2022 outlook for Alaska: Omicron is the wild card

The year 2021 is history. It was a tough year in many respects, though not as bad as 2020.

What will 2022 be like?

Probably a lot like 2021 but perhaps better in some ways. The wild card is the new omicron variant of COVID-19, which is spreading rapidly.

Alaska’s economy is slowly getting back in gear thanks partly to massive infusions of federal aid – $2.8 billion in 2020 and 2021, according to estimates by the University of Alaska’s Small Business Development Center.

About $260 million of that flowed into the Matanuska-Susitna Borough, according to the university’s SBCD.

Tourism prospects are looking better for 2022. Cruise ship cancellations made 2020 a disastrous year and although there was a small cruise season in 2021 but it mainly helped Southeast Alaska. No large cruise ships came across the gulf to Southcentral Alaska.

The season was partly savaged by an aggressive marketing campaign by Alaska visitor groups aimed at independent travelers.

Cruise firms hope for a more normal 2022 season but it all depends on the COVID-19 virus. Things are off to a shaky start for cruise ships in the Caribbean winter season where sailings so far are seeing infections among passengers and crews from the new omicron variant. That may have a dampening effect on early spring bookings for summer Alaska voyages.

But Alaskan marketing efforts are getting underway again led by the state’s Alaska Tourism Marketing Association, the statewide visitor industry trade group. Funded by federal grants through the state, the effort is again focused on independent travelers.

Anticipating another strong season for independents, airlines have laid on a large number of summer flights, so there will be ample seat capacity. The outlook is for a visitor season much like 2021 and likely better. But it all depends on the virus.

Meanwhile, the blue-collar industrial part of the state’s economy – oil, mining, fish, construction and tourism, are regaining their footing. Here’s what to watch for in 2022:

Oil and gas: Key decision looms for Pikka project

Watch for a decision by Australia-based Santos, now the new owner of Oil Search, and Spain-based Repsol to move ahead with construction of phase one of Pikka, a large oil discovery on state lands on the North Slope.

Also, watch for progress by ConocoPhillips in negotiations with the U.S. Bureau of Land Management on a revised development plan for Willow, another new discovery, this one in the National Petroleum Reserve-Alaska, a 23-million-acre federal reserve west of producing oil fields in the central North Slope.

If Pikka moves ahead there will likely be new construction on the North Slope in 2022. Willow’s construction has been put off until a new plan is agreed and a new Supplemental Environmental Impact Statement and new permits are issued, process that will take several years.

Otherwise, activity will continue in the existing oil fields with some new drilling and facility construction. The outlook is for continued stability in oil production and even a small increase as ConocoPhillips’ new GMT-2 project ramps up in production.

In Cook Inlet, where Hilcorp Energy is the major operator, limited production of oil continues from offshore platforms and wells drilled fom shore by Bluecrest Energy, while natural gas production continues from both onshore and offshore by Hilcorp and two small independent companies.

Oil and gas employment is still down from pre-pandemic 2019, at 6,300 in November. That’s less than half of workers in the Alaska industry in 2015. Jobs in petroleum are the most highly paid in the state.

Mining: Bright spot in economy

This is the bright spot among Alaska’s major industries. Alaska’s five metals-producing mines and single coal mine did well in 2021, with strong commodity prices and with disruption by the he virus. The trends are expected to continue in 2022 although the new omicron variety of the virus presents unknowns.

The Greens Creek Mine, on Admiralty Island near Juneau and the Kensington gold mine at Berners Bay, are major employers in the capital city. Pogo and Fort Knox, two gold mines in Interior Alaska, are major employers in the Fairbanks area.

Usibelli Coal Mine, a major energy supplier in Interior Alaska, is the domimant employer in Healy, south of Fairbanks. The Red Dog lead and zinc mine north of Kotzebue is a major employer in Northwest Alaska small communities.

In 2022, watch for developments in two large new minerals projects, the Donlin Gold project in the mid-Kuskokwim River region west of the Mat-Su Borough, and the Ambler Metals copper project in the western Brooks Range. Both mines are in advanced stages of development planning.

Both projects could bring benefits to the Mat-Su Borough. A natural gas pipeline built from the Mat-Su would supply natural gas to Donlin Gold, if it moves ahead, while ore concentrates trucked from a copper mine in the western Brooks Range could be shipped by road and rail and ultimately by sea from Port Mackenzie, on upper Cook Inlet.

Another mining project to watch is at NovaMinerals’ gold prospect is the western part of the Mat-Su Borough. Where they operate, mined are good employers, paying the second-highest wages in the state after petroleum.

Fisheries in 2022: Mostly good for salmon, again

In fisheries, 2021 was a good year for salmon harvesters in Bristol Bay and that is expected to continue in 2022, with good catches expected again next year. Harvesters hope strong prices for sockeyes will continue through the new year, too.

It wasn’t such a good story for crab harvesters offshore in western Alaska, mostly in the Bering Sea, where catches were curtailed. This has less of an economic impact in the state, however, because most of the Bering Sea crab fleet is Seattle-based.

The fisheries picture for the Lower Yukon River region is also cloudy. The chum salmon fishery crashed in 2021 and there were no commercial harvests. The outlook for 2022 is for continued uncertainty.