Editor’s Note: With natural gas getting closer to Homer every day, questions abound. The last story in this three-part series looks at the question: What will be the economic impact of natural gas on the community?
Since March, workers with Chumley’s General Contractors have been clearing easements and laying the natural gas trunk line from Anchor Point to Homer. Enstar Natural Gas is in the process of selecting contractors who will build out the distribution lines to the city of Homer and Kachemak City
Almost $24 million in gas line construction happening over the next two years initially will mean more construction jobs.
As Homer and the lower Kenai Peninsula convert to natural gas, that also can cause other economic effects, such as:
• An estimated 60 percent savings in heating costs compared to fuel oil;
• A boost to local plumbing contractors and appliance sales companies as homeowners and businesses convert to natural gas; and
• A potential economic boost as savings from cheaper energy puts more money in the local economy and makes businesses and industry more competitive.
What’s not known is how big an economic impact natural gas will be to Homer.
“This is sort of like the Alaska gas line in miniature,” said Steve Colt, a professor of economics with the Institute of Social and Economic Research, University of Alaska Anchorage.
John Sims, an Enstar spokesperson, said Chumley General Contractors, the builder of the trunk line, told him that about 30 to 40 workers are now on the trunk line project, and that by midsummer about 125 workers total will be on the trunk line and Homer and Kachemak City distribution line projects. Speaking for Enstar, Sims said locally four new jobs have been created with a marketing representative, inspectors and service technicians.
The impact of construction jobs on other jobs can be calculated. Colt said that a general rule of thumb is one job created for every two construction jobs, assuming the construction worker lives and spends money in Homer. Thus, the gas line construction could lead to 63 additional jobs.
The impact of cost savings from lower energy also can be calculated. Colt pointed to “Snapshot: The Homer Energy Rebate Program,” a 2012 study by another ISER researcher, professor emeritus Scott Goldsmith, and associates Sohrab Pathan and Nathan Wiltse, that looked at the economic effect of Alaska’s Home Energy Rebate Program.
In that program, energy savings came from making homes more energy efficient through things like better insulation and more efficient heating appliances. In that program, homeowners saved $22 million, the study said, with spending generating about 240 jobs a year. That’s based on a multiplier of 11 jobs created for ever $1 million of new household spending.
Harder to calculate is the effect on local businesses, primarily four plumbing and heating contractors, as home and businesses convert to natural gas. If those businesses have to hire more workers, that could mean more skilled jobs. Colt said Anchorage saw that with the rebate program. Initially, energy rater specialists came down from Anchorage, but as people were trained locally, those jobs went to locals.
“You might think the Kenai Peninsula College campus would put on some extra sections of HVAC (heating, ventilation and air conditioning) training if there’s enough lead time to get people trained up,” Colt said.
Carol Swartz, director of the Kachemak Bay Campus, Kenai Peninsula College, said the college hadn’t thought of that. The college looks at labor forecasts to see what fields need workers and training, but the need for heating and plumbing workers hadn’t been brought to her attention.
The Department of Labor also hasn’t done any forecast, said Alyssa Shanks, an economist who looks at the Gulf of Alaska Coast Region for the state. Her office doesn’t speculate, but looks at impacts on the labor market every quarter.
“That’s when we can say, ah ha, this had an impact,” Shanks said.
Aside from construction jobs, it’s hard to figure out over time the overall economic impact, said Neil Fried, another Department of Labor economist.
“It’s so subtle and happens over time,” he said. “It’s very theoretical and difficult to look at something and say, ‘This created so many jobs.’ Does it lead to other industries? Does it make other industries more efficient and competitive?”
That might be a positive economic impact, he said.
“You look at seafood processing. That’s a big user of energy. Who knows what that can do?” Fried said. “For a fish processing operation, it certainly makes it more attractive.”
With lower energy costs, Homer could be more competitive with other areas of the state.
The city hasn’t tried to quantify the economic impact of the gas line or commissioned a study, although that’s something the Homer City Council might want to do, said Katie Koester, the city economic development coordinator.
“I think it will be very positive for the economy,” she said. “It’s one of the biggest things for economic development, but it’s on the individual level. That’s how you want it to be, not one big business coming in and changing the landscape.”
Fried said the long-term economic impact would be hard to calculate.
“My guess is it’s so much more subtle, but it’s real,” he said. “On the other hand, there’s no doubt it’s an economic benefit.”
How well Homer does may be up to individuals and businesses, Colt said.
“The devil is very much in the details,” he said. “It’s like a business opportunity. The question is ‘Will local folks be able to take advantage of that and how well can they do that?”
“You’ll be a good example of a place that didn’t have it and now will have it,” Fried said of how Homer will change with natural gas. “I think there are unintended consequences, but in this case positive consequences that are harder to guess.”
Michael Armstrong can be reached at email@example.com.