An economic boom usually occurs wherever oil is discovered. State and local governments in particular come out on top, and the growth in the area generates much in the way of income for local businessmen and real estate developers. But in the case of the Prudhoe Bay oil fields in north Alaska, the impact to the state’s economy and way of life was astounding. Here’s how it all happened.
Discovery of Oil: Indigenous peoples in Northern Alaska were known to have gathered oil-saturated peat from the area around Prudhoe Bay up to Point Barrow, calling it pitch and burning it for heat and light. Whalers who worked the area recognized this pitch as being petroleum based. In the early 1920’s the head of the U.S. Geological Survey (USGS) in Alaska, Alfred Hulse Brooks, followed up on advice from a whaler turned settler that oil seepages existed along the Alaska arctic coast. Brooks investigated and filed a report that confirmed observations of oil seepages that dated as far back as 1836. The confirmation of the discovery became highly important in the next few years as the U.S. Navy began to convert its ships from coal burners to oil, greatly increasing the demand in the U.S. for petroleum and petroleum reserves. The government then established four major petroleum reserves in the U.S. plus its territories. The fourth one was in Alaska north of the Brooks Mountain range extending up to Point Barrow in the Arctic Ocean. Surveys by both the USGS and the Navy were made of the reserves with the most informative one being done by the USGS in 1953, when they discovered several oil fields in the area, but none would be deemed cost-effective to open. In the late 1960’s the Atlantic Richfield Company (ARCO) dug two discovery wells near Prudhoe Bay that in 1968, generated yields of both oil and natural gas at the rate of about 1,200 barrels per day. The oil field’s existence was confirmed, but now the problem became how to get the oil from the well down to refineries in the lower 48 states. Several different plans were proposed including airborne supertankers, submarine tankers to transit under the ice, and extending the Alaska Railroad to Prudhoe Bay. Then, in February, 1969, an unincorporated group named the Trans-Alaska Pipeline System (TAPS), created by ARCO and composed of several oil companies, petitioned the U.S. Department of the Interior to allow them to do the research necessary for the construction of a pipeline.
Opposition and Legal Issues Blocking Construction: By June, 1969, TAPS summarized their planning and research, and formally applied with the U.S. Department of the Interior for a permit to build the pipeline. The Interior Department then sent its own personnel out to analyze the proposed route, the plan, and the preliminary designs. Their results pointed out that the plan to bury the pipeline beneath the earth’s surface was a non-starter as the land was largely permafrost and would melt into a muddy mess when the hot oil from the ground moved through the pipeline. Another obstacle standing in the way was a freeze on all projects in the state that crossed land claimed by Alaskan Natives set up in 1966 by the then Secretary of the Interior. Both TAPS and the Interior Department formed a work around by visiting the natives’ villages along the route that had claims and obtaining waivers. The new Secretary of the Interior then petitioned Congress with the waivers, and after a few months of hearings and debate, the Secretary was given permission to lift the freeze. TAPS began to move forward only to be stopped by Alaskan Native and conservation groups who filed a suit asking a judge for an injunction to block the project on the grounds that it violated the Mineral Leasing Act and also the newly approved National Environment Policy Act. Both acts together restricted the size of leases, and required reviews to ensure that the environment was protected from unnecessary destruction. The injunction was granted, and the project was stopped in its tracks. TAPS then made a move of its own by incorporating the project into a new joint venture named the Alyeska Pipeline Service Company. Edward L. Patton, the manager of an Exxon refinery in California, was named president and CEO of Alyeska. Patton lobbied Congress for a comprehensive settlement to resolve all disputes over the right of way for the pipeline. Alyeska was also required to file an environmental impact statement, and that caused a large furor from conservation groups complaining about the project’s impact on the tundra, animals, trees, pollution, and damage to geographic features. Further, there were complaints about the road that would parallel the pipeline in order to facilitate construction and maintenance. Finally, in October 1971, President Richard Nixon signed the Alaska Native Claims Settlement Act providing a major monetary settlement for all the outstanding claims by native groups. However, it took another vote in Congress to satisfy all the conservationist complaints and adjust the governing statutes with amendments designed to allow the project to move forward. The vote ended in a 49-49 tie in the U.S. Senate that had to be broken by Vice President Spiro Agnew, who favored the project. In October, 1973, the Organization of Petroleum Exporting Countries (OPEC) declared an oil embargo against the U.S. over support for Israel during the Yom Kippur War. This suddenly raised the stakes for getting the pipeline built, and President Nixon began to lobby Congress for the pipeline’s completion. Finally, on November 16, the Trans-Alaska Pipeline Authorization Act became law removing all existing legal barriers that stood in the way.
Design: There were very many issues engineers had to deal with when creating the design for the pipeline. Owing to the harsh, sub-zero climate, and to protect the permafrost ecology, the entire system was to be built above ground on supports that provided enough room in many places for wildlife to pass underneath. The route crosses the Denali earthquake fault, so parts of the pipeline were built on slider supports enabling it to shift with ground movement. The annual temperature swings can be as much as 150 degrees Fahrenheit causing expansion and contraction of perhaps five miles or so over the course of a year. To remedy this the pipeline rests on its supports without being welded or fastened in. To permit the expansion/contraction to take place, the engineers added an extra eleven miles in total to the overall length. The flow of oil is designed to be carefully controlled so that it moves through the line as it cools, and the water that accompanies it does not have time to freeze. Eleven pumping stations would be built to facilitate the flow (twelve stations were actually planned but Pump Station 11 was never built). Owing to the size and length of the meandering that the pipeline required, the overall length of the line would be 800 miles, but the distance it covered only about 639 miles. The starting point would be in Prudhoe Bay, and it would run nearly due south to the town of Valdez, located on Prince William Sound in the Gulf of Alaska. From there the crude would be stored in terminals until it is loaded onto tanker ships and sent to refineries in the lower 48 states. The line crosses 34 major rivers, 500 minor streams, several mountain ranges with a peak elevation of 4,739 feet, and grades of up to 145%. The line consists of about 42,000 separate sections of pipe either four or six feet in length and four feet in diameter all welded together with about 66,000 field gird welds. It rests upon 78,000 vertical support members. Fully operational, the pipeline would transit at the minimum about 350,000 barrels of crude per day. Prices vary, but with a typical current price of $80 per barrel, the pipeline would ship about $28,000,000 worth of crude oil per day, or about $10,220,000,000 per year
Local Impact of Construction: The 640-mile pipeline created an economic boom for small towns near where it went through. The need for workers resulted in high pay rates and plenty of money moving around through the local economies. Housing costs skyrocketed as availability receded. Lines formed at restaurants; stores sold out of basic merchandise. People not employed directly by the project left jobs for better paying service jobs in the vicinity of the pipeline. Police officers quit working for various cities and counties and went to work for better paying jobs as security guards that watched over the pipeline. Crime in many forms appeared along the route especially prostitution, and thievery. Most crimes were of the economic variety, but a large number of arrests were made over barroom fights. A shootout took place in Fairbanks in 1975 that involved local pimps fighting over territory for their prostitutes. As many as thirty of Alyeska’s yellow painted trucks were stolen.
Economic Impact on the State of Alaska: Needless to say, the economy of Alaska improved dramatically owing to the pipeline. In thirty years from the onset of the oil flows in 1977, Alaska went from the state with the highest personal income taxes to no income taxes. The tax burden grew, but was shifted to oil producers and shippers. The state was able to charge a royalty on all oil extracted from within its borders, and an income tax on the corporations connected to the oil industry. Further, the state collected major amounts of money from property taxes paid by oil industry participants with developed buildings or infrastructure. Inside of a few years this created a major windfall in public funds for the state, causing the Governor, Jay Hammond, to set up a permanent fund (Alaska Permanent Fund) to capture some of the windfall and invest it for the future. The fund now pays a dividend to all Alaska residents of an average of about $1,600 per year. The state also set up a rainy-day fund to cover unexpected budget shortfalls.
Conclusions: The Alaska historian Terrence Cole once wrote, “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.”
Sources:
Dayinhistory.org, Engineering Marvel: The Completion of the Trans-Alaska Pipeline.
Wikipedia, Trans-Alaska Pipeline System.