Busy construction season slated for 2012
Alaska’s contractors are back in the upswing, according to the Associated General Contractors of Alaska.
AGC released its annual construction spending forecast, and it’s good news for the most part, with total spending up, particularly in the private sector.
Total spending for 2012 is expected to be up 3 percent to $7.7 billion compared to 2011. Without oil and gas spending, that amount is $4.6 billion, which is still an improvement. Wage and salary employment will remain unchanged from last year at 15,800. This is still down from the 2005 peak at 18,300.
ACG’s forecast draws from data provided by the Institute of Social and Economic Research. ISER economist and researcher Scott Goldsmith joined AGC Executive Director John MacKinnon in addressing the numbers to expect this year.
“Things look pretty healthy in spending from our private sector basic industries of oil and gas, mining. Some of us had hoped that they’d be a little bit higher than they are,” Goldsmith said. “In terms of our support industries, utilities and health care are strong and weaknesses in residential and commercial, we shall wait to hear some good news coming out of the economy.”
Private spending will be up in all categories, most notably in mining, utilities and health, the latter two being helped by public funding for some projects.
The biggest spending will remain in oil and gas construction at $3.1 billion. Most construction concerning the big three oil companies (BP, ConocoPhillps, Exxon) will be on infrastructure maintenance since they will not be doing exploratory drilling. Some will go to BP’s sustained production on light reserves with some heavy oil development. Work with ConocoPhillips and Exxon will go toward developing existing reserves. Work with other smaller operations will their support drilling programs, including ENI, Pioneer, Brooks Range Petroleum, Savant, Great Bear and Repsol.
Construction spending relatively flattened over the last several years but is about double what it was in 2004, mostly due to work on existing infrastructure.
“We’re seeing a tremendous amount of the increase is largely on the maintenance and structure side. It’s not on getting new production on oil,” MacKinnon said.
Mining construction will see an 11 percent increase with significant spending related to the studies from the large-scale prospects of Donlin Creek, Pebble and Livengood. Capital spending will go down slightly at the large mines like Pogo, Kensington, Greens Creek, Red Dog, Fort Knox, Usibelli and Nixon Fork with efforts going more into facility upgrades than production.
Utility work will see the biggest jump over last year as more effort goes into power generation, such as a new Anchorage Municipal Light and Power and Chugach Electric Association’s new gas-fired power plant plus wind farms at Fire Island near Anchorage and Eva Creek outside Fairbanks.
There are hydroelectric projects under way at Blue Lake near Sitka, Terror Lake near Kodiak and Allison Creek in the Copper Valley. Many of these projects are being aided by increased state funds for fiscal year 2012. Work on other utilities like telecommunications and natural gas transmissions will go up too.
Large federal funding will help push Native health projects forward this year, particularly on hospitals.
Spending for other basic rural or commercial projects will remain unchanged, as will residential construction spending.
Public spending will be down for traditional government purposes, particularly as the state will have to compensate for many projects as federal financing drops. This is especially evident with a sharp 67 percent decrease concerning the Denali Commission. The commission, like many public efforts, will see federal dollars getting tighter.
“This may be a sign of things to come,” Goldsmith said of the state-federal partnership.
This is also evident in defense construction, which will take a 17 percent hit this year at $460 million. This is compliant with nationwide defense spending cuts.
However, many projects, particularly those related to transportation and education, will see hefty increases. Grant funds in the state capital budget will push highway construction spending up 10 percent, although federal funds continue to be the largest contributor in this area. This is also true for airports.
Construction includes a number of projects at Ted Stevens Anchorage International Airport, ports and harbor work around the state and capital construction programs for modernizing the railroad.
Education project funding will be up in part because of a $397 million statewide bond package that was passed in 2010.
Goldsmith said Alaska is fortunate to have adequate funds in the capital budget for many public projects.