Alaska's Construction Spending: 2011 Forecast

Abstract

The total value of construction spending “on the street” in Alaska in 2011 will be $7.1 billion, up 4% from 2010.1,2,3 Wage and salary employment in the construction industry will continue the slow decline that began in 2006, but the level remains above the long-term average for the industry. Excluding the oil and gas sector—which accounts for 41% of the total—construction spending will be $4.2 billion—up 5% from 2010. Private-sector construction spending will be up 6% from 2010, to $4.5 billion, in spite of the expected slow growth in the overall Alaska economy. Oil and gas sector spending will be about $2.9 billion, up 3%. Spending will increase in the utility and hospitals4 categories, but will decline in residential and other commercial categories. Public construction spending will be up 1%, to $2.7 billion, due to the large FY 2011 state capital budget. The main infusion of cash from the American Recovery and Reinvestment Act (ARRA) has worked its way through the system, and federal spending overall has declined. Uncertainty is particularly significant in the forecast this year, especially in the oil and gas sector—in spite of high oil prices. In January 2011, uncertainty surrounds most of the large-scale petroleum projects on the North Slope and in Cook Inlet. Environmental reviews are slowing development drilling at Point Thomson east of Prudhoe Bay and Alpine West in the National Petroleum Reserve Alaska. Exploration drilling offshore in the Chukchi and Beaufort seas continues to face legal challenges. The offshore Liberty project is under internal environmental review. In Cook Inlet, a major offshore exploration effort awaits the uncertain arrival of a jack-up rig. In this forecast we assume most of these projects will move forward this year, but their pace is hard to predict. If several are delayed in 2011, oil and gas spending will be significantly lower.