By Tim Bradner
Alaska Journal of Commerce

To no one's surprise, the petroleum industry packs quite a wallop in terms of its economic contribution to the state's economy, even outside the effects of the spending of state oil revenues.

An analysis of the industry's spending on the economy was released June 30 by the industry's Alaska Oil and Gas Association.

Oil royalties and taxes have long paid 80 percent to 90 percent of the state's annual budget. But the new report, prepared by consultants Information Insights, shows that industry activities support 9.4 percent of all employment and 11.2 percent of all wages paid in Alaska.

The study used information provided by oil and gas companies and contractors in 2007. It showed 41,744 employed directly and indirectly as a result of industry activities, with a total payroll of $2.41 billion paid that year.

The results of the report were released by AOGA at an Anchorage Chamber of Commerce luncheon June 30.

Direct employment by producing companies and support contractors totals 4,497 jobs with $643.8 million in payroll.

Spending for goods and services by company employees creates another 8,410 jobs and $769.2 million in payroll in the economy. An additional 28,837 jobs and $987 million in payroll are created through the indirect effects of spending by employees of producing companies and contractors.

The total of all three categories, direct company employees, contractor and supplier employees and “induced” jobs created by the spending of industry payroll, results in 41,744 jobs and $2.41 billion in payroll, Brian Rogers of Information Insights, principal author of the report, told the Anchorage chamber. Information Insights is a Fairbanks-based economic research firm. McDowell Group, a Juneau economics firm, assisted with the report.

The report also found that the oil and gas industry also pays the highest wages in Alaska.

Producing companies pay an average monthly wage of $12,737, which is 3.5 times higher than the average Alaska monthly wage of $3,627, Rogers told the chamber luncheon. The wage and salary data was obtained from the state Department of Labor and Workforce Development.

The industry also made $28 million in charitable contributions in the state during 2007, exceeding the total of all Alaska-based charitable foundations of $21.6 million.

In terms of regional effects, 12 percent of Anchorage's jobs and 16.6 percent of its payroll come from the industry. In Fairbanks, 5.5 percent of jobs and 5.9 percent of payroll are related to industry.

On the Kenai Peninsula 14.9 percent of jobs and 23.6 percent of payroll are provided by oil and gas employers. In the Matanuska-Susitna Borough 10 percent of employment and 12 percent of payroll is from industry.

Rogers pointed out that no industry activity actually occurs in the Mat-Su, and that all industry jobs held by residents there are elsewhere, on the North Slope or in Anchorage.

When state revenues paid by the industry are included, the total benefits of to Alaska's economy is far greater. Scott Goldsmith, a senior economist at the Institute of Social and Economic Research at the University of Alaska Anchorage, said that about one-third of Alaska's total economy is supported one way or another by the petroleum industry.

Petroleum producers paid the state $5.14 billion in revenues in state fiscal year 2007. That amount is expected to double as the books closed on June 30for fiscal 2008. If current oil prices are maintained, revenues could exceed $14 billion in fiscal 2009, the state budget year beginning July 1.

Tim Bradner can be reached at tim.bradner@alaskajournal.com">tim.bradner@alaskajournal.com.