Recovery of oil patch keys economic upswing in Alaska

Posted: Sunday, April 15, 2001

ANCHORAGE -- Wanted: Workers who know their way around an oil field. Salaries in the high five digits. Report to eager employers in Alaska, and don't forget to bring a heavy coat.

While chill winds are blowing through the Lower 48 economy, Alaska is enjoying bright economic weather, created in large part by strong oil prices -- currently around $25 per barrel -- that translate into higher state revenue, higher employment and overall higher hopes.

''My gut feeling is that we're on the front end of a boom that's going to last four, five, six years,'' said Chris Johansen, engineering manager at Flowline Alaska, a Fairbanks-based company that makes and insulates pipelines.

''We are more optimistic than we've been in a long time,'' agreed Neal Fried, a state labor economist. ''We have high oil prices, the oil industry is in good shape.''

Each year Alaska's economy is less and less dependent on oil, but when the industry is cruising like now, the state also gets a nice ride. Oil taxes and royalties accounted for more than 75 percent of the state government's $2 billion operating budget in the latest fiscal year. Upswings are also felt strongly in real estate, retail and construction.

Times are so good that some Alaska companies are beginning to worry about their ability to attract enough skilled employees to keep up with an increasingly ambitious work load in the North Slope oil region.

The oil patch is bustling around the country, so Alaska is competing with the Lower 48 states and elsewhere for engineers, pipefitters, drilling workers and more to find and develop new oil reservoirs.

''Our business is cyclical -- always has been,'' said Clyde Treybig, quality and marketing manager for Doyon Drilling Inc., based in Fairbanks. ''In one of these ramping-up modes like we're in now, it's hard to find competent people with experience.''

''Right now, if I needed to hire three more welders, I could call the (union) hall and they wouldn't have them,'' Johansen said.

Things are not quite that tight, union officials say.

''For the most part we have enough people,'' said Jim Laiti, business agent for Plumbers and Pipefitters Local 375 in Fairbanks. ''We haven't had any trouble supplying people, but we're at the break-even point.''

The state pegged oil industry employment in January at 9,300, up 23 percent from a year earlier. The number is still well below that of the early 1990s, but oil fields have since been streamlined and production has slowed.

At Flowline Alaska, the job ranks have expanded to nearly 100 workers, Johansen said. A few years ago, when oil prices were in the tank, there were fewer than 10.

Steve Harrison, a marketing manager for Schlumberger Oilfield Services in Anchorage, says his firm has about 400 people working, up 25 percent from December 1999.

Doyon Drilling, owned by an Alaska Native corporation, was down to about 80 workers when oil prices fell below $9 a barrel a couple years ago. Now the count is running close to 800, Treybig said.

Doyon is training rig workers in a makeshift facility at Prudhoe Bay, the hub of the state's oil production.

''We get them trained as soon as we can so we can have people working safely out there,'' he said.

More drilling on the North Slope means more work for a variety of people. New wells require new drill pads, pipelines and systems to process natural gas that comes up with the crude.

''It's been an awfully busy year for us,'' said Don Lowry, a business agent for the Operating Engineers Local 302 in Fairbanks. ''We've probably dispatched between 150 and 200 members up to the Slope this winter.''

A study commissioned by the industry says that in 1999, the state's producers, transportation and refining companies paid more than $422 million to their 4,532 workers -- an average of $93,000 each. The companies overall spent $1.7 billion in the state that year, the study found.

The two largest operators, BP Amoco PLC and Phillips Petroleum Co., say they will spend a combined $1.6 billion this year on their Alaska properties, up around 15 percent from last year.

Alaska's economy has greatly diversified since the early 1990s. A major gold mine opened near Fairbanks, and the world's largest zinc mine began producing on the state's remote northwestern coast. Big-box retailers like Wal-Mart, Costco and The Home Depot opened dozens of new stores in a market that had been largely ignored, and tourism has boomed.

But those businesses essentially took up the slack as the oil flow slowed. Throughout the '90s, while much of the country boomed, Alaska's economy merely puttered.

''We weren't high-flying, so we didn't have anywhere to fall compared to the rest of the nation,'' said labor economist Fried.

The current optimism among development-minded Alaskans is also fed by projects still in the talking stages.

There's hope that a pipeline will be built soon to carry North Slope natural gas to market, and that the Arctic National Wildlife Refuge will be opened to oil drilling, as President George Bush has proposed.

Alaska is also a leading candidate for basing a missile defense system under consideration in Washington.

Some areas of Alaska's economy could slow this year due to spending cuts in the rest of the country, notably tourism and air cargo.

But so far, cruise lines are continuing to boost the number of berths on their sailings, and air cargo flights are up about 7 percent in first quarter, according to Linda Close, marketing manager at the Ted Stevens Anchorage International Airport.

In addition, passenger airlines have all either maintained their service or increased the number of flights for this summer's peak season.



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