The Good Life in Valdez, Alaska, is Directly Related to the Oil Industry

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Valdez is a company town where people living off big oil have lovely cedar-sided homes with lush lawns and new four-wheelers parked in driveways next to RVs the size of city buses.

VALDEZA, Alaska — Valdez is a company town where people living off big oil have lovely cedar-sided homes with lush lawns and new four-wheelers parked in driveways next to RVs the size of city buses.


Across the street or next door are residents not employed in the oil industry who sometimes have to work two and three jobs to live in dilapidated mobile homes set up on weed-filled gravel lots.


Valdez is a city of the "haves" and the "have-nots."


It also is the end point for the 800-mile trans-Alaska pipeline from the North Slope, but the crisis of reduced production this month has little, if any, immediate impact on the town. However, City Manager John F. Hozey says it does send the city a message.


"It is kind of a wake-up call to realize what happens when you put all your eggs in one basket," he said.


Valdez is where the Alyeska Pipeline Service Co., operator of the pipeline, has a marine terminal where tankers are loaded with crude for delivery to West Coast refineries.


The trans-Alaska pipeline and marine terminal cost the oil companies $8 billion to build back in the 1970s. The project was completed in 1976, with the first oil from the North Slope reaching the marine terminal at 11:02 p.m. on July 28, 1977.


The terminal's 18 large crude oil tanks, each with a holding capacity of 510,000 barrels, are dwarfed only by the Chugach Mountains that surround the town of 4,450 residents.


From his corner office at the marine terminal, Tom Stokes, 50, gets to take in the view.


"It is a stunning place to live," said Stokes, manager of the Valdez Marine Terminal. From his office window, he says he can see eagles soaring by, sea otters swimming in the harbor and an occasional black bear sauntering past.


"It is a good place to work. A good community. We are pretty proud of what we do," Stokes said.


Since 1977, the marine terminal has received more than 14 billion barrels of oil down the pipeline.


"That's a lot of oil," Stokes said.


The oil began flowing in 1977, peaking at more than 2 million barrels in 1988. It has been declining since as the huge pool of North Slope oil is being drawn down. Now, the marine terminal receives less than half as many barrels -- and that was before BP's decision to partially shut down half of the Prudhoe Bay oil field because of corroded pipes.


On Wednesday, the field was only yielding 150,000 barrels of crude instead of the normal 400,000 barrels.


BP has admitted it was lax in maintaining the transit lines that take oil to the starting point of the trans-Alaska pipeline in Prudhoe Bay. But Alyeska officials say they send a cleaning device, called a maintenance pig, down the entire pipeline every seven to 14 days and send a so-called smart pig to investigate the pipeline's condition every three years.


More than 800 tankers a year used to arrive at the Valdez terminal to be loaded with crude. Now, the terminal gets about 360 tankers a year. Stokes said there has not been a leak of crude oil at the terminal for more than two years.


"That is a pretty significant drop-off," Stokes said.


Alyeska has been downsizing in recent years and now employs about 285 people in Valdez. At the peak of construction of the terminal, 4,300 were employed -- probably more than live in the city now. The average salary last year for Alyeska employees was $92,000.


But the city is hard on people living outside the oil circle, even more so as the volume of oil coming into town dwindles.


The average salary for residents in the Valdez-Cordova census area is $3,484 a month, or about $41,000 a year -- but the yearly figure does not account for many residents who find seasonal employment only, according to the State Department of Labor and Workforce Development. Employment increases substantially during the summer months and falls off in the winter when Valdez normally gets more than 26 feet of snow.


"It is a fight," said Richard Fraley, director of maintenance at one of the city's nicer hotels. He paid $14,000 for a 22-year-old trailer, what he calls his "shanty trailer." If he thought he could get more than $5,000 for it now, he'd consider moving.


"There are people who can't afford to get out of town," said Fraley, who also works as a plumber's assistant and puts out floating boom to safeguard again possible leaks by the fuel barges to make ends meet.


"We lost our music store, jewelry store, one of the chiropractic stores, one of the car parts stores and the gas station shut down," he said. "We lose a business in town about every six months."


Jamie Hillberg, 23, the hotel's front desk manager, said half her take-home pay goes to rent a modest $800 one-bedroom apartment.


"I live paycheck to paycheck. I can't even afford to fix my car," she said.


Hillberg made her escape to Seattle but returned to be close to family. She said young people graduating from high school don't want to stay in Valdez because they don't see any opportunities for them.


"The main feeling when you get out of high school is, 'I can't wait to get out of this town,'" she said.


City manager Hozey said between one-third and one-half of the town's work force have jobs related to the marine terminal, but none are as high-paying as the Alyeska Pipeline Service Co. jobs. While he stresses that the city has a good relationship with Alyeska, it's been strained with the oil companies.


More important to the town is the tax revenue it gets from the trans-Alaska pipeline. The town receives about 70 percent of its income from the oil industry.


The problem is that the pipeline, put on an accelerated depreciation schedule in 1984, is losing value. That means less money for the town, which has no sales tax and gets the remainder of its income from fairly high property taxes to offset the declining value of the pipeline.


Lynn Chrystal, a former mayor and councilman, said the city kept trying to talk to the oil companies about the tax situation for years, but got nowhere.


"The city was backed up against the wall," he said.


The revenue situation became so critical that a few years ago the city approved a personal property tax on tankers. BP PLC, Exxon Mobil Corp., and ConocoPhillips -- the three large North Slope producers -- sued. BP and Exxon Mobil settled the case, but ConocoPhillips continues to fight.


Meanwhile, the city has collected $20 million in tanker taxes. That money, while needed, goes mostly unspent in case Valdez loses the case and is forced to give the money back, Hozey said.


He said the city has an operating budget of about $20 million and expected a $1.5 million deficit in 2006. The only reason it came out on top was because it challenged the assessed value of the pipeline and got a higher assessment this year -- the first time that had happened.


The fight comes with a price to the city. So far in 2006, Valdez has spent $800,000 on legal fees.


Tom Gilson, who was Valdez's finance director from 1978-1999, said city officials aren't allowed into the room when the state and the oil companies sit down to set a value on the pipeline.


"We in Valdez have likened that to the fox guarding the hen house," Gilson said.


The assessed value of the pipeline is determined not by the value of the oil in it but by the number of barrels flowing through it.


"It has been a constant battle," Gilson said. "The state has been putting the screws to Valdez ... for years," he said. "We see no fairness in it."


George Lammon, a 36-year-old deckhand from Joshua Tree, Calif., works summers on one of the salmon purse seiners in Prince William Sound. The boat's fuel bill will probably run $15,000 this summer.


"The price of fuel has really gone up," he said. "It is another example of unbridled global capitalism."


Source: Associated Press


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