The Trans-Alaska Pipeline System (TAPS) includes the trans-Alaska crude-oil pipeline, 12 pump stations, several hundred miles of feeder pipelines, and the Valdez Marine Terminal. TAPS is one of the world's largest pipeline systems. It is commonly called the Alaska pipeline, trans-Alaska pipeline, or Alyeska pipeline, (or the pipeline as referred to in Alaska), but those terms technically apply only to the 800 miles (1,287 km) of the pipeline with the diameter of 48 inches (122 cm) that conveys oil from Prudhoe Bay, to Valdez, Alaska. The crude oil pipeline is privately owned by the Alyeska Pipeline Service Company.
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The construction of the Trans-Alaska Pipeline System and its completion in 1977 had an immense effect on Alaska, the United States, and the rest of the world.
Boomtowns
Construction of the pipeline caused a massive economic boom in towns up and down the pipeline route. Prior to construction, most residents in towns like Fairbanks—still recovering from the devastating 1967 Fairbanks Flood—strongly supported the pipeline.[80] By 1976, after the town's residents had endured a spike in crime, overstressed public infrastructure, and an influx of people unfamiliar with Alaska customs, 56 percent said the pipeline had changed Fairbanks for the worse.[81] The boom was even greater in Valdez, where the population jumped from 1,350 in 1974 to 6,512 by the summer of 1975 and 8,253 in 1976.[82]
This increase in population caused many adverse effects. Home prices skyrocketed—a home that sold for $40,000 in 1974 was purchased for $80,000 in 1975.[83] In Valdez, lots of land that sold for $400 in the late 1960s went for $4,000 in 1973, $8,000 in 1974, and $10,000 in 1975.[84] Home and apartment rentals were correspondingly squeezed upward by the rising prices and the demand from pipeline workers. Two-room log cabins with no plumbing rented for $500 per month.[85] One two-bedroom home in Fairbanks housed 45 pipeline workers who shared beds on a rotating schedule for $40 per week.[86] In Valdez, an apartment that rented for $286 per month in December 1974 cost $520 per month in March 1975 and $1,600 per month—plus two mandatory roommates—in April 1975. Hotel rooms were sold out as far away as Glenallen, 115 miles (185 km) north of Valdez.[87]
The skyrocketing prices were driven by the high salaries paid to pipeline workers, who were eager to spend their money.[88] The high salaries caused a corresponding demand for higher wages among non-pipeline workers in Alaska. Non-pipeline businesses often could not keep up with the demand for higher wages, and job turnover was high. Yellow cab in Fairbanks had a turnover rate of 800 percent; a nearby restaurant had a turnover rate of more than 1,000 percent.[89] Many positions were filled by high school students promoted above their experience level. To meet the demand, a Fairbanks high school ran in two shifts: one in the morning and the other in the afternoon in order to teach students who also worked eight hours per day.[90] More wages and more people meant higher demand for goods and services. Waiting in line became a fact of life in Fairbanks, and the Fairbanks McDonalds became No. 2 in the world for sales—behind only the recently opened Stockholm store.[91] Alyeska and its contractors bought in bulk from local stores, causing shortages of everything from cars to tractor parts, water softener salt, batteries and ladders.[91]
Note, unlikely to happen in the lower 48 as Alaska historically has a low population issue, there's simply not enough people in the state to fill our jobs. I've mentioned this in the past re we never have enough cops, building low income housing in my town because we needed lower wage workers, etc. Commuting to Alaska from other states isn't possible heh
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Economy of Alaska
Main article: Economy of Alaska
See also: Alaska Permanent Fund
The wealth generated by Prudhoe Bay and the other fields on the North Slope since 1977 is worth more than all the fish ever caught, all the furs ever trapped, all the trees chopped down; throw in all the copper, whalebone, natural gas, tin, silver, platinum, and anything else ever extracted from Alaska too. The balance sheet of Alaskan history is simple: One Prudhoe Bay is worth more in real dollars than everything that has been dug out, cut down, caught or killed in Alaska since the beginning of time.[98]
Alaska historian Terrence Cole
Since the completion of the Trans-Alaska Pipeline System in 1977, the government of the state of Alaska has been reliant on taxes paid by oil producers and shippers. Prior to 1976, Alaska's personal income tax rate was 14.5 percent—the highest in the United States.[99] The gross state product was $8 billion, and Alaskans earned $5 billion in personal income.[98] Thirty years after the pipeline began operating, the state had no personal income tax, the gross state product was $39 billion, and Alaskans earned $25 billion in personal income.[98] Alaska moved from the most heavily taxed state to the most tax-free state.[99][100]
The difference was the Trans-Alaska Pipeline System and the taxes and revenue it brought to Alaska.[98] Alyeska and the oil companies injected billions of dollars into the Alaska economy during the construction effort and the years afterward.[101] In addition, the taxes paid by those companies altered the tax structure of the state. By 1982, five years after the pipeline started transporting oil, 86.5 percent of Alaska revenue came directly from the petroleum industry.[102]
The series of taxes levied on oil production in Alaska has changed several times since 1977, but the overall form remains mostly the same.[103][104] Alaska receives royalties from oil production on state land. The state also has a property tax on oil production structures and transportation (pipeline) property—the only state property tax in Alaska. There is a special corporate income tax on petroleum companies, and the state taxes the amount of petroleum produced. This production tax is levied on the cost of oil at Pump Station 1. To calculate this tax, the state takes the market value of the oil, subtracts transportation costs (tanker and pipeline tariffs), subtracts production costs, then multiplies the resulting amount per barrel of oil produced each month. The state then takes a percentage of the dollar figure produced.[105]
Under the latest taxation system, introduced by former governor Sarah Palin in 2007 and passed by the Alaska Legislature that year, the maximum tax rate on profits is 50 percent. The rate fluctuates based on the cost of oil, with lower prices incurring lower tax rates.[104] The state also claims 12.5 percent of all oil produced in the state. This "royalty oil" is not taxed but is sold back to the oil companies, generating additional revenue.[106] At a local level, the pipeline owners pay property taxes on the portions of the pipeline and the pipeline facilities that lay within districts that impose a property tax. This property tax is based on the pipeline's value (as assessed by the state) and the local property tax rate. In the Fairbanks North Star Borough, for example, pipeline owners paid $9.2 million in property taxes—approximately 10 percent of all property taxes paid in the borough.[107]
Alaska oil production peaked in 1988.
The enormous amount of public revenue created by the pipeline provoked debates about what to do with the windfall. The record $900 million created by the Prudhoe Bay oil lease sale took place at a time when the entire state budget was less than $118 million,[99] yet the entire amount created by the sale was used up by 1975.[108] Taxes on the pipeline and oil carried by it promised to bring even more money into state coffers. To ensure that oil revenue wasn't spent as it came in, the Alaska Legislature and governor Jay Hammond proposed the creation of an Alaska Permanent Fund—a long-term savings account for the state.[109] This measure required a constitutional amendment, which was duly passed in November 1976. The amendment requires at least 25 percent of mineral extraction revenue to be deposited in the Permanent Fund.[110] On February 28, 1977, the first deposit—$734,000—was put into the Permanent Fund. That deposit and subsequent ones were invested entirely in bonds, but debates quickly arose about the style of investments and what they should be used for.[111]
In 1980, the Alaska Legislature created the Alaska Permanent Fund Corporation to manage the investments of the Permanent Fund, and it passed the Permanent Fund Dividend program, which provided for annual payments to Alaskans from the interest earned by the fund. After two years of legal arguments about who should be eligible for payments, the first checks were distributed to Alaskans.[112] After peaking at more than $40 billion in 2007, the fund's value declined to approximately $26 billion as of summer 2009.[113] In addition to the Permanent Fund, the state also maintains the Constitutional Budget Reserve, a separate savings account established in 1990 after a legal dispute over pipeline tariffs generated a one-time payment of more than $1.5 billion from the oil companies.[114] The Constitutional Budget reserve is run similar to the Permanent Fund, but money from it can be withdrawn to pay for the state's annual budget, unlike the Permanent Fund.[106]
