Study reveals economic impact of oil industry

Posted: Saturday, March 02, 2002

The oil and gas industry's presence on the Kenai Peninsula is hard to miss. Just visit the Kenai airport to witness the biweekly changing of the guard on the North Slope. Or take a drive north on the Kenai Spur Highway toward Nikiski, where it is impossible to ignore the abrupt turn from natural scenery to that of steam- and smoke-producing refineries.

Still, those are obvious and direct physical effects of an industry's existence. What has long been elusive is tangible data revealing the extent to which the industry affects the economy and, consequently, the residents of the peninsula.

Both directly and indirectly oil and gas companies are responsible for thousands of jobs for people on the peninsula. In addition, they provide lease payments, royalties and corporate, property and severance taxes that help grease the cogs and wheels of peninsula government.

A study jointly commissioned by the Alaska Oil and Gas Association and the Alaska Support Industry Alliance, which was released in Jan. 2001, used 1999 purchasing and payroll records provided by 13 companies involved in the industry to examine the direct, indirect and induced economic impacts of oil and gas companies in communities throughout the state.

The study was initiated after a similar one was done in Fairbanks that revealed surprising results, said Judy Brady, executive director of AOGA.

"Fairbanks does not normally think of itself as an oil and gas town, but the figures showed (numbers) both higher than you would normally think of people employed and indirect spending," she said.

After revealing results in an area not normally associated with the petroleum industry, AOGA and ASIA commissioned an independent firm from Fairbanks to find out what other surprises might be in store. Using the zip codes of people employed by the oil and gas industry, researchers found out where workers lived and where they were spending their money, thereby creating indirect impacts on their home economies.

As far as the Kenai Peninsula Borough is concerned, Brady said, researchers expected to find that oil and gas are very important to the workings of the peninsula economy. But it is the extent to which it is integral that they wanted to reveal.

"I think if you talk to anyone on the Kenai Peninsula they know the importance of oil and gas. But what people didn't realize was the importance of overall jobs," she said.

The study found that, statewide, the petroleum industry is Alaska's largest nongovernmental industry, as it spends $422 million on payroll, thus generating 12 percent of all nonmilitary payroll in the state.

Similarly, oil and gas create more jobs and paychecks than any other nongovernmental industry on the peninsula by directly employing 674 people and paying them a cumulative $63 million annually.

Seven of the 13 primary producers and refiners are directly responsible for more than one-third of the total payroll in the Kenai Peninsula Borough by employing 26 percent of the 16,343 employable residents.

Still, the impact goes beyond monthly paychecks. What runs an economy is where those paychecks are spent in addition to the paychecks of those who work in the many support companies which depend on oil and gas business.

Support industry businesses combined with the $215 million spent on goods and services in the Kenai economy makes a total indirect impact of 2,822 jobs and $94 million in payroll. Additionally, the 77 jobs and $20 million in payroll resulting when the 674 oil and gas employees spent their pay all combine to mean that the petroleum industry accounted for approximately 4,273 jobs and $177 million on the peninsula.

According to the report, the oil and gas industry has been a significant economic force in the area for more than 40 years, and in 2000, five of the top 10 employers in the borough were directly linked to the oil industry. Agrium, Peak Oilfield Service Company, Alaska Petroleum Contractors, Tesoro Alaska and Baker Hughes Oilfield Services all ranked among the top 10.

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