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Sunday, July 11, 2004 - Page updated at 08:10 P.M.
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Stephen Dunphy / Times staff columnist
Alaska's economy fueled by more than just oil


MICHAEL DINNEEN / AP
A $228 million, 447,200-square-foot concourse opened in June at the Ted Stevens Anchorage International Airport as tourism becomes an increasingly important part of Alaska's economy. The ceiling lighting is designed to simulate the aurora borealis, and historical photos line the hallway.
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ANCHORAGE — Northrim Bank's beginnings are typical in Alaska — start with next to nothing and work hard to make something of yourself in America's last frontier.

Northrim's founders, Marc Langland and Arnold Espe, who died in 1997, worked for big out-of-town banks. They struck out on their own when bank consolidation swept through the market in the late 1980s.

"We had our first offices in a trailer out in the parking lot," recalls Langland, chairman, president and CEO of the bank, which started in 1990 with a modest $7 million public offering. Today Northrim is perched in the middle of the economy with about $750 million in assets and a dozen branches in the Anchorage area making commercial loans to the region's small businesses.

The bank picked a good time to begin, with the Alaska economy in the early stages of a 16-year run of uninterrupted growth, a record unmatched by any other state, according to Neal Fried, an economist with the Alaska Department of Labor.

Last year was typical, Fried said, with a 1.5 percent increase in employment generating about 4,500 new jobs, half of them in health care and social assistance. That's on top of 2 percent growth in 2002 and 1.9 percent growth in 2001 at a time when most of the nation — including Washington — was going through a recession and losing jobs.

Oil is king

The North Slope oil fields remain a cornerstone of the economy. Prudhoe Bay fields — drilled on subsurface lands owned by the state government — spin off taxes and royalties that fund 80 percent of state government. New fields continue to be added to the original gushers, helping the state maintain the flow of oil through the Trans-Alaska Oil Pipeline at slightly less than a million barrels a day. That's down from the peak of more than 2 million barrels a day in the 1980s. The run-up in crude-oil prices this spring has boosted state revenues even more, helping the state dodge another fiscal crisis. Alaska Gov. Frank Murkowski still wants to get a permanent fix to the boom-and-bust nature of the state's finances. He called a special session in June to try to get lawmakers to come up with a long-term plan to address the state's chronic deficits, but legislators left town June 28 without a solution.

One reason was that the state cash register hummed with oil prices high enough to wipe out the entire 2004 deficit. Alaska now expects a state budget surplus, which would be only the third in 13 years.

Oil wealth also has been good for Alaska consumers. It has allowed Alaska to get by with no state income or sales taxes. Oil dollars have endowed a state savings account — known as the Permanent Fund — that tops $27.8 billion. This fund has become a significant force in the economy. Each October, it pays out dividends to every resident man, woman and child, and sparks a frenzy of buying as the checks are cashed. The stock-market crunch has hit the fund payout in recent years — dividends hit a peak of $1,950 in 2000, but totaled only $1,108 last year.

One Murkowski proposal would tap the fund, guaranteeing a minimum dividend of $1,000 a person in exchange for access to fund earnings for government.

Federal dollars also have propped up the Alaska economy.

Alaska Sen. Ted Stevens, the state's senior Republican, has used his political clout in Congress to help funnel billions of dollars into Alaska. Federal spending in 2002 was about $7.5 billion, or $11,746 per person, the highest per-person federal outlay in the country, according to the Census Bureau. The money has helped fund Native American health services, scientific research, missile-defense systems, airport development and a recent military construction boom.

Tourism coming on strong

Tourism is a growth industry in the state. A $228 million, 447,200-square-foot concourse opened in June at the Ted Stevens Anchorage International Airport, offering nine new gates, all leased by Alaska Airlines. The terminal and expanded airport amenities will serve the growing wave of tourists to the state.

The number of tourists visiting Alaska annually increased from 870,000 in 1990 to more than 1.4 million in the past few years, although growth slowed in the wake of the 2001 terrorist attacks. But in recent years, it's tourism — more than the oil industry — which has left the most visible mark on Anchorage.

New hotels dot the cityscape, and an expanding number of shops sell stuffed polar bears, T-shirts, smoked salmon, gold-nugget jewelry and other souvenirs.

One of the big drivers of the tourist industry has been the cruise ships of the Holland America Line and other companies. Like most things in Alaska, there is a connection back to the Seattle area — more cruise ships are departing from Seattle.

The tourist dollars are part of a broader flow of Alaska dollars percolating through the Northwest economy. In 2003, almost half a million containers moved through the Port of Tacoma headed for Alaska, filled with groceries, clothes, cars and the staples of northern life. Bellingham is the terminal point for ferry service to and from the state. Puget Sound serves as headquarters for much of the fishing industry that works off Alaska, as well as tugs and barges that service Alaska mines and North Slope oil fields.

The Greater Seattle and Tacoma/Pierce County chambers of commerce studied the impact of Alaska on the region in 1996. It estimated Alaska directly and indirectly supported more than 90,000 Puget Sound-area jobs and accounted for more than $2.9 billion in Puget Sound-area earnings.

Fried and other economists say that might have changed. Oil-field development has slowed, reducing the amount of equipment moving from Puget Sound to the North Slope.

And Anchorage has enough critical mass in its population to support a strong retail economy, with Costco, Wal-Mart and Nordstrom in the market.

Starbucks has several stores under construction downtown. There is even talk of a Krispy Kreme opening soon.

"It's kind of sad," said one Alaskan who has been in the state for years. "You can be in Anchorage and it's like almost every place else in the U.S."

Sights on the refuge

The economy would pick up if the oil industry launched big new high-profile projects.

"Some day the Lower 48 will wake up and not worry about pristine wilderness and let us put oil in the pipeline and let people use it," said Langland, the Northrim Bank chairman. He said that anyone who has been to Prudhoe Bay knows the industry can do it in an environmentally sensitive way.

Alaska politicians also have fought to open the coastal plain of the Arctic National Wildlife Refuge to oil exploration, which is considered to be the most promising area in North America to discover another Prudhoe Bay-size oil field. But keeping the oil rigs out of the refuge has been a cause célèbre of the U.S. environmental movement.

Few in the oil industry are counting on the refuge to open up anytime soon.

More interest is now centered in construction of a 3,500-mile-long pipeline to bring the state's North Slope natural gas to the Lower 48. There are several competing routes and still much political wrangling about the pipeline.

"But it's a question of when, not if," said Langland. "The gas potential is incredible."

Stephen H. Dunphy's columns appear Tuesdays-Fridays and Sundays. Phone: 206-464-2365. Fax: 206-382-8879. E-mail: sdunphy@seattletimes.com.

Copyright © 2004 The Seattle Times Company

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