News

Oil’s upside

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Taxable property, the Alaska oil pipeline/U.S. Bureau of Land Management photo

News analysis

On the 40th anniversary of the Trans-Alaska Pipeline System (TAPS), it might be time to consider the full implications of a study documenting huge increases in the lifespans of northern Alaskans since 1980 and ponder why.

Is it possible the reason rests largely in one, simple, three-letter word spelled O-I-L?

In the North Slope Borough, there is a strong argument to be made that people are living longer, a lot longer, more than a decade longer than in 1980, because of the change in economic status driven by the development of Prudhoe Bay.

As economists for Northern Economics noted in a 2006 report for the federal Minerals Management Service, “the discovery of oil in Prudhoe Bay, the inception of the NSB (North Slope Borough) in 1972, and the formation of the regional and village Alaska Native corporations changed the structure of the North Slope economy. ”

Oil brought money to the North Slope, and money brought jobs, and jobs changed people’s lives.

“Between 1973 and 1980, the NSB collected about $150 million in property taxes from oil companies operating out of Prudhoe Bay, and an additional $88 million in state and federal monies,” the report notes. “As a result, the borough took over from the state and federal entities many public services in the villages. During this time, the borough implemented major infrastructure projects (i.e. schools, houses, utility systems, airports, roads, etc.); and the Borough soon after became the largest employer of North Slope residents with jobs created for government administration and construction projects.”

Meanwhile, the Arctic Slope Regional Corporation – one of 13 regional corporations born of the Alaska Native Claims Settlement Act – was gearing up to help put its shareholders to work in the oil patch. 

All of this “over the past 25 years has significantly improved the quality of village life,” the report noted.  “Significant improvements have occurred in water and sanitation facilities, health and social services, education, housing, public safety, transportation and communication.”

And the link between improved socioeconomic status and longer lifespans is well documented.

A meta-analysis of 48 studies published in “The Lancet,” a respected English medical journal, earlier this year concluded that low socioeconomic status was a greater threat to longevity than excess alcohol consumption or obesity.

The report questioned global efforts to improve life spans solely be changing behaviors, arguing that “such approaches fail to address powerful upstream structural solutions such as investment in early education programmes for children (allowing parents to work while their children are cared for) and work incentive programmes (ie, earned income tax credit) that might be a cost-effective way to reduce inequalities in health. By showing low socioeconomic status has a comparable health effect to that of major risk factors, the results of our study suggest that socioeconomic circumstances….should be treated as a target for local and global health strategies, health risk surveillance, interventions, and policy.”

Fate made low socioeconomic status a target on the North Slope in part thanks to the luck of oil development and in part due to Native leaders who wanted to see to it their people benefited from a share of the profits from that development. The results of the latter’s efforts to both create jobs in local government and in the oil patch cannot be ignored when looking at the new data on longevity from the Journal of the American Medical Association Internal Medicine.

But some people sensed this before the study was published.

Arctic Americans

“If you were to travel to the North Slope 70 years ago, you would find a seminomadic people subsisting off the land and living in sod houses much like their ancestors had for millennia,” Charlotte Brower, the then mayor of the North Slope Borough, told the U.S. Senate Committee on Energy and Natural Resources two years ago. “But the discovery of oil in Prudhoe Bay in the 1960’s changed all of that. In a period of roughly 30 years, we experienced over 200 years worth of development and advancement. We formed a local, home-rule government and built roads, airports, schools, hospitals, houses, and utilities. We provided police, fire, first responder, and search and rescue services. Our people went from burning whale oil to keep warm to having natural gas heaters.

“Our experiences have also taught us that natural resource development and a healthy environment are not mutually exclusive goals. Billions of barrels of oil have been extracted from the North Slope without any significant spills or environmental damage. We have watched the Central Arctic Caribou herd, which calves throughout Prudhoe Bay, thrive. And our borough instituted a robust permitting system that drives the oil industry to minimize and mitigate negative impacts. As a result, our subsistence way of life has flourished along with our local economy.”

Brower’s comments reflected a view from an earlier time in the 49th state.

Before oil became the devil in Alaska, it was foreseen as something of a savior. Alaska Gov. Jay Hammond, possibly the greenest of Alaska governors, had high hopes for what oil dollars might do to solidify the state’s economy and thus improve people’s lives.

“Alaska oil’s new bonanza: vast amber waves of grain” the Christian Science Monitor headlined in 1980 above a story that started like this:

Alaska is tapping its oil wells for a second product — bountiful cropland — to ensure a continuing harvest long after the oil runs out.

“The  payoff, said bearded Alaska Gov. Jay Hammond on a visit to Chicago, is that with this fall’s harvest his state has joined the grain export business….Alaska’s potential farmland, Hammond said, is “about the size of the farm production lands of Washington, Wyoming, Montana, South Dakota, and most of Nebraska combined.”

Alaskans now largely look back on those agricultural projects as boondoggles, but Hammond, a revered Alaska political even before his death, and the late Bob Palmer, Hammond’s special projects director, might simply have been men ahead of their time.

Alaska has seen a resurgence in agriculture in recent years and with climate change warming the north, who knows what opportunities the future might hold.  From Bryce Wrigley and Scott Mugrage in the frozen Interior to Tim Myer in windswept far Western Alaska, there is a new enthusiasm for farming.

And the Western part of the state could use a boost from Meyer or somebody because as the JAMA study also underlines, the costs of low socioeconomic status are as bad as the benefits of higher economic status are good.

The numbers

The life expectancy for a man born in the Kusilvak census area north and west of Bethel is 66.6 years – a full decade less than the U.S. national average. Women fair much better; they on average live to 75.7 years, but that still trails the national norm by almost six years.

Violence plays a tragic part in early death. Men in Kusilvak (formerly Wade Hampton) are six times more likely to kill themselves or be killed by someone else than the national average. The death rate from self-harm or interpersonal violence is a national worst 184 per 100,000 compared to 54.3 on the North Slope where men are now expected to live to the age of 76.2, on par with the average for all Alaska men, and women to 78.2. 

The North Slope Borough ranks 20th in per capita income among all U.S. counties and boroughs. Kusilvak ranks 3,140 of 3,143 or fourth poorest. It suffers from the greatest unemployment in the country even though many people there have simply stopped looking for work and thus don’t show up on unemployment roles.

The reported unemployment was 23.7 percent in 2014. The rate exceeds that of the U.S. during the Great Depression. 

The per capita income of $11,210 ranks Kusilvak only above the poorest of two counties in South Dakota, both of which share Kusilvak’s distinction of being predominately Native American, and Wheeler, Georgia. The ratings do not factor in the cost-of-living in the villages of Kusilvak, where a half-gallon of milk, as in much of rural Alaska, is likely to cost $10 or more. 

Villages prices for home heating oil and other necessities are similarly high. Were cost-of-living realities factored into the national rankings, Kusilvak would likely be the poorest place in the country.

The North Slope Borough is close to the other end of this scale. It isn’t the richest place in America, but it’s right up there with a per capita income of $46,451, just slightly better than that for people living in the nation’s capital city.

Economically, the average North Slope resident is about four times better off than the average Kusilvak resident. The implications for life expectancy, given what is known about ties to socioeconomic status, are obvious.

And so is the economic driver behind the differences: oil.

The North Slope Borough was blessed with resource riches. Kusilvak is resource poor. The differences affect people’s live in many ways, including how long they live.

Bad, bad, black crude

Alaskans, by and large, love to bash Big Oil. The tanker Exxon Valdez did, after all, make a huge mess of Prince William Sound in 1989, and the oil companies do make huge profits, which tend to make Alaskans question whether they are getting their fair and equitable share.

But it’s interesting to look back to where Alaska was before oil. Before 1970, Alaska was a poor state where people died young. It was saddled with the highest income tax in the country, and yet produced pre-70 state revenues below $200 million, according to the Alaska Department of Labor. 

Corrected for inflation that doesn’t look quite as tiny as it seems; it would amount to revenue of about $1.3 billion this year, just enough to cover the current budget of the Alaska Department of Education.

On the other hand, the population of the state was only about 40 percent of what it is today (in part because there were so few jobs) so there was 60 percent less demand for government services. Given that, the state would have had enough revenue in current dollars to pay for today’s Department of Education, plus the Department of Health and Social Services. Combined, they gobble up about 60 percent of the state budget. 

Alaska grew them over the years because it had the money to afford to grow them. Alaska would be a much different place today if oil hadn’t come along. Even before the first of it started flowing south in 1977, the poor state was destined to become a rich state.

“The seventies was doubtless an extraordinary decade in Alaska’s economic history,” a group of state economists wrote on the 40th anniversary of Statehood in 1999. “It was an era of giant paychecks and economic windfalls brought on by events like construction of the Trans-Alaska Pipeline and huge king crab catches. A perusal of the broad economic and demographic data of this period quickly reveals that the 1970s were a special time in Alaska. During this decade employment grew three times faster in Alaska than it did nationally. The gross state product nearly tripled. Personal income more than doubled. Dreams were fulfilled and fortunes were made. It gave many of today’s successful entrepreneurs, households and organizations a big start in life. Alaska was the nation’s ‘land of opportunity’ during the 1970s.”

Oil development was the economic equivalent of a galloping glacier. The immediate impacts were huge and destined to linger for a long, long time.

Today the state is sitting on a $53 billion permanent fund, and the people of the Arctic are living longer more comfortable lives than their ancestors could ever have imagined. Where things have gone well, they have sometimes gone very well.

As for the future, no one knows.

 

 

 

 

 

 

 

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