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Technical Report
Number 38
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AlaskaOCS
Socioeconomic
m ~ Studies Program
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Sponsor:
Bureau of
Land Managemen t
A'JE Alaska Outer
rt 'I~-Continental Shelf
Office --~
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Western Gulf of Alaska
Petroleum Development Scenarios
Economic and Demographic Impacts
I "
The United States Department of the Interior was designated by the Outer
Continental Shelf (OCS) Lands Act of 1953 to carry out the majority of
the Act's provisions for administering the mineral leasing and develop-
ment of offshore areas of the United States under federal jurisdiction.
Within the Department, the Bureau of Land Management (BLM) has the
responsibility to meet requirements of the National Environmental Policy
Act of 1969 (NEPA) as well as other legislation and regulations dealing
with the effects of offshore development. In Alaska, unique cultural
differences and climatic conditions create a need for developing addi-
tional socioeconomic and environmental information to improve OCS deci-
sion making at all governmental levels. In fulfillment of its federal
responsibilities and with an awareness of these additional information
needs, the BLM has initiated several investigative pro$rams, one of
which is the Alaska OCS Socioeconomic Studies Program (SESP).
The Alaska OCS Socioeconomic Studies Program is a multi-year research
effort which attempts to predict and evaluate the effects of Alaska OCS
Petroleum Development upon the physical, social, and economic environ-
ments within the state. The overall methodology is divided into three
broad research components. The first component identifies an alterna-
tive set of assumptions regarding the location, the nature, and the
timing of future petroleum events and related activities. In this
component, the program takes into account the particular needs of the
petroleum industry and projects the human, technological, economic, and
environmental offshore and onshore development requirements of the
regional petro~eum industry.
The second component focuses on data gathering that identifies those
quantifiable and qualifiable facts by which OCS-induced changes can be
assessed. The critical community and regional components are identified
and evaluated. ,Current endogenous and exogenous sources of change and
functional organization among different sectors of community and region-
al life are analyzed. Susceptible community relationships, values,
activities, and processes also are included.
The third research component focuses on an evaluation of the changes
that could occur due to the potential oil and gas development. Impact
evaluation concentrates on an analysis of the impacts at the statewide,
regional, and local level.
In general, program products are sequentially arranged in accordance
with BLM' s proposed OCS lease sale schedule, so that information is
timely to decisionmaking. Reports are available through the National
Technical Information Service, and the BLM has a limited number of
copies available through the Alaska OCS Office. Inquiries for informa-
tion should be directed to: Program Coordinator (COAR), Socioeconomic
Studies Program, Alaska OCS Office, P. 0. Box 1159, Anchorage, Alaska
99510.
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TI.CIINIC/\1. I{Lf~Oin NO. JH
ALASKA OCS SOCIOECONOMIC STUDIES PROGRAM
WESTERN GULF OF ALASKA PETROLEUM DEVELOPMENT SCENARIOS:
ECONOMIC AND DEMOGRAPHIC IMPACTS
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(1"'a··-R A R~y;-;----
• HABITAT DIVISION
AlASKA o:::pT OF FISH ~ . & GAME
333 Raspberry Road
Anchorage, Alaska 99502
PREPARED FOR
BUREAU OF LAND MANAGEMENT
ALASKA OUTER CONTINENTAL SHELF OFFICE
DOCUMENT IS AVAILABLE TO THE PUBLIC THROUGH THE
NATIONAL TECHNICAL INFORMATION SERVICE
5285 PORT ROYAL ROAD
SPRINGFIELD, VIRGINIA 22161
III
NOTICE
This document is disseminated under the sponsorship of the
U.S. Department of the Interior, Bureau of Land Management,
Alaska Outer Continental Shelf Office, in the interest of
information exchange. The United States Government assumes
no liability for its content or use thereof.
ALASKA OCS SOCIOECONOMIC STUDIES PROGRAM
WESTERN GULF OF ALASKA PETROLEUM DEVELOPMENT
SCENARIOS: ECONOMIC AND DEMOGRAPHIC IMPACTS
Prepared by
Lee Huskey and William Nebesky
Institute of Social and Economic Research
University of Alaska
August 1979
IV
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LIST OF TABLES
LIST OF FIGLJf{ES
INTRODUCTION
Background .
The Purpose of the Study
Study Design
Overview.
TARLE OF CONTENTS
THE ALASKAN ECONOMY, 1965-1976
Introduction
Growth of Aggregate Indicators
The Causes of Growth.
Structural Change in the Alaskan Economy
Population .
Unemployment
Personal Income
Summary: The Effects of Economic Growth
Existing Economic Conditions .
\ ' .
The Economies of the Gulf of Alaska Region,
The Causes of Growth
1965-1976'
Summary .
THE ALASKAN ECONOMY IN THE BASE CASE
The Purpose of the Base Case .
Base Case Assumptions
The Alaskan Economy t~oderate Base Case Growth
Alternative Base Cases .
Summary and Conclusions.
THE IMPACT OF WESTERN GULF OCS DEVELOPMENT
ON THE ALASKAN ECONOMY: THE MODERATE BASE CASE
The Development Scenarios .
Definition and Measures of Impact
Summary of the Moderate Base Case
The Impacts of Western Gulf OCS Development: Mean Scenario
The Impacts of Western Gulf OCS Development: 5% Scenario
The Impacts of Western Gulf OCS Development: 95% Scenario
Summary and Conclusions.
v
vii
xiii
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. .35
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48
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63
107
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129
161
173
175
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188
191
192
. 224
• 230
232
TilE IMP/\CT OF WESlTI~N GULF OCS DEVELOPMENT:
TilE CUMULATIVE C/\SE 0
The Impact of \~estern Gulf OCS Development
at the 5X Level: The High Base Case . 0
The Impact of Western Gulf OCS Development
at the 95% Level: The Low Base Case 0
SENSITIVITY ANALYSIS
Sensitivity to Major Changes in the Base Case .
The Sensitivity to State Expenditure Pol icy .
SUMMARY AND CONCLUSIONS
APPENDIX A: HISTORICAL GROWTH, 1965-1976
APPENDIX B: MAP MODEL ASSUMPTIONS .
APPENDIX C: A PROCEDURE TO DETERMINE THE SHARE OF OCS
EMPLOYMENT TO ALASKAN RESIDENTS .
APPENDIX D: SELECTED MODEL OUTPUT .
APPENDIX E: CENSUS DIVISION PROJECTIONS .
REFERENCES .
VI
235
235
. 242
. 245
. 246 . 248
. 257
. 261
\ 257 . ' .
287
. 295
359
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LIST OF TABLES
1. Growth of Employments Population, and Personal
Income, Alaska, 1965-1976 .
2. Alaska Economic Grmvth by Sector, 1965-1976
3. Alaska Fisheries Activity, 1970-1975 .
4. State Real Per Capita Operating and Capital
Expenditures, 1970-1977.
5. The Effect of Structural Change, Alaska, 1965-1976
6. Distribution of Employment, Alaska,
1965, 1970, 1975, and 1976.
7. The Economic Structure of Small States
8. Economic Structure of Small States, 1977.
9. Population Growth, Alaska, 1965, 1970-1976 .
10. Alaska Population Age-Sex Distribution, 1970, 1976
11. Unemployment, Alaska, 1965-1976.
12. Seasonality of Employment, Alaska,
1950, 1960, 1965. 1970, 1975, and 1976.
13. Anchorage Consumer Price Index .
14. Alaska Growth of Real Per Capita Income, 1965, 1970-1976
15. Growth of Employment, Population, and Personal
Income, Anchorage, 1965-1976 .
16. Civilian Employment Growth, Anchorage, 1965-1976 .
17. Location Quotients, Anchorage, 1965, 1970, 1975, 1976
18. Anchorage Basic Sector Growth, 1965, 1970,
1973, 1975, and 1976.
19. Anchorage Distribution of Employment,
1965, 1970, and 1916.
20. Anchorage Population Growth, 1965, 1970-1976
VII
19
25
30
33
38
39
41
42
46
47
49
51
53
54
62
64
68
70
72
74
21. Anchor-age Age Distribution of Nonmilitary l3ase Populiltion
2?.. /\nchOt'll~Je UnelllploynJent and SeasorwlHy, ·1%~>. 1970-1976.
23. Anchorage Growth of Real Per Capita Income, 1965, 1970~1976
24. Growth of Employment, Population, and Personal Income,
Southcentral Region, 1965-1976
25. Employment by Industry, Southcentral Alaska.
26. Estimated Fish Harvesting Employment .
27. Basic Sector Growth, Southcentral Alaska, 1965, 1970,
1973, 1975, and 1976.
28. Employment Distribution by Industry, Southcentral
Alaska, 1965, 1970, and 1976 .
29. Population Growth, Southcentral Alaska, 1965, 1970-1976.
30. Unemployment and Seasonality, Southcentral Alaska,
1965, 1970-1976
31. Growth of Real Per Capita Income, Southcentral Alaska,
1965, 1970-1976
32. Growth of Aggregate Indicators, Small Economies,
1965. 1970, and 1976.
33. Distribution of Intrastate Flows of Freight and
Mail from Southcentral Origins, 1973
34. The Structure of Local Economies
35. Lower Cook Inlet Employment Scenarios.
36. Beaufort Sea OCS Employment Scenarios.
37. Northern Gulf of Alaska OCS Employment Scenarios
38. Aggregate Indicators of Economic Growth, Moderate
Base Case, Alaska, 1977-2000 .
39. The Structure of Employment, Moderate Base Case,
Alaska, 1978, 1980, 1985, 1990, 1995~ 2000
40. The Components of Population Change, Moderate Base
Case, Alaska, 1977-2000.
VIII
76
71
79
82
84 4
87
89
91
93
95
96
99
102
105
120
121
122
131
135
138
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41. Age-Sex Structure of the Population, Moderate
Base Case, Alaska, 1980, 2000.
42. Real Per Capita Income, Moderate Base Case,
Alaska, 1977-2000.
43. State Revenues, Moderate Base Case, Alaska, 1977-2000
44. State Expenditures, Moderate Base Case, Alaska, 1977-2000
140
141
144
146
45. State Fund Balances, Moderate Base Case, Alaska, 1977-2000. 149
46. State Fiscal Position, Moderate Base Case, Alaska, 1977-2000
47. Aggregate Indicators of Economic Growth, Moderate Base
Case, Anchorage, 1977-2000.
48. Economic Structure, Moderate Base Case, Anchorage.
49. Aggregate Indicators of Economic Growth, Moderate Base
Case, Southcentral, 1977-2000. \
50. Economic Structure, Moderate Base Case, Southcentral.
51. Aggregate Indicators of Economic Growth, Low Base Case,
Alaska, 1977-2000.
52. Structural Characteristics, Lriw and Moderate Base Cases.
53. Aggregate Indicators of Economic Growth, High Base
Case, Alaska, 1977-2000.
b4. Structural Characterist·lcs, Hlyh and Moderdle Bct~e Cctses
55. Estimated Share of Alaska Resident Employment by OCS Task
56. Direct Employment Requirements~ Mean Scenario
57. Direct Employment Requirements, 5 Percent Scenario
58. Western Gulf OCS Property Tax Revenues ..
59. Direct Employment Requirements, 95 Percent Scenario
60. Employment Impact, Western Gulf OCS Mean Scenario, Alaska
61. The Structure of the Economy, Mean Scenario, Alaska .
62. Population Impact, Western Gulf OCS Mean Scenario, Alaska
IX
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180
< 183
186
187
189
196
198
200
63. The Migration Component of Population Change,
Western Gulf ~1ean OCS Scenario, 1981-1992
64. Age-Sex Structure of the Population, Western Gulf
Mean OCS Scenario, Alaska .
65. Personal Intome Impact, Western Gulf OCS
Mean Scenario, Alaska
66. Real Per Capita Income Impact, Western Gulf OCS
Mean Scenario, Alaska
67. State Revenue Impact, Western Gulf OCS
Mean Scenario, Alaska
68. State Government Expenditure Impacts, Western Gulf
OCS Mean Scenario, Alaska . .
69. Impact on State Fiscal Position, Western Gulf OCS
Mean Scenario, Alaska
70. Impact on Aggregate Indicators of Economic Growth,
Western Gulf OCS Mean Scenario, Anchorage
71. Economic Structure, Western Gulf OCS Mean Scenario,
Anchorage
72. Impact on Aggregate Indicators of Economic Growth,
Western Gu 1 f OCS Mean Scenario, Southcentra 1 , .
73. Economic Structure, Western Gulf OCS Mean Scenario,
Southcentral
74. The Impact on Major Economic Indicators, Western
Gulf OCS 5 Percent Scenario, Alaska.
75. Structural Characteristics of the Alaska Economy,
Western Gulf OCS 5 Percent Scenario
76. The Impact on Major Economic Indicators, Western
Gulf OCS 95 Percent Scenario, Alaska
77. The Impact on Major Economic Indicators, Western
Gulf OCS, 5 Percent Scenario/High Base Case
78. Structural Characteristics of the Alaska Economy,
Western Gulf OCS, OCS-Moderate Base Scenario/
5 Percent OCS-High Base Scenario.
X
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79.
80.
81.
82.
83.
84.
The Impact on Major Economic Indicators, Western Gulf
OCS 95 Percent Scenario/Low Base Case 244
Capital Move Scenario . 247
The Impact of Western Gulf OCS Development
With Three Alternative Base Cases:
Basic Case, No-ALCAN Construction,
and the Capital Move, Mean Scenario 249
The Effect of Alternate State Expenditure Policies
on the Impact of Western Gulf OCS
Development, Mean Scenario 251
The State Expenditure Impact, Western Gulf OCS
Mean Scenario . 255
Summary of the Long-run Impacts of Alternative
Development Scenarios (Impacts in the Year 2000) . 260
XI
XII
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LIST OF FIGURES
1. Structure of the Basic MAP Model
2. MAP Regions .
3. Alaska Census Divisions
4. Western Gulf of Alaska,
Location of Study Area
5. Determination of OCS Employment
Estimates Used in the MAP Model
XI II
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I. INTRODUCTION
Ba~ound
The United States, because of the progressive depletion of U.S. petro-
leum reserves, has become increasingly reliant on foreign energy supplies.
Concern over the reliability of these foreign supplies has led the fed-
eral government to establish policies aimed at increasing domestic energy
supplies. Because of its high potential as a source of oil and gas, the
U.S. Outer Continental Shelf (OCS) figures significantly in the future
energy program of the United States.
Although Alaska has historically played a small role in the U.S. energy
supply, production at Prudhoe Bay and future development of the Alaska
OCS will increase its importance. It has been projected that by 1985
over 25 percent of total domestic crude oil production could be from
Alaska {Federal Energy Administration, 1976). Through 1974, Alaska had
produced only one percent of the total cumulative petroleum production
in the United States (U.S. Geological Survey, 1975); however, the devel-
opment of existing oil and gas reserves and the exploration for additional
reserves will center importantly on Alaska. Alaska accounts for over
one-fourth of the identified oil and gas reserves in the United States,
and an estimated one-third of all undiscovered recoverable domestic oil
reserves are in the state. Since over 60 percent of the estimated
undiscovered OCS reserves in the United States are in Alaska, Alaska is
particularly important to the OCS program (U.S. Geological Survey, 1975).
The development of Alaska•s petroleum reserves is also important to the
Alaskan economy. Changes produced by past petroleum development in the
state have been major. The rapid changes in the Alaska economy and popu-
lation associated with the development in Upper Cook Inlet and Prudhoe
Bay created strains on the Alaskan society and environment. At the same
time, these developments generated the most prosperous economic period
in the state•s history as well as prospects of continued prosperity
through the next decade. The development of petroleum reserves in
Alaska•s OCS will also affect the population and economy of Alaska.
The Purpose of the Study
The nature of the changes which result from Alaskan OCS development will
not necessarily t'esemble those caused by past petroleum development. One
objective of the current study being undertaken by the Institute of
Social and Economic Research (ISER) for the Bureau of Land Management•s
OCS Studies Program is to provide the information needed to anticipate
the major dimensions ot the economic and sue ictl iHIIJaL-ts of the proposed
oil and gas developments in the Western Gulf of Alaska. To achieve
this objective, ISER will provide a series of economic and population
forecasts through 2000 under several alternative scenarios for petroleum
development in the Western Gulf. By contrasting these forecasts with a
base case forecast which does not include the proposed development, it
is possible to assess the major dimensions of the impacts of OCS develop-
ment on population, employment, income, and the state•s fiscal position.
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This study is part of the Bureau of Land Management•s Alaska OCS Socio-
economic Stucl·ies Program. The objective or this rro~Jram is to ass('SS
the potential impacts of proposed lease sales in the federal offshore
areas of Alaska. The study of the impacts of OCS development in the
Western Gulf of Alaska is one of a series of studies describing lease
sale impacts. Already completed is a study of the impact of the joint
federal-state sale in the Beaufort Sea (ISER, 1978) and the federal sale
in the Northern Gulf (ISER, 1979); future studies will be conducted for
lease sales in the Lower Cook Inlet and the Bering Sea-Norton Sound.
The studies program is concerned with many aspects of OCS impact on many
different levels. The major objective of this study i~ to examine only
a portion of OCS impact, the statewide and regional economic and demo-
graphic impacts.
In order to assess the impact of the proposed Western Gulf OCS develop-
ment, the study must accomplish two additional objectives. First, an
understanding of the existing state and regional economies must be de-
veloped. The important economic relationships need to be understood in
order to say anything about future growth and the effect of OCS develop-
ment on the economy. Secondly, the study will develop a process for
economic impact assessment. Rapid growth associated with OCS development
will affect most economic variables; a much smaller number is important,
and information on these dimensions of impact will describe the ~ffect
of rapid growth on the state and regional economies. The process of
economic impact assessment will consist of the selection of the nmjor
variables to analyze and the appropriate questions to ask about each
of these.
3
Th·is study consists of three major· parts: a baseline study of the
economies of the state and its Gulf of Alaska region, a base case projec-
tion describing the future economy without Western Gulf development, and
an examination of the impact of Western Gulf development. This section
describes the relationship of each of these parts to the impact assessment
and the methodology chosen to make the necessary projections.
EXAMINATION OF PAST ECONOMIC GROWTH
Examining the past growth of the Alaska economy and the economy of the
Gulf of Alaska region provides an understanding of the'..way the economy
works. This type of examination is implicit in the development of eco-
nomic models. Making this analysis explicit will emphasize those aspects
of economic growth which are important. The two aspects of the economy
which will be emphasized in such a process are the important causes of
growth and the economic relationships which transfer growth between
sectors of the economy. An examination of the historical pedod will
provide an indication of the types of response we can expect to OCS
petroleum development. In addition, the historical grawth and develop-
ment of these economies provide a point of comparison for future economic
growth, both OCS and non-OCS related.
THE BASE CASE
Petroleum development in the Western Gulf of Alaska will affect both
the structure and size of the Alaska economy. Changes in the economy
which result from the development of the OCS resources can be defined
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as the impact of this development. This impact can only be described
as changes from a certain pattern of economic growth which would have
occurred without OCS development. The non-OCS base case is developed
to provide a reference point for the analysis of the impacts of OCS
development. Comparing a projection of economic activity with OCS
development to the base case will isolate the impacts of development.
THE ROLE OF SOCIOECONOMIC PROJECTIONS
The uncertainty of the future, though it may increase the problems associ-
ated with making projections, increases the importance of these projections.
Decision makers in both the public and private sectors need information
about the future in order to plan their actions. The more uncertain the
future events, the more important is some projection of them. Projections
serve two important purposes--they serve as a means of determining future
demands and needs for services, and they allow policy makers to test the
alternative effects of various policies.
Models are used to test the relative efficiency of alternative policy
choices. When models explicitly include policy variables, such as tax
rates, or variables directly affected by policy, such as the level of
petroleum employment, they can be used to test the effects of policies
described by these variables. By making separate projections under vari-
ous assumptions about policy choices, the effects on important variables
such as population or employment can be compared. Alternative policy
choices can be compared in terms of their relative costs and benefits.
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Projections increase the information available to decision makers for
making policy choices. Many present policy choices have important future
implications which must be considered by policy makers. For example,
current policy decisions regarding Western Gulf OCS petroleum develop-
ment will have their major effect in the middle of the next decade. By
providing descriptions of the most probable future levels of important
variables, socioeconomic projections serve as a framework for making
policy choices.
METHODOLOGY
This section describes the methodology used to make the projections of
Alaskan economic growth in both the base case and OCS development cases.
Two econometric models, statewide and regional econometric models, are
used to make the projection. This section will describe the models used
and their strengths and weaknesses.
The Statewide Econometric Model
The basic model to be utilized in the analysis of the OCS development
scenarios is the statewide econometric model of the Alaskan economy
developed in the Man-in-the-Arctic Program (MAP) presently being con-
ducted by the Institute of Social and Economic Research of the University
of Alaska. There are three comporients of this model: an economic model,
a fiscal model, and a demographic model. The basic structure of the model
is shown in Figure 1.
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The economic model is divided into exogenous or basic sectors and endoge-
no us or nonbas i c sectors. The 1 eve 1 of output, in the exogenous sectors
is determined outside the state•s economy. The primary reason for the
nonbasic sector is to serve local Alaskan market~, so the level of out-
put is determined within the Alaskan economy. The basic industries in
the model are mining, agriculture-forestry-fisheries, manufacturing,
federal government, and the exogenous components of construction and
transportation. The model can accommodate exogenous sectors in other
industries, such as a tourist sector in services. The nonbasic industriE;s
are transportation-communication-utilities, wholesale and retail trade,
finance-insurance-real estate, services, and the remainder of construction.
In the model, industrial production determines the demand for labor and
employment; employment is that level needed to produce the required output.
Employment and the wage rate determine wages and salaries, the most impot·t-
ant component of personal income. The Alaskan labor market is an open one
with equilibrium achieved through migration of individuals. Because of
this, the most important determinant of Alaskan wage rates are U.S. wage
rates; wages are also affected by rapid growth of employment in Alaska.
An estimate of disposable personal income is made by adding an estimate
of nonwage income to wages and salaries and adjusting this by deducting
income taxes. The level of real disposable income is found by deflating
disposable personal income by a relative price index; the major deter-
minants of Alaskan prices are U.S. prices, the size of the economy, and
the growth rate of the economy. Incomes determine the demand for local
production; incomes and output are simultaneously determined.
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Population is detennined based upon a projection of each of its components--
births, deaths, and migration. The model uses a~e-sex-race specific sllr-
vival rates and age-race specific fertility rates to project births and
deaths for the civilian population. Total civilian population is found
by adding civilian net migration to the natural increase. Net migr~tion
is determined by the relative economic opportunities in Alaska. In the
model, these are described by employment changes and the Alaskan real
per capita income relative to the real per capita income of the United
States. An exogenous estimate of military population is added to deter-
mine total population.
\
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The fiscal model, which provides important pieces of information for the
economic model, also provides a framework for analyzing the effects of
alternate fiscal policies. The fiscal model calculate~ personal tax pay-
ments in order to derive disposable personal income. The fiscal model,
based on an assumed state spending rule, also calculates personnel ex-
penditures, state government employment, and the amount spent on capital
improvements which determines a portion of employment in the construction
industry. All three submodels are linked through their requirement for
information produced by the other submodels.
The Regional Econometric Model
The regional model provides an allocation of employment, income, and
population in the state to seven regions of the state. These regions
are shown in Figure 2. The economic component is similar in each region
to that of the state model. The major difference is that some regional
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FIGURE 2. MAP REGIONS
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economies are influenced by economic activity in other regions; the most
notable of these is Anchorage. The demographic component of the regional
model is much simpler than that component of the state model. Regional
population is estimated as a function of employment. Regional population
is estimated in two components--enclave and nonenclave population. A
weighted average of the nonenclave population to nonenclave employment
ratio for the state and the lagged value in the region is multiplied by
the nonenclave employment to estimate nonenclave population in the current
year. The weights used to determine regional population in this study
equal the proportion of state population for the lagged regional popula-
tion to employment ratio and one minus this proportion for the state ratio.
Enclave employment is added to nonenclave population to determine total
regional population. Enclave employment includes the military and major
construction projects such as the trans-Alaska pipeline. , The regional
model has no fiscal component and must accept an exogenous pattern of wage
and salary payments to state and local government workers. Usually the
pattern of wage and salary payments used is taken from a similar state
model projection. Estimates of regional employmeht, population, and
income in the regional model are constrained to total to equivalent
variables from the state model results.
STRENGTHS AND LIMITATIONS
The models used in this analysis have several strengths and weaknesses
which must be considered when examining the reported results. The prin-
cipal strength of the MAP models is that they capture the essence of
the Alaska growth process. Export base industries and government
11
create growth directly through IIi r·i ng and i ndi rcctly thl~ough tile demand
generated by their employees for l0cally produced goods and services.
Incomes earned by these export base workers and the workers who supply
the goods and services provide the base of the economy.
Compared to two alternative forms, the economic base and input-output
models, the econometric specification of the MAP model type is preferred
since it captures the dynamics of industry growth. The economic base
model is useful for projecting marginal changes but assumes that changes
in the support sector are proportional to changes in basic sector employment.
This misses both the feedback effect of the growth of the support sector
incomes and the change in the responsiveness of th~ support industries
over time. While input-output models more precisely define the inter-
industry flows of purchases of goods and services, they represent the
economy only at a particular point in time. The econometric approach
·can capture some of the changing relationships over time, as these are
described by historic changes or incorpm~ated by the modeler.
The limits on the econometric method define the limits on the acceptance
of the resulting projections. No model is able to capture revolutionary
changes which violate the assumptions upon which the model is built, un-
less structural change has been foreseen and incorporated by the modeler.
The limitations of the model increase the more the model is extended into
the future and the more locationally precise the model is expected to be.
In other words, more confidence should be placed in the 1985 results than
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in those for 1995, and statewide projections are more likely to be "con·ect"
than regional results.
Another important limitation of this model is that the projections should
be considered contingent. The accuracy of the projections depends on
the continued relevance of the model's historical structure and the
accuracy of the assumptions about the level, timing, and distribution of
the exogenous variables. One result of this contingency is that the pro-
jections may-not necessarily agree with the actual levels of the projected
variables for any given year. Projections are based on the average
historical relationships between the projected variabl~s and important
exogenous variables. This leads to two reasons why projections in any
year may differ from the actual levels of projected variables. First,
estimates of the level of important exogenous variables may differ from
the actual levels. Secondly, in any given year, the relation between
projected and exogenous variables may differ from the historical average.
Cyclical effects may cause yearly divergence from the general trend of
economic growth. The relationships described by the model, while they
may not predict actual levels in any particular year, describe the
general trend of future Alaskan economic growth.
The final limitation of the results concerns the projection of the regional
distribution of state growth. These results are merely allocations of
the projected statewide totals to the regions. This should not be assumed
to be a detailed analysis of the regional economies and should not replace
such analysis.
13
ASSUMPTIONS
Once the model is given, the base case is defined by th(~ assumptions
about the future levels of the exogenous variables. There are four
major types of assumptions required to define a development scenario.
First, there are assumptions about the growth of exogenous industries in
both the petroleum and nonpetroleum sectors. Secondly, assumptions about
the level of state petroleum revenues are needed. Thirdly, assumptions
about the change in certain national variables are needed. Finally, an
assumption must be made about the way state expenditures grow in the
future.
\
GENERAL METHODOLOGY FOR ANALYSIS
The general approach to be pursued in the analysis of the impacts of
Western Gulf OCS development will be as follows: A se~ of scenarios
will be developed which contain no Western Gulf OCS development.
These scenarios will be run using the MAP model and will serve as points
of comparison for each alternate Western Gulf scenario. Each of the
Western Gulf development scenarios will then be run. Each of these
runs will then be compared to the appropriate base run to examine the
impact of this hypothetical development on the major dimensions of the
Alaskan economy.
Overview
The remainder of this report will analyze the historical growth of
the state and regional economies and the projections of future growth,
both with and without OCS activity in the Western Gulf. The effect of
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alternative Western Gulf development scenarios will be exam·ined. Part II
describes the historical growth in Alaska and its Gulf of Alaska region.
Part III presents the projection of economic activity in a base case
which contains no offshore activity in the Westerl'l Gulf~ Parts IV-VI
then describe the impacts of alternative Western Gulf development scenarios.
Part VII attempts to capture the uncertainty attached to these estimated
impacts by examining the sensitivity of the results to several of the
uncertain elements of the scenario. Finally, Part VIII summarizes our
major findings.
15
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II. THE ALSAKAN ECONOMY, 1965-1976
Introduction
The historical period serves as a point of reference for discussing poten-
tial future growth. Examining past economic changes provides us with
information not only on what happened, but also on how things happened.
By understanding how things happened in the past, we can acquire an under-
standing of the process of growth in the Alaskan economy. Without some
specific assumption about how this process would change in the future,
we would not expect the future growth to be qualitatively different.
Knowledge of the changes in the levels of and the relationships between
economic variables in the past allows us to assess the possible future
economic effects of potential changes.
In this section, we will examine the Alaskan economy between 1965 and 1976.
This was a period associated with tremendous growth and was chosen to pro-
vide a long-te\~m look at the changes in the economy. ThP pPriorl r.ontnins
three significant events: the major Upper Cook Inlet oil development, the
Prudhoe lease sale, and the construction of the trans-Alaska oil pipeline.
-we--are interested in the comparative ac:tivity in three separate_p_e_riod_s:
before 1970, after 1970, and 1973-1975 (the peak years of Trans-Alaska
Pipeline System (TAPS) construction). The Prudhoe Bay lease sale in 1969
marked the beginning of Alaska as a major petroleum economy. Comparing
the economy before and after this date will illus\rate the effects of
this change. The years 1973 to 1975 are the years of most rapid expan-
sion of TAPS construction. Examining this period in comparison with the
17
entire post-1970 period will allow us to assess the short-run response
of the economy to this rapid expansion.
This section has three objectives. The first objective will be to describe
what happened during this period in terms of major economic variables.
The second objective of this section will be to describe the Alaskan
economy's growth process. The growth process includes both the factors
causing growth and the response of the economy to these changes. Finally,
we will attempt to describe the effects of the past growth on indicators
of economic welfare such as unemployment and per capita income. Gaining
an understanding of the economy during this period wilJ allow us to under-
stand better the probable effects of future potential OCS activity.
Growth of Aggregate Indicators
Economic growth is a multidimensional process for which" there is no single
summary measure of either the level of growth or the welfare associated
with that growth. Economic yr·uwLh is usually defined in tm~ms of thC!
change in the level of certain economic indicators. This is only one aspect
of growth; the effects of growth on the process of change and the level of
economic welfare are also important. This section will describe the change
in some major economic variables, while the other aspects of growth will
be discussed later. Table 1 describes the change in the level of three
aggregate indicators of economic activity: employment, population, and
personal income. These do not exhaust all of the possible indicators of
economic activity, but they do describe the general economic trends during
the period.
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TABLE 1 . GROWTH OF EMPLOYMENT, POPULATION
AND PERSONAL INCOME, ALASKA
1965-1976
1 2 Personal Income 3
Population Employment ($ Million)
1965 265,192 70,530 858
1970 302,361 92,476 1 .412
1971 312,930 97,584 1 ,557
1972 324,281 104 ,243 1 .698
1973 330,365 109,851 2,008
1974 351 ,159 128,178 2,436
1975 404,634 161 ,313 3,514
1976 413 ,289 171,714 4,133
Annual Average
Percent Change
1965-1976 4.12 8.43 15.36
1970-1976 5.35 10.87 19.60
1All estimates State of Alaska Department of Labor, Research and
Analysis Section, Population Estimates by Census Division, except 1970
which is April 1970 Census of Population.
2Alaska Department of Labor, Statistical Quarterly, various years.
3u.s. Department of Commerce, Bureau of Economic Analysis, Regional
Economic Information System, July 1978 printout.
19
1 Population grew at an annual average rate of 4.1 percent throughout the
period. The state experienced over a one percent greater growth rate
in population after 1970. Of the growth in population between 1965 and
1976, over 75 percent occurred after 1970. The most rapid increase
occurred during the period of trans-Alaska pipeline construction when
total population increased by 15.2 percent between 1974 and 1975.
Growth in population is determined by the growth in employment. Total
nonagricultural wage and salary employment grew by almost 150 percent
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between 1965 and 1976. Employment growth averaged a rate of 8.43 percent ~
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per year during the period. After 1970 employment grew at a faster aver-
age rate of 10.9 percent per year. More than 78 percent of the growth in [~
employment occurred after 1970.
Personal income is the final measure of aggregate economic growth. Per-
sonal income is shown in Table 1 in nominal dollars. Its growth reflects
both real economic growth and Lhe increases in prices. Nominal personal
income increased at an average rate of 15.4 percent per year throughout
the period. As in population and employment, the major growth in personal
income occurred after 1970.
1The average annual percent change or average annual rate of growth
is used extensively throughout this paper as an indicator of the function-
ing of the economy. This term is equal to that yearly percentage change
which would have to occur to obtain the year-end projection. This indicator
is calculated as follows: Let B = A(l+r)t where A and B are the start and
end values of some variable; t is equal to the duration of the period of
interest; and r is the average annual percent change. Given A, B, and t,
solve for r.
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Overall, these aggregate indicators illustrate a rapidly growing economy.
The major growth in the period occurred after 1970 when the economy was
influenced significantly by the construction of the trans-Alaska pipeline.
Growth in the population occurred at a rate which was slower than the
growth of either employment or personal income.
The Causes of Growth
Three major events shaped the growth of the state during this period.
The first was the development of the Upper Cook Inlet oil and gas fields
during the late sixties. The second major event was the Prudhoe Bay lease
sale in 1969, which produced a major source of revenue\for the state and
began an era when the state became a major oil producer. Finally, the
construction of TAPS beginning in 1974 led to the most rapid growth during
the period. This section will examine the Alaskarl gro~th process in an
attempt to relate these events and other factors to the/growth of the
Alaskan economy.
Traditionally, the growth of regional economies is described by economic
base theory; the practical application of this theory is widely used in
regional analysis. Economic base theory states that a region grows pri-
marily as a re?ult of increased export activity to other regions. The
demand for these exports is not influenced by activity within the region,
so the level of economic activity is fixed by external factors. The
local support sector exists to serve the basic sector and the population
associated with it. Growth occurs as a two-part process; the expansion
of the export sector leads to an expansion of the local support sector.
21
One of the strongest statements in support of this theory was made by
North. He argued that the growth of exports was the most important
reason for growth in a region; he presented economic base theory as a
long-run theory of economic growth (North, 1955). In response, ,Tiebout
argued this theory was not a theory of economic development and it was
only valid in the short run. Tiebout pointed out that nonexport sectors
such as government and local investment may generate growth even in the
short run. Tiebout argued that the importance of exports as a determi-
nant of regional income is inversely related to the size of the region
(Tiebout, 1956). Anything whi~h increases regional income would lead to
economic growth through the expansion of the support sector. Tiebout
expanded the explanation of the causes of growth. Regional growth may
result not only from an expansion of th.e export base but a 1 so from
improved technology, an increase in trade within the local economy, and
the expansion of nonexport sectors. This section will attempt to assess
the role of each of these factors in the growth of the Alaska economy.
BASIC SECTOR GROWTH
The growth of the export base or basic sector is one of the major causes
of economic growth. The basic sector was still a major force determining
the growth of the Alaskan economy during the period between 1965 and 1976.
This section will examine the growth of the various industries which make
up the Alaskan basic sector. By examining the growth in each industry,
we can see the relative importance of the basic sector to Alaskan economic
growth.
22
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A major problem in examining the relation between the economy•s basic
sector and its growth is determining which industries in a region are
basic industries. Traditional multiplier analysis is importantly depen-
dent on this, since the size of the multiplier is determined by this
disaggregation. The problem arises because every industry has both basic
and nonbasic sectors. An Alaskan example is the construction industry
which includes a basic component such as pipeline and federal government-
sponsored construction, a nonbasic component such as housing construction,
and an investment component which is exogenous in the short run while it
is endogenous in the long run. Even an important support sector industry
such as services has a relatively large basic component in hotel and motel
service which serves the tourist industry.
Many methods exist for defining industries as either basic or nonbasic.
Leven suggested that, other than conducting a survey, most traditional
methods for separating these sectors incorrectly estimate the importance
of the basic sector (Leven, 1964). In this section, we will determine the
basic sector by definition. Those industries where the level of activity
is affected most significantly by external factors will be considered
basic industries. Mining, agriculture-forestry-fisheries, manufacturing,
federal government, and construction are basic industries. The demand for
. the products of both mining and agriculture-forestry-fisheries is deter-
mined in national and international markets not within the Alaskan economy.
The most important components of manufacturing are food processing and
petrochemicals which are extensions of the fishing and mining industries.
The level of federal government activity in Alaska is determined by
23
decisions made outside the state. Construction has both basic and non-
basic components; however, major changes in cons truct·i on activity are
determined by outside agencies and firms. The most important recent
example of this is the construction of the trans-Alaska pipeline.
Table 2 illustrates the growth of the Alaskan economy by sector. Industry
growth is described by the growth of employment and wages and salaries.
Growth of employment i 11 ustrates the direct effect of the industry on the
growth in the number of jobs. Wages and salaries are an important component
of both personal income and industrial output. This measure allows us to
estimate the broader effect of the industry on the economy. The growth
in wages and salaries can differ from employment growth for three reasons.
First, the growth of wage rates can differ between industries. Wage rates
are determined by the industrial productivity, as well as differential
demand. Secondly, the hours worked in different industries could differ.
·During the construction of the TAPS, the hours worked increased consider-
dbly 111 construction, raising average wages becausP nf nvPrtime. Finally,
wages and salaries can increase at a different rate than employment because
the composition of industrial employment changes.
The distinction between employment and wage and salary growth is important
when examining the relative growth of the basic sector. Overall employment
in the basic sector grew much less rapidly than the remainder of the economy
in all but the pipeline years, 1973-1975. Between 1965 and 1976, basic
·sector employment increased at an average annual rate of only 2.9 percent
per year, compared to 6 percent for the entire economy and 10.2 percent
24
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TABLE 2. ALASKA ECONOMIC GROWTH BY SECTOR
1965-1976
Average Annual Rate of Change
1965 -1976 1970 -1976
Wages & Wages &
1973 -1975
Wages &
Em~loyment Salaries Em~lo~ment· Salaries Em~lo:tment Salaries
Basic Sector 1 2.9 16.7 4.7 23.6 13.8 54.2
Mining 12.5 23.1 -4.9 16.3 37.8 68.8
Construction 15.2 29.1 27.9 50.6 82.2 157.8
Manufacturing 4.6 11.1 4.7 13.0 1 . 1 15.5
F edera 1 Civil ian .3 7.6 .8 8.0 3.5 12.7
Federal Military -2.7 5.7 -4.1 4.3 -4.1 2.5
Support Sector 10.2 18.6 12.3 24.1 23.7 52.5
Transportation-
Comm.-Util ities 7.4 16.9 9.6 22.8 26.0 58.7
Trade 9.7 16.4 10.2 19.3 19.7 38.9
Finance-Insurance-
Real Estate 11.2 18.5 14.8 24.4 18.1 30.3
Services 12.6 24.3 16.0 30.9 28.5 68.1
Other
State Government 6.6 15.7 5.4 15.8 6.0 23.0
Local Government 10.1 18.8 11.1 21.7 11.9 20.5
Total Nonagricultural
Wages and Salaries2 6.0 17.5 ]-.8 23.4 16.5 47.5
1Agriculture-forestry-fisheries is left out of this table. During the peri oct, changes in the
coverage of fisheries employment distorts the real growth in this industry.
2 rncludes military wages and salaries from U.S. Department of Commerce, Bureau of Economic Analysis,
Regional Economic Information System, July 1978 printout.
SOURCES: Alaska Department of Labor, Alaska Labor Force Estimates, Estimates of Total Population,
various years.
Alaska Department of Commerce and Economic Development, The Alaska Economy: Year End
Performance Report 1977.
for the support sector. After 1970 industrial growth rates were much
closer; basic sector employment grew at a rate of 4.7 percent, compared
to 7.8 percent for the entire economy. The growth rates are much closer
when wages and salaries are considered. Between,l965 and 1976, the wages
and salaries earned in the basic sector grew only .8 percent less than
the economy-wide average of 17.5 percent. After·l970 basic sector wages
and salaries grew slightly faster than the economy as a whole.
The effect of pipeline construction on the growth of the economy can be
seen in the period 1973 to 1975. Employment in the basic sector grew at
13.8 percent annually, while the economy grew at 16.5 percent. Wages and
salaries increased more rapidly, increasing at a rate of 54.2 percent
annually in the basic sector, compared to 47.5 percent for the economy
as a whole.
One of the major reasons for the overall character of the basic sector
Wd!> Lhe ueL.lining role of the federal governmont in the state economy.
The federal government has played a major role in the economy of Alaska.
Between 1965 and 1976, federal government civilian employment increased
from 17,400 to 17,900. Employment grew faster between 1973 and 1975 in
response to TAPS construction's reaching a peak of 18,300 in 1975. The
average growth rate of federal civilian employment was less than one per-
cent per year over the entire period. Military employment actually declined
throughout the period with an average growth rate of -2.7 percent per year.
Wages and salaries in this sector increased, but at ra~es much less than
26
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the growth of the economy in general. Federal government employment con-
tinued to supply a stable base for the economy but was not responsible
for the tremendous growth in the econ01ny th1·ou~hou L the period.
The most rapidly growing basic industry was construction. Employment grev~
at an average rate of more than 15 percent throughout the period; this was
more than twice the growth rate of the economy. The obvious reason for
this growth was the construction of the trans-Alaska pipeline beginning
in 1974. The most rapid increase in construction employment came between
the period 1973 and 1975 when con?truction employment increased at a
rate of 82.2 percent per year. The state has estimated that in 1976
construction employment connected with the Alyeska project was approxi-
mately 15,000, or 50 percent of the total state construction employment
(Alaska Department of Labor, 1977). Wages and salaries mirrored the
growth in employment, increasing at an average annual rate of 50.6 per-
cent after 1970.
Mining employment also increased at a rapid rate throughout the period;
its average annual rate was 12.5 percent. Unlike construction, mining
experienced cyclical growth during the period. Mining employment in-
creased between 1965 and 1970 to 3,000, then fell to 2,000 in 1973 before
increasing to 4,000 in 1976. The early growth in mining resulted from
discovery, development, and production of oil and gas from the Kenai
Peninsula and Cook Inlet fields. Oil was discovered in 1957 at the
Swanson River; production increased from one million barrels per month
27
in 1966 to a peak in 1970 of 7.5 million barrc:l:. per month. Employment
associated with these fields grew at an annual ratP of approximatc:ly
40 percent in the late sixties, causing,min·ing employment to triple
between 1965 and 1969 in the Cook Inlet Region (Anchorage, Kenai,
Matanuska-Susitna, Seward) (Scott, 1978). Employment associated with
this development dropped after this peak production. During the 1970s,
the development of the Prudhoe Bay fields resulted in the expansion of
the mining industry. This development led to growth in both exploration
and production employment and headquarters employment in Anchorage. The
most rapid expansion of the mining industry came between 1973 and 1975
when both employment and wages and salaries incr~ased at rates more than
three times as great as the economy.
Manufacturing in Alaska has traditionally been associated with the fish-
ing industry because of the large component of food processing employment.
The composition of manufacturing changed over the period with food proc-
essing becoming less important; this chdllye in LUIIIIJusiLion accounts fOI~
the differential growth in employment and wages and salaries since food
processing is a traditionally low-paying sector.· Between 1970 and 1976,
employment in manufacturing grew at a rate of 4.6 percent annually,
while wages and salaries grew at 11.1 percent. Food manufacturing,
because of its relation to the fishing industry, showed cyclical growth;
employment fell between 1973 and 1974 and did not rise again until 1976.
The fastest growing sector of manufacturing was 11 other 11 manufacturing
which consists principally of petroleum refining,.petrochemical, and
printing and publishing. Between 1965 and 1976, employment in 11 0ther 11
28
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manufacturing increased at an average annual rate of 6.5 percent, which
meant that this sector was increasing its share of manufucturing employment.
Agriculture-forestry-fisheries depends on the development of the state•s
renewable natural resources. The growth of these industries depends to
some extent upon the natural resource cycles. State Labor Department
estimates do not include all of the employment in this industry since
a large proportion of the workers are self-employed. Independent esti-
mates of employment in these industries suggest little growth. Forestry
employs only about 22 people statewide; most of the logging employment
is accounted for in lumber and wood products manufacturing (Scott, 1979).
One indicator of agricultural activity is employment reported in a
yearly agricultural survey. This survey reports a decline in total
agricultural employment from 900 in 1965 to 750 in 1975 (USDA). The
fishing industry has tradition ally been important to Alaska. Based on
estimates from Fish and Game fish ticket data, employment was estimated
to have increased from about 4,340 in 1970 to about 5,720 in 1976. This
is an annual growth rate of 1.3 percent (Rogers and Listowski, 1978);
Table 3 shows some additional indicators of the growth of the fisheries
industry. The catch and value statistics shown in this table illustrate
the cyclical nature of the fishing industry. The real value of fish-
eries catch peaked in 1973 at $117,842 (in 1967 dollars).
29
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TABLE 3. ALASKA FISHERIES ACTIVITY, 1970-1975
1970 1971 1972 1973 1974 1975
Catch
(million 1 bs) 533.6 471.0 422.5 513.1 454.2 442.4
Value ($.000) 97,497 85,585 92,431 142,353 144,809 129,402
Real Value
($.000) 88.957 75,735 79,751 117,842 108,147 84,965
SOURCE: Alaska Department of Commerce and Economic Development, The Alaska [
Economy, 1977, 1 978.
The major growth in the basic sector was in mining and~construction.
The traditionally important fishing industry did not keep up with growth
in other basic sectors. Federal government employment, while it provided
a stable base for the economy, actually declined. Overall, employment
in the basic industries grew rapidly but not as rapidly,~s the total
economy. The differential growth in average wages led to increases in
basic sector wages and salaries at rates close to state averages.
THE GROWTH OF STATE GOVERNMENT
The growth of nonexpert sectors may also be responsible for the growth of
a regional economy. An important sector contributing to the growth of
Alaska between 1965 and 1976 was the expansion of state government. There
are two reasons for selecting state government as a growth-initiating
sector. First, state government experienced rap~d growth in the early
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1970s. Secondly, this growth was funded by the growth in revenues \'Jhich t_,
were exogenous to the econon~. The lease bonus from the Prudhoe Bay
30
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lease sale in 1969 resulted in the increased state revenues. This placed
state government in a position equivalent to the basic sector. Growth in
exogenous revenues led to increased expenditures which caused growth in
the economy. Because of this, state and local gov·ernment could be a pos-
sible source of economic growth. The growth of state government expendi-
tures vlill influence the economy in two ways. First, increased state
expenditures will lead to increased employment in state and local govern-
ment. Secondly, state capital expenditures will increase employment in
the construction industry. State expenditures on construction of highways
and ports provide increased activity in the construction industry. Examin-
ing the growth of state expenditures during the period will provide an
indication of the state government•s contribution to growth.
Since statehood, total state expenditures have increased at an average
annual rate of 21 percent (Goldsmith, 1977). Examination of expenditures
shows there are three distinct periods of expenditure growth: prior to
the 1969 Prudhoe Bay lease sale, between 1970 and 1972 when the init\al
adjustment to these revenues occurred, and after 1972. The primary
interest is in the period after the state received the lease bonus in
1970. In examining expenditures in this period, Scott (1978) found:
1. The constant dollar increase was 62 percent of the
nominal dollar increase.
2.
3.
The rate of increase.was more rapid between 1970
and 1972 than between 1972 and 1977 ..
Operating expenditures have grown more rapidly over
the whole period, while capital expenditures grew
more rapidly between 1970 and 1972. These suggest
that each type of expenditure may be sensitive to
different factors, with operating expenditures respond-
ing to increases in demand and capital expenditures
responding more to available revenues.
31
The question of whether state expenditures responded to growth or were
grm<Jth inducing co.n be examined in Table 4 (from Scott, 197B), which
shows the growth of real per capita state expenditures. If expenditures
increased but real per capita expenditures remained constant, the growth
of expenditures, in the absence of significant economies of scale, could
be assumed to be simply keeping up with the growth in demand. If real
expenditures grew faster than population, state government could be con-
tributing to growth. Both real per capita operating and capital expend-
itures increased between 1970 and 1972. Real per capita operating
expenses increased at an average rate of 19.9 percent in this period,
while capital expenditures increased at a rate of 32.3 percent per year.
After 1972 and the initial response to the Prudhoe Bay lease sale revenues,
operating expenditures increased at a rate of 3.4 percent and capital
expenditur~s actually decreased at a rate of -6 percent.
Between 1970 and 1972, state government expenditures expanded much more
rapidly than either population or prices. After 1972. expenditures have
grown more in line with population and prices. The expansion of real per
capita expenditures between 1970 and 1972 is an indication that state
government was a contributing factor to the growth during this period.
The growth of real per capita expenditures reflected the initial response
to the large increase in revenues from the Prudhoe Bay lease sale. State
government contributed to growth since it distributed exogenous revenues
to the economy. This extra demand resulted in economic growth. The long-
term consequences result from the change in the relationship between state
expenditures and economic growth as defined by real per capita expenditures.
32
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TABLE 4. STATE REAL PER CAPITA OPERATING AND
CAPITAL EXPENDITURES
1970-1977
(Constant 1967 Dollars)
Operating Capital Total
Fiscal Resident Expenditures Expenditures Expenditures
Year Po~ul ati on 1 Per Ca~ita Per; Ca~ita Per Ca~ita
1970 294,560 $ 722.20 $317.02 $1,039.22
1971 302,361 990.64 374.77 . 1 .365,41
1972 312,930 1 ,038. 74 555. 11 1,593.85
1973 324,800 1 , 108.15 497.07 1,605.22
1974 330,600 1 '168. 14 475.66 1.643.80
\
1975 351,159 1,199.92 548.54 1,748.46
1976 404,635 1 '156. 97 486.57 1 ,634. 54
1977 413,289 1,224.88 409.17 1 .634.05
Average Annual Rate of Increase /
1970-1977 5.0% 7.8% 3.7% 6. 7%
1972-1977 5.7% 3.4% -6.0% 0.5%
1970-1972 3.1% 19.9% 32.3% 23.8%
1state's estimate from Research and Analysis Section, Employment
Security Division, Alaska De artment of Labor, State of Alaska Current
Po~ulation Estimates by Census Divisions, July 1 year . The population
as of the beginning of the fiscal year was used.
33
This h·istor·ical period illustrates the state'~, UllHJUP financidl pn~;ition.
The revenues associated with Prudhoe Ba; production will be availahlc
to the state to increase economic gr·owth. HovJeVCI', Prudhoe revenues are
a fixed flow of resources v1hich v1ill not be affected by economic growth.
Since they are fixed, growth will reduce the share of these revenue~
available to existing residents. This relation makes the ability of the
economy to generate revenues to replace Prudhoe revenues an important
future consideration.
SUMMARY
Two major factors have been responsible for the growth\of the Alaskan
economy since 1965. The expansion of basic industries and the growth
of state government were the most important growth-initiating factors.
Unlike most states, the Alaskan government had an exogenous source of
revenues in the early 1970s which it could use to expand government
spending in more than a proportionate response to the growth of the
economy. The rapid increase in government spending v1as important as a
I
source of growth in the early 1970s. The most important basic sectors
during this period were mining and construction .. These industries
experienced particularly rapid growth after 1973 with the construction
of TAPS and development of Prudhoe Bay. The traditionally important
basic sectors of federal government and agricult4re-forestry-fisheries
expanded at a much less rapid pace.
The expansion of state government and the basic sector was important to
growth of the economy, because this expansion led to an increase in
34
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incomes. Factors which cause incomes to i nct·ease i ndcpcndentl y .of ex pan-
sian of either the basic sector or state government can also result ·in
the expansion of the economy. Income can increase because of an increase
in the productivity of labor or increased demand for labor not associated
with an incfease in the basic sector. One factor that is important for
Alaska incomes is the influence of overall U.S. wage rates. Since Alaska
is an open economy, Alaska is part of the U.S. labor market. Growth is
transmitted from its initiating source through the economy by increased
demand for local goods and services. As incomes increase, a portion of
this income is spent on goods and services in thelocal economy. This
additional expenditure leads to increasing employment in the support
sector. This growth in employment leads to incr.eased incomes which
generate new increases in demand. The simultaneous nature of this
process can be seen as growth in income leads to increases in d~mand and
further income growth.
Structural Change in the Alaskan Economy
The relation between the growth-initiating sectors and the remainder of
the economy is an important part of the economic growth process. In our
analysis of Alaskan growth, one thing was evident: the growth of employment
in the basic sectors stimulated a greater-than~proportional response in
the remainder of the economy. One measure of this response is the ratio
of total-to-basic sector employment; the larger this ratio, the more im-
portant is the economy's response to basic sector growth. In 1965, the
ratio of total-to-basic employment was 2.25; it had risen to 2.95 by 1973
prior to the trans-Alaska pipeline construction. Even in 1976 with the
35
tremendous amount of basic construction employnH~nt, the ratio was 2.69.
The change in this ratio shows that along with the rapid growth in the
levels of economic activity, there has been a qualitative change in the
relationships in the economy. This qualitative change is a change in
the structure of the economy which will be described in this section.
STRUCTURAL CHANGE
The economic relationships which determine the flow of income, goods,
and services are determined by the structure of the economy. The struc-
ture of the economy's productive sector can be defined by the distribu-
tion of employment or gross product among industries. The economy's
structure influences its overall level of activity, the level of prices,
and seasonal and cyclical stability. The structure both affects and is
affected by growth.
The growth of the economy leads to changes in its structure. Structural
change can result from a change in the structure, of demand as changes in
incomes and prices affect the structure of consumption. However, changes
in demand may only change the distribution of imports unless supply con-
·. ' .
ditions lead to the production of goods locally. If economies of scale
are obtained in production, regional growth will alter the production
costs. As economies grow and achieve economies of scale, they will
substitute local production for imports of goods or services. When the
economic change is large relative to the local economy, structural change
may result.
36
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The structure of the economy also affects growth. Chinitz suggested that
the structure of the export sector influences important determinants of
growth such as bank lending patterns and entrepreneurship (Chinitz, 1961).
The structure of the export sector may also influence growth through its
propensity for backward and forward linkages. The Alpetco project is a
recent example of a forward linkage from the Alaska petroleum sector.
The structure will influence the economy's response to major exogenous
changes. The region's industrial structure will determine how much of
the incomes generated by export activity will be ·spent locally.
ALASKA STRUCTURAL CHANGE \
The ratio of total-to-basic employment has steadily increased from the
early fifties (Goldsmith and Huskey, 19788). This growth in the nonbasic
or support sector of the Alaskan economy means that equivalent increases
in basic employment will lead to greater growth. Table,-5 illustrates the
effect of structural change on growth. The last two columns show what
growth would have been with the given basic sector growth and the main-
tenance of 1965 and 1970 total-to-basic ratios. In all cases, these
ratios underestimate the economy's real growth.
Table 6 provides a detailed description of the structure of Alaska indus-
try in 1965, 1970, and two pipeline years--1975 and 1976. The support
industries as a group expanded. Trade and transportation-communication-
utilities remained constant after 1970. The service industry grew sig-
nificantly in this period, increasing from 10.7 percent to 16.1 percent
of total employment. Business services increased from 1.97 percent to
37
Year ----
1965
1970
1971
1972
1973
1974
1975
1976
TABLE 5. THE EFFECT OF STRUCTURAL CHANGE,
ALASKA, 1965-1976
Total
Total Non-Civilian Ratio of Employment
Agricultural Total Basic Total/ Hhen Using
Employment Employment Basic 1965 Ratio
70,530 31 ,393 2.25
92,476 35,028 2.64 78 ,697 .·
97,584 35,447 2.75 79,638
104,243 36,137 2.88 81 '188
109,851 35,849 3.06 80,541
128,178 45,698 2.80 102,668
161,313 58,592 2.75 131,637
171,714 63,732 2.69 143,185
Total
Employment
When Using
1970 Ratio
82 ,879
93,582
95~404
94,643
120,645
154,686
168,256
Basic Employment includes: Mining, Contract Construction, Manufacturing,
Agri culture-Forestry-Fisheries, Federal Government, and t~i 1 itary.
SOURCE: Alaska Department of Labor, Statistical Quarterly, various quarters
{primarily third), 1966-1977.
38
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TABLE 6. DISTRIDUTJOH OF EMPLOYMENT, ALASKA
196S, 1970, 1975, and ·19/G
Total \·:age and Sa 1 ary
Employ.nent
l·li ni ng
Contr~ct Construction
J.tanufactu ring
Food
logging lu;nber and Pulp
Other Manufacturing
Transportation, Communication,
1965
~ of Total
fmr~U~r~~:r.~J.
100.00
1.54
9.15
8.90
4.26
3.27
1.36
and Public Utilities 10.30
Trucking and Warehousing 1.72
Water Transportation 1.47
Air Transportation 2.72
o·thf:r Transportu t ion . 76
Communications and
Public Utilities 3.63
Trade 14.11
Wholesale 2.63
Retail 11.48
General Mdse. and Apparel 2.69
Food Stores 1.65
Automotive f, Service Stations !lA
Eating/DI'inl:ing Establ isha::ents 2. 77
Other Retail 4.35
Finance, Insurance, and ·
Real Estate
Services
Hotels, Motels, and lodges
Persona 1
Business
l·ledical
Other
Government
Federal
State
local
1\griculture, Forestry, and
Fisheries
3.08
10.65
1.46
.96
1.97
2.03
4.22
42.06
24.72
9.87
7.47
.20
1970
X of Total
.D:u~.l.o...Y 111 ~.!:IJ:.-
100.00
:,L24
7.4!i
8.48
4.04
2.98
1.45
9.85
1.79
.90
3.32
.95
2.89
16.61
3.51
13.10
3.63.
1.85
1.81
3.02
2.78
3.35
12.37
l. 57
.92
I 2,16
2.35
5.37
38.45
18.50
11.21
8.73
• 21
1975
% of Total
~~~nt_
100.00
2.35
16.04
5.98
2.68
2.09
1.20
10. 21~
2.45
.86
2.96
1.13
2.69
16.25
3.66
12.58
2.55
1.62
1.77
3.88
2.76
3.74
15.58
1.96
.5/
4.54
2.68
5.83
29.22
11.34
9.59
8.30
.63
1976
~ of Total
I!!PlC:..lil!en~
100.00
2.31
l7 .61
6.02
2.98
1.89
1.14
9.18
1.89
• 78
2.70
1.08
2.73
16.05
3.55
12.50
2.tf8
l. 74
1.63
3. 76
2.84
4.14
16. ll
1.87 . : . .;
5.04
2.92
5.75
27.89
10.45
8.22
9.21
.70
SOURCE: Statistical Quartel'ly_, /\1askil Department of Labor, various issues.
39
5.04 percent and were the major component of service sector change.
Finance-insurance-real estate also increased as a proportion of total
employment. (The employment levels are found in Appendix A.)
The Extent of Future Structural Change
The Alaska support sector has increased its share of -employment since
1965, which is part of a much longer trend. An important question when
examining potential future growth is what the extent of future structural
change will be. If the support sector were to continue to expand its
share of employment at its past rate of about 2.5 percent per year, the
support sector would account for 85 percent of employment in 2000 and
almost 100 percent six years later. This~ of course, cannot happen;
however, there are reasons to expect future growth in the support sector.
The most important reason is that economic growth will increase market
size, which will allow more local production of goods and services.
Tables 7 and 8 give some insight into the limits to the growth of the
support sector. Table 7 compares the Alaskan distribution of employment
to the United States and some other states. Only in finance-insurance-
real estate and transportation does Alaska come close to the employment
shares of other states. The shares of trade and services are well below
those of other states. If the only thing determining industrial produc-
tion were scale economies, the structure of a region could be assumed to
grow toward the structure of similar regions. The average of other states
is similar to the U.S. distribution and supports this hypothesis.
40
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Alaska
·'n'yor.~~r.g
Vcrcont
North Dakota
South Dakota
Dcl.:1•.•nrc.
Mont~na
Idaho
Ncv:J.dn
Nc.•.., Hampshira
Ho.~-.•aii
Rhode Isla:1d
Maine
Nc·,., Mexico
Utah
Nebraska
Hcst Virginia
Arkansns
Missis::;ippi
Arizona
Knnso.s
Oregon
Okhho~
Color~do
'\ohu:hi n8 ton
Total
· Employment
_(thous:mds)'
151.7
168.7
179.5
227.8
227,0
234.3
263,7
. 305.5
323.7
348,1
362.2
383.0
384.3
430.9
500.2
583.6
549.2
714.5,
778,1
829.8
878.5
962.7
1,001.6
l,COS.l
i,4os:6
Average (excluding Alaska)
u.s. Avcrncc
-:1-,
r-1 [j
Table '1 •. · THE ECO~O~!IC S'l'Rt:CTURE OF SNJ\.'LL STATES
Percent 'in
Services
15.2
13.9
23.4
19.3
21.1
. 16. 9
18.4
17.5
40.8
18.3
24,0
18,8
17.0
19.5
.17. 4
17.4
15.8
111,0
14.3
18,2
17.5
17.5
16.6
19' '•
18.4
19.0
13.8
Pzrccnt :!.n
Trade
17.5
21.9
20.7
29.0
27.5
22.0
25.2
25.1
19.8
21.5
25.4
19.9
21.1
22.9
/.ll. 0
2~: .• 5
22.1
2.:.. 3
19.7
23.8
23.7
23.4
23.4
23.7
23.3
22.~
Percent in
:Financc-
Insur.:~nce
Real F.::;tntc
5.1
3.4
4.0
I~ t 5
4.4
l;. 0
4.4
5.3
4.2
4.9
6,9
5.0
3.9
3.6
4.2
?.• 9
5 ,(\
4,9
6,2
5.0
6.1
5.6
4,8
5.1
Percent in
Tro.nsportation-
Cor:"u...:unica tion-
Public Utilities
9.0
5.4
5.2
7.8
6.0
6.0
3.6
7.8
3.5
4.5
6.0
6.1
· i.2
. 6. 6
.5.4
4.7
5.2
6.6
5 •. 7
6.0
6 .• 5
5.7
5.8 s.s
Source: U.S, DC?O.~t~c~t of in~or~ ]urcau of ~abor St~tistic~, Emoloi~~~t nnd E~,n~n~s, June 1978,
!'crec!\t i~
Govc!':'l~C~~
:J4,5
22.7
18.2
~, " /.IJoO
'24.9
17.8
27.8
21.8
16.1
16 .. :
24.2 , " ..
..._;) ' I
21.3
26.9
23.8
22.2
20.9
10 (I _,. .....
21.2
23.2
20.9
20 • .3
22,4
22.2
ZO.i
n . .s
l.S.S
TABLE 8. ECONOMIC STRUCTURE OF SMALL STATES
1977
Total Regional
Personal Support/ Index Emp 1 oyment 1 Support Industry Income Personal of Costs
(Thousands) (Million$) Income (U.S.=l)
Alaska 71,100 4,311 16.5 1.42
Wyoming 79,100 3,073 25.7 .90
Vermont 94,700 2,814 33.7 1.02
North Dakota 136,600 4,044 33.8 .92
South Dakota 132,700 4 '104 32.3 .92
Delaware 114,700 4,477 25.6 1.02
Montana 147 ,300 4,661 31.6 .90
Idaho 164 ,600 5,128 32.1 .90
Nevada 228,800 5,059 45.2 '..99
New Hampshire 168,400 5,547 30.4 1.02
Hawaii 234,600 6,773 34.6 1.21
Rhode Island 181,000 6,332 28.6 1.02
Maine 178,300 6,221 28.7 1.02
New Mexico 227 ,400 6,970 32.6 .'88
Utah 256,300 7,510 34.1 .98
,-
Nebraska 336,500 1 0 ,491 32.1 .93
West Virginia 264,000 11 '129 23.7 .85
Arkansas 321,100 11 .878 27.0 .89
Mississippi ·331 ,800 12,019 27.0 .89
Arizona 446,600 14,943 29.9 .99
Kansas 464,700 19,802 23.5 .93
Oregon 511 .500 16 ,651 30.7 .998
Oklahoma 510,400 17,839 28.6 .98
Colorada 558,900 18,752 29.8 .98
Washington 755,900 27 .534 27.5 .998
Support
Emp 1 oymen t/
Regionally
Deflated
Personal Income
23.4
23.1
34.4
31.1
29.7
26.1
28.4
28.9
44.7
31.0
41.8
29.2
29.3
28.7
33.4
29.9
20.1
24.0
24.0
29.6
21.9
30.6
28.0
29.2
27.4
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1support sector includes: Services, Trade, Finance-Insurance-Real Estate, ['
and Transportation-Communication-Public Utilities. .
SOURCES: U.S. Department of Labor, Bureau of Labor Statistics, Employment
and Earnin~, June 1978.
U.S. Department of Labor, Bureau of Labor Statistics, Monthly
Labor Review, April 1978.
42
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~= "--'
Examining Table 7 shows that the variation around the U.S. average cannot
be explained simply by scale. Table 8 shows that real personal income may
explain some of the differences; when personal income is adjusted to
reflect regional cost differences, there is a sin)ilarity among states.
The ratio of support employment to personal income is close to 30.00 for
most states independent of their size, although the ratio is lower for
some states larger than Alaska. Alaska's ratio is less than this. Both
Tables 7 and 8 indicate that the support sector in Alaska has room for
expansion.
What explains the support sector's relative underrepresentation in the
Alaska economy? One explanation might be a certain threshold size which
Alaska has not yet reached after which the support sectors grow somewhat
proportionately. A second explanation could be the composition of the
export sector. Large petroleum and mining operations and government pro-
vide much of the support activity internally leading to an underdeveloped
support sector. A third reason could be the high cost of doing business
in Alaska which dampens the effects of scale and reduces the competitive-
ness of Alaska production. The extent of the state could be another
reason for Alaska's underdevelopment of the support sector. The dis-
tribution of population may make it more profitable to serve some areas
such as Southeastern and Western Alaska from outside the state. The most
optimistic reason would be that it is merely an information problem. If
outside investors do not know the Alaska market, they will underinvest.
That, coupled with the slow reaction of investment in the support sector
to the recent rapid growth, would mean that Alaska could· expect future
43
growth in these sectors merely to catch up with the existing growth in
the basic industry.
SUMMARY
This section has described the second part of the process of economic
growth, the response of the economy to changes in those sectors which
initiate growth. This response has changed in the Alaska economy since
1965; an important indicator of this is the increased share of the
support sector. Relative to other states, Alaska is underserved by the
support sector. Because of this, there is some reason to believe the
support sector will continue to expand as a portion of\total employment.
This understanding of structural change and its relation to economic
growth increases our awareness of the effects of the scale and the
timing of future economic activity.
Population
Industrial growth and the change in the structw~e of the economy are not
the only aspects of economic growth. Population growth is another com-
ponent. The level of population is influenced by the level of economic
activity. Migration is a major component of population change, and the
relative economic opportunities within Alaska determine levels of in-and
out-migration. The population of a region also influences the economic
activity. The characteristics and size of the population determine the
region's local demand for goods and services and its labor force composi-
tion. This section will discuss the growth and composition of the Alaska
population.
44
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Table 9 shows the growth in population between 1965 and 1976. As would
be expected, population increased most rapidly with the construction of
TAPS; between 1973 and 1974, population increased 6.29 percent, while
it increased by 15.23 percent between 1974 and 1975. Population increased
by 148,100, or 55.8 percent, between 1965 and 1976.
The age and sex distribution of the population determines the demand that
population places on both public and private se~vices. A population with
a large school-age component will have a higher demand for schools than
the same population with a different distribution. The age-sex distribution
will also influence the size of the labor force produced by a given popula-
tion. Table 10 describes the age-sex distribution in 1970 and 1976.
Comparing the age-sex distribution between 1970 and 1976 shows two observ-
able trends. First, the proportion of males in the population has declined.
The second trend is the increase in working-age population relative to the
remainder of the population. The surprising observation is that the age-
sex distribution has maintained relative stability. The tremendous growth
in the population between 1970 and 1976 seems to have affected the distribu-
tion only slightly.
Population has grown rapidly since 1965, although the growth has been
less rapid than the growth in employment. This differential growth has
resulted in a fall in the dependency ratio (population/employment). The
ratio of population-to-employment has fallen from 3.76 in 1965 to 2.41 by
1976. TAPS construction may be largely responsible for the low ratio in
1975 and 1976, since the pipeline has attracted single workers. The
45
Number
of Births
1965 7 ,063
1970 7,560
1971 7 ,312
1972 6,948
1973 6,611
1974 7,006
1975 7,470
1976 7,834
TABLE 9. POPULATION GROWTH, ALASKA
1965, 1970-1976
Estimated
Number Natural Net l of Deaths Increase Migration
l ,400 5,663 4,538
l ,431 6,129 l ,672
l ,455 5,857 4·, 712
l ,467 5,481 5,870
l ,464 5,147 937
l ,468 5,538 15,256
l ,522 5,948 47,527
l , 713 6,121 2,534
Population
as of
July l
265,192
302.361 2
312,930
324,281
330,365
351,159
404,634
413,289
1Difference between change in population and natural increase.
2 April 1970.
3Average annual percent increase between 1965 and 1970.
% Increase
over
Previous Year
3.84
2.66 3
3.50
3.60
1.88
6.29
15.23
2.14
SOURCE: Alaska Department of Labor and the Division of Economic Enterprise,
Department of Commerce and Economic Development, as reported in.
The Alaskan Economy, Year-end Performance Report, 1977, except
1970 population which is from U.S. Department of Commerce, Bureau
of Census, 1970 Census of Population.
46
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TABLE 10. ALASKA POPULATION
AGE-SEX DISTRIBUTION
1970, 1976
1970 1976
Males Females Total Males Females Total
Age
All ages 54.2 45.7 51.6 48.4
0-13 16.5 15.7 32.2 14.1 13.2 27.3
14-19 5.7 5.2 10.9 6.6 6.0 12.6
20-29 12.4 8.7 21.1 11.2 10.4 21.6
30-39 7.7 6.5 14.2 7.8 7.8 15.6
40-54 8.1 6.6 14.7 7.7 7.2 14.9
55-64 2.5 2.0 4.5 3.1 2.6 5.7
64 + 1.3 1.0 2.3 1.1 1.2 2.3
SOURCES: U.S. Department of Commerce, Bureau of the Census, 1970 Census
of Population.
U.S. Department of Commerce, Bureau of the Census, 1976 Survey
of Income and Education Microdata Tape.
47
dependency ratio had fallen substantially before construction on the
pipeline began; in 1973 the ratio was 3.01. The dependency ratio has
fallen as the proportion of the population which is working has increased.
This increase results from a change in the proportion of the population
which is of working age; the proportion of the population between 14 and 64
has increased from 65.4 percent in 1970 to 70.4 percent in 1976. The in-
creased labor force participation of this population is also responsible.
Population growth results from the net effect of births, deaths, and in-
and out-migration. As would be expected in a region with a small popula-
tion which is experiencing rapid economic growth, migration was the ·most
important component of population change throughout the period. Migration
accounted for 69 percent of the total change in population between 1970 and
1976. In 1975. it accounted for 89 percent of the increase in population.
Unemployment
Unemployment has always been an important problem for the Alaska economy.
Table 11 shows the dimensions of the problem. Since 1970, the unemploy-
ment rate has remained close to 10 percent; only in 1975 did it fall below
10 percent. The unemployment rate remained constant even though employ-
ment was increasing throughout the period. This illustrates a particular
Alaska dillema. Increases in employment lead to., increases in· migration,
which increase the labor force and leave the unemployment rate high. This
has important welfare effects when skill levels are considered. If migrants
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are more qualified and take the new jobs, employment growth may do little [_
to increase the welfare of original res1dents. The other factor which
48
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Year
1965
1970
1971
1972
1973
1974
1975
1976
TABLE 11. UNEMPLOYMENT, ALASKA
1965-1976
Total Unemployment
Unemployed Rate (%)
7,700 8.6
9,700 9.0
12 '1 00 10.4
12,900 10.5
13 ,900 . 10.8
14,900 10.0
14,900 8.3
21 ,000 10.5
Labor Force
Participation
Rate (%)
38.16
39.94
40.97
41.27
42.78
\ 46.00
47.40
52.65
SOURCES: Alaska Department of Labor, Labor Force Estimates, and Alaska
Department of Labor, Estimates of Total Resident Population,
various years.
49
[
maintained the high unemployment rate was the increase in labor force
participation. The labor force participation rate responds, like migration, [~
to economic opportunities. As the employment opportunities expand, more
people enter the labor force. The labor force participation rate increased
from about 40 percent in 1970 to 53 percent in 1976.
One factor influencing unemployment in Alaska isthe seasonality of em-
ployment. Economies which are dependent on natural resource production
often have seasonal cycles. This has been accentuated in Alaska by the
severe winters which limit activity. Since the seasonal decline usually
occurs in the winter months, one measure of seasonality is defined by
the ratio of the fourth-quarter employment to the third-quarter employ-
ment. The closer this index is to one, the less seasonal is the industry.
Table 12 shows the seasonality of Alaska industries. Seasonality has
decreased in importance throughout the historical period. In 1960,
the overall seasonality index was .8313. In 1975 the seasonality index
for total employment was .9402; the increase in seasonality in 1976 was
due to the pipeline construction employment in the summer of 1976. The
decrease in seasonality since 1960 has been a result of three factors.
First, the increased importance of support sector industries with smaller
seasonal components resulted in lowering the average seasonality. The
seasonality index of services, trade, and F.I.R.E. has always been close
'(
to one. Secondly, the technology became available to work through the
winter in construction. Finally, market forces made it profitable to
empfoy these technologies in Alaska.
50
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TABLE 12. SEASONALITY OF EMPLOYMENT, ALASKA
1950, 1960, 1965, 1970, 1975, and 1976
1950 1960 1965 1970 1975 1976
Mining
Construction
Manufacturing
Transportation,
Communication, and
Public Utilities
Trade
Finance, Insurance,
and Real Estate
Services
Government
Total
.6267
.7900
.2440
.8248
.9226
1 .0000
.9583
.9632
.7505
.7143
.5862
.5137
.9683
.9718
1 .0000
.9123
.. 9815
.8313
.7949
.6460
. 6531
.9125
.9905
.9706
.9664
.9617
.8718
.8556
. 7279
.5457
.8851
.9733
'
.8942
.9716
.9810
.8800
'
/
.9009
.8374
.6886
.9887
1 .0048
1. 0000
.9812
1. 0049
.9402
SOURCE: State of Alaska, Alaska Labor Force Estimates, various years.
51
.9690
.6906
.6714
.8871
.9120
.9270
.9387
.9689
.8733
Personal Income
Growth of personal income increases the demand for goods and services and
is an important determinant of the growth of the Alaska economy. Growth
in personal incomes is also a measure of the benefits received from
economic growth. Personal income has grown at an average rate of more
than 15 percent throughout the period. The best measure of the welfare
effects of personal income is real per capita income. Increasing incomes
will only increase welfare-if it is increasing faster than prices and
population. Real per capita personal income measures the command of the
average individual over goods and services.
Table 13 shows the effect of price increases in Alaska as measured by the
Anchorage CPI. By comparing the growth in the Anchorage index to the
United States, we can assess one impact of rapid development. Prior to
1974, the Anchorage CPI was increasing at a slower rate than the U.S. CPI,
which meant the price differential between Alaska and the United States
was falling. With the TAPS boom, this trend was reversed. Prices rose
relatively faster in Alaska after 1975 because of bottlenecks and the
rapid increase in demand. Bottlenecks resulted when the rapid increase
in demand was met by the relatively fixed supply system.
Table 14 shows the growth in real per capita personal income. The maximum
increases came in 1973 and in 1975 when real per capita income in Alaska
increased by over 10 percent. In all but 1972, the growth of real per
capita income was greater in Alaska than in the United States. This shows
that an average Alaskan's command over goods and services has increased
at a rate much greater than in the United States as a whole.
52
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1970
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1972 r 1973 L~
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1975
[ 1976
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TABLE 13. ANCHORAGE CONSUMER PRICE INDEX
(1967 = 100)
Anchorage
Index
94.2
109.6
112.9
115.9
120.8
133.9
152.3
163.3
% Change
Over
Previous
Years
3.07 1
3.01
2.66
4.23
10.84
13.74
7.22
United
States
Index
94.5
116.3
121.3
125.3
133.1
\
147.7
161.2
170.2
1Average annual rate of price increase 1965-1970.
% Change
Over
Previous
Years
4.23 1
.4.30
3.30
6.23
10.97
9.14
5.58
SOURCE: Alaska Department of Commerce and Economic Development,
Jhe Alaska Economy Year End Performance Report, 1978.
53
Year
1965
1970
1971
1972
1973
1974
1975
1976
TABLE 14. ALASKA GRO~ITH OF REAL PER .CAPITA INCOME
1965,1970-1976
Real Per Capita Income in Mi 11 ions
Alaska United States
% Increase % Increase
Over Over
Total Previous Year Total Previous Year
3,435 2,895
4,260 4.40 1 3,348 2. 95 1
4,407 3.45 3,406 1.73
4,518 2.52 3,585 5.26
_.. ' 5.031 11.35 ·3,742 4.38
5,180 2.96 3,675 -1.79
5 '701 •. 10.06 3,636 - 1 .06
6 '124 7.24 3,755 3.27
1Average annual percent increase between 1965 and 1970
SOURCES: U.S. Department of Commerce, Bureau of Economic Analysis, Regional
Economic Information Center, July 1977 printouts.
U.S. Department of Commerce, Bureau of the Census, Statistical
Abstract of the United States, 1966 and 1967.
U.S. Department of Labor, Handbook of Labor Statistics, 1972
and 1977.
54
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Summary: The Effects of Economic Growth
During the period between 1965 and 1976, the Alaska economy experienced
rapid growth. The expansion of the economy during this period is symbolized
by the growth in three aggregate indicators of economic activity: personal
income, employment, and populat·ion. Personal income, which measures the
command of residents over goods and services, expanded by 382 percent during
the period from $858 million to $4,133 million. Employment expanded by
144 percent from 70,530 to 171,714 between 1965 qnd 1976. Population
grew from 265,192 in 1965 to 413,289 in 1976, an increase of 56 percent.
Growth did not occur evenly during the period; the most rapid growth
occurred after 1970. For each of the aggregate indicators, the growth
rate was more rapid after 1970. Population grew at an average annual rate
of 5.4 percent after 1970 compared to 2.7 percent between 1965 and 1970.
Employment grew at an average rate of 10.9 percent per year between 1970
and 1976, compared to 5.6 percent prior to 1970. ·Personal income grew at
almost twice its pre-1970 rate between 1970 and 1976.
Economic growth during the period examined in this section resulted from
expansion of the basic sector. The industries which were most important
in the basic sector growth were mining and construction. The expansion of
these sectors was directly related to petroleum development in the state.
Prior to 1970, development of oil fields on the Kenai Peninsula and in
Upper Cook Inlet \'/ere primarily responsible for growth. The development
of the Prudhoe Bay fields after the lease sale in 1969 resulted in mining
employment growth both at Prudhoe Bay and in Anchorage. The construction
55
of the trans-Alaska pipeline to transport the oil from Prudhoe Bay was
responsible for a 158 percent increase in construction employment between
1973 and 1975. This major petroleum-related growth occurred after 1970,
contributing to the more rapid growth in the latter part of the study
period.
Two other factors contributed to state economic growth. First, the
additional state revenues available after the Prudhoe lease sale in 1969
allowed the state to increase expenditures. The increase in state gov-
ernment employment and capital improvement expenditures were partially
responsible for state growth in the early 1970s. Secondly, as the scale
of the economy increased, the relation between the support sector and
basic sector growth changed. Increased scale allowed more local produc-
tion of goods and services, which meant that increased basic sector
activity resulted in greater-than-proportional growth in the support
sector.
Existing Economic Conditions
The existing economic conditions in Alaska reflect the end of work on the
TAPS project. The project was completed in 1977, but the peak employment
on the pipeline project occurred in 1976. The fall in construction employ-
ment between 1976 and 1977 illustrates the significance of this to the
economy. Construction employment fell by 35.4 percent from 30,200 to
19,500 in 1977 (Alaska Department of Labor, 1978).
56
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Although the economy experienced a fall in total employment, the drop was
not so great as would have been expected given the response the economy
experienced during the pipeline buildup. Nonconstruction employment
actually rose between 1976 and 1977. Total nonagricultural wage and
salary employment fell by only 7 .000, or only 65 percent of the fall in
construction employment; nonconstruction employment increased by 3,700.
This increase was a result of the expansion of both the basic sector and
the support sector. The major basic sector to increase was mining, which
increased by 1 ,000 employees. This increase was a result of the continued
development of the Prudhoe Bay fields and the preparation for further
exploration activity. This included substantial expansion of headquarters
employment in Anchorage. Trade and finance-insurance-real estate accounted
for 1 ,500 of the increased employment. This was an unexpected response
from the support sector, given decreasing basic s~ctor employment. Local
government added significantly to this growth, expanding employment by
about 2,000.
Two delayed adjustments could be responsible for growth in the post-
pipeline period. The first may have been a delayed response by the
support sector to the larger economy. The full expansion of this sector
may have been prevented during the pipeline period; the larger economy
which existed even after the completion of the pipeline required a larger
support sector. The expansion of this sector during the period may have
been constrained by the tight labor market and high wages available in
other sectors. Another factor which may have been responsible for the
delayed response was the rapid growth of the economy; the 1977 response
57
was the delayed investment response. The second delayed adjustment which
prevented the proportional drop in the economy in the post-pipeline
period was the spending of accumulated savings and capital gains. This
dissaving lengthened impact of the pipeline beyond the period of direct
employment impact.
The economy has adjusted to the end of the pipeline. Future growth can
be expected to be at much lower rates than in the past. Future growth
will depend on the expansion of the basic sector and whatever structural
change may occur. One of the most important basic industries for the
future will be mining. With the beginning of productibn at Prudhoe Bay,
Alaska became the third largest oil producing state. Continued develop-
ment at Prudhoe Bay and exploration in NPRA, as well as the OCS areas,
. will be responsible for the continued future gro~t1th of this industry.
The 200 mile fisheries limit will increase the importance of the fishing
industry. Alaska•s current domestic catch accounts for only 7 percent
of the fishery resource (Alaska Pacific Bank, 1979). The near-future
growth may be limited because of the investment required to move into
bottomfishery. In the near future, construction will be dependent on
' '
government projects. The next major project planned is the construction
of the ALCAN natural gas pipeline in the early 1980s. If constructed,
this project should have impacts similar to the TAPS project.
58
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The Economies of the Gulf of Alaska Region, 1965-1976
OVERVIEW
The major impacts from OCS development in the \·Jestern Gulf of Alaska are
projected to occur in the Gulf of Alaska region of the state. The Gulf
of Alaska region contains two major subregions, Anchorage and Southcentral.
The Anchorage region consists of the Anchorage Census Division. South-
central includes six census divisions: Kenai, Seward, Matanuska-Susitna,
Valdez-Chitina-Whittier, and Cordova~McCarthy. It also includes the
Yakutat portion of the Skagway-Yakutat Division. (Figure 3 shows the
Alaska Census Divisions.) The character of each of these subregions
differs. Anchorage is the urban center of the state. The Southcentral
region consists of a series of small, rural economies.
The Gulf of Alaska region is the most populous region of the state. It
contains almost 60 percent of the state•s population. Many of the events
which have influenced the growth of the state octurred in the Gulf of
Alaska region. The Cook Inlet oil and gas fields are located in that
region, and the terminus of the trans-Alaska pipeline is also in the Gulf
of Alaska region at Valdez. This region also contains one of the major
fishing ports in the state at Kodiak. Anchorage, the state•s major metro-
politan center is in the region. The region and its subregional economies
experienced rapid growth between 1965 and 1976. The Gulf of Alaska region
grew faster than the state and increased its share of state employment from
53.6 percent to 56.5 percent. This section will examine the growth of the
Gulf of Alaska•s two subregions during the 1965-1976 period.
59
0'1
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'• ., ,, ..
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.,,,, ____________________________ \
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~U~~OKWIM
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FIGURE 3.
ALASKA CENSUS DIVISIONS
LEGEND
~CAI.E
Sf.....,.,.b~P~ ~~ .?J!kiLES
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ANCHORAGE
The position of Anchorage as the major metropolitan center of Alaska and
the administration and distribution center for much of the state means
that growth in Anchorage reflects the growth in the rest of the state.
This factor explains why Anchorage, while having no actual pipeline
construction, experienced rapid growth during the pipeline period. As
an urban area, the past and future expected growth in Anchorage differs
importantly in its causes and effects from the state as a whole. This
section will describe the historical growth of Anchorage and will attempt
to isolate the important causes of growth which are unique to Anchorage.
Growth of Aggregate Indicators
Table 15 shows the growth of three indicators of aggregate economic
activity: employment, population, and personal income. Total employment
increased by about 42,440 during the period; over 73 p~rcent of this
increase occurred after 1970. After 1970, the average growth rate of
employment was 9.7 percent compared to the overall 8.2 percent rate.
Between 1973 and 1975, the period of the most rapid TAPS growth, total
employment increased by 38 percent.
Population followed the same path as employment, increasing more rapidly
in the last six years of the period. Population grew at an average rate
of 5.54 percent per year between 1965 and 1970; for the period after 1970,
the rate was 6.58 percent. Unlike employment, population grew faster
in Anchorage than in the state, which grew at 5.3 percent. This meant
61
TABLE 15. GROWTH OF EMPLOYMENT, POPULATION,
AND PERSONAL INCOME, ANCHORAGE
1965-1976
Personal Income
Population Employment ( $ Mi 11 ion)
1965 102,337 30~678 371.0
1970 126,333 41,995 634.9
1971 135,777 45,452 732.9
1972 144,215 48,252 800.2
1973 149,440 50,627 883.1
1974 153,112 58' 713 1111.6
1975 177,817 69,645 1577.6
1976 185,179 73 '113 1799.1
Average Annual
Percent Change
/
1965-1976 5.54 8.22 15.43
1970-1976 6.58 9.68 18.96
SOURCES: All estimates State of Alaska Department of Labor, Research and
Analysis Section, Population Estimates by Census Division, except
1970 which is Census of Population.
Alaska Department of Labor, Statistical Quarterly, various years.
U.S. Department of Commerce, Bureau of Economic Analysis, July 1978.
62
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that population was concentrating in Anchorage even though the pipeline
construction had slowed the trend tm-Jard employment concentration.
Personal income experienced growth similar to state growth; personal
income increased at close to 15 percent annually in Anchorage and the
state. For the entire period, the annual rate of growth was slightly
higher for Anchorage. After 1970 the higher incomes associated with
the pipeline construction led to a slightly faster rate of growth in
the state.
The Causes of Growth
The Anchorage economy expands for reasons similar to those causing expan-
sion in the state economy. One cause of growth is the expansion of the
basic industries of agriculture-forestry-fisheries, mining, manufacturing,
construction, and federal government. For the local economy, state
government growth can also be seen as a basic sector, since the factors
determining its growth are political decisions external to the region.
The growth of the basic industries is sho~n in Table 16 which describes
the growth of all industrial sectors in Anchorage.
Over the period 1965-1976, the fastest growing basic sector was mining.
Mining grew at an average annual rate of 12.91 percent over the period.
Between 1965 and 1970, mining employment increased by an average rate of
20.9 percent per year. The growth of mining was the result of the develop-
ment of regional headquarters and administrative staffs to support the
63
TABLE 16. CIVILIAN EMPLOn1ENT GROWTH
ANCHORAGE, 1965-1976
Average Annual 1\verage Annual
Percent Increase Percent Increase
Indus.!.!:.1'_ 1965-1976 1970-1976
Total 8.22 9.68
Agriculture, Forestry,
and Fisheries 10.48 11.33
Mining 12.91 6.63
Contract Construction 8.39 13.69
Manufacturing 6.78 8.14
Transportation, Communication,
and Public Utilities 9.92 11.26
Transportation 10.68 10.77
Air 11.93 10.29
Other 9.52 11.29
Communication 8.60 13.92
Public Utilities 7.75 8. 77
Trade 10.58 10.82
Wholesale 11. 94 11.39
Reta i 1 10. 13 10.61
Finance, Insurance, and
Real Estate 11.42 13.61
Services 13.69 15.81
Hotels 10.96 11.41
Personal 3.81 2. 12
Business 18.09 26.71
Medical 13.17 14.17
Other 13.53 13.51
Federal Government .40 .53
State Government 8.38 8.97
Local Government 7.97 6.96
Average Annual
Percent Increase
1973-1975
17.29
15.82
30.09
29.94
10.58
26.01
31.60
19.28
47.32
16.74
5.22
18.32
28.33
15.12
13.56
27.23
28.77
4.97
78.67
7.08
19.99
3.41
5.61
13.06
SOURCE: Department of Labor, Statistical Quarterly, various issues.
64
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development of the Cook Inlet and Prudhoe Bay fields. The growth of
mining employment in Anchorage, as in the state, was cyclical, falling
after 1970 when peak development of Upper Cook Inlet was reached. After
1973 mining employment grew at an average rate of 22.3 percent per year.
The growth during this period included headquarters growth necessary for
the development of the Prudhoe Bay fields. Over the period, Anchorage
averaged more than one-third of the statewide mining employment.
Construction was the second fastest growing major component of the basic
sector.1 Construction grew at an average annual rate of 8.39 percent
between 1965 and 1976. Between 1973 and 1975 when the\most rapid buildup
resulting from the pipeline occurred, the growth rate averaged 29.94 per-
cent. In Anchorage, the construction industry did not include major
projects connected with resource development such as TAPS. Construction
in Anchorage was largely an investment response to expected future
grm'l'th and an expansion of .the capacity of Anchor.age housing and private
sectors to meet the rapid growth in population.
The government component of the basic sector experienced minimal growth
between 1965 and 1976. Federal government remained almost constant
throughout the period, growing at an overall rate of less than one per-
cent per year. State government employment grew at a rate slightly
greater than growth in total employment, an annual average rate of
1Agriculture-forestry-fisheries, while experiencing a very rapid
rate of growth, had 1 i ttl e impact on the Anchorage economy. . In 1976,
employment in this industry was only 100 people.
65
8.38 percent between 1965 and 1974. As on the state level, state gov-
ernment is partially responsive to local demands. However, since the
determinants of its growth are outside the region and a large component
of state government is administrative for programs outside of Anchorage,
state government can be considered basic. The most rapid period of
growth of state government in Anchorage was in the beginning of the
1970s. Between 1970 and 1972, state government employment grew at a
rate of 20.2 percent per year. This reflects the rapid growth of total
state government at the time.
The final basic sector is manufacturing which grew at ,an average annual
\
rate of 6.78 percent between 1965 and 1976. When the period after 1970
is considered, the growth rate increases; but it is still less than the
growth rate of total employment. · Manufacturing experiences a steady
increase throughout the period, not a cyclical increas~ as at the state
level. This is because the manufacturing in Anchorage has only a small
component of food manufacturing which reflects cycles of the fishing
industry.
Anchorage: The Administration and
Distribution Center for Alaska
Anchorage serves as the administration and distribution center for Alaska.
Because of this, traditional service functions such as trade, services,
transportation-communication-utilities, and finance-insurance-real
estate have important basic components. These sectors are support
sectors at the state levels since they respond primarily to grov1th in
66
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state incomes. The distinction arises because the location of support
activities is not spread uniformly with basic activities; economies of
scale are one primary reason activities would concentrate in one place.
Because a portion of these sectors in Anchorage responds to demands
from outside the region, they can be considered part of the Anchorage
basic sector. This response of the Anchorage support sector provides
a major link between the economies of Anchorage and the state.
There are many ways of distinguishing the basic and nonbasic components
of an industry. The most accurate would be by survey. In a survey, a
sample of firms in each industry would be asked the portion of their
output sold inside and outside the region. Another method involves
the use of location quotients. A location quotient for industry i is
defined as the ratio of the percent of total employment in Anchorage in
industry i to the percent of total employment in the state in industry i.
The use of location quotients to measure the basic components of support
industries requires the assumption that consumption in all parts of the
state is similar and that this average consumption is reflected in the
proportion of employment in these industries at the state level. This is
an extreme assumption since consumption levels will most probably differ
across regions because of income and environmental differences. Location
quotients provide no more than an indication of the basic component of
industries. Its major advantage is that it is inexpensive to use.
Table 17 shows the Anchorage location quotients for the four support
industries: transportation-communication-utilities, trade, finance-
insurance-real estate, and services.
67
TABLE 17. LOCATION QUOTIENTS, ANCHORAGE
1965, 1970, 1975,1976
Transportation,
Communication, and
Public Utilities
Trade
Finance, Insurance, and
Real Estate
Services
Location Quotient = -
"1965 19/0 l97~:i 19/6 ---------------·----·----
.8284 .9485 1.0323 1. 1039
1.2927 1.2354 1 . 3191 1. 3548
1.3706 1.4074 1. 3877 1 .4058
1.1531 1.2326 1. 2407 1. 3117
Total Anchorage Employment in Industry i
Total Anchorage Employment
Total State Employ~ent in Industry i
Total State Employment
SOURCE: Alaska Department of Labor, Statistical Quarterly, various issues.
68
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Table' lR shows the 1\nchorage basic sector as r.stirnat(~d us·in~l location
quotients to estimate the basic sector portion of the service, trade,
finance, and transportation industries. The portion of support industry
employment which is basic is equal to !-QLQ 1 The location quotient
methodology does not provide an exact description of the basic component
of these industries. This method may overestimate the basic ~omponent
if the assumption of similar consumption is not true. The location
quotient may underestimate the true amount of export component since it
considers only the net difference in regional consumption and does not
allow for interregional trade (Hoover, 1970). For example, the location
quotient method estimates no basic component of transportation prior to
\
1975. This is surely an underestimate since the Port of Anchorage
serves as the entrance source of supply for approximately 80 percent of
the state's population (Municipality of Anchorage, 1978). This analysis
is useful in pointing out the relationship of the Anchorage support
sector to the state economy. Table 18 shows the trends in this campo-
nent of the Anchorage basic sector. The component of the basic sector
made up of transportation-communication-utilities, trade, finance-
insurance-real estate, and services has been increasing. In 1965. this
component accounted for 12 percent of the civilian basic sector; and by
1976, it accounted for 28 percent. Overall, the importance of the basic
sector to the Anchorage economy decreased as it did at the state level.
The civilian basic sector decreased from 57 percent of total employment
in 1965 to 47 percent in 1976.
69
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TABLE 18. ANCHORAGE BASIC SECTOR GROWTH
1965, 1970, 1973, 1975, and 1976 ~~
lJ!dustry 1965 1970 1973 1975 1976
r,
Agriculture, Forestry, r-·
L and Fisheries 33 52 82 110 100
Mining 371 958 769 1 ,301 1 ,409 [
Contract Construction 3,127 3,514 4,178 7,054 7,587
Manufacturing 791 1,018 1 ,286 1 ,573 1,629 [
Transportation, Communication, \ -and Public Utilities -0 - -0 --0 -230 697
"'-'
Trade 1,195 1,642 2,239 3,611 4,195
r-· Finance, Insurance, and -~
Real Estate 350 573 825 1 ,010 1 ,229
Services 500 1,208 1 ,323 2,612 3,510 L
Federal Government 9,395 9,509 9,558 10,222 9,813 [ State Government ] ,672 2,421 3,667 4,056 4,053
Total Civilian
Basic Employment 17,434 20,895 23,927 31 , 779 34,222 L
Total Military Employment J5, 190 }2 ,884 14,049 J 2,642 ]2,179
Total Basic Employment 32,624 33,779 37,976 44,421 46,409 [
Total Basic/ L Total Employment .7113 .6155 .5872 .5398 .5440
Civilian Basic/Total [ Civilian Employ~ent .5683 .4975 .4726 .4563 .4680
L
SOURCE: Alaska Department of Labor, Statistical Ouarterl~, various issues. L
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The Economic Structure
The growth of the /\nchor·a~e economy has resulted not only in a change in
the levels of economic indicators but also in a change in the process by
which growth is transmitted. This change is similar to that experienced
in the state economy. The decreasing proportion of basic employment, as
illustrated in Table 18. is one result of this change. Total basic employ-
ment fell from 71 percent to 54 percent of employment between 1965 and
1976. (This assumes the basic component of services, finance, trans-
portation, and trade is found using the location quotient.) The increase
in the support sector means the economy will have a greater response to
growth in the basic sector. Table 19 details the change in the economy's
structure as measured by employment distribution.
The changing structure of the Anchorage economy can easily be observed
from this table. The traditional support sector industries of services,
finance, trade, and transportation increased their share of total em-
ployment from 42.2 percent in 1965 to 58.9 percent in 1976. This is a
result of the increased importance of the support sector in both the state
and Anchorage economies. The share of government has decreased. This
is primarily because of the limited growth of federal government. The
share of federal government fell from 30.6 percent in 1965 to 13.4 percent
in 1976. Total government's share fell from 43.7 percent in 1965 to
26.4 percent in 1976. The share of employment in construction increased
between 1970 and 1976, reversing the trend between 1965 and 1970. This
reversal may be a short-run phenomenon reflecting only the increased
activity connected with TAPS construction.
71
TABLE 19. ANCHORAGE DISTRIBUTION OF EMPLOYMENT
1965, 1970, AND 1976
% of Total Non-Agricultural Wage & Salary Employment
Industry 1965 1970 1976
Agriculture, Forestry,
and Fisheries .11 . 12 . 14
Mining 1.21 2.28 1. 93
Contract Construction 10.19 8.37 10.38
Manufacturing 2.58 2.42 2.23
Food • 59 .47 .46
Lumber . 06 .11 • 19
Paper . 01 .01 .03
Other 1. 92 1.83 1. 56
Transportation,
Communication, and
Public Utilities 8.53 9.30 10.13
Transportation 5.52 6.67 7.07
Communication 2.20 1.82 2.28
Public Utilities .81 .82 .78
Trade 17.21 20.52 21.83
Wholesale 4.00 5.29 5.80
Retai 1 13.21 15.23 16.03
Finance, Insurance, and
Real Estate 4.22 4. 71 5.82
Services 12.28 15.25 21.13
Hotels 1.50 1.80 1.97
Personal 1.31 1.27 .83
Business 2.57 2.83 6.72
Medical 2.22 2.85 3'.63
Other 4.71 6.49 7.97
Federal Government 30.62 22.64 13.42
State Government 5.45 5. 77 5.54
Local Government 7.59 8.61 7.40
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Anchorage, like the state, has been experiencing and should continue to
experience an increusc~d ·importance of the support sr~ctor. This structural
change is a result of the increased size of the econon~ which allows the
production of more goods and services for local consumption. This process
affects Anchorag~ in a twofold manner since it provides support sector
goods and services for the state as well as the region.
Population
Table 20 shows the growth of population in the Anchorage region. Anchorage
experienced major population growth since 1965. Of the 82,842 population
increase since 1965, 71 percent occurred after 1970. Migration accounted
for 70.6 percent of the increase between 1970 and 1976. The major migra-
tion increase occurred in 1975 at the height of pipeline activity when
the state estimated migration of 22,222 to Anchorage. As in the state,
migration was the most important component of population growth.
The dependency ratio in Anchorage fell during this period, although the
fall was not so great as at the state level. The dependency ratio in
Anchorage fell from 3.01 in 1970 to 2.53 in 1976, a drop of 16 percent,
compared to a 36 percent drop at the state level. The reason for the
fall was the same as at the state level, an increased proportion of the
population in the labor force. Since Anchorage serves as home to many
workers in other areas of the state, the ratio will be higher.
\
Anchorage does have comparative age distributions of the population in
1970 and 1975. These illustrate one reason why the population~to-
73
Number
TAGLE 20. ANCHORAGE POPULATION GROWTH
1965' 1970-197fi
Estimated Population
Number Natural Net as of
% Increase
over
of Births of Deaths Increase Migration Jul,Y 1 Previous Year
1965 102,337
1970 3,285 489 2,796 126,333 1
1971 3 '192 473 2,719 6,725 135,777
1972 3 '119 490 2,629 5,809 144,215
1973 4,247 424 3,823 1 ,402 149,440
1974 3,123 481 2,642 1 ,030 153 '112
\
1975 2,990 507 2,483 22,222 177,817
1976 3,472 519 2,953 4,409 185 '179
1u.s. Department of Commerce, Bureau of the Census, 1970 Census of
Population, April 1970 estimate.
2Percent average annual increase.
4.302
7.48
6.21
3.62
2.46
16.14
4.14
SOURCES: Alaska Department of Labor, Estimates of Total Resident Population
and Estimates of Civilian Population, various years.
Alaska Department of Health and Social Statistics, in communication
with the Municipality of Anchorage.
74
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employment ratio has fallen. Comparing these figures shows a relatively
stable age distribution when the major growth which took place is con-
sidered. However, the proportion of nonworking-age population has
fallen. The population under fifteen accounted for 33.9 percent of the
population in 1970 and for 29.3 percent in 1975 .. This reflects a rela-
tive decrease in family size and a decreased demand for services such
as schools. The percentage of the population available for the labor
force, ages 15-64, increased from 64.6 percent in 1970 to 68.6 percent
in 1975. This is one reason for the decreased dependency ratio.
Table 21 compares the age distribution in the two periods.
Unemployment
Anchorage, like the state, has a serious unemployment problem, although
the unemployment rate is less than the state. The unemployment rate has
remained less than 10 percent through the period. The unemployment rate
rose to a high of 9.7 percent in 1973 prior to the construction of the
pipeline; the rate then fell to a low of 6.7 percent in 1975 and rose
again in 1976 as pipeline construction came to an end. Except for 1975,
the total number of unemployed increased throughout the period. Increases
in employment opportunities encourage increases in the labor force in a
corresponding manner. The increased labor force results from two forces:
increases in the population from migration and increases in the proportion
of the population in the labor force. Table 22 shows the increased labor
force participation throughout the period. This increased labor force
participation rate is partially an effect of the increase in the age
group available for work.
75
TABLE 21. ANCHORAGE AGE DISTRIBUTION OF
NONMILITARY BASE POPULATION
% of 1970
___M_e_ Population
0 - 4 10.40
5 -14 23.50
15 -30 28.10
30 -40 15.50
40 -50 12.40
50 -64 8.60
65 + 1.50
% of 1975
Population
9.50
19.80
34.10
15.30
11.90
7.30
2.10
SOURCE: Patricia L. Dolezal and Richard L. Ender, 1976 Population
Profile, Municipality of Anchorage, September 1976. 1970
Census of the Population PC(l)-B3 Table 35.
76
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Year
1965
1970
1971
1972
1973
1974
1975
1976
TABLE 22. ANCHORAGE UNEMPLOYMENT AND SEASONALITY
1965,1970-1976
Labor Force
Total Unemployment Participation
Unemployment Rate ( %) Rate (%)
2.249 6.2 41.44
3,267 6.7 43.21
4,418 8.2 44.43
5,140 8.9 44.68
5,818 . 9.7 44.40
5,980 8.6 49.66
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5,279 6.7 47.85
7,372 8.4 50.56
Seasonality
Index
.9406
.9526
.9680
.9738
.9281
.9914
.9818
.9920
SOURCE: Alaska Department of Labor, Alaska, Labor Force Estimates.
77
Seasonality has not been a major factor in the Anchorage economy.
Anchora9e is less dependent on traditionally seasonal industries and
has a larger proportion of the less seasonal support sector employment.
Only in 1973 is the seasonality index less than .95, which may reflect
more cyclical than seasonal problems. Since the beginning of pipeline
construction, the seasonality index has remained above .98 which reflects
the technology and profit factors on Anchorage's most highly seasonal
industry, construction.
Personal Income
Personal income incre~sed at an average annual rate of\approximately
15.4 percent between 1965 and 1976. The grov1th of personal income is
only one determinant of the command over goods and services. In order
to increase the command over goods and services, personal income must
increase faster than both population and prices. Real per capita
income reflects the effects of population and prices on incomes.
Table 23 shows the growth of real per capita income over time. The
growth has been about 4 percent per year over the entire period. At
the height of pipeline activity between 1973 and,l975, real per capita
personal income increased at a rate of 9.12 percent per year.
Summary
Anchorage experienced rapid growth between 1965 and 1976. During this
period, the proportion of state population in An~horage increased.
Employment grew more rapidly outside of Anchorage. The differential
78
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Year
1965
1970
1971
1972
1973
1974
1975
1976
TABLE 23. ANCHORAGE GROWTH OF REAL PER CAPITA INCOME
1965, 1970-1976
Real Real
Persona 1 Personal Per Capita
Income Income Personal Income
($ Thousands) ($ Thousands) (1967 $)
371 ,037 393,882 3,849
634,884 579,274 4,585
732,881 649 '142 4,781
800,201 690,424 4,788
883,144 731,079 4,892
1,111,635 830,197 5,422
1,577,614 1 ,035,859 5,825
1,799,125 1,110,173 5,950
% Annual Average
Increase
1965 -1976 15.43 9.88 4.04
1970 -1976 18.96 11.45 4.44
1973 -1975 33.65 19.03 9.12
SOURCES: U.S. Department of Commerce, Bureau of Economic Analysis,
Regional Economic Information System, July 1978 printouts.
Alaska Department of Labor, Estimates of Total Resident
Population.
79
growth \<Jas a result of the rapid employment grm-1th associated with T/\PS
construction outside of Anchorage. Expansion of the traditional basic
sector was an important cause of the growth of the Anchorage economy.
However, the support sector in Anchorage also has an important basic
component. The support sector industries in Anchorage have a basic
component responding to growth outside of Anchorage. This relation-
ship, along with the increased scale of the economy, was responsible for
the change in the structure of the economy which took place.
The population of Anchorage expanded rapidly during this period. The
major component of growth was migration which was induced by increased
economic opportunities. As at the state level, the increased economic
activity had little effect on the Anchorage unemployment problem; only
in the peak TAPS year did the unemployment rate fall belm<~ 8 percent.
Real per capita did expand during this period as a result of the in-
creased activity.
SOUTHCENTRAL
Anchorage, because of its link to the rest of the state through the suppo:t
function, is indirectly affected by resource deve·lopment; the remainder of
the Gulf of Alaska region is directly affected by resource development.
The Southcentral region contains both the historically important natural
resource industries and the new natural resource industries. Fisheries of
Southcentral are some of the most important in the state, accounting for
close to half the catch of the state•s fishing industry. The Upper Cook
Inlet region was the state•s first major oil producing region and con-
tributed to the development of the petrochemical industry in Kenai.
80
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The oil port built as the terminus of the trans-Alaska pipeline at
Valdez contributed to the economic grmvth of the Southcentral region
during construction and will contribute to its growth in the future.
This section will examine the historical growth of the region.
Growth of the Aggregate Indicators
The aggregate indicators of economic growth illustrate the importance of
TAPS construction to the economy of this region. (See Table 24.) Between
1973 and 1976, the population of the region increased by almost 20,000;
employment, by more than 10,000; and personal income, by $330 million .
Population grew at an overall average rate of 6.34 percent per year
between 1965 and 1976. Population in the region grew by almost 29,196
between 1965 and 1976. Over 67.5 percent of this growth occurred after
the beginning of the pipeline construction in 1974.
Population growth followed a pattern established by employment growth.
Employment grew at an annual average rate of ll .26 percent during the
period; in the post-1970 period, the rate increased to 15.7 percent.
The employment growth rates are greater than the population growth rates.
This reflects the type of employment growth in the region at this time.
Employment connected with mining and construction is more transient than
employment in other sectors and does not bring dependents to the area.
This pattern also results from shift schedules which allow workers, par-
ticularly in mining, to live in other regions. The short-term enclave
81
TABLE 24. GROWTH OF EMPLOYMENT, POPULATION, AND
PERSONAL INCOME, SOUTHCENTRAL REGION
1965-1976
Population Employment
1965 30,235 7,124
1970 37,809 9,582
1971 39,227 10 '127
1972 39,148 10 '735
1973 39 '716 12 '131
1974 41 ,986 13,645
1975 51 ,923 18,300
1976 59,431 23,030
Annual Average
Percent Change
1965-1976 6.34 11.26
1970-1976 7.83 15.74
Personal Income
($Million)
90.1
157.3
165.1
172.9
210.2
264.4
414.0
548.7
17.85
23.15
SOURCES: All estimates State of Alaska Department of Labor, Research
and Analysis Section, Population Estimates by Census Division,
except 1970 which is Census of Population.
Alaska Department of Labor, Statistical Quarterly, various years.
U.S. Department of Commerce, Bureau of Economic Analysis,
July 1978.
82
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nature of the employment, such as construction of the TAPS line, was
another reason for the decreased dependency ratio in the region.
Personal income grew at an average annual rate of 17.9 percent between
1965 and 1976. Most of this growth came after 1973 with pipeline con-
struction. Personal income increased at an annual rate of 37.7 percent
after 1973. There are two reasons the economies of Southcentral did not
feel the full impact of this growth in income. First, the transient and
enclave nature of pipeline construction and mining employment means that
less of the income is spent in the region. Secondly, because they are
smaller economies, the leakages from the economy are greater and there
is less induced response to growth in incomes.
Causes of Growth
The major cause of growth in the Southcentral region was the expansion
of the traditional basic industries. Table 25 provides information on
employment growth by industry and on the basic sector.
The three major industries affecting the growth of Southcentral Alaska
are mining, construction, and fisheries. The fisheries industry includes
both actual harvesting and food processing. The growth rate of mining
averaged 8.27 percent over the entire period. Mining experienced cyclical
growth, declining after 1970 and rising again after 1973. The recent
growth of the industry is a result of exploratory activity and increased
petrochemical activity (Kenai Borough, 1977).
83
TA~LE 25. EMPLOYMENT BY INDUSTRY
SOUTHCENTRAL ALASKA
Annual Average Percent Increase
Industry 1965 -1976 1970-1976 1973-1975
Agriculture, Forestry,
and Fisheries
Mining
Contract Construction
Manufacturing
Food
Transportation, Communication,
and Public Utilities
'Transportation
Communications
Public Utilities
Trade
Wholesale
Retail
Finance, Insurance, and
Real Estate
Services
Hotel
Personal
Business
rvtedi ca 1
Other
Government
Federal
· State and Loca 1
Total
38.44
8.27
20.71
9.53
6.30
9. 51
9.15
22.71
5.90
10.88
11.95
10.47
10.57
12. 12
11 . 61
3.37
18.49
11.60
9.64
-3.80
8.49
11.26
37.87
1.37
85.19
11.90
8.65
2.09
34.50
19.69
8.38
11.22
10.59
11.46
14.68
16.72
20.09
4.28
37..07
9.15
11.54
-4.28
7.50
15.74
/
5.16
18.59
131.70
.55
.20
32.62
49.33
2.86
12.66
31.72
60.82
23.95
25.86
21.56
24.77
-1.01
78.12
-6.89
24.90
5.65
6.33
22.82
SOURCES: Estimated from Alaska Department of Labor, Research and Analysis
Section worksheets.
Alaska State Housing Authority, Alaska, Yakutat, Comprehensive
Development Plan, Anchorage 1971.
Alaska Consultants, Inc., Anchorage, Alaska, Yakutat, Comprehensive
Development Plan, December 1976.
84
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The major mining development occurred early in the period with the develop-
ment of the Kenai-Upper Cook Inlet fields. Petroleum activity in the
Kenai fields can be described in two periods: Field development occurred
between 1961 and 1968; this phase included the development of both onshore
and offshore fields. During this phase, mining employment increased by
over 600 percent. Major construction of petrochemical facilities also
took place during this period. Three petrochemical plants and seven
pipelines were completed between 1961 and 1968. The second major phase
was production. By 1970, all the major components of the petroleum
industry had begun production (Math Sciences, 1976). The oil production
phase is less employment intensive than the development phase. The begin-
ning of production resulted in a fall in mining employment to approximately
600 in 1971. Employment in mining remained at approximately 600 until 1975
when employment increased rapidly to 900. This increase came as a result
of OCS exploratory activity, the construction of TAPS, and expansion of
refinery and petrochemical capacity in Kenai (Scott, 1979).
Construction employment increased at an annual average rate of 20.7 percent
throughout the period. The major increase occurred between 1973 and 1975
when construction employment increased at an annual rate of 131.7 percent.
This increase was a result of the construction of the trans-Alaska
pipeline and the Valdez Port facility. Construction activity in Valdez
accounted for almost 70 percent of total regional employment in 1975 and
78 pe~cent in 1976. Although this is not all TAPS-connected employment,
it shows the magnitude of the effect of this project on the region.
Regional construction employment prior to 1970 was influenced importantly
85
by petrochemical development in Kenai. Construction of five petrochcmir.al
facilitie~~ and seven pipelines increased Kenai's construction employment
to a peak of 1,209 in 1968 (Math Sciences, 1976). By 1970, construction
employment had decreased until its regional total was 583.
The final basic.industry in the Southcentral region is the fisheries
industry. This industry consists of fish harvesting employment and fish
processing employment. Fish processing is a major component of manufac-
turing. The full impact of fisheries cannot be observed from employment
data. Employment reported in nonagricultural wage and salary employment
excludes self-employed which is a major component of fishery employment.
(The rapid growth in agriculture-forestry-fisheries employment is pri-
marily a result of a redefinition of the employment category in 1972.)
Employment itself may not. be a good indicator of the industry's health;
in most industries, employment may be a good indicator of income, but
fisheries• incomes depend upon the catch and its market value.
Independent estimates of fishery employment have been made based on
catch and gear statistics. The totals for three regions--Prince Hilliam
Sound, Cook Inlet, and Southwest--are shown in Trble 26.
These regions include more than Southcentral; however, the figures provide
an indication of the probable pattern of industry growth in the South-
central region. Employment in 1976 was only 9 percent higher than in
1970. These figures show the cyclical behavior of fishery employment.
Employment fell until 1972. After that, it peaked at 2,235 in 1973.
86
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TABLE 26. ESTIMATED FISH HARVESTING EMPLOYMENT
1970 1971 1972 1973 1974 1975
Emp 1 oyment 1 2,193 2,052 1 ,853 2.235 1 ,998 2,031
Catch 2 269.3 256.6 233.8 362.6 254.5 256.8
(mi 11 ion 1 bs. )
Value 2 40,681 36,658 44 '773 73 .496 65,912 60,971
(thousand $)
Real Value 37,117 32,469 38,631 60,841 49,225 40,033
(thousand $)
1Rogers and Listowski, 1978.
2 Alaska Department of Commerce and Economic Development, 1977.
Value is deflated by the Anchorage CPl.
1976
2,388
245.4
93.668
57,080
After falling slightly, employment then rose to its present level of
2,388. Information on the value and catch show a similar cyclical growth.
Since 1970, catch in the Central region peaked at 362.6 million pounds in
1973 and fell to 256.8 million pounds in 1975. Except for the bonanza
year in 1973, catch has varied relatively little from an average of
253 million pounds. The real value of this catch was only 7.8 percent
higher in 1975 than in 1970; its peak was $60.8 million in 1973. The
catch statistics provide an indication of the importance of the region to
Alaska fisheries.
87
The manufacturing sector, because of the large fish processing component,
was affected by the fish harvesting activity in the region. Manufacturing
increased at an average annual rate of 9.5 percent per year. This was
well over the average rate of increase in the state. Manufacturing has
experienced cycles similar to fisheries, but they have not been as pro-
nounced. The main reason for this is that manufacturing includes compo-
nents of the petrochemical industry in Kenai. The petrochemical industry
is not cyclical, so it stabilizes the Southcentral manufacturing industry.
The final basic sector is federal government employment. Federal govern-
me-nt employment actually fell during the period from 975 in 1965 to 637
in 1976. The lowest point was in 1974 when employment was 595. Military
employment in the region also followed the same pattern. Military employ-
ment in 1976 was l ,660 less than in 1965. The primary reason for this was
the closure of the Kodiak Naval Station.
Table 27 summarizes the basic sector in the Southcentral region. The
basic sector more than doubled between 1965 and 1976. (The year 1973 has
been included in order to observe the non-TAPS trend.) While the total
basic sector (including the military) remained constant between 1965 and
1973, the civilian basic sector grew by approximately 1,600 employees.
The growth of the civilian basic sector replaced the lost military and
federal government employment.
88
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TABLE 27. BASIC SECTOR GROWTH, SOUTHCENTRAL ALASKA
1965,1970, 1973, 1975, and 1976
Industry 1965 1970 1973 1975
Agriculture, Forestry,
and Fisheries 19 99 491 543
Mining 345 762 640 900
Contract Construction 880 583 681 3,656
Manufacturing 1 '188 1,647 2,627 2,656
Federal Government 975 828 602 672
Tota 1 Civilian
Basic Employment 3,407 3,919 5,041 8,427 ..
Total Military Employment _?,651 2,110 1,039 747
Total Basic Employment 6,058 6,029 6,080 9,174
Total Basic/
Total Employment .6197 .5157 .4617 .4817
Civilian Basic/Total
Civilian Employment .4782 .4090 .4155 .4605
1976
680
827
6,978
3,234
637
12,356
991
13,347
.5556
.5365
SOURCES: Estimated from Alaska Department of Labor, Research and Analysis
Section worksheets.
Alaska Department of Labor, Estimates of the Population.
Alaska State Housing Authority, Alaska, Yakutat, Comprehensive
Development Plan, Anchorage, 1971.
Alaska Consultants, Inc., Yakutat, Comprehensive Development Plan,
Anchorage, Alaska, 1971.
89
The Economic Structure
Table 27 shows the basic-to-total employment ratios; between 1965 and
1973, this ratio fell. During this period, the support sector increased
its importance relative to the basic sector. With the construction of
TAPS, the support sector did not expand as rapidly as the basic sector.
The enclave nature of pipeline employment meant that the suport services
were mostly provided by the enclave sector. This limited the necessary
expansion of the support sector to accommodate pipeline employment and
reversed the trend of decreased basic sector importance.
Table 28 illustrates the structure of the Southcentral economy as defined
by its employment distribution. The non-TAPS trend can be seen by examin-
ing the change between 1965 and 1970. Between these periods, the support
sectors either increased their share of employment or remained constant;
the overall change was not so great as in the state or Anchorage. Only
trade expanded its share significantly from 11.4 percent to 14 percent.
One interesting trend is the reduction of importance of food manufacturing.
The 1976 figures are skewed because of the pipeline construction; in
1976, construction accounts for over 30 percent of the total civilian
employment.
Population
Population in the Southcentral region increased by over 28,000 between
1965 and 1976; over half of this increase came after 1973. The major
growth in the Southcentral region was a direct result of the construction
of the trans-Alaska pipeline beginning in 1974. Such rapid growth in the
90
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TABLE 28. EMPLOYMENT DISTRIBUTION BY INDUSTRY
SOUTHCENTRAL ALASKA
1965, 1970, AND 1976
Percent of Total Employment
Industr.z:: 1965 1970 1976
Agriculture, Forestry,
and Fisheries .27 1.03 2.95
Mining 4.84 7.95 3.59
Contract Construction 12.35 6.08 30.30
Manufacturing 16.68 17.19 14.04
Food 15.24 13.49 9.24
Transportation,
Communication, and \
Public Utilities 7. 61 7.93 6.39
Transportation 5.24 5.44 4.24
Communication .36 .89 1.07
Public Utilities 1.85 l . 61 1.08
Trade ll . 41 13.96 ll. 00
Wholesale 1.43 2. 01 l. 53
Retail 9.99 ll. 95 9.47
Finance, Insurance, and
Real Estate 2.23 2.20 2.08
Services 10.36 10.72 ll. 28
Hotel 1.94 1.61 2.01
Personal .35 .29 . 16
Business 1.64 l. 19 3.28
Medical l. 95 2.87 2.02
Other 4.48 4.76 3.81
Federal Government 13.69 8.64 2.77
State and Local
Government 20.56 24.29 15.60
SOURCES: Estimated from Alaska Department of Labor, Research and Analysis
Section worksheets.
Alaska State Housing Authority, Alaska, Yakutat Comprehensive
Development Plan, Anchorage 1971.
Alaska Consultants Inc., Anchorage, Alaska, Yakutat Comprehensive
Development Plan, December 1976.
91
relatively small region meant that migration was the most important
component of growth. Between 1973 and 1974, migration accounted for
90 percent of the increase in population. Table 29 shows the employment
growth in Southcentral.
The dependency ratio in Southcentral fell dramatically from 1965 to 1976.
The ratio dropped from 4.24 in 1965 to 2.58 in 1976, a 40 percent decrease.
The enclave nature of the ~APS construction affected this significantly;
the ratio fell 22 percent after 1973. The nature of pipeline construction
meant that workers in the region would not be accompanied by their families.
The trend had been established prior to this. Increased labor force par-
ticipation is primarily responsible for this change. An increase in the
proportion of employment covered in these employment statistics was also
responsible for the decrease in this ratio as fishing became less important.
Unemployment
The unemployment rates were high even during the period of rapid employment
growth in connection with TAPS. Unemployment was highest in 1972 when the
unemployment rate reached 15.0 percent. With the beginning of pipeline
construction, the unemployment rate began to fa 11 • reaching its 1 owest
point in 1975 at 12.4 percent. Even though the percentage of unemployed
fell throughout the period, the number of unemployed grew.
As in the state, the seemingly contradictory growth in employment and
unemployment is a result of two factors. First, the increased employment
92
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TABLE 29. POPULATION GROWTH, SOUTHCENTRAL
ALASKA, 1965, 1970-1976
Estimated
Number Number Natural Net
of Births of Deaths Increase Migration
1965
1970 863 215 648
1971 505 139 366 926
1972 505 138 367 -406
1973 718 173 545 -31
1974 768 231 537 1,667
1975 634 244 390 9,828
1976 993 227 766 6,436
1April 1970 population estimate.
2 Annual average increase from 1965 to 1970.
Population
as of
July 1
30,235
37,540 1
38,832
38,739
39,253
\
4i ,457
51,675
58,877
% Increase
over
Previous Year
4.4 2
3.4
-0.2
1.3
5.6
24.6
13.9
SOURCE: State of Alaska, Department of Health and Social Services,
Health Information System Section.
93
opportunities led to increased migration. Secondly, the increased employ-
ment opportunities were responsible for increased labor force participation.
As can be seen from Table 30, the labor force participation rate increased
from 38.2 percent in 1970 to 54.8 percent in 1976. This increase resulted
from an increased participation among existing population and a high rate
of participation among migrants.
The seasonality index remained close to .80 throughout the period. Only
during 1974 and 1975, did the index rise, indicating a fall in seasonality.
The fall in the seasonality index in 1976 is a result of peak employment
on the pipeline being reached in the summer of 1976.
Personal Income
Personal income is an important economic indicator since it influences
demand and growth of the support sector. It is also a measure of the
growth of residents' economic welfare. The effect of price increases
(measured by the Anchorage CPI) and popul~tion increases on the real
per capita income of residents is shown in Table 31. The real per capita
incomes of the Southcentral region increased at an overall average yearly
rate of 5.42 percent; this is less than one-third the rate of increase
of personal income. The most rapid growth occurred between 1973 and 1975,
the period of peak TAPS construction.
Summary
The construction of the trans-Alaska pipeline was the most important
factor determining the economic growth of the Southcentral region. The
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Year
1965
1970
1971
1972
1973
1974
1975
1976
TABLE 30. UNEMPLOYMENT AND SEASONALITY
SOUTHCENTRAL ALASKA
1965' 197 0-197 6
Labor Force
Total Unemployment Participation
Unemployment Rate {%) Rate (%)
1 ,172 10.30 41.38
1 ,835 13.44 38.24
2 '135 14.66 38.90
2,257 15.03 39.17
2,336 14.07 42.94
2,744 14.80 45.09
3,094 12.42 48.68
4,502 13.83 54.78
Seasonality
Index
.8322
.7959
.8375
.7815
.8242
.9481
.9971
.7722
SOURCES: Alaska Department of Labor, Labor Force Estimates, various years.
Alaska Department of Labor, Estimates of the Population.
Alaska State Housing Authority, Yakutat, Alaska Comprehensive
Development Plan, Anchorage 1971.
Alaska Consultants Inc., Anchorage, Alaska, Yakutat Comprehensive
Development Plan, December 1976.
95
TABLE 31. GROWTH OF REAL PER CAPITA INCOME
SOUTHCENTRAL ALASKA
1965, 1970-1976
Real Per Capita
Personal Real Personal Personal
Income Income Income
Year .{$ Thousands) ($ Thousands) (1967 $)
1965 90,128 95.677 3,164
1970 157,316 146,234 3,796
1971 165,099 143,536 3,728
1972 172,916 149,194 3,811
1973 210,235 174,036 4,382
1974 264,428 197,482 4,704
1975 414,045 271 ,861 5,236
1976 548,661 335,983 5,653
Annual Average
Percent Increase
1965 -1976 17.85 12.10 5.42
1970 -1976 23.15 14.87 6.86
1973-1975 40.34 24.98 9.31
SOURCES: U.S. Department of Commerce, Bureau of Economic Analysis,
Regional Economic Information System, July 1978 printouts.
Alaska Department of Labor, Labor Force Estimates, various years.
Alaska Consultants, Inc., City of Yakutat, Comprehensive
Development Plan, December 1976,
U.S. Department of Labor, Bureau of Labor Statistics.
Alaska State Housing Authority, Alaska, Yakutat, Comprehensive
Development Plan, Anchorage, 1971.
96
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majority of the growth in employment, population, and personul income
occurred after 1973. Prior to the construction of the pipeline, South-
central was experiencing a structural change similar to the state. The
basic sector was playing a less important role in the Southcentral economy.
The magnitude of pipeline employment and its enclave nature reversed this
trend. The growth of employment was much greater than population, indicat-
ing an increased labor force participation of the population. Per capita
incomes rose with growth. Growth in employment did not dramatically affect
the Southcentral unemployment rate.
The Regional Economy in the Southcentral Alaska Region\
Southcentral Alaska is made up of a number of local economies. These
economies differ in their size and economic structure. The economies
range from the largest, Valdez with a 1976 employment of 7,818, to the
smallest, Yakutat with employment in 1976 equaling 241 .. The economies
not only differ in size but also in the factors determining their growth.
A question of some interest is whether the region can be treated as a
single economy. This is important because in our projections Southcentral
is treated as a single economy. In this section, we will examine the
small economies which make up Southcentral and show why Southcentral can
appropriately be treated as a single region.
In Alaska, the spatial order of the economy is that all local economies
have a position in a regional structure. The link through transportation
and support services in Anchorage makes a large portion of Alaska a region
centered on Anchorage. Our aim in defining economic regions is to provide
97
some spatial disaggregation of this major region. There are two approaches
which have been taken to define regions. The first approach is based on
the principle of functional integration. This notion would group economies
which are interrelated and integrated. The second approach is based on
the principle of homogeneity. This approach forms regions which are as
much alike as possible and different from other regions (Nourse, 1968).
This section will investigate the Southcentral subregions in terms of
these principles.
The Local Economies
This section will describe the local economies in terms of their size and
growth since 1970. Although each census division is not an individual
economy, the analysis must concentrate on census divisions because of data
limitations. Table 32 shows the employment, population, and personal
income of each subregion in 1965, 1970, and 1976.
Table 32 shows that the growth in the region has been concentrated in
three areas: the Kenai Census Division, the Matanuska-Susitna Census
Division, and Valdez. Between 1965 and 1970, the major growth in the
region was centered in Kenai with the petroleum development in Cook
Inlet. Between 1965 and 1970, employment in Kenai grew at an annual
average rate of 15.3 percent per year. Kenai increased its share of
regional employment from 31.9 percent in 1965 to 36.6 percent in 1970.
After 1970, Valdez was the fastest growing region. Between 1970 and 1976,
employment in Valdez increased by over eight times. The construction of
98
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TAI3LE 32. GROWTH OF AGGREGATE INDICATORS
SMALL.ECONOMIES
1965, 1970, AND '1976
Em~lo,lment 1 Personal Income
Pof2ulation (Million $)
Cordova-McCarthy
1965 1 • 991 604 7.5
1970 1 ,857 702 9.8
1976 2,353 1 ,041 17.7
Valdez-Chitina-Whittier
1965 2,396 452 6.1
1970 3,098 831 9.7
1976 13,000 7,818 163.0
Matanuska-Susitna
1965 6,125 1,083 13.4
1970 6,509 1 '145 24.3
1976 14,010 2,269 108.9
Seward
1965 2,213 620 5.7
1970 2,336 692 8.4
1976 3,395 1 '136 25.9
Kenai
1965 8,446 1,753 26.7
1970 14,250 3,576 57.2
1976 16,753 6,465 156.0
Kodiak
1965 9,064 2,310 30.6
1970 9,409 2,469 45.0
1976 9,366 4 '153 72.9
Yakutat
1965
1970 350 193 3.0
1976 550 241 4.2
1civilian nonagricultural wage and salary employment.
SOURCES: Alaska Department of Labor. Po~ulation Estimates by Census
Divisions, various years.
Alaska Department of Labor, Statistical Quarterly, various years.
U.S. Department of Commerce, Bureau of Economic Analysis,
Regional Economic Information System Prin~outs, July 1~78.
99
TAPS was responsible for this growth. The fastest growing economy after
Valdez wos Matanuska-Susitna which increased employment at a 1?. 1 percenL
rate. Kenai grew at an average annual rate of 10.4 percent after 1970.
During this period, Kodiak and Seward also experienced rapid average
annual growth rates of close to 9.0 percent.
One noticeable trend was nonproportionate growth in population in Matanuska-
Susitna and Kodiak. In Matanuska-Susitna, population was determining the
growth of employment. Matanuska-Susitna experienced suburbanization from
Anchorage which actually encouraged growth of employment to serve the
suburban population. The population of Kodiak fell slightly between 1965
and 1976; this was a result of the closure of the Kodiak Naval Station
during the period. Civilian employment growth actually replaced the
decline in military employment. The three major economies in terms of
personal income were Valdez, Kenai, and Matanuska-Susitna, all with more
than $100 million in personal income in 1976.
Functional Integration
Economies can be functionally integrated even though they are physically
separate if they interact in the production and distribution process.
Any set of economies which are open, allowing the exchange of goods and
the flow of productive factors, are functionally integrated. The extent
of these flows between the individual economies in Southcentral Alaska is
one measure of how integrated are the economies. The Southcentral Alaskan
economy will not have perfect functional integration; the smallness of
these economies and their separation in distance will assure this. In
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this section, we will attempt to determine the degree of integration of
these economies.
Transportation links and trade flows are measures of the degree of
exchange between economies. The Southcentral region, relative to the
rest of the state, has highly developed transportation links. Most
larger communities in the region are linked by roads and/or ferry and by
a highly developed communications system. There are numerous deepwater
ports and commercial marine freight service. The communities of the
Kenai, Seward, Matanuska-Susitna Census Divisions, and Anchorage are
linked by the Seward, Sterling, and Glenn Highways. Valdez is linked
through the Richardson Highway. Ferry service connects Cordova, Valdez,
Kodiak, Seward, Whittier, Homer, and Seldovia. Van container service is
available in Cordova, Valdez, Kodiak. and Seward (ISER, 1978).
.'
The trade flows between these areas were described in a census of trans-
portation conducted by the Institute of Social and Economic Research
(ISER, 1976). Table 33 shows the distribution of intrastate freight
from Southcentral points of origin. This is not a pure measure of
trade flows since it includes transshipments of goods, but it does pro-
vide an indication of the trade links between the economies of the region.
Freight and mail measure the flow of goods between communities, which
include both final goods and material inputs. It is not a perfect measure
of integration since it does not indicate the flow of labor and capital
between communities. Of all the census divisions, Skagway-Yakutat is
the least tied to the Gulf of Alaska region of the Southcentral economies.
101
....
0
N
DESTINATION
ORIGIN Anchorage
Anchorage 5.84
Cordova 63.88
Kenai 39.90
Kodiak 76.96
Matanuska-
Susitna 10.59
Seward 12.36
Ska9way-
Yakutat . 14
Valdez-Chitina-
Whittier 41.14
TABLE 33. DISTRIBUTION OF INTRASTATE FLOWS OF FREIGHT
AND MAIL FROM SOUTHCENTRAL ORIGINS, 1973
(Percent of flows from Southcentral origins)
Matanuska-
Cordova Kenai Kodiak Susitna Seward
.86 6.04 4.14 1.32 1.03
13.54 .38 7.17 .48 0
.62 15.50 2.64 . 17 . 15
.02 11 . 87 6.73 0 . 01
0 32.46 0 .50 25.91
. 08 5.53 0 0 0
.02 28.80 0 0 0
7. 77 15.05 5.46 .73 7.97
SOURCE: ISER., Census of Ala~ka Transportation, September 1976.
Skagway-
Yakutat
. 07
.65
. 15
0
0
0
.67
2.93
.Valdez-Chitina-
i~hi tti er
2.63
1.17
23.20
.26
5.71
68.60
0
.60
-, -·-,
I. j
Total
21.93
87.27
82.33
95.85
75.17
86.57
29.63
81.65
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Only 30 percent of the freight leaving Skagway is shipped to other areas
of Southcentral Alaska. For a number of the divisions (Valdez, Kodiak,
Kenai, and Cordova), Anchorage is the destination for major portions of
their flows; while, as an illustration of the role of Anchorage in the
statewide transportation system, less than 30 percent of Anchorage goods
flows to other regions of Southcentral. The existing transportation
links and the flows of freight show that the economies of Southcentral
Alaska, when Anchorage is included, do exhibit a degree of functional
integration. The integration described by the trade flows means that
changes affecting one area will have corresponding effects in the other
economies of the region. \
Homogeneity
The economies of the Southcentral region vary in two ways which signifi-
cantly affect their structure--size and basic sectors. 'Size will determine
the economies of scale which can be reached in a region and the structure
of the support sector. Larger economies can support larger, more diverse
support sectors. The basic sectors also provide an irifluence on the
support sectors and the economic structure. The economies of the South-
central region can be separated into groups based on size and the basic
sector. Kenai, Matanuska-Susitna, and Valdez are relatively large
economies with nonfishing basic sectors. Mining and manufacturing are
important for Kenai; construction and transportation, for Valdez; and
the suburban phenomenon, for Matanuska-Susitna. The growth of these
economies will not be affected by natural resource cycles. The remaining
economies are significantly influenced by fisheries, and their attendant
103
cyclical behavior. These classifications are not distinct. Kodiak and
Yakutat may experience significant petroleum development in the future
which will change their economic base.
Table 34 describes a measure of the structure of these local economies.
The per capita employment in the support sector measures the relative
size of the support sector (transportation-communication-utilities,
trade, finance-insurance-real estate, services, and state and local
government). This ratio provides an indication of how the economy would
respond to exogenous changes in its population caused by expansion of
the basic sector. The similarity among the structures of the local
economies can be seen. Except for Valdez and Matanuska-Susitna, the
ratio is close to .2. Valdez has a lower value because a large propor-
tion of the population was enclave construction employment associated
with TAPS which did not make full demand on the support sector. The
low level of the ratio in Matansuka-Susitna results because of its sub-
urban link to Anchorage. Comparison of the per capita support sector
levels to the Anchorage level of .28 shows that the support sector, at
least by this measure, is relatively undeveloped. The similarity of
per capita support sector levels means that these economies may respond
to future expansion of their populations in a similar manner.
Southcentral Alaska is treated as a single region in our projections.
The major question addressed in this section was whether it is valid to
treat Southcentral Alaska as a single economy for projection. This is
different than asking whether Southcentral Alaska is a single economy.
104
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TABLE 34. THE STRUCTURE OF LOCAL ECONOMIES
(The per capita level of support sector employment, 1976)
Support Sector Per Capita
Census Division Po2ulation Em2lo,Yment Su22ort Em2lo,Yment
Kenai 16,753 3,521 .21
Seward 3,395 681 .20
Cordova-McCarthy 2,353 522 .22
Valdez-Chitina-Whittier 13,000 2,327 . 18
Matanuska-Susitna 14,010 1 ,888 .13
Kodiak 9,366 1,870 .20
Yakutat 550 122 .22
Anchorage 185,179 52,540 .28
SOURCES: Alaska Department of Labor, worksheets, except for Yakutat which
is from Alaska Consultants, Yakutat, Comprehensive Plan, 1976.
105
Although the area is not fully integrated, we have shown that trade
links do exist between the local economie~. Between 30 and 96 percent
of the freight leaving Southcentral ports goes to other areas in the
Gulf of Alaska region. The importance of Anchorage as a regional center
should not be understated; Anchorage serves the region as the center for
administrative, distributive, and financial servi~es. This both ties
the region together and limits the growth of the support sectors in the
local economies. The local economies were shown to have similar struc-
tures. The relative importance of the support sectors in these economies
was shown to be similar. Except for the Matanuska-Susitna Census Division,
the ratio of support employment to population was around .20. This
structural similarity means that the response of these local economies
to exogenous change will be similar. Although we cannot assume that the
response to exogenous change is completely independent of location, the
above analysis of trade links and structural similarity shows that we
can expect similar regional responses to exogenous change. By making
the additional assumption that future changes will follow historical
patterns, Southcentral Alaska can be used as a region for projection
purposes.
106
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~-~~!~~~~TY.
The econon~ of Alaska expanded rapidly during the period 1965 to 1976.
The major industries responsible for this growth were construction and
mining. Development of the Cook Inlet fields was important to gro\"lth
in the early part of the period, while the development of Prudhoe Bay
influenced economic growth significantly during the latter part of the
period. The expansion of state government between 1970 and 1972 was
also responsible for a portion of the economy's growth. The construc-
tion of the trans-Alaska pipeline was the most important factor influenc-
ing growth during the period. The economy experienced its fastest
growth during the period of peak pipeline employment. \
The Alaska growth process consists of growth-initiating factors and the
response of the economy to these factors. The major cause of growth was
expansion of the basic sector industries--mining, construction, manufac-
turing, agriculture-forestry-fisheries, and federal government. The
response to change in these sectors occurs with the expansion of activity
in the support sectors. Over the historical period, the response of the
support sector has been nonproportional to the growth in the basic sector.
The support sector has expanded its share of the economy as a result of
the increased scale of the economy which allows a more local production
of the goods and services consumed. This type of structural change can
be expected to continue in the future.
The growth associated with this period affected population, unemployment,
and personal income. Population increased primarily because of in-migration
107
·in response to the increased economic opportun·ities. Population did not
respond as rap·idly as employment growth; this Vfas a result of a change in
the character of the population. The increase in the population occurred
mostly in the working ages. Unemployment was only minimally affected
during the period, and the unemployment rate fell only during the period
of most rapid growth in 1975. The seasonality component of unemployment
fell throughout the period primarily as a result of the increased impor-
tance of the less seasonal support industries. Growth increased real
personal incomes; so that for most of the period, it increased faster
than the U.S. average. Finally, prices exhibited a trend toward the
U.S. level as the scale of the economy expanded. The r~pid expansion
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with the TAPS caused this trend to be reversed. l~
108
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III. THE ALASKAN ECONOMY IN THE BASE CASE
This chapter will describe the projected growth of the Alaskan economy
without the development of the Western Gulf of Alaska Outer Continental
Shelf (sale no. 46). In order to examine the effect of previous OCS
activity on the impacts of Western Gulf development, three alternative
base cases will be examined. Each of these cases will have similar
assumptions concerning future non-OCS developments, but they will have
different assumptions about the development of OCS activity in Lower
Cook Inlet, the Beaufort Sea, and the Northern Gulf of Alaska.
The Purpose of the Base Case.
Petroleum development in the Western Gulf of Alaska may affect both the
structure and the size of the Alaska economy. Changes in the economy which
result from the development of OCS resources can be defined as the itnpact
of this development. The impact can only be described as changes from a
certain pattern of economic growth which would have occurred without OCS
development. The base case describes the projected growth of the economy
without the development for which the impact is to be measured. Comparing
two projections of the economy, the base case and the OCS case, will define
the impact of OCS development.
The base case scenarios described below are consistent, plausible patterns
of development; however, they should not be mistaken for best-guess pat-
terns of development in any sense. The actual pattern likely to occur
is subject to an enormous amount of uncertainty determined by technology,
109
market prices, federal policies, and other uncertain events. To project
any one economic future would be little more than idle speculation, since
at this point many major events and decisions affecting Alaska are un-
certain. The MAP model is designed to permit the formulation of ranges
of scenarios which reflect these uncertainties in order to trace out the
range of possible outcomes. This study does this in respect to various
alternative OCS scenarios. The same approach could be used to determine
the range of alternative non-OCS assumptions. To estimate the impacts of
OCS development~ a single base case is needed. This must be selected on
the basis of the consistency and plausibility of the assumptions, consis-
tency with historical growth, and consistency with assumed future patterns
\
of economic relations. The effect of this base case choice will be
measured by testing the sensitivity of the results to certain of the
more important assumptions.
/
The purpose of establishing a base case must be kept in mind when examin-
ing the results. The base case ~s run in order to isolate the changes
resulting from OCS development; this should influence the variables
we examine. Rapid growth associated with OCS development will affect
most economic variables. Although many variables will be affected, a
much smaller number is important, and information on these dimensions
of impact will describe the effect of rapid growth on state and regional
economies. The base case will be analyzed to provide a point of refer-
ence for these dimensions.
110
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Base Case Assumptions
The base case is defined by assumptions about the future levels of
certain exogenous variables. The set of assumptions necessary for a
base case scenario includes three important compo~ents. The first·
involves assumptions about the level of employment in those industries
whose level is assumed to be influenced by factors outside the economy,
the exogenous industries. Those industries include manufacturing,
agriculture-forestry-fisheries, federal government, mining, and a portion
of the construction industry and the transportation industry. The second
set of assumptions involves the level of certain exogenously determined
revenues which result from the production of the petroleum industry.
These include royalties, production taxes, property taxes, and corporate
income tax. The final assumption concerns the rule which defines an
assumed spending pattern for the state.
The uncertainty surrounding the future petroleum and world energy markets,
as well as economic decisions which influence state economic growth, means
that any assumption about the appropriate base case scenarios is subject
to criticism. An extensive development of a base case scenario which
required considerable tin1e and research would, because of the uncertainty,
be subject to the same type of criticism. The uncertainty involves such
major factors as the construction and timing of the ALCAN gas line and
future state spending policy. Because of this, an extensive development
of the base case scenario was not undertaken in this study; instead, a
reasonable set of assumptions was developed which placed emphasis on
lll
consistency of assumptions and reasonableness of approach. This section
describes the set of assumptions used in the base case.
NON-OCS ASSUMPTIONS
Industry Assumptions
There are two special groups of industry assumptions which are required.
First, assumptions about employment connected with special projects,
mainly resourcede-velopment projects, are needed. Secondly, assumptions
about the growth of the major exogenous industries--manufacturing,
agriculture-forestry-fisheries, and federal government--are required.
Special projects include petroleum projects, major construction projects,
and the operations of these projects. Petroleum activity is assumed to
continue at Prudhoe Bay with further exploration and development of the
Kuparak and Lisburne formations. Mining employment peaks in this area
at 1,783 in 1980. The Upper Cook Inlet fields are the other major area
of petroleum activity. Employment is assumed to increase from its
present level between 1985 and 1990 as the oil fields are shut down.
Gas production continues after 1990 but with a reduced work force.
There is little other new mining activity in the state with other mining
maintaining current levels throughout the projection period.
Major construction projects in the state during the projection period
include the Trans-Alaska Pipeline Service (TAPS) and the ALCAN gasline.
TAPS is completed in 1977, after which the line's capacity is assumed to
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be increased by the addition of four pun1p stations between 1979 and 1982.
The ALCAN gasline is assumed to be built between 1981 and 1984 with peak
employment of 4,800 in 1982. The only other special construction project
in the state during the projection period is the construction of the
Pacific LNG plant between 1980 and 1983; this project employment peaks in
1982 with 1,300 employees.
TAPS is assumed to require 850 workers per year for its long-term operations.
ALCAN operations employment is assumed to be 96 beginning in 1985. TArs•
higher operations employment can be accounted for, since TAPS has more
pipeline in Alaska, Valdez port employment is part of TAPS employment,
\ and TAPS has substantial Alaska headquarters employment. Operations
employment for the Pacific LNG plant is 60 beginning in 1984.
The level of employment in federal government and agriculture-forestry-
fisheries and output in manufacturing is set exogenously. Federal govern-
ment employment is assumed to follow its general historical trend and
remain constant at the 1976 level throughout the forecast period. The
trend in the historical period reflected increases in civilian employment
offsetting decreasing military employment. Employment in agriculture-
forestry-fisheries is assumed to be dominated by increases in fisheries.
Given favorable conditions, employment in Alaska fisheries has been pro-
jected to increase by almost four times between 1975 and 2000. This will
result with the establishment of an American trawl fishery which com-
pletely replaces foreign fishing off Alaska (ISER, 1979). The opposite
extreme would be an assumption of no employment growth without bottomfish
113
development. In this study, we assume an average rate of growth of
3 percent per year. This is consistent with moderate replacement of
the foreign fishery by Alaskans (Scott, 1979).
Output in manufacturing is assumed to increase at an average annual rate
of 4 percent, which is consistent ~ith both the historical trend and the
assumed growth in the fisheries industry.
National Variables
Alaska is part of the larger U.S. economy, and it is affected by changes
in the national economy. Three assumptions about the future growth of
the U.S. economy are needed. These assumptions are based upon the long-
term projections of the consumer price index by Data Resources, Inc.
Assumed U.S. rates were those from DRI 1 s TRENDLONG0678'forecast (DRI,
1978). This assumption assumes the continuation of long-term trends in
important exogenous variables. The average annual rate over the period
of the forecast was used as our assumption. The consumer price index
was assumed to grow at 5.5 percent per year. The U.S. real per capita
disposable income, adjusted to reflect consistent tax assumptions, was
assumed to grow at 2.2 percent per year. Finally, DRI does not provide
a projection of U.S. weekly compensation. U.S. weekly compensation was
assumed to increase at a rate of 6.8 percent per year.
Petroleum Revenues
The petroleum revenues received by the state consist of royalties, pro-
duction taxes, property taxes, and the corporate income tax. The major
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source of these revenues in the projection period is the Prudhoe fields.
The revenues are determined by the assumed rate of production of oil
and gas and its wellhead value. Prudhoe oil production is assumed to
peak in 1985 at 641.5 million barrels, while gas_production is assumed
to maintain its peak production of 912 billion cubic feet per year once
this is reached in 1987. The wellhead value of Prudhoe oil is deter-
mined by the following assumptions: constant real West Coast market
price of $12 per barrel, constant real vessel and processing costs of
$1.75 per barrel, and a TAPS tariff of $5.25 in 1978. The nominal TAPS
tariff is assumed to remain constant until 1990 when increasing operating
costs are assumed to dominate decreasing capital costs; after 1990 the
real tariff is assumed to remain constant. The wellhead value of gas
was assumed to equal $1.00 per MCF in 1978; this assumes the producers
pay a $.45 per MCF processing cost.2 These wellhead values are only part
of an array of many possible wellhead values. The range of wellhead
values is a function of the uncertainty about the future levels of those
factors influencing these values. Revenues are determined by existing
state laws describing royalties, production taxes, property taxes, and
corporate income taxes.
THE STATE EXPENDITURE RULE
Because of the central role of state and local government in the Alaska
economy and because the behavior of these governmental units depends
largely on policy choices to be made over the next several years within
2These base case assumptions were selected prior to the passage of
the 1978 Energy Bill which sets a ceiling of $1.68 per MCF on Prudhoe gas.
115
a framework far different from the past, the treatment of expenditures
by state and local gover~ments is a central feature of any development
scenario.
Two factors determine the current framework in which state expenditure
policy will be determined. First, revenues to the state will increase
tremendously with the completion of the trans-Alaska oil pipeline. These
revenues will follow closely the pattern of production from Prudhoe Bay.
Secondly, the establishment of the Permanent Fund will place new con-
straints on the use of certain petroleum revenues. The Permanent Fund
was adopted in 1976 as a constitutional amendment. It established that
a minimum of 25 percent of all mineral lease rentals, royalties, royalty
sale proceeds, federal mineral revenue sharing payments, and bonuses
received by the state would be placed in the fund. This forced savings
is only a portion of the revenues available to the state. Revenues
accumulating in the General Fund will be greater than in the Permanent
Fund for most of the period.
These changes in the structure of state spending limit the usefulness
of past spending policies in determining the spending rules to be used.
The rate of state expenditures, because it is a matter of policy choice
to be made within a framework far different from past experience, cannot
be modeled simply from past experience. However, past experience can
provide a guide for developing the hypothetical spending rule used in
the simulation. Scott, in his paper 11 Behavioral Aspects of the State
of Alaska•s Operating Budget FY 1970-FY 1977,11 found two major factors
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responsible for the growth of state expenditures. First, real per capita
state expenditures increased in response to real per capita income growth,
a demand effect. Secondly, expenditures increased in relation to the
available funds for state expenditures. The pattern between capital and
operating expenditures differed. Capital expenditures increased strongly
in response to available fund growth but the higher levels were not main-
tained. The higher levels of operating expenditures were maintained.
Adjustments to available funds seemed to provide a new base for the
growth of these expenditures.
Based on this analysis, the following pattern of state,expenditures was
assumed. Expenditures were assumed to increase in response to increases
in personal income. The income elasticity of both capital and operating
expenditures was less than one to reflect assumed increases in scale
economies associated with the production of state services. The major
difference was that the real level of state operating expenditures was
assumed to be maintained when real per capita income falls, while the
level of capital expenditures was assumed to fall in response to this
change.
The response to fund availability was composed of two parts. Expendi-
tures responded to changes in the general fund balance. The response
was weighted depending on the existing surplus; the weight equalled the
previous year fund balance divided by general fund expenditures. In other
words, the response to a change in the general fund was weighted by the
number of years of existing expenditures which could be taken out of the
117
general fund. The response of capital expenditures was greater than the
operating expenditure response.
Most relationships in the model are derived from historical relations.
The elasticities in the operating and capital expenditure equations cannot
be derived in this manner since the structure .will be uniquely different
in the future. Assumptions about these elasticities must be made. The
elasticities in both sets of equations are chosen so that the elasticity
of real per capita income equals .5. Real per capita expenditures in-
crease at half the rate that real per capita incomes increase. This
rate was chosen both to reflect economies of scale in production of
\
government services and to reflect a decreased importance of state gov-
ernment in the Alaskan economy. Alaska has a much h.i gher ratio of state
expenditures to personal income than other states, and it was assumed
that this ratio should fall toward the other states. The elasticities
for that portion of state expenditure growth which was affected by the
fund availability were determined by examining the changes in the
period 1970 to 1971 which was the last period of rising general fund
balance. Changes in this period served as a guide for making assumptions
about the fund balance elasticity of state expenditures. Elasticities
on the increase in the general fund of 2 percent for the operating
budget and 10 percent for the capital budget were used.
Admittedly, these expenditure rules are highly speculative, but they
seem to reflect the wide range of policy choices open to state govern-
ment as a consequence of new oil revenues. It is impossible to predict
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the specific expenditure path. Because of this, we assume a hypothetical
rule which is reasonable. The sensitivity of the impacts measured with
this rule will be tested.
ALTERNATIVE OCS SCENARIOS
Three alternative scenarios describing OCS activity prior to the Western
Gulf Lease sale will be described in this section. Three lease sale
areas--the Lower Cook Inlet, Beaufort Sea, and the Northern Gulf of
Alaska--are involved. The first Lower Cook lease sale took place in 1977.
The Beaufort sale is scheduled for 1979. The Northern Gulf sale is sched-
uled for 1980. The three alternative scenarios describe low, moderate,
and high levels of activity in each area. The employment levels in each
of these scenarios are described in Tables 35, 36, and 37.
These scenarios differ in timing as well as magnitude. The Lower Cook
scenarios range from an exploration-only case to a high case with peak
employment of almost 2,500. The timing differs significantly between
the moderate and high scenarios, with the moderate scenario reaching peak
employment three years prior to the high scenario. The high Lower Cook
scenario also contains the development of an LNG plant with 60 employees
during its operation.
All three Beaufort scenarios contain production of oil and gas. There
is less variation in the Beaufort scenarios than in Lower Cook. In all
cases, peak employment occurs in 1989; it ranges from 740 in the low
scenario to 1 ,344 in the high scenario. Since the Beaufort is a joint
119
T/\BlT 3~i. Lm-111{ COOK INLET EMPLOYMENT SCENAIUOS
Low 1 2 H" h 1 Moderate lg ---
Mining Mining Construction Mining Construction Manufacturing
1978 84 70 0 84 0 0
1979 126 321 88 126 0 0
1980 252 664 162 252 0 0
1981 210 804 108 486 213 0
1982 126 572 38 776 213 0
1983 84 523 0 1 ,285 543 0
1984 42 622 0 1,590 858 0
1985 42 604 0 1,548 317 0
1986 0 545 0 1,347 0 60
1987 0 411 0 1 '139 0 60
1988 0 417 0 1 '139 0 60
1989 0 417 0 1 ~ 139 0 60
1990 0 417 0 1 '139 0 60
1991 0 417 0 1 '139 0 60
1992 0 417 0 1 '139 0 60
1993 0 417 0 1 '139 0 60
1994 0 417 0 1 '139 0 60
1995 0 417 0 1 '139 0 60
1996 0 417 0 1 '139 0 60
1997 0 417 0 1 '139 0 60
1998 0 417 0 1 .139 0 60
1999 0 417 0 1 '139 0 60
2000 0 417 0 1 '139 0 60
1Based on scenarios in Lower Cook Inlet, Final Environmental Impact
Statement, 1976.
2Based on Lower Cook Inlet scenario in Beaufort Sea Petroleum Develop-
ment Scenarios. Economic and Demographic Impacts, Technical Report No. 18,
Alaska OCS Socioeconomic Studies Program, 1978. pistribution between off-
shore/onshore and industry was based on the distribution in the Lower
Cook EIS.
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[ TABLE 36. BEAUFORT SEA OCS EMPLOYMENT SCENARIOS
r
Low Moderate High
[ Mining Construction Mining Construction Mining Construction
L 1981 67 49 67 49 67 49
1982 198 198 198 198 198 198
1983 198 247 198 247 198 247
1984 232 247 232 247 232 247 r 1985 67 99 67 99 67 99
.J
1986 70 281 112 304 70 403 c 1987 123 331 276 333 148 642
1988 228 395 479 466 321 810
1989 345 395 616 466 583 761
r~ 1990 387 132 595 155 710 254
\~ . .J 1991 434 132 524 155 . 758 254
[ 1992 388 66 503 77 748 127
1993 355 132 432 155 681 254
1994 333 132 535 155 647 254
1995 334 59 438 77 616 127
[ 1996 333 18 440 22 . 572 36
1997 332 0 417 0 551 0
fJ 1998 330 0 393 0 547 0
1999 327 0 393 0 548 0
2000 325 0 394 0 542 0
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1981
1982
1983
1984
1985
1986
1987 ...... 1988 N
N l9B9
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
TABLE 37. NORTHERN GULF OF ALASKA OCS EMPLOYMENT SCENARIOS
Low 1
Monufocturing
and
Mining Construction Trans po rtnti on Mining
149 0 82 106
149 0 82 171
114 0 62 271
21 0 17 284
0 0 0 315
0 0 0 286
0 0 0 305
0 0 0 576
0 0 0 779
0 0 0 1 '114
0 0 0 1 ,198
0 0 0 1 ,034
0 0 0 939
0 0 0 840
0 0 0 865
0 0 0 965
0 0 0 990
0 0 0 1 ,015
0 0 0 1 '01 5
0 0 0 1 '015
1 Sear adjusted
Moderate 1
Con stru cti on
0
0
0
0
254
533
915
777
627
622
88
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0
0
0
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0
0
0
0
0
Manufacturing
and
Tronsportation
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68
87
146
155
173
290
248
262
367
325
286
261
285
285
285
285
285
285
285
285
Mining
166
266
340
418
391
370
399
798
1 ,539
2,300
2,461
2,279
2,248
2,154
2,014
2,044
2 '144
2 '194
2 ~ 194
2,156
Highl
Manufoctu ring
and
Construction Transportntion
0 82
0 144
0 185
765 227
2 '1 01 430
2,208 340
2,222 363
1,888 713
998 621
444 820
449 830
139 689
0 671
0 695
0 695
0 695
0 695
0 695
0 695
0 683
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state-federal lease sale, it also provides increased revenues to the
state. These include bonus, royalty, severance tax, property tax, and
corporate income tax revenues. They are described in Appendix B.
Only the moderate and high scenarios for the Northern Gulf contain produc-
tion. The low scenario, as in the Lower Cook, is an exploration-only
case. Peak employment occurs in 1990 in the moderate case and 1991 in
the high case. Peak Alaskan resident employment equals 3,740 in the
high case and 2,061 in the moderate case.
Developing these alternative base case scenarios &llows us to assess the
effects of the level of previous OCS activity on the impacts of the sale
under consideration. The uncertainty of the level of OCS activity makes
this necessary. By comparing the impact of a Western Gulf scenario with
different base case scenarios, we can assess the sensitivity of development
to previous OCS activity.
The Causes of Economic Growth
The growth of the Alaskan economy is determined by three separate but
interrelated factors: changes in the level of employment in the exogenous
sectors of the economy, changes in the level of personal income, and
changes in state expenditures. If we measure economic growth as the
expansion of employment, the effect of these factors can be seen.
Growth of the exogenous sector directly affects economic growth by the
employment it creates. The growth of this sector is determined by
123
external demand for Alaskan products. The most obvious example of this
type of growth is the employment associated with the construction of the
trans-Alaska pipeline. The employment generated by this project was
determined by demand for Alaska 1 s petroleum resources.
The growth of state expenditures is another source of economic growth.
State expenditures are a source of growth since they translate revenues
raised outside of the Alaskan economy such as petroleum-related revenues
into demand for Alaskan products. State expenditures influence employ-
ment growth in two ways. First, state capital expenditures on projects
such as ports and highways increase the output of the construction indus-
try. This increases the demand for construction employment. Secondly,
state operating expenditures are partially spent on personnel expenditures.
This determines the level of state government employment.
State spending will be determined by two influences which are proxies for
demand and supply effects. Growth of income will generate demand for in-
creased government services. The second influence on expenditures is a
supply influence. With the flow of revenues from Prudhoe Bay oil and
gas, Alaska will begin to accumulate a surplus in its General Fund.
This surplus, unlike the surplus in the Permanent Fund, can be used for
state government expenditures. This fund balance is assumed to have a
supply effect on expenditures, causing them to be increased as funds
accumulate in the balance. This is an assumption which is required
about future state spending patterns. The effect of state expenditures
on employment is determined by the wage rate of state employees. Once
124
state personnel expenditures are determined, the wage rate determines
the number of state employees.
Employment in each of these sectors influences the growth of the economy
through the increased demand for goods and services produced in Alaska.
For endogenous sectors, employment is determined by the demand for labor
needed to produce a desired level of output. The demand for output is a
function of real disposable income. Demand is income elastic, so that
increases in personal income lead to increased demand. This effect is
simultaneous; increased incomes lead to increased'demand which increases
employment. This increased employment generates its own demand, and the
process continues. The process stops when leakages outside the economy
dominate the flow of income.
Income increases with increases in the average income per worker and
with increases in the number of workers in the economy. The average
income is substantially determined by wages and salaries, so it reflects
changes in the wage rate. The real wage rate is determined by changes
in prices, bottlenecks in the economy associated with rapid growth, and
changes in outside wages. The U.S. labor market affects the Alaskan
real wage rate because of the small size of the Alaskan labor market and
the mobility of Alaskan workers. Because of these factors, migration
becomes the equilibrating factor maintaining the relation between Alaska
and U.S. wages. Changes in the sectoral composition of employment will
also affect the average wage. As high wage sectors such as construction
and mining increase in importance, wages and salaries will increase more
than proportionally to employment growth.
125
The response of the economy to increases in income will be determined by
the structure of the economy. Larger economies provide more of their
own goods and services, there are fewer leakages, and the multiplier is
larger. This results because economies of scale allow lowered produc-
tion costs and the substitution of local production for imports. Growth,
by affecting the structure of the economy, will also influence the
response of the economy to increases in income.
The effect of an increase in personal income on growth will also depend
on the increase in prices resulting from growth. Real income determines
the demand for goods and services. The price level of the Alaskan
economy is determined by U.S. prices since Alaska imports most of its
goods. The size of the economy also affects the price level; larger
economies provide economies of scale which reduce the cost of production
and reduce prices. The rate of growth also affects prices. Rapidly
growing regions are more subject to bottlenecks and supply constraints
which lead to price increases.
Employment and income growth influence the growth of population in the
state. Population grows as a result of natural increase and migration.
Natural increase (the excess of births over deaths) is a function of the
age distribution of the population. Migration is determined by the rela-
tive economic opportunities available in Alaska. Changes in employment
opportunities and the relative per capita income between Alaska and the
rest of the United States will determine migration. Migration has a con-
siderable effect on the age-sex distribution of the population. Migration
126
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which is determined by economic opportunities primarily affects the age
group under forty. Migration after forty years of age is a response to
other factors such as retirement and the high cost of living {Seiver,
1975).
State economic growth does not occur uniformly throughout the state but
varies by region. Regional growth depends on the factors causing grovvth.
Factors which have a similar influence on state growth may affect the
growth in each region differently. For example, equal growth in state
government employment and exogenous employment, although they may affect
state growth the same, will differ in their regional impacts, depending
on the concentration of exogenous employment and the dispersion of state
government expenditures. ·
The causes of regional growth are the same as those at the state level--
increases in exogenous employment, increases in personal income, and in-
creases in state expenditures. Growth of any of these factors within the
region will lead to growth in the region. The economies of Alaskan regions
are not independent, but are interdependent. Because of this, growth in
one region will affect growth in other regions. Four processes reflect
this interaction; the strength of the interdependence of the Alaskan
regional economies depends on the strength of these processes. First,
government spending works to distribute growth between the regions.
Increases in state revenues which result from growth in one region will
be translated into growth in other regions through the distribution of
state expenditures. State expenditures are distributed to a region in
127
relation to its population. However, government centers such as Anchorage
and Juneau receive a greater-than-proportionate share of state expendi-
lures hccattse of the administrative and headquarters functions they serve.
Second, changes in state wage rates will affect growth in the reg·ions.
Increases in wage rates increase personal incomes in each region and
the demand for goods and services in each region. Third, regions which
serve as regional centers will reflect growth in other regions, since
they provide goods and services to other regions. The growth of Anchorage
which serves as the financial, distributional, and adminstrative center
of the state is the most obvious example of-this, although smaller centers
such as Fairbanks also experience this type of relation. Finally, migra-
tion between regions illustrates interaction of the regional economies.
Residents of one region respond to employment opportunities in another
region by migrating to it, so that employment growth in one region
determines the population of other regions.
128
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The Alaskan Economy
Moderate Base Case Growth
The base case describes the general pattern of the Alaska economic growth
without development in the Western Gulf of Alaska OCS. The impact of
Western Gulf development will be measured as changes from this base case
pattern of growth. In analyzing the projected base case growth, we will
examine the change in the magnitudes of the important economic variables,
as well as changes in the economic structure or process of growth.
The historical economic growth serves as a reference for describing
future projected growth. Between 1965 and 1976, the Alaska economy
experienced rapid growth. Employment grew at an annual average rate of
8.4 percent throughout the period. Expansion of the mining and construe-
tion was largely responsible for this growth. Economic growth also
produced some structural changes. The most significant of these were
the increased importance of the support sector and the aging of the
population. Population grew at an annual rate of 4.1 percent over the
period; migration was responsible for the large proportion of this
growth. Growth had little effect on unemployment but did improve real
per capita incomes of Alaskans relative to the U.S. average. Historical
growth had opposite effects on prices. As the scale of the economy
grew, the price level relative to the United States fell; however, the
·rapid growth connected with the impact of TAPS reversed this trend.
The overall growth of the state economy in the future will be affected
by growth in its basic sector. Rapid increases or declines in this
129
sector provide interesting periods for our analysis. The early 1980s
are important for basic sector growth. Two special construction proj-
ects, the ALCAN gas line and the Pacific LNG plant, have peak construe-
'-
tion years between 1981 and 1983. Mining activity is also important.
Prudhoe employment is assumed to fall from about 1800 in 1980 to about
900 in 1983 and then begin to rise; Lower Cook OCS activity peaks in
1981; and Beaufort and Northern Gulf OCS development begin in 1981.
Another event of importance is the shutdown of the Upper Cook Inlet oil
production in 1990. This reduces mining employment by 450, an 11 percent
fall. Peak Prudhoe oil production occurs in 1985; the effect of this on
revenues to the state government makes this an important point in time
to consider.
THE STATE
The General Pattern of Development
Economic growth is a multidimensional process which no one indicator can
describe. While population, employment, and personal income do not
describe the full range of growth, they can be used to describe the
general pattern of growth. Employment measures the ability of the
economy to create jobs; personal income measures the effect of the
economy on residents' command over goods and services; and population
growth describes the response of people to these changing economic
opportunities. Table 38 shows the projected levels of population,
employment, and personal income. Overall, there is substantial growth
although not so rapid as in the 1965-to-1976 period.
130
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1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
TABLE 38. AGGREGATE INDICATORS OF ECONOMIC GROWTH
MODERATE BASE CASE, ALASKA
1977-2000
Personal Income
Po~ulation Employment (Millions of Nominal
410,660 185' 508 4,072
406,667 178,526 4,236
418,656 185,225 4,743
434,173 194,054 5,395
456,078 206,859 6,420
487,441 225,394 7,958
504,694 231,506 8,645
503,802 224,632 8,360
513,372 227,742 9,008
530,903 236,983 10' 155
551,736 248,235 \ 11 '535
573,044 259,246 12' 979
593,590 269,355 14,453
612,523 278,055 15' 919
626,140 282,828 17 '082
639,242 287,596 18,420
655,575 295,033 20,171
672,781 303,083 22, 121
692,017 312,619 24,367
713,324 323,534 27,051
734a418 334,057 29,785
756,187 344,923 32,888
780,692 357,663 36,514
805,725 370,496 40,496
SOURCE: MAP Model.
131
$)
Population is projected to be approximately 805,700 by 2000. Between 1978
and 2000, the population grows at an annual rate of almost 3.2 percent.
This rate is approximately 25 percent less than the average annual growth
rate experienced between 1965 and 1976 but faster than the average rate of
2.8 percent experienced prior to the construction of TAPS. Population
falls after the completion of both TAPS in 1977 and ALCAN in 1983. In
each case, population declines by less than 1 percent; and the peak
population is exceeded the following year. The most rapid period of
population growth occurs between 1978, the year TAPS is completed, and
1982, the peak year of ALCAN construction. During this period, population
increases at a rate of 4.6 percent per year. \
Employment is projected to grow at an average annual rate of 3.4 percent,
reaching approximately 370,500 by 2000. Like population, employment ex-
periences its greatest growth between 1978 and 1982 when"it grows at a
rate of 6.0 percent per year. These projected growth rates are not so
great as the 8.4 percent rate of growth experienced between 1965 and
1976. Employment is projected to decline after completion of both the
TAPS and ALCAN projects. The decline is more substantial than the
decline in population, which is approximately 4 percent in each case.
The 1983 employment level is not reached until 1986. Employment is pro-
jected to grow faster than population throughout the forecast period; this
supports the trend observed in the historical period. The dependency
ratio falls from 2.28 in 1978 to 2.2 by 2000.
132
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The growth in personill income is re lilted to the growth in e111p l oyment,
since wages and salaries at~e a majm· component of personal income.
Changes in the composition of employment, changes in the productivity of
labor, and changes in the level of prices will result in differential
rates of growth between personal income and empl6yment. Personal income
is in nominal dollars, so it reflects both the real growth of the economy
and increases in prices. Personal income grows at an annual average
rate of 10.8 percent. Personal income grows faster in the period prior
to the 1983 ALCAN peak construction. Between 1978 and 1982, personal
income grows at a rate of 17.1 percent per year; which is twice the
average yearly rate after 1983. This illustrates the importance of the
high-wage pipeline construction employment to growth in personal income.
Between 1978 and 2000, personal income grows at a~ annual average rate
of 10.8 percent, which is less than the 15.4 percent rate experienced
between 1965 and 1976.
Although population, employment, and personal income do not experience
growth at so rapid a rate as they experienced between 1965 and 2000,
economic growth is projected to be substantial. Employment is projected
to increase by 107 percent, population by 98 percent, and personal
income by 856 percent between 1978 and 2000. The difference between the
projection and the historical period is caused by the major role pipeline
construction played in the historical period.
133
Emp~ment and the Structure of the EcononlY_
The increased demand for industrial output will result in growt~ of
1\laska employment. Total 1\laska employment is projected to more than
double by the end of the projection period. He saw in the historical
period that growth does not occur in all industrial sectors evenly.
Between 1965 and 1976, we observed structural change which increased the
importance of the support sector in the economy. The projected economic
growth continues the structural change observed in the historical period.
Table 39 illustrates the changing structure of the -Alaska economy. This
table shows the growth of three sectors of the Alaska economy--the
support sector which includes transportation-communication-utilities,
trade, finance, and service employment; the government sector which
includes state, local, federal civilian, and federal military employment;
and the basic sector which includes mining, manufacturing, agriculture-
forestry-fisheries, and construction.
The sector which is projected to grow most rapidly is the support sector.
This sector grows at an annual average rate of approximately 5.1 percent
bet\-Jeen 1978 and 2000; this is faster than the growth of total employment.
The support sector expands more rapidly in all parts of the period.
This sector expands its share from approximately 37 percent of total
employment in 1978 to 53 percent by 2000. Expansion of this sector is
consistent with past trends in the Alaska economy. This projected
expansion of this sector does not exceed the limits suggested by national
comparisons. The projected share is close to the average share of this
134 [
1978
1980
1985
1990
1995
2000
TABLE 39. THE STRUCTURE OF EMPLOYMENT
MODERATE BASE CASE, ALASKA
1978,1980, 1985, 1990, 1995,2000
Support Sector Government Basic
Employment % of Total Employment % of Total Employment
66,504 37.3 68,862 38.6 43,159
76,658 39.5 69,783 36.0' 47,612
97,786 42.9 74,546 32.7 55,410
130,174 46.8 80,037 28.7 67,844
155 ,621 49.8 82,001 26.2 74,997
197,090 53.2 84,669 22.9 88,737
Sector
% of Total
24.2
24.5
24.3
24.4
24.0
24.0
Support Sector includes transportation-communication-public utilities,
trade, finance~ and service employment.
Government includes state, local, and federal employment.
Basic Sector includes mining, manufacturing, agriculture-forestry-fisheries,
and construction employment.
SOURCE: MAP Model
135
sector in the U.S. economy and several small states described in Table 7.
The support sector expands because of increased demand for goods and
services. Demand increases as incomes increase. The nonproportional
response of this sector occurs as the scale of the economy expands and
allows more local production of these goods and services.
The nongovernment basic sector maintains a relatively constant share of
total employment throughout the projection period. Its share is close
to 24 percent in all but the years connected with large special projects.
The share of total employment is between 25 and 26 percent in the period
with ALCAN construction. Employment in the nongovernme'nt basic sector
expands at an average annual rate of 3.3 percent between 1978 and 2000.
Employment in this sector reaches a peak of over 58,000 in 1982 and 1983
when both the ALCAN and Pacific LNG projects are at their peak. After
completion of these projects in 1983, basic sector employment falls by
almost 7 percent. The peak level is not reached again until 1987.
Growth in this sector after the ALCAN project ends in 1984 averages an
annual rate of 3.1 percent. Growth is mostly a result of the expansion
of manufacturing and construction since there is only limited expansion
of special projec~ construction and mining.
The growth of the government sector is a result of the expansion of state
and local government since federal employment is assumed to follow its
historic trend and remain constant. State and local government employ-
ment increases by almost 16,000 between 1978 and 2000. The growth of
state and local government is not strong enough to maintain the share of
136
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the government sector. The share of government employment falls from
almost 39 percent in 1978 to 23 percent in 2000.
Population
Population grows through natural increase and net in-migration. Natural
increase occurs when there is an excess of births over deaths. Migration
results in population increases when in-migrants outnumber out-migrants,
and population decreases when the opposite is true. Each of these factors
affects not only the size of the population but the age and sex distribu-
tion as well. The projected population increase of 399,000 between 1978
and 2000 is significantly affected by migration. Population growth in the
base case also continues the aging of the population. Table 40 shows the
components of population change.
As in most small regions experiencing rapid growth, migration is the
most important component of population change. Table 40 shows net migra-
tion from the previous year. Between lq78 anrl ?nnn, almn~t half nf thP
population growth is net in-migration. Net in-migration occurs in all but
three years of the projection period; net out-migration occurs in 1977,
1978, and 1984, years following the completion of major TAPS and ALCAN
construction. The economic opportunities associated with ALCAN and
Pacific LNG construction are also responsible for major in-migration
in 1981 when migration is responsible for 68 percent of the population
growth, and 1982 when migration accounts for 76 percent of the popula-
tion growth. Migration also plays an important part in population growth
between 1986 and 1990 when the Northern Gulf is developed. Migration is
137
TABLE 40. THE COMPONENTS OF POPULATION CHANGE
MODERATE BASE CASE, ALASKA
. 1977-2000
Net Migration Natural Increase
1977 -24,935 6,383
1978 -11 '241 7,202
1979 5,268 6,697
1980 8,650 6,870
1981 14,768 7' 144
1982 23,727 7,654
1983 8,784 8,501
1984 -9,582 8,697
1985 1,383 8,163
1986 9,400 8' 127
1987 12,437 8,403
1988 12,531 8,788
1989 11 '392 9", 165
1990 9,453 9,491
1991 3,888 9,735
1992 3,344 9,754
1993 6' 561 9,767
1994 7,288 9,918
1995 9,140 10,097
1996 10,959 10' 351
1997 10,423 10,676
1998 10,801 10 '972
1999 13,230 11 ,280
2000 13,357 11,682
SOURCE: MAP Model
138
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responsible for over fifty percent of population growth in each of these
years.
Population growth results in changes to the age-sex distribution of the
population. Table 41 compares the age-sex distribution of the population
in 1980 and 2000. The aging of the population is projected to continue~
with the cohorts over 30 gaining as a proportion of the population. The
proportion of the population over 30 increases from 37.6 percent in 1980
to 43 percent in 2000. One reason for the fall in the dependency ratio
can be easily seen; between 1980 and 2000~ the proportion of children
(0-14) falls from 29.6 percent to 28.1 percent.
Personal Income
Personal income is projected to increase at an average rate of 10.8 percent
per year. Increase in personal income is one of the benefits of growth;
it measures the command of residents over goods and services. The full
effect of increases in personal income is diminished by increases in
prices; as prices of goods and services increase~ a dollar can buy less.
Economies which increase real personal income may not be increasing
benefits if it does not increase as fast as population. Increases in real
per capita income measure real increases in the command of the average
resident over goods and services. Table 42 shows the projected change in
th~ price level (RPI) and real per capita income.
'The Alaska relative price index measures the increase in Alaska prices
relative to a 1957 U.S. average. RPI increases at an average annual rate
139
TABLE 41. AGE-SEX STRUCTURE OF THE POPULATION
MODERATE BASE CASE, ALASKA
1980, 2000
1980 2000
Age Cohorts Males Females Males Females
0 -14 15.08 14.56 14.27 13.81
15 -29 18.47 14.33 15.84 13.09
30 -49 13.35 12.12 14.83 13.37
50 -59 3.31 2.92 3.83 3.70
60 + 3.06 2.81 3.37 3.90
SOURCE: MAP Model
140
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TABLE 42. REAL PER CAPITA INCOME
MODERATE BASE CASE, ALASKA
1977-2000
Real Per Capita 1 Alaska Relative
Price Index
Income ($ 1957 us = 100)
. 1977 3,924 252.71
1978 3,724 279.75
1979 3,862 293.36
1980 4,029 308.40
1981 4,323 325.62
1982 4,721 345.81
1983 4,737 361.63
1984 4,448 373.05
1985 4,511 389.00
1986 4,687 408.12
1987 4,873 429.09
1988 5,026 450.64
1989 5 '151 472.73
1990 5,250 495.08
1991 5,282 516.52
1992 5,347 538.94
1993 5.461 563.47
1994 5,579 589.39
1995 5,706 617.10
1996 5,864 646.66
1997 5,988 677.29
1998 6,132 709.32
1999 6,290 743.61
2000 6,448 779.46
1Deflated by Alaska Relative Price Index
SOURCE: MAP Model
141
of 4.8 percent, between 197B and 2000. Over the period, RPI moves toward
the U.S. average since United States CPI is assumed to increase faster,
at a rate of 5.5 percent per year. This supports the pre-pipeline trend;
as the scale of the economy increases and more goods and services are
produced locally, the price level falls relative to the U.S. average.
During the buildup of the ALCAN and Pacific LNG, RPI increases faster
than the United States CPl. This diverging price level is a result of
the rapid growth connected with development. Overall. the price level
follows trends similar to the historical growth.
Real per capita income expands by 73 percent between 1978 and 2000. The
average rate of growth is 2.5 percent per year. This is less than the
5.4 percent growth in real per capita income between 1965 and 1976 and
the 3.5 percent annual growth rate prior to TAPS construction between
1965 and 1973. This rate is slightJy greater than the 2.2 percent
increase assumed for the United States in general. The high wage of
special project construction workers affects real per capita incomes--
real per capita income peaks in 1982 and 1983 and falls by 6 percent
after the peak ALCAN year. The rise in real per capita incomes shows
an increase in benefits of growth; however, this does not address
distributional questions concerning personal income.
The State Fiscal Position. Over the projection period, state government
will receive revenues from petroleum development which exceed current
levels of expenditure. State government•s decision on the expenditure
of these revenues will influence the growth of the Alaska economy. In
142
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the historical period, we observed state government's role in the growth
process. State government contributes to growth by the expenditure of
revenues directly through state government employment and indirectly
through capital expenditures which influence the level of activity in
the construction sector. When revenues from outside the economy such as
exogenous petroleum revenues are spent, this extra demand causes growth.
This section describes the projected revenues to the state, the state's
projected expenditures, and the overall fiscal position of the state in
the projection period.
State Revenues. The State of Alaska has two major sources of revenues:
exogenous petroleum revenues which are determined by the flow of oil and
gas on state lands and endogenous revenues which are determined by the
state's economic activity. Endogenous revenues include income tax, busi-
ness taxes, and other revenues determined by the growth of the economy.1
Table 43 shows the growth of state government revenues between 1977 and
2000. Total revenues are almost $7.0 billion larger in 2000 than in
1977. Overall, these revenues increase at a rate of 10.4 percent per
year. Prudhoe oil revenues peak in 1985. Prior to 1985, the rate of
increase in revenues averages 20.9 percent per y&ar, while this slows
to 5.2 percent following 1985. The pattern of revenues follows the
pattern of petroleum revenues received by the state.
1other tax revenues include revenues from the personal income tax,
nonpetroleum corporate income tax, business license tax, motor fuels tax,
alcohol tax, cigarette tax, school tax, ad valorem tax, and other mis-
cellaneous taxes.
143
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
SOURCE: MAP Model
TABLE 43. STATE REVENUES
MODERATE BASE CASE, ALASKA
1977-2000
(Millions of Nominal Dollars)
General Fund Petroleum
Revenues Revenues
796 197
1,054 471
1 ,441 861
1,625 996
1,989 1 ,278
2,331 1,476
2,655 1,643
3,230 2,122
3,639 2,422
3,833 2,431
4,100 2,482
4,377 2,523
4,665 2,571
4,804 2,467
4,975 2,414
5,202 2,438
5,457 2,467
5,686 2,435
5,911 2,381
6,213 2,373
6,555 2,374
6,911 2,372
7,316 2,378
7,773 2,379
~44
Other Tax
Revenues
214
207
274
313
356
438
554
654
688 r i
751 l_
820
914
1,006
1,095
1 '172
1 ,258
1 ,364
1 ,482
1 '614
1 ,789
1 '991
2,213
2,478
2,790
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The most important source of revenues to the state during the period
between 1977 and 2000 are petroleum revenues. Petroleum revenues include
royalties, production taxes, property taxes, and petroleum corporate
income taxes from petroleum production. Petroleum revenues are earned
from production on state lands in Upper Cook Inlet, Prudhoe Bay, and the
Beaufort Sea. Because of their importance, Prudhoe Bay production domi-
nates these revenue flows. Petroleum revenues increase until 1989, after
which their general pattern is declining revenues. The decrease~in reve-
nues reflects declining production at Prudhoe Bay. Between 1977 and 1989,
yearly petroleum revenues increase at an average rate of over 23.8 percent
a year. After 1989 petroleum revenues fall, falling 7.5 percent by 2000.
Other tax revenues, which include personal and business taxes, increase
throughout the projection period. The increase in these revenues results
from the growth of the economy. These revenues grow at an average rate of
11.8 percent between 1977 and 2000. Other tax revenues fall after comple-
tion of TAPS in 1977. The increase in these revenues after 1990 counter-
acts the decline in petroleum revenues.
~tate Expenditures. State government expenditures increase during the
projection period; they are shown in Table 44. The increase in state
expenditures is a result of two forces. First, expenditures grow as a
response to the general growth of the economy. Increased population and
prices result in increasing expenditures to provide the same level of
services as measured by real per capita expenditures. The growth of
income is assumed to increase the demand for the level of services
provided. The second force operating on state expenditures is the
145
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
TABLE 44. STATE EXPENDITURES
MODERATE BASE CASE, ALASKA
1977-2000
Total Expenditures
(Millions of Nominal Dollars)
1 '161
1 ,311
1 .415
1,567
1 ,744
2,019
2,380
2,595
2,762
3,099
3,454
3,873
4,288
4,713
5,092
5,419
5,797
6,254
6,733
7,268
7,888
8,561
9,296
10,135
1oeflated by Alaska Relative Price Index
SOURCE: MAP Model
146
Real Per Capita1
Expenditures
1 '119
1 '152
1 '152
l, 170
1 '174
1 '198
1,304
1 ,381
1,383
\ 1 ,430
1.459
1 ,500
1,528
1 ,554
1 '575
1 ,573
1 '569
1 ,577
1 ,577
1 .576
1,586
1 ,596
1 ,601
1 ,614
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accumulation of unspent revenues. These revenues will place pressure on
the government to increase expenditures.
State expenditures increase more than eight times between 1977 and 2000.
The average annual growth rate during this period is 9.9 percent per year.
After 1989, when petroleum revenues peak, the growth of expenditures is
at a rate ofonly 8.1 percent per year. The projected growth in state
expenditures repeats, over a much longer period, the experience of the
state after the Prudhoe lease sale. The Prudhoe Bay experience may pro-
vide an indication of how the state will expand services in the future.
Despite the rapid growth of expenditures during the historical period, the
functional distribution of expenditures remained fairly stable .. From
this, we may be able to infer that the state will continue to distribute
expenditures between the nine functional categories (ed~cation, social
services, health, natural resources, public protection, justice develop-
ment, transportation, and general government) as in the pas·t (Goldsmith,
1977).
Real per capita expenditures can be considered a measure of the level of
state services received by an individual •. Increases in state expenditures
\
are of two types--providing additional services and providing the same
level of services to an increased population. Increases in services
occur throughout the period. Real per capita expenditures increase by
44.2 percent between 1977 and 2000. This is a modest expansion when it
is compared to the rise in real per capita expenditures of 118 percent
between 1969 and 1973 (Goldsmith, 1977). The growth in real per capita
147
·expenditures is not even throughout the period; almost 83 percent of the
increase occurs between 1977 and 1989 when oil revenue~ peak.
Balances. The huge increases in revenues which result from the produc-
tion of oil and gas place the State of Alaska in a unique position. The
excess revenues available allow the state to build up its fund balance.
These funds not only provide a source of future revenues; they also gen-
erate interest earnings which increase yearly revenues. There are two
types of fund balances: the permanent and general funds. (See Table 45.)
The permanent fund is a legislated savings account for the state. In 1976
Alaska adopted a constitutional amendment which established the permanent
fund. The relevant section of the constitution is Article IX, Section 15,
which reads:
ALASKA PERMANENT FUND. At 1 east twenty-five percent· of all mineral
lease rentals, royalties, royalty sale proceeds, federal mineral
revenue sharing payments, and bonuses received by the State shall
be placed in a permanent fund, the principal of which shall be used
only for those income producing investments specifically designated
by law as eligible for permanent fund investments. All income from
the permanent fund shall be deposited in the general fund unless
otherwise provided by law.
This establishes the permanent fund as a minimum amount of petroleum
revenues which cannot be spent. The permanent fund grows continually
throughout the projection period. By 2000 there are $4.9 billion in the
permanent fund. The general fund includes the remainder of the state's
unspent revenues. For most of the period, the general fund is more
important than the permanent fund. At its peak in 1996, the general
fund has almost $12 billion, which is greater than three times the
amount in the permanent fund. The decline in petroleum revenues after
148
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1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
SOURCE: MAP Model
TABLE 45. STATE FUND BALANCES
MODERATE BASE CASE, ALASKA
1977-2000
{Millions of Nominal Dollars)
General Fund Permanent Fund
Balance Balance
668 2
617 49
815 153
1,054 275
1 ,501 411
2,055 563
2,627 732
3,550 949
4,738 1,188
5,852 1,437
6,947 1,684
7,972 1,936
8,934 2,193
9,687 2,445
10,294 2,689
10,844 2,937
11,330 3,188
11 ,667 3,437
11,833 3,681
11 ,851 3,924
11,695 4,168
11,342 4,413
10,790 4,660
10,006 4,907
149
Fund Balance
Interest
35
47
47
69
94
136
186
239
320
421
517
613
703
790
861
922
979
1,032
1,074
1,104
1,124
1 , 131
1 , 125
1 '1 05
1989 reduce the rate of increase in the general fund. Beginning in 1997,
the general fund is drawn down for expenditures. Between 1996 and 2000,
the general fund is reduced by almost $2 billion. The cyclical nature of
petroleum revenues and their importance as a part of state revenues mean
that when expenditure policies are tied to revenues, they will eventually
lead to expenditures in excess of revenues. Since the increase in ser-
vices cannot be supported by normal revenues, the fund balance must be
drawn on. Changes in the rate of spending out of revenues will only
affect the timing of this, not its eventuality (Goldsmith, 1977). These
fund balances provide an additional source of revenue to the state. The
general fund is assumed to earn interest at the rate of 7 percent per
year. while the permanent fund earns a slightly higher rate of 7.5 percent.
These rates reflect the diverse portfolio held by the state which includes
both long-and short-term bonds as well as in-state loans. At their peak
in 1998, these revenues are about 16 percent of the state's general fund
revenues. The interest revenues fall as the general fund is decreased.
State Fiscal Position. The state's fiscal position is determined by two
factors. First, the Prudhoe Bay petroleum revenues are the major portion
of state revenues which are a fixed flow of resources through time.
Growth in the economy will not affect the level of these revenues.
Secondly, economic growth increases expenditures without the same response
in nonpetroleum revenues. These factors lead to the pattern of the fund
balances shown in the previous section.
150
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t
Table 46 contains two indicators which illustrate the statets fiscal
position. The first is the excess of general fund revenues over general
fund expenditures. As long as this is positive, the general fund balance
will increase; when it is negative, the fund balances must be drawn down
to meet expenditures. The excess of revenues over expenditures increases
until 1985, after which it falls. After 1985 expenditures are increasing
faster than revenues. After 1998 expenditures are greater than revenues,
and the fund balance must be drawn down. This pattern has long-range
effects since it affects not only the level of the general fund but also
the interest earned on the fund balances. This interest is an important
part of revenues to the state.
The other factor,affecting the value of the fund balances to the state is
prices. As prices increase, the purchasing power of the fund will decrease.
Table 46 shows the value of the total general and permanent fund balances
in constant 1977 dollars. The effect of prices is to reduce the real
value of the fund earlier. The real value of the fund peaks in 1993 at
$6.5 billion; this is four years before the nominal fund balance peaks.
By 2000, the real fund balance has fallen 26 percent from its peak; this
compares to the 6 percent fall the nominal fund balance experiences by
2000. The real fund balance illustrates the effect of price increases
on the fixed flow of revenue which is included in the fund.
GROWTH OF THE REGIONAL ECONOMIES
The regions of Alaska do not uniformly reflect state growth. Differ-
ences reflect the location of exogenous employment growth as well as the
151
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
SOURCE: MAP Model
TABLE 46. STATE FISCAL POSITION
MODERATE BASE CASE, ALASKA
1977-2000
General Fund Revenues
Minus General Fund
Expenditures Fund Balance
(Millions of (Millions of 1977
Nominal Dollars) Constant Dollars)
-137 671 -4 602
302 835
361 1,090
583 1 ,486
707 1 , 916
740 2,3?0
1,140 3,051
1 ,426 3,854
1,364 4,519
1,342 5,089
1 ,276 5,562
1,219 5,955
1 ,004 6' 199
851 6,359
798 6,469
738 6,519
586 6,484
409 6,360
262 6,172
88 5,926
-109 5,619
-305 5,256
-536 4,841
152
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size and structure of the regional economy. This section will describe
the distribution of state growth in the base case between two of the
state's regions, Anchorage and Southcentral. As we have seen in the
historical analysis, Anchorage and Southcentral, while closely related,
are different types of economies. Anchorage is the state's major region.
Its growth is largely affected by its role as the administrative and dis-
tributive center for the state. This provides an indirect link between
the Anchorage economy and the state's resource industries. Because of
this role, growth in other parts of the state is reflected by growth in
Anchorage. Southcentral is a combination of many small, local economies
which are significantly dependent on the resource industries; both petro-
leum development and fisheries are important to these economies. These
small economies, while physically separated, form a regional economy with
similar structure and important trade and transportation links.
Anchorage
Aggregate Indicators. Table 47 shows three indicators of the growth of
the Anchorage economy during the projection period. Employment, popula-
tion, and real disposable income show that the state growth is reflected
in Anchorage even though there is no major exogenous resource development.
Population grows at an annual average rate of 3.6 percent during the
period. Anchorage grows faster than the state, and the concentration of
population in Anchorage continues throughout the projection period. In
1977, 46.3 percent of the state's population is in Anchorage; by 2000,
that has increased to 53.5 percent. Population does not fall after
completion of TAPS but experiences a slight decrease in 1984 after the
153
[
T/\BLL '17. 1\(;(;I~I:G/\TE INDICATORS 01 LCONOf.liC GIW\·Jill r~
MODERATE 13ASE C/\SF, ANCIIOR/\CE
1977-2000 l :
r -~
Real Disposable I
Personal Income
Population Employment (Millions of Constant$) [ 1977 190,188 85,523 573
1978 197,348 84,128 586
j ' 1979 201 ,235 87,606 626
1980 207,323 91,938 677
1981 218,549 98,521 743 r··
I 1982 235,361 107 '641 828 \_.
1983 245,371 111,732 874
1984 244,577 109,304 867 r,
1985 249,962 111 ,258 899 I L~
1986 259,583 116,354 958 [ 1987 271,446 122,666 1 '032
1988 283,370 128,846 1 '1 02
1989 295,031 134,617 1 '171
1990 305,932 139,743 1,235 [
1991 314,949 143' 103 1 '281
1992 323,997 146,538 1 '330 [ 1993 334,571 151 ,342 1 '397
1994 345,660 156,519 1,466
1995 357,795 162,462 . 1 '547 c 1996 371,182 169,227 1 '639
1997 384,828 275,961 1 '729
1998 399,234 183,020 1,824 [ 1999 415,315 191 '184 1, 938
2000 431 ,026 199' 012 2,047
L
[
[
SOURCE: MAP Model L
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peak ALCAN year. Between 1984 after the ALCAN is completed and 2000,
the population grows at an average annual rate of 3.6 percent.
Population follows the pattern of employment growth. Employment grows
at an average annual rate of 4.0 percent between 1978 and 2000. As with
population, employment experiences a slight decrease in 1984 when the
ALCAN construction is in its final year. After 1984, employment grows
at an average of 3.8 percent per year. Throughout the projection period,
the dependency ratio (the ratio of population to employment) falls; this
ratio is 2.22 in 1977 and 2.17 by 2000. This small decline results from
the aging of the population and the increased participation in the labor
force of the working-age population.
The final indicator of regional economic growth in the projection period
is the total regional real disposable income. This accounts for the
effect of prices and taxes on incomes. Total real disposable income
increases at an average of 6.0 percent per year between 1978 and 2000.
It experiences a slight peak in 1983, the final peak ALCAN year.
The Economic Structure. Table 48 shows the changes in structure of the
Anchorage economy as measured by the distribution of employment. The
major exogenous industries of mining and exogenous construction grow
only slightly after completion of TAPS; this employment is made up of
headquarters mining employment. Growth over this sector occurs with the
expansion of headquarters employment for the development of Lower Cook,
Beaufort, and Northern Gulf OCS development. The major growth occurs in
155
-'
(.]'1
0'1
TABLE 48. ECONOMIC STRUCTURE
HODERATE BASE CASE
ANCHORAGE
Support Sector I Support Sector II Government Basic Sector
Employment % of Total fmployment % of Total Employment % of Total Employment
1978 36,835 43.9 12 '153 14.5 31 ,427 37.4 3,439
1980 42,516 46.4 13,652 14.9 31 '763 34.6 3,746
1985 54,917 49.7 17,453 15.8 33,527 30.3 4,632
1990 74,018 53.6 22,850 16.5_ 35,580 25.8 5,692
1995 89,403 56.0 27,195 17.0 36,368 22.8 6,780
2000 114,667 58.9 34,495 17.7 37.,427 19.2 8,107
Support Sector I includes trade, services, and finance-insurance-real estate employment.
Support Sector II includes transportation-communication-public utilities and other construction
employment.
Government includes state, local, and federal employment.
Basic Sector includes manufacturing, agriculture-forestry-fisheries, mining, and exogenous
construction employment.
SOURCE: MAP Model
[-J L'l
% of Total
4. 1
4. 1
4.2
4. 1
4.3
4.3
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the local support sector. This sector is composed of two components:
1) local construction and transportation-communication-utilities and
2) trade, services, and finance-insurance-real estate. Each component of
the support sector increases its share of total employment during the
projection period. Local construction and transportation-communication-
utilities increase from 14.0 percent in 1977 to 17.7 percent by 2000;
while trade, service, finance-insurance-real estate increases from
43.9 percent to 58.9 percent. These changes are a continuation of his-
torical changes in the structure of the Anchorage econ?my. These shares
are greater than the shares of similar industries on the state level be-
cause of the important administrative and distributive role of Anchorage.
Southcentral
Aggregate Indicators. Unlike Anchorage, the growth of Southcentral
depends largely upon the growth of the regional exogenous sector. The
exogenous sector is influenced significantly by four events: the con-
struction of the Pacific LNG plant between 1980 and 1983, the develop-
ment of the Lower Cook OCS, the development of the Northern Gulf OCS,
and the shutdown of the Upper Cook oil fields in 1990. Three aggregate
indicators--population, employment, and disposable real income--are
shown in Table 49. Population falls after the completion of th~ trans-
Alaska pipeline in 1977. Between 1978 and 2000, population is projected
to grow at an average annual rate of 2.2 percent. Population falls slightly
(less than one percent) in 1991 when the Upper Cook Inlet oil fields are
closed.
157
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
TABLE 49. AGGREGATE INDICATORS OF ECONOMIC GROWTH
MODERATE BASE CASE, SOUTHCENTRAL
1977-2000
Rea 1 Di sposab 1 e
Personal Income
Population Employment (Millions of Constant $)
58,958 23' 117 180
53,826 20,898 145
55,799 21 ,946 159
59,054 23,745 184
62,075 25,688 214
63,464 26,915 237
63,425 26,528 224
64,866 26,732 221
66,203 27,497 235
68,340 28,810 256
69,987 30,024 279
72' 143 31,149 294
74,454 32,310 310
76,801 33,520 . 329
76,095 32,987 318
75,663 32,788 318
76,558 33,299 329
77,470 33,824 340
78,879 34,629 355
80,669 35,635 373
82,006 36,400 388
83,321 37 '158 403
84,802 38,046 421
86,386 38,978 439
SOURCE: MAP Model
158
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Employment grows faster than population in Southcentral during the pro-
jection periods. Employment falls after TAPS is completed in 1977.
After this, it grows at an average rate of 2.9 percent per year. The
ratio of population to employment was much higher in 1978 in Southcentral
(2.58) than in the state (2.27). The Southcentral ratio falls toward
the state ratio by 2000 (2.22 for Southcentral and 2.17 for the state).
This trend was experienced in the historical period; the population-to-
employment ratio fell from 4.24 in 1965 to 3.07 prior to the TAPS con-
struction in 1974. The declining dependency ratio results from a change
in the character of the population. As at the state level, the population
is aging and the labor force participation is increasing~ These factors
account for the greater proportion of employed in the population.
Disposable real income grows throughout the period after falling with the
completion of the trans-Alaska pipeline; in 1978 it is almost 20 percent
lower than in 1977. Between 1978 and 2000, disposable real income
increases at an annual average rate of 5.2 percent.
The Economic Structure. Table 50 shows the changes in the structure of
the Southcentral economy during the projection period as described by
changes in the distribution of employment. Two important trends can be
observed from this table. First, those exogenous sectors which have
recently been important to the region's growth, construction and mining,
decrease their importance throughout the projection period. After com-
pletion of TAPS, this exogenous construction decre~ses, then·increases
to a peak of 2,578 in 1982 with construction of the Pacific LNG plant
159
--'
0"1
0
TABLE 50. ECONOMIC STRUCTURE
MODERATE BASE CASE
SOUTHCENTRAL
Support Sector I Support Sector II Government Basic Sector
Employment %of Total Employment % of Total Employment % of Total Employment
1978 8,134 38.6 3 '1 01 14.7 4,717 22.4 5,146
1980 9,173 38.2 3,515 14.7 4,837 20.2 6,462
1985 10,792 38.8 4,316 15.5 5,412 19.4 7,317
1990 13,321 39.1 5,338 15.7 6,058 17.8 9,358
1995 14 ,641 41 .4 5,442 15.4 6,265 17.7 9,040
2000 17 '155 42.6 6,157 15.3 6,548 16.3 10,369
Support Sector I includes trade, services, and finance-insurance-real estate employment.
Support Sector II includes transportation-communication-public utilities and other construction
employment.
Government includes state, local. and federal employment.
Basic Sector includes manufacturing, agriculture-forestry-fisheries, mining, and exogenous
construction employment.
SOURCE: MAP Model
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% of Total
24.4
26.9
26.3
27.5
25.5
25.8
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and development of the Lower Cook OCS. After the Cook Inlet oil fields
are shut down in 1990, mining employment is reduced. The second trend
is the increasing importance of the support sector in the region.
Trade, services, and finance-insurance-real estate increase their share
of total employment from 38.6 percent in 1978 to 42.6 percent in 2000.
This follows a historical trend. The increased scale of the Southcentral
economy during the projection period leads to a greater-than-proportional
increase in support sector employment.
Alternative Base Cases
\
Two additional base case projections were made. These base cases differ
in the assumed level of OCS activity in the Lower Cook Inlet, Beaufort
Sea, and Northern Gulf of Alaska. The major difference between these
base cases is one of magnitude; the high base case assumes a higher
1 evel of OCS activity than the moderate base case. The 1m., base case
assumes only exploration activity in the Lower Cook and Northern Gulf
and lower develop,ment activity in the Beaufort. The major difference
between the projected growth of the base cases in these three scenarios
will also be in magnitude. Each alternative base case will be described
by four major variables: employment, population, total state expenditures,
and the fund balance. These cases affect the structure of the economy
in a manner similar to the moderate case. (The detailed scenarios are
shown in Appendix C.)
161
LOW BASE CASE SCENARIO
The minimum base case scenario includes the same non-OCS assumptions as
the moderate scenario. The d·ifference between these cases involves the
assumptions about OCS activity in the Lower Cook Inlet, Beaufort, and
Northern Gulf. The minimurr1 development scenario assumes only exploration
activity in the Lower Cook and the Northern Gulf. Lower Cook OCS employ-
ment occurs between 1978 and 1985 with a peak of 252 in 1980. In contrast,
the moderate case has a Lower Cook OCS employment peak of 912 in 1981
and operations employment of 417 remains throughout the period. The
level of activity assumed in the low Beaufort sc~nario is much closer to
the moderate scenario. The low Beaufort scenario contains production
and has employment through the entire projection period. Peak employment
of 740 occurs in 1989; this is 68 percent of the peak in the moderate
Beaufort scenario. Operations employment is approximately 82 percent of
the moderate case by the end of the period. Since Beaufort OCS production
occurs in state waters, Beaufort will also generate tax, bonus, and
royalty revenues to the state. Northern Gulf exploration activity is
over by 1985; in the moderate case, peak Alaska employment of 2,061 is
reached in 1990.
General Pattern of Growth
Table 51 describes four indicators of the magnitude of economic growth
projected for the low base case. Population is projected to increase at
an annual average rate of growth of 3.0 percent between 1978, the year
after the TAPS project is complete, and 2000. The most rapid period of
growth is between 1978 and 1983, the peak ALCAN year; growth averages
162
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1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
TABLE 51. AGGREGATE INDICATORS OF ECONOMIC GROWTH
LOW BASE CASE, ALASKA
1977-2000
State Expenditures
(Mi 11 ions of
Population Employment Nominal Dollars)
410,660 185,508 1 '161
406,709 178,557 1 ,311
417,661 184,486 1 ,415 .
431,495 192 '187 1,559
452,241 204,393 1 '723
483,427 223,073 1,993
500,077 228,948 2,356
498',073 221,443 2,567
505,276 223,064 2,733
' 518,872 229,850 3,046
534,660 238,100 3,363
551.766 247,041 2,732
569,539 256,222 4 '116
586,227 264,339 4,521
601 ,891 271,666 4,872
617,622 278,987 5,252
635,402 287,820 5,671
653,250 296,526 6 '145
672,192 305,953 6,629
691,214 315,284 7,154
712,212 325,991 7,723
733,838 336,928 8,404
757,989 349,560 9 '135
782,602 362,233 9,966
1sum of permanent and general funds
SOURCE: MAP Model
163
Fund Balance 1
(Millions of
Nomina 1 Do 11 a rs)
671
666
967
1.330
1 ,921
2,639
3,389
4,540
5,975
7,352
8,716
10,301
11 ,287
12 ,314
l3 '193
14,008
14,742
15,310
15,694
15,916
15,973
15,820
15,460
14,858
4.4 percent per year during this period. Population falls after comple-
tion of TAPS in 1977 and the last peak ALCAN year in 1983; in both cases,
the decrease is less than one percent. The rate of population growth is
slightly less than the 3.2 percent rate in the moderate base. By the
peak ALCAN construction year, 1983, population is approximately 4,600
greater in the moderate base case. This is mainly a response to the
more rapid Lower Cook development in the moderate case. By 2000,
population is 23,000 less in the low base case.
Employment is projected to be 362,223 by 2000 in the low base case.
This is 8,300 less than in the moderate base case. Employment falls
from 185,500 in 1977 to 178,560 in 1978 with the completion of TAPS in
the low base case. After 1978, employment grows at an annual rate of
3.27 percent. Like population, employment is projected to grow most
rapidly with the buildup before the ALCAN. Between 1978 and 1982,
employment increases at the average rate of 5.7 percent per year. The
overall growth is less than the growth in the moderate base case. As in
the moderate base case, population is projected to increase less rapidly
than emp 1 oyment.
Throughout the projection period, state expenditures in the low base
case are only slightly less than in the moderate base case. By 2000,
expenditures in the low base case are $9,966 million, which is almost
two percent lower than in the moderate base case. In 1981, at the peak
of Lower Cook moderate development, moderate case expenditures are only
slightly more than one percent higher. The lower base case also has a
164
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similar effect on the fund balances. The fund balance in the low base
case is $55 million less than the fund balance in the moderate case by
2000. This is a difference of only one percent. The moderate base case
has a larger fund balance even though it has larger expenditures because
of the greater revenues received from the Beaufort OCS. The pattern of
the fund balance is similar in both cases. In the low base case, the fund
balance increases at an annual average rate of 17.2 percent until 1997,
when it peaks. Between 1997 and 2000, the fund falls by 7 percent in the
low case because fund balances are drawn down to meet state expenditures.
This is similar to the pattern found in the moderate base case.
The growth projected for the low base case is similar in magnitude to
that projected in the moderate base case. There is significant differ-
ence in the major variable by 2000. The difference varies from popula-
tion, which is 3 percent smaller, to state expenditures, which are only
.4 percent smaller. The difference results because of development in
the Lower Cook and Northern Gulf OCS which occurs in the moderate case
but not in the low case.
Structural Differences and Similarities. The main difference between
the low and moderate base cases involves the magnitude of the variables.
The effect of·economic growth on the process of change is similar in
both base cases. Four major structural changeS, were observed in the
moderate base case. These were measured by changes in the employment
distribution, the dependency ratio, the regional distribution of the
165
population, and the fund balance. The change in the employment distribu-
. tion measures the increased importance of the support sector in the
Alaska economy. As the economy grows larger, the support sector experi-
ences a greater-than-proportional growth because more goods and services
are produced locally. The dependency ratio decreases as a greater pro-
portion of the population is employed. This results from increases in the
proportion of the population of labor-force age and increased labor-force
participation of this population. The concentration of population in
Anchorage was also observed in the moderate base case. Anchorage's role
as the administrative and distributive center for Alaska assures the
continuing growth of Anchorage even if the major cause of growth continues
to be resource development outside the region. The final structural
characteristic observed in the moderate base case concerns the state
fiscal sector. The influence of petroleum revenues on state expenditures
leads to expenditures which increase faster than revenues. Eventually,
the fund balances must be drawn down to meet expenditures.
Table 52 compares these structural characteristics in the low and moderate
scenarios. This table shows that, while the base cases differ in magni-
tude, they are quite similar in the important structural characteristics.
The support sector expands to about 53 percent of total employment in
both cases. The dependency ratio (population/employment) falls by about
4 percent between 1980 and 2000 in both cases. Similarly, Anchorage is
projected to contain almost 54 percent of the state's population by 2000.
The projected pattern of general fund revenues net of general fund expen-
ditures is similar in both cases. In the early part of the period,
166
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TABLE 52. STRUCTURAL CHARACTERISTICS
LOW AND MODERATE BASE CASES
1980
Percent of Total Employment low base case 39.4%
in Support Sector moderate base case 39.5%
Dependency Ratio low base case 2.25
moderate base case 2.24
Percent of Total Population low base case 47.8%
in Anchorage moderate base case 47.8%
General Fund Revenues Minus \
General Fund Expenditures low base case 363
(millions of nominal $) moderate base case 361
167
1990 2000
46.1% 53.0%
46.8% 53.2%
2.22 2.16
2.20 2.17
50.0% 53.5%
50.0% 53.5%
1 ,027 -602
1,044 -536
revenues exceed expenditures; the fund is being built up. By the end of
the period, expenditures are greater than revenues; and the fund must be
drawn down to make up the difference in expenditures.
HIGH BASE CASE SCENARIO
The high and moderate base case scenarios differ only in the assumptions
made about OCS development in the Lower Cook, Beaufort Sea, and Northern
Gulf. The Lower Cook development scenarios differ in both magnitude and
timing between the two cases. Peak employment does not occur in the high
case until 1984; the peak level of employment is 2,448. Peak employment
occurs in the moderate case in 1981~ moderate case employment is greater
[
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r
[
than high case for the first four years of the period. Operations employ-\~,
ment in the high case is almost three times as high as in the moderate
case; it includes operation of an LNG plant. The Beaufort high scenario
peaks in 1989 at 1,344, which is 24 percent greater than the moderate
Beaufort peak. By 2000, employment is 38 percent greater in the high
case. The higher Beaufort production also means greater revenues from
production in state waters. Northern Gulf development in the high sce-
nario peaks in 1991 with 3,740, while the moderate scenario peaks in 1990
with 2,061. This is a difference of 81 percent.
General Pattern of Development. Table 53 shows four indicators of the
magnitude of economic growth in the high base case. Population is pro-
jected to be 837,888 in 2000. This is 32,163, or 4.0 percent, greater
than in the moderate base case. The population falls after TAPS is
completed in 1978 but does not experience a similar fall after ALCAN in
168
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f TABLE 53. AGGREGATE INDICATORS OF ECONOMIC GROWTH
[ HIGH BASE CASE, ALASKA
1977-2000
[ Stat~ E~penditures Fund Balance 1
(Millions of (Millions of
r-· PoEulation EmElo~ment Nominal Dollars) Nominal Dollars)
_,
1977 410,660 1 , 161 185,508 671
[ 1978 406,709 178,557 1 ~311 666
1979 417,661 184,486 1 ,415 967
1980 431,495 192,187 1,559 1,330
[ 1981 454,273 205,895 1 '723 1 ,924.
1982 486 '141 224,856 2,011 2,635
1983 509,747 235,658 2,376 3,387
r~ 1984 520,191 236,585 2,653 4,521
L-.j 1985 540,357 245,927 2,904 5,922
r 1986 560,731 255,056 3,325 7,222
1987 582,340 264,996 3,665 8,509 L 1988 605,100 275,525 4,071 9,745
[ 1989 623,917 283,001 4,490 10,967
1990 639,451 288,328 4,877 12,021
1991 656,425 295,235 5,206 12,968
L 1992 670,490 300,080 5,617 13,836
1993 686,752 306,934 5,993 14,658
1994 704,358 314,864 6,452 15,346
[~ 1995 723,291 323,807 6,945 15,868
-~ 1996 742,659 333,013 7,479 16,258
L 1997 764,683 344,153 8,062 16,514
1998 787,251 355,465 8,738 16,597
1999 812,471 368,566 9,489 16,490
2000 837,888 381,508 10,343 16 '164
6
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1sum of permanent and general funds t SOURCE: MAP Model
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[ 169
1984. The moderate base case experiences a fall between 1983 and 1984.
This increase is a result of development activity in the Lower Cook
which increases employment from 989 in 1982 to its peak of 2,448 in
1984. This increase counteracts the fall in population after ALCAN is
complete. The growth rate of population between 1978 and 2000 is an
average of 3.3 percent per year which is slightly higher than in the
moderate base case.
Unlike the moderate base case, employment does not fall after the peak
ALCAN year 1983. The OCS development of both Lower Cook and Northern
Gulf prevent the loss of employment after ALCAN. Because of the earlier
Lower Cook development in the moderate base case, employment in the high
case is less than in the moderate case until 1983. Employment in the
high case grows at an annual average rate of 3.5 percent between 1978
and 2000. By 2000, employment is almost 11,000 greater than in the
moderate base case.
The state•s fiscal position is affected in two ways by the different
base cases. First, different rates of growth in population, prices, arid
personal income will affect the level of expenditures. Secondly, differ~
ential production in the Beaufort Sea will mean different revenue streams
to the state. By 2000, state expenditures are projected to have reached
$10.3 billion in the hiah base case. This is 2.1 percent greater than
the projected state expenditures in the moderate base case. Expenditures
are greater in the moderate base case until 1984 because of the earlier
Lower Cook OCS activity. Overall, expenditures increase at an average
170
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rate of 10.0 percent per year in the high case. The fund balance is
greater in the hiah base case by $1.3 billion in 2000. The larger fund
balance is due to larger Beaufort Sea OCS revenues and the larger expen-
ditures early in the period in the moderate case. These early expendi-
tures reduce the fund and the interest earned on the fund. The fund
experiences the same pattern of growth in the high as in the moderate
base case, rising to a peak and then falling. The peak in fund balance
is reached in 1998, which is one year later than in the moderate base
case.
Structural Similarities and Differences. Table 54 shows the indicators
'
of the major structural characteristics of the high and moderate base
cases. The structural changes which occur because of the projected growth
are similar in both the high and moderate cases. The support sector will
include over 53 percent of total employment; the dependency ratio will
fall to about 2.2 people per employee; and Anchorage will contain about
54 percent of the state•s population. The excess of general fund revenues
over expenditures is larger in the high case, although it is still nega-
tive in 2000. The pattern of the fund balance growth is similar in both
cases.
171
TABLE 54. STRUCTURAL CHARACTERISTICS
HIGH AND MODERATE BASE CASES
1980
Percent of Total Employment high base case 39.4%
in Support Sector moderate base case' 39.5%
Dependency Ratio high base case 2.25
moderate base case 2.24
Percent of Total Population high base case 47.8%
in Anchorage moderate base case 47.8%
General Fund Revenues Minus
General Fund Expenditures high base case 363
(millions of nominal $) moderate base case 361
172
1990
47.1%
46.8%
2.22
2.20
50.0%
50.0%
1,054
1,004
2000
53.4%
53.2%
2.20
2.17
53.5%
53.5%
-326
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Summary and Conclusions
The growth of the Alaska economy between 1977 and 2000 is projected to be
substantial, although the economy is not projected to grow so rapidly as
it did between 1965 and 1976. This section presented three alternative
base cases, each with different assumptions about the level of OCS activity
in the Beaufort Sea, Lower Cook Inlet, and Northern Gulf of Alaska. By
2000, population is projected to be between 782,602 and 837,888, depend-
ing upon the level of OCS activity assumed. Employment is projected to
be between 362,233 and 381,508.
The three base case scenarios differ only in magnitude; they exhibit simi-
lar patterns of development. This pattern was illustrated by the growth
in the moderate base case. The economy•s growth is not projected to be
constant throughout the period. The most rapid period of growth occurs
during the construction of the ALCAN gasline between 1978 and 1982.
During this period, the average annual growth of employment is 6.0 percent.
compared to 3.4 percent for the whole period. Population grows 44 percent
faster than over the entire period when ALCAN is constructed.
Economic growth provides increases in two measures of individual benefits:
real per capita income and real state expenditures. Real per capita income
increases by 64 percent between 1977 and 2000. This means that the real
purchasing power of the average Alaskan increases with economic growth.
Real per capita expenditures are a proxy for the level of services provided
by the state government. Real per capita state expenditures increase by
44 percent over the projection period. Over 82 percent of the increase
occurs prior to 1989 when petroleum revenues peak.
173
Economic growth in all three base case scenarios results in similar
structural characteristics. Sturctural changes caused by growth affected
each scenario in a similar fashion. In all scenarios~ the importance of
the support sector is projected to grow throughout the period. The pro-
portion of the population which is employed is also projected to increase
over the period. Population is projected to concentrate in Anchorage in
all scenarios. The final structural pattern which is similar in all cases
is the relationship between state revenues and expenditures. In all cases,
expenditures exceed revenues by the end of the period, necessitating the
reduction in the fund balance.
\
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IV. THE IMPACT OF WESTERN GULF OCS DEVELOPMENT
ON THE ALASKAN ECONOMY: THE MODERATE BASE CASE
In order to capture the important dimensions of uncertainty surrounding
oil and gas development in the Western Gulf of Alaska, the development
patterns implied by three alternative resource discovery scenarios were
examined and contrasted with the base case projections presented above.
The alternate OCS scenarios were designed to capture differences in re-
source quantities, transport requirements, and technology, all of which
will affect the impacts of any development which actually occurs. The
three scenarios which were examined included the level of development
which would occur if the mean, 95 percent, and 5 percent probability
resource levels were discovered in the Western Gulf lease sale area.
This chapter will describe the impacts of each of these scenarios rela-
tive to the moderate base case. The impact of the 95 percent discovery
relative to the low base case and the 5 percent discovery relative to
the high base case will be discussed in the following chapter. The
first section of this chapter examines the petr.oleum development sce-
narios, and the next section presents the economic impacts implied by
each of these scenarios.
The Development Scenarios
Three offshore development scenarios were examined based upon geological,
technical, and employment data prepared ·by Dames and Moore (Dames and
Moore, 1978). The petroleum development scenarios are for the proposed
Gulf of Alaska OCS lease sale no. 46, currently scheduled for Autumn 1980.
175
The scenarios discussed below are for the 5 percent, 95 percent, and
statistical mean levels of U.S.G.S. resource estimates. These scenarios
will affect the Alaska economy through the direct employment associated
with the field development and production and the additional revenues
earned by the state. Figure 4 shows the location of the study area.
DIRECT EMPLOYMENT
The development of the Western Gulf OCS will have two types of employment
effects: direct employment in the field and headquarters employment.
Headquarters employment is assumed to increase with development to pro-
vide the engineering support, coordination, and administration necessary
for the level of activity in the field. All headquarters employment is
assumed to be located in Anchorage.
The effect of direct OCS employment on the Alaska economy will depend on
the extent to which the incomes earned in OCS development are spent in
Alaska. Two factors limit the impact. First, the probable enclave
nature of the development will limit the extent of the interaction with
the economy when workers are on the job. If OCS development follows the
pattern established by Prudhoe Bay development, workers will be located
in camps where their direct interaction with the 1 oca 1 economy wi 11 be
limited. The isolated location of these OCS developments near small,
existing communities increases the probability of enclave development
since small Alaska communities do not have the infrastructure needed to
support OCS development. Secondly, the international character of many
offshore petroleum firms means they have regular, experienced crews which
176
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SOURCE:
FIGURE 4. WESTERN GULF OF ALASKA,
LOCATION OF STUDY AREA
Dames and Moore, 1978.
177
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are dispatched to jobs around the world (Dames and Moore, 1978). The
internaLional chc~r·actl~t· of" Lhese crews may lll(~iltl Ult~L wiil'n they are not.
working, they will be outside Alaska. The first step in estimating the
overall impact of Western Gulf OCS development 1s to estimate the share
of direct employment which will reside in Alaska and interact with the
economy. Figure 5 illustrates the process used to derive the direct OCS
employment impact on the Alaska economy.
Table 55 shows estimates of the share of direct employment to Alaska
residents (SEAR) which were used to adjust the direct employment estimates
provided by Dames and Moore (Dames and Moore, 1978). In this context,
Alaska resident means any employee who resides in Alaska and interacts
with the economy during the duration of the project task. SEAR adjust-
ments were made to the direct field employment only; headquarters employ-
ment is all assumed to reside in Alaska. The SEAR-adjusted employment
is used in the scenarios provided to the MAP model to generate impacts.
I
SEAR coefficients were determined by the characteristics of the task and
considerations of labor supply and demand. Such task characteristics as
rotation, duration of the job, and specialized skills requirements were
considered. It was assumed that the longer the task's off-duty rotation,
the smaller was the probability that an employee would be an Alaska resi-
dent since he could travel from the site to a residence outside the state.
For the short-duration jobs, it was assumed ther~ was little reason for
workers to reside in Alaska or for Alaskans to move into these jobs.
Finally, the more specialized the skills required, the greater the chance
178
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FIGURE 5. DETERMINATION OF OCS EMPLOYMENT
ESTIMATES USED IN THE MAP MODEL
Direct OCS
Field Employment
X
Share of Direct Employment
To Alaska Residents
'V
Direct Alaska Resi~ent
OCS Field Employment
+
--------------
OCS Related
Headquarters Employment
\ ll
OCS Employment Estimates
Used in MAP Mod~l
179
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Task
Onshore
l. Service Base
2. Helicopter Service
3. Service Base Construction
4. Pipe Coating
TABLE 55. ESTIMATED SHARE OF ALASKA
RESIDENT EMPLOYMENT BY OCS TASK
Phase
1979-1984
all phases l. 00
exploration & development .50
production l. 00
development .50
development .20
5. Onshore Pipeline Construction development .20
6. Oil Terminal Construction development .50
7. LNG Plant Construction development .50
8. Oil Terminal Operations production l. 00
9. LNG Plant Operations production l. 00
Offsh6re
1 . Surveys exploration .20
2. Rigs exploration . 20
3. Platforms development . 10
production l. 00
4. Platform Installation development . l 0
5_,. Offshore Pipeline Construction development . l 0
6. Tugboats exploration .40
development .80
production .80
Time Period
1985-1989 1990-2000
1.00 l. 00
.53 .58
l. 00 l. 00
.53 .58
. 21 .23
.21 .23
.53 .58
.53 .58
l. 00 l. 00
l. 00 l. 00
. 21 .23
.21 .23
.30 .33
l. 00 l. 00
.l 05 .116
.105 .116
.42 .46
.88 .97
.88 .97
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the skills would not be available in Alaska and outside workers would be
hired. This meant a smaller probability that the worker would reside in
Alaska. These factors change in a systematic fashion through the phase
of development~ so that the probability of workers residing in Alaska
increases from the exploration to the production phase. The final factor
considered was time. It was assumed that over time~ as more OCS projects
occur and present non-OCS petroleum projects wind down, the supply of
labor for each of these tasks within Alaska will increase. This will
increase the probability that workers will reside in Alaska. This is
reflected by the increase in SEAR coefficients through time. Appendix C
describes the detailed assumptions behind the SEAR coe~ficients.
REVENUE
Unlike the OCS activity proposed for the Beaufort Sea, production in the
Western Gulf OCS occurs only in federal waters. Becaus& of this, the
state will not earn royalty, bonus~ or severance tax revenues from the
project. The major source of additional revenues will be the property
tax revenues from onshore facilities. The property tax revenues earned
by the state were based on the estimates of construction cost provided
by Dames and Moore (Dames and Moore~ 1978). The property tax which the
state receives is 20 mills on certain oil and gas prop~rties. The prop-
erty tax specifically excludes such property as oil refining property,
gas processing ~roperly, and in Ler·es t or· r-ights to pt'oduce oil. The
property value taxed is depreciated over the life of the field and
increased with inflation (Alaska Department of Revenue, 1977).
181
ALTERNATIVE WESTERN GULF SCENARIOS
The Mean Probability Resource Level Scenario
The mean scenario represents activity surrounding exploration and develop-
ment of tracts assumed to be leased in the 1980 sale. It is assumed
that 0.2 billion barrels of oil and 0.7 trillion cubic feet of gas are
discovered. In this scenario, the discoveries are located in two separate
fields, the Albatross and Tugidak Basins. Only one economic field is
discovered in the Albatross Basin which contains .16 billion barrels
of oil (Dames and Moore, 1978).
Exploration activity in this scenario begins in 1981 and lasts for three
years. Field development and the construction of facilities begin in
1984. Production begins in 1987. Total direct construction employment
peaks in 1984. The resources are insufficient to justify construction
of an onshore terminal, so development activity consists of the construe-
tion of a single platform, service base, and offshore loading system.
The largest mining employment occurs during exploration. Petroleum
employment maintains a permanent workforce of only 64 after 1991. Pro-
duction ends in 1999. Transportation activity peaks in the first year
of exploration (1981) with 98 employees. (Employment levels are shown
in Table 56.)
The nonproportional relation between Alaska resident employment and
direct employment results from the changing task composition of industry
employment. Alaska resident construction employment peaks at 260 in
1984, the same year as the peak in total construction employment. After
182
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Construction
Total SEAR
Direct Adjusted
Employment Employment
1981 0 0
1982 0 0
1983 0 0
1984 521 260
1985 467 49
1986 300 32
1987 0 0
1988 0 0
1989 0 0
1990 0 0
1991 0. 0
1992 0 0
1993 0 0
1994 0 0
1995 0 0
1996 0 0
1997 0 0
1998 0 0
1999 0 0
2000 0 0
TABLE 56. DIRECT EMPLOYMENT REQUIREMENTS
MEAN SCENARIO
Mining 1 Manufacturing
Total SEAR Total SEAR
Direct Adjusted Direct Adjusted
Employment Employment Employment Employment
280 92 ' 0
283 93 0
137 42 0
10 10 0
63 50 0
275 118 0
271 81 0
206 80 0
41 41 0
39 39 0
39 39 0
64 64 0
64 64 0
64 64 0
64 64 0
64 64 0
64 64 0
64 64 ./ 0 " 52 52 0
0 0 0
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Transportation
Total SEAR
Direct Adjusted
Employment Employment
98 41
98 41
49 21
0 0
40 33
34 29
12 10
24 22
24 22
24 22
24 22
24 22
24 22
24 22
24 22
24 22
24 22
24 22
24 22
0 0
1 Includes headquarters employment based on 2.67 persons per exploration well, .6 persons per development
well, and 40 persons per 2,000,000 barrels per day during production. Once peak is reached, production employ-
mentis maintained (Alaska OCS Office).
SOURCE: Dames and Moore, 1978
1984, the major construction activity is platform installation which is
offshore work, assumed to have a low Alaska resident share because it
requires specialized skills and is temporary. Alaska resident mining
employment peaks in 1986, although total mining employment peaks in the
exploration phase. By 1989, all mining employment is production employ-
ment, all of which is assumed to be Alaska resident. Transportation
employment, like mining, has a much smaller Alaska resident component
during exploration. However, peak resident employment occurs in the
first year of exploration in 1981 when 41 Alaska residents are employed
in transportation.
\
There are no direct state revenues generated by this development. Only
shore-based facilities (taxed by the Kodiak Borough) are located on shore.
The 5 Percent Probability Resource Level Scenario /
This scenario describes the activity surrounding the exploration, devel-
opment, and production in the largest assumed find discussed in this
report. It is assumed that 1.2 billion barrels of oil and 3.5 trillion
cubic feet of non-associated gas are discovered. Oil and gas are found
in both the Albatross and Tugidak Basins, although gas found in the
Tugidak Basin is uneconomical and is not developed.
Exploration begins in 1982 and lasts five years. Mining employment reaches
an early peak of 1,097 in 1984 during exploration. Field development
begins in 1985 and lasts until 1989. Construction employment begins in
1983 and reaches a peak of 2,410 in 1987. Mining_ employment peaks after
184
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exploration at 1,254 in 1990 and maintains a permanent employment of
approximately 740. Production of oil begins in 1990 and gas in 1986.
This scenario also includes an LNG plant which begins production in 1986
and has a long-term employment of 50. Transportation employment peaks in
1985 during development, with 457 employees. Table 57 shows the employ-
ment levels in this scenario.
As in the mean scenario, the Alaska employment share is greatest in the
production phase and smallest during exploration. Alaska mining employ-
ment peaks at 880 in 1990, when total mining employment peaks. Alaska
employment plays a relatively small part in the exploration peak in
1984. The Alaska resident construction employment peaks in 1985, two
years prior to total construction employment. This is a result of the
increased importance of platform installation after 1985. Peak Alaska
resident construction employment is 647. The shifting task composition
of transportation employment accounts for the increased importance of
Alaska resident employment after production begins. After peaking in
1985 at 373, transportation employment maintains a permanent employment
of about 191.
This scenario produces property tax revenues from onshore facilities.
Property tax revenues begin in 1987. Revenues decline after 1987. By
2000, property tax revenues have fallen to $2.4 million. (See Table 58.)
. 185
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Construction
Total SEAR
Direct Adjusted
Employment Employment
1981 0 0
1982 0 0
1983 207 364
1984 1 ,547 587
1985 1,579 647
1986 1 ,527 315
1987 2,410 530
1988 1,547 205
1989 933 98
1990 467 54
1991 0 0
1992 0 0
1993 0 0
1994 0 0
1995 0 0
-1996 0 0
1997 0 0
1998 0 0
1999 0 0
2000 0 0
TABLE 57. DIRECT EMPLOYMENT REQUIREMENTS
5 PERCENT SCENARIO
Mining 1 Manufacturing
Total SEAR Total SEAR
Direct Adjusted Direct Adjusted
Employment Employment Employment Employment
263 91 0
552 171 0
539 161 0
1,097 345 0
1,083 395 0
705 313 50 50
490 314 50 50
768 634 50 50
1,036 797 50 50
1,254 880 50 50
1 '007 812 50 50
737 729 50 50
696 658 50 50
685 685 50 50
710 710 50 50
735 735 50 50
735 735 50 50
735 735 50 50
735 735 50 50
735 735 50 50
Trans~ortation
Total SEAR
Direct Adjusted
Employment Employment
90 38
196 82
196 82
432 260
457 373
298 276
249 226
219 200
207 191
201 185
186 184
196 191
196 191
196 191
196 191
196 1 91
196 191
196 191
196 191
196 191
1Includes headquarters employment based on 2.67 persons per exploration well, .6 persons per development
we 11 , and 40 persons per 2, 000,000 barre 1 s per day during production.
mentis maintained (Alaska OCS Office).
Once peak is reached, production employ-
SOURCE: Dames and Moore, 1978
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TABLE 58. WESTERN GULF OCS PROPERTY
TAX REVENUES
(Millions of Nominal Dollars)
5 Percent Scenario
1987 6.4
1988 6.4
1989 6.3
1990 6.1
1991 6.0
1992 5.8
1993 5.5
1994 5.3
1995 4.9
1996 4.6
1997 4.1
1998 3.6
1999 3. 1
2000 2.4
\
Based on construction cost from Dames and Moore, 1978.
187
The 95 Percent Probability Resource Level Scenario
The 95 percent probability resource level for the lease sale area in the
Western Gulf is no oil or gas resources. Because there are no resources,
this scenario describes an exploration-only case. Exploration begins in
1981 and lasts three years. The maximum employment occurs in the first
two years with 405 mining employees and 147 transportation employees.
The Alaska share of this employment is low; at its maximum, it includes
120 mining employees and 62 transportation empl~yees. Because there is
no production, there are no property taxes generated by this project.
(See Table 59.)
\
Definition and Measures of Impact
OCS development will lead to changes in those factors which have been
isolated as important for economic growth: exogenous employment, personal
income, and state expenditures. Changes in these factors will result in
changes in population, the structure of employment, the state•s fiscal
position, and the regional distribution of growth. These changes are
the economic impact of OCS development.
We will examine the impact of each of the three petroleum scenarios.
The impacts will be compared to economic growth in the moderate case.
The impact will vary since the scenarios vary in terms of their primary
employment impact, timing, level of production, and revenues which accrue
to the state. The impacts will be measured as changes from the base case.
In making this comparison, it must be assumed that the economy responds
the same to employment and revenues generated by Western Gulf OCS develop-
ment as it did to past exogenous changes.
188
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TABLE 59. DIRECT EMPLOYMENT REQUIREMENTS
95 PERCENT SCENARIO
M" . 1 1 mng Transportation
Total Direct SEAR Adjusted Total Direct SEAR Adjusted
Employment Employment Employment Employment
1981 405 120 147 62
1982 405 120 147 62
1983 137 41 40 21
1984 0 0 0 0
1 Includes headquarters employment based on 4 persons per exploration
well, .6 persons per development well, and 40 persons per 2,000,000 barrels
per day during production. Once peak is reached, production employment is
maintained (Alaska OCS Office).
SOURCE: Dames and Moore, 1978
189
Rapid economic growth associated with OCS development will affect most
economic variables. Although many variables will be affected, a much
smaller number is important; and information on these dimensions of
impact will describe the effect of rapid growth on the state economy.
Petroleum development in the Alaska OCS can have two major types of
impact. First, OCS development will affect the magnitude of the eco-
nomic indicators. OCS development will expand the economY. Secondly,
OCS development may change the process of growth. OCS development may
change certain structural trends observed in the base case. Both of
these dimensions will be considered when the impact of OCS development
is examined.
The impact of any specific scenario can be discussed by referring to the
following set of questions:
1. How has the magnitude of economic indicators been changed
by OCS development?
a. How has the growth of the aggregate indicators of
economic activity--employment, population, personal
income--been affected by OCS development?
b. How has OCS development affected the state's fiscal
position? Have state rev~nues and expenditures \
changed? What is the effect on the fund balance?
c. What is the effect of OCS development on the earn-
ing power of individuals, as measured by real per
capita income?
190
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d. What is the effect of OCS development on the
average level of services, as measured by real
per capita state expenditures, provided by the
state?
Has OCS development changed the process of growth?
a. Are the components of population growth changed in
relative importance?
b. Are past trends in the age-sex distribution and
its effect on the dependency ratio changed by OCS
development?
c. Are past trends in the composition of employment
changed by OCS development?
d. Does OCS development change the interaction among
regions?
Summary of the Moderate Base Case
The moderate base case is one of three base cases used in this report.
The alternative base cases used in this study differ by the assumed
level of previous OCS activity; the non-OCS assumptions in all three
base cases are similar. The moderate base case includes moderate devel-
opment scenarios of the first Lower Cook OCS lease sale area, the Beaufort
Sea OCS lease sale area, and the Northern Gulf OCS lease sale area ..
Substantial growth is projected over the period 1978 to 2000 for the
moderate base case. Employment is projected to reach 370,496 by 2000
191
and grow at an annual average rate of 3.4 percent. The most rapid
growth occurs with the construction of the ALCAN gasline between 1981
and 1984. Population is projected to grow at a rate slightly less than
employment and reach 805,725 by 2000. Personal income is projected to
expand at an average annual rate of 10.8 percent between 1978 and 2000.
The growth of these aggregate variables, while substantial, is less than
the growth during the period 1965-1976.
Four structural characteristics of this projected growth were observed.
First, as the scale of the economy expands, the importance of the support
sector increases. Secondly, the changing age distribution of the popula-
tion and increased labor force participation lead to decreases in the
dependency ratio (population/employment). Third, as the state grows,
more of this growth is concentrated in Anchorage. Fin~lly, the state's
fund balance increases to a peak and then falls as expenditures exceed
revenues and the fund balance is used to make up the difference.
The Impacts of Western Gulf
OCS Development: Mean Scenario
This section will describe the economic impact of the mean Western Gulf
OCS development scenario. The mean scenario impacts will be described
in detail in this section, while the impacts of the 5 percent and
95 percent scenarios will be described as they relate to this scenario.
The major difference between these scenarios is in the magnitude of
impact; the structural characteristics are similar.
192
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The phases of activity in the development of the Western Gulf exploration,
development, and production are not distinct. Exploration begins in 1981;
development begins in 1984; and production begins in 1987. This schedule
of activity provides two significant time periods to examine: 1980-1986,
when development and exploration occur, and 1987-1999, when only produc-
tion activity occurs.
The Western Gulf mean scenario differs significantly from previous
development scenarios we have examined (ISER, 1979). The most important
difference for the results discussed in this report is the small size of
production employment associated with the lease area. \Long-term produc-
tion employment in both mining employment and transportation averages
only 88. Mining also drops significantly after development; Alaskan
resident employment in mining falls from a peak of 118 'in 1986 to 39 by
1990. The final major difference is that production ends in 1999, one
year prior to the end of our normal projection period in 2000.
The differences, particularly the small size of long-term OCS employment,
necessitate some caution in interpreting the model results. The small
size of the direct employment associated with the project increases the
relative importance of the state expenditure response to the overall
impact. Western Gulf development according to the mean scenario is
projected to have a negative impact on state expenditures. This pro-
jected reduction of state expenditures reduces state employment and
dampens the impact of the direct OCS employment on the economy. We are
not assuming that the reduction of state expenditures with increased
193
population would be the state•s response. The negative expenditure
impact is a result of the expenditure rule assumed in the model. This
rule determines the growth in real per capita expenditures as a function
of the growth in real per capita income. Expenditures are reduced in the
OCS case because real per capita income grows slower after its peak than
in the base case. This, combined with the small size of the direct
employment, produces a decline in expenditures. In all cases, the level
of expenditures in the OCS case cannot be considered significantly dif-
ferent from the level in the base case. Reference to the level of OCS
development in the case where there is no expenditure response will allow
us to assess the effect of the expenditure rule on OCS impact.
In this case, we assume that there is no state expenditure response to
OCS development and that expenditures remain at their base case levels.
The difference in the impacts in the two cases is a result of the expen-
diture rule.
EMPLOYMENT
This section will examine the impact of OCS development on employment.
Employment is one of the aggregate indicators of economic growth. OCS
development increases the growth of employment over most of the projection
period. OCS development not only affects the magnitude of employment
growth but may also change the structure of employment observed in the
base case. If OCS development affects the growth of industries differ-
\
ently from the base case, the structure will change.
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The long-term employment impact of Western Gulf development is insigni-
ficant. By 1999, employment is projected to be only 15 greater than in
the moderate base case. (See Table 60.) The average growth rate between
1980 and 1999 is 3.3 percent per year, the same as in the base case.
The peak impact occurs in 1984 when employment is 1 ,304, or .6 percent
greater than in the base case. This is the same year that total direct
Alaska resident employment reaches its peak.
The overall general pattern of employment impact follows the pattern
of direct Alaska resident employment. Direct employment is close to
20 percent of the total impact in 1984 when direct employment peaks.
Development of the Western Gulf OCS does not prevent the fall in employ-
ment in 1983 after the peak ALCAN construction years. The growth of
employment from 1980, the year of the OCS lease sale, to 1986, the end
of both the exploration and development, averages 3.43 percent per year.
This is only slightly faster than the 3.39 growth rate in the base case.
The growth rate after 1986 is less than in the base case. The reduced
rate of growth in the production period is a result of the decrease in
employment impact after its peak in 1984.
Western Gulf development according to the mean scenario has insignificant
long-term effects on total Alaskan employment. The projected impacts
aftet~ 1989 are close to the direct OCS employment levels. In some years
(1989-1991), the employment impact is negative. The major reason for
this result is the projected decline in state and local government
employment which results from the decline in state expenditures. After
195
1980
1984 1
1985
1986 2
1990
1995
1999
TJ\f3LE GO. EMPLOYMENT IMPACT
WESTERN GULr OCS
MEAN SCENARIO, J\LASKJ\
Base Case Mean OCS Scenario
Employment Employment
194,054 194,054
224,632 225,936
227 ,742 228,576
236,983 237,589
278,055 277,993
312,619 312,695
357 ,663 357,679
1Peak direct Alaska resident employment.
2The end of the exploration-development phase.
SOURCE: MAP Model .
196
Impact
0
1 ,304
834
606
-62
75
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1990, state and local government employment averages about 100 less than
in the base case. The effect of eliminating this expenditure impact is
to increase the growth of total employment. With constant expenditures
case, the employment impact of Western Gulf development is 278 in 1999,
which is .8 percent greater than the base.
The growth caused by OCS development does not significantly change the
structure of employment from that observed in the base case. Table 61
compares the structure of the economy, as described by the employment
distribution in the base and impact cases. The major change in the
structure of the economy observed in the base case is ~upported by the
introduction of the mean Western Gulf OCS development scenario. The
support sector increases in importance throughout the projection period,
increasing to approximately 53 percent in both cases.
POPULATION
Population is an aggregate indicator of economic activity which measures
the response of people to increased employment opportunities. OCS develop-
ment will increase the magnitude of population growth. OCS development
may also change the characteristics of the population such as the age-sex
distribution or the importance of the components of change. This section
will examine the impact on population of Western Gulf OCS development.
Population is only 376 greater by 2000 because of Western Gulf OCS
development. Population impact peaks in 1984 at about 1 ,900 which is
less than one percent greater than the base case. This is the year in
197
Support Sector
Moderate Base
Mean Scenario
Government
Moderate Base
Mean Scenario
Basic Sector
Moderate Base
Mean Scenario
TABLE 61. THE STRUCTURE OF THE ECONOMY
MEAN SCENARIO
ALASKA
Proportion of Total Employment
1980
39.5
39.5
36.0
36.0
24.5
24.5
1985
42.9
43.0
32.7
32.7
24.3
24.3
1990 --r--
46.8
46.8
28.8
28.8
24.4
24.4
1995
49.8
49.8
26.2
26.2
24.0
24.0
2000
53.2
53.2
22.9
22.8
24.0
24.0
Support Sector includes transportation-communication-public utilities,
trade, finance, and service employment.
Government includes state, local, and federal employment.
Basic Sector includes mining, manufacturing, agriculture-forestry-fisheries,
and construction employment.
198
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which both, the . .employment impact and. t.he l ev.e.l of direct Alaska resident
employrn.ent on the project reach their peak. ·The average growth rate
between 1980 .and 1999 is 3.1 percent.per year. This is not significantly
different from the growth rate in the base case. As in the base case,
pqpul ati on gra,wssl i ghtly s 1 ower than employment; the dependency ratio
falls from 2.28 jn 1978 to 2.~ 18 in 1999. Table, 62 describes the popula-
tion impact .. This pattern, of populatiqn impact i$ also affected byJhe
reduc:tionjs state government employment. . When state expe~djtures .are
held constant between the base and mean scenario cases, the 1~99 popula~
tion impact more.than doub}es.
The pattern of growth is affected by OCS development. The development
of the Western Gulf OCS does reverse the decrease experienced after the
peak ALCAN construction year, 1983. The peak populatio·n impact of the
Western Gulf occurs in 1984. The addition of this employment results in
a slight increase in population between 1983 and 1984. Population, like
employment, grows faster than in the base case in the period from the
beginning of exploration to the end of development and slower after that.
Between 1980 and 1986, the .average annual rate of growth is 3.5 percent
in the mean scenario and 3.4 percent in the base case. Between 1986 and
1999, the rate of growth in the mean scenario is 3.2 percent compared to
3.3 percent in the base case. The main reason for this differential
growth is that impact population increases throughout exploration and
development. Once production begins, impact population stabilizes at a
level lower than the peak.
199
1980
1984 1
1985
1986 2
1990
1995
1999
TABLE 62. POPULATION IMPACT
WESTERN GULF OCS
MEAN SCENARIO, ALASKA
Base Case Mean OCS Scenario
Population Population
434,173 434,173
503,802 505,702
513,372 514,895
530,903 532,225
612,523 612,961
692,017 692,525
780,692 781 ,069
1Peak direct Alaska resident employment.
2The end of the exploration-development phase.
SOURCE: MAP Model
200
Impact
0
1,900
1,523
1 ,321
438
508
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Table 63 compares the role of migration in population change between
1981 and 1992. These years cover the peak development years when the
population impact from OCS development increases to its peak in 1984
and then falls to a constant level of approximately 500 by 1989. The
importance of migration as a component of population change does not
significantly differ from the base case during this period. Migration
accounts for over 50 percent of the population change between 1981 and
1983 and between 1986 and 1990 in both case. After 1990, migration is
less important to population growth than natural increase. The decrease
in level of employment in the Northern Gulf and Western Gulf and the
higher number of births resulting from high population are responsible
for this effect. The small size of the Western Gulf employment impact
results in its having little effect on the overall components of popula-
tion growth. The major effect of this development occurs in 1984 when it
reduces out migration by 1,386, or 14 percent.
Two related trends concerning the structure of the population were ob-
served in both the base case and the historical period. The first was
the reduction in the dependency ratio. This trend is also projected to
occur in the Western Gulf development case. By 2000, the dependency
ratio in both the base and OCS development cases has fallen. The depen-
dency ratio is 2.18 in 2000 with OCS development. The major reasons for
this are an increase in the labor force participation of the working-age
population and an increase in the proportion of working-age population
in the population. This is related to the second observed change in
the structure of the population, the aging of the population. Table 64
201
TABLE 63 .. THE MIGRATION COMPONENT OF POPULATION CHANGE
WESTERN GULF MEAN OCS SCENARIO
1981-1992
Migration as a Percent of Total Population Change
Moderate Mean OCS
Base Case Scenario
1981 67.4 68.0
1982 75.6 75.7
1983 50.8 50.4
1984 1
1985 14.5 10.2
1986 53.6 52.8
1987 59.7 58.6
1988 58.8 58.4
1989 55.4 54.9
1990 50.0 49.6
1991 28.5 28.7
1992 25.5 25.6
1End of ALCAN. Net out-migration occurs.
SOURCE: MAP Model
202
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TABLE 64. AGE-SEX STRUCTURE OF THE POPULATION
WESTERN GULF MEAN OCS SCENARIO
ALASKA
980 2000
Age Cohorts Males Females Ma es Females
0-14 15.08 14.56 14.27 13.81
15-29 18.47 14.33 15.82 13.08
30-49 13.35 12.12 14.84 13.38
50-59 3.31 2.92 3.83 3.71
60 + 3.06 2. 81 3.37 3. 91
\
SOURCE: MAP Model
203
shows the age-sex distribution prior to OCS development and at the end of
the projection period. As in the base case, the population is projected
to age. The population over 30 increases from 37.6 percent in 1980 to
43 percent in 2000.
PERSONAL INCOME
The final aggregate indicator of economic growth is personal income.
The overall impact of OCS development is to increase personal income
slightly relative to the base case. (See Table 65.) By 1999, Western
Gulf OCS development will have increased the level of personal income by
one million, less than one percent above the base case. Personal income
is projected to increase at an average annual rate of 10.6 percent be-
tween 1980 and 1999. This is in both the OCS and the base cases. The
levels. In 1999, the impact is $40 million in this case. Even correct-
ing for the effect of state expenditures, the ~estern Gulf impact on
personal income is small.
The impact of Western Gulf OCS development on personal income rises to
its 1984 peak, then falls until 1991. This coincides with the decrease
in the level of project employment. OCS development is not enough to
prevent the fall in personal income after the peak ALCAN year in 1983.
The magnitude of the fall is similar in both the base and impact cases.
Growth in personal income averages a rate of 11.2 percent per year during
204
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1984 1
1985
1986 2
1990
1995
1999
TABLE 65. PERSONAL INCOME IMPACT
WESTERN GULF OCS MEAN SCENARIO
ALASKA
(Millions of Nominal Dollars)
Base Case Mean OCS Scenario
Personal Income Personal Income
5,395 5,395
8,360 8,461
9,008 9,063
1 0 '155 10 '198
15,919 15,914
\
24,367 24,375
36,514 36,516
1Peak direct Alaska resident employment.
2The end of the exploration-development phase.
SOURCE: MAP Model
205
Im~act
0
. 100
55
44
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9
1
the development and exploration phase. After the end of this phase in
1986, the average rate of growth is 10.3 percent per year. As with em-
ployment and population, the rate of growth of personal income is faster
during the exploration-development phase than during the same time period
in the base case and slower than in the base case after this period.
The growth in personal income reflects the ability of the economy to
generate increased returns to factors. It is not the best measure of
the welfare of the region because it reflects both the growth of employ-
ment and prices. One measure of welfare is real per capita income.
This measures the command of the average individual over goods and
services. Real per capita income accounts for the effect of prices and
population on the growth in personal income. Ta~le 66 shows the impact
of Western Gulf development on real per capita income. The development
of the Western Gulf OCS has two differential periods of impact. OCS
activity has a positive effect on real per capita incomes until 1986;
after this, the impact on real per capita income is negative. The
impact on real per capita income is greatest in 1984, the year of the
peak direct Alaska resident construction employment; real per capita
income is $30, or 0.6 percent greater than in the base case. By 1999,
real per capita income is less than but not significantly different from
the base case. The differential between the OCS development and base
cases is affected by the composition of employment. The greatest differ-
ence occurs when the peak in high wage construction employment occurs,
not when the peak in total employment occurs. Real per capita income as
a measure of welfare does not consider the distribution of income.
206
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TABLE 66. REAL PER CAPITA INCOME IMPACT 1
WESTERN GULF OCS MEAN SCENARIO
ALASKA
Real Per Capita Income Relative Price Index
Mean Mean
Base Case Scenario Impact Base Case Scenario Impact
1980 4,029 4,029 0 308.4 308.4
1984 2 4,448 4,479 30 373.0 373.6
1985 4,511 4,521 10 389.0 389.3
1986 3 4,687 4,692 6 408.1 408.4·
1990 5,250 5,245 -5 495.0 495.0
1995 5,706 5,704 -2 617.1 617.1
1oeflated by Alaska RPI.
2Peak real per capita income impact. Peak direct Alaska resident
employment.
3The end of the exploration-development phase .
. SOURCE: MAP Mode 1
207
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ThP OCS development of the Western Gulf has no significant effect on
Alaskan price levels because of the small size of the direct employment
effect. The relative price index is less than one point greater than in
the base by 1986, the end of the exploration-development phase. After
1986, the economy in the OCS development case is projected to expand less
rapidly than in the base case. Because of this, prices do not increase
so fast in the OCS case, and the price differential between the cases is
eliminated.
THE STATE FISCAL POSITION
The development of the Western Gulf OCS will affect the state fiscal
position in two ways. First, OCS development will affect the revenues
received by the state. Although the state will not receive direct
revenues from the OCS activity in this scenario, the extra economic
growth which will result because of OCS activity will generate additional
state revenues. Secondly, OCS development will affect the state's
fiscal position through its impact on state expenditures. The change in
population and economic activity which will result from OCS development
may change the determinants of state expenditures. The interaction of
expenditures and revenues will affect the fund balance and the level of
services provided by the state. This section will describe the impact
of OCS development on the state's fiscal position.
REVENUES
The OCS development of the Western Gulf of Alaska produces no direct
revenues for the state. This major source of revenues are those revenues
208
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generated by the growth of the economy and earnings of the permanent fund.
Table 67 illustrates the impact of OCS development on total general fund
revenues and endogenous revenues, which is the component of general fund
revenues. By 1986, total general fund revenues are about $3.8 billion.
This is $4 mill~on greater than in the base case. The revenue impact
falls with the decrease in direct employment until 1992, when direct
resident employment stabilizes. After 1995, the revenue impact increases.
By 1999, the impact on total general fund revenues is $13 million. Total
general fund revenues grow only slightly faster because of OCS develop-
ment over the 1980-to-1999 period.
\
Prior to 1990, the major component of the impact revenues are the endo-
genous revenues, those revenues generated by the growth of the economy.1
These revenues include income taxes and business taxes: The income taxes
paid by OCS resident Alaska employees are included in these revenues.
When the impact on general fund revenues peaks initially in 1985 at
$7 million, endogenous revenues account for 86 percent of the revenue
impact. By 1999, the majority of the revenue impact is projected to
result from increased earnings on the fund balances. In 1999, the extra
earnings on the fund balances account for approximately 92 percent of the
additional revenues.
1Endogenous revenues include personal income taxes, nonpetroleum
corporate income taxes, business license t~xes, motor fuels tax, alcohol
tax, cigarette tax, ad valorem tax, school tax, fees and license revenues,
ferry revenues, and miscellaneous taxes and revenues.
209
TABLE 67. STATE REVENUE IMPACT
WESTERN GULF OCS MEAN SCENARIO
ALI\SKA
(t1i"ll·ions of Nomincd Dollctrs)
Genera 1 Fund Revenues Endogenous Revenues
Mean Mean
Base Case Scenario Impact Base Case Scenario Impact
1980 1 ,625 1 .625 0 231 231 0
1984 1 3,230 3,234 4 452 455 3
1985 3,639 3,646 7 458 464 6
1986 2 3,833 3,837 4 515 519 4
1990 4,804 4,806 2 945 944 -1
1995 5,911 5,918 8 l ,647 l ,647 l
1999 7,316 7,330 l3 2,761 2,761 l
"··
1Peak direct Alaska resident employment~
2The end of the exploration-development phase.
SOURCE: . MAP Model
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STATE EXPENDITURES
The pattern of projected state expenditure impacts has a significant
effect on the overall impact pattern projected for Western Gulf OCS
development. Table 68 shows the expenditure impact of OCS development.
Two distinct periods of impact occur. Prior to the end of the development
phase in 1986, expenditure impacts are positive; after 1986, total state
expenditures are reduced by Western Gulf OCS development. State expendi-
ture impacts peak in 1985 at $10 million. By 1999, state expenditures
are $19 million less than in the base case. At both its peak in 1985
and at the end of production in 1999, the difference from the base case
is insignificant; in both cases, the difference is less than 0.5 percent
of the base level. The OCS development of the Western Gulf according to
the mean scenario has little effect on state expenditures.
Expenditures increase for two reasons. First, expenditures increase be-
cause of increases in population and prices. As population and prices
increase, expenditures must increase to maintain the same level of
service. Secondly, expenditures will increase if the level of service
provided by state government increases. Real per capita expenditures
are a measure of the level of services provided by the state. Table 68
shows the impact of OCS development on the real per capita expenditures.
Real per capita expenditures are less than in the base case throughout
the period. The difference is less than one percent throughout the
period. The maximum difference in real per capita expenditures is in
1984, when they are $5 less than in the base case. By 1999, real per
capita expenditures are only $4 less with OCS development.
211
TABLE 68. STATE GOVERNMENT EXPENDITURE IMPACTS
WESTERN GULF OCS MEAN SCENARIO
ALASKA
Total State Expenditures
(Millions of Nominal Dollars)
Real Per Capita 1 State Expenditures
Mean Mean
Base Ca:se Scenario Impact Base Case Scenario Impact
1980 1 ,567 1 ,567 0 1,170 1 ,170 0
1984 2 2,595 2,598 3 1 ,381 1,375 -5
1985 2,762 2,772 10 1,383 1,383 0
1986 3 . 3,099 3,099 0 1,430 1,426 -4
1990 4,713 4,703 -10 1,554 1,550 -4
1995 6,733 6,723 -10 1 ,577 1 ,573 -4
1999 9,296 9,277 -19 1 ,601 1,597 -4
1oeflated by Alaska RPI.
2Peak direct Alaska resident employment.
3The end of the exploration-development phase.
SOURCE: MAP Model
212
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FUND BALANCE
The state's fund balance consists of the total of the permQnent and
general fund. The permanent fund will not be affected by Western Gulf
OCS development because OCS development on the Western Gulf does not
produce the type of revenues subject to the permanent fund. The fund
balance impact will be on the general fund. The fund balance follows
the same pattern as in the base case, rising to a peak in 1997 and then
falling as the fund balance is drawn on to meet expenditures. However,
development of the Western Gulf OCS according to the mean scenario
increases the level of the fund balance. This is not a suprising result
since state expenditures are reduced and revenues increased because of
this development. By the end of the exploration-development phase in
1986, the fund balance i$ projected to be $3 million greater than in the
base case. By the end of the production period in 1999, the fund balance
is $204 millirin, or almost one percent less than in the base case. The
increased fund balance generates more interest revenue which contributes
to the increased fund balance. Table 69 shows the same pattern when the
fund balance is adjusted for price increases. By 1999, the real fund
balance is increased by $69 million. General fund revenues minus general
fund expenditures describe the balance between revenues and expenditures.
The addition of the Western Gulf OCS development according to the mean
scenario increases general fund revenues net of expenditures above the
base case levels. During this period, the revenue impact of OCS develop-
ment is greater than the expenditure impact. This is responsible for the
positive fund balance impact in this scenario.
213
1980
1984 1
1985
1986 2
1990
1995
1999
TABLE 69. IMPACT ON STATE FISCAL POSITION
WESTERN GULF OCS MEAN SCENARIO
ALASKA
General Fund Revenues Minus
Real Fund Balance General Fund Expenditures
(constant 1977 dollars) (millions of nominal dollars)
Mean Mean
Base Case Scenario Impact Base Case Scenario Impact
1 ,090 1 ,090 0 361 361 0
3,051 3,046 -5 1 '140 1 ,141 1
3,854 3,849 -5 1,426 1 ,426 0
4,519 4,518 -1 1 ,364 1 ,369 5
6,199 6,219 20 1,004 1 ,016 12
6,360 6,405 45 409 426 17
5,256 5,326 69 -305 -276 29
1Peak direct Alaska resident employment.
2The end of the exploration-development phase.
SOURCE: MAP Model
214
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The overall impact of Western Gulf OCS development on the state fiscal
position is ambiguous. The fiscal position is a combination of the
impact on state services as measured by real per capita expenditures and
the fund balance. According to these projections, Western Gulf develop-
ment causes each of these measures to move in opposite directions. The
fund balance is increased because of OCS development. The increase
results because of a reduction in state expenditures which results
partially from decrease in the level of real per capita expenditures.
THE REGIONS
This section examines the regional impacts of OCS develppment on two
regions, Anchorage and Southcentral Alaska. Different types of impact
can be expected in each region since the character of the regions differs.
Anchorage is the metropolitan center of the state. OCS development will
impact Anchorage both through the direct OCS headquarter-s employment and·
through Anchorage's role as the administrative and distributive center
for the state. Southcentral will be mainly affected by the direct OCS
development; Western Gulf activity occurs within Southcentral Alaska.
This section will describe the impact of OCS activity on each region in
terms of the growth of the aggregate indicators of economic growth--
population, employment, and disposable real personal income--and changes
in the structure of the economy as measured by the distribution of employment.
215
Anchorage
Table 70 shows the impact on Anchorage of developing the Western Gulf
OCS according to the mean scenario. The pattern of these indicators is
similar to that found for the state. The pattern of increase is deter-
mined by the pattern of direct resident employment impact and the level
of state government expenditures. The projected reduction in state
government expenditures is important for Anchorage since Anchorage
growth is not directly influenced by OCS activity.
Population is projected to increase to 415,474 by 1999 with Western Gulf
OCS development. This is only an 158 increase over the. base case.
Population grows at an average annual rate of 3.7 percent from 1980 to
1999. This is approximately the same as the rate in the base case.
The Anchorage population impact peaks in 1984, when population is 1.016
greater than in the base case. Even though the major direct employment
occurs in the Southcentral region, Anchorage has almost half of the
population impact. In 1984, 53 percent of the state population impact
occurs in Anchorage; by 1999, the Anchorage impact is 42 percent of the
statewide impact. As in the base case, population continues to concentrate
in Anchorage. By 1999, Anchorage contains 53.2 percent of the state
population in both the base case and the OCS development case.
The reduction in state expenditures influences the pattern of OCS employ-
ment impact in Anchorage. By 1999, employment is projected to be 191,176,
which is approximately the same as in the base case. The Anchorage
employment impact also peaks in 1984 at 613 which is 0.5 percent greater
216
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TABLE 70. IMPACT ON AGGREGATE INDICATORS OF ECONOMIC GROWTH
[ WESTERN GULF OCS MEAN SCENARIO
ANCHORAGE
[ Populatioo
Base Case Mean Scenario ImQact
[ 19801 207,323 207,323 0
1984 244,577 245,593 1 ,016
L 19852 249,962 250,689 726
1986 259,583 260 '177 594
1990 305,932 306,153 221
[ 1995 357,795 358,002 207
1999 415,315 415,474 158
r, Employment
Base Case Mean Scenario ImQact r 1980 91,938 91,938 0 L.; 1984 109,304 109,917 613
[ 1985 111 .258 111 ,642 384
1986 116,354 116,606 253
1990 139,743 139,698 -45
1995 162,462 162 ,481 18 c 1999 191,184 191.176 -8
5 Real Disposable Personal Income 3
(Millions of Constant Dollars)
[ Base Case Mean Scenario Im~act
1980 677 677 0
1984 867 874 7
L 1985 899 903 4
1986 958 961 2
1990 1 ,235 1,235 0 r 1995 1 ,547 1 ,547 0 . ~
1999 1,938 1,937 0
[
l
1Peak direct Alaska resident employment.
2The end of the exploration development phase.
r: 3Deflated by Alaska RPI~
SOURCE: MAP Model
[ 217
Lltcllt th<· bct·.r• r:c~';(• populalion. Between l~Ji\0 illlrl lCJHG, f'l11ploym<'nl qrm·r,
al about ~ IH'tTUitL in l>olh th(~ base and OCS casl~S. /\s in Utl~ bitS(~ case,
population increases slower than employment, and the dependency ratio has
fallen to 2.17 by 1999.
Real disposable income is projected to approximately $2.0 billion in
2000. Real disposable income increases at an average rate of 5.7 percent
per year from 1980 to 1999 in both cases. There is no long-term impact
on real disposable income projected.
Economic Structure. The impact of OCS development in the Western Gulf
may not affect all industries equally. Table 71 illustrates the effect
of OCS development on the structure of employment. All 'of the industrial
sectors grow with OCS development. As in the base case, the most rapid
growth occurs in the support sector. Over the impact period, 1980-2000,
transportation-communication-utilities and local construction increases
its share of employment from 14.9 percent to 17.7 percent; and trades
servicess and finance-insurance-real estate increases its share from
46.4 percent to 58.9 percent. The basic sector maintains a relatively
constant share of employment; the increase in this sector comes mainly
from the growth in manufacturing. Although government employment increases,
its share falls from 34.6 percent to 19.2 percent between 1980 and 2000.
The development of the Western Gulf OCS supports the changing structure
of the economy projected in the base case.
218
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TABLE 71. ECONOMIC STRUCTURE
WESTERN GULF OCS MEAN SCENARIO
ANCHORAGE
--' ' '
Support Sector I Support Sector II Government Basic 'Sector
Employment % of Total Employment % of Total Employment % of Total Employment
1980 42,516 46.4 13,652 14.9 31,763 34.6 3,746
1985 55,173 49.7 17,524 15.8 33,574 30.3 4,642
1990 74,004 53.6 22,852 16.6 35,541 25.7 5,705
1995 89,431 56.0 27,207 17.0 36,338 22.7 6,793
2000 114,587 58.9 34,495 17.7 37,400 19.2 8 '1 07
Support Sector I includes trade, services, and finance-insurance-real estate employment.
Support Sector II includes transportation-communication-public utilities and other construction
employment.
Government includes state, local, and federal employment.
Basic Sector includes manufacturing, agriculture-forestry-fisheries, mining, and exogenous
construction employment.
SOURCE: MAP Model
% of Total
4.1
4.2
4.1
4.3
4.2
Southcentral Alaska
Table 72 describes the impact of Western Gulf OCS development according
to the mean scenario on the Southcentral region of Alaska. This table
shows three aggregate indicators of economic growth which are projected
to increase with OCS development. The lease sale area is located in the
Southcentral region so that the major direct impact will occur in this
region. The relatively underdeveloped support sector of the region will
limit the impact of OCS development.
Population is projected to grow at an average annual rate of 1.9 percent
from the lease sale in 1980 to 1999. By 1999, the population is 85,053,
which is 251 greater than in the base case. The peak population impact
occurs at the end of the exploration-development phase in 1986. Popula-
tion is almost 611 greater than in the base case.
Employment is projected to increase to 38,142 by 1999, which is only 96
greater than in the base case. With Western Gulf development, employment
increases at an annual rate of 2.5 percent between 1980 and 1999 in both
cases. Peak employment impact occurs in 1984 when peak direct Alaska
resident employment occurs. In 1984, employment is 405 greater than in
the base case. Direct resident OCS employment accounts for 64 percent
of the total employment impact in 1990 and 64 percent in 2000. The
employment impact is always positive in Southcentral; state government
employment plays a smaller role in this region than in Anchorage.
220
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TABLE 72. IMPACT ON AGGREGATE INDICATORS OF ECONOMIC GROWTH
WESTERN GULF OCS MEAN SCENARIO
SOUTH CENTRAL
Population
Base Case Mean Scenario Impact
19801 59,054 59,054 . 0
1984 64,866 65,404 538
1985 66,203 66,667 464
1986 68,340 68,952 611
1990 76,801 77,022 221
1995 78.879 79 '181 301
1999 84,802 85,053 251
Employment
· Base Case Mean Scenario Impact
1980 23,745 23,745 0
1984 26,732 27,137 405
1985 27,497 27,737 240
1986 28,810 29,091 280
1990 33,520 33,590 70
1995 34,629 34,744 115
1999 38,046 38,142 96
Real Disposable Personal Income 2
(Millions of Constant Dollars)
Base Case Mean Scenario
1980 184· 184
1984 221 228
1985 235 239
1986 256 260
1990 329 329
1995 355 356
1999 421 423
1Peak direct Alaska resident employment.
2oeflated by Alaska RPI.
SOURCE: MAP Model
221
Jmpact
0
7
3
4
1
2
1
Real disposable personal income in 1999 is only $1 million greater than
the base case because of OCS development. As with the employment impacts,
the peak real disposable personal income impact occurs with peak Alaska
resident project employment in 1984. Real disposable personal income
is $7 million, or 3 percent greater than in the base case in 1990.
The importance of the high wage OCS employment results in this increase.
Western Gulf OCS development has its major impact on Southcentral Alaska.
ECONOMIC STRUCTURE
Western Gulf OCS development according to the mean scenario supports the
structural change which was projected in the base case. All sectors
increase employment between 1980 and 2000; however, the rate of increase
differs between industries. As in the base case, government's share
decreases from 20.2 percent in 1980 to 16.3 percent. Trade, service,
and finance-insurance-real estate expands its share of employment from
38.2 percent to 42.6 percent between 1980 and 2000. This response is
expected since the local economy will expand the goods and services pro-
duced locally as its scale increases. With the buildup of OCS activity
in the Northern and Western Gulf, the ba~ic sector increases its share
from 26.9 percent in 1980 to 27.5 percent in 1990. After the peak in
Northern Gulf activity and the shutdown of the Upper Cook Inlet fields
in 1990, the basic sector's share of total employment is reduced to
25.5 percent. Table 73 describes these structural changes.
222
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TABLE 73. ECONOMIC STRUCTURE
WESTERN GULF OCS MEAN SCENARIO
SOUTH CENTRAL
Support Sector I Support Sector II Government Basic Sector
Employment % of Total Employment % of Total fmployment % of Total Employment
1980 9,173 38.2 3,515 14.7 4,837 20.2 6,462
1985 10,865 38.7 4,380 15.6 5,427 19.3 7,406
1990 13,345 39.1 5,370 15.7 6,046 17.7 9,384
1995 14,678 41.3 5,480 15.4 6,256 17.6 9,091
2000 17 '155 42.6 6,155 15.3 6,539 16.3 10,369
Support Sector I includes trade, services, and finance-insurance-real estate employment.
. -
Support Sector II includes transportation-communication-public utilities and other construction
employment.
Government includes state, local, and federal employment.
Basic Sector includes manufacturing, agriculture-forestry-fisheries, mining, and exogenous
construction employment.
SOURCE: MAP Model
% of Total
26.9
26.4
27.5
25.6
25.8
The Impacts of Western Gulf
OCS Development: 5 Percent Scenario
The five percent probability resource level scenario projects a higher
level of oil and gas discovery than the mean scenario. The higher level
of discovery requires greater development activity than in the mean
scenario. The most important difference between these scenarios is the
magnitude of direct employment; differences in magnitude are also the
major differences between the impacts associated with each scenario.
This section will describe the magnitude of the impact associated with
the 5 percent scenario in terms of four measures of economic activity:
employment, population, state expenditures, and the fund balance. We
\
will also compare the structural similarities and differences between
the mean scenario and the 5 percent scenario.
The five percent scenario includes the development of two fields. Oil
and non-associated gas are developed in the Albatross Basin, and only oil
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is developed in the Tugidak Basin. For our analysis, we will concentrate ~~
on the period between the lease sale in 1980 and the end of development
in 1990. Peak direct resident employment occurs in 1985. The period
after 1990 is dominated by production.
GENERAL PATTERN or GROWTH
The general pattern of development projected with the inclusion of the
5 percent Western Gulf scenario is shown in Table 74. Four indicators--
employment, population, state expenditures, and the real fund balance--
are shown. The other variables mentioned in the discussion can be found
224
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1980
1985 1
1990 2
1995
2000
1980
1985
1990
1995
2000
TABLE 74. THE IMPACT ON MAJOR ECONOMIC INDICATORS
WESTERN GULF OCS 5 PERCENT SCENARIO
ALASKA
Population Employment
5% 5%
Base Case Scenario Impact Base Case Scenario
434,173 434,173 0 194,054 194,054
513,372 523,415 10,043 227,742 234,154
612,523 622,824 10,301 278,055 282,362
692,017 699,740 7,723 312,619 314,665
805,725 813,749 8,025 370,496 372,859
}mpact
0
6,412
4,307
2,045
2,363
State Expenditures Real Fund Balance 3
(Millions of Nominal Dollars) JMillions of Constant Dollars)
1,567 1,567 0
2,762 2,806 44
4,713 4,753 40
6,733 6,730 -3
10,135 1 0 '121 -14
1Peak direct resident employment.
2End of exploration and development phase.
3Deflated by Alaska RPI.
1,090 1 .090 0
3,853 3,821 -32
6,199 6,178 -21
6,360 6,406 45
4,841 4,982 141
SOURCE: MAP Model
225
in Appendix D. This scenario, like the mean scenario, increases employ-
ment, population, and state expenditures throughout the projection period.
In this section, we will discuss the impact of ~estern Gulf OCS develop-
ment according to the 5 percent scenario.
Population is projected to be 813,749 by 2000. This is 8,025, or 1.0 pel~-
cent greater than population in the base case population. Between 1980
and 2000, the population growth rate averages 3.2 percent per year,
which is greater than the 3.1 percent rate in the base case for the same
time period. The maximum increase in population resulting from OCS
development occurs in 1988 when population is almost 10,400 greater than
in the base case. This is after direct resident construction employment
reaches its peak and results from a combination of increased natural
increase. By 1990, when development ends, population impact is approxi-
mately the same, 10,300. The growth rate between 1980 and the end of
development averages 3.7 percent per year, compared to 3.5 percent in the
base case. After the major development and exploration activity is over
in 1991, the growth slows to 2.7 percent per year, which is slightly less
than the base case growth rate during this same period.
The pattern of population growth and impact can be explained by the
growth of total employment. Total employment is projected to be 2,363
or 0.6 percent greater than in the base case by 2000. The inclusion of
the Western Gulf 5 percent development scenario increases the growth
rate between 1980 and 2000 from 3.1 percent per year in the base case
to 3.3 percent per year. The maximum increase in employment occurs in
1985, the year of peak direct employment
226
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The state fiscal position is affected by Western Gulf OCS development
according to the 5 percent scenario. This impact is shown by state
expenditures and the real fund balance. State expenditures are projected
to increase to $10.1 billion by 2000; this is less than in the base case
by 0.1 percent. This insignificant difference is a result of growth in
real per capita income similar to the moderate case. The growth rate
between 1980 and 2000 is only slightly different from the base case.
State expenditures grow at approximately 9.8 percent per year over the
period in both cases. The average rate of growth in expenditures is
11.2 percent per year between 1980 and 1990 and that falls to 7.9 percent
per year between 1991 and 2000. Expenditures grow slightly faster in the
base case after 1991. As in the mean scenario, all determinants of the
growth in expenditures--population, prices, per capita real income--grow
slower during this period as the adjustment from peak impact to production
employment is made. The growth in expenditures is not $0 rapid as
either population or prices. Because of this, real per capita expendi-
tures are lower than in the base case. By 2000 real per capita expendi-
tures are $20 less than in the base case.
The pattern of the real fund balance growth in this scenario is similar
to the base case pattern. The real fund rises to a maximum amount in
1993, then falls in both cases. With Western Gulf OCS development, the
real fund balance rises to a maximum of almost $6.5 billion by 1993.
After this, the fund is drawn down as the general fund is used to make
up the difference between expenditures and revenues. The pattern of
227
fund balance growth with Western Gulf OCS development in the 5 percent
scenario differs in two ways from the base case .. First, the peak in
1993 is greater. The real fund balance is $14 million greater in 1993
with OCS development. Secondly, the real fund balance does not fall by
as much after 1993. By 2000, the real fund balance is actually greater
by $141 million than in the base case; the fund balance is 2.9 percent
greater in 2000 because of OCS development.
STRUCTURAL SIMILARITIES AND DIFFERENCES
The major structural characteristics of the projected economic growth
which were observed to be important in the base case were the increased
importance of the support sector, the decreasing dependency ratio, the
concentration of population in Anchorage, and the pattern of fund bal-
ance growth. The mean Western Gulf OCS development scenario was shown
to support the base case trends. Table 75 compares indicators of these
structural characteristics between the mean scenario and the 5 percent
scenario.
Similar structur~l changes occur in both the mean and 5 percent scenario
cases. Both of these scenarios support the base case trends projected
in these characteristics.
228
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TABLE 75. STRUCTURAL CHARACTERISTICS OF THE ALASKA ECONOMY
WESTERN GULF OCS 5 PERCENT SCENARIO
1980 1990 2000
Percent of Employment in the
Support Sector
Mean Scenario 39.5 46.8 53.2
5% Scenario 39.5 47.0 53.3
Dependency Ratio
{Population/Employment}
Mean Scenario 2.24 2. 21 2.18
5% Scenario 2.24 2.21 2.18
Percent of Population in
Anchorage
Mean Scenario 47.8 50.0 53.5
5% Scenario 47.8 49.9 53.5
General Fund Revenues Minus
General Fund Expenditures
{Millions of Nominal Dollars}
Mean Scenario 361 1 ,016 -504
5% Scenario 361 1 ,017 -428
229
The Impact of Western Gulf
OCS Development: 95 Percent Scenario
Table 76 shows the impact of the 95 percent Western Gulf OCS development
scenario on employment, population, state expenditures, and fund balance.
This scenario describes the exploration-only case when no petroleum
i
resources are found. The scenario has only minimal impact on the Alaska
economy.
Exploration occurs between 1981 and 1983. There is direct OCS employment
only in those years. The scenario increases employment and population
by less than one percent. The maximum population impact occurs in 1982
when population is .2 percent greater than in the base case. At its
maximum difference, employment is only .2 percent greater than in the
base case.
The long-term impact is a result of adjustments during the exploration
phase. For example, the growth during exploration phase increases state
expenditures. State expenditures increase from this new base throughout
the projection period. The major long-term impact of this development
scenario is on the fund balance. By 2000, the real fund balance is
$9 million less than in the base case. The increased expenditures and
the reduced interest revenues account for the growing negative impact on
fund balances.
The minimal impact of this scenario means that it will not affect the
structural changes found in the base case.
230
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1980
1981
1982
1983
2000
1980
1981
1982
1983
2000
TABLE 76. THE IMPACT ON MAJOR ECONOMIC INDICATORS
WESTERN GULF OCS 95 PERCENT SCENARIO
ALASKA
Population Employment
95% 95%
Base Case Scenario Impact Base Case Scenario
434 '173 434,173 0 194,054 194,054
456,078 456,530 452 206,859 207,193
487,441 488,154 712 225,394 225,883
504,694 505,236 542 231,506 231 ,820
805,725 805,825 101 370,496 370,508
\.
State Expenditures Real Fund Balance 1
Impact
0
334
489
313
12
~Millions of Nominal Dollars} JMillions of Constant Dollars}
1 ,567 1,567 0 1,090 ' 1,090 0
1.744 1,744 0 1,485 1,485 0
2,019 2,022 4 1 ,916 1 ,914 -2
2,380 2,385 5 2,350 2,347 -3
10 '135 10 '136 1 4,840 4,831 -9
1Deflated by Alaska RPI.
SOURCE: MAP Model
231
Summary and Conclusions
Western Gulf OCS development will change the magnitude of economic
indicators. In all three cases--the 5 percent~ mean~ and 95 percent
scenarios--the aggregate indicators of economic activity increase.
Even though the aggregate indicators increase, the long-term inpact of
Western Gulf OCS development will be insignificant. If the Western Gulf
OCS is developed according to the 5 percent scenario~ employment will be
0.6 percent larger than the base case in 2000; population will be 1.0 per-
cent larger; and personal income will be 0.9 percent larger. The mean
scenario increases employment by only 12 over the base case at the end
of production in 1999; population, by 376; and personal_ income, by
$1 million. The 95 percent scenario is the exploration-only case, and it
increases the aggregate indicators by less than one percent.
The pattern of overall impact is due to two factors. First, the direct
impact of Western Gulf development is small. In the mean case, long-
term direct employment is only 86. Secondly, the pattern of the growth
of real per capita income results in a decrease in state expenditures in
the final years of both production cases. This fall dominates the moderate
case and dampens the impacts in the high case. This effect cannot be
assumed to describe the reaction of the state to increased growth; it is
a technical result of our assumed state spending rule~ Because expendi-
tures are reduced, the impact of OCS development on the fund balance is
positive in both the production cases.
232
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Two measures of individual welfare are real per capita income and real
per capita state expenditures. In both development cases, the impact on
real per capita income is positive during exploration and development.
Once production begins, the changing composition of employment and higher
prices lead to a reduction in real per capita incomes below the base case
levels. Real per capita expenditures are less than in the base case in
both production cases.
Overall~ the process of growth remains unchanged by OCS development.
The structural changes and changing relationships projected in the base
case are supported by OCS development. The increased proportion of
employees in the population is also observed in both development cases.
As in the base case, the increased scale of the economy increases the
importance of the support sector as the economy provides more of its
own goods and services. Finally, development of the Western Gulf OCS
increases the concentration of population in Anchorage~
233
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V. THE IMPACT OF WESTERN GULF OCS DEVELOPMENT:
THE CUMULATIVE CASE
The impact of Western Gulf OCS development will depend on the base case
to which it is compared. In Chapter III, we developed three base cases,
each containing a different level of previous OCS lease sale activity.
Varying the base case by the level of previous OCS activity will allow
us to bracket the range of possible Western Gulf OCS impact. The sen-
sitivity of the Western Gulf OCS impacts to the level of previous OCS
activity is of interest. In the last chapter, we provided an analysis
of the impact of OCS development relative to the moderate base case.
\
In this chapter, we will examine the range of impacts from the 5 percent
scenario on the high base case and the 95 percent scenario on the low
base case. For the most part, these impacts will differ only in magnitude
from those discussed in the mean scenario. The changes in magnitude will
be described by the general pattern of grm<Jth. Structural similarities
and differences will also be discussed.
The Impact of Western Gulf OCS Development
At the 5 Percent Level: The High Base Case
THE HIGH BASE CASE
The major difference between the high and moderate base cases is the
level of activity assumed in the Lower Cook, Beaufort, and Northern Gulf
.OCS lease sale areas. The high case has a peak direct employment which
is more than one-and-one-half times greater than'in the moderate case
235
in the Lower Cook, 24 percent greater in the Beaufort, and 81 percent
r
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greater in the Northern Gulf. The high Lower Cook scenario also includes f-
constr·ur:t:ion and opc-~raUon of an LNG facility. ThP hiuh ba~;<~ ca~;<~ has
i
greater levels of economic activity than the moderate case. Population
is projected to be 837,888 by 2000 in the high base ca.se, with a 3.3 per-
cent average annual growth rate. Employment is projected to increase to
381 ,508 by 2000. This is almost ll ,012 greater than employment in the
moderate base case. The overall state fiscal position differs between
the cases. Expenditures by 2000 are about two percent greater in the
high base case than in the moderate case. The larger Beaufort revenues
also lead to an increase in the fund balance between the high and moderate
base cases. By 2000, the real fund balance in the high base case is
$5.2 billion, which is $480 million greater than in the moderate base
case. The change in the structural characteristics found in the moderate
base case are also found in the high base case.
THE GENERAL PATTERN OF GROWTH
Table 77 examines the economic growth with Western Gulf OCS development
according to the 5 percent scenario relative to the high base case.
Comparing these cases shows us the impact of OCS development. The
impact is similar to that projected in the other cases; population,
employment, and state expenditures all increase as a result of OCS
development. The fund balance is reduced because of OCS development,
but the negative impact decreases by the end of the period.
236
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1980
1985 1
1990 2
1995
2000
1980
1985
1990
1995
2000
TABLE 77. THE IMPACT ON MAJOR ECONOMIC INDICATORS
WESTERN GULF OCS
5 PERCENT SCENARIO/HIGH BASE CASE
Population Employment
5% 5%
Base Case Scenario Im~act Base Case Scenario
431 ,495 431 ,495 0 192' 187 192,187
540,357 551,243 l 0,886 245,927 252,964
639,451 650,925 ll ,473 288,328 293,324
723,291 732,263 8,972 323,807 326,410
837,888 847,577 9,689 381,508 384,591
Im~act
0
7,036
4,997
2,603
3,083
State Expenditures Real Fund Balance
{Millions of Nominal Dollars) {Millions of Constant 1977
1,559 1,559 0
2,904 2,972 68
4,877 4,948 71
6,945 6,973 28
l 0,343 l 0,389 46
1Peak direct Alaska resident employment.
2The end of the development phase.
l '094 l ,094
3,779 3,736
6,090 5,997
6,451 6,370
5,210 5' 161
Dollars)
0
-43
-93
-81
-49
SOURCE: MAP Model
237
Population increase~ at an average rate of 3.4 percent per year from the
beginning of OCS development in 1980 to the end of the period in 2000.
In 2000, population is projected to be 847,577, which is 1.2 percent
greater than in the base case. The maximum increase in population as a
result of OCS development occurs in 1988 when population is 11,544 or
2 percent greater than in the base case. The growth rate during the
exploration-development phase (1980-1990) averages 4.2 percent per year.
After 1991, when production is the dominant activity, the growth rate
averages 2.7 percent per year. The economy grows faster than in the
base case during the exploration and development phase and slower during
the production phase.
Employment is projected to increase to 384,591 by 2000. This is 3,083-
greater than in the base case. The overall growth rate is approximately
3.5 percent per year in both the base and OCS cases. The peak employment
impact occurs in 1985 when total employment is 7,036 or 2.9 percent
greater than in the base case. Direct OCS resident employment peaks in
1985. Employment, like population, increases faster in the exploration-
development phase (1980-1990) than after 1990 when production is the
dominant activity.
The state's fiscal position is affected by Western Gulf OCS development.
By 2000, state expenditures are projected to be $46 million or less
than one percent greater than in the base case; total expenditures
are projected to be $10.4 billion by 2000. The maximum impact of OCS
development on state expenditures occurs in 1986 when expenditures are
238
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$91 million greater than in the base case. The maximum expenditure
impact occurs after the maximum population impact because of the lags
built into the expenditure rule. The pattern of expenditure growth
differs between the base case and the 5 percent scenario. Expenditures
increase faster with Western Gulf OCS development than in the base case,
12.2 percent per year compared to 12.1 percent, during the exploration-
development phase (1980-1990). After 1990, the increase in expenditures
is more rapid in the base case, 7.8 percent compared to 7.7 percent per
year. The incfease over the base case is not so great as the combined
increase in prices and population, so OCS development has a negative
impact on real per capita state expenditures. Real per capita state
expenditures are $14 less than in the base case by 2000.
The pattern of real fund balance growth is similar in both the base case
and the OCS development case. In both cases, the real fund balance
rises to a peak in 1994 and then falls as the fund balance is drawn down
to make up the difference between revenues and expenditures. At its
peak in 1994, the real fund balance with OCS development is $6.5 billion,
which is $85 million less than in the base case. By 2000, the real fund
balance is $49 million, or one percent less than in the base case because
of OCS development.
The relative impacts of the 5 percent developmen4 scenario are differ
when they occur with the moderate or high base case. The major cause of
this difference is the expenditure impact projected in the moderate base
case. The population impact in 2000 differs between these cases by
239
20.7 percent; the population impact is 8,025 with the moderate base case
and 9,689 with the high scenario. The employment impact in 2000 is 2,363
with the moderate base case and 3.083 with the high base case, a differ-
ence of 30 percent. The expenditure impacts differ in sign in 2000; the
impacts are negative with the moderate base case and positive with the
high base case. The fund balance impact is positiv~ with the moderate
base case and negative with the high base case. The pattern of fund
balance impact is similar in each case, with the negative fund balance
impact being reduced by the end of the period.
STRUCTURAL SIMILARITIES AND DIFFERENCES \ •,
Table 78 compares certain structural characteristics of economic growth
in the mean OCS-moderate base case scenario and the 5 percent OCS-high
base case scenario. These indicators describe tne four types of struc-
tural change found in the base case: first, the increased importance of
the support sector as the scale of the economy increases; second, the
increasing proportion of the population which is emp]oyed; third, the
continuing concentration of population in Anchorage; finally, the pattern
of state expenditure which results in their being greater than revenues.
The development of the Western Gulf OCS, according to the 5 percent see-
nario given the high base case, experiences the structural change which
is similar to that found in the mean scenario case. The support sector
increases its share of employment to about 54 percent in both cases.
The dependency ratio decreases through the projection period, although
it is slightly higher in the 5 percent scenario. By 2000, Anchorage has
240
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TABLE 78. STRUCTURAL CHARACTERISTICS OF THE ALASKA ECONOMY
WESTERN GULF OCS
OCS-MODERATE BASE SCENARIO/
5% OCS-HIGH BASE SCENARIO
1980 1990 2000
Percent of Employment in the
Support Sector
Mean Scenario 39.5 46.8 53.2
5% Scenario 39.4 47.3 53.5
Dependency Ratio
{Population/Emploxment)
Mean Scenario 2.24 2.21 2.18
5% Scenario 2.25 2.22 2.20
\
Percent of Population in
Anchorage
Mean Scenario 47.8 50.0' 53.5
5% Scenario 47.8 49.9 53.4
/'
General Fund Revenues Minus
General Fund Expenditures
{Millions of Nominal Dollars)
Mean Scenario 361 1 ,016 -504
5% Scenario 363 1,039 -309
241
increased its share of state population to about 54 percent in both
cases. In both the mean OCS-moderate base scenario and the 5 percent
OCS-high base case scenario, general fund revenues minus expenditures
are negative by 2000. In both cases, the fund balance must be drawn on
to meet expenditures by 2000.
The Impact of Western Gulf OCS Development
At the 95 Percent Level : The Low Base Case
THE LOW BASE CASE
The low base case scenario contains the same non-OCS assumptions as the
moderate and high base case scenarios. It differs from these cases in
its assumptions about OCS activity in the Lower Cook, Beaufort Sea, and
Northern Gulf. Lower Cook and Northern Gulf are assumed to have explora-
tion-only in this scenario. Production occurs in the Beaufort. Peak
employment in the Beaufort reaches 740 in 1989; this is 68 percent of
the peak in the moderate Beaufort scenario. The growth in the low base
case is less than in the moderate case. Over the period 1978-2000,
population is projected to increase at an average rate of 3 percent per
year. Population is projected. to be 782,602 by 2000. Employment is
projected to increase to 362,233 by 2000 in the low case. State expendi-
tures are less than one percent lower than in the moderate case by 2000.
They are projected to be almost $10 billion by 2000. The fund balance
is $300 million less than in the moderate base case by 2000. In 20DO,
the fund balance is projected to be $14.8 billion. The pattern of fund
balance growth is similar in both cases, rising to a peak of almost
242
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$16 billion in 1997, then falling as funds are used to make up the
difference between expenditures and revenues. The structural changes
found in the moderate base case are also found in the low base case.
THE GENERAL PATTERN OF GROWTH
The 95 percent scenario describes the activity associated with only
exploration in the Western Gulf OCS. The development has minimal
impact on the Alaska economy. Table 79 shows the impact of exploration
on population, employment, state expenditures, and the fund balance.
The maximum increase in population occurs in 1982 when OCS exploration
activity increases population by 714, or .2 percent. 1-he maximum employ-
ment impact occurs in 1982. Employment is 489 or 0.2 percent greater
than in the base case because of exploration activity. The expenditure
impact follows the same pattern. Expenditures are $5 million or 0.2 per-
cent greater in 1983. By 2000, expenditures are still $1 million greater
than in the base case. The extra expenditures throughout the period
result in the fund balance being $26 million less by 2000. These impacts
are similar to those experienced with the moderate base case.
Because of the small impacts associated with OCS exploration, the struc-
tural change projected in the base case is not affected.
243
1980
1981
1982
1983
2000
TABLE 79. THE IMPACT ON MAJOR ECONOMIC INDICATORS
WESTERN GULF OCS
95 PERCENT SCENARIO/LOW BASE CASE
Population Employment
95% 95%
Base Case Scenario Impact Base Case Scenario
431 ,495 431 ,495 0 192 '187 192,187
452,241 462,693 452 204,393 204 ,726
483,427 484,141 714 223,573 223,563
500,077 500,620 543 228,948 229,261
782,602 782,698 96 362,233 362,243
\
State Expenditures Real 'Fund Balance
Impact
0
334
489
314
10
1
(Millions of Nominal Dollars) (Millions of Constant Dollar~
1980 1.559 1 ,559 0 1 ,094 1 ,094 0
1981 1,723 1 ,723 0 1,497 1 ,497 0
1982 1,993 1 ,997 4 1 .936 1 ,934 -2
1983 2,356 2,361 5 2.378 2,375 -3
2000 9,966 9,967 1 4,850 4,841 -9
1Deflated by Alaska RPI.
SOURCE: MAP Model
244
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VI. SENSITIVITY ANALYSIS
Our knowledge of future events is uncertain. In spite of this uncertainty,
we need to make assumptions about certain future events. Events which
are important to the future economy must be incorporated in our projec-
tions. These assumptions which form the basis for both the base case and
OCS development scenarios are uncertain. The uncertainty surrounding these
assumptions makes it necessary to investigate the extent to which our
major findings are sensitive to the more important of these assumptions.
The previous sections tested the sensitivity of Western Gulf OCS impacts
to OCS-related assumptions. By examining the alternate OCS scenarios,
we saw the effect of varying resource discovery levels on impacts.
Examining the cumulative cases provided an indication of the sensitivity
of our results to the level of previous OCS activity. In this section,
we will test the sensitivity of our results to two general categories of
assumptions. The first set of assumptions to be examined concerns the
state expenditure policy which was assumed to be adopted in the forecast
period. Changes in the assumed expenditure policy will alter the effect
of OCS development on state expenditures and may change the impacts on
the economy. The second set includes the assumptions about the level of
activity in the base case. We will examine the effect on the OCS impact
results of major changes in the base case assumptions.
In this section, six specific sensitivity tests were conducted on the
mean Western Gulf OCS development scenario. Comparing these results to
245
the mean results in our basic case will allow us to assess the sensitivity
of our results to these major sets of assumptions. The sensitivity test
will also expand our understanding of the assumed state expenditure rule
and the negative expenditure impacts found in the mean scenario.
Sensitivity to Major Changes in the Base Case
The base case assumptions used in this study contain an element of uncer-
tairity concerning two major construction projects, the ALCAN gasline and
the state capital move from Juneau to Willow. ALCAN construction is
included in our assumptions; the capital move is not. This section
tests the sensitivity of our results to these assumptions.
In the base case, the ALCAN 9asline is assumed to be constructed between
1981 and 1984 to transport natural gas from Prudhoe Bay to the "Lower 48."
There is uncertainty concerning not only the timing of this construction
but also the eventuality of construction. For a variety of reasons,
including the recent recognition of substantial oil and gas reserves in
Canada and Mexico, the outlook concerning the feasibility of the ALCAN
line has changed since it was approved (Tussing and Barlow, 1979).
Because of this uncertainty, it is necessary to test the effect on OCS
impact of changes in the ALCAN assumptions. We examine the effect on
the OCS impact of eliminating ALCAN construction from the base case.
Eliminating ALCAN has two types of direct effects. First, major exogenous
employment will be eliminated from 1981 to 1984. Secondly, eliminating
ALCAN will reduce state revenues. Without the ALCAN, there will be no
gas production in either Prudhoe or the Beaufort Sea. The state will
246
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not earn royalties, production taxes, or corporate income taxes from
this gas. The reduction in revenues will affect economic activity
through its effect on state expenditures.
The sensitivity of our findings to increased levels of exogenous base
case activity was also tested. The base case assumptions did not include
the capital move from Juneau to Willow. Although Alaskans voted to move
the capital in 1974, recent cost estimates and disagreement over the
method of paying for the move have made it less likely. In the sensiti-
vity test, the major direct effect of the capital move is assumed to be
the increased construction activity connected with the\move. State
government employment is not assumed to be affected by the move. (See
Table 80.) The capital move is assumed to occur between 198l.and 1984,
which is at the same time as the ALCAN construction.
TABLE 80. CAPITAL MOVE SCENARIO
1980
1981
1982
1983
1984
1985 .
Construction Employment
0
869
664
1 '185
1 '135
716
SOURCE: Alaska Department of Labor, Alaska's Economic Outlook to 1985,
1978.
247
Table 81 compares the impact of the mean Western Gulf OCS devclopn1ent
scenario on three sets of base case assumptions--the basic case, the no-
ALCAN case, and the capital move case. These tests show that the magni-
tude of OCS in1pact is relatively insensitive to the addition of the
capital move to the base case assumptions, but sensitive to the removal
of ALCAN. Since the base case is changed in each case, the relative
effect of OCS development will differ in each case. During the ALCAN
and capital construction period (1980-1984), the impacts in all three
cases vary by small amounts. By 1990, the population and employment
impacts of the no-ALCAN ar~ much larger, while the capital move cases
vary by less than 22 people from the base case. State'·expenditures
increase in the no-ALCAN case. The major reason for this concerns the
growth rate of real per capita income. The pattern of growth of real
per capita income in both the base case and the OCS case is similar when
ALCAN is excluded. By 2000, the state expenditure impact is greater in
the no-ALCAN case than in either of the other cases; this determines the
difference in the other variables.
The Sensitivity to State Expenditure Pol~
In the previous analysis, it was necessary to specify an expenditure
rule which captured the essential features of state fiscal policy.
Inasmuch as state expenditures are actually a matter of policy choice,
the expenditure rule could follow any one of an infinite number of
possible specifications. The expenditure rule chosen in the analysis
assumes that real per capita expenditures grow at a rate equal to one-
half the rate of growth in real per capita income. Expenditures are
248
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TABLE 81 . THE IMPACT OF WESTERN GULF OCS DEVELOPMENT
[ WITH THREE ALTERNATIVE BASE CASES:
BASIC CASE, NO-ALCAN CONSTRUCTION,
AND THE CAPITAL MOVE
[ MEAN SCENARIO
[ 1981 1983 1990 1999
[
Po~ulation Im~act
Basic Case 396 536 438 376
No ALCAN 387 500 972 1 ,018
L Capital Move 402 541 460 447
I Employment Impact
l _; Basic Case 293 319 -62 15
No ALCAN 286 295 220 293
[ Capital Move 279 323 -35 51
[ Personal Income Impact
{Millions of Nominal Dollars~
c Basic Case 15 18 - 5 1
No ALCAN 14 16 18 43
< Capita 1 Move 15 19 - 3 7
C State Expenditures Impact
[
1Millions of Nominal Dollars)
Basic Case 0 3 -10 -19
No ALCAN 0 4 2 3
6 Capital Move 0 3 - 9 -16
[ Fund Balance Impact
(Millions of Nominal Dollars)
Basic Case 0 - 3 38 204
L No ALCAN 0 - 3 -24 -20
Capital Move 0 - 3 34 183
L
L SOURCE: MAP Model
~
c 249
also assumed to increase with increases in th~ available general fund
balance. Past pattern of state expenditures points to these factors as
determinants of expenditure growth (Scott, 1978). Even if we accept the
general form of this rule, the relative effect of any one component may
vary and the sensitivity of the measured impacts to this variation needs
to be tested.
Three alternative formulations of the basic expenditure rule were tested.
Each alternate rule differed by the assumed influence of real per capita
income and the available general fund balance on the growth of state
expenditures. Two cases examine the sensitivity of our measured impacts
to the effect of real per capita income on expenditures. The expenditure
elasticity of real per capita income is the percentage increase in state
expenditures resulting from a one percent increase in real per capita
income. In the basic rule, the expenditure elasticity of real per capita
income was .5;.two extreme elasticities were tested: the expenditure
elasticity of real per capita income equal to 0 (EL3=0) and equal to 1
(EL3=l). The final rule tested the sensitivity of our results to· the
removal of the effect of the available general fund balance on expendi-
tures (EX6=0). The major difference in all of the variables examined
will result from differences in the expenditure impact.
Table 82 compares the relative OCS impacts of the various expenditure
rules. The sensitivity of OCS impact to the expenditure elasticity of
real per capita income can be seen by examining the impacts produced by
250
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TABLE 82. THE EFFECT OF ALTERNATE STATE EXPENDITURE
[ POLICIES ON THE IMPACT OF WESTERN
GULF OCS DEVELOPMENT
MEAN SCENARIO
[
1985 1990 1999 [ Population Impact
L Basic Case 1 ,523 438 376
EL3=1 1 ,568 -140 -1 '136
EL3=0 1 ,595 924 1,034
[ EX6=0 1,499 445 270
[ Employment Impact
Basic Case 834 -62 15
EL3=1 870 -424\ -762
[ EL3=0 906 232 317
EX6=0 831 .•. -49 -39
[ Personal Income Impact
(Millions of Nominal Dollars)
c Basic Case 55 -5 •' 1
EL3=1 58 -36 -118
EL3=0 59 19 45
6 EX6=0 55 -4 -6
[ State Expenditures Impact
(Millions of Nominal Dollars)
C Basic Case 10 -10 -19
EL3=1 11 -29 -85
EL3=0 13 2 5
EX6=0 9 -9 -17
[
Fund Balance Impact
[ (Millions of Nominal Dollars)
Basic Case -2 38 204
[ EL3=1 -6 79 606
EL3=0 -3 -8 1
EX6=0 -2 34 206
r:
SOURCE: MAP Model
L 251
the basic rule, the full income effect rule (EL3=1), and the no-income
effect rule (EL3=0). The relative pattern of expenditure impacts can be
explained by the pattern of real per capita income growth. The basic
pattern of real per capita income growth in the impact case rel~tive to
!
the base case was shown in Chapter IV. Real per capita income increases
faster than in the base case as direct OCS employment builds to a peak.
After the peak employment is reached, real per capita income increases
at a slower rate.
The growth rate of real per capita income is slower after the peak direct
employment occurs than for the same period in the base case. This effect,
combined with the sma 11 size of direct emp 1 oyment, 1 eads to a reduction
of state expenditures in the mean scenario case. The tests in Table 82
illustrate the importance of this effect. In 1985, the impacts in all
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indicators are similar. By 1990, after peak employment has been reached, [_;
the state expenditures impact is negative in all cases with positive
income elasticities. This is because the rate of real per capita income [
growth after 1984 is lower than in the base case. The negative impact is r-
greater the larger the elasticity. By 1999 the case with no income effect
on expenditures has a much larger impact. The impact on population,
employment, personal income, and the fund balance is influenced by the
expenditure effect. The case with the full income effect has negative
population, employment, and personal income impacts.
252
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The final expenditure rule tested removed the influence of the available
fund balances from the determination of state expenditures. The impacts
of OCS development are lower when the fund balance does not influence
expenditures. This can be seen by comparing the impacts of the no-fund
balance effect case (EX6=0) and the basic case. The population, employ-
ment, and personal income impacts are greater in the basic case by 1999.
The differences between these cases cannot be considered significant.
A more important issue concerning the choice of the expenditure rule is
the assumption implicit in our analysis that the state will choose to
respond to changes caused by OCS development as it responded in the base
case. If the state should behave differently in the face of OCS activity,
the measured impacts may change significantly. To ascertain the impor-
tance of this to our results, it may be useful to distinguish that
portion of the total impact due to changes in state spending from that
which is due to changes in the private sector of the economy.
In order to isolate the component of our measured impact which is due to
changes in state expenditures, we examined the impacts of the case in
which the base case level of state exp~nditures was maintained. OCS
development was not assumed to affect state expenditures in this case.
Since OCS development increases both population and prices, such a policy
would mean a reduction in the level of real per capita expenditures.
This case is not presented as a plausible response of the state. However,
it does permit us to separate for purposes of analysis that portion of
impact due to state expenditures.
253
Table 83 illustrates the state expenditure impact. The proportion of
impact due to state expenditures is equal to the proport-ion of impact
not accounted for in the constant expenditure case. By comparing the
basic rule with the constant expenditure case, we can estimate the pro-
portion of the reduction caused by the negative expenditure impacts.
The state expenditure impact is greater in 1999 than in 1990. In 1990,
decreases in state expenditures account for 50 percent of the population
in1pact, 75 percent of the employn1ent impact, and 75 percent of the
personal income impact. By 1999, state expenditure decrease accounts
for a 58 percent reduction of the population, 85 percent reduction of
employment, and ~8 percent reduction of personal income.
Comparing the impacts of OCS development under our assumed expendi-
ture rule and with constant expenditures illustrates the sensitivity of
our results to our assumptions about expenditures. In this case, the
important assumption is not about the form of the expenditure rule in
general, but in the state's response to OCS development. If the state
does not respond to OCS dev~lopment as it does to other development,
impacts will differ from those projected in this study.
254
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TABLE 83. THE STATE EXPENDITURE IMPACT
WESTERN GULF OCS
MEAN SCENARIO
1985 1990
Population Impact
Basic Rule 1,523 438
Constant Expenditure 1 ,245 772
Employment Impact
Basic Rule 834 -62
Constant Expenditure 654 185
Personal Income Impact
(Millions of Nominal Dollars)
Basic Rule 55 -5
Constant Expenditure 44 15
255
1999
376
904
15
278
1
40
256
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VII. SUMMARY AND CONCLUSIONS
In this report, we have assessed the major impacts that offshore oil and
gas development in the Western Gulf of Alaska will have on the process
of Alaska economic growth. These projected impacts were assessed in
terms of both an assumed base case growth without the project and the
historical economic growth. Relative to both historical growth and
projected economic growth, development of the Western Gulf will have
only minor effects on the economy of the state.
For all of the scenarios, the qualitative nature of th~ influence of OCS
development on the growth process is similar. Development generates
direct employment activity in the construction, mining, manufacturing,
and transportation industries which builds to a peak during the develop-
ment phase, then declines to a stable, long-term level as production
dominates the activity. This development activity generates both new
private incomes and public revenues which induce impacts. Expenditure
of wages and salaries earned in OCS activity generates further income
and employment in the endogenous sector of the economy through the in-
creased demand for the output of these sectors. The increased economic
activity also influences public expenditures which affect economic
activity.
The qualitative nature of the impacts is also similar across scenarios.
Four major structural changes were observed in the base case and the
historical period. First, as the scale of the economy increased, more
257
90ocls and sPrvices were procluced locally and the importance of the
support sector increased. Secondly, the population aged and labor force
participation increased over time; this led to an increase in the propor-
tion of the population which is employed. Thirdly, the role of Anchorage
as the administrative and distributive center of Alaska resulted in
population growth continuing to center in Anchorage. Finally, state
expenditures and revenues were projected to follow a pattern in which
expenditures would increase faster than revenues after the major petroleum
revenues peaked. This pattern of expenditure and revenue increase would
necessitate drawing down the general fund balance. This results from
the declining importance of the petroleum revenues throughout the period.
All of the Western Gulf OCS development scenarios support these trends.
The qualitative impact of OCS development on individual welfare was also
similar across scenarios. In all scenarios, real per capita incomes
increased significantly over the base case levels during the buildup to
the peak employment. After this, increases in population and prices led
to no real significant increases in real per capita income. The level
of real per capita state expenditures is also reduced by OCS development
relative to the base case. The red~ction in real per capita state
expenditures is responsible for a fall in expenditures with OCS develop-
ment. This fall dominates the direct OCS effects in the mean scenario
and dampens the impacts in the high case with the moderate base case.
In the high OCS case with the high base case, this effect does not occur.
258
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Quantitatively, the impacts across scenarios differ. The single most
important determinant of impact is the size of the field. The 5 percent
scenario has larger development activity and so has a larger impact.
The 95 percent scenario contains only exploration and has only minimal
impact on the major economic variables. Table 84 shows the relative
year 2000 impacts across the five OCS scenarios. The major dimensions
of both base case growth and OCS development are uncertain. By examining
the three alternate development scenarios, we get some feeling for the
range of impacts possible from OCS development in the Western Gulf.
259
N
"' 0
Moderate Base Case
Mean OCS Scenario
5% OCS Scenario
95% OCS Scenario
High Base Case
5% OCS Scenario
Low Base Case
95% OCS Scenario
SOURCE: MAP Model
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TABLE 84. SUM~IARY OF THE LONG-RUN It~ PACTS OF
ALTERNATIVE DEVELOPMENT SENARIOS
(IMPACTS IN THE YEAR 2000)
State Expenditures
(Millions of ·
Population Employment Nomina 1 Do 11 ars)
(1999) 376 15 -19
8,025 2,363 -14
101 12 1
9,689 3,083 46
96 lO 1
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Fund Balance
(Millions of
~aminal Dollars)
204
458
-28
-119
-26
-. -,
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APPENDIX A
Historical Growth, 1965-1976
261
Inc!ustr:,Y-_ 1965
Nining 1 ,1 00
Contract Construction 6,400
~!ilnufacturi r.g 6,300
Food Processing 3,000
Logging-Lu:nber
and ?ulp 2,300
Other Manufacturing 1,000
".,)Transportation, Communication
" and P~blic Utilities 7,200 ·v Tr~cking and ~arehousing 1,200
~ater Transportat1on 1·,000
Air Transportation 1,900
Other irans portati on 500
Com1~nications and
?ublic Utilities 2,600
Trade 10 ,'000
Who1CS<l]C 1,900
?.etai1 8,100
Fin~nce, Insurance and
RN1 Est.:!tC 2,200
Services 7,500
Hotels, Motels, etc. 1,000
?crsonal 700
Business 1,400
:-:edicul 1 ,400
Other 3,000
TABLE A.l. GRO\HH IN EI'~PLOY~I,ENT, ALASKA, 1965-1976
1970 1971
3,000 2,400
6,900 7,400
7,800 7,800
3,700 3,500
2,800 2,800
1,300 1,400
9,100 9,800
1,700 1,500 .
800 800
3,000 2,800
900 1. coo
2, 700 3,700
15,400 1G,200
3,200 3,200
12,200 12,900
3,100 3,2co··
11,400 12 ,CJC
1,400 l,G08
800 sco
. 2' 000 2,100
2,200 2,GCO
5,000 5,1',00.
Averaqe ~~onth 1 ~ Emp1 ovment
1972
2,100
7,900
s, 100 .
3,800
2,800
1 ,500
10,000
l,GCO
BOO
3,000
1,000
3,600
17.100
3,300
13,800
/
3,700
14,000
1,800
900
2,100
3,000
6,200
1973
2,000
7,800
9,400
4,600
3,200
1,500
10,400
1,500
900
3,300
1,100
3,600
18,300
3,400
14',900
4,300
15,200
1,900
90(.'
2,1UU
3,300
7,000
r---="1
l. J
1974 1975 1976
3,000 3,300 4,000
14,100 25,9CO 30,200
9,600 9,6C: 10,300
4,300 4,30j 5, l·Ja
3,600 3,400 3,200
1,700 1 ,30:l 2,00Q
12,400 16,5GC i5,8CO
2,200 4,000 3,200
1,000 1,400 1 ,300
4,000 4,808 t,, 700
1,300 ~.800 1 ,900
3,900 4,5C~ 4,700
21.100 2G,2CO 27,600
4,000 5·,SCQ 6,1 co
17,100 2D,3VQ 21,500
4,900 6,CC:J 7.1 co
13,300 25' ~co 27,700
2;500 3 ,20·: 3,20J
800 9·:~ 9CO
3,000 7,3:0 8,7CO
3,800 .. """'""" ~-r,..J'~oo~...,' 5,CQO
8,200 9,~00 Q C"''t ... , ... \.1~
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TABLE A;l. (continued)
!ndustr:L_ 1965 1970
Government 29,000 35,600
Federal 17,400 17,100
State 7,000 10,300
Local 5,300 8,1 co
Agriculture, Forestry
and F1 s:1eri es 100 800
. Total Civ'ilian Non-Agricultural
)
1-.'age and Salary Employment 70,500 93,100
)
1971
38,000
17,300
11 '700
9,000
900
98,300
·----, l .J
· Average Monthll EmEloyment
1972 1973
40,500 41,600
17;200 17,100
13,300 13,800
10,000 10,700
900 1,000
104,200 110,000
,...._....,
l J
1974
43,800
18,000
14,200
11,600
1,000
128,200
) Total Civilian Basic 31,300 35,600 35,800 313,200 37,300 45,700
Military 33,000 31,400 30,100_ 26,500 27,500 _]_7-!500
Totai Bas·ic 64,300 137,000 135,900 62,700 64,800 73,200
Total Support Sector 26,900 39,000 41,800 44,800 48,200 56,700
Tot.Jl Emplo,p.ent 114,000 129,900 133,900 136,500 143,200 161,500
Basic Employr.1ent Includes: Mining; Construction; ~lanufacturing; Federal Government; Agriculture, Forest1·y and
Fisheries, and l•lilitary.
Support Sector Includes: Transportation, Communication and Public Utilities; Trade; Finance, Insurance ar.d Real
Estate; and the Services.
SOURCE: Alaska Department of Labor, Alaska Labor Force Esti~ates, various years.
Alaska Department of Labor, Estimates of Total Resi~ent Population and Estimates of Total Civilian Po~ulation.
:-----,
' J
1975 1975
47,200 47,200
18,300 17,900
15,500 14,1 co
13,400 15,200
1,000 1,200
161,300 171 '1 00
58,600 53,600
25,300 24,500
83,900 88,100
73,800 78,2CO
190,200 .. 203,20~
Industrv
Total
Agri cul tur·e, Forestry
and Fisheries
~lining
Contract Construction
}:ar.ufacturi ng
Transportation, Communication
and P~biic Uti1itie~
Transportation
Air
Other
Co;:-.~.un i cation
Public Utilities
Trade
:·:holesale
Retail
Finance, Insurance and
R~al Estate
Services
Hotels
Personal
Business
r·~cd i ca 1
o:r.er
Federal Govern~ent
State Government
Local Government
1965
30,678
33
371
3,127
791
2,618
1,694
773
921
674
250
5,280
1 ,226
4,053
1,295
3,767
t,GO
402
789
681
1,41:.4
9,395
1,672
2,329
T~?~E A.2. ANCHORAGE CIVILIAN EMPLOYMENT ~ROWlH,
ALASKA, 1965-1976
1970
41,995
52
958
3,514
1, 018
3,907
2,800
1,482
1, 318
76~.
343
8,6~7
2,220
6,397
1,980
6,403
755
535
1 ': 88
1 '200
2, 725
9,509
2,421
3,515
1971
45,452
53
915
3,924
1 .• 117
4,591
2,805
1,455
1,350
1 ,411
374
9,334
2,292
7,042
2·,087
7,027
709
SSG,
1,194'
1, '~EO
3,038
9,530
3,020
3,845
1972
48,252
76
806
4,272
1 '215
4,522
2,8?.1
1,529
1,192
1 '289
411
9,948
2,423
7,52S
2,415
7' 725
7 ~,.,
.:Jc.
556
1 '120
1 '759
3,459
9,435
3,500
4,349
1973
50,527
82
769
4,178.
1,286
4,525
3' 129
1,835
1 '29~.
1,045
451
10,663
2,475
8,188
2,303
8,319
811
567
1 '190
1, 993 .
3,758
9,5~S
3,667
4,677
SO~~C£: Department of Labor, Statisti~al Qu~~~cr1v; vario~s issues.
..... -l r--': r___, •• .J
1974
53,713
100
1 ,035
5,882
1 ,379
5,383
3,938
2,123
1,814
1 '163
483
12,298
2,860
9,438
3' 151
10,119
1,114
57.2
1,680
2,283
4,471
.. 9, 925
3,985
5,257
1975
59,645
110
1 ,301
7,054
1 '571
7,343
5,419
2,610
2,80:?
1 ,426
499
14,928
4,077
10,852
3,615
13,465
1 ,345
62~
3, 795
2,:8G
5,410
10.222
4,056
5,979
__ ...., -
1975
72,113
7,5£7
'i ,529
7,~09
5 'i 72
2 ,5G8.
2,5:~
1 ,670
553
15,958
4,24Q
4,257
15,l..51J
~, 4,14
S!Ji
1;,91~
2,~37 o,;zs
Industry
Agriculture, Forestries and
Fisheries
:·iining
Contract Construction
~:anufacturing
Food
Transportation, Cc!t'.rr . ..:ui cation
and ?ub1ic Utilities
Trar.sportation
Coe'.~un i cations
Fublic Utilities
TABLE A.3. EMPLOYMENT BY INDUSTRY, SOUTHCENTRAL ALASKA
. 1965, 1970-1976
1965 1970 1971 1972 1973
19 . 99 85 356 491
345 762 633 611 640
880 583 895 763 1581
1,188 1,647 1,627 1,818 2,627
1,086 1,293 1,229 1 ,456 1,995
542 760 796 793 896
373 521 502 442 tf97
26 85 132 175 209
132 154 .63 176 189
:rr<!de 813 1 ,338 1, 31 g 1 ,383 1,460
1 \~h~lesale 102 193 .275 162 133
Retail 711 1,145 1,134 1,221 1,327
Finance, Insurance and Real
Estate 159 211 204 220 233
Services 738 1,027 1,099 1,228 1,440
!-:cte1 138 154 230 297 300
?ersona 1 25 28 29 39 50
Business 117 11t, 94 87 139
t·ied i cal 1.39 275 286 315 451
Other 319 t,56 4[)0 ' 490 ./ 500
"' G~ve1·r.;,~~n t
Federal 975 828 742 62!3 602
State and Local 1,455 2,327 2,725 2,932 3,056
Total 7,124 9,582 1 0' 127 10.735 12,131
SCUKCE: Estimated fror.1 Alaska Dep~rtmcnt of Lat-or, Research and Analysis Section ~lorksheets.
A1as~a Stat:? Housing Authority, Alusk.:~, Ynkutnt_~_J:.?EJ>J:e>_l!~_;;ivc Development Plan, Anchorage 1971.
Alas"a Consultants, Inc., A!"'choragc, Alaska, Yakutat, C~n~ive Development Plan, December 1976.
r-;
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1974
492
580
1,239
2,522
2,013
1,329
708
218
03
.1.611
202
1,459
308
1,709
427
40
178
400
664
so~ ... :>
3,180
13,645
1975
543
900
3,656
2,656
2,003
1,576
1 '1 06
233
2~1 .),
2,337
34t,
1,983
3.77
2,128
467
49
441
~o• J-i
780
672
3,455
18,300
,,____..,
' J
__ll7_6_
680
827 .
6,973
3,234
2,127
1 (472
977
44i
242
2,533
353
2 '180
4·SO
2,597
.452
3S
755
455
c-~ ...
o..;/0
637
3,592
23,.030
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APPENDIX B
MAP Model Assumptions
A set of assumptions about the level of exogenous variables determines
a development scenario; this section describes the assumptions in the
non-OCS base case scenario. There are four major types of assumptions
required for a scenario. First, there are assumptions about the growth
of exogenously determined employment in both the petroleum and nonpetroleum
sectors .. Secondly, assumptions about exogenously determined petroleum
revenue.s received by the state are needed. Thirdly, there are assumptions
about national variables. Finally, an assumption about the way the state
spends its money is needed. Once these assumptions are set, the set of
projections is determined by the model.
EMPLOYMENT ASSUMPTIONS
Employment assumptions include those associated with special projects
and those associated with industry growth in manufacturing, agriculture-
forestry-fisheries, and federal government.
Special Projects
Special projects include three basic types--petroleum projects, major
construction projects, and operations of the major projects. Tables B.l
and 8.2 show the project employment assumptions. The methods used to
determine these levels are described below.
267
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,~
!.
TABLE B.l. MINING EMPLOYM~NT
1
f~,
Prudhoe, 2 Lisburne N. Gulf
Upper 3 4 f" and and Lower Other
Year Kuparak Cook OCS Cook Mining
1977 1 ,586 271 575 2,082 l 1978 1 ,624 0 575 2,082
1979 1,585 0 575 2,082
1980 1 ,783 0 575 2,082 ) -
1981 1 ,402 0 575 2,082
1982 1 '149 0 575 2,082
1983 897 0 575 2,082
1984 904 0 575 2,082
1985 987 0 575 2,082
1986 963 0 610 2,082 r·
1987 985 0 645 2,082 l'
1988 985 0 680 2,082
1989 1 ,009 0 715 2,082 r-
1990 1,009 0 750 2,082 L
1991 1 ,020 0 300 2,082 r 1992 1 ,020 0 300 2,082
1993 940 0 300 2,082 h
1994 886 0 300 2,082
1995 886 0 300 2,082 [J
1996 886 0 300 2,082
1997 886 0 300 2,082 u 1998 886 0 300 2.082
1999 886 0 300 2,082 ~;
2000 886 0 300 2,082
[
1Based on employment scenarios from Alternatives for the L Future: Petroleum Develo ment Stud , North Slo e of Alaska
Department of Natural Resources, 1977 . Scenarios for 1 and
5 billion barrel reserves were adjusted to reflect reserves L and production schedules of these fields.
2Exploration activity drilled 9.6 wells; assumed employment
L per well equaled 90 man-years from OCS Technical Report No. 17
(Dames and Moore, 1978).
3Estimate by the author based on current employment. L 4Net employment in mining.
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TABLE B.2. CONSTRUCTION EMPLOYMENT
ECONX 1 ECONX 2
Year TAPS ALCAN 3 Total
p .f. 4 ac1 1c
LNG
1977 5,300 1 0 5,300 0
1978 0 0 0 0
1979 90 2 0 90 0
1980 90 0 90 146
1981 90 1 .425 1 ,515 844
1982 90 4,763 4,853 1 ,323
1983 0 4,663 4,663 420
1984 0 265 265 0
1985 0 0 0 / 0
1Based on estimate of TAPS construction employment by the Alaska
State Labor Department.
2Assumed construction of four pump stations to increase capacity
by 1982. Pump Station construction employment estimate from The
Beaufort OCS Petroleum Development Scenarios, Dames and Moore~978.
3Northwest Energy Company manpower estimate, July 17, 1978.
4Based on letter to the Department of Natural Resources from S.
California Gas, March 17, 1978, estimating peak construction employment
of 1,500. Four-year construction period from E.I.S. for Pacific Alaska
LNG Project, November 1974. \
269
• Prudhoe Bay, Lisburne, and Kuparak mining employment was
estimated from two sources of information. Employment
scenarios were based on the scenarios described in the
Alaska Department of Natural Resources, Alternatives for
~he_fy_tur~: Petroleum Development Study, North-Slo~e o~
Alaska~]l. The employment schedules were adjusted
based on the estimated reserves, productivity, and the
production schedules in Beaufort Sea Region Petroleum
Development Scenarios (Technical Report No. 6, Alaska
OCS Socioeconomic Studies Program, 1978).
• Northern Gulf OCS employment is an estimate of 1977
exploration employment. This was based on information
in Monitoring Petroleum Activities in the Gulf of Alaska
(Technical Report No. 17, Alaska OCS Socioeconomic Studies
Program, 1978). Total employment associated with explora-
tion was divided by the total wells drilled to obtain a
man-years-per-well figure of approximately 90. Approximately
9.6 wells were drilled in 1977. Total exploration employment
was adjusted by the percentage of Alaskan resident employment
assumed in the report. There is no activity assumed after
1977. .
• Upper Cook employment was an estimate of current employment
made by the author. Employment was assumed to increase
slightly between 1985 and 1990 as the oil fields are shut
down. Gas production is assumed to continue after 1990.
• Other mining was assumed to maintain its 1976 level, except
in Anchorage and Fairbanks which were adjusted to an esti-
mate of the 1977 mining employment. ·
Table 6 shows special project construction emplo~ment.
• ECONXl are highly paid construction workers associated with
major projects, long hours, and extreme working conditions~
Two projects are assumed in this category, the trans-Alaska
pipeline and the ALCAN gasline. TAPS is completed in 1977.
The 1977 employment is based on an actual estimate made by
the Alaska Labor Department. After 1917 the line's capacity
is assumed to be increased by the addition of four pump sta-
tions. Pump station construction employment estimates made
in Technical Report No. 6 (Alaska OCS, 1978) were used to
estimate employment. With completion of the TAPS construc-
tion in 1977, the line's capacity is assumed to be 1.2 million
barrels per day. The capacity must be expanded to deliver the
assumed base case North Slope production, which is 1.73 million
270
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barrels per day by 1983. Four additional pump stations \'Jere
assumed to be needed to deliver this production. This was
based on the ratio of capacity to pump stations (.15 million
barrels per pump station) with eight pump stations. With
this ratio, twelve pump stations would be needed to deliver
1:73 million barrels per day. These additions would also
allow the line some additional capacity. The ALCAN gasline
is assumed to be built between 1981 and 1984. The estimates
are based on the most recent construction manpower estimates
made by Northwest Energy Company in a letter to the state
(July 1. 1978).
• ECONX2 employment is associated with special construction
projects which are assumed to have regular employment sched-
ules and be able to draw on local labor markets. One project
of this type is assumed to be built, the Pacific LNG project.
Pacific LNG is scheduled to begin construction in 1980 and
operations in 1984 (Anchorage Daily News, Septemb~r 23. 1978).
The construction schedule is based on an estimated peak con-
struction employment of 1,500 (letter from S. California Gas
to Alaska Department of Natural Resources, May \7, 1978) and
the four-year construction period from the 1974 E.I.S. for
the Pacific LNG project.
Operations employment for these projects is transportation employment
for the pipelines and manufacturing for the petrochemical projects.
Alyeska estimated an operations employment of 300 for startup in 1977
and 850 per year for the long-term operations (Alaska Construction and
Oil, October 1976). ALCAN operations employment is assumed to be 96
beginning in 1985. This estimate was based on ALCAN's 1976 application
to the Federal Power Commission. The difference in operations employment
is accounted for because TAPS has more pipeline in Alaska, the Valdez
port employment is part of the TAPS employment, and TAPS has substantial
Alaska headquarters employment. Operations employment for the Pacific
LNG plant is 60 beginning in 1984.
271
Employment for these special projects is allocated to MAP Regions as
follows:
1. Prudhoe, Lisburne, Kuparak employment to Region 1
2. Upper Cook N. Gulf OCS, Pacific LNG employment in Region 4
3. Other mining at its appropriate regional level
4. ALCAN and TAPS construction based on miles of pipe in region
plus 300 TAPS headquarters in Anchorage in 1977
5. ALCAN operations is allocated by the miles of pipeline in
each region
6. TAPS operations employment will be allocated as follows:
300 in Anchorage, 200 in Valdez, and the remainder based
on the regional distribution of the pipeline. ·
Industry Growth
The level of employment in federal government and agriculture-forestry-
fisheries is set exogenously. Federal government employment is assumed
to follow its general historical trend and remain constant at the 1976
level throughout the forecast period. The trend in the historical
period reflects increases in civilian employment offsetting decreasing
military employment. The regional allocation will also remain constant.
Employment in agriculture-forestry-fisheries will be assumed to increase
at a rate of 3 percent per year. This reflects an assumption of little
\
growth in agriculture and a modest increase in fisheries. The South-
central Water Study estimated approximately a 5 percent annual increase
with maximum fisheries development. Employment will be assumed to in-
crease at this rate in each region.
272
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Output in manufacturing must be determined exogenously. It is assumed to
increase at an average annual rate of 4 percent which is consistent with
both the historical trend and the assumed gro\'Jth in the fisheries industry.
Regional growth will be determined by the mix of industries with food
manufacturing growing at the same rate as fisheries, 3 percent; lumber
growing at 4 percent; paper growing at 2.5 percent; and other manufactur-
ing bringing the growth rate into line with the overall 4 percent per year.
PETROLEUM REVENUE ASSUMPTIONS
Petroleum revenues to the state consist of royalties, production taxes,
property taxes, and the corporate income tax. This se·ction will examine
the revenue assumptions chosen for the base case. Where it was possible
and did not conflict with other assumptions made in this study, we used
revenue estimates made by the state; in other cases, revenues were esti-
mated based on assumptions about the wellhead value and'production.
COOK INLET REVENUES
Table B.3 details the royalty and severance revenues from oil and gas
production in Upper Cook Inlet. The overall assumption is that oil
production would be over in 1995, while gas production will continue
throughout the projection period. The specific assumptions are:
• Oil royalties and production tax are from a Legislative Affairs
Agency memo of July 14, 1977. Revenues were estimated through
1985; after that a 15 percent decline was assumed in the value
of oil produced. The average production of the well was assumed
273
TABLE B.3. COOK INLET REVENUES 1
Oil Oil Gas Gas
Royalties Production Tax Royalties Production Tax
Fiscal Year (Millions) (Millions) (Millions) (Millions)
1978 33.1 16.3 4.4 2.3
1979 31.3 14.4 5.4 2.8
1980 29.5 12.7 6.9 3.6
1981 27.9 10.9 8.3 4.4
1982 26.4 9.1 9.0 4.6
1983 24.6 7.3 9.1 4.7
1984 22.9 5.5 9.3 4.8
1985 21.2 3.7 9.4 4.9
1986 20.1 3.0 9.4 4.9
1987 19.1 2.0 9.4 4.9
1988 18.2 1.0 9.4, 4.9
1989 17.3 0 8.5 4.4
1990 16.4 0 7.7 3.9 [
1991 0 0 6.9 3.5
1992 0 0 6.2 3.2
1993 0 0 5.6 2.9
1994 0 0 5.0 2.6
1995 0 0 4. 5 '' 2.3
1996 0 0 4.1 2.1
1997 0 0 3.7 1.9
1998 0 0 3.3 1.7
1999 0 0 3.0 1.5
2000 0 0 2.6 1.4
1same as The Permanent Fund and the Alaskan Economy (Goldsmith, 1977)
study except oil royalties which are the same until 1985, then decline at 1-
15 percent to be eliminated in 1996. --·
274 [
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to decline below the taxable rate in 1989, and production was
assumed to stop in 1995.
• Gas royalties and production tax are based on estimates of
production through 1985 made by the Revenue Department in
Revenue Journal, Vol. 1, No. 2, October 1976. Decline after
1985 was assumed by the author to be at a rate of 10 percent
per year. The 1977 ratio of royalties an~ production taxes
to production was assumed to hold throughout the projection
period.
PRUDHOE BAY REVENUES
Prudhoe Bay will produce the major petroleum revenues for the state in
the projection period. To arrive at revenue estimates, estimates of
production and the wellhead value are needed. These estimates are shown
in Table B.4 and Table B.5.
• Production of oil was assumed to equal estimates made in
Technical Report No. 6 (Alaska OCS Socioeconomic Studies
Program, 1978).
• The wellhead value per barrel of oil was calculated based
on discussion with BLM-OCS. These assumptions reflect
those made with respect toN. Gulf oil.
1. West Coast market price is $12/bbl. This reflects
a $1.50 discount from a $13.50/bbl Gulf Coast price.
The discount is for transport costs. The real market
price stays constant.
2. Vessel costs equal $1.00/bbl from Valdez to the West
Coast and $.75/bbl processing costs. These costs remain
constant in real terms.
3. The TAPS tariff is $5.25 in 1978. The nominal tariff
remains constant until 1990 when it is assumed the increased
275
TABLE 8.4 .. PRUDHOE BAY OIL 1
Total
Wellhead Wellhead
Production Price Value
Fiscal Year -----(Million Bbls) ( $/Bb 1) (Mi 11 ion$)
1978 237.3 5.00 ll86. 5
1979 474.5 5.56 2638.2
1980 584.0 6.16 3597.4
1981 595.7 6.79 4044.8
1982 607.5 7.45 4525.9
1983 619.6 8.15 5049.7
1984 631 .5 8.88 5607.7
1985 641.5 9.66 6196.9
1986 613.2 10.48 6426.3
1987 545.7 11.35 6193.7
1988 5ll .9 12.25 6270.8
1989 475.4 13.22 6284.8
1990 409.7 14.24 5834.1
1991 367.7 15.02 5522.9
1992 347.7 15.85 5511.0
1993 329.4 16.72 5507.6
1994 299.3 17.64 5279.7
1995 268.3 18.61 4993.1
1996 246.4 . 19.63 4836.8
1997 228.1 20.71 4724.0
1998 211.7 21.85 4625.6
1999 197.5 23.05 4552.4
2000 183.8 24.32 4470.0
1 1 . See text for exp anat1on.
276
Royalties
(Million$)
148.3
329.8
449.7
505.6
565.7
631 .2
701 .0
774.6
803.3
\ 774.2 '
783.9
785.6
729.3
690.4
688.9
688.5
660.0
624.1
604.6
590.5
578.2
569.1
558.8
Production
Tax
{Million$)
124.6
277.0
377.7
424.7
475.2
530.2
588.8
650.7
674.8
650.3
658.4
659.9
561.5
531 .6
530.4
530.1
508.2
480.6
465.5
454.7
445.2
438.2
430.2
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TABLE B.5. PRUDHOE BAY GAS 1
r
[ Wellhead Wellhead Production
Production Price Value Royalties Tax
Fiscal Year (Billion C. Ft} ($/MCF} (Million$) (Million$} (Mill ion$)
[ 1978 3.9 1.00 3.9 .5 .4
1979 5.1 1.06 5.4 .7 .6
[ 1980 5.9 l.ll 6.5 .8 .7
1981 28 1.17 32.8 4.1 3.4
[ 1982 43 1.24 53.3 6.7 5.6
1983 50 1.31 65.5 8.2 6.9
1984 780 1.38 1076.4 134.6 113.0
1985 830 1.45 1203.5 150.4 126.4
['"
1986 870 1.53 1331.1 166.4 139.8 L
1987 912 1.62 1477.4 184.7 155.1
r 1988 912 1.71 1559.5 194.9 163.7
1989 912 1.80 1641.6 205.2 172.4 L 1990 912 1.90 1732.8 216.6 181.9
[ 1991 912 2. 01 1833.1 229.1 192.5
1992 912 2.12 1933.4 241.7 203.0
1993 912 2.23 2033.8 254.2 213.5 c 1994 912 2.36 2152.3 269.0 226.0
1995 912 2.48 2261.8 282.7 237.5
[; 1996 912 2.62 2389.4 298.7 250.9
1997 912 2. 77 2526.2 315.8 265.3
1998 912 2.92 2663.0 332.9 279.6
[ 1999 912 3.08 2809.0 351.1 294.9
2000 912 3.25 2964.0 370.5 311 .2
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operating costs dominate the decreasing capital costs.
After 1990, the tariff remains constant in real terms.
This assumption reflects only one of a number which could
be made concerning oil wellhead values.
1 Production of gas at Prudhoe is assumed to increase follow-
ing the Department of Revenue assumed production until 1987
when the peak production assumed by Dames and Moore (Beaufort
OCS Petroleum Scenarios, 1978) is reached. This production
level is assumed to remain throughout the period.
1 The wellhead value of gas was calculated assuming the com-
promise energy bill is adopted so that Prudhoe gas could
sell at a wellhead value of $1.45 per MCF. This assumes
the ability to roll this gas with other gas. It is assumed
that producers pay $.45 processing costs for a net of $1 .00
wellhead. A constant real price of gas is assumed.l
Revenues from these are determined based upon state laws. Royalties
are 12.5 percent of the wellhead value of oil and gas. The production
tax in each case is a fraction of the nonroyalty value. This fraction
depends upon the productivity of the average well in the field. The
production tax on oil was assumed to equal 12 percent through 1989 when
production declines and the rate falls to 11 percent. The production
tax on gas is assumed to equal 12 percent throughout the projection
period.
1sase case was selected prior to final adoption of Federal Energy
Act of 1978 which set a ceiling for Alaskan gas wellhead price.
278
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MISCELLANEOUS REVENUES
There are three important miscellaneous petroleum revenues: the property
tax, the reserves taxes, and the corporate income tax. Table 8.6 shows
the assumed value of these taxes.
• The property tax taxes all petroleum-related property except
oil refining and gas processing property and leases at a rate
of twenty mi 11 s. We used the property tax revenue series
estimated by the Department of Revenue in Alaska Oil and Gas
Structure. This assumed construction of the TAPS and ALCAN
lines.
• The reserves tax involves the repayment by the state of taxes
•
paid by petroleum producers in 1976 and 1977. Credits of up
to 50 percent of the production taxe? are given until the
$499 million collected is repaid. This tax affects only
producers at Prudhoe. /
The Alaskan corporate income tax was changed in the last
legislative session so that no state projection of this
revenue stream is available. The corporate income tax on
petroleum is 9.4 percent of taxable petroleum income. Taxable
income· is gross income minus capital and operating costs and
Alaskan taxes. The figure is not net of federal taxes. The
tax was based on estimates of net income determined by the
following procedure.
1. ALCAN and TAPS income was based on an assumption
that these lines would be guaranteed a 20 percent after-
tax return on their equity by the rate structure. It
279
TABLE B.6. OTHER REVENUES
Property Tax 1 Reserves Tax 2 ANCSA 3 Corporate 4 Income Tax
Fiscal Year (Million$) (Million$) (Million$) _{Million$)
1978 173.0 (83.3) (23.8) 33.5
1979 185.0 (166.4) (52.9) 127.8
1980 193.2 (204.8) (72.1) 167.3
1981 226.7 (44.8) ( 81 . 6) 188.5
1982 251.8 0 ( 91 . 6) 212.8
1983 257.0 0 ( 1 02.3) 265.1
1984 261.4 0 (68.8) 348.9
1985 295.9 0 0 384.8
1986 281.1 0 0 405.1
1987 267.0 0 0 407.2
1988 253.7 0 0 421.6
1989 241.0 0 0 428.7
1990 229.0 0 0 421.4
1991 217.5 0 0 409.7
1992 206.6 0 0 416.5
1993 196.3 0 0 425.7
1994 186.5 0 0 418.8
1995 177.2 0 0 410.1
1996 168.3 0 0 410.7
1997 159.9 0 0 409.9
1998 151 . 9 0 0 411.0
1999 144.3 0 0 416.6
2000 137.1 0 0 418.5
1Based on estimates in Alaska Oil and Gas Tax Structure, Department
of Revenue.
250 percent of Prudhoe production taxes.
32.0 percent of wellhead value at Prudhoe until $500 million is paid
to the fund.
4Actual fiscal year 78 value; afterwards estimated as explained in
the text.
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was assumed that 15 percent of the capital cost of both
projects was equity. The TAPS project was assumed to
cost $10.5 billion and the Alaskan portion of the ALCAN
line was assumed to cost $4.3 billion. The equity
portion was depreciated in a straightline return on the
remaining equity adjusted for an assumed 48 percent
Federal tax rate.
2. Corporate taxable income for Prudhoe Bay gas and oil
production was derived by estimating the components of
revenues and costs. Revenues are derived above. The
cost assumptions were derived from Technical Report
No. 6 (Alaska OCS Socioeconomic Studies Program, 1978).
The assumptions are shown below:
Total Costs
Debt Proportion
Interest on Debt
Project Life
Total Throughput
Prudhoe Oil
$9.45 billion
25 %
9.0%.
25 years
10.5 billion bbls
Prudhoe Gas
$2.6 billion
25 %
9.0%
26 years
26 billion MCF
Capital costs per barrel were found with this information.
Per barrel costs were used to account for the flow of in-
vestment over the life of the field. Capital costs equalled
debt service plus depreciation costs. Operating costs were
added for total costs. These costs were:
Capita 1 Costs
Operating Costs
Prudhoe Oil
$1.24/bbl
$1.00/bbl
Prudhoe Gas
$.14/MCF
$.08/MCF
In addition, $.12 per barrel and $.02 per MCF were allowed
for overhead as per the legislation. Taxable income was
found by subtracting these costs and allowable Alaska
taxes from revenues.
3. The ratio of oil and gas taxable income to severance
taxes at Prudhoe Bay was applied to Cook Inlet to estimate
taxable income from this production.
4. Estimated corporate income tax was found by applying
the .094 rate to this income.
5. A final portion of the tax includes a redistribution
of multistate corporate profits. This portion allocates
281
worldwide corporate profits based on three factors: non-
production property in Alaska as a percent of worldwide
property, nonproduction payroll in Alaska as a percent
of worldwide payroll, and Alaskan sales as a percent of
worldwide sales. The average of these was taken as the
proportion of worldwide profits which were taxed at
9.4 percent. Conversation with Alaska Department of
Revenue led us to the conclusion that this component
would be extremely small, so it was ignored in this
study.
BEAUFORT OCS REVENUES
Tables B.7 through B.9 show the revenues associated with each of three
Beaufort scenarios. Revenues are based on production estimates provided
by the Alaska OCS Office of BLM. Wellhead values are determined by the
wellhead value at Prudhoe minus transport costs from the Beaufort. These
real 1978 transport costs were $.60 per barrel for oil and $.15 per MCF
for gas. Other assumptions included:
l. Half of the production and offshore capital facilities
would be located in state waters.
2. A conventional scheme of bonus bidding was used with
$100 million being bid.
3. Discoveries on state-owned properties will be subject to
state royalties and production taxes at current rates.
4. Oil and gas production from the Beaufort is transported
via TAPS and ALCAN rather than new pipelines or alternate
modes.
282
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1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
TABLE B.7. BEAUFORT MINIMUM SCENARIO
DIRECT REVENUE EFFECTS
(Millions of Nominal Dollars)
Production 3 Property 4 Corporate 5
Bonus 1 Ro,Yalties 2 Tax Tax Income Tax
50 0 0 0
0 0 0 0
0 0 0 . 31
0 0 0 .44
0 0 0 .70
0 0 0 .71
0 0 0 .48
0 0 0 2. 01
0. 0 0 4.75
0 0 0 8A2
0 9.10 7.60 13.29
0 24.10 20.30 15.05
0 33.00 27.70 16.77
0 42.80 35.90 17.58
0 45.10 37.90 19.04
0 44.00 40.00 20.43
0 5.0.20 42.20 20.92
0 50.60 42.50 20.37
0 50.70 42.60 19.70
0 49.40 41.50 18.89
0 46.30 38.90 17.94
0 42.80 35.90 16.82
1BLM-Alaska OCS Office.
2Royalties estimated at 12.5 percent of total wellhead value.
3Production tax equals 12 percent of the nonroyalty portion of
0
0
0
0
0
0
0
0
0
0
.42
3. 77
5.66
7.84
9.27
9.10
9.06
9.21
8. 72
8.18
7.14
5.81
total wellhead value.
4Tax at 20 mills of petroleum property value.
5corporate·income tax at 9.4 percent of taxable petroleum income.
283
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Bonus 1
50
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
TABLE B.8. BEAUFORT MODERATE SCENARIO
DIRECT REVENllr fTfECTS
(Mi"llions of Nonlin<1l Dulldr~;)
Production 3
2 Property
Royalties Tax Tax
0 0 0
0 0 0
0 0 .31
0 0 .44
0 0 .70
0 0 .71
0 0 .82
0 0 3.03
0 0 6.21
0 0 11 >Ol
12.50 10.50 16.22
33.10 30.10 18.49
51.00 42.90 20.69
54.70 46.00 22.06
57.80 48.50 24.18
61.00 51.20 26.37
63.20 53.00 27.60
65.40 55.00 28.03
67.70 56.80 28.00
65.90 55.40 27.81
62.20 52.30 27.50
58.10 48.80 27.08
1BLM-Alaska OCS Office.
4 Corporate 5
Income Tax
0
0
0
0
0
0
0
0
0
0
.43
7.12
10.41
11.13
11.96
12.74
11.29
12.41
12.77
11.79
9.87
7.63
2Royalties estimated at 12.5 percent of total wellhead value.
3Production tax equals 12 percent of the nonroyalty portion of
total wellhead value.
4Tax at 20 mills of petroleum property value.
5corporate income tax at 9.4 percent of taxable petroleum income.
284
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1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
TABLE B.9. BEAUFORT HIGH SCENARIO
DIRECT REVENUE EFFECTS
(Millions of Nominal Dollars)
Production 3 Property 4 Corporate 5
B . 1 onus Ro~al ties 2 Tax Tax Income Tax
50 0 0 0
.0 0 0 0
0 0 0 . 31
0 0 0 .44
0 0 0 .70
0 0 0 . 71
0 0 0 .82
0 0 0 3.78
0 0 0 9.21
0 0 0 16.71
0 37.50 31.40 24.88
0 67.10 56.40 28.60
0 85.10 71.40 32.35
0 90.70 76.20 34.72
0 95.60 80.30 38.43
0 100.80 84.70 42.18
0 106.40 89.30 44.34
0 112.20 94.30 45.13
0 115.90 97.30 45.23
0 112.70 94.60 45.21
0 101.50 85.20 45.04
0 91.70 77.00 44.73
1BLM-Alaska OCS Office.
2Royalties estimated at 12.5 percent of total wellhead value.
3Production tax equals 12 percent of the nonroyalty portion of
0
0
0
0
0
0
0
0
0
0
4. 51
15.54
19.48
20.43
21.95
23.09
21.97
23.18
23.90
20.42
17.62
13.19
total wellhead value.
4Tax at 20 mills of petroleum property value.
5corporate income tax at 9.4 percent of taxable petroleum income.
285
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APPENDIX C
A Procedure to Determine the Share of
OCS Employment to Alaskan Residents
The direct total employment estimates made by Dames and Moore in the
Northern Gulf OCS petroleum scenarios (Dames and Moore, 1978) have been
refined to refl~ct resident/nonresident composition of this employment.
Resident, in the context of these refinements, refers to an individual
that resides in Alaska for the duration of employment (including offsite).
Resident employees do not need to live in Alaska before the project begins.
Resident employment·is assumed to have full impact on the Alaska economy,
\
while the impact of nonresident employees is assumed to be negligible.
To assist in the determination of the share of employment to Alaska resi-
dents (SEAR), a cross section of information regarding the classification,
structure, duration, and impact of OCS petroleum development-related
employment is presented in Table C.l, 11 Characteristics of OCS Employment
by Task,11 which accompanies this appendix.
A brief outline of the table's format and information content will pre-
cede a discussion of the assumptions used to provide consistency and
accuracy in the interpretation of this information.
TABLE FORMAT
Columns one and two categorize employment by sector (or task) and by phase
of development, respectively. Column three lists the rotation factor
287
TP.SLE c .1. CHARI\CTERIST ICS OF ocs EMPLOYNENT BY TASK
7
Payments
Allocation 8
5 Coefficients Es~-::~:-!tc
Poten:iol Share to Share of :::,;;,~ioy;;:~:'lt
2 3 AK Resident 6 AK Residents 8 To A1as%;;n r{CS i c!::~t.S
Employment Sectors 1 Pha~r. of 2 Rotation 4 Share f"rc:n Employment 6 In Years: ('::'~·I 'OJ_,., \I
For Petroleum Operations Deve l op!llent_ Factor3 Duration 4 Indus tl·y5 t~ulti pl i er 1 5 10 1979-84 1SS5-29 1990 -+
ONSHORE
Exploration 1 ,~a 1.0 1.0 1.0 • :J 17 , Service Base Development 1 p .2 1.5 NA 1.0 1. 0 i.Q ..
Production ,. 1.0 1.0 1.0 1.0
Explorction 2 a ( .3) b
.5 .525 .578
2. Helicopter Service Deve: opn:.:nt . 1 • 5 p .2 1.5 NA .!' .525 .S73
Prodt.:ction 1 1.0 1 1'1 , .-.
·~ I ,V
3. Sel·vi ce Base Con st. 1.11 T .5 1.5 1 .5 .525 .573
4. Pipe Coating 1.11 T .2 1.1 .2 .2 .21 .231
5. Onshore Pipeline Con st. 1.11 T .2 1.1 .2 .2 .21 ?'l1 .... <J • ~ Deve 1 opment .25 .25 • 25
N 6. Oil Terminal Canst. 1.11 T .5 1 • 1 .2 .5 .525 .5i8 co 7. LNG Plant Canst. , 1.11 T NA 1 • 1 .2 . 5 .o2:; !:7-:J co
Concrete Platform Const.'P
t..JIV
8. NA NA NA NA' NA NA 1.1"' ,,; ~. ,,("\ ''"
9. Oil Terminal Operations ~Production p 1.0 1. 5
} .75 .75 9 1.0 l.Q 1 .0
.75
10. U\G Plant Operations J p 1. 0 1.5 1.0 1.0 i.G
OFFSHORE
n. Surveys
} Exp 1 orotic.'
.,. .2 1.1 .2
} .15
.2 .21 .231 '
,~·"' .55 ,55
12. Rigs 2 T • 1 1.1 .2 .2 . 21 .231
{ Deve1cp:nent 2 . 1 (. 3) b 1.2c .4
} .75
• 1 . 3 "''l
7-9 . .-... 13. Platforms p
1.4d
.75 • :J
Production 1.0 .8 1.0 , " 1.0 •• v
14. Platform Installation } 2 T • 1 1.1 .2 .25 .25 .25 • 1 . 1 C5 .116
DevelopMent
15. Offshore Pipeline Canst. 2 T • 1 1.1 .2 .25 .25 .25 • 1 • 1 C5 • • r '.~ .......
Exp1oraticn 1. 5 . 15 c .4 .4 .~2 .~~~2
15. Supply-Anchor-Tugboats De!vclo;:r::cnt 1.5 T .~
1 .• 2d
.8 NA .8 .32 :,::. • i:l 1.4d *""'"' .... Produc;:icn 1.5 .5 1.4 .8 .8 iD c~: :· .~ .... • J V\J
a Approximation 6Numbers in parer.t.hcscs indicate second 5-yeur per-iod
r--! . r~ r----~.,,--, r:--:not ~ .. ., , ,j cubrr-l :!! c--:1 l! :·! .~,....., .,.....___., ,.--j ·-J , .... lFl rs, . .·ee ~ l Jr~,;:a I··· J !
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TABLE NOTES
Characteristics of OCS Employment by Task
1. These are the employment sectors (or tasks) requested by Tom Smythe
of Alaska Consultants in his November 21 correspondence with Richard
Schmidt of Peat, Marwick, Mitchell and Co.
2. Dames and Moore, 11 Alaska OCS Socioeconomic Studies Program, Northern
Gulf of Alaska, Petroleum Development Scenarios,11 Draft Report,
Task 9BA, October 24, 1978, Table 5-4, pages 119-122. ·
3. Ibid.
4. Based on discussions found in Planning for Offshore Oil Development,
Gulf of Alaska OCS Handbook, Division of Community Planning, ADCRA,
1978, pages 40-41 and 223-224. Note: P = permanent; T = temporary.
5. Interview: Max Beazley, Staff Engineer at Mobil Oil Corporation,
Exploration and Producing. Mr. Beazley is currently working in the
Prudhoe Unit, a planning team for future development in Prudhoe Bay.
6. 11 Planning for Offshore Oil Development,11 Division of Community
Planning, Alaska Department of Community anQ Regional Affairs,
October 1977, Table 12, pages 17-18.
7. Column 6 shows the task-specific employment multipliers assumed
by Commu.nity and Regional Affairs (lefthand number). The right-
hand number in this column is the implicit proportion of resident
employment when a resident multiplier of 1.5 is assumed.
8. 11 A Socia·l and Economic Impact Study of Offshore Petroleum and Natural
Gas Development in Alaska: Phase II,'' Mathematics Science Northwest,
Inc., and Alaska Consultants, Inc., for BLM, October 1976, page 19.
9. Amendments suggested by Ed Phillips, Alaska DNR.
10. Concrete Platform Construction is not considered feasible in the
Gulf of Alaska.
289
associated with each task. The rotation factors are taken from Dames and
Moore (see Table Note 2) and are calculated as follows:
1 + Number of days off duty
Number of days ·on duty
' They are used to determine the on-and offsite employment for a given task.
Employment duration (permanent or temporary) by task is listed in column
four. The information in columns one through four characterize employment ~--
L-by task. They are intended to provide qualitative limits for the SEAR
estimates. ~~-
The SEAR estimates shown in column eight of Table C.l are based partly on
other estimates of the resident share of OCS employment. Columns five
through seven provide alternative implicit and explicit estimates of the
SEAR. Column five includes an industry perspective on the resident
potential of Alaska OCS employment. Column six provides estimates of
the share of resident employment implicit in multipliers estimated by
Community and Regional Affairs. The lefthand numbers are the task-
specific OCS employment multipliers. The implicit SEAR (righthand
number) is found by comparing these task-specific numbers with the resi-
dent multiplier (1 .5) assumed in the study. The payment allocation
coefficients found in column seven were developed for use in a regional
input-output analysis designed to capture the socioeconomic impacts of
OCS petroleum development in the Yakutat area. (See Table Note 8.) An
even distribution of skills across resident and nonresident groups is
required in order to reinterpret the payment allocation coefficients in
the context of employment and residency. This assumption is, perhaps,
290
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unrealistic during exploration and petroleum field development; Under
this interpretation, the payment allocation coefficients will overstate
the SEAR for tasks relevant to those phases of ~evelopment.
METHODOLOGY AND ASSUMPTIONS
The task-specific information just outlined has been mapped into a final
SEAR estimate (in column eight) for each task using the following
methodology:
1. The SEAR estimates contained in columns five, six, and
seven are used to bracket a reasonable SEAR range for
each task.· For example, the SEAR range for offshore
platform installation (task 14) extends from .1 to .25.
2. In the interest of consistency, an additional set of
general, phase-specific SEAR guidelines are developed.
Here, a given employment task is examined in the con-
text of its phase of development.
Tasks subsumed under exploration (Onshore: service base, helicopter service;
Offshore: surveys, rigs, supply-anchor-tugboats) are temporary, require
"extreme specialization," and usually embrace a reparatory work crew
having "international character."1 These conditions imply a low SEAR
(of approximately .1 to .2) for exploration employment. Of course,
exceptions to these guidelines occur. For example, helicopter service
during exploration may be contracted through Anchorage-based firms.2
1oames and Moore, "Alaska OCS Socioeconomic Studies Program, North-
ern Gulf of Alaska, Petroleum Development Scenarios,11 Draft Report,
Task 9BA, October 24, 1978, pp. 106-107.
2Dames and Moore, "Alaska OCS Socioeconomic Studies Program, Monitor-
ing Petroleum Activities in the Gulf of Alaska and the Lower Cook Inlet
Between April 1975 and June 1978," Technical Report #17, August 1978, p. 38.
291
The offshore development phase, including platform installation (14) and
operation (13) offshore pipeline construction (15), and supply-anchor-tug
boats (16), is assumed to retain the descriptive and structural character-
istics mentioned above for the case of exploration.
Onshore development includes various types of construction employment.
Although the work force is generally seasonal (not unusual in the Alaska
construction industry), the potential for civil construction work by
Alaska-based contractors is more likely than that of offshore development
or of exploration, particularly as the overall sphere of OCS development
broadens. It is assumed that a SEAR of about .4 to .5 is consistent with
these conditions.
During production, employment is generally permanent and oriented toward
less specialized, more routine entry-level positions. These employment
characteristics appear to be compatible with Alaska residency. Overall,
we attach a SEAR o·f 1. 0 to tasks subsumed under the production phase.
Table C.2 summarizes the general SEAR guidlines outlined above.
TABLE C.2. PHASE-SPECIFIC SEAR GUIDELINE
Exploration
Development
Production
Onshore
. 1 -• 2
.4 - . 5
1.0
292
Offshore
• 1 -• 2
. 1 -• 2
1.0
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'----'
Additionally, there are two principal relationships which influence the
trend in the share of OCS employment to Alaska residents (SEAR). First,
the internal supply of labor that is qualified to perform the variety of
tasks delineated in column one of Table C.l is assumed to increase in
response to earlier 11 layers 11 of OCS petroleum development, as a function
of other mining activity, a~d to more general growth in the Alaska economy.
Second, for those OCS employees that initially accept nonresident status,
it is likely that a certain percentage shift to Alaska residency over time.
We consolidate the combined effects of these employment dynamics into an
assumption calling for a one percent annual average rate of growth in the
SEAR for all tasks having an initial SEAR of less than\one. For simplicity,
the continuous compounding of growth per period is replaced by a five per-
cent increase between 1985 and 1989 and a ten percent increase thereafter.
This assumption corresponds to the figures in the three subcolumns under
column eight.
293
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APPENDIX D
Selected Model Output
Variable Definitions
POP
MIGNET
NINCTOT
EM99
EMSPP
EMG9P
EMNSP
EMA9
EMGF
EMP9
EMT9
EMS9
EMPU
EMM9
EMFI
EMD9
EMCN
EMCNl
EMGA
EMOT
PI
PIRPC
RPI
E99S
EXOPS
EX CAP
E99SRPC
REVGF
RP9S
RT98
RENS
Population (103 persons)
Net migration (103 persons)
Natural increase (103 persons)
Total employment (103 persons)
Proportion of employment in the support sector
Proportion of employment in the government sector
Proportion of employment in the basic sector
Employment in agriculture-forestry-fisheries (103 persons)
Employment in federal government (10 3 persons)
Employment in mining (lo3 persons)
Employment in transportation (103. persons)
Employment in services (103 persons)
Employment in utilities (103 persons)
Employment in manufacturing (10 3 persons)
Employment in finance-insurance-real estate (10 3 persons)
Employment in trade (103 persons)
Employment in construction (103 persons)
Employment in local construction (103 persons)
Employment in state and local government (103 persons)
Other employment (103 persons)
Personal income (millions of nominal dollars)
Real per capita personal income
Relative price index {$1957 US = 100)
Total state expenditures (millions of nominal dollars)
Total state operating expenditures (millions of nominal dollars)
Total state capital expenditures (millions of nominal dollars)
Real per capita state expenditures
Total general fund revenue (millions of nominal dollars)
Total petroleum revenues (millions of nominal dollars)
Total nonpetroleum tax revenues (million~ of nominal dollars)
Total endogenous revenues (millions of nominal dollars)
295
Yar:_i_a_b_l e _D_e_f_i_n_it i _o_ns (continued)
GFBAL
PFBAL
RINS
FUND
FUND77
SIMP
EXBITES
VIABL2
RENSRAT
General fund balance (millions of nominal dollars)
Permanent fund balance (millions of nominal dollars)
Fund balance interest (millions of nominal dollars)
Total fund balance {millions of nominal dollars)
Real fund balance {millions of real 1977 dollars)
General fund revenues minus general fund expenditures
{millions of nominal dollars)
State total expenditure as a percentage of personal income
Nonpetroleum revenues as a percentage of general fund
expenditures
Endogenous revenues as a percentage of personal income
296
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MODERATE BASE CASE
\
·'
297
S i ~ ~!Lh :'I 0 ~; n·;TPU~, UY ~sr·:¥:
13 N"!,
r~ ., ~I~~·::!' :; :~: ';'Q"~ :: 'iif 'l ~:-'iS I.lL' E11G9P E~N5?. EiH.9
1 '.l7 7 4 1 ••. r. ;, -24. •.: .15 G. lt11 lfl~. c;o e 0. J 63 o. 371.3 0.259 1 • 1
1C:711 4 ')t) • G r, ·1 -11.2::1 7. ?~ 2 171l.'i26 0. 3 7 3 0. JU6 0.242 1. 2
1Cl 7CJ 4 1 II • () '> G 5. ~ l;i) h .r. •)7 111: •• :.!25 0.3CIJ 0. l74 C.2•l3 1. 2
1 ·B 1 4.11~.17J il.ti'i 6. !3 7 194.0')4 o. 'l'l5 O.JG 0. 2 <Is 1 • 2
1 'P' 1 4'i(,,()7fl 111 • 7 ri fJ 7 • 1'-1 II ~')6.fl')9 0. II•JU 0. H 1 0. 2 51 1. )
1 CJ ill. 41l7.1J£:1 2]. 7 27 7. f-i')ll 22 'i. )'lll .,) ,It;? .l O.JlB J. ,? 59 1 • 3
1<l'lJ 5')4 ,(,Ci!l n. 'l! IJ I• , ') 0 1 :!J1.JOr, 0.425 o. 322 0. 2 5J 1.4
1CJ •14 'i'H.flr.2 -CJ -~' il2 i.l. (J 'l7 221; .(;32 0.421 0. 3 37 0. ~4 2 1. I.
1"'·'1'i 513 • .372 1, ]H .1 li. H.> 3 227.742 v. 42 !.J 0 • .12 7 0.243 1.~
1'ill() 530.'iOJ '1 .4 fl. 1 27 2 3 I) ,'i I!] 0. 439 0. 3 16 0./.45 1. 5
l'l~\7 5"i1,73(i 12.107 ;:1. 4 .') 3 ~48.2~5 !).449 O.JvG 0.2~S 1. 5
l<Jflr~ ~·73.Qll4 12.5.11 B. ?ilR 259. 241i 0.456 0.2G'J 0. 2 45 1. 6
1 r:< PCJ 5'1). c;q 1 1 • 3 <J2 CJ.1fi5 21i9.J55 0.1163 o. 2')3 0.245 1. 6
1 :j C) r'\ 612.5:l:l CJ. 4 ') J '). 4 9 1 278. •':'')'j •). 4 6 H 0.).88 0.244 1. 7
1CJ'l1 (, 2 (; • 1 4 3. r, f• p 'l , 7 1:, 211 2. r• 21! 0. 47 2 O.J.P.7 0. 2 II 1 1.7
l'l •12 (j I <l. 2 li ;~ J. :l !14 '! •. , ~.II 2H7.S% 0.4 77 o.~n2 0. 24 1 1. 8
1 ') ') 3 6SS.r.,7:, 1\ , r, ii 1 ~...1./f\7 2') .. ,. 0.13 t) • Ill) II 0. 2 7'.i 0.24 1 • <l
1'l"14 (i7/.,7f>1 7,?.111' 'l • I') 11 ~ J\).1. 01\3 0. 4 q 1 0. 2 b'J 0.24 1. lj
1 C) q 'j (, ')?. • I) 17 'J • 1 (j 1!."197 :312.(;19 •J .1198 0.262 0. 2!1 1. 9
1"l96 71:1.324 10 • ~~ 'j 9 10.351 .321.534 J.SJS 0 • ..!55 0.:!4 2.
1"·'17 711l.llld 1 ') • 112 3 1 0. 6 76 J34.057 0.511 0.249 0. 211 2. 1
Fln 75(>. 107 1'l.ij';1 11.972 ]U 11. 92 3 (1.518 0.2 42 0.24 2. 1
l<:J<l'J 7(JO,(,G2 13.23 11.21! 357.(;63 0. 525 0.235 0.24 2.2
'2:' 00 fit)'>. 72 'i 13.:1~7 11.(;A2 37Q.r:q(, 0.532 0.22') 0. 2£1 2. 2
N
1.0 co
EM~t:t El':lFl E~TCJ E:1SG E :1 PU E~OT 'Ei'll1 'J E:i :·r
F<77 !!~.921 4. r; 14 '), !j{J2 22.64') 1.184 14.55 11.355 5. 7 79
1CJ7H 42.9/.1 ll •. 1 51 Hl. 2'1 11 2 1. 'j 1. 1 'i 4 14. 2 69 1 1 • ') 06 5. 7 3 P,
1')7 C) I!/., q /'. 1 4. 'i 6J 1 :) • 7 7 :j 23.f.Cl3 1. 2119 14.5 3f.l 12.411 6. 1 7 0
1 ') ~" u2. n 1 ~-1·~ 4 11.l'l] 2'i.r,us 1. 32 1 14.0iib 12.1]96 b.75a
1'1~11 U2.S1 21 5. )Jfi 1 2. :~ h 2q.(l')5 1 • 4 05 15.377 1 J. 17 7.516
1'1'12 4 2. 'J 2 1 4. 7117 1 ]. 1 'ifl 3.1. r, 4 G 1 • 511 16.J6 . 13.843 u .5 5J
1 fl(l1 4/.,'l/.1 4. 'i £; (, 1.1.747 3U, (•55 1. 54U 16.279 14. 32 8. 9 06
1 (') '111 lj 2. 9 2 1 4. f)9tJ 1 .1. ij(,(j 32. 7'i() 1 • 53 u 16 • .)3) 14.1\67 !3.G52
1 '.l qc; 4.?.921 4.6:1 lJ. i1 ') 3 3. ') J<; y~ 57 16. 1 4 5 15.364 P, • ~ lj
l'i il fi 'P .921 I~ • r, <) !3 1 4 • (, 1 4 Jli.4!12 1. 63 5 16.£173 1S.877 9. 617
E' i! 7 b2,Q21 4. 7:14 1 'i. 2 ') 7 1'J.471 1 • 71 3 1G.d64 1 G • 4 03 10.J97
lll~P 42.,.•21 S .2 1 r, 1 s • (') 'i (, 112. 2~ 1. 7f.! 1 17.238 16.947 11.1 C7
1 r, ,; CJ 112.G21 "i,o1H 1 :, • (, .1 'l 44.921 1 • ti41i 17.574 17.542 11.794
1'1'1•1 U2.921 ;-.• g ti 7 17. i 2G !17. 22 9 1. 9 03 11 .a 5o 18.12 12.404
1 q '11 l~/.q21 'i ' ') IJ 1 1 7 • r ' 4R.62f! 1. 9 'H. 1~.i)12 1il.744 12.764 I I
, 'l/. 4~.'121 '>. J=,o 1 7. r, 1l:i ~~i.1Bil 1.')7'2 18.164 19.367 13. 16'J
1'' .. l u2 .n, 5. 1 1 ifl,22f ~2. 5'l f) /..026 11J.4 2 0. 0 OJ 13.7132
1 r; ") II :p • <j 7. 1 :~ • q f) 1 il • 7 r; 1 5r;.~s~ 2. l)tJ 111.651 ~0.6b 14.411
l'l'J"• 11;!.'111 , .. _ ~I(Jt1 1 ') •. 1 (,<) ">7, ·Jtl'l 2. 1 IIJ 1il.<J44 21.3J'J 15.156
1 '' <J r, 42.fi21 ') . •.) (') 20. r: •n 61. J 2. 212 1<). 274 22.041 16•004
1197 II~. 9 ,: 1 r, • J <j 1 2 "). 7 ~·l+ 6!!. 5 ·JS 2.27~ 19 .507 22.766. 16.334
1'l'l'l 4'::!. '):? 1 'i. G g 3 21. J7 :; C.7. dC>t:l 2. )4 b 1CJ.'l05 23 • .515 17.691
1 ,, 'f (l ll? .~-:' l '1.0'iJ 22.1~>7 71. ti 7 3 2.424 20. 27 1 24~ 289 1 u. 7 1
2" f'r· lj ~. c; :? 1 <,, (<)4 7.2. 'J2 !; 7 5 • U6 <J 2.5 2-J .6 3.1 2S.Oa'3 19.725
r--""' [---: ~ r-: rJ r--l r--' ~ r-=-1 rn LJ r~ ~ ~ c------: r---"1 ..----, ~ :---]
j J j
l ,,,,,,
r-:1 ['~ r-: r--1 r---1 m-l ~ [""':1 :--:----1 ~ r-l ,..---, lJ ,---., ,...._..., r-l r----. ,----, :--1 l J ,, j J
F:O: n•• E I"C ~; r: :1c ~l1 r;~Gl\ i'J PI:tl!C UP! EXOi?S
1')77 21l,!l 19 1(,. ') 'i 9 11. lRII 27. 2 50 lj'J 72. 3 8 3924.32 2 52.71 n1u.
1«7P. /.1!. 1(. (j 1 1.414 11.3(}7 7. s. q 4 1 ll.!)b.liH 3723.':!1 2 "]<). 7 J 'J (f 4.
1 (j 7 ~ :!(.. 4 '\ 'i 12.277 11.'i7.! :?. 6. J 73 4 71: J • 1 J J 1; (, 2 • ) 7 293.J'll:l 1 ,, 1 'j.
1 'lfl ') 2tl .56). 1J.r>2(, 1J.C.01 2!i.BG2 539'>. 2'l lj:)2'J.~4 30:l. ~ i120.J5
1 r.ll 1 31.:!1)') 16.11')4 14.H•1 27.623 6419.62 4322.83 32S.623 1247.59
1 <; R:?. 3 '). r. ... '3 22. J 7 4 1 'i, IJ 3'i :?.13. 037 7958.32 47.!1.;15 34').illli 1<135.16
l'if'\ 1 3(,,211 2:!. (',!' J lli. u 2(, J1.C,Il1 ~~ 6 ll4. q lj lj] ') 6. l> 6 J 61 • 63 1 17CJ.05
1'lfl4 3':i.42~ 1 "1 .2 c,3 1(, .fl14 32.003 •JJ 1>0. !l1 44!18.3 J7J.J')~ 1.159.66
1 'i il 'i 3 f;. (, 17.fi71 17. ]') l J 1. (,2!) 900~. C4 ''510.79 3130.998 191B.4
1'11>1) 11l.fl51 1'1 ,(:(,J 1 r~ • G '1 'l J 1 • 'l.J 1 u 1 ')4 • H 46Ufi.78 408.122 2101.17
1 (. q7 11 1. 'j.qf; 21.Jr>4 1'J.'l7<) 33. 11 6 115'3').2 ;lf.i72. 56 42'1.08~ :D70.06
1 'l:VI 44.047 22.S76 21.20>! 34.64 2 12CJ71!. 7 5025.q5 450.642 :16~6.92
1 '1 'l q !IIi. 41 5 23.'i2') 22.31Z4 3:>.964 1445.!.9 5150.7 472.727 J:) 20. b 4
1 '1 ') ') 4'1.511 24.2 2 .l • .17(, :17.116 1'l91~.ll 521+ 9. •) 495. OS 336;1 .3 5
1'111 4'l,7]6 24.1117 ).l,fl'l(, .1P.11 1 7 ,) til • !l 'i2'11.79 51 6. 51,, 3701.41
1'l')). 51.112 211. 'i'l 211. 4 (,I~ JII •• U~1 1 Jj!l :.1·) • 4 r,.1 '16 • 7 9 5 3U. CJ 43 J'J8S.63
19')1 'i 1. 1 7'1 2'i.t} .lfl 25. ldJ .1 •J. 21l 20170.'1 5460.~4 5 (,J. 4 7 4 2 qJ. u ;j
Fl'l4 SS.2<JJ 26.(.74 26.4(jl) 3B.721 22121.4 557CJ.o4 589. 3!l5 4667.79
1'.1'1 ') 'l7.R1J 27.0 26 27.6'17 39.011 2 4) (,(i • fi 5705.'}9 617.:l95 5070.97
1 q Q (, fi().51!.l 2'1 • J J 5 2'l.\.'(\2 J~·. ') 3 1 /.7 0 5~. 8 5P64.J1 646.663 5519,27
1997 (i). :122 J·'). 5 fi .'30. 507 40.169 297811.0 5'JU7.')(i 677.294 60 30.96
1r:J<)f'l 6!). 12 4 32.079 32.024 4'). 645 J288d. 1 6131.6 709.319 6550.54
1<lG~ n<J .43 ~~ 3:l."'l3 3.1.1D7 41.0H7 .16 51 il. 4 6289.9 2 7113. 6 1 2 711<1.71
2('!')1'\ 7:~.7"9 35. 7 21 3 5. 663 41. 74!3 4<)4% .4 b448.28 779.456 7810.61
N
1.0
1.0 ~ r.c ,w E'l 'iS "F.:'I'lS!lPC R F.:V G t> HP9S !lT90 RE!\S GFBAL
1977 27'>.32!i 1161.fl2 111fl. ')(j 796.27 197.201 214.301 270.522 Gf>0.165
1'17r) 2 p ,'). 1311.1.1 1152.40 1051,1> 4 71. 4 2 cu. <J 16 240.272 617.209
1') 7<J 2'1!). 1U14.71 1 1 'i 1. ') 14Uil.77 86 J. 7 274.373 222.54';1 814.761
1 ') fJ ') J .l 1 .J:) , 1 :.c,r,. 7& 117•). 1 1(, ~ 4. 51 <) \j(,. 3 ] 12. ·J 09 2JO.P.56 1C54.02
1 ,, p 1 ]'72.1211 1'741.')'1 1 1 ., :1 • ;16 1YUB.S5 127ti.41 J~5.tJ09 2(,4 • .314 1SOO.G7
1'.l il2 ''a!~. r, i:l s 2( 1 8. 0 9 11'J7.69 2.330.77 147'5.74 43t).:j57 330.533 2055.:.:9
1 '1·13 "i :-! 1. 2Cl3 237"),(,4 1BJ.n2 26'iS.01 16112.7 5:}4.402 422.537 26:27.34
1 ') J II ')(,:1. 76(, 2594.65 1 J HI).') .1 3230.4!3 2121.71 & 54. 1 5 452.302 35'iC.. 23
1 :)f~ 'i (i 'i r, • 1 11 7 27C•2.t;() 1 3B 1, 3 1Cd8. 62 21n2.22 IJH!l.!l 97 457.94 47.37.79
1"f!ll 70.7,62/l 3 (''l!> ,1• 1 111 .l 'l • 111 31'.12,!>1 ). 4 Ji) • f) f! 751.246 515.097 53 52. 3 5
1'1 q7 11'J!l.3?.3 34'i·~.3 1 !j '} <.J • 1 !;1()~.44 2!1 f\2. 07 319.1)68 6')3.fi24 c,9 :n. 33
1 'i.'lR ') 2 ') • :; 17 31\7.1. J'J 149'),93 1;]77. ~5 252J. 13 <J13.G09 710.544 7971.75
1 r, 1''1 <l7'7,05 4207.93 15213.1 4 (J 04 .6 2570.9 1006.')7 8 24. 565 13933.78
l'l ')I" 1~2q,17 4713. !Ill 1">';4.33 ~; ,rn3. 72 2 4 r, 7. 11)94.69 944.65') 96 8(>. 7 9
1191 101r •• o1 ')('<1:?.2 1'174,'}1 4'17 5. 19 <!414.02 117 1. :j 4 10G2.99 102G3.7
1 <) 9?. 1011'). 73 'i41'1.1fl 1572.99 5202.18 243t).1!J 1257.98 1168.59 10!343. 6
1') 9 3 1':1 H···· 45 'i7')6,()fi 1%'). :?.2 54':>6.95 24u7.0R 13(>4.31 129!>.13 11329.9
l'l'J!j 113'1,32 625:l .J II 1'i77.2P 'if..l1 ;,, (. 1 2435.11 141'!1.71 1459. 13 11667.1
1'19 r; 117~.ur, 6732.74 1'i76,6 'i '!1 ~. !.lU 23o1.26 H .. 14.27 11i46.58 1Hl32.6
19')1) 1227.64 726£).04 1575.1'i2 6212.'ltJ 2373.27 1789.26 1072:21 11fi51.2
1 ') CJ7 12CJ'i.1'i 7!187.97 1"•fl':>.7'l 65'}<;.·:'9 2374.39 199('.15 2135.5B 11695. J
1 <J Ql1 14 !)?.,c; 4 :1 ~i b 0 • '.l H 1 'i%. •)7 C911.Jq 2 371 ~ 9 2213.'J5 242-o.Jo 11341.6
1tl'1'l 151<1,1'3 'i2G':i,"•1 1601.21 7]1(,,4) 2377.55 2478.03 27 60. 51 10790.
2')')'1 165 J. 84 1~1]4.'! 1 611 • '77 7772.99 2370.55 2790.J7 3161.16 10006.3
1<;7"' ?..4 Jr;. ·' '13 6n.li
Jr.?n 4 fl • ('"~.., ~-> 4( . ,., ; ~~ UlG. 1~4
1<J7q l')J, 7.7~ 4(. ;::, 7 R <l(q.~37
]c.:;() 27r). c.; . "'; ~~ r; 112° ...... ~
1 ~.'J 1 I~ 1 1 • 47 r-:i '1.~ • =~ '"\ i i'~'~.J~
,.~(I~ ')h 1. ~2') , -~ -, •. _, :? , 2f,id.')2
1 •; n I 711 .• F.r,'O j:l f) .. 1 4 1 1~~,'1.04
1" 1 i; q r:n. n4 °1 .>.JH.'lq-;_ (I /j'l>l. il~
1 <) 1'i 1 1 '17. 5 s .l 1 ') • .-, r, r, C,ti /.S • l/.1
1«1'(, 14 n . .15 !; /I). "1 1 ;? 7 2r••; • 7
1'lf!7 1n "u. 2 •; 17. ll'o (: ;3ll l,. C) 3
1'li<R 19J'i.f1 (.1~.(;:!:1 ·1 q ·)!. s 5
19 '1'1 ~1():1.07 701./ "7 1 1 1 2;,. q
19'1" ~lPP~. '>2 7°Y.,l~J5 1 ) 1 .11 • 1
1C'l] 26f1:J.P.7 J.'(, 1 •1-114 1 2r.11 2 .G
1'~ '12 791fi. 75 fi~2. ~~2tl 137~').4
10'11 J1'H1.27 '!7<;.3)13 14'i11l.2
1 qr, !j 3'~1?,02 1·=·1?..21 1')1'1:..1
199 5 31'·'31. C:2 lr' 7 ;~. ~ u , c; '), 3. 1
1 q 95 39 23.7 2 11~4.32 15?75 •.
191)7 4168.14 i 12 3. !.17 15863.5
1q98 441'3.22 11J1.2R 15754.8
1'1'lC) 1:659.57 112 4 ,'1 15449 .6
2000 4907.07 1104.77 1!Jq13.3
'EX BITES 'II r-B!.2 !:lENSRAT
19 77 ". 229 ., • r, "'4 ·'),%8
1 97 fl 0 .2') !) • 5'1 6 1). •)57
w 19 7'l (). 2 4 0 ,II(, fl ().()!17 0 19'l"' r,. 2 34 ·~. 44 3 0.!143 0
1 ') p 1 :). /. 1 'l i). 4 J f' 0.041
1'! :4?. 0.204 J. 4 4 3 !.043
1 ') '13 0.222 r) • 4 'l 1 n. !l ur.;
1 ':' Fl4 I). 2 ') 0. 4 ~ (, '). 054
1':l.'l"> ('. 211(, '1.4"''3 "I .I) 51
1':1116 ().24] I) • .1 r, 7 0. •j 51
19 A7 1).2.19 O.JY<J 0. () '12
1 CJAf1 '1.239 ('I. 4 •1. 0 'iS
1 n :Jri n ,/. 3n 0.404 ·). 057
P'-l'' ~. 2 3'1 ·1. t< ", 7 '1,"')9
](i') 1 J • 2 4 1 0 ,II 12 .'). ')(; 2
1 'l 'I 7. 0 .2 3 ') 0. 41 A J. Q(i 1
1'19 3 ~. 2.111 " • 4/.6 .• ,'164
1 ') q I~ o. 23 1 1),435 ').!)C6
1 ') 9 ') 0.n6 0 ,114 (, ').~fiB
lJ'l(i 0.22 0. 4t> '1, ·J r;c;
1 'l q 7 0.21"1 0 .·4 7 3 0.0"7/.
1'198 ..... 21 3 /) • 4 a~ ~. ') 74
1gqq 0 .20') ~.5 1). n 76
2000 0. 2 0 5 1).':)16 .J.075
,..,___,
L
r---"
l ...
,...._........
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671. J(j9 :) • 13 1 S31.912
b t' 2. 1.1 fj3 0. , .1 !~ :>h8. SC8
f3]4.B62 j. 13 1 622.0l2S
1 )<;1), 2r1 0. 13 3 71P.529
1_. H~J. B:. o. 1 ~u uC6.1on
H1u.02 0.11') 'j12.63~
2.F>0. C 1 G. 121 1 ,) 'I 'i.
'l;: ",1 • '::d 'J • 1 J r, 1 131 • 3 3
.ltl:>l. 77 J. 1J 1 1 1 7 (i • ~~ ll
4"• 1 n. r: <J J. 12:. 1270. l4
"•': ll·J •. 1 d ·j. 12?. 14')3.26
'i5C•2.31 J. 1 ~ 1 15&'i. rJ 1
S'J5'>.01 0. 12 1729.57
() 1 f)'). '• 4 J. 1 1 9 1 'l 02.,; (l
635G.14 o. 122 20 7 7. 4
6411 <J. r:·1 0.121 2221.62
(,5 Hl. 7 I). 118 2Jd2.6 5
64f13.fi2 0. 117 2584.::36
fi3 6'). 1 5 0.115 2805.-13
6171.7'1 0. 1 1 3 30 6 3. ~
597.5. 71 0-113 3352.5
561Q,4] 0.111 3662.82
5256.42 o. 1 1 3999.05
484').63 0.10d 4389.92
1
:-l
557.16
595.271
6 ~·j-(}96
7 4(~-(:.
!Un. iJ&1
94t.J.41tl
10 flO. II 2
111>'L3
1217.22
131l..lJlJ
14'•3.4H
1613.73
17&0 • .17
1956.13
2134.4<:1
2282.13
2446.7<)
2652.05
2!377.':l9
3139.59
3433.47
374A.65
4090.04
4486.36
-137.452
-4. 4 16
301.&53
3 60.<; f!7
ScU. 31J
7 oc,. 57 9
740.12!3
11 39. [J 4
1426.47
13ti4. 36
1341.03
1276.02
1219 • .31
100~~46
851.285
7S7.754
7 37.8 05
585.992
40!:!.973
261.8LI4
88.488
-108.613
-305.27
-5 36.2 38
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MEAN WESTERN GULF DEVELOPMENT SCENARIO
(Levels and Differences from the Moderate Base Case)
\
301
w
0
N
SI:1 11tA'!'I011 OflTl':i:' BY DSI':T
197"7
1'17!3
1CJ7'1
1 'i '1 ()
1 ') .1 1
1 'Jf\2
1')H 1
19 .•l II
1986
1 <1H7
1<i<1J1
B3CJ
1'1<)')
1':1 9 1
1]:12
1'1'l:l
1'19 4
1CJ9'i
1'l'l6
1 :J 'J7
1 Q<)S
1•1 q 9
2:)')~
1977
1 ') 7 P.
1 '17 ')
1 <)A.')
1CJ q 1
1n2
1 r, '13
1 I) ·1 lj
1 '195
1 'i IJ r,
1 ~~A 7
1'lflH
1<) 09
1'1'1:)
1"'11
11i'l2
1'19~
1 <1 '1 11
1::) CJ ')
1 9'1 Fi
1Q')7
1 CJ93
1'l<i'l
2001'\
?0?
4 1 o') ,{16
4 "6. r,r, 7
41!1.651i
4.14.113
4C,O,U74
4H>\ .072
r>O'i. 23
s·.,s. 7~ 2
'l14.P'1S
.'il2.225
552.1i45
571,7"7'1
5911, 13
li~2.CJf.1
62fi,609
lil'J.724
65(·. Q(i q
671.284
692.525
711.~13
7:111, 9 1
7 'jf,. (,11 1
781.069
8')').744
!12.921
42.921
4 2. ') 21
47. .'i 21
u2. qz 1
42. <) 2 1
42.q21
U7.,921
LI2.1J21
42.921
Ll2. q 7.1
L;?. • '12 1
4;>. 9?1
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MEAN WESTERN GULF DEVELOPMENT SCENARIO
CONSTANT STATE ~XPENDITURE CASE
(Levels and Diferences from the Moderate Base Case)
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5% WESTERN GULF OCS DEVELOPMENT SCENARIO -
MODERATE BASE CASE
(Levels and Differences from the Base Case)
\
·'
317
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1<:77 rn Q,f>G
1 ()7 (! 40(,.6(;7
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1 "l n 'i 521.41'i
10()(; 54". 19
1'1 n7 %?. .074
1 n nil 'i!D.ll12
1°89 603.852
10t:l0 67.2 .1"24
1CJ q 1 63'). 923
19:1?. 648.675
1 q 9 3 663.878
1:;9 4 6 Fl'1. 38 'i
1'<'l') 6 qq. 7 4
19 9ri 721.223
1 ')97 7 4 ;!.4 2"0
1G.qR 764.17(!
1399 7138.707
2000 813.749
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1°77 U2,'l21
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1CJ79 42.n 1
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1911 42. 92 1
19U4 42.921
101'>5 42.021
19 'l5 42.921
1 987 42.921
1t:lr>'1 42.921
19 =J q 47..921
10'10 42.'l21
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1'1'13 42. Q 2,
1:) 9 4 42.CJ21
1 "')5 42 .n 1
1 q 1)(1 4?..9:n
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8.203
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12.2£12
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3. 1 2
2.785
5.2 4 9
6. !j l'i4
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11.043
10. 4 J tl
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13.156
13.271
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4.514
4.J51
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1 <Ll] 7.11 .6·;<: 1r:1 •. u.J 1 ~ ,1(,. 6 2J5P. 12 0. 111 10'13 • .25 1 07<;.06 751.&5&
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1 <j fl" 11 fl7. r;r:, 121.:'35 ':i1 /.2. ~· 3 377G.37 J. 122 1263.45 130J.GY 1400.72
1 n n (, H )7 .1:, II;"(\. :p~ 721.1J>4 I~)<!(, • 'J j G. 1.., .,
L •· 14')7. )3 1 1:4 c;. {, !~ 12 'l'l. 61
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1 ') qq 10)S.~ ~;~~-[)64 <17411. 77 5J<lil.11 0. 11\l 1o9H.21 17 46 • 1 q 1235.511
1 r~ 'l 'f 21Ct;.}2 f. q , • J~ , 3 1 J'• l',fi J! 'i 7<Jq.] 2 0. 11lt 1.'164.~3 1915.24 1222.0.3
F!)l'l ~;, <;~1. (, "17ti. ( 72 121~!"'.tl (i·"· u 9. (:2 ·:.It 2)14.-33 20E.ti.6<J 1054.15
1 ~ 91 27 11 .I; 7 B">3.75c; 12%7.1:! (, 2f' 6. 3 o. 11 fl 2160.01 2217.09 94b.f!12
Fl92 2'.1fiq. 3 <; CJ21 • 3 1JRJ5.0 6428.71 0. 1 1 '.i 2 3 38. !.1 5 2399.36 868.023
1B3 )2 '2'l. 32 <tdJ.J4n 14 c; 53. 3 6519.21 0. 11 7 25 J2 .6 7 2566.81 0 22.5 23
1'1'14 14"H.Cr2 1e:~2.2J 1 s l L; 'j. f) 65 27. J1. c. 115 2702. '1lj 2770.97 687.297
1') 9 5 :nrl7.45 1091.(>1 1 'i8 60. 4 6451.17 'J. 114 2 9 29 .7 3 3CO 1. o 522.7 5
1 ') ')(j )QC)7 .35 112'1."> 16 2 5fl. 1 6317.34 ·J. 11 3 3197.67 3264.06 3P.9.789
1'1'17 4253.i~2 11Sr· .OG 16':;14.2 6125.29 0. 111 )463.9 2 3544. f:l9 256.078
1998 1+51:'.'i9 1177.26 1o?<J7.3 ':i877. 7 <) • 1 1 371:!9.22 3875.05 83.055
19'19 476£i.77 i 1114.36 164<10.1 557 o. 55 o. 10fl 4139. 0 3 4230.01 -1 07. 172
2')00 5022. (:f. 1178.14 16164:3 5210.35 0.107 4543.98 4640.42 -325.805
EX BI TP S VTABL2 !:'::?ISP AT
1" 77 fl .n<J ...... '~)': 4 -:'.150
1')78 0.25 0.5'16 0. ,')57
w 1<17<j •J.242 0.4 61 0.047 w 1') d f) ;~. 2 37 G. llll2 ').')43 0">
1 9fl1 0 .2 1 'l 0.!139 0.041
19 8 2 0. 2 (l!l 0.4 4] ;).042
1 Q 'l1 "' • 21 :; :1.436 ). ') 48
, ('". ~ l~ 0.232 ('.~25 0.')52
19 fJ ') (", ..,.,,, ...... .:... .., :).422 0. 051
1 <; flr) r.2.1 0.41~ c. 0 53
1'1!11 1).;?21 0.417 0.05')
1<18>1 '). 2 27 ll.U19 0.'1')7
1 q 8') 0.231 0.421 0.06
1 'lQ I) 0. 2 3 ~ 0.421 o. or,2
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1 ')94 I). 22IJ 0.4~P. 0.')()7
1 •;'15 0.221 0 •1l5-r: 0.06«
, I)') 6 r,. 217 '1.471 '). "71
1 'J97 :) • 21 2 :).~!:15 o. ')72
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5% WESTERN GULF OCS DEVELOPMENT SCENARIO -
HIGH BASE CASE
(Levels and Differences from the Base Case)
337
S1~~li.li~ION OU'I'PDT DY DS~T
ll!!
rnP x::..G~ ::T ~:n:TOT I:::'l'l'l E ~s I?P E:-IG'lP EMNSI? EMA9
1CJ 7 7 41'~.Fifi -2 I~ • ') J ~ 6. 3 !l J 1n'i.SOA 0.3 63 o. J78 0.259 1-1
1 '• i fl lll'i(i. 7 on -1i.1rlr; 7. 202 1/fl. 557 a. 37 3 o. Jil5 0.242 1. 2
1')71 4'17.(ifi1 II. 2 3 h.i)'J') 1illl.litl6 O.Jd2 C.376 0.2112 1. 2
1 'in" IJJ 1.49 5 7. ·~I) 5 6.fl2G 192. 1 !17 O.JIJ4 0. 3 b) 0.2411 1.2
V·P1 4 ~~~ ,65"7 16.12J'> 7 • !)~ 206.178 0.409 0. ) lj 0. 2 51 1. 3
nq2 4fl7.141 24.8')3 7. fi 11 225.563 0.424 0.318 •J .250 1.)
1 CJ A] 51:1.05 17.43!1 a. 5os 237.99 6 0.11) o. 3 12 0.7.50 1. 4
1<1Rll 'i7 7. 5A 5 ·'' CJ 9 9. 052 2111.64 o. 437 0.315 o. 248 1. 4
19 tl s 55 1. 2111 1!i,'iC,8 9. 11Hi 2 5:?.. 'Hi 4 0.45 0. 3 02 0.249 1.11
1 '' n 6 571,0:?6 10.251 9.54'1 2(,0.'121 0.454 0.299 0.2~7 1. 5
1'J R 7 5'lJ.!J06 13.001 9.787 271.22 0.1162 0.291 a. 247 1. 5
1Cf.'.'! 6 Hi .554 12.719 10. 141 2fl1.274 O.ll60 o. 2 85 0 .241'1 1.6
10ilQ 635.JQ1 fl .277 1(1.472 2118. 3 0.47 0.282 0. 2110 1. 6
F)!)(\ 651.97.5 li, CJ 2 11''.fi1!l 293.3211 0.473 0.279 0.240 l. 7
.1 C) '1 1 667.113) f>.tlC.R 10. 6 )II 2'Jf'l.641 o. 479 0.273 0.247 1.7
1992 6R1.148 1. 004 1 0:711 30ll.06 0. 48 3 0.271 o. 246 1. 8
t:)9J li C)ll. 27 4 II, 4117 1~.1i73 3~9.955 0.489 0.2 66 0.245 1.8
1 r, '1 !j 713.1'15 (i .2 06 10.711 317.35 0. 49 5 0. 2 6 0.245 1.6
1 C) CJ 'i 732.2n3 n. 2 3 a 11).029 32 h. 41 0. !'. C2 0.2 54 0. 244 1. 9
1 ') '}(, 751 .834 8.538 11. 0 35 3 35.773 o.soo 0.248 0.244 2.
1'1'17 774.043 10.957 11 • 2 54 347.04 0.515 0.241 0.244 2. 1
1999 790.724 11.112 1 1. 5 74 3 58.1124 0.522 0.235 0.244 2. 1
199q 822.055 13.44 11.1395 37 1. 59 0. 529 o. 228 0.2114 2.2
2000 847.577 13.224 12.307 3 84.591 ·0.535 0.222 0.243 2. 2
w w E:-!G!'" EM P'l EMT9 EMSq EMPU EMOT EMM 9 EMFI 00
1977 42.921 4, 514 Q, 842 22.649 1 • 1 e 4 14.5 5 11 • 3 56 5. 7 79
1978 42.'121 (1,365 10.296 21.905 1. 19.4 14. 2 7 11.906 5. 7 39
lQ 79 42.9?. 1 11.3 6 S 10.728 23.533 1.244 14.5 09 12.411 6. 1 33
1')iJI) 112.921 4.5Q2 1 1. 2R 4 25. 552 1.308 14.1313 12 .896 5.6 54
1 '1 (> 1 ~2 ·''2 1 4 .n 1~ q 1 2. 3 on 211. 1. 40 2 15. 3 51 13. 37 7. 4 91
1 CJ i'l ~ 42.<)21 4, I> ~9 13.556 J3. 77 1 • 51 3 1&.06& 13.043 8.582
t'HD 42.921 C,,U')[l 111.)01 )h.25fi 1 • 5 ~) 1 16.5011 14.32 9.316
1., n~ 42.921 5.97 15.1)1 Jli .9'15 1.6ll7 16. b 36 1~.867 9.7112
1 ()A') 4:?.. 921 5. 7Y 1 16.267 (j "). 125 .1 .731 17.025 15.~24 10.575
1 C) 116 42.'121 5. 53 5 16,1151 4 2. 15 1. 77'1 17.2'14 15.'137 11.0112
1 <J .'J7 47.. 921 5.Gl6 17. 00:1 . 45.09H 1. Bll 9 17.635 1&.548 11.827
19AR 112. =12 1 6.5% 17. flO~> 4 7. GOS 1. Q07 17.%2 17.092 12.462
1 ''~'' Q 42 • '12 1 7 • 71' 1r>.O~H 4'1. J3 1 1. 'J 4 7 18. 187 17. 7R7 12. 9 0 9
1'1<)1) 4}.,q21 B.798 1 0. tl(, 7 ;,I).~,JCJ t.'J?H 1B ·.J ll6 18.365 13. 2 4 7
1 C) <J 1 4~.921 n.s 18. '12CJ r,2,(,J1 2.0~5 tr.Sll4 1A,9G 1J.7fl)
1 'I 'l :?. ,, 2 • 'J2 1 !1 • :! lj 6 1 (J. l)'}lj 54.003 2.057 1 il • (j fl 1 19.577 14. 1112
1')') J 4 2. <J 2 1 7.7S2 19.')')7 %. 059 2. 1 10.tl6) 20.213 14.661
1 ') 9 ~ li/.,'121 7.:-,13 20.025 SF'. 4 2 3 2. 151 1Ci.0Flfl 20.07 15.266
19 <) c, 42. n 1 7.!!5 20.1)17 1'>1.~76 2.212 19.36 21.5119 16.002
1 t; 'l (i q2.921 7.4f>1 21.20~ 64. 1 4 2. 2 71 1q,()37 22.251 16.738
1'1')7 4~.Q21 7.54 21.'1011 67.676 2.342 19.%6 22.976 17.641
t<JCJ:I 42,q::'1 7. r,n r, 2~.51J'l 71.2 :>3 ~ .4 1 1 20.292 23.725 18.539
1'1'19 112,q21 7.:.~~7 :u. 11 /') 1 75.36r~ 2. [IQ 20. 6 6) 211.499 19.597
?.000 11~.921 7. ') 113 24. 1 61 79.454 2.566 21.023 25.2':19 20.634
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1<'1 7 7 24.l'1'J 1 fi. 5 '>9 1 1. 1 09 27.2 56
1 97R 2/J • 7 7 1 11. 4 ~6 11.JI)CJ 25.941
1'l7Q ?G • ?. 4 7 12.129 11.912 26.421
BB:l 2R. 1fl 1 3. 2~ 3 12. 84 26.81
1901 31 .?15 1f,.fl44 14.0% 27. 2'11
1~1 A 2 J:..Of..<J 22 .5n 1S.IHi2 . 28.723
1 <J 83 37 .6'12 23.6 2 17. 256 31.363
10~4 3'1.2fl4 21.1')6 113.307 33.145
1Q q 5 42.215 23.242 19. CJ')1 J3.JU 9
1CI% 43.9(,] 24. lli 21. 1 07 35. 1%
19R7 4Ci.525 2 5 ~ 7 73 22.252 35.889
19 013 4R.692 26. 41~ 2 3. 4 1 37. 1 (j()
1'fP.CJ 50.213 26.163 24.21fl 3!!. 2!)
1!)<)() ')1. 372 ?.'l.fi74 24.n75 3A.BG3
1!JQ1 53.1!12 2r •• uo7 2'i. 6% 3U. q·r4
1 'l 'l 2 '14.)'11 26.564 26.249 39.493
Fl 9 3 56. 1 2 5 27. 3 59 27.')5') 39.466
1CJ'l4 5A. 1J 9 2P .3 5 2fl. () 45 3° • 642
19'l'i (il).'}fl 29.443 29.264 39.912
19 9 6 63.f•"!5 30.5113 30. 4 C) 4 40.34U
1C1 1H Ci!i • % 1 32. OP 6 32.1).12 40. 66 5
1 9 <) !l 11!1.!179 33.645 3J.5CJ 41.219
w 1'}1)<) 72.29 6 35.S35 35. 479 41. G 77
w
1.0
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!:XC A!' I::~)'~ s E99S!lPC Rl-!VGF
1CJ77 27'1.326 1160.!32 . 11111.'}6 7 96.2 7
1Cl78 2HO. 1311.13 1152.37 1053.134
1'17'1 2'1:). 1414.71 115':i.B6 1439.75
Bf30 3 2Q. 27 1 1 558. " 1 1 71~ • 1 (, 1 62 n.
1 '1 'l 1 367.356 1723.3Q 1165.':17 1'1P 3. 22
19>12 44'l. llt;2 2014.31 11<)5.116 2330.62
J:l[l3 5:>'3. 3 ?7 23!33.44 1275.67 266Q.76
1 q ~ 4 5 RH • J 4 5 2 (i(l 4 • 4 ') 133'1.')!) J2Q0.76
19 .'J "i ?OR. 292 2972.3!) 13:-n.si )7£iiJ.24
1 <J llG !147 .or,J 311 1(,. 1 2 14.11. ]') 39'12. n
1'11'1 H 113 .4 3733.0fl 1 4.33. 5 4265.2
191!£1 g r.4. 9 8 4 1 'if!. 0 5 14f,G.59 4'i49.93
1CI>iC) 1017 .49 45fi5.4(• 1 4'<11. S! 7 4 fl p 0. 0 1
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1CJ91 1Qf1.LI.2R 5274.86 150B.f>P. 5202.6 2
1 Q q 2 1123.13 5676.111 1S25.Jfi 54 h 5 • 3
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11'1 'l 4 121LG3 o4P? .~ 2 152!l.2q 5 1i70.72
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1CJ!)(l 14f.9.67 878':'. 41 E>3CJ. JG 7207.94
1CJ99 1591.33 9'j33.02 1545.1'1 171f•.37
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7970.25 rn 35.18
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14fl94. 3 5253.48
16116.2 5276. ') 7
17232.7 5278.2
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20064.4 5391.96
2 17 35 • 2 54 7J .j 5
2371().6. 5579.40
25996. SG 93.09
28522.9 5rl14.~5
31515.2 5CJ%. 37
3 4 U C6. 2 . 611)4!.24
3BG2U. 1 6261.26
42700.4 6417.62
RPGS RT9!3
197.201 21'4.301
4 71. 4 206.933
!160.7 273.:122
9%.3 310.3U
1 27f! • Lj 1 352.416
1475.74 4J8.079
1 6 42. 7 563.112
2121~71 G'l1.571
2LI22.22 765.f:l82
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2'l'JO. 05 g 26. Lj 2
2533.9 1n1.%
2o2G.5A 1122.16
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2513.44 1269.fJ
25112.27 1373.33
2576.65 14131.4
25 50. 0 7 15 !}~. 9 9
2 51)3. 02 17 37. 1
2501.94 1913.99
2505.57 2116.86
24 9~. 2 2J 59.27
2Lifl7.79 2643. 4CJ
2475.54 2975.29
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570.277
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227.772
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337.714
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742.184
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1tJ7Q 1 'i1. 77~. 4 (, • .>P) %7. or,~ 1'1().'1!)1 0.132 &22.5U1 6'i0. 9 t; 9 JOO.o!;4
1 () 'l ~ 7.7 'i. (oll.11t)1 1:.'13).~5 1)43.fl'i 0.135 714.74 7114.611 362.9 87
19l'l1 411.47'> Q(!.!J?lj , '1 24 • 2 2 11+'1 6. 33 il. 125 7'16. 626 f!2fl.501 S9t:. 1 6Y
1CJ q 2 563. 112'"> 136.7'l:l 2foJ4 • U!l 1')27.25 0.,, 4 9 (\9 • 9 4 9 4 3. 7 28 710.623
1901 711 .(,')C) 1a1.~~r. 1:1Hf>.R9 2:152.% 0. 1 1 5 1047.25 10113.06 752.0116
l"lfl4 q!j fJ. &4 'l 2~(1.7!:11 !;')15.52 J0\)7. 7 0. 12J 1175.64 1213.& 112!1. (j ll
1G n c; 1Hl7.'i'; :17.".0) 5n9'5.54 )7)5.93 (1.119 1299.114 1339.68 13i!C.02
1 C) A(, 14 37 • .l'i lo Hl. (o2""• 7161.26 4]]').01 o. 122 , 45'!. n 1501.115 1265.72
1'l II 7 HJllll.2 "">Oil.!; 711 ~.If.; )/l • 7 ') llfl(o5 .96 0. 1 1U 1 sns. H 1630.29 1273.49
19 '1 R 19 J').(.l ~9fl.853 '1647. '.'5 'i30fl. 54 0. 11 7 1749.64 1797.57 1212.31
1'lWI 21'l'l.32 61!4 .97 3 1 on 51. 3 5711.b5 0.11'l. 1911.69 1962.49 1204.27
19C) 0 211 'ill. fi 770.589 1H!d'J.9 5<J97.34 \).12 20'59 .113 2113.28 103(3.55
1<l91 2711.47 1\44.5114 121321. 6192.0fJ 0. 1 1 H 2203.51 2260.59. . 431.12')
1 fl 'l2 2G6fl.J5 '?11.027 1367H. 633!:1.36 0. 1 19 2378.54 2439.05 856.9 9&
19 C) .l 3229. 32 972. 3') 1 , ''4 89. 8 642B.32 0. 117 25~0.21 2604.35 811.816
199U 34fHl.02 11)30 .!l.l 1';175.1 !'>441.67 0. , 15 21 n. 9 a 21300.97 6Fl5.25A
19') 5 37112. 45 1079.69 15701.7 6370.46 0.114 29'35.85 3027.91 526.676
19 q 6 3997 • .1'> 1117.8) 16(1G6. 6241.27 o. 1 1 J 3216.8 3293.19 394.301
1 fl ')7 425J.fl2 1146.71 1635f!. 6~54. 47 0. 1 1 1 34'16.71 3577.68 261.926
1990 4~11).59 11tdi.]) 1(,449. 5012.92 0.11 3825.81 3911.64 90. 9 9 6
11'1')9 4766.77 1173.1Jfl 16J51l. 5513.11 0.10~ 4178.71 4269.69 -95.0 16
20(11) 5022.66 1168.6 , 1 61) 4 5, 2 5161.41 0.107 4587.1 4683.54 -308.7 38
'EXDITES VIADL2 F.ENSRAT
w
~ 1977 1'1.?.29 0. (>·) 4 0. 'HiS
0 1<l7P, 0.25 0.51)6 0.057
1979 0.24:! o.u(,? 0. 0117
. 1 CJ0'1 0.237 0.442 0.043
1C) p 1 0.217 0.4JC) 0.1)41
19n (' • 2'"1 ] ".443 0 • .)!:12
1 9 flJ 0.211 0.430 o. 01:7
19R 4 0.22(> O.U29 1).052
1 g 8 5 0. 219 !).427 ').051
1 q ~ (i 1).22fl 0.41'1 o.o:,u
19137 ').223 0.4?.3 0.()55
1'JR8 •'l.224 0. 4 25 a. o sn
19r>9 0.22fl 0.426 0.06 /
1 fl') 0 ".232 /).4:J.(i " t1 •. ; 62 '
1 <J 91 0. 220 0.11.12 0.063
199 2 0.23 o.r.:J7 0.065
1)!}3 , • 226 C.444 (). !)66
1Cl'l4 1).223 0.452 0.067
1 q ') 5 1}.21<.1 0.4 6 J 0. 06'J
1 ') lJ6 o. 215 0.475 0.071
1')97 0.21 I).Uf>CJ 0.072
199fl 1). 20 7 0 • 5') 3 0.~175
H99 0.202 0.519 o. 077
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APPENDIX E
Census Division Projections
The purpose of this appendix is to describe the methodology chosen to
allocate the MAP projections for the Southcentral Region to census·
divisions within the region. Projections of employment, population,
and income for the Southcentral Region were made through the year 2000.
Within the Southcentral Region, it is necessary to disaggregate the results
to census divisions. The following seven census divisions are included:
Matanuska-Susitna, Kenai-Cook Inlet, Seward, Valdez-Chitina-Whittier,
Kodiak, Cordova-McCarthy, and Yakutat (a portion of the. Skagway-Yakutat
Census Division). Population, income, and employment by the five regional
industrial sectors was allocated to each census division. Census division
projections were made consistent with projections made by Alaska Consul-
tants (1979).
The approach described below produces only allocations of regional projec-
tions and cannot be assumed to substitute for a detailed analysis and
forecast of local economic growth. Two types of information are used to
make the census division allocations: historical information on the census
divisions and the regional projections made by the MAP model. Judgmental
review of the historical period is used to set starting parameters for
each census division. These parameters are adjusted throughout the pro-
jection period to account for changes in relationships at the regional
level. This process allows the census division allocations to reflect
changes in relationships such as scale effects projected by the MAP model.
359
The allocation of population and income to the census divisions depends
upon the allocation of employment. Census division allocations of employ-
ment follow traditional economic base theory. This theory assumes the
main cause of regional economic growth is the growth in the region's basic
sector; growth in the basic sector is determined by factors external to
the region. Employment in the nonbasic sector responds to growth in the
basic sector since it serves the basic sector. Once the relation between
these sectors is known and basic employment is known, nonbasic employment
is determined. For this allocation process, industrial sector I (mining
and exogenous construction), sector II (manufacturing and agriculture-
forestry-fisheries). and sector III (government) are basic. Sector IV
(construction and transportation-communications-utilities) and sector V
(trade, services, and finance) are nonbasic. Employment was allocated
in the following six steps:
• ~djustment for Census Division of Direct Impact. c For the
base case and each OCS scenario, the regional totals were
adjusted by subtracting the projections made by Alaska
Consultants for the census divisions of impact. Alaska
Consultants• projections were used for Yakutat, Cordova,
Seward, and Kodiak.1
• Allocation of Employment in Industries I .and II and
Federal Government. Employment in these industries was
allocated to each census division exogenously. This
allocation will reflect assumptions regarding particular
1vakutat and Cordova are assumed to be unaffected by Western Gulf
OCS development and remain at their base case level throughout.
360 .
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projects and developments such as a bottrnnfishery in Kodiak
or construction and operation of an LNG in Kenai. Alaska
resident OCS employment in excess of Alaska Consultants'
resident employment estimates were allocated to the other
census divisions based on the proportion of population in
the census division.
• Allocation of State and Local Government Employment.
Regional projections of government employment in the base
case were allocated to the census divisions using the shift-
share technique. Shift-share analysis assumes that the growth
rate of subregions is related to that of regions. The sub-
regional growth rate is made up of a share component equal
to the regional rate plus a shift component which describes
the subregion's comparative advantage.
The comparative advantage term for each census division was
found by examining the growth rate of government employment in
each census division over four periods: 1965-1970, 1965-1976,
1970-1976, and 1972-1976. The average annual growth rates for
government employment for each census division and the region
are shown in Table E.l.
After examining the differential in growth rates from Table E.l,
the differences shown in Table E.2 were selected for the pro-
jection period. For each census division, except Valdez, the
average differential over all periods was used. The period
361
TABLE E.l. GROWTH RATES OF STATE AND LOCAL
GOVERNMENT EMPLOYMENT FOR SELECTED PERIODS
Census Divisions 1965-1970 1965-1976 1970-1976
Kodiak ~. 089 1. 078 1.098
Kenai 1.122 1.108 1 .096
Matanuska-Susitna 1 .061 1.107 1.147
Seward 1.038 1. 053 1. 066
Cordova 1 .071 1. 078 1 .084
Valdez 1 .070 1. 075 1.079
Southcentral Region 1 .097 1. 085 1.075
1972-1976
1.029
1 .062
1 .1 03
1 .1 00
1.060
1.104
1.052
SOURCE: Alaska Department of Labor, Labor Force Estimates, various years:
TABLE E.2. YEARLY GOVERNMENT EMPLOYMENT GROWTH
RATES FOR THE PROJECTION PERIOD
Census Division Growth Rate
Kodiak R _, . 04
Kenai R + .02
Mat-Su R + .03
Seward R -. 01
Cordova R
Valdez R
Yakutat R
Where: R is the Southcentral regional rate of growth from
the MAP regional model.
362
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1972-1976 was dropped for Vuldez to abstract from pipeline-
induced increases. Yakutat was assumed to resemble the Cordova
Census Division since separate information was not available
for this area. A check against the Lynn-Canal Icy Straits
labor market area which contains Yakutat shows that this is
a reasonable assumption. Excess government employment was
allocated to the census divisions based on the proportion of
government employment in the initial allocation.
1 Allocation of Nonbasic Employment. Economic base theory is
operationalized through the development of nonbasic/basic
multipliers which describe the relationship bet0een the sectors.
Two multipliers are developed to allocate nonbasic employment
to the region, one describing Sector IV and one describing
Sector V. The long-run multipliers for a change in basic
employment are assumed to equal the average nonbasic-to-
basic ratios found for the period 1972-1976 (except Valdez,
where 1975 and 1976 were ignored because of the pipeline).
Table E.3 shows the nonbasic/basic ratios used in the projec-
tion. (Yakutat is assumed to be the same as Cordova. A
check against a 1976 employment survey in Yakutat conducted
by Alaska Consultants showed these ratios to be similar.)
The major cause of growth in the Matanuska-Susitna Census
Division (without the capital move) is assumed to be the
growth of this area as a suburban community of Anchorage.
Because of this assumption, nonbasic employment is assumed
363
TABLE E.3. NONBASIC/BASIC MULTIPLIERS
FOR THE PROJECTION PERIOD
Multiplier for
Sector IV Multiplier for
(Construction and Sector V
Transportation-(Trade, Services, and
Communications-Finance-Insurance-
Census Division Utilities) Real Estate)
Kodiak . 18 .35
Kenai .39 .57
Seward .11 .33
Cordova . 18 .32
Valdez .25 .38
\
Yakutat . 18 .32
to grow as a function of population. Estimates of Matanuska-
Susitna (Mat-Su) Census Division nonbasic employment are based
on the following approach:
1. Mat-Su population is estimated as a function of Anchorage
population using the following regression equation:
Mat-Su Population= -9851 + .1269 x (Anchorage Population)
R2 = .986
This was estimated in "The Effects of Regional Population
Growth on Hunting for Selected Big Game Species in South-
central Alaska, 1976-2000" (ISER, 1978).
2. Nonbasic employment is estimated using multipliers
relating the change in population and the change in
employment. These multipliers are assumed to equal
the average from the period 1970-1976; they were ·
.03 for industry IV and .06 for industry V.
364
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The extra regional nonbasic employment was allocated to
the census division based on the proportion of employment
in the census division. This captures any scale effects
projected at the regional level since multipliers in
larger regions will change.
t Allocation of Regional Population. Except for the Matanuska-
Susitna Census Division, population was allocated as a
function of total civilian employment. Population-to-
employment ratios were found from two sources. For Kodiak,
Kenai, Seward, and Valdez, population/emp1oyment ratios were
found by comparing Alaska Labor Department estimates of popu-
lation and employment. In all but Valdez, the ratios used
are the average of the 1972-1976 ratios. For Valdez, the
1975 and 1976 ratios were not included in the average because
of the pipeline. The population-to-employment ratios for
Cordova and Yakutat were based on estimates made by Alaska
Consultants. Table E.4 shows these estimates.
The extra population in the region was allocated based on
.the proportion of total population occurring in each census
division. For this allocation, the population in Matanuska-
Susitna was assumed to equal that found by multiplying the
population/employment ratio by total employment.
365
TABLE E.4. POPULATION-TO-EMPLOYMENT RATIOS
FOR THE PROJECTION PERIOD
Census Division
Kodiak
Kenai
Seward
Cordova
Valdez
Yakutat
Population-to-Employment
Ratio
2.3
2.6
2.3
2.1
2.6
2.2
SOURCES: Alaska Department of Labor, Labor Force Estimates by Industry
and Area and Population Estimates by Census Division.
Alaska Consultants, Inc, fordova Comprehensive Development
Plan, 1976, and Yakutat Comprehensive Development Plan, 1976.
1 Allocation of Real Disposable Personal Income. Real dispos-
able personal income by place of residence was allocated to
each census division by the proportion of the total popula-
tion in the census division.
Tables E.5 through E.8 include the estimates of growth in each census
division in the Southcentral region in five-year increments.2 These
2Low scenario projections are provided for only the period of sig-
nificant impact. 1981-1984.
366
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C
projections are consistent with the census division projections made
for the co~nunities of impact (Alaska Consultants, 1978) and the MAP
projections for the Southcentral region. However, the variables will
not add to the Southcentral totals. Since a portion of the growth in the
Matanuska-Susitna Census Division is assumed to be Anchorage metropolitan
area growth, a portion of the Matanuska-Susitna population is assumed to
be projected in the Anchorage region.
367
[~
TABLE E.5. CENSUS .DIVISION PROJECTIONS r
WESTERN GULF DEVELOPMENT SCENARIO l
MODERATE BASE CASE r·
{
1980 1985 1990 1995 2000
Seward L~
EM1EX 3" 440 5 7 9
EMRR 223 354 51,0 543 568 I EMG9 404 463 510 545 602
EMS4 93 144 263 155 175 [ EMS5 433 511 510 736 957
POP 3,468 4' 135 4,775 5.056 5,768
DPIR 10.8 14.7 20.4 22.7 29.3 t .
Kodiak (
EM1EX 2 9 9 I 7 9 1...
EMRR 1 ,867 2,382 2,734 2,932 3,082
EMG9 2,031 2,184 2,269 2,366 2,414 r
EMS4 495 778 863 959 1 ,048
EMS5 1,302 1 , 917 2,306 2,803 2,998 [
POP 10,856 13 ,851 15.668 17 ,967 19 ,556
DPIR 33.8 49.2 67.0 80.8 99.3 ['
Cordova
EM1EX 2 3 557 17 24 E EMRR 697 749 812 902 969
EMG9 359 420 475 495 523 ~-
EMS4 97 119 313 324 332 L
EMS5 281 329 439 530 652
POP 2,872 3,240 4,098 4,536 5,000 L .
DPIR 8.9 11.5 17.5 20.4 25.4
Yakutat
[
EM1EX 2 2 12 20 20 L EMRR 94 111 164 197 204
EMG9 90 107 179 188 198
EMS4 44 129 554 395 520 L EMS5 71 104 231 250 263
POP 604 815 2,148 2,175 2,306 L DPIR 1.9 2.9 9.2 9.8 ii.7
368 L
[
[ TABLE E.5. (Continued)
[ 1980 1985 1990 1995 2000
Kenai
[ EMlEX 851 1,055 1.602 712 787
EMRR 2,100 2,278 2,644 3 ,319 4,202
EMG9 856 1,031 1 ,270 1 ,357 1,497
[ EM 54 1,870 1,736 1.783 1,890 2,165
EM 55 4,378 4,738 5,787 5,690 6,686
[ POP 27 ,046 28.900 33 ,794 32,191 34,404
DPIR 84.2 102.7 144.6 144.8 174.7
r· Matanuska-Susitna
I EMlEX 6 230 469 187 235
EMRR 100 94 141 167 215
L. EMG9 622 681 761 734 730
[ EM 54 622 669 721 949 1 , 151
EM 55 1 ,991 2,500 3,199 3.908 4,866
[ POP 16,458 21 ,869 28,972 35,553 44,846
DPIR 51.2 76.4 118.7 145.8 189.7
[ Valdez
EMlEX 417 387 451 376 388 c EMRR 41 45 56 72 95
EMG9 475 527 594 580 584
[ EM 54 293 245 228 231 228
EM 55 716 693 769 724 732
POP 5,222 5,058 4,048 3,345 4,547 c DPIR 16.3 18.0 17.3 15.0 23.1
[
EMlEX includes exogenous construction, m1n1ng, and all direct OCS employment.
L EMRR includes other manufacturing and agriculture-forestry-fisheries.
EMG9 includes federal, state, and local government.
L
EMS4 includes local construction and transportation.
EMS5 includes trade, services, and finance-insurance-real estate.
r~
POP is population.
DPIR is real disposable personal income (millions of constant dollars).
L 369
[
TABLE E.6. CENSUS DIVISION PROJECTIONS L WESTERN GULF DEVELOPMENT SCENARIO
MEAN CASE
1985 1990 1995 2000
f'
Seward L EM1EX 440 5 7 9
EMRR 354 510 543 568 r· EMG9 466 510 545 602 L
EMS4 164 263 155 175
EMS5 515 510 736 975 [
POP 3~699 4 ~775 5,056 5,768
DPIR 13,238 20~422 22,752 29,273 !
Kodiak ,.
EM1 EX 8 12 17 15 I l. ..
EMRR 3~214 3,689 3~957 4 ~ 159
EMG9 2 ~ 187 2~299 2,370 2,414 L EMS4 801 882 1 ,048 978
EMS5 1 ,923 2~312 2,810 2,998 [ POP 12,612 14,353 16,455 17,844
DPIR 45 ~ 136 61 ~387 74,049 90 ~561
[:
Cordova
EM1EX 3 557 17 24 G EMRR 749 812 902 969
EMG9 420 475 495 523
EMS4 119 313 324 332 [
EMS5 329 439 530 652
POP 3~240 4,098 4,536 5,000 L DPIR 11 ~595 17.527 20~412 25.376
Yakutat [
EM1EX 2 12 20 20 L EMRR 111 164 197 204
EMG9 107 179 188 198
EMS4 129 554 395 520 L EMS5 104 231 250 263
POP 815 2 '148 2,175 2~306 i DPIR 2,918 9 ~ 187 9 "700 ,, /()")
, I UU I I 'I V,J L
370 L
[
[ TABLE E.6. (Continued)
[ 1985 1990 1995 2000
Kenai
[ EMl EX 1 '1 07 1,626 749 787
EMRR 2,278 2,644 3.319 4,202
EMG9 1,088 1 ,250 l,350 1,492
[ EMS4. 1,858 1,958 2,017 2,294
H1S5 4,824 5,819 5.689 6,679
[ POP 29,971 32,822 31 .• 543 34 ,633
DPIR 107 ,261 140,376 141 ,948 175,769
['' Matanuska-Susitna
.~
EMlEX 261 484 210 235
[ EMRR 94 141 167 215
EMG9 657 749 730 728
[ EMS4 702 791 1 ,018 i' ,221
EMS5 2,492 3,218 3,933 4,866
[ POP 21 '961 29,000 35,579 44,847
DPIR 78,595 124,031 160 '1 09 227,605
c Valdez
EMlEX 397 455 393 388
c EMRR 45 56 72 95
EMG9 502 585 577 582
EMS4 251 264 248 242
[ EMS5 677 820 730 732
POP 5,029 5,538 4,855 4,569 c DPIR 17,999 23,688 21,848 23,189
[
EMlEX includes exogenous construction, m1n1ng, and all direct OCS employment.
EMRR includes other manufacturing and agriculture-forestry-fisheries.
L EMG9 includes federal, state, and local government.
EMS4 includes local construction and transportation.
L EMS5 includes trade, services, and finance-insurance-real estate.
r POP is population.
DPIR is real disposable personal income (millions of constant dollars).
[ 371
[
TABLE E.7. CENSUS DIVISION PROJECTIONS r--
WESTERN GULF DEVELOPMENT SCENARIO !'
HIGH CASE
f-:
1985 1990 1995 2000
Seward ~~
l
EM1EX 469 5 7 9
EMRR 353 511 543 568· ~-EMG9 478 520 550 607
EMS4 247 336 191 211 I EMS5 535 604 743 964
L.
POP 35960 3,940 4,003 4,525
OPIR 15,070 17,151 19,406 23,076 r--
I_
Kodiak r-
EM1EX 7 9 9 9 i
l -:
EMRR 3,214 3,689 3,957 4,159.
EMG9 2,184 2,296 2,366 2,414 [
EMS4 778 863 959 1 ,048
EMS5 1,917 2,306 2,803 2,998 r POP 13,851 15,668 17,967 19,556
OPIR 52 .712 68,202 87,100 99,729 [ ·' /
Cordova
EM1EX 3 557 17 24 ['
EMRR 749 812 902 969 b,
EMG9 420 475 495 523 [ EMS4 119 313 324 332
EMS5· 329 439 530 652
POP 3,204 4,098 4,536 5,000 L
DPIR 12,330 17,838 21,989 25,498
Yakutat
[
EM1EX 2 12 20 20 L EMRR 111 164 197 204
EMG9 107 179 188 198
EMS4 · 129 554 395 520 L EMS5 104 231 250 263
POP 815 2.148 2,175 2,306 L OPIR 3,102 9,350 i0,544 il ~760
372
f·
[
r TABLE E. 7. (Continued)
[ 1985 1990 1995 2000
Kenai
[ EMlEX 1 ,741 1 ,992 971 1 , 100
EMRR 2,278 2,644 3 ,319 4,202
EMG9 1 ,044 1 ,265 1 ,347 . 1 ,487 [-
EMS4 2,442 2,181 2,228 2,534
EMS5 5,431 5,954 5,937 7,029
[' POP 31 ,801 33,964 32,755 36,272 --DPIR 121.024 147,848 158,788 184,977
[ Matanuska-Susitna
r· EMlEX 638 713 348 426
EMRR 94 141 167 215
\.__) EMG9 690 758 729 T25
[ EMS4 836 934 1,096 1,303
EMS5 2,542 3,489 3,995 4,942
[ POP 22,398 29,595 36,034 45,350
DPIR 85,239 128,825 174,684 231,269
c Valdez
EMlEX 518 516 495 449 c EMRR 45 56 72 95
EMG9 534 592 576 580
[ EMS4 341 306 289 269
EMS5 789 869 802 776
r--' POP 5,488 5,907 5,301 4,811
6 DPIR 20,886 25.712 25,700 24,535
[
EMlEX includes exogenous construction, mining, and all direct OCS employment.
[ EMRR includes other manufacturing and agriculture-forestry-fisheries.
EMG9 includes federal, state, and local government.
L EMS4 includes local construction and transportation.
EMS5 includes trade, services, and finance-insurance-real estate.
[
POP is population. ·
DPIR is real disposable personal income (millions of constant dollars).
L 373
[
TABLE E.8. CENSUS DIVISION PROJECTIONS r-
WESTERN GULF DEVLOPMENT SCENARIO L
MODERATE BASE CASE
r-
1981 1982 1983 1984
Seward r'
EM1EX 3 4 i 4 4
EMRR 224 204 245 291
EMG9 413 421 431 440
EMS4 104 130 122 128 I -EMS5 440 445 460 474 L
POP 2,720 2,764 2,846 2,964
DPIR 9,378 10,312 11,039 10,094 r ~
(
Kodiak r-
I
EM1EX 2 4 5 6 I Li
EMRR 2,644 2,766 2,916 3,062
EMG9 2,099 2,120 2 '141 2,163 [
EMS4 533 588 643 733
EMS5 1,416 1 '540 1,672 1 ,801 [
POP 11 ,447 12,017 12,614 13,278
DPIR 39,467 44,833 44,494 45,218 L
Cordova
EM1EX 2 2 2 3 [
EMRR 707 717 727 749
EMG9 404 408 412 416 [ EMS4 102 106 111 115
EMS5 290 296 311 320
POP 3,010 3,068 3,126 3 '182 L
DPIR 10,378 11,446 11 .027 10,836
Yakutat r
EM1EX 2 3 3 2 L EMRR 96 98 109 111
EMG9 93 94 102 102
EMS4 75 85 124 129 L EMS5 79 83 93 96
POP 690 726 810 810 I DPIR 2,379 2,709 2.857 2,758 '---'
374 H
L
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[
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L
[
[
L
[
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[
[
[
[
[
[
[
[•
L
L
TABLE E.8. (Continued)
Kenai
EMlEX
EMRR
EMG9
EMS4
EMS5
POP
OPIR
1981
1 ,621
1 ,234
850
1 '720
4,599
29,083
99,122
Matanuska-Susitna
EMlEX
EMRR
EMG9
EMS4
EMS5
POP
OPIR
Valdez
EMlEX
EMRR
EMG9
EMS4
EMS5
POP
OPIR
52
56
605
626
2,291
17,540
60,475
339
25
464
246
686
5,085
17,405
1982
2,139
1 ,294
907
1 '751
4,985
30,588
112,092
77
58
634
676
2,251
18,622
69,475
346
26
486
261
657
4,840
1 7 • 971
1983
1 ,303
1 ,357
1,050
1,542
4,486
26,987
96,209
120
60
719
630
2,506
19 '705
69,507
358
28
554
250
757
5,566
19,235
1984
892
1 ,484
l '1 08
l ,452
4,293
26,533
90,292
126
62
746
666
2,695
20,787
70,782
359
29
575
257
791
5,756
19,677
EMlEX includes exogenous construction, mining, and all direct OCS employment.
EMRR includes other manufacturing and agriculture-forestry-fisheries.
EMG9 includes federal, state, and local government.
EMS4 includes local construction and transportation.
EMS5 includes trade, services, and finance-insurance-real estate.
POP is population.
OPIR is real disposable personal income (millions of constant dollars).
375
r
TABLE E.9. CENSUS DIVISION PROJECTIONS . l
WESTERN GULF DEVLOPMENT SCENARIO L.
LOW CASE
1981 1982 1983 1984 L
Seward L EM1EX 3 4 4 4
EMRR 224 204 245 291 L EMG9 417 425 432 440
EMS4 131 157 131 128
EMS5 447 452 462 474 r
POP 2,796 2,840 2,872 2,964
DPIR 19,664 10,623 1 0,145 10,096 I
(
Kodiak r·
EM1EX 2 4 5 6 f \ __ ;
EMRR 2,644 2,766 2 ,916 3,062
EMG9 2,099 2,120 2,141 2,163 I
L EMS4 533 588 643 733
EMS5 1 ,416 1 ,540 1 ,672 1 ,801 j:
POP 11 ,447 12,017 12,614 13,278 L
DPIR 39,565 44,949 44,560 45.230 f .
c
Cordova
EM1EX 2 2 2 3 L EMRR 707 717 727 749
EMG9 404 408 412 416
EMS4 102 106 111 115 L
EMS5 290 296 311 320
POP 3,010 3,068 3,126 3,182 I
b DPIR 10,404 11 ~476 11 ,042 10,840
f'
Yakutat L_.
EM1EX 2 3 3 2 r EMRR 96 98 109 111 L EMG9 93 94 102 102
EMS4 75 85 124 129 [ EMS5 79 83 93 96
POP 690 726 810 810 L DPIR 2,384 2,7i6 2,861 2,759
376 t
378
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REFERENCES
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Alaska Consultants, Inc. 1976. Yakutat Comprehensive Development Plan.
Alaska Consultants, Inc. 1979. Northern Gulf of Alaska Local Socio-
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[
[
l
,-
[
[
[
l~
[
[
[
[
[
L
L
Tussing, A. and C. Barlow. 1979. The Alaska Highway Gas Pipeline: A L'
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380
L
L
L
[
[
[
[
[
[
r
[
[
c
8
[
c
[
[
L
[
[
U.S. Department of Labor, Bureau of Labor Statistics. 1978. Employment
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\
381