Alaskans Set to Pocket Hefty Oil Dividend

Published November 18, 2011

Alaska residents will receive $1,174 each—more than $3,000 on average per household—in oil revenue disbursements this year from the state’s Permanent Dividend Fund, the Alaska Department of Revenue has announced. 

Created in 1976 through a constitutional amendment approved by the voters, the Permanent Dividend Fund is Alaska’s way of allowing residents to benefit from the oil revenues generated on federal land in their state. This year’s total dividend came to $760.2 million. To be eligible to receive a share of the money, a person must have lived in Alaska for at least one year.

Drilling Restrictions Reduce Payout

The amount the fund pays out to residents varies from year to year, with the fattest payment—$2,059 per resident—sent out in 2008. Federal restrictions on oil recovery in recent years have kept the annual dividend payment from reaching previous levels. 

The annual announcement of the size of the dividend has become a much-anticipated event in Alaska. Gov. Sean Parnell (R) was more than happy to do the honors this year by tearing open a gold-colored envelope to reveal the size of the 2011 dividend. 

Improvements Possible?

“The good news is that this is wealth that is rebated to the ‘people’ rather than lost to additional government expenditure,” said Robert L. Bradley Jr., CEO and founder of the Institute for Energy Research. “The bad news is that the royalty is from government land and thus has to go through a political process. This is obviously a privatization opportunity to reduce the size of government and to get economic rents into the hands of individuals who are directly involved.”

Nils Andreassen, managing director of the Anchorage-based Institute of the North, says he sees much good coming from the fund but doesn’t want Alaskans to take their natural resources for granted. 

“Alaskans are co-owners of 103 million acres of land, with the state’s responsibility to develop resources on that land for the maximum benefit of the people,” Andreassen said. “The Permanent Fund is a valuable mechanism for translating current wealth into a future, renewable resource. However, the dividend Alaskans receive as part of their ‘share’ has increasingly led to a sense of entitlement, with no real understanding of where it’s coming from.”

Other States Missing Out

Recent discoveries of oil and gas locked up in shale formations in many of the lower 48 states, along with recent improvements in drilling technology, are providing other states similar opportunities to revive their economies through energy production. 

“Some states, like Alaska, Texas, and North Dakota, have been taking advantage of these energy production opportunities to create jobs and wealth, yet other states are imposing environmentally unnecessary restrictions on oil and natural gas production,” said Heartland Institute Science Director Jay Lehr. “It is no secret that unemployment rates in Alaska, Texas, and North Dakota are substantially below the national average. Other states would be wise to follow their lead.”

Bonner R. Cohen, Ph. D. ([email protected]) is a senior fellow at the National Center for Public Policy Research.