The sale last September of leases on North Slope oil land is a "happening" in the resource history of Alaska that will have tremendous economic and social impact for years to come. Suddenly nearly one billion dollars have been deposited in the treasury of a state with a total annual budget of only 15 percent of this sum.
Alaskans are on the verge of having a major share in the greatest raw material industry of the modern world. They also face the sobering responsibility of using their new wealth wisely in the total public interest, with special care for the welfare of native people and for the protection of the natural environment.
Perhaps the nearest comparison to the Alaskan windfall is the oil development in Libya during the 1960s. Apparently the present-day Libyan proved oil reserves approximate those estimated to be proved on the North Slope by 1980. The revenues earned from oil by the Libyan government grew from a negligible amount in the early 1960s to approximately half a billion dollars in 1966 and an estimated one billion dollars in 1969.
The oil companies operating in Alaska anticipate production of about 500,000 barrels a day by late 1972 or early 1973, assuming that a pipeline south to Valdez has been completed. By 1980, 3-5 million barrels a day seems a reasonable estimate. The annual yield from royalties and severance taxes by 1973 would be around $45 million, increasing to $273 million by the next decade.
Thus, Alaska now has a remarkable opportunity for what Venezuelans refer to as "oil seeding"—using the public revenues derived from oil for socially and economically beneficial purposes. Most of the bonus payment funds are available for use in the state because they are outside the normal flow of tax or bond revenues used to meet operating and capital requirements.
"Seeding" in Alaska could mean the establishment of a unique social and economic development trust representing an investment in the future of the state and its people. A portion of the trust funds could be held as endowment; each year only the dividends and interest, and perhaps capital gains, would be spent. Some could be used for business and industrial developments with a full financial payout. Some could go toward overhead or infrastructure investments in transportation or public utility facilities. Other allotments could support welfare programs, health services, education, natural resource conservation, scientific and technological advance, and cultural programs.
Beyond this is the possibility of reducing ordinary taxes, although Alaskans should proceed in this direction with great caution in order to avoid reliance on windfalls to meet the state's usual day-to-day expenses. Or the funds simply could be divided up among the population, upwards of $3,000 per person—an alternative involving the risk that the funds would be spent unwisely.
The establishment of a trust would protect the inheritance Alaskans have received in the form of revenue from a natural resource they own jointly. Rather than one giant trust, there could be several, devoted to specific objectives. If they were regarded as endowment funds, important decisions would have to be made about how much to invest in Alaskan enterprises and how much to invest elsewhere.
The old questions of rate of return, security of investment, diversity, and liquidity would arise. These and other things being equal, investment in stocks, bonds, and mortgages in Alaska would be preferable, but there would not be enough sound opportunities in the state for a $900 million investment all at once, and this probably would be the case for a long time.
Viewed as program expenditures rather than endowment investment, nearly all of the funds should be placed in Alaska. But the processes and guidelines for making these decisions will have to be delicately calibrated if the greatest good for all is to be the result.
In effect, the North Slope is the open sesame to a richly rewarding future. But the nagging question persists: Will it be?
Will Alaska's leaders succeed in building a great and good industry with social gain the byproduct, or will they muff the historic opportunity? Will this be a story quickly told like so many others—sea otters; copper, whaling, the DEW line, or even gold—over within a decade or two, leaving little behind of lasting benefit? The answers, as the modern folk song puts it, are "blowin' the wind."
Adapted from a paper presented Joseph L. Fisher at the Conference on the Future of Alaska, in Anchorage, November 10, 1969.
A version of this article appeared in print in the June 1970 issue of Resources magazine.
