Alaska's Economy.

• Author: Lawer, Betsy
• Position: ECONOMY OP-ED

The foundation of Alaska's Economy has not changed, even though economic circumstances world-wide have changed dramatically. The striking change in commodity prices worldwide has left state government with less money to spend, but it has not changed the competitive advantages that drive Alaska's economy.

The foundation of any economy, big or small, is capital investment--money spent to make money. Investment capital flows to competitive advantage. The competitive advantages that Alaska enjoys have not changed, except maybe for the better.

Alaska's principal competitive advantage is an abundance of certain natural resources. Oil is by far the most abundant natural resource found in Alaska and the most valuable. But natural gas, minerals, fish, timber, and incomparable natural scenery are also in abundant supply in comparison to other places in the world. Geographic location offers the other competitive advantage. Proximity to Asia lowers the cost of delivering natural resources extracted in Alaska to Asian countries that are the largest market for those natural resources. Geographic location also brings to Alaska an enormous amount of federal spending for national defense. Alaska's geographic location may prove increasingly valuable as the Arctic passage is developed as a second major route for surface transportation of commodities and products.

Investment for oil exploration and development is being curtailed, but it hasn't stopped. Major finds and development projects were announced earlier in the year, and the companies involved are going forward. Through mid-September of this year, average daily oil production was up about five thousand barrels a day and projected to exceed the average daily production level on an annual basis forecast by the Alaska Department of Revenue. Investment will be curtailed as long as the price of oil remains low; as long as governments, both state and federal, make it more expensive to get the oil out of the ground; and as long as state government insists on taking a larger share of the profits from its sale.

Abundant natural gas deposits remain and are not stranded as some portray it. North Slope gas is being injected into the ground to maximize oil production and by regulation cannot be harvested and sold off until perhaps 2025, under any circumstances. So, the fact that the major oil producers have left the commercialization of that gas to the State of Alaska is not negatively impacting the economy at...