Alaska's Oil

The Gold Rush of the 1890s has been overshadowed by the Alaska oil rush of the 1970s. Oil had been discovered earlier on the Kenai Peninsula south of Anchorage, but the discovery in 1968 and development of vast oil deposits on the North Slope, bordering the Beaufort Sea, transformed the young state in many ways.

The challenge of transporting the oil from its remote location was met by one of the 20th century's great engineering projects: the construction of the trans-Alaska oil pipeline. The pipeline, completed in 1977, starts within sight of the Beaufort Sea and ends 800 miles south at the Gulf of Alaska port of Valdez. It crosses three mountain ranges and more than 800 rivers and streams . It runs above ground for 420 miles, held up by poles that are insulated so that the heat of the oil isn't transferred to the ground where it would melt the permafrost. For another 380 miles, the pipe is buried.

The engineering challenges included anticipating and countering the impacts of earthquakes, as well as dealing with permafrost and the migration habits of caribou herds. The pipeline successfully withstood a magnitude 7.9 earthquake in 2002. The only damage was to some of its supports as sections were shaken sideways as much as 7 feet. The line was shut down for several days while repairs were made. The 15 billionth barrel went through the pipeline in 2005.

Construction of the pipeline brought workers to the state -- at the peak of construction, it employed more than 28,000 workers, and more than 70,000 were employed over the lifespan of the project -- and development of the field brought oil field workers to the North Slope and white-collar workers to Anchorage. From a Philadelphia dentist looking for a little more adventure to a Florida real estate agent in need of a change of scenery, the population of the state grew rapidly as people from all over the country came to not only work directly on the pipeline, but also to support the workers. Anchorage, long a small city, became a much larger one.

The Beaufort Sea was friendlier to pedestrians than to shipping on this day in early May.

Construction of the oil field facilities also was challenging. Buildings were shipped as modules during the short summer season when the Beaufort Sea was open for shipping. Crew quarters had to be raised on stilts so the heat of the buildings wouldn't melt the underlying permafrost.

A typical North Slope worker spends two weeks on the Slope and then flies back to Anchorage for two weeks at home. Some Slope workers live in Anchorage or on the Kenai Peninsula; others commute by air from as far away as Texas.

At the peak of production, 2 million barrels of oil moved down the pipeline each day. With declining production in recent years, the pipeline now moves about 800,000 barrels a day to Valdez, where it is transferred to tankers that take it to refineries in the Lower 48 states.

The state's share of the oil field revenue was so great that it discontinued the state income tax, invested in big projects (not always wisely) and, within a few years, established a Permanent Fund that has grown to more than $30 billion in assets. An annual dividend from this fund is paid to every Alaskan who has lived in the state for the entire previous year. The size of the dividend varies from year to year; it is based on an average of the Permanent Fund's investment profits in the most recent five years. In 2007, the individual dividend was $1,654, one of the highest ever. The year before it had been $1,107.

Oil field revenue has long contributed 80 percent or more of the funds for the state's annual budget, and that is one of the reasons why the state is a strong advocate for development of the neighboring oil field in the Arctic National Wildlife Reserve. It is also actively working to encourage the construction of a new pipeline, this one to transport the North Slope's natural gas. The estimated cost of the new pipeline is $20 billion. Under the most favorable circumstances, it would take several years for the new resource to be available for consumption.