Managing Extractive Resource Wealth for Sustainability: Alaska in the Time of Falling Oil Production

Abstract

Cash economies in many parts of the Arctic North have long been dominated by resource extraction industries such as petroleum and metal mining. These developments are often short lived, generating cycles of economic booms followed by busts. And the wealth created by these activities tends to flow South, as profits to large firms and wages to temporary residents. But in Alaska the Permanent Fund (and a number of smaller financial accounts), has captured a significant share of the wealth generated by the production of petroleum over the last 30 years. Alaska residents now have the opportunity to use this wealth (currently estimated at $45 billion in financial assets and $81 billion in the state share of oil still in the ground) to build a strong economy, not only for the current generation but for future generations of Alaskans as well. This will be a unique challenge, balancing the needs of current and future generations, the preferences of urban and rural residents, permanent and temporary citizens, and others. This paper will examine the challenges facing Alaska as it begins the task of wealth management in an era of declining petroleum production. This should provide lessons for other regions impacted by cycles of resource extractive industries.