their PFD, including college funds, 40 percent used it to pay debt (such as credit card debt, garnishment, child support payments), 33 percent used it for vacation, 31 percent donated a portion to a charity, and 19 percent used it to make a major purchase of more than $500 (such as snow machines, TVs, four- wheelers).32 Like other income that enters Alaska’s economy, the PFD supports additional jobs and income beyond the initial payment to recipients and has far-reaching impacts on many sectors in Alaska’s economy (which are described in more detail later in this chapter).

Pick. Click. Give.

The Pick. Click. Give. (PCG) program enables donations of a portion or all of an individual’s PFD to a charitable organization. Since the program began in 2009, PCG has facilitated more than $20 million in donations.33

University of Alaska College Savings Plan

Eligible PFD applicants can place up to 50 percent of their PFD in a 529 college savings plan created by the state legislature in 1990. Since 1991, Alaska residents have contributed $174.9 million to this plan.34

30 American Community Survey 2011-2015 Five-Year Estimates. 31 Permanent Fund Dividends and Poverty in Alaska, Matthew Berman and Random Reamey, November 2016, http://www.iser.uaa.alaska.edu/Publications/2016_12-PFDandPoverty.pdf 32 McDowell Group, A Statewide Household Survey of Alaskan Giving, prepared for The Alaska Giving Coalition, March 2008. 33 Personal Communication, Sofia Fouquet, Pick.Click.Give. Program Manager, 5/8/2017. 34 State of Alaska Department of Revenue Permanent Fund Dividend Division, Annual Report 2016, https://pfd.alaska.gov/LinkClick.aspx?fileticket=rSpgeMOLgys%3d&tabid=506&portalid=6&mid=6428 The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 37 State Funding of K-12 Schools and The University of Alaska

Public schools, including the University of Alaska, receive a significant portion of their funding from oil and gas revenue as described below.

K-12 Support

In SFY2016, the Alaska Department of Education and Early Development (DEED)’s budget totaled $1.6 billion, of which 82 percent ($1.3 billion) was UGF. Of the $1.3 billion in UGF, an estimated 90 percent ($1.2 billion) originated from oil and gas revenue (including Constitutional Budget Reserve funding) or $8,654 per student enrolled in K-12 public schools in Alaska.35 Note that this education spending does not include local contributions.

Aside from specific state program funding (such as federal grants), most support of Alaska’s public K-12 school funding is determined using a “foundation formula” (adopted in 1998). The formula calculates the amount of state aid to individual school districts each year based on student enrollment, defined as the “average daily membership” (ADM). ADM is adjusted for variations in school size, geographic cost differentials, special and intensive needs student populations, correspondence programs, federal aid, and the ability of communities to provide local contributions.

The adjusted ADM is then multiplied by the Base Student Allocation (BSA) to determine each district’s level of state funding. In 2016, the ADM was 129,704.74 and the BSA totaled $5,880 per student, with oil and gas-related revenue accounting for $5,292.36

University of Alaska System

The University of Alaska system includes three campuses—University of Alaska Fairbanks, University of Alaska Anchorage, University of Alaska Southeast—and serves approximately 35,000 full and part-time students annually. The university system employed 4,700 people in 2016.37

In SFY2016, the University of Alaska budget of $834.3 million included:

• 42.0 percent ($350.8 million) in UGF • 34.2 percent ($285.0 million) in DGF • 15.1 percent ($126.0 million) in federal funding • 8.7 percent ($72.5 million) from other sources.

Because of UGF funding, nearly 40 percent of the university’s budget was supported by oil and gas revenue. The University of Alaska Southeast benefits most, with 48 percent of funding coming from oil and gas-related funding. University of Alaska Fairbanks and University of Alaska Anchorage also benefit greatly, with 43 percent

35 Average spending per 128,705 total students enrolled. 36 https://education.alaska.gov/stats/SchoolEnrollment/2017SchoolEnrollment.pdf 37 Alaska Legislative Finance Division, The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 38 and 37 percent, respectively, coming from oil and gas-related funding. In terms of university employment, this level of oil and gas-related revenue is the equivalent of approximately 1,400 positions.

Figure 7. Estimated Proportion of Budget Supported by Oil and Gas Revenue by Campus, 2016

48% 43% 38% 37%

Statewide University of University of Alaska University of Alaska University of Alaska Alaska Anchorage Fairbanks Southeast

Note: Assumes 90 percent of UGF originates with oil and gas revenue, including CBR revenue. Source: Governor’s Office of Budget and Management and McDowell Group estimates.

MEDICAID PAYMENTS

Medicaid is the nation’s major funding source for basic health and long-term-care services for low-income families and people with disabilities. The Medicaid program in Alaska is administered by the Alaska Department of Health and Social Services.

Medicaid financing rules require states to spend their own funds to receive a federal financial match for Medicaid services.38 Prior to Medicaid expansion on September 1, 2015, the federal government covered 50 percent of state expenditures for most Medicaid services for eligible recipients and 65 percent of state expenditures for eligible children (ages 0-18) and expectant and new mothers (60 days after birth). With Medicaid expansion, 32,958 enrollees (or 18 percent of all people covered by Medicaid) were 100 percent federally funded through CY2016 (and will transition to 90 percent federally funded in 2020 and beyond.)39 Medicaid coverage for children and new mothers is handled through the Denali Kid Care program (Alaska’s Children Health Insurance Program).40

• Since state funds are required to obtain the federal match, without oil and gas-related revenue (and absent additional revenue generated by a statewide property, sales, or income tax) the entire Medicaid program in Alaska would be at risk. o Approximately $9 of every $10 of Alaska’s state match of federal dollars is related to oil and gas revenue ($575 million of $639 million total)

38 There are no federal limits on program spending. 39 http://dhss.alaska.gov/HealthyAlaska/Pages/dashboard.aspx 40 The Federal Medical Assistance Percentage (FMAP) and Enhanced Federal Medical Assistance Percentage (eFMAP) are formula based and can vary. The eFMAP for 2013 is 65 percent. The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 39 o Approximately $3.3 of every $10 spent on Medicaid in Alaska (both state and federal funds) is related to oil and gas revenue ($575 million of $1.7 billion). • In 2016, 182,925 individuals received medical benefits through the Medicaid Program.41 o State funding covered approximately 149,967 individuals. • The SFY2016 budget for Medicaid was $1.7 billion, including $638.9 million in UGF (37 percent of total), $1,089.4 million in federal support (62 percent), and $5.4 million in other funding (<1 percent).

COMMUNITY ASSISTANCE PROGRAM

The Community Assistance Program is one of the most important sources of non-locally generated operating revenue for many communities in Alaska (AS 29.60.850-.879 and 3 AAC 180). The program annually provides Alaska’s boroughs, cities, and unincorporated communities with funds vital to the delivery of basic public services. Payments received may be used at a community’s discretion for any public purpose.42 Municipalities and unincorporated communities may receive, upon application, a base payment, plus a per capita payment. This funding generates economic activity in the form of local government staffing, operating expenses, or community projects.

The Community Assistance Program is established in the State’s GF. One-third of the Fund’s amount is distributed by the Alaska Department of Commerce, Community and Economic Development. If the fund balance falls below $60 million, no payments may be made from the fund. The Legislature can also appropriate less than $60 million (including nothing at all); in SFY2016, $57 million was distributed.

• The Fund has distributed $1.9 billion (or $3.0 billion in 2016 dollars) since its inception in 1985. • An estimated $9 of every $10 distributed from the Fund came from oil and gas revenue, reaching about 229 municipalities, boroughs, and unincorporated communities throughout Alaska.

In SFY2016, the Legislature appropriated the fund at base payments of:

• $458,800 for Municipalities, of which $412,920 comes from oil-related UGF • $367,000 for Organized Boroughs ($330,300 oil-related UGF) • $91,800 for Cities ($86,620 oil-related UGF) • $30,600 for Unincorporated Communities in the unorganized borough ($27,540 oil-related UGF) • $19,300 for Unincorporated Communities in organized boroughs ($17,370 oil-related UGF)

If the amount of funding available exceeds the amount needed to fund the basic payments, the balance is distributed on a per capita basis, excluding the unincorporated communities located within organized boroughs.

For some of Alaska’s smaller communities, the Community Assistance Program is critical to sustain their operations. For example, in Bettles and Eagle program funding accounted for 94 percent ($96,866 of $102,827 total (SFY2015)) and 54 percent ($100,625 of $184,671 total (SFY2015)) of total annual revenues, respectively.43,44

41 Source: FY14 Budget Overview citing MMIS/JUCE. Count includes beneficiaries for whom a direct services claim was paid. Total associated payment is $731.7 million. Excludes CAMA, Senior Care Drug and Public Assistance field service benefits. 42 http://www.commerce.alaska.gov/dnn/dcra/CommunityAidAccountability/CommunityRevenueSharing.aspx 43 https://www.commerce.alaska.gov/dcra/dcrarepoext/RepoPubs/FinDocs/EagleFY2015CertifiedFinancialStatement.pdf 44 https://www.commerce.alaska.gov/dcra/dcrarepoext/RepoPubs/FinDocs/EagleFY2017Budget.pdf The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 40 Local Government Revenue

In addition to property taxes collected by the State of Alaska, local governments generate revenue from taxation of oil and gas property assets. As with the Community Assistance Program, property taxes provide unrestricted revenue to communities. Without the oil-related revenue, local governments, like the State, would need to provide fewer services and spend less on capital projects and/or raise more taxes from businesses and households.

Property holders can claim local oil and gas property taxes paid as credits towards state oil and gas property taxes.

Oil and Gas Property Taxes

In SFY2016, local governments generated $446.8 million from taxation of oil and gas properties, approximately 26 percent of total tax revenue ($1.8 billion).45 Other property tax revenue accounted for the largest portion (54 percent or $950.1 million). Sales and other tax revenue composed the remainder ($358.5 million or 20 percent).46

Figure 8. Local Government Tax Revenue by Category ($million), SFY2016

Sales Tax, $229.2

Other Taxes, $129.3

Total Revenue Other Property Tax, $1.8 Billion $950.1 Oil and Gas Property Tax, $446.8

Source: Alaska Department of Commerce, Community and Economic Development.

45 Oil and gas property tax (commonly termed the 43.56 tax) does not include property taxes on refineries. 46 Other taxes apply to motor fuel, raw fish, hotel beds, and alcohol and tobacco products, among others. The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 41 In 2016, oil and gas assets in Alaska were assessed at $27.6 billion, with more than 73 percent of total assessed value (or $20.3 billion) in the North Slope Borough. In contrast to the North Slope, where assets consist mainly of oil and gas production infrastructure, assessed values in the Fairbanks North Star Borough ($677.8 million) and Valdez ($1.9 billion) result from refineries, TAPS, and marine terminal facilities (Valdez). Production facilities in Kenai Peninsula Borough were assessed at $1.4 billion, nearly double the 2010 assessment due to increased oil and gas activity and investment related to the Alaska Liquified Natural Gas (Alaska LNG) project. Oil and gas assets in Mat-Su, Anchorage, Cordova, Whittier, and other locations make up the remaining $301.5 million in oil and gas infrastructure assessed value.

In 2016 dollars, total oil and gas property taxes to local governments increased by $79.3 million (22 percent), between 2010 and 2016.

Table 14. Oil & Gas Infrastructure Assessed Value ($million), 2010-2016 City, Borough, or 2010 2011 2012 2013 2014 2015 2016 Municipality North Slope $16,113.5 $16,591.8 $17,427.0 $18,784.7 $18,602.1 $20,181.1 $20,267.1 Valdez 2,151.2 1,943.9 1,882.7 2,676.7 2,303.9 2,169.0 1,920.8 Kenai Peninsula Borough 714.0 699.0 810.1 989.8 1,139.8 1,224.5 1,415.1 Fairbanks North Star 763.4 705.6 669.2 951.7 869.7 832.7 677.8 Borough Anchorage 229.0 255.4 283.3 350.8 333.6 429.2 283.2 Cordova 10.1 8.7 8.6 12.5 10.9 10.9 9.4 Mat-Su 7.7 7.2 7.1 7.8 7.3 16.7 7.5 Whittier 1.7 1.5 1.5 2.1 1.8 1.8 1.6 Outside Taxing Jurisdictions 4,045.6 3,609.2 3,402.3 4,874.6 4,120.6 3,753.7 3,021.5 (State and Fed) Nominal State Oil & Gas $24,036 $23,822 $24,492 $28,651 $27,390 $28,620 $27,604 Full Value Assessment Total Inflation-adjusted Oil & Gas Full Value $26,456 $25,418 $25,602 $29,518 $27,768 $28,981 $27,604 Assessment ($2016) Source: Alaska Department of Commerce, Community and Economic Development.

Table 15. Local Revenues from Oil & Gas Property Taxes ($million), 2010-2016 City, Borough, or Municipality 2010 2011 2012 2013 2014 2015 2016 North Slope $270.8 $307.0 $322.4 $347.5 $344.1 $339.1 $373.3 Valdez 43.0 43.8 38.9 34.5 53.5 43.4 43.4 Fairbanks North Star Borough 9.3 10.7 9.6 9.1 13.0 12.1 12.0 City of Fairbanks 0.2 0.1 0.2 0.1 0.2 0.4 0.3 Kenai Peninsula Borough 6.8 7.1 6.7 7.8 9.3 10.3 11.6 City of Kenai 0.1 0.1 0.1 0.1 0.2 0.3 0.3 Anchorage 3.5 3.4 3.9 5.5 5.5 5.0 5.6 Mat-Su 0.1 0.1 0.2 0.1 0.2 0.4 0.2 All Other (Cordova/Whittier) 0.1 0.1 0.1 0.2 0.3 0.2 0.1 Nominal Total Oil & Gas Property Tax $333.9 $372.3 $382.0 $404.7 $426.3 $411.1 $446.8 Revenues Total Inflation-adjusted Oil & Gas $367.5 $397.3 $399.4 $416.9 $432.2 $416.3 $446.8 Property Tax Revenues ($2016) Note: Columns may not sum due to rounding. Source: Alaska Department of Commerce, Community and Economic Development.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 42 Table 16. Comparison of Tax Revenue by Source, 2016 % of % of All Total Oil & Gas Property Taxes Property Total Taxes City, Borough, or Municipality Property Tax Tax from From Taxes ($million) ($million) O&G O&G ($million) Property Property North Slope $373.3 $386.1 $386.1 97% 97% Valdez 43.4 48.9 49.3 89% 88% Fairbanks North Star Borough 12.0 107.1 111.5 11% 11% City of Fairbanks 0.3 15.2 21.3 2% 1% Kenai Peninsula Borough 11.6 62.1 92.2 19% 13% City of Kenai 0.3 3.8 10.6 8% 3% Anchorage 5.6 515.3 583.4 1% 1% Mat-Su 0.2 119.3 128.7 <1% <1% Cordova/Whittier 0.1 2.3 5.8 5% 2% All Other 0.0 136.7 366.4 0% 0% Total Oil & Gas Property Tax Revenues $446.8 $1,396.8 $1,755.3 32% 25% Note: Columns may not sum due to rounding. Source: Alaska Department of Commerce, Community and Economic Development.

Employment Impact of State and Local Oil Revenue

As described above, taxes and royalty payments from the oil and gas industry to state and local governments are used to fund a broad range of agency operations, programs and projects. As these oil-related revenues are spent, thousands of jobs and millions of dollars in wages are generated across Alaska. Economic modeling conducted for purposes of this study provide estimates of the total (direct, indirect, and induced) employment and wage impacts associated with government spending of oil-related revenue.

Table 17. Estimated Employment and Wages Related to Oil Industry Taxes and Royalties in Alaska, 2016 Spending of Oil &Gas Total Annual Total Category Taxes & Wages Employment Royalties ($billion) ($billion) State Agencies (Excluding K-12 Education and Medicaid) $2.02 19,500 $1.13 State Programs (K-12 Education and Medicaid) $1.70 19,600 $0.80 State Capital Projects (5-yr. Average) $1.11 10,400 $0.56 Permanent Fund Dividend $0.65 4,200 $0.17 Local Government Operations and Projects $0.45 4,600 $0.26 Total $5.92 58,300 $2.93 Source: Alaska Legislative Finance and McDowell Group estimates.

Employment and wages impacts in 2016 include,

• State Agency Operations: $2.0 billion in unrestricted oil and gas revenues were used to fund state agency operations (including the University of Alaska). That spending funded a total of 19,500 jobs, including approximately 9,900 state government jobs and another 9,600 jobs in the support sector. These jobs accounted for a total of $1.1 billion in annual wages.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 43 • Statewide Program Expenditures: Approximately $1.7 billion in K-12 and Medicaid expenditures (of oil and gas derived revenues) supported approximately 19,600 jobs in schools, medical care facilities, and throughout the support sector. • Capital Spending: Approximately $1.1 billion of oil and gas-related revenue was used to fund capital projects throughout Alaska. While this capital funding is often matched with funding from other sources (especially federal dollars), in general this level of construction spending would have direct, indirect, and induced effects of approximately 10,400 jobs and $0.6 billion in wages. • PFD Distribution: Assuming dividends are spent much like other household income, the $650 million disbursed in 2016 supported an estimated 4,200 jobs with wages of $0.2 billion. • Local Government: An estimated 4,600 direct, indirect and induced jobs are connected to the $0.5 billion paid to local governments by the oil and gas industry. An estimated $0.3 billion in wages was supported by this revenue.

In summary, taxes and royalties paid by the oil and gas industry account for about 58,300 jobs in Alaska and $2.9 billion in annual wages.

Combined Economic Impact of Oil Industry Private Sector Spending and Public Sector Payments

Combining with the oil and gas spending total impacts (45,575 jobs and $3.1 billion), the total employment impact of Alaska’s oil and gas industry is 103,875 jobs and $6.0 billion. This impact represents 32 percent of Alaska’s wage and salary employment, and 35 percent of total wages paid to these employees.47

47 In 2016, Alaska’s total wage and salary employment was 331,800 jobs paying $17.7 billion in wages. The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 44 Chapter 5. Alaska’s Production in the U.S. and World Market

This chapter briefly describes Alaska’s current and historical oil and gas production and the state’s role in national production of energy and refined oil products. Alaska Oil Production and Prices

Alaska has produced oil from the North Slope since the early 1970s (oil and gas production started in the 1950s in Cook Inlet) and production has generally declined since a peak of slightly more than two million barrels per day in 1988. Since 2001, production from the North Slope has declined an annual average of 4.2 percent. Through much of that time, however, the decline was substantially masked by strong oil prices. Within this period, peak daily production of 1,004,000 barrels occurred in SFY2002, and the average Alaska North Slope (ANS) price peaked in SFY2013 at $113 per barrel. For SFY2016, production averaged 532,000 barrels per day with an average price of $43 per barrel. For the first time in 14 years, North Slope production increased over the prior year (increasing 2.8 percent, or nearly 14,000 barrels per day compared to SFY2015).

Alaska’s three primary refineries—the Petro Star refineries in North Pole and Valdez, and Tesoro’s refinery in Kenai—use Alaska crude oil to produce refined products such as diesel fuel, gasoline, and jet fuel.48 However, most Alaska crude oil is transported to larger-scale refineries in Washington, California, and Hawaii.

Figure 9. Alaska Crude Oil Production* and Alaska North Slope Oil Price, SFY2001-SFY2016

1,200 $113 $120

1,000 $100

800 $80

600 $60

400 $43 $40 Average Price perBarrel Price Average

200 $20 Average Daily (1,000 Production Daily AverageBarrels)

0 $0 2001 2004 2007 2010 2013 2016

Average Daily Alaska Oil Production ANS West Coast Spot Price

* Includes Cook Inlet and North Slope production. Source: Alaska Department of Revenue.

48 Two facilities on the North Slope provide refined products for local operations. The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 45 Alaska and the Domestic Petroleum Industry

After peaking at 9.6 million barrels per day in 1970, total U.S. oil production declined by an average of 1.7 percent per year for nearly 40 years. Technological innovations such as fracking and directional drilling, along with significant new investment encouraged by high oil prices, resulted in a nearly 80 percent increase in national production between 2008 and 2015. While oil production fell slightly in 2016 to an average of 8.9 million barrels per day, that year was the tenth highest on record.

Figure 10. United States and Alaska Average Daily Oil Production (1,000 Barrels), 1900-2016

12,000 (1970) 10,000 9,637 2016 (8,876) 8,000

6,000 Barrels) 4,000 (2008) (1988) 5,000) 2,017 2,000

Average Average DailyProduction (1,000 (2016) - 490 1900 1929 1958 1987 2016

Alaska United States

Source: United States Energy Information Agency.

Production increased primarily in Texas, North Dakota, New Mexico, Colorado, Wyoming, and Oklahoma. Combined, these states have added slightly more than 3.7 million barrels of new production since 2008, or more than seven times Alaska’s current production.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 46 Table 18. U.S. Oil Production Change, 2008-2016 2008 Avg. Daily 2016 Avg. Daily Percent of Percent Region Production Production Total 2016 US Change (1,000 barrels) (1,000 barrels) Production Texas 1,109 3,213 190% 36% North Dakota 170 1,035 509% 12% Alaska 683 490 -28% 6% California 586 513 -12% 6% Oklahoma 184 420 128% 5% New Mexico 164 402 145% 5% Colorado 82 315 284% 4% Wyoming 145 198 37% 2% Other 1,877 2,290 22% 26% Total 5,000 8,876 78% 100% Note: Annual daily average data from the EIA are based on a calendar year while data from the Alaska Department of Revenue are based on the state’s fiscal year. Columns may not sum due to rounding. Source: United States Energy Information Agency.

Figure 11. United States Oil Production, by Key Production Regions, 2000-2016

10,000

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000 Average Daily (1,000 Production Daily AverageBarrels)

1,000

0 2000 2004 2008 2012 2016

All Other Texas Gulf of Mexico (Federal) North Dakota California Alaska

Source: United States Energy Information Agency.

Alaska’s 194 million barrels of crude oil in 2016 represented approximately 6 percent of the nation’s total production, down from a high of approximately 25 percent in 1988, when more than 2 million barrels per day flowed through TAPS. As recently as 2011, Alaska contributed more than 10 percent to national production.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 47 From 1977 (when oil started flowing through TAPS) to 2016, the U.S. produced nearly 104 billion barrels of oil. Alaska contributed 17 percent or approximately 18 billion barrels.49

Figure 12. Alaska's Contribution to U.S. Oil Production, 1972-2016

30%

24.8% 25%

20%

15%

10% 5.5%

5% Percent of U.S. Oil Oil of PercentU.S. Production

0% 1972 1983 1994 2005 *2016

*2016 data is preliminary. Source: United States Energy Information Agency; Alaska Department of Revenue.

World Oil Production Table 19. Proportion of Global Crude Oil Supply, 2015 Avg. Daily Percent Alaska crude oil represented approximately 0.6 Production of Country percent of total global production in 2015. Because (1,000 Global of this relatively small contribution, changes in the barrels) Supply state’s production levels have little or no impact on Russia 10,253 12.7% international oil prices. Alaska’s peak contribution Saudi Arabia 10,168 12.6% to global supply was 3.5 percent in 1987, a level United States (Exc. Alaska) 8,932 11.1% comparable to Kuwait’s current contribution. Alaska 483 0.6% China 4,278 5.3% In 2015, Russia, Saudi Arabia, and the U.S. were the Iraq 4,054 5.0% top three global producers, accounting for nearly 37 Canada 3,677 4.6% percent of total oil production. From 2000 to 2015, Iran 3,300 4.1% United Arab Emirates 3,019 3.7% U.S. production grew 62 percent; compared to 58 Kuwait 2,804 3.5% percent in Russia and 21 percent in Saudi Arabia. Venezuela 2,500 3.1% All Other 27,085 33.6% Total 80,553 100% Note: Data represents a calendar year, instead of a fiscal year used by the State of Alaska. Source: United States Energy Information Agency.

49 United States Energy Information Agency; Alaska Department of Revenue.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 48 Figure 13. Global Oil Production by Region, 2000-2015 90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

Average Daily (1,000 Production Daily AverageBarrels) 10,000

0 2000 2003 2006 2009 2012 2015

All Other Other Middle East Russia United States Saudi Arabia China Canada

Source: United States Energy Information Agency.

U.S. Petroleum Consumption

Consumption of refined oil products in the U.S. averaged 20,000 barrels per day in 2016, most of which came from domestic refineries, according to the U.S. Energy Information Administration. Gasoline accounted for nearly half (47 percent) of total consumption, followed by diesel products (19 percent), jet fuel (8 percent), and other products such as propane, asphalt, heavy oil fuels, and naphtha (26 percent).

Between 1991 and 2016, annual average consumption of refined oil products in the U.S. increased slightly (0.8 percent). However, the trend masks a significant decline of more than 10 percent following the economic recession of 2008. Consumption has not yet recovered to pre-2008 levels.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 49 Figure 14. United States Refined Products Consumption, 1991-2016

25,000

20,000

15,000

10,000

5,000

Average Average DailyConsumption (1,000Barrels) 0 1991 1996 2001 2006 2011 2016

Other Gasoline Diesel Jet Fuel

Source: United States Energy Information Agency.

Petroleum Imports and Exports

The U.S. is a net importer of oil and a net exporter of refined oil products. In 2016, the U.S. imported an average of 7.9 million barrels of oil per day (crude and refined combined) while exporting an average of 0.5 million barrels per day.

Oil exports have increased since late 2015 when a 40-year-old ban on U.S. crude-oil export was lifted.50 Canada is the primary destination for most crude oil exports and is also the U.S.’s largest source of oil imports, providing an average of 3.3 million barrels per day (or 41 percent of U.S. oil imports).

In 2016, the U.S. imported 2.1 million barrels per day of refined products and exported an average of 4.1 million barrels per day of refined products. Canada was the primary source of refined products, averaging 0.5 million barrels per day. Mexico and Canada were the main markets for U.S.-produced refined products, receiving a daily average of 879 and 564 thousand barrels, respectively.

50 Note: Exports of crude oil to Canada and small shipments from Alaska were allowed prior to 2015. The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 50 Figure 15. United States Imports/Exports of Oil and Refined Products, 1992-2016 12,000

10,000

8,000

(1,000 Barrels) (1,000 6,000 Average Daily Volume Daily Average 4,000

2,000

- 1992 1996 2000 2004 2008 2012 2016

Oil Exports Oil Imports Refined Product Imports Refined Products Exports

Source: United States Energy Information Agency.

U.S. Natural Gas Production

Primarily due to advances in technology, U.S. natural gas production grew approximately 50 percent between 2005 and 2016. While 2016 production (28,300 BCF) was 1.6 percent lower than 2015 levels (28,753 BCF), those two years represent the highest production levels on record.

Figure 16. United States Natural Gas Production, 1990-2016 35,000 (2016) 30,000 28,300

(1973) 25,000 22,648

20,000

(2005) 15,000 18,927

10,000 Annual Production (BCF) Production Annual

5,000

0 1900 1929 1958 1987 2016

Source: United States Energy Information Agency.

Most of the growth in domestic gas production has occurred in Pennsylvania (+5,100 BCF), Ohio (+1,400 BCF), West Virginia (+1,200 BCF), and Oklahoma (+800 percent). Combined, production in these four states grew from 2,100 BCF in 2005 to 10,600 BCF in 2016, a 400 percent increase. At the same time, Alaska production fell from 487 BCF to 344 BCF (a 29 percent decline).

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 51 Table 20. United States Natural Gas Production by State, 2008-2016 Percent of Total 2005 Annual 2016 Annual State Percent Change 2016 Production (BCF) Production (BCF) Production Texas 5,276 6,986 32% 25% Pennsylvania 169 5,260 3,022% 19% Oklahoma 1,639 2,475 51% 9% Louisiana 1,296 1,859 43% 7% Colorado 1,133 1,703 50% 6% Wyoming 1,639 1,603 -2% 6% Ohio 84 1,472 1,662% 5% West Virginia 221 1,375 522% 5% Alaska 487 344 -29% 1% All Other 6,983 5,223 -25% 18% Total 18,927 28,300 50% 100% Source: United States Energy Information Agency.

Figure 17. United States Annual Natural Gas Production by Key Producing States, 2000-2016

30,000

25,000

20,000

15,000

10,000 Annual (BCF)Production Annual

5,000

0 2000 2004 2008 2012 2016 All Other Texas Pennsylvania Oklahoma Louisiana Colorado Alaska

Source: United States Energy Information Agency.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 52 Chapter 6. Economic Impact Comparisons of Alaska’s Other Key Sectors

This section provides data on the economic impact of Alaska’s key sectors other than oil and gas. While each industry is a very important part of the Alaska economy, the analysis illustrates by comparison the critical and predominant role of the oil and gas industry.

Economic Impact Analyses

While there is not a single, comprehensive study that compares the economic impact of all sectors using the same methodology and same time period, there have been some recent statewide economic impact studies of Alaska’s seafood, visitor, and mining industries.

Seafood Industry

In 2015, McDowell Group conducted a statewide economic impact analysis of Alaska’s seafood industry.51 Key findings include:

• A total of 60,000 workers were engaged in Alaska’s seafood industry, earning $1.6 billion in annual labor income (2013 and 2014 averages). The industry employed 34,100 non-Alaska residents in Alaska during 2014. • Including multiplier impacts, the seafood industry accounts for 41,200 full-time equivalent jobs (many jobs are temporary and seasonal), $2.1 billion in total labor income, and $5.9 billion in total economic activity in Alaska. • A total of 31,580 fishermen earned income in Alaska’s commercial fisheries, including skippers and crew; 17,600 Alaska resident commercial fishermen had a total gross (ex-vessel) income of $735 million in 2015. • Alaska’s 2014 seafood harvest of 5.7 billion pounds had a total ex-vessel value of $1.9 billion. Processors generated 2.8 billion pounds of Alaska seafood products in 2014 with a first wholesale value of $4.2 billion. • Alaska’s seafood processing employment, including on-shore and off-shore, included an estimated 25,055 workers in 2014. Shore-based processing employment in Alaska peaked at just under 20,800 jobs in 2014, with annual average employment of about 9,200. Shore-side and floating processors paid a total of $400 million in wages in 2014. • The seafood industry accounted for about 20 percent of Alaska’s basic private sector economy (based on 2013-2014 data).

51 McDowell Group, The Economic Value of Alaska’s Seafood Industry, Prepared for Alaska Seafood Marketing Institute, 2015, http://ebooks.alaskaseafood.org/ASMI_Seafood_Impacts_Dec2015/pubData/source/ASMI%20Alaska%20Seafood%20Impacts%20Final%2 0Dec2015%20-%20low%20res.pdf The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 53 • The businesses and individuals in Alaska’s seafood industry contributed roughly $138.6 million in taxes, fees, and self-assessments, which help fund state, local, and federal government.

Visitor Industry

In 2016, McDowell Group conducted a statewide economic impact analysis of Alaska’s visitor industry.52 For the 12-month period between October 2014 and September 2015, the study reported:

• Total employment estimated at 39,700 full- and part-time jobs, and $1.4 billion in labor income, including multiplier impacts. This represented 9 percent of statewide employment and 5 percent of statewide labor income in 2014-2015. • A total of 2 million out-of-state visitors traveled to Alaska. Cruise ship passengers accounted for 48 percent of the annual total, followed closely by 47 percent who traveled to and from Alaska by air. Summer visitation represented 86 percent of annual visitors. • Out-of-state visitors spent an estimated $1.9 billion in Alaska. • The visitor industry accounts for: o Southeast: 21 percent of employment and 15 percent of labor income o Interior: 10 percent of employment and 6 percent of labor income o Southcentral: 7 percent of employment and 3 percent of income o Southwest: 4 percent of employment and 2 percent of income o Far North: 1 percent of employment and <1 percent of income • Visitor-related tax revenues to local governments in 2014-2015 totaled $82.9 million. • Visitor-related revenues to state government in 2014-2015 totaled $104.8 million.

Mining Industry

In 2017, McDowell Group prepared an updated summary of the statewide economic impact analysis of Alaska’s mining industry.53 In 2016, the summary reported:

• A total of 4,350 direct mining jobs in Alaska • Including the multiplier impacts, 8,600 total jobs attributed to Alaska mining industry • $675 million in total direct and indirect payroll • $111 million in payments to Alaska Native corporations • $81 million in state government-related revenues through rents, royalties, fees, and taxes • Mostly year-round jobs for residents of more than 50 communities throughout Alaska, half of which are found in rural Alaska where few other jobs are available • Some of Alaska’s highest paying jobs with an estimated average annual wage of $108,000, over twice the state average for all sectors of the economy • $23 million in local government revenue through property taxes and payments in lieu of taxes

52 http://www.mcdowellgroup.net/wp-content/uploads/2016/07/Visitor-Impacts-2016-update-4_15_16.pdf 53 http://alaskaminers.org/economic-impact/ The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 54 Gross State Product

While Gross State Product (GSP) does not measure the full extent of an industry’s economic impact, it does measure the market value of all final goods and services produced within a state.54 In 2016, Alaska’s GSP was $50.7 billion, ranking 46th in the U.S. Between 2015 and 2016, Alaska’s GSP contracted by 5.0 percent. The largest industry in Alaska as measured by GSP was government ($10.6 billion), accounting for 20.9 percent of Alaska’s 2016 GSP. Government’s GSP value declined by 0.9 percent between 2015 and 2016. The second largest industry in Alaska was mining ($7.5 billion) which includes oil and gas extraction, support activities for mining (including oil and gas), and mining.55 Between 2015 and 2016, the mining sector contribution to GSP declined by 19.8 percent -- subtracting the most from Alaska’s GSP, down 3.7 percentage points from 2015. The second largest industry to subtract from growth was construction – down 0.6 percentage points.56

Figure 18. Top Five Industries Contributors to Alaska’s Gross State Product, 2016

Total: $50.7 B Education services, health care, and social assistance, All other, $3.8 B, 7% $16.2 B, 32%

Transportation and Warehousing, $6.1 B, 12% Government (Public Sector), $10.6 B, 21%

Finance, Insurance, Real Mining (includes Estate, Rental, and Leasing, oil and gas), $6.5 B, 13% $7.5 B, 15%

Source: Bureau of Economic Analysis.

54 An industry's GSP, referred to as its "value added", is equivalent to its gross output (sales or receipts and other operating income, commodity taxes, and inventory change) minus its intermediate inputs (consumption of goods and services purchased from other U.S. industries or imported). GSP differs from national Gross Domestic Product; GSP excludes and national GDP includes the compensation of federal civilian and military personnel stationed abroad and government consumption of fixed capital for military structures located abroad and for military equipment, except office equipment. 55 The term mining includes the extraction of minerals occurring naturally: solids, such as coal and ores; liquids, such as crude petroleum; and gases such as natural gas. It also includes quarrying, well operations, milling, and other preparation customarily done at the mine site, or as a part of mining activity. Exploration and development of mineral properties are included. Data on subsectors of mining (oil and gas extraction, mining, except oil and gas, and support activities for mining are not published. 56 https://www.bea.gov/regional/bearfacts/action.cfm?geoType=3&fips=02000&areatype=02000. Accessed May 23, 2017. The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 55 Appendix A. Published Trends in Alaska’s Oil and Gas Industry

This appendix discusses trends in the oil and gas industry as it is narrowly defined in government statistics. Published employment data indicates Alaska oil and gas industry employment – as defined by the U.S. Bureau of Labor Statistics and ADOLWD – peaked in December 2014 at 15,300 jobs. Between 2001 and the peak in 2014 (and calculated on an annual average basis), oil and gas industry employment expanded 56 percent, adding 5,300 jobs. From peak annual employment in 2014 through 2016, the sector lost 3,500 jobs, declining 24 percent.

Figure 19. Alaska Oil & Gas Industry Employment, Published Data, 2001-2016

18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0 2001 2004 2007 2010 2013 2016

Annual Average Employment Peak Monthly Employment

Note: Includes NAICS Sectors 211 (oil and gas extraction), 213111 (drilling oil and gas wells), and 213112 (support activities for oil and gas operations). Source: Alaska Department of Labor and Workforce Development.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 56 Table 21. Alaska Oil & Gas Industry Employment, Published Data, 2001-2016 Year Annual Average Peak Month 2001 9,500 9,800 2002 8,900 9,200 2003 8,100 8,400 2004 8,200 8,500 2005 8,700 9,300 2006 10,100 10,700 2007 11,500 12,000 2008 12,800 13,700 2009 12,900 13,600 2010 12,700 13,400 2011 13,000 13,400 2012 13,600 14,300 2013 14,100 14,500 2014 14,800 15,300 2015 14,200 14,800 2016 11,300 12,900 Note: Includes NAICS Sectors 211 (oil and gas extraction), 213111 (drilling oil and gas wells), and 213112(support activities for oil and gas operations). Source: Alaska Department of Labor and Workforce Development.

A similar pattern is seen in wage data, with total annual wages peaking in 2014 at slightly more than $2.0 billion, following years of stable growth. Wages fell slightly in 2015 then sharply in 2016 after the oil price crash, declining by approximately $490 million, or 24 percent.

Figure 20. Annual Oil and Gas Wages, ($million) 2007-2016

$2,009 $1,978 $1,818 $1,734 $1,594 $1,475 $1,516 $1,523 $1,520 $1,280

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Note: Includes NAICS Sectors 211 (oil and gas extraction),213111 (drilling oil and gas wells), and 213112 (support activities for oil and gas operations). Source: Alaska Department of Labor and Workforce Development.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 57 Employee Residency

ADOLWD’s methodology for calculating workforce residence is based on Permanent Fund Dividend (PFD) applications and results in a conservative estimate of “resident” employment. A new resident to Alaska must reside in the state for a full calendar year before they are eligible to apply for a PFD. A new Alaska resident who arrived in the state in February of 2017, for example, would not be eligible to apply for a PFD until the 2019 application period. As a result, this person would reside in Alaska for nearly two years before being recorded as an Alaska resident.

For comparison purposes, in 2015 (2016 data are not released yet), on average 16 percent of Alaska’s jobs were held by nonresidents. Some sectors, including the oil and gas sector, are above that average. Other sectors relying on nonresidents include: seafood processing (65 percent); metal mining (34 percent); accommodations (32 percent); transportations and warehousing (24 percent); and professional, scientific, and technical services (22 percent).

Nonresidents are often employed in seasonal industries, remote site locations (where workers work on a rotation schedule, allowing for workers to not live close to their job) or have specific job skills not readily available in Alaska. Additionally, nonresident status as determined by DOLWD is whether a worker received an Alaska PFD; therefore, some people may have intent to be permanent residents yet have not met the minimum length of residency requirement to be eligible for a dividend.

Figure 21. Percent of Positions Held by Nonresidents, by Sector, 2015

Seafood Processing 65%

Oilfield Services 38%

Metal Mining 34%

Accommodations 32%

Oil and Gas 28%

Transportation and Warehousing 24%

Professional, Scientific and Technical Services 22%

Retail Trade 9%

Healthcare and Social Assistance 8% Average: 16% Finance and Insurance 4%

Local Government 4%

State Government 4%

Utilities 3%

Note: Data exclude self-employed, fishermen, and private household workers. Source: Alaska Department of Labor and Workforce Development.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 58 Within the oil and gas industry, residency rates vary, with approximately 39 percent of oil and gas support services jobs held by non-residents in 2015. Nonresidents held 40 percent of drilling oil and gas well positions, and 29 percent of oil and gas extraction jobs. Employment at refineries and pipelines had a much higher residency rate, with only 7 percent of jobs being held by nonresidents.

Table 22. Alaska Residents in the Oil & Gas Industry Workforce, 2015 Resident Nonresident Nonresident Resident Nonresident Nonresident Workers Workers % of Total Wages Wages % of Total Workers ($millions) ($millions) Wages Oil & Gas 3,317 1,385 29% $658 $253 28% Extraction Drilling Oil 750 501 40% $69 $34 33% and Gas wells Support 7,684 4,842 39% $661 $421 39% Services Refineries and 1,441 116 7% $173 $11 6% Pipelines Total 13,192 6,844 34% $1,561 $719 32% Note: Includes NAICS codes 211, 213111, 213112, 324, and 486. Source: Alaska Department of Labor and Workforce Development.

The Role of the Oil and Gas Industry in Alaska’s Economy McDowell Group, Inc.  Page 59 Alaska Oil and Gas Association 121 W. Fireweed Lane Suite 207 Anchorage, AK 99503 Phone: 907-.272.1481 • Fax: 907.279.8114 [email protected] • www.aoga.org

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