The coming decade may be a telling time for what has consistently been billed as the state's most economically diverse region. There are dark signs, but also bright opportunities.
On the down side, Cook Inlet oil production has fallen by a quarter since 1991, and a recent Kenai Peninsula Borough report says the industry's employment has fallen more than 13 percent. Tesoro Petroleum Corp. recently began a two-month study to determine whether it should close or sell its Nikiski refinery.
In fisheries, Ward's Cove Packing Co. closed its Kenai processing plant last year, and Icicle Seafoods Inc. has announced no plans to rebuild its Homer plant, which burned in 1998. Since 1990, the borough said, employment in seafood processing has declined nearly 30 percent.
Yet booming tourism helped spark a 50 percent increase during the 1990s in retail and wholesale jobs. Construction jobs have grown by nearly a third since 1990, and service jobs have increased by a fifth.
There are even signs for hope in the oil industry. Miami-based Forcenergy Inc. has emerged from bankruptcy and plans this summer to install Cook Inlet's first new offshore platform since 1986. The company hopes that will nearly double the inlet's oil production.
Alaska gained a whole new industry in 1998, when Native-owned Natchiq Inc., and its subsidiary, Alaska Petroleum Contrac-tors Inc., opened a yard in Nikiski to assemble sea-lift modules -- prefabricated buildings filled with oil field equipment that are too large to move on public highways.
The yard has been idle since shipment of the first lot of modules in July. But APC has proved that the peninsula is equal to the work.
In March, Natchiq plans to bid on construction of a module for Russia's Sakhalin oil field and hopes to build that in Nikiski. This winter, Arco began exploring for oil in the National Petroleum Reserve-Alaska. That also could bring business for the Nikiski yard.
Meanwhile, the borough has appropriated $50,000 to pursue creation of a foreign trade zone, which would allow duty-free import of raw materials and components for items manufactured here and sold abroad. That could help businesses such as APC, or foster new industries, such as assembly of computers from foreign components or the import of items for repair.
Perhaps the brightest star on the horizon is the borough's $100,000 effort to promote Nikiski, rather than Valdez, as the terminus for a pipeline to export North Slope natural gas. The main goal would be production of liquefied natural gas for export to Asia. That could mean construction in Nikiski of one of the biggest LNG plants in the world.
Access to North Slope gas also could increase the life of existing gas-dependent industries and foster a host of new ones, such as the manufacture of plastics or the refining of iron ore.
"There's hundreds of things you can do with natural gas," said Tom Boedeker, Soldotna city manager and president of the Kenai Peninsula Borough Economic Development District.
The borough's existing infrastructure is a plus, said Neal Fried, an economist for the Alaska Department of Labor. Without it, he said, there would be no discussion of Nikiski as the pipeline terminus.
Meanwhile, the state continues to upgrade peninsula highways. The city of Homer and the Alaska Railroad in Seward plan major dock improvements, and Seward plans a harbor expansion. In 1998, Homer Electric Association completed the $2.5-million installation of a fiber-optic cable from Homer to Soldotna. Chugach Electric Association hopes to build a $90 million electric transmission line between Anchorage and Soldotna.
Boedeker said such infrastructure improvements foster economic growth.
"We'd like to try to foster development of the telecommunications infrastructure," he said. "HEA's fiber-optic line opens up a lot of opportunities, but band-width out of the peninsula needs to be expanded."
There are fiber-optic connections from Anchorage to the Lower 48, he said, but there is a 100-mile gap between Anchorage and the end of HEA's line in Soldotna. The borough must close that gap to exploit information-age opportunities, he said.
"If the communications infrastructure is here, we can compete," he said. "If it's not here, we'll get bypassed."
Fried said that despite setbacks in particular industries, the peninsula continues to grow, if slowly, thanks to its economic diversity. Department of Labor reports say government -- particularly local government and borough schools -- accounted for a quarter of the borough's wage-and-salary jobs in 1998. Retail and wholesale trades accounted for nearly a quarter and services for a fifth. Construction accounted for 5.5 percent, and seafood processing for 4.9 percent.
Lucrative oil industry jobs accounted for 6.5 percent of wage-and-salary jobs but 12.3 percent of the borough's total payroll. The timber industry, which barely existed in 1990, employed more than 200 people in 1998. In 1997, peninsula commercial fishers earned nearly $69 million.
"But just because you're diverse doesn't mean you're the fastest growing," Fried said.
Peninsula employment grew by 7 percent per year in the 1970s, by 5 percent per year in the 1980s and by 2 percent per year in the 1990s, department reports said. Retailers added 1,200 jobs in the 1990s, accounting for 38 percent of wage-and-salary job growth.
Though the new Kmart and Fred Meyer stores were noticeable, most retail growth was among small businesses, particularly restaurants. The department credited the booming tourism for much of the retail growth.
According to department reports, nearly 1,200 fishing charter boats operated on the peninsula last year, and in 1993, the University of Alaska documented more than 200,000 fishing trips to the Kenai and Russian rivers. In 1998, more than 182,000 people visited Kenai Fjords National Park and more than 125,500 cruise ship passengers disembarked in Seward.
New attractions, such as the Alaska SeaLife Center in Seward and the Challenger Learning Center nearing completion in Kenai, add to the draw.
Also contributing to the retail boom, the borough's population grew by 2.3 percent per year in the 1990s. Meanwhile, the Labor Department said, there are signs that the peninsula is becoming a popular spot to retire.
On top of that, Fried said, peninsula residents have increasingly shopped here rather than in Anchorage.
"That's been an important trend in Alaska in the 1990s," he said. "It has a double-whammy effect. Those tax dollars stay. It generates more employment, and that generates more economic activity. Without that growth, the Kenai Peninsula and the state would have experienced very little growth in the 1990s, particularly in the last five years."
