Trade group predicts 13 percent increase in Alaska construction

Oil industry tops big-spender list with more than $2 billion earmarked for building within the state, a 20 percent increase

Posted: Wednesday, February 22, 2006

ANCHORAGE - Alaska should see another booming year in construction, according to an industry trade group.

A study commissioned by the Associated General Contractors of Alaska and its sister organization, the Construction Industry Progress Fund, estimates $6.6 billion in construction spending in 2006, a 13 percent increase over last year.

Private building is expected to reach nearly $4 billion and public spending $2.6 billion. Just one sector, hospitals, is expected to see a reduction.

The organizations commissioned the University of Alaska Anchorage Institute of Social and Economic Research to develop the forecast.

The study, in its third year, surveys entities about their construction plans. Researchers also reviewed 2005 spending to see how accurate estimates were.

ISER put spending last year at $5.8 billion. It had predicted $5.9 billion. Federal spending was underestimated, researchers said, but several large-scale projects were postponed or canceled.

The cost of building materials rose considerably in 2005, prompting some industries to delay projects.

The estimate of nearly $4 billion in private sector construction would be an 11 percent increase.

The oil and gas industry tops the big-spender list with more than $2 billion in projected construction spending, a 20 percent increase.

Much of the increase is projected in exploration and development on the North Slope and in Cook Inlet. Investments in refinery and pipeline upgrades also are expected.

North Slope producers BP Exploration, ConocoPhillips and Exxon Mobil are projected to invest $1.5 billion in Alaska operations.

Smaller North Slope independent producers also have committed to exploration, with nine exploratory wells announced so far. Pioneer Natural Resources should be among the leading spenders on North Slope exploration.

Marathon Oil is expected to invest in exploration and development activities in Cook Inlet. Much of Marathon's work will depend on obtaining approval for a gas storage facility, the study said.

Chevron, which bought Unocal last year, announced plans for $60 million in Cook Inlet work.

Mining companies were projected to spend about $200 million, a 5 percent increase over 2005.

Residential construction spending is expected to reach $715 million, a slight increase over last year, while commercial spending should see a 20 percent boost to about $300 million.

Residential building could be higher but activity will decline, the study said. A growing population will boost demand but construction likely will be dampened by rising prices and interest rates.

The Matanuska-Susitna, Juneau and the Kenai Peninsula areas should see strong spending, while the Fairbanks and Anchorage markets are expected to slow.

Much of the projected commercial construction will be in Anchorage. Projects include a convention center and several large office buildings, as well as cargo terminals and rental car facilities at the city's airport.

The Mat-Su area will see additional retail space built, while commercial construction in Fairbanks should slow.

The state's hospitals should see about $220 million in work, a 37 percent drop. The decline follows completion of the Mat-Su Regional Medical Center.

Spending by private utilities is expected to see a 45 percent jump, to $400 million.

Government agencies plan to spend about $2.6 billion this year, a 17 percent increase over 2005, the study said.

National defense spending is expected to reach $730 million in Alaska, an 8 percent increase.

Government pending to support planes, trains, roads and ports is expected to total $860 million, a 7 percent increase.

Highway spending should reach $450 million, up from $400 million. Of that, researchers estimate, about $100 million will come from state sources to augment federal money. The remaining $350 million should come solely from federal highway funding.

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