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MAlUNE & COASTAL HABITAT MANAGEMENT
ALASKA DEPT. OF FISH & GA.\IE
333 Raspberry Road
Anchor::!g~. A.lru:ka 99502
Technical ~eport
Number 50
Alaska CS
Socioeconomic
Studies Program
Sponsor:
Bureau of Land
Management
Alaska 0 uter
Continental
Shelf Office
·Bering-Norton
Petroleum Development Scenarios
. -
Economic and Demog·rap ·hic Aria lysis
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 programs, 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 petroleum 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 deci~ionmaking. 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.
II
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MARINE & COASTAL HABITAT MANAGEMENT
ALASKA DEPT. OF FISH & GAME
333 Raspberry Road
Anchorage, Alaska 99502
TECHNICAL REPORT NO. 50 CONTRACT NO. AA550-CT6-61
ALASKA OCS SOCIOECONOMIC STUDIES PROGRAM
BERING-NORTON PETROLEUM DEVELOPMENT SCENARIOS
ECONOMIC AND DEMOGRAPHIC ANALYSIS
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
~. .. ~· '
::'y_.
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
BERING-NORTON PETROLEUM DEVELOPMENT SCENARIOS
ECONOMIC AND DEMOGRAPHIC ANALYSIS
Prepared by
Edward D. Porter
Institute of Social and Economic Research
University of Alaska
June 1980
IV
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LIST OF FIGURES.
LIST OF TABLES .
INTRODUCTION .
TABLE OF CONTENTS
Background. . ...
Scope . . . . . . . . . . . . . . . .
Methodology for OCS Impact Assessment
HISTORICAL STATEWIDE AND REGIONAL GROWTH
PATTERNS: THE BASELINE STUDY ....•.
The Alaskan Economy, 1965-1978 •....
The Regional Economies of Anchorage
and the Norton Sound Area. . . .
Summary . . . . . . . . . . . . .
STATEWIDE AND REGIONAL GROWTH WITHOUT
THE PROPOSAL: THE BASE CASE ..... .
Background ..•.•........
Assumptions: The Base Case Scenario
Base Case Forecasts . . • . . . . .
STATEWIDE AND REGIONAL IMPACTS OF PROPOSED
FEDERAL OCS DEVELOPMENT IN THE NORTON SOUND AREA
Background ....••...........
The Bering-Norton OCS Development Scenarios
Impacts of' the OCS Development Scenarios.
SUMMARY ..
REFERENCES
v
. VII
XI
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13
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46
68
71
71
71
106
135
135
. 136
143
173
175
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LIST OF FIGURES
1. Structure of the MAP Statewide Model ..
2. MAP Regions ...
3. State Population, 1965-1978
4. Composition of State Population Growth, 1965-1978 .
5. Statewide Employment, 1965-1978 .•..
6. Composition of Statewide Employment, 1965-1978.
7. Composition of Government Employment, 1965-1978 ..
8. Composition of Basic Sector Employment, 1965-1978 .
9. Composition of Support Sector Employment, 1965-1978
10. Statewide Personal Income, 1965-1978 ..
11.
12.
Real Per Capita Income, 1965-1978 ..
Composition of Wages and Salaries, 1965-1978.
13. Alaskan Wage Rates, 1965-1978 .
14. Alaskan and U.S. Unemployment .
15. Unemployment, Employment Growth, and Labor Force
Participation Rates, 1970-1978 .
16. Alaskan and U.S. Inflation, 1965-1978 .
17. State Government Revenues, 1965-1978 ..
18. State Government Expenditures, 1965-1978.
19. Anchorage Population, 1965-1978 .
20. Anchorage Employment, 1965-1978 .
21. Anchorage Basic Sector Employment, 1965-1978.
22. Anchorage Support Sector Employment, 1965-1978.
23. Anchorage Government Sector Employment, 1965-1978
24. Anchorage Personal Income, 1965-1977.
VII
6
9
15
17
21
23
24
25
27
28
29
31
33
35
36
40
42
44
48
50
51
52
53
55
25. Anchorage Real Per Capita Income, 1965-1977
26. Norton Sound Population, 1965-1978.
27. Norton Sound Employment, 1965-1978 •..
28. Norton Sound Basic Sector Employment, 1965-1978 .
29. Norton Sound Support Sector Employment, 1965-1978 .
30. Norton Sound Government Sector Employment, 1965-1978.
31.
32.
33.
34.
35.
36.
Norton Sound Personal Income ......... .
Norton Sound Real Per Capita Income, 1965-1977.
Nominal State Expenditures and Revenues ....
Real Per Capita State Expenditures and Revenues ..
Alaskan Population Forecast, 1979-2000, Base Case .
Components of Population Growth, 1979-2000, Base Case
37. Age Structure of Alaskan Population, 1979-2000, Base Case
38. Alaskan Employment, 1979-2000, Base Case ........ .
39. Composition of Alaskan Employment, 1979-2000, Base Case ... .
40. Alaskan Personal Income, 1979-2000, Base Case .....
41. Alaskan Real Per Capita Income, 1979-2000, Base Case.
42. Alaskan Wages and Salaries, 1979-2000, Base Case.
43. Alaskan Wage Rates, 1979-2000, Base Case ..... .
44. Alaskan and U.S. Inflation, 1979-2000, Base Case ..
45. State Government Revenues, 1979-2000, Base Case
46. State Government Fiscal Policy, 1979-2000, Base Case.
47. State Government Fund Balances, 1979-2000, Base Case.
48. Anchorage Population, 1979-2000, Base Case.
49. Anchorage Employment, 1979-2000, Base Case.
50. Anchorage Personal Income, 1979-2000, Base Case
VIII
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64
66
67
104
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107
108
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51. Anchorage Real Per Capita Income, 1979-2000 ..
52. Norton Sound Population, 1979-2000, Base Case
53. Norton Sound Employment, 1979-2000, Base Case .
54. Norton Sound Personal Income, 1979-2000, Base Case ..
55. Norton Sound Real Per Capita Income
56. Alaskan Population Impacts. . ...
57. Alaskan Employment Impacts.
58. Alaskan Employment Impacts, By Sector, Moderate Case.
59. Alaskan Personal Income Impacts .....
60. Alaskan Real Per Capita Income Impacts ..
61. State Government Fiscal Impacts: Revenues .
62. State Government Fiscal Impacts: Expenditures
63. State Government Fiscal Impacts: Fund Balances.
64. State Government Fiscal Impacts: Moderate Case.
65. Anchorage Population Impacts.
66. Anchorage Employment Impacts ..
61. Anchorage Employment Impacts, By Sector, Moderate Case.
68. Anchorage Personal Income Impacts .....
69. Anchorage Real Per Capita Income Impacts.
70. Norton Sound Population Impacts ..
71. Norton Sound Employment Impacts
72. Norton Sound Employment Impacts, By Sector, Moderate Case
73. Norton Sound Personal Income Impacts ....
74. Norton Sound Real Per Capita Income Impacts .
IX
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130
131
133
134
1%
147
148
149
150
153
154
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158
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LIST OF TABLES
1. Alaska Population, Age-Sex Distribution, 1970, 1976 . . . . . . 18
2. Seasonality of Employment in Alaska,
Selected Years, 1950 to 1978 . 38
3. Federal Employment, Base Case . . . . . 74
4. Agriculture-Forestry-Fisheries Employment Forecast. 76
5. Manufacturing Employment Forecast ..
6. Upper Cook Inlet Employment Forecast.
7. Prudhoe Bay Employment Forecast ..
8. Employment Forecasts, TAPS Project.
9. Employment Forecasts, ALCAN Project
10. Lower Cook OCS Sale CI Employment Forecasts
11. Beaufort Sea Employment Forecasts .
12. Northern Gulf of Alaska OCS Sale 55 Employment Forecasts.
13. Western Gulf of Alaska OCS Sale 46 Employment Forecasts ..
14. Lower Cook Inlet OCS Sale 60 Employment Forecasts
15. ALPETCO Project Employment Forecasts ..... .
16. Pacific Alaska LNG Project Employment Forecasts
17. Susitna Hydroelectric Project Employment Forecasts.
18. Bradley Lake Hydroelectric Project Employment Forecasts
19. State Production Tax Revenues .
20. State Royalty Revenues ....
21. State Petroleum Property Tax Revenues .
77
79
80
82
83
85
86
87
89
90
91
92
94
95
97
98
101
22. Resource Estimates, Bering-Norton OCS Development Scenarios 137
23. Direct Employment Requirements: Exploration-only Scenario . 139
XI
24. Direct Employment Requirements: Low-Find Scenario ...
25.
26.
27.
Direct Employment Requirements: Medium-Find Scenario.
Direct Employment Requirements: High-Find Scenario ..
Direct State Property Tax Revenues:
Bering-Norton OCS Sale ........... .
XII
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141
142
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I. INTRODUCTION
Background
The progressive depletion of U.S. domestic petroleum reserves and in-
creased concern over the reliability of foreign supplies have led to
growing concern in the United States about future energy sources. The
federal government has begun to establish policies aimed at increasing
domestic energy supplies. The U.S. Outer Continental Shelf (OCS) has
drawn considerable attention as a future source of petroleum supplies.
These areas, because of their high potential as a source of oil and gas,
figure importantly in the future energy program of the United States.
Historically, the role of Alaska in supplying energy has been small; total
cumulative production in Alaska through 1974 was less than 1 percent of
the U.S. total. Alaska has played a more important part in OCS produc-
tion; petroleum production in the Upper Cook Inlet accounted for about
7.6 percent of cumulative U.S. Outer Continental Shelf oil production
by the end of 1978 (U.S. Geological Survey, 1979).
Alaska accounts for over one-fourth of the identified oil and gas reserves
in the United States. The search for new domestic reserves will center
importantly on Alaska since it is estimated that more than one-third of
all undiscovered recoverable domestic oil reserves are in the state.
Alaska•s importance in the OCS program is a result of the fact that over
60 percent of the undiscovered OCS reserves are expected to be found in
the Alaska OCS (U.S. Geological Survey, 1975).
Alaska•s new role as a major U.S. energy supplier has already brought
significant changes to the Alaska economy and society. The prospect of
even further transformation looms large in the state•s future as planned
development extends to Alaska coastal waters. The first steps toward
development of Alaska•s coastal resources have already been taken with
past federal lease sales in the Northern Gulf of Alaska, Lower Cook
Inlet, and the Beaufort Sea.
Changes produced by past petroleum development in the state have been
major. The rapid changes in the Alaska economy and population associ-
ated with the development in Upper Cook Inlet and Prudhoe Bay have
created strains on the Alaska society and environment. At the same
time, these petroleum developments generated the most prosperous economic
period in the state•s history and produced prospects of continued pros-
perity throughout the next decade.
The nature of the changes induced by prospective new developments, how-
ever, will not necessarily resemble those characteristic of developments
of the recent past. The technology, resource levels, and institutional
arrangements surrounding Bering Sea developments are subject to a wide
range of uncertainty. Consequently, the implications of Bering Sea
development for Alaskan economic and demographic processes can be accu-
rately assessed only by an analysis which incorporates both these unique
institutional and technological features, as well as the uncertainty
surrounding them.
2
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6
The objective of this report is to provide the information needed to
anticipate the major dimensions of the economic and social impacts of
proposed oil and gas developments in the Bering Sea-Norton Sound Basin.
The Institute of Social and Economic Research, as part of the Bureau of
Land Management's (BLM's) OCS Studies Program, has provided a series of
economic and population forecasts through the year 2000 under several
alternative scenarios for Bering Sea/Norton Sound petroleum development.
By contrasting these forecasts with a base case forecast, which does not
include the proposed developments, it is possible to assess four major
dimensions of the impacts of OCS development--population, employment,
income, and state government fiscal impacts. This report will provide
an assessment of these impacts.
Scope
This study consists of three major components. First, a baseline study
examines the existing and historical structure of economic and demo-
graphic change within the regions most directly affected by the proposal,
the Norton Sound and Anchorage regions, as well as in the state as a
whole. Second, a set of forecasts are developed through the year 2000,
based on the assumption that the proposed development does not occur.
This base case then serves as a benchmark for comparison with an alter-
native set of forecasts premised on the occurrence of the proposed
Bering-Norton OCS development. The final section presents an analysis
of the impacts of these developments, measured as the difference
between base case and OCS case forecast values.
3
Methodology for OCS Impact Assessment
The methodology to be used in assessing the impacts of the proposed
federal OCS developments in the Bering Sea-Norton Sound area involves
comparing two sets of economic and demographic projections--one contin-
gent on the occurrence of the proposed development, and a second based
on assumptions which omit the development. The impact of the development
is measured as the difference between the two projections.
Because these projections are long range, there is a considerable degree
of uncertainty associated with them. The specific future value of each
and every forecast variable is unknown. However, certain such variables
may be estimated from their statistical relationships to other such
variables during the historical period. An econometric model is used to
summarize these estimated structural relationships. Other variables, on
the other hand, may not be estimated from historical data, either because
they are determined by factors outside of the scope of the system under
study or because they represent unique new situations not captured by
historical data. While such variables (called exogenous) are neither
known nor estimable with any degree of precision, the plausible range of
values for such variables is quite often known. As a consequence, it is
then feasible to develop a set of alternative forecasts, each contingent
on assumed values of the exogenous variables, which span the plausible
range of such variables and thus bracket the range of forecast variables.
This section describes the models and exogenous assumptions required to
develop a set of contingent forecasts, and it describes a methodology
for utilizing such forecasts in assessing the impact of OCS development.
4
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THE ECONOMETRIC MODELS
Two econometric models--a statewide model and a regional model designed
to disaggregate the statewide results--are utilized in the analysis.
The Statewide Model
The principal model being utilized in the analysis of the proposed
federal OCS development is the statwide econometric model developed by
the Man-in-the-Arctic Program (MAP) at the Universityof Alaska Insti-
tute of Social and Economic Research. The model consists of three
interrelated components: an economic model, a fiscal model, and a
demographic model. The basic structure of the model is as shown in
Figure 1.
The economic model is divided into exogenous or basic sectors and endo-
genous or nonbasic sectors. The level of output in the exogenous sectors
is determined outside the state 1 s economy. The primary reason for the
nonbasic sector is to serve local Alaskan markets, so the level of
output is determined within the Alaskan economy. The basic industries
in the model are mining, agriculture-forestry-fisheries, manufacturing,
federal government, and the export component of construction. The
nonbasic industries are transportation-communication-utilities, whole-
sale and retail trade, finance-insurance-real estate, services, and the
remainder of construction.
Industrial production in nonbasic industries determines the demand for
labor and employment; employment is that level needed to produce the
5
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required output. The product of employment and the wage rate determine
wages and salaries by industry. Aggregate wages and salaries are the
major component of personal income. By assumption, the Alaska labor
market is open to in-or out-migration from the Lower 49. In either
case, labor demand is always satisfied. Wage rates in Alaska are deter-
mined in part by U.S. wage rates. Thus, both the supply and price of
labor are linked to economic activity in the Lower 49. 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 dis-
posable personal income by a relative price index; the major determinants
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.
Population is determined based upon a projection of each of its com-
ponents--births, deaths, and migration. The model uses age-sex-race-
specific survival rates and age-race-specific fertility rates to project
births and deaths of the civilian population. Total civilian population
is found by adding civilian net migration to the natural increase. Net
migration 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
determine total population.
7
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 calculates personal tax
payments in order to derive disposable personal income. The fiscal
model, based on an assumed state spending rule, also calculates person-
nel expenditures, 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 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
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 are based on the proportion of state population
·in the region. Enclave employment is added to nonenclave to determine
total regional population. Enclave employment includes the military and
8
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major construction projects such as the trans-Alaska pipeline. Esti-
mates of the regional model are constrained to total to equivalent state
model results.
USE OF THE MODELS FOR IMPACT ASSESSMENT
In order to properly assess the impact of proposed federal OCS development,
a plausible range of OCS development scenarios should be used to produce
a set of contingent forecasts, each of which should then be compared to
a plausible range of corresponding base case forecasts, to bracket a
range of potential impacts. However, insofar as such an approach leads
to a proliferation of cases which planners are seldom prepared to evaluate,
an alternative approach is utilized. Each of a range of plausible OCS
development scenarios serves as the basis for a set of forecasts, each
to be compared to a single mid-range base case forecast. This gives a
single impact for each development scenario, rather than the range of
impacts which would be preferable in principle. Then, by varying the
key base case assumptions, the sensitivity of this measure to those
assumptions is tested to gauge the reliability of the measured impact.
LIMITATIONS OF THE PROPOSED METHODOLOGY
The methodology sug·gested above is designed to extract a maximum amount
of information from historical data using accepted econometric techniques.
As such, it can reasonably be expected to reduce the uncertainty associ-
ated with the impacts of the proposed developments. However, to suggest
that it can completely eliminate such uncertainty or in some cases even
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significantly reduce it may be to exaggerate the capabilities of the
technique, the information contained in historical data, or both. For
example, no such model can possibly capture radical structural change,
and any such model is limited by the quality and reliability of the data
used in its specification and estimation.
At the state level, the major sources of uncertainty which place limita-
tions on such a method are twofold: first, there is a great deal of
speculation built into the development of a base case scenario, as will
be seen below; and second, the state policy response to the OCS develop-
ment is both unpredictable and a potentially major determinant of the
impact of such development. On the other hand, a reasonably sized data
base such as that used in the estimation of the state model can be
expected to result in accurate contingent forecasts; and in those cases
where measured impacts prove insensitive to base case assumptions, to
reliable uncontingent impact measures.
The regional results are subject to far greater limitations and possess
far fewer strengths for several reasons. First, the available data is
far sparser than on a statewide basis, and the potential specifications
are far more complex. As a consequence, estimated relationships in the
regional model are less reliable than their statewide counterparts.
Furthermore, especially in remote regions such as those analyzed here,
the susceptibility of the region to major structural change as a conse-
quence of OCS development is far greater than that encountered at a
statewide level. As a consequence, while the techniques proposed here
11
extract the maximum information likely to be gained econometrically,
such results necessarily must be interpreted as only a first approxima-
tion rather than a detailed analysis of the regional economies. An
accurate assessment must incorporate detailed microlevel analysis of
such economies. Econometric techniques cannot and should not replace
such analysis.
12
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II. HISTORICAL STATEWIDE AND REGIONAL GROWTH PATTERNS:
THE BASELINE STUDY
The Alaskan Economy, 1965-1978
The period from 1965 to 1978 witnessed rapid changes in the Alaskan
economy, largely induced by the introduction and maturation of the petro-
leum industry within the state and a changing role of state government
in the economy. By 1965, oil and gas developments in the area of Upper
Cook Inlet were getting underway, developments which would supply about
2 percent of domestic oil in the United States by the turn of the decade.
But far more significantly, the exploration activity also begun in the
mid-1960s in the state would, in 1968, yield the largest oil and gas
discovery in North America. The Prudhoe Bay discovery, accounting for
nearly a fourth of domestic oil reserves, promised to make Alaska a
dominant domestic oil supplier by the onset of 1980. The discovery had
two major effects, one short-term and one long-term. In the short term,
development of the Prudhoe resources required construction of a major
pipeline. This construction effort, peaking in 1976, raised employment
by 42 percent and income by nearly 75 percent during a span of three
years, only to be followed by the most precipitous drop in basic sector
employment since statehood, as construction was completed in 1977. The
onset of production from Prudhoe in 1977, however, began to reveal the
nature of the true long-term significance of oil and gas development in
the state. Because of the capital intensive nature of petroleum develop-
ment, this significance was not to be found in the generation of any sub-
stantial long-term direct employment. Rather, the long-term effect would
be to alter radically the role of state government in the economy. The
13
Prudhoe discovery occurred on state-owned lands. Revenues from the initial
sale of drilling rights and prospective royalty and production taxes
broadly expanded the set of policy options available to state government,
placing the Alaskan government in a role unique among the American states
in its ability to control its own future development.
This section attempts to map out the major development patterns which have
emerged during this period and which promise to shape the course of future
economic growth within the state.
DIMENSIONS OF GROWTH
Alaskan Population, 1965-1978
Figure 3 presents the growth of Alaskan population during the period 1965-
1978. As is apparent from the figure, there have been three distinct sub-
periods in which population growth varied dramatically. From 1965 to
1973, population growth proceeded at a relatively stable rate, averaging
2.8 percent annually. The pipeline buildup from 1973 to 1975 produced
an explosion in state population which expanded over 22 percent in the
two-year period. As the construction effort peaked in 1976, and fell
off abruptly thereafter, population began dropping slightly in 1977 and
again in 1978 for an average rate of decline of less than 1 percent
annually in the 1976-78 period.
Population growth is composed of two components: natural ·increase (the
excess of births over deaths) and net migration (total in-migration less
14
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260.
FIGURE 3. STATE POPULATION, 1965-1978
(thousands of persons)
L----------------·--------------------1
1965 1970 1975 1980
n
(j
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L
[
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
SOURCE: Alaska Department of Labor
15
265.192
271.505
277.90 6
284.88
294.56
302.361
312.93
324.281
330.365
351.159
404.634
413.289
411.211
406.956
total out-migration). Figure 4 breaks down the changes in Alaskan
population since 1965 into its two components.
Historically, Alaska has exhibited a rate of natural increase (excess of
births over deaths per 1 ,000 persons) higher than any other state. This
reflects both the highest birth rate and the lowest death rate among the
states. Both features stem from the youthfulness of the Alaskan popula-
tion, with the bulk of that population falling into the 14-to-30-year-age
brackets, the area of both highest fertility and lowest death rates.
Because of the high rate of turnover of the Alaskan population, this
somewhat abnormal age distribution has remained fairly stable over time,
as shown in Table 1. Natural increase has accounted for slightly under
half of total population growth since 1965 and has occurred at a relatively
stable rate, growing at an average rate of 1.5 percent annually.
The major source of population growth since 1965, however, has been net
migration. While the stability of the age distribution reflects a rapid
turnover among the population, on balance there has historically been a
tendency for in-migration to more than offset out-migration, as seen in
Figure 4. Only the precipitous construction employment drop following
completion of the pipeline has been of sufficient magnitude to generate
negative net migration (from 1977 to 1978).
Net migration has been found empirically to increase with the rate of
employment growth in Alaska and with the differential between Alaskan
and U.S. average real per capita incomes. This observation can best
16
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40.
20.
-20.
FIGURE 4. COMPOSITION OF STATE POPULATION GROWTH,
1965-1978
(thousands of persons)
Total (DELT)
Change
Net Migration (MIGNET)
L-----------------------------------------------------------------~
1965 1970 1975 1980
NATINC DELT MIGNET
1965 5.662 10.201 4.539
1956 5.273 6.313 1. 04
1967 5.026 6.401 1. 375
1968 5.098 6.974 1. 676
1969 5.613 9.68 4.067
1970 6.127 7.801 1. 674
1971 5.857 10.569 4.712
197 2 5.479 11.351 5.872
1973 5.147 6.084 0.937
1974 5.609 20.794 15. 185
1975 5.948 53.475 47.527
1976 6.295 8.655 2.36
1977 6.772 -2.078 -8.85
1978 6. 702 -4.255 -10.957
SOURCE: Alaska Department of Labor
17
Males
Age
All Ages 54.2
0-13 16.5
14-19 5.7
20-29 12.4
30-39 7.7
40-54 8.1
55-64 2.5
65 + 1 .3
TABLE l. ALASKA POPULATION
AGE-SEX DISTRIBUTION
1970' 1976
1970
Females Total Males ---
45.7 51.6
15.7 32.2 14.1
5.2 10.9 6.6
8.7 21.1 11 .2
6.5 14.2 7.8
6.6 14.7 7.7
2.0 4.5 3. 1
1.0 2.3 1.1
1976
Females Total
48.4
13.2 27.3
6.0 12.6
10.4 21.6
7.8 15.6
7.2 14.9
2.6 5.7
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.
18
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be understood,by viewing the migration decision as a choice made by an
individual in the face of uncertainty. The probability that any indi-
vidual will choose to move will depend on the expected gain to be real-
ized by such a move. As the expected gain rises, the individual becomes
more likely to migrate. The expected gain from a move is simply the
product of the wage differential to be realized as a consequence of the
move and the probability of actually securing employment at that higher
wage. Thus, either a change in the rate of employment growth in Alaska
(by increasing the probability of being hired) or an increase in the
absolute income differential between Alaska and the United States will,
by raising the expected gain from in-migration, attract increasing
numbers of new migrants to the state.
Unlike natural increase, however, migration into Alaska has created a
great deal of volatility in the dynamics of statewide population growth.
Net migration reached over +47,000 in 1975 and as low as nearly -9,000 in
1977. Of the total contribution of nearly 78,000 made by net migration
to population growth over the period, over 72 percent occurred since 1973.
This volatility of population can create major strains on local infra-
structure when the growth occurs at too rapid a rate for adjustment.
Such strains produce adverse effects on prices and unemployment, as will
be discussed below. Further, it creates a somewhat characteristic Alaskan
policy problem--namely that state policies aimed at the promotion of
growth objectives may be doomed to failure by their own success. That
is, any policy producing substantial, rapid growth in the Alaskan economy
19
may also, by its attraction of temporary migrants, have benefits which
flow disproportionately to non-Alaskans. Thus, a major concern over
growth-oriented policies must be the sustainability of such policies.
As will be seen later, this is of particular concern when the state•s
major wealth is a depletable resource.
Alaskan Employment, 1965-1978
Figure 5 presents the growth of Alaskan employment during the period
1965 to 1978. As in the case of population growth, three distinct sub-
periods are clearly discernible. In the pre-pipeline period from 1965
to 1973, employment grew steadily at an average rate of 3.6 percent.
During the buildup and construction of the pipeline between 1973 and 1976,
total employment expanded over 42 percent, an annual average rate of over
12.5 percent. After the 1976 peak, total employment fell off, but much
less radically than the decline in construction employment. While 1978
construction employment dropped by nearly 60 percent from its 1976 peak,
total employment fell by less than 4 percent.
Total wage and salary employment in the state can be divided into three
major categories: government, basic employment, and support sectors.
Basic employment will be defined as those private sectors in which pro-
duction is aimed primarily at the satisfaction of export demands. In
Alaska, such sectors include agriculture, forestry, and fisheries; mining
(primarily petroleum); construction; and manufacturing. Support sector
employment is engaged in activity aimed primarily at the satisfaction of
local demands and includes utilities, transportation, communications,
trade, finance, and services.
20
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FIGURE 5. STATEWIDE EMPLOYMENT, 1965-1978
[~ (thousands of persons)
r·
r·
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r
L
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f'
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240.
120.
Total (EM99ST)
Wage and (EM98ST)
Salary
Support Sector (EMSlST)
60.~~~~~~~~~~~~~~~~~~~~~~~~~G~overnment (EMG9ST)
0.
Basic
Sector {EMBlST)
1965 1970. 1975 1980
EM99ST EM98ST EM51ST EMG9ST EMB1ST
1965 115.143 103.543 :26.901 62.68 13.962
1966 117.601 106.401 28.26 64.105 14.036
1967 121.667 110.467 30.244 65.49 14.733
1968 123.629 112.429 32.102 64.804 15.523
1969 130.81 7 118.917 35.891 65.68 17.346
1970 136.397 123.897 38.998 66.978 1 7. 921
1971 140.671 127.671 41.76 68.029 17.882
1972 144.096 130.696 44.847 66.948 18.901
1973 150.308 137.308 48. 165 68.951 20.192
1974 169.652 155.652 56.74 71.224 :27.688
1975 201 .84 186.649 73.867 72.479 40.303
1976 211.41 2 195.561 78. 107 71.816 45.638
1977 204.127 189.106 79.237 73.779 36.09
1978 200.49 185.84 81 • 011 74.756 30-073
SOURCE: Alaska Department of Labor, Statistical Quarterly, various issues.
21
One of the most significant historical trends identifiable from the data
is the changing role of government in the Alaskan economy. As shown in
Figure 6, the share of government employment in total Alaskan wage and
salary employment has fallen from over 60 percent in 1965 to about
40 percent in 1978. In addition, there has been a fairly dramatic shift
in the composition of such employment. Historically, federal employment
has been the mainstay of the Alaskan economy. In 1965, nearly 49 percent
of Alaskan employment consisted of federal employees, over 65 percent of
whom were military. By 1978, the federal share of employment was more
than cut in half, and the military share of that employment had fallen
to 52 percent. Nonetheless, total government employment in Alaska has
risen, due to a steadily growing state and local government sector which
has more than offset the declining military presence in Alaska. As seen
in Figure 7, by 1969 state and local employment had exceeded federal
civilian employment. By 1975, it exceeded military employment; and by
1978, it had reached a level approaching 84 percent of total federal
employment.
Basic employment in Alaska consists primarily of construction and manu-
facturing (primarily food processing) employment, as shown in Figure 8.
Pipeline construction caused employment in the Alaskan construction
industry to nearly quadruple between 1973 and 1976. Interestingly,
however, despite the 60 percent drop by 1978 from the 1976 peak, 1978
construction employment remained over 64 percent higher than its 1973
level. In addition, development and production employment at Prudhoe
Bay, North Slope exploration; oil industry administration employment in
22
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0.54
FIGURE 6. COMPOSITION OF STATEWIDE EMPLOYMENT,
1965-1978
(proportion of total employment)
(EMSl.EM)
(EMG9.EM)
Basic (EMBl .EM)
0 4 ~t===!==~~~~~~==~==~==~==~ Sector -~~ ---------------------------~
1965
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1970 1975
EMS1.EM EMG9.EM EM81.EM
0.26
0.266
0.274
0.286
0.302
0.315
0.327
0.343
0.351
0.365
0.396
0.399
0.419
0.436
0.605
0.602
0.593
0.576
0.552
0.541
0.533
0.512
0.502
0.458
0.388
0.367
0.39
0.402
0.135
0.132
0.133
0. 138
0.146
0.145
0. 14
0.145
0.147
0.178
0.216
0.233
0. 191
0. 162.
1980
SOURCE: Alaska Department of Labor, Statistical Quarterly, various issues.
23
50.
25.
FIGURE 7. COMPOSITION OF GOVERNMENT EMPLOYMENT,
1965-1978
(thousands of persons)
Total (EMG9ST)
State and · ( EMGAST)
Local
Military (EMGMST)
Federal (EMGCST) Civilian
0.L------------------------------------------------------------------J
1965 1970 1975 1980
EMG9ST EMGAST EMGMST EMGCST
1965 62.68 12.234 33.017 17.429
1966 64.105 13.396 33.2 17.509
1967 65.49 14.389 33.679 17.422
1968 64.804 15.324 32.62 16.86
1969 65.68 16.877 32.35 16.453
1970 66.978 18.441 31.425 17.112
1971 68.029 20.686 30.074 17.269
1972 66.948 23.264 26.45 17.234
1973 68.951 24.332 27.453 17.166
1974 71 .224 25.755 27.453 18.016
1975 72.479 28.837 25.348 18.294
1976 71 .81 6 29.334 24.539 17.943
1977 73.779 31.061 24.984 17.734
1978 74.756 34.122 22.501 18.133
l.
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t.
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r-------------------------------------------------------------------------~
SOURCE: Alaska Department of Labor, Statistical Quarterly, various issues. L
24 L
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r~
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25.
FIGURE 8. COMPOSITION OF BASIC SECTOR EMPLOYMENT,
1965-1978
1970
EMB1 ST
1965 13.962
1966 14.036
1967 14.733
1968 15.523
1969 17.346
197 0 17.921
1971 17.882
1972 18.901
1973 20.192
1974 27.688
1975 40.303
1976 45.638
1977 36.09
1978 30.073
(thousands of persons)
1975
EMCNST EMM9ST EMP9ST
6.455 6.274 1.088
5.864 6.634 1 .372
5.991 6.621 1.967
5.998 ·6. 924 2.455
6.653 7.025 3.494
6.894 7.839 2.995
7.445 7.78 2.431
7.893 8.06 2.113
7.837 9.349 1.966
14.068 9.612 2.977
25.88 9.639 3.795
30.235 10.334 3.967
19.546 10.895 4.958
12.24 11.595 5.562
EMA9ST
0.145
0.166
0.154
0.146
0.174
0.193
0.226
0.835
1.04
1 . 031
0.989
1.102
0.691
0.676
Total (EMBlST)
SOURCE: Alaska Department of Labor, Statistical Quarterly, various issues.
25
Anchorage~ and a·vigorous growth in manufacturing have at least partially
offset the decline in basic sector employment during the post-pipeline
period.
Growth in the Alaskan support sector since 1965 is shown in Figure 9.
In the stable growth period before the pipeline (1965-1973)~ the support
sector grew at well over twice the rate (7.6 percent) of total employment
(3.6 percent). Services employment led this growth~ at a rate of 9.1 per-
cent. Finance and trade followed closely behind (8.7 percent and 7.9 per-
cent~ respectively), while transpprtation, communications~ and public
utilities grew at only 4.6 percent annually. Services employment responded
most vigorously to pipeline construction, growing over 37 percent between
1974 and 1975. As a whole, the support sector expanded by over 62 per-
cent between 1973 and the peak of pipeline construction. Interestingly,
however~ employment in the support sector did not decline with completion
of the pipeline~ but rather has continued to grow~ although at a rate
(3.7 percent) below that of the pre-pipeline period (4.6 percent).
Alaskan Personal Income
Alaskan personal income growth, as employment and population, can be
divided into the same three subperiods. As shown in Figure 10, in the
pre-pipeline years from 1965 to 1974~ income grew steadily~ averaging
about 12.3 percent annually. Accompanied by inflation and population
growth~ however, this represented only about a 4.4 percent average
annual growth in real per capita income~ as shown in Figure 11. From
1974 to the peak of pipeline construction in 1976, income rose by
26
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r :
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sa.
22.
FIGURE 9. COMPOSITION OF SUPPORT SECTOR EMPLOYMENT,
1965-1978
(thousands of persons)
T
( EMSl ST)
Trad~ . (EMD9ST)
~~~•====serv ices ( EMS9ST)
Transpor tion,
~-.... _ _,. _ _.Communi c ti ons, ( EMU9ST)
Public U ilities
2 .r;;=::=:=::=:::. .... ~~~~~==!:::~::~::~:::::::::::=::;F~in~a1rnJcE~e~,~Insu(rance, ~ ea st te EMFIST)
1965 1970 1975 1980
EM 51ST EMD9ST EMS9ST EMU9ST EMFIST
1965 26.901 9.95 7.513 7.267 2.171
1966 28.26 10.806 7.89 7.279 2.285
1967 30.244 11 . 754 8.692 7.483 2.315
1968 32.10 2 12.519 9.289 7. 811. 2.483
1969 35.891 13.946 10.486 8.807 2.652
1970 38.998 15.365 11 • 435 9.1 3.098
1971 41.76 16. 148 12.559 9.808 3.245
1972 44.847 17. 107 14·. 034 9.993 3.713
1973 48.165 18.337 15. 182 10.403 4.243
1974 56.74 21 .135 18.313 12.398 4.894
1975 73.86 7 26.198 25. 134 16.489 6.046
1976 78.10 7 27.569 27.673 15.76 7.105
1977 79.237 28.453· 27.441 15.569 . 7.774
1978 81".011 28.848 27.566 16.369 8.228
SOURCE: Alaska Department of Labor, Statistical Quarterly, various issues.
27
3500.
2500.
1500.
FIGURE 10. STATEWIDE PERSONAL INCOME, 1965-1978
1970
(millions of current dollars)
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
857.
926.
1 016.
1 110.
1245.
1 412.
1557.
1 698.
2002.
2437.
3528.
4195.
4315.
4415.
1975 1980
SOURCE: U.S. Department of Commerce, Bureau of Economic Analysis, Survey
of Current Business, August 1979.
28
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L
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FIGURE 11. REAL PER CAPITA INCOME, 1965-1978
[ (thousands of 1979 dollars)
[
[
[
L
r
L
X103"
13.6'~------~----~~~~~~~~~~~~~--------~~
12.0
[ 10 4
[
[
[
r~
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8.8
~------------------------------------------------------------------------------~ 1970
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
7317.63
7650.87
8016.97
8084.73
8455.59
8881.79
9371.82
9630.57
10783.9
11 1 98.6
12321.3
13278.1
12959.2
12105.9
1975
SOURCE: Alaska Department of Labor and U.S. Department of Commerce,
Bureau of Economic Analysis.
29
1980
72 percent in nominal terms and 46 percent in real per capita terms.
After the peak of pipeline construction, between 1976 and 1978, per-
sonal income continued to rise modestly, about 2.6 percent annually.
However, these gains were more than offset by inflation and population,
with real per capita incomes falling about 5.6 percent annually after
the 1976 peak.
These figures, however, do not capture the full magnitude of the pipeline
and post-pipeline experience, inasmuch as they are adjusted by the
Bureau of Economic Analysis to reflect the incomes of resident Alaskans
only. A substantial share of income during pipeline construction was
earned by nonresidents. As shown in Figure 12, the growth of wages
and salary payments grew roughly parallel to personal income in the
1965-to-1974 period. (More precisely, personal income growth followed
wage and salary growth, inasmuch as such payments are the major component
of personal income--between 80 and 90 percent, historically). Because of
wages and salaries earned by nonresidents, the growth of wages and salaries
during pipeline construction was more dramatic than resident personal
income growth, with wages and salaries more than doubling between 1974
and 1976. Furthermore, unlike resident personal income, which continued
to rise modestly even after the peak of pipeline construction, wage and
salary payments actually declined by 16 percent in the 1976-to-1978 period.
Because wages and salaries dominate the personal income received by
Alaskans, the sources of such payments reveal the underlying structure
of income growth during the period, as shown in Figure 12. Wages and
30
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L
FIGURE 12. COMPOSITION OF WAGES AND SALARIES
1965-1978
(millions of current dollars)
[ 5000. r-------..i!:!!:!S!s....t::!!~~:ll-:l:~.:.s....iii~~$__----,
[
r~
L
r·
L
[
[
[
L
r '
L
('
I
Ll
[
2500.
e.
1965 1970
WS99ST WSS1ST
1965 722.3 201 .645
1966 777.285 218.22
1967 867.176 243.033
1968 947.335 269.04
1969 1080.86 319.055
1970 12t7.74 359.985
1971 1 315.2 392.598
1972 1447.06 444.356
197 3 1564.03 496.207
1974 2106.06 673.77
1975 3402.94 1152.82
1975 4247.18 1362.48
1977 3804.95 1380.42
1978 3606.58 1404.49
1975
WSG9ST WS 61 ST
363.507 157. 15
395.005 164.06
442.88 181.264
475.023 203.273
516.293 245.515
593.559 264.195
646.625 275.974
708.574 294.135
747.916 319.905
830.269 602.024
960.558 1289.56
1089.32 1795.37
1166. 39 1226.2
1291.58 881.358
Total (WS99ST)
(WSSlST)
Governme t (WSG9ST)
Basic·Se tor (WSBlST)·
1980
SOURCE: Alaska Department of Labor, Statistical Quarterly, various issues.
31
salaries were composed primarily of government wages (50.3 percent) in
1965. By 1978, the government share had fallen to 36 percent, although
generally government wages and salaries grew steadily throughout the
period at about 10 percent annually. The income "explosion" in 1975
and 1976 was due primarily to wage and salary payments in construction
and to a lesser extent in the support sector, primarily transportation.
However, the "explosion" was due as much to an increase in wage rates as
to increased employment. Between 1974 and 1976, basic sector employment
rose 65 percent, while wages and salaries in the basic sector nearly
tripled, due·to a more than 80 percent increase in average wage rates
in the sector, as shown in Figure 13. In the support sector, wages and
salaries more than doubled in the two-year period, reflecting a 38 per-
cent rise in employment and a 47 percent increase in wage rates.
However, while both basic employment and wage rates dropped in the
period following the peak of pipeline construction, causing over a
50 percent decline in basic sector wages and salaries, neither employ-
ment nor wage rates in the support sector fell significantly during the
1976-to-1978 period. Thus, by 1978, the support sector had become the
dominant source of both income (39 percent of wages and salaries) and
employment (49.5 percent) in the Alaskan economy.
Special Features
The Alaskan economy exhibits several major characteristics unique among
the states. We now turn to consider each of the four major distinguish-
ing characteristics of the Alaskan economy: its typically high unemploy-
ment 1 eve 1 s , the season a 1 i ty of emp 1 oyment, its· price 1 eve 1 , and the
unique role of state government.
32
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FIGURE 13. ALASKAN WAGE RATES, 1965-1978
(thousands of current dollars)
X103
40.0r----------------------1~~~~~~~~~&TI~----------------------
30.0
20 0·
0.0
1965 1970
WR 81 ST
1965 11255.5
1966 11688.5
1967 12303.2
1968 13094.9
1969 14154.
1970 14742.2
1971 15433.1
1972 15561.9
197 3 15843.1
1974 21743.2
1975 31996.6
1976 39339.4
1977 33976.2
·1978 29307.3
WRS1ST
7495.82
7721.87
8035.74
8380.78
8889.56
9230.87
9401.29
9908.26
10302.2
11874.7
15606.7
17443.8
17421.4
17337.
1975
WRG9ST
5799.41
6161.85
6762.56
7330.15
7860.73
8862.
9505.13
10583.9
10847.1
11657.2
13252.9
15168.3
15809.2
17277.2
Basic (WRBlST)
Sector
Sector (WRSlST)
overnment (WRG9ST)
1980
--
SOURCE: Alaska Department of Labor, Statistical Quarterly, various issues.
33
,.
-
Unemployment. ~nemployment has traditionally been a serious problem
in Alaska. Despite generally vigorous growth since 1975, unemployment
rates have remained considerably above the national level, as shown in
Figure 14. In only a single year, 1975, did Alaskan unemployment dip
below that of the United States. Unemployment rates can be a misleading
indicator of economic conditions, however, for the following reason.
Defined as the ratio of unemployed persons seeking employment to the
total labor force, it may fall due to either of two reasons--an increase
in employment or a decrease in search by unemployed workers. In the
first case, a decrease in unemployment indicates rising employment
levels; but in the second, it may indicate precisely the opposite since
it is precisely at times of falling employment when workers get discour-
aged from searching and leave the labor force (by definition). For
example, as shown in Figure 15, generally unemployment rates move
opposite the direction of employment growth, as would be expected.
However, on occasion such as in 1977, the year following the peak of
pipeline construction, the unemployment rate fell despite falling employ-
ment. The reason for the apparent anomaly is made clear by the labor
force participation rate behavior, also depicted. In 1977, labor force
participation fell drastically, by about 20 percent, sufficient to
reduce the unemployment rate despite a falling employment level. None-
theless, despite its peculiarities in use as an economic indicator, its
high level does illustrate a unique Alaskan dilemma. Even at the peak
of pipeline hiring, Alaskan unemployment dipped only slightly below the
national rate, and then only because the national economy was in the
depths of a particularly severe recession. By 1976, at the peak of
34
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FIGURE 14. ALASKAN AND U.S. UNEMPLOYMENT,
1970-1978
Alaska
(UNRAT)
United
States
(UNRATUS)
[ 1970 1975 1980
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UN RAT UNRATUS
1970 9. 5.283
1971 10.4 6.242
1972 10.5 5.717
1973 10.8 4.842
1974 1 o. 5.758
1975 8.3 9.175
1976 10.5 7.9
1977 9.1 7.008
1978 11 • 1 5.892
SOURCE: U.S. Department of Labor, Bureau of Labor Statistics, and Alaska
Department of Labor.
35
FIGURE 15. UNEMPLOYMENT, EMPLOYMENT GROWTH,
AND LABOR FORCE PARTICIPATION
RATES, 1970-1978
55·------------------------------------~--------------------_,
40-L-........ -...----
25.
1970 -1975
L..FPR UNRAT
1970 39.94 9.
1971 40.97 10.4
1972 41.27 10.5
1973 42.78 10.8
1974 46. 10.
1975 47.4 8.3
1976 52.65 10.5
1977 42.55 9.1
1978 43.23 11 • 1
Labor Force
~--•Participation (LFPR)
Rate
EMGRO
6.821
5.542
6.813
5.381
16.698
25.821
6.027
-4.035
-0.477
Emp 1 oyment ·
Growth Rate (EMGRO)
1980
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-------------------~--------r-·
SOURCE: Alaska Department of Labor. L;
36
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pipeline construction, unemployment in Alaska had surged to over 10.5 per-
cent. The problem is a fundamental feature of the Alaskan economy which
stems largely from the volatility of migration discussed above. As
employment rises, the attraction of migrants from the Lower 48 raises
the labor force by even more, forcing a rise in the unemployment rate.
Furthermore, rising employment has typically resulted in increased labor
force participation rates, reducing still further any tendency of employ-
ment increases to lower unemployment rates significantly.
Seasonality. A second feature characteristic of Alaskan employment and
also closely related to the unusually high Alaskan unemployment rate is
the seasonality of employment in certain sectors of the economy.
Economies dependent on natural resources often have seasonal cycles, but
the effect is particularly accentuated by the severity and length of
Alaskan winters. One measure of seasonality is the ratio of fourth-to-
third-quarter employment. The closer the index to one, the less seasonal
the industry. Table 2 shows the seasonality of Alaskan industries.
Seasonality has decreased in importance over time, owing to several
factors. First, the shifting structure of the economy toward the sup-
port sectors has resulted in increasing concentration in nonseasonal
employment such as services and trade. Second, technology became avail-
able during the period to permit winter construction activity, and
market conditions made it profitable to employ these technologies in
Alaska.
37
SECTOR
t4i ning
Construction
Manufacturing
Transportation,
Communication,
Public Utilities
Trade
Finance,
Insurance, and
Real Estate
Services
Government
Total
TABLE 2. SEASONALITY OF EMPLOYMENT·IN ALASKA
SELECTED YEARS, 1950 TO 1978
1950 1960 1965 1970 1975 1976
.6267 .7143 .7949 .8556 .9009 .9690
.79 .5862 .6460 .7279 .8374 .6906
.2440 .5137 .6531 .5457 .6886 .6714
.8248 .9683 .9125 .8851 .9887 .8871
.9226 .9718 .9905 .9733 1.0048 .9120
1.0 1.0 .9706 .8942 1.0 .927
.9583 .9123 .9664 .9716 . 9812 .9387
.9632 .9815 .9617 .9810 1.0049 .9689
1977
.9190
.720
.650
1 .035
.985
1 .040
.936
1.005
.7505 .8313 .8718 .88 .9402 .8733 .935
SOURCE: State of Alaska, Alaska Labor Force Estimates, various years.
38
1978
.9459
.766
.596
.908
.961
.979
.923
1.112
.940
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Price Levels and Inflation. Perhaps the most commonly recognized
characteristic of the Alaskan economy is its high price level relative
to the United States. Cost-of-living differences have been estimated
at between 37 and 66 percent between Anchorage residents and U.S. urban
dwellers on average. Price differences are much more accentuated in
rural areas, possibly as high as 70 percent more than Anchorage (see
Scott, 1978). This price differential is attributable to a wide variety
of causes including high transport costs to and within Alaska, high
construction costs, uncertainties and delays in shipping, and rapid
fluctuations in both private and government activity that create short-
ages and bottlenecks within the state.
What is less commonly recognized than the high level of Alaskan prices
is their tendency to increase at a rate less than that of the United
States. Figure 16 shows the rate of inflation in Alaska and the United
States as a whole. Generally, there has been an historical tendency of
Alaskan inflation to remain below the U.S. level. This effect is to be
expected in a developing economy, as expansion of markets permits reali-
zation of economies of scale in transportation and distribution and
improved infrastructure generally reduces the costs of market trans~
actions. There is a notable exception to this principle, however,
namely when the growth occurs at a rate so fast as to create bottlenecks
and shortages before the existing infrastructure can adjust to the new
capacity requirement. Price increases then serve as the adjustment
mechanism; and in such cases, Alaskan inflation has actually run ahead
of that in the United States. However, as seen in the figure, this has
39
0.100
0.050
1965
FIGURE 16. ALASKAN AND U.S. INFLATION, 1965-1978
1970
USINF
1965 0.016
1966 0.03
1967 0.028
1968 0.042
1969 0.054
1970 0.059
1971 0.042
1972 0.033
1973 0.062
1974 0. 11
1975 0. 091
1976 0.057
1977 0. 065
1978 0.076
19"75
ANINF
0.003
0.039
0.021
0.026
. 0.032
0.035
0.03
0.027
0.042
0.108
0.137
0.072
0.072
0. 071
United
._~~.c.. $tates
Alaska
(USINF)
(ANINF).
1980
..
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-----·--------------------------------------------------------------------------------~
SOURCE: Based on U.S. consumer price index and Anchorage consumer price
index estimated by U.S. Department of Labor, Bureau of Labor
Statistics.
40
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happened in only four of the years since 1965; and three of these years
(1975 to 1977) reflected the effects of the pipeline construction. Thus,
while periods of rapid expansion may generate adverse price effects, the
general tendency of stable growth is characterized by rates of increase
lower than the United States, implying a long-term tendency toward
equalization of price levels.
The Role of State Government. Probably the most significant long-term
structural change induced by Alaskan petroleum development will be the
alteration in the role of state government in the economy. Part of this
change had already been realized during the historical period, but much
of the change will occur in the future.
As shown in Figure 17, the state•s annual general fund revenues by 1978
had risen to more than seven times their 1965 levels. These revenues
can be divided into three broad groups: petroleum revenues such as
production taxes, royalties, and property taxes; federal grants; and
revenues from a variety of nonpetroleum state taxes such as income and
corporate taxes.
Federal grants in aid were the major source of state revenues through
most of the 1960s, accounting for over 55 percent of general fund
revenues in 1965. After 1970, growth in such grants expanded rapidly,
growing at over 15 percent annually. Because they are tied closely to·
population, such grants are likely to continue to grow into the future.
However, as a share of total revenues, their contribution has fallen
over time, to about a fifth of total revenues by 1978.
41
FIGURE 17. STATE GOVERNMENT REVENUES, 1965-1978
(millions of current dollars)
Total (REVGF)
Prudhoe Bay
Lease Sale )
800.
400.
Other ( RNDS)
~----Federal (RFDS)
0.
1965 1970 1975 1980
REVGF RP9S RNDS RFDS
1965 150.987 16.473 51.209 83.305
1966 152.564 21 .601 61.545 69.418
1967 168. so 7 21 .466 67.837 79.204
1968 177.628 42.967 72.944 61.717
1969 188.119 32.841 . 81.829 73.449
1970 1146.22 936.182 133.525 76.513
1971 355.991 47.702 197.76 110.529
1972 376.236 45.308 206. 771 124.157
1973 385.462 51.249 188.624 145.589
1974 424.578 76.838 206.428 141.312
1975 588.82 87.49 315.125 186.205
1976 1017.83 385.756 391.375 240.703
1977 1186.5 472.596 484.285 229.624
1978 1073.37 480.81 344.756 247.8
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----------~~~~~~~--------------------------~----~------------~----~-------------------------r SOURCE: Alaska Department of Revenue, Revenue Sources, various issues. L
42 L
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A variety of nonpetroleum-related state revenues such as the corporate
and personal income taxes, interest earnings, and a variety of license
and various other fees contributed greatly to the growth of state
revenues over the period. Between 1970 and 1979, such revenues grew
at an annual rate of 14.5 percent, contributing nearly a third of state
revenues by 1979.
However, the major structural change in the pattern of state revenues
is the growing dominance of petroleum revenues due to the development
of Prudhoe Bay. The first major impact of such development occurred
in fiscal 1970 when the sale of drilling rights brought the state over
900 million dollars in revenue, over 4.5 times the level of revenues
from all other sources in 1970. This surplus was used largely to finance
expanded services through the mid-seventies, before production from Prud-
hoe would initiate the flow of royalty and severance tax revenues. Pro-
duction began in 1977, and by 1979 associated revenues were contributing
over 48 percent of total general fund revenues.
State government expenditures, as shown in Figure 18, also grew nearly
sevenfold between 1965 and 1978. Generally, three distinct subperiods
can be identified during the period--the pre-Prudhoe sale period from
1965 until 1970, the pre-production period in the interim between the
sale and the onset of Prudhoe production (1971-76), and the production
period from 1977 to 1978. Before the Prudhoe sale, expenditure growth
was constrained by the availability of revenues. Expenditure growth
between·l965 and 1970 averaged 12.6 percent annually. Between 1970 and
43
FIGURE 18. STATE GOVERNMENT EXPENDITURES, 1965-1978
(millions of current ~ollars)
800.
400.
0.
1965 1970 1975
E995 EXOPS . EWSS
1965 175.531 88.4 5.2~244
1966 179.837 100.5 59.82
1967 211.124 113.6 67.6
1968 228.245 129.3 76.688
1969 271.559 152.1 88. 125
1970 318.386 199. 107.75
1971 455.044 315.8 131.019
1972 524.41 366.5 154. 192
1973 601 .833 421 .8 163.747
1974 665.766 482.3 200.747
1975 793.386 597.6 244.023
1976 1043.46 778.9 269.357
1977 1122.13 895.1 290.933
1978 1200. 1047. 322-.493
-f
[
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Total {E99S)
Operatin r~
Expendit res (~XOPS) -
(EWSS)
1980
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f' __________ S_O_U_R_C_E_:_A_l_a_s_k_a_O_f_f_i_c_e __ o_f_t_h_e __ G_o_ve_r_n_o_r_,--T-he __ E_x_e_c_u_t_iv_e __ B_u_d_g-et--,-v-a_r_i_o_us __ i_s_s_u_e_s_. _______ L
44 [
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1976, the growth of expenditures accelerated to nearly 22 percent annually,
spurred by increased demands for public services throughout the pipeline
construction and financed by the surplus from the Prudhoe sale and later
by a tax on reserves in place at Prudhoe. Since 1976, expenditure growth
has stabilized at an average 7.3 percent annual rate of increase.
As shown in Figure 18, wages and salaries paid to state workers main-
tained a stable share of total expenditures, varying only between a
third and a fourth of total expenditures during the period. Growth in
such wage and salary payments averaged 15 percent annually over the
period, although employment grew at only about 8 percent until peaking
in 1975, then actually declined until 1978 when it began to grow modestly
again. The more rapid growth in wages financed a growth in real wages at
over 7 percent annually. While real wages for the civilian sector as a
whole fluctuated wildly during the period immediately prior to and after
the peak of pipeline construction, by 1978 real civilian wage rates gen-
erally were only 21 percent higher than their 1965 levels. Real wage rates
in state government, on the other hand, were 48 percent higher by 1978.
Limiting the analysis to state employees, however, understates the full
impact of the expansion of state expenditures on the economy. As shown
in Figure 18, while state government wages and salaries occupied a
fairly stable share of state expenditures, total operating expenditures
did not. In fact, operating expenditures rose from less than half
(46 percent) of the budget in 1965 to over 87 percent of the budget in
1978, reflecting largely the transfer of functions to a rapidly expanding
45
local government sector. Largely financed by state transfers, local
employment nearly quadrupled during the period, growing at an average
10.8 percent annual rate.
Over the period, combined state and local government grew from 11.8 per-
cent to 18.4 percent of total wage and salary employment and raised its
share of total wage and salary payments from 12.7 percent to 19 percent.
Even more significantly, the revenue claims on future production at
Prudhoe alone promise to accelerate the state government role in the
economy, both as an employer and as a provider of direct investment.
The overtaking of expenditures by state revenues and their expected
rapid growth provide the state with a wide range of future expenditure
options, which will be discussed below.
The Regional Economies of Anchorage
and the Norton Sound Area
The impacts of proposed federal OCS developments in the Norton Sound
area are likely to be concentrated in two areas of the state: Anchorage,
because of its role as a statewide support center; and the area surround-
ing Norton Sound, because of its proximity to production operations.
Consequently, this section examines the historical development of these
two local economies in order to provide a point of reference for develop-
ment of the base case forecasts to be presented below.
46
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ANCHORAGE
At least in recent history, Anchorage has occupied a central role in
Alaskan economic growth, as a transportation and support center for the
state. Because of its size relative to the statewide economy, state-
wide activity both mirrors and is mirrored by economic activity in
Anchorage. Consequently, the development process of Anchorage has
generally been quite similar to the growth of the state as a whole.
However, there have been. some significant differences in growth patterns
which have led to an increasing concentration of state activity in
Anchorage. .We now turn to an examination of the major features of this
process.
Dimensions of Growth
Population. Figure 19 presents the growth of Anchorage population since
1965. In 1965, 38.6 percent of Alaskan population was located in Anchor-
age. By 1978, over 45.6 percent of statewide population was located in
Anchorage. Between 1965 and 1969, Anchorage population grew at almost
exactly the rate of statewide population increase (2.7 percent). From
1969 until the start of the pipeline buildup, however, the average growth
rate of Anchorage population more than doubled, to 6 percent; while the
statewide rate rose, but to only 3.6 percent. The population response
to the pipeline construction effort was somewhat different in Anchorage
than statewide. Between 1974 and the peak of construction in 1976,
statewide population expanded 17.7 percent, while Anchorage population
grew 20.1 percent. However, while statewide population declined after
47
1965·
FIGURE 19. ANCHORAGE POPULATION, 1965-1978
1970
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
(thousands of persons)
POPTR5
102.337
105.925
107.817
111.6
114.15
126.333
135.777
144.21 5
149.44
1 53. 11 2
177.817
1 85. 1 7 9
195.826
185.5
1975
SOURCE: Alaska Department of Labor
48
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1976~ Anchorage population did not peak until 1977~ reflecting a greater
concentration of production-oriented activities in Anchorage.
Employment. Figure 20 presents the growth of Anchorage employment since
1965. Total employment in the period 1965-1978 grew at an average annual
rate of 5.2 percent~ higher than the statewide average (4.4 percent).
Basic sector employment~ as shown in Figure 21~ grew at a 6.9 percent annual
average rate, compared to 6.1 percent statewide. This growth was driven by
an increasing concentration of petroleum industry headquarters in Anchorage,
as well as by rapid growth in construction employment associated with the
location of new support facilities in Anchorage. The support sector grew
even more rapidly~ at an average annual rate of over 10.1 percent, com-
pared to 8.9 percent statewide. As shown in Figure 22, trade and services
comprise over 70 percent of support sector employment throughout the period.
The greatest growth came in the service sector~ which grew at an average
annual rate of 11.5 percent~ while trade lagged at 9.3 percent. Within
the government sector, as shown in Figure 23~ there were dramatic struc-
tural changes during the period~ with state and local government rising
from 14 percent of total government employment in 1965 to over 34 percent
of the total by 1978.
The overall structural composition of Anchorage employment differs signif-
icantly from the rest of the state, insofar as over half of the Anchorage
workforce is employed in the support sector; while outside of Anchorage
only 37 percent of total employment is in that sector. This structural
difference explains a great deal of the resiliency of the Anchorage economy
49
75.
50.
FIGURE 20. ANCHORAGE EMPLOYMENT, 1965-1978
(thousands of persons)
Total (EM99R5)
~ ...... -... Support
Sector ( EMSl R5)
0. !--~----.---~--~--_.---4----~--.---~--~--.. --~--._.Basic Sector
------------------------·-•··-,.., -•·--•-oo-•-
1965. 1970 1975
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
EM99R5
45.826
46.679
47.943
49.22
52.237
54.878
59.905
61 .956
64.676
72.248
82.277
85.256
93.046
88.478
EMS1R5
12.959
13.755
14.727
15.702
16.212
20.907
23.039
24.61
26.41
31 . 151
39.351
43.074
45.487
45.372
SOURCE: Alaska Department of Labor
50
EMG9RS EM61RS
28.546 4.321
28.81 4. 114
29.135 4.081
29.438 4.08
29.037 4.988
28.429 5.542
30.846 6.02
30.977. 6.369
31.952 6.314
32.7 8.397
32.899 10.027
31.457 10.725
36.32 1_1.239
32.878 10.228
( EMG9R5)
(EMB1R5)
1980
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12.0
8.0
0.
1965
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
FIGURE 21. ANCHORAGE BASIC SECTOR EMPLOYMENT
1965-1978
(thousands of persons)
Total
r1ining
1970 1975
-
EMA9R5 EMP9R5 EMCNRS EMM9R5 EMB1R5
0.033 0. 371 3.126 0.791 4.321
0.023 0.448 2.846 0.797 4. 114
0.029 0.562 2.722 0.768 4. 081
0.027 0.781 2.438 0.834 4.08
0.036 0.858 3.142 0.952 4.988
0.052 0.958 3.514 1.018 5.542
0.063 0.916 3.924 1.117 6.02
0.076 0.806 4.272 1. 215 6.369
0.082 0.768 4.178 1.286 6.314
0.1 1.036 5.882 1.379 8.397
0.099 1. 301 7.054 1.573 10.027
0.1 1.409 7.587 1.629 10.725
0.133 1 .424 7.995 1.687 11.239
0.24 1.874 6.431 1.683 10·. 228
SOURCE: Alaska Department of Labor
51
( EMBl RS)
(EMCNR5)
( H1P9R5)
1980
25.
FIGURE 22. ANCHORAGE SUPPORT SECTOR EMPLOYMENT
1965-1978
(thousands of persons)
Total (EMS1R5)
Services ( EMS9R5)
(EMD9R5)
0.
1965 1970 1975 1980
EMU9R5 EMo:.q5 EMFIR5 EMS9R5 EMS1R5
1965 2.618 5.279 1 .295 3.767 12.959
1966 2.619 5.695 1 .359 4.082 13.755
1967 2.771 6.261 1 .363 4.332 14.727
1968 3.046 6.552 1.452 4.652 15.702
1969 3.515 7.548 1 .604 5.545 18.212
1970 3.907 8.617 1. 98 6.403 20.907
1971 4.591 9.334 2.087 7.027 23.039
1972 4.522 9.948 2.415 7.725 24.61
1973 4.625 10.663 2.803 8.319 26.41
1974 5.583 12.298 3.151 10.119 31. 151
1975 7.343 14.928 3.615 1 3.465 39.351
1976 7.409 15.958 4.257 15.45 43.074
1977 7.961 16.576 4.74;j 1 6.207 45.487
1978 7.95 16.865 5.019 1 5.538 45.372
SOURCE: Alaska Department of Labor
52
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L
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r" I
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6
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30.0
20.0
10.0
0.0
1965
FIGURE 23. ANCHORAGE GOVERNMENT SECTOR EMPLOYMENT
. 1965-1978
(thousands of persons)
1970 1g?$
EMGAR5 EMGFR5 EMG9R5
1965 4.001 24.545 28.546
1966 4.289 24 .. 521 28.81
1967 4.664 24.471 29.135
1968 5.022 24.416 ·29.438
1969 5.712 23.325 29.037
1970 6.036 22.393 28.429
1971 6.866 23.98 30.846
1972 7.839 23.138 30.977
1973 8.345 23.607 31.952
1974 9.242 23.458 32.7
1975 1 0. 035 22.864 32.899
1976 9.465 21.992 31 .457
1977 11.101 25.219 36.32
1978 1 1 . 266 24.713 32.878
SOURCE: Alaska Department of Labor
53
Total ( Er1G9R5)
( EriGFR5)
( EMGAR5)
1980
in the wake of construction employment declines following pipeline com-
pletion. Because Anchorage is much more dominated by support sector
activities than the rest of the state and because such activities appear
to have fallen off very modestly in the post-pipeline years, Anchorage
has been less hard hit by the decline than other regions more dependent
on basic sector employment.
Income. In the period 1965-1974, Anchorage income growth closely fol-
lowed that of the state. As shown in Figures 24 and 25, personal income
grew steadily during the 1965-1974 period, averaging nearly 13 percent
annually, slightly higher than the statewide rate (12.6 percent). From
the beginning of the pipeline buildup to the peak of construction in 1976,
Anchorage income grew 69.3 percent, as opposed to a statewide growth of
72 percent. In real per capita terms, Anchorage income expanded 13.5 per-
cent during the two-year buildup from 1974 to 1976; while statewide
income expanded 18.6 percent during the same two years. On the other
hand, the Anchorage income behavior in the post-pipeline period has been
far different from the statewide response. In nominal terms, statewide
personal income growth slowed to 2.6 percent annually; and although 1978
data for Anchorage is not yet available, the 1977 income figure registers
a 16.6 percent growth over the 1976 level. As in the case of employment,
this difference is due to two structural features of the Anchorage
economy. First, the concentration of petroleum industry administrative
personnel in Anchorage maintained basic sector incomes even as the
pipeline was completed; and second, the concentration of the more resil-
ient support sector in Anchorage maintained support sector incomes in
the face of the construction decline.
54
r-.
l "
r .
L
L
L
[
[
[
L
r ,
L
I,
I
L
[
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L
l
b
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b .
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,--L ____ _
r
I :
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[
17S0.
1250.
?50.
FIGURE 24. ANCHORAGE PERSONAL INCOME, 1965-1977
(millions of current dollars)
1970
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
PIR5
371.
398.
462.2
501.6
586.2
662.7
732.9
800.2
883.1
1111.6
1614.4
1882.5
2073.8
1975 1980
·-·-----·····-···-----·-------------------:-----------------SOURCE: U.S. Department of Commerce, Bureau of Economic Analysis.
55
FIGURE 25. ANCHORAGE REAL PER CAPITA INCOME,
1965-1977
(thousands of 1979 dollars)
X103
14.0·r-------------~~~~~~~~~~_n~~--------~
12.0
1970 1975 1980
PIRPCR5
1965 8209.02
1966 8428.73
1967 9400.62
1968 9326.04
1969 10273.5
1970 9976.8
1971 10167.2
1972 10205.2
1973 10515.9
1974 11715.2
1975 12830.1
1976 13298.5
1977 13078.5
SOURCE: Population from Alaska Department of Labor, Personal Income from
U.S. Department of Commerce, Bureau of Economic Analysis.
56
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l
.. f-
. .
.. L
f '
l '
I L,
r~
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c
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I
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,~
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[
Summary of the Growth Process
The Anchorage economy, like the state as a whole, has undergone a period
of rapid growth since 1965. Generally, during the pre-pipeline period,
this growth mirrored statewide growth, although a significant structural
difference--the concentration of support sector employment in Anchorage--
kept Anchorage growth slightly ahead of the statewide average in the
pre-pipeline years, increasing the concentration of Alaskan economic
activity in the Anchorage area. The concentration of support sector
activity in Anchorage led to different economic responses to the pipe-
line boom and its aftermath in Anchorage than in the state as a whole.
Generally, the boom in Anchorage during the 1974-1976 period was slightly
less pronounced than in the state as a whole, largely because support
sector income variation during the boom was less variable than that of
the basic sectors, especially construction. Furthermore, and perhaps
of greater significance, the decline of economic activity in the state
since 1976 has been much less severe in Anchorage than elsewhere for two
reasons. The portion of basic sector employment located in Anchorage
is largely administrative, and such employment has declined much less
drastically than field construction employment since 1976. Second, the
statewide support sector has maintained its peak level, at least through
1978, and the concentration of the sector in Anchorage has limited the
post-pipeline decline in the region.
NORTON SOUND
Two census divisions, Nome and Wade Hampton, comprise the area along the
perimeter of Norton Sound. Unlike the Anchorage economy, whose growth
57
is directly tied to statewide activity, the Norton Sound region is a
very small economy, largely isolated from the bulk of statewide activity.
Dimensions of Growth
Population. Figure 26 presents the growth of Norton Sound population
during the 1965-1978 period. Population fluctuates substantially
throughout the period, although such fluctuations are due at least in
part to measurement error. The Alaska Department of Labor acknowledges
such problems and cautions users that such problems are most serious for
the smaller census divisions. The census years, however, are thought
to be reliable, as is the 1978 value, calculated as a change from the
1970 census. Using these points, the 1978 population in the area
reflects an average growth of 2.3 percent annually since 1970, well
above the 0.4 percent average annual growth experienced in the region
between 1960 and 1970. Because of its slow growth relative to the
state as a whole, the region declined from approximately 4 percent of
Alaskan population in 1960 to less than 3 percent in 1978.
Employment. The growth and composition of Norton Sound employment is
presented in Figure 27. While employment fluctuation has been much less
than population (possibly due to better quality data than to any real
behavioral phenomenon), there has been some fluctuation, with three
periods clearly identifiable. From 1965 to 1971, total employment was
relatively stable. Within the basic sector, there were wide fluctuations
in construction and manufacturing employment, but these fluctuations
58
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L
L
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~
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r
L
[
[
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L
[
[
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r=
L
r,
L
FIGURE 26. NORTON SOUND POPULATION, 1965-1978
(thousands ·of persons)
11.80
10.60
10.00
9.40 ..__ ____ _
1965 151?0
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
SOURCE: Alaska Department of Labor
59
1975
PO PTRB
11 . 05 4
.11 .464
11.314
11 . 51
10.96
9.666
9.667
9.68
9.56
11.165
10.944
10.931
9.498
11.6
1980
FIGURE 27. NORTON SOUND EMPLOYMENT, 1965-1978
(thousands of persons)
3.a0
2.40
1965 1970 1975
EM99R8 EMG9R8 EMS1R8 EM61 R8
1965 1. 759 1 . 108 0.461 0.19
1966 1.869 1 .248 .0. 491 0.13
1967 1 .868 1 .134 0.56 0.174
1968 1.866 1 .065 0.573 0.228
1969 1.848 1. 072 0. 531 0.245
1970 1. 726 0.99 0.543 0.193
1971 1. 704 1 • 014 0.503 0.187
1972 1 .907 1.096 0.572 0.238
1973 2.11 3 1.174 0.708 0.231
1974 2.22 1 .155 0.883 0.182
1975 2.528 1 . 188 1.109 0.23
1976 2.77 1 .244 1. 126 0.399
197 7 2.482 1.178 0.933 0.371
1978 3.135 1 .602 1. 216 0.317
Total ( EM99R8)
Government (EMG9R8)
Support (EMS1R8)
Sector
Basic (EMB1R8) Sector
1980
[
[
r
L
1:
L
[
[
r·
L
~--------------------[' SOURCE: Alaska Department of Labor L
60 [
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~
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L
[
r
L
r
L
[
E
G
[
6
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I:
L
acted to at least partially offset one another, as shown in Figure 28.
Support sector employment remained somewhat stable at about 500 persons,
as shown in Figure 29. Government sector employment was undergoing sub-
stantial structural change, with state and local employment growth largely
offsetting a substantial decline in feder~l (primarily military) employment,
as shown in Figure 30. By 1971, growth in state and local government and
a mild construction boom spurred a round of growth and structural change
which continued through 1975. Between 1971 and 1975, support sector
employment grew by over 120 percent, with most of this growth occurring
in services and finance. By 1975, the support sector comprised 44 percent
of total employment, compared to 39 percent in 1971. By 1976, support
sector growth had moderated and actually declined in 1977. By 1978,
however, a large increase in state and local government employment, as
well as more modest growth in manufacturing, acted to more than offset a
sharp construction decline to trigger new growth in the support sector,
almost wholly in services. By 1978, total employment had reached a level
78 percent higher than in 1965, and a substantial amount of structural
change had occurred within and between the major sectors of the economy.
Basic sector employment by 1978 was much more heavily composed of mining
and construction activity than in the earlier years when manufacturing
dominated the basic industries. Services now dominated the support secto~.
and state and local government had completely reversed roles with the
federal government as a source of government sector employment. The
support sector had risen to nearly 39 percent of total employment, as
opposed to 26 percent in 1965, making the local economy resemble more
closely the statewide economy by the end of the period.
61
0.400
0.300
FIGURE 28. NORTON SOUND BASIC SECTOR EMPLOYt·1ENT
1965-1978
(thousands of persons)
Total (EMB1R8)
r
l-"
( EMt·19R8) [
0.000
1965
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1978
EMA9R8
o.
o.
0.003
0.009
0.005
0.005
0.003
0.01
0.008
0.008
o. o.
0. o.
EMP<:irt8
0.007
0.007
0.009
0.014
0.012
0.009
0.017
0.008
0.003
0.009
0.041
0.108
0.12
0.1
SOURCE: Alaska Departnent of Labor
62
EMCNR8 EMM9R8
0.094 0.088
0.03 0.093
0.073 0.09
0.101 0.103
0.078 0.15
0.039 0.14
0.038 0.128
0.083 0.137
0.065 0.156
0.049 0. 115
0.099 0.09
0.202 0.089
0.131 0.114
0.084 0.132
Mining (EMP9R8)
( Et~CNR8)
Ag/For/Fish. (EMA9R8)
1980
EMB1R8
o. 19
0.13
0. 174
0.229
0.245
0. 193
o. 187
0.238
o. 231
0.182
0.23
0.399
o. 371
0.317
[
[
[
r =
L
r I: u
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[
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[
[
r
L
[
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6
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r =
L
f '
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1.50
FIGURE 29. NORTON SOUND SUPPORT SECTOR EMPLOYHENT
1965-1978
(thousands of persons)
( EMSl R8)
Services (EMS9R8)
~,.C:-.....-~~,__ ... Trade ( EMD9R8)
!:==----~~====~--~~----~~=~~:;~-.._~~~T~r<ans/Comm/ Public U ilities
Finance (EMU9R8)
1975 1980
EMU9R8 EMD9R8 EMFI.Rs-. · EMS9R8 EMS1R8
1965 0. 112. 0.187 0.01 ·. o. f$-1; ·, 0.461
1966 0.1"24 0.186 0.011 0.11: ·:o •. .491
1967 0.135 0.209 0.01 0.205 0.56
1968 0.123 0.249 Q.~01 t 0.19 0.573
1969 0.112 0.218 0.009 Q.1g. 0.531
1970 0.125 0.202 0.009 0.297 0.543
1971 0.121 0.195 0.011 0·.176 0.503
1972 0.134 0.206 0 .018" 0.214 0.572
1973. 0.202 0.244 0.036 0.225 0.708
1974 0.214 0.328 0.069 0~271 0.883
1975 0.229 0.295 0.194 0.391 1. 109
1976 0.197 0.315 0.206 0.408 j. 126
1977 0.142 0.339 0.168 0.283 0.933
1978 0.15 0.354 0.144 0.567 1. 216
SOURCE: Alaska Department of Labor
63
0.
0.
FIGURE 30. NORTON SOUND GOVERNMENT SECTOR EMPLOYr1ENT
1965-1978
1965 1978 1975
EM GARS EMGFR8 EMG9R8
1965 0.319 o. 789. 1.108
196"6 0 •. 348 0.9 1.248
1967 0.355 Oc. 778 1.134
1968 0.317 0.747 1.065
196·9 : -e 0.341 0.73 1.072
1970 0.-384 0.60.6·. 0.99
1971 0.440 . 0.568 1.014
1972 0.549 0.548 1. 096
1973 0.568· 0.606 1.174
1974 0.519 0.637 1.155
1975 0.569 0.619 1.188
1976 0.633 0.611 1 -244
1977 0.664 0.514 1.178
1978 1.073 0.529 1.602
SOURCE: Alaska Depart~ent of Labor
Total
State e\
Local
( Er1G9R8)
( EMGAR8)
[
r ~
L
" L
r~
L
[
Federal (EMGFR8) [
1980
[
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[
Income. Figures 31 and 32 present the growth of Norton Sound personal
income in nominal and real per capita terms, respectively. In nominal
terms, income grew steadily throughout the period, at an average annual
rate of 13 percent. Real per capita income grew at an average rate of
8.8 percent annually.
Summary of the Growth Process
The Norton Sound area, while having undergone substantial growth during
the 1965-1978 period, has followed a development pattern quite different
from that of Anchorage or the state as a whole. Unlike the rest of the
state, in which the major driving force of the growth process has been
growth of basic sector employment, the source of growth in Norton Sound
has been growth of the support sector itself, fueled in part by payments
made under the Alaska Native Claims Settlement Act and a variety of
other income transfer programs, but primarily by a rapid increase in
government employment toward the end of the period. This development
has altered the structure of the regional economy radically over the
period, creating an increased dominance of support sector employment
which, by 1978, much more closely resembled the structure of the state-
wide economy.
65
50.
30.
10. '-------
1965
FIGURE 31. NORTON SOUND PERSONAL INCOME
(millions of current dollars)
1970·
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
PIR8
13.9
14.8
15.4
18.4
20.
21.3
23.6
26.8
51.8
47.2
57.1
65.7
60.4
SOURCE: U.S. Department of Commerce, Bureau of Economic AnalysJs.
66
r
r
[
r·
f"
['
[
1:
G
[
[
[
1980
[
[
E
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r
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L
I'
I .
L
[
[
[
[
L
[
r
L
r
L
L
[
b
[
L
[
[
r-
L
FIGURE 32 .. NORTON SOUND REAL PER CAPITA INCOME,
1965-1977
(thousands of 1979 dollars)
X103
10.0~~----------~BD~~~~~~Lg~~~~~--------~-,
8.0
6.0
4.0
2~0 L---------------------------~~----------~
1965 1970 1975 1980
1965
1966
. 1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
PIRPCR8
2847.38
2896.03
2984.83
3317.01
3650.63
4191.06
4598.36
5092.08
9642.21
6821.73
7373.12
7862.55
7853.53
1-~--------------------------------~--~~--~--1. u
[
SOURCE: Population from Alaska Department of Labor; personal income from
U.S. Department of Commerce, Bureau of Economic Analysis.
67
Summary
The period from 1965 to 1978 was one of significant growth and structural
change within both the statewide economy and the regional economies of
Anchorage and the Norton Sound.
Statewide, the period was characterized by stable growth stimulated
largely by a growing petroleum industry and state and local government
prior to 1974, after which an 11 explosion 11 in incomes, wages, employment,
and population accompanied the construction buildup during the building
of the trans-Alaska pipeline. Following the peak of pipeline construction
in 1976, despite a precipitous drop in construction employment, support
sector employment and incomes remained at near their peak levels. This,
combined with maintained growth in government incomes, served to dampen
greatly the severity of the economic decline following pipeline completion.
Furthermore, the onset of production from Prudhoe Bay by the end of the
period was providing the state government with a new and rapidly grow-
ing revenue source with which it could control its future growth.
Anchorage came increasingly to be the center of economic activity within
the state over the historical period. Furthermore, much of the growth
in the support sector was concentrated in Anchorage along with the admin-
istrative component of basic sector employment. As a consequence, the
Anchorage economy showed a much more stable response to the pipeline
boom than any other region of the state.
68
[
[
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b
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L
I:
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r,
I
L
[
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L
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k
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6
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r=
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L
The Norton Sound area underwent structural changes during the period
somewhat different from those of the state as a whole. Personal income
transfers and later government sector growth triggered a substantial
growth in the support sector, so that by 1978 the regional economy was
altered to a structure much more closely resembling that of the state as
a whole.
69
[
[
[
r~
L
u -
-
[
[
r·
L
I"'
I L;
L
III. STATEWIDE AND REGIONAL GROWTH WITHOUT THE PROPOSAL:
THE BASE CASE
Background
Having examined the historical patterns of growth in the statewide and
regional economies, it is now necessary to utilize the above information
in developing a set of forecasts of statewide and regional activity
through the year 2000. Generally, this information has been incor-
porated into the calibration of statewide and regional econometric
models, as described in Chapter I. However, such models .require the
development of scenarios--sets of assumptions about exogenous activity--
upon which contingent forecasts may be made. This section has two pur-
poses: first, to present the scenario upon which the forecasts are
contingent; and second, to present the forecasts of the major economic
variables through the year 2000 in the absence of the proposed Bering-
Norton OCS development. This forecast will then serve as a benchmark
from which to measure the impacts of the proposal in a later section.
Assumptions: The Base Case Scenario
The base case scenario consists of three sets of assumptions--those
concerned with-national variables which directly or indirectly affect
Alaskan economic activity, those describing development in the exogenous
sectors of the Alaskan economy, and those affecting state fiscal policy.
71
NATIONAL VARIABLES ASSUMPTIONS
Inasmuch as Alaska is an open economy, it is affected by changes in the
national economy. Consequently, several assumptions about the future
growth of the U.S. economy are required. The assumptions needed are
threefold. First, a forecast of average weekly earnings in the United
States is required as an input into the estimation of Alaskan wage
rates. Second, the Alaskan price level is tied in part to the national
price level so that a forecast of the U.S. consumer price index is
needed. Finally, inasmuch as a major determinant of migration to Alaska
is the income differential between Alaska and the lower 48, a forecast
is required of real per capita disposable income in the United States.
The long-run assumptions for these national variables are based on long-
term forecasts prepared by Data Resources, Inc., in their September 1979
forecast of U.S. economic activity (TRENDLONG0979). This forecast pre-
diets a long-run average rate of increase in the U.S. consumer price
index of 7.56 percent. Real disposable per capita income is forecast
to increase at a 2.12 percent average annual rate. Hourly earnings are
forecast to increase at 8.73 percent, while average hours worked are
forecast to decline slowly at -0.23 percent.
Consequently, average weekly earnings may be expected to grow at an
annual rate 'of 8.5 percent (i.e. 8.73 percent minus 0.23 percent).
These long-term average growth rates were adopted as the three national
variable assumptions utilized in the analysis.
72
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l
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[
r ,
I u
I= L.
I •
l
r~
L--
r_:
L
EXOGENOUS INDUSTRY ASSUMPTIONS
Several industries in the Al~skan economy grow largely or entirely in
response to forces external to the Alaskan economy. These sectors
include the federal government, mining, manufacturing, agriculture-
forestry-fisheries, and portions of the construction and transportation
industries. The assumptions affecting these sectors are of two types:
industry-wide assumptions as to growth in federal government, agriculture-
forestry-fisheries, and manufacturing; and special project assumptions
affecting mining, construction, manufacturing, and transportation.
Industry-Wide Assumptions
Federal Employment. In 1978, federal employment in Alaska was 40,691,
consisting of 55 percent military and 45 percent civilian personnel.
Since 1972, civilian employment has increased at about 1 percent annually,
while military employment has fallen at an annual rate of over 5 percent,
reflecting an acceleration of a long-term downward trend. In the next
several years, increased employment required to implement new federal
land-use legislation is expected to accelerate the growth rate of civil-
ian employ~nt, at least temporarily; while military employment is
expected to remain constant, as shown in Table 3.
Agriculture-Forestry-Fisheries. About a thousand persons statewide make
up the sector which is designated agriculture-forestry-fisheries. New
proposals for dramatic increases in bottomfishing have been suggested as
a means to shift the Alaskan economy toward renewable resource industries.
Thus, employment in agriculture, forestry, and fisheries during the
73
TABLE 3. FEDERAL EMPLOYMENT, BASE CASE
(Thousands of Workers)
Year Civilian 1 Military2 Total
1977 17.734 24.984 42.718
1978 18.19 22.501 40.691
1979 18.955 22.501 41.456
1980 19.345 22.501 41.846
1981 19.535 22.501 42.036
1982 19.712 22.501 42.213
1983 19.891 22.501 42.392
1984 20.072 22.501 42.573
1985 20.254 22.501 42.755
1986 20.438 22.501 42.939
1987 20.623 22.501 43.124
1988 20.81 22.501 43.311
1989 20.999 22.501 43.5
1990 21.19 22.501 43.691
1991 21.382 22.501 43.883
1992 21.576 22.501 44.077
1993 21.772 22.501 44.273
1994 21.970 22.501 44.471
1995 22.169 22.501 44.67
1996 22.37 22.501 44.871
1997 22.574 22.501 45.075
1998 22.778 22.501 45.279
1999 22.985 22.501 45.486
2000 23.193 22.501 45.694
11977 actual value from Alaska Department of Labor, Statistical
Quarterly, Second Quarter, 1978.
1978 value from Alaska Department of Commerce and Economic Develop-
ment, The Alaska Economy: Year End Performance Report, 1978, p. 43.
1979 to 1981 forecasts from Alaska Department of Commerce and Economic
Development, The Alaska Information and Reporting System, Quarterly Report,
July 1979, Table I.
1981 to 2000 forecasts based on historical rate of increase over the
1961 to 1978 period.
21977 to 1978 values from Alaska Department of Commerce and Economic
Development, Jhe Alaska Economy: Year End Performance Report, 1978, p. 43.
Assumed to remain at 1978 value throughout forecast period.
74
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6
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r:
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6
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[
forecast period consists of two components--those persons engaged in
bottomfishing and those persons engaged in activities which have his-
torically characterized the sector (primarily also fishing activities).
The Southcentral Water Study (Scott, 1979) estimated a 15 percent growth
in conventional fisheries employment by the year 2000 over its 1978
level (implying an annual rate of growth of .637 percent). Thus, the
conventional agriculture-forestry-fisheries employment was assumed to
expand by 15 percent by the end of the forecast period. Bottomfishing
by Alaskans, on the other hand, is assumed to replace foreign bottom-
fishing entirely by the year 2000 so that a growing employment begins in
1980 and accelerates throughout the forecast period, requiring over
2,000 persons by the year 2000 (see Table 4).
Manufacturing. The manufacturing sector consists of four components:
food manufacturing (primarily seafood processing), lumber and wood
products manufacturing, pulp and paper manufacturing, and other manu-
facturing. The assumed increase in bottomfishing would result in an
increase of 11,061 in food manufacturing employment by the year 2000.
In addition, existing fisheries are expected to require a 15 percent
increase in food processing employment by 2000 (see Report of Economics
Task Force, Southcentral Alaska Water Resources Study, p. AD-4, 1/31/79).
The remaining components of manufacturing are forecast to grow through
1981 at rates forecast by the Alaska Department of Commerce and Economic
Development (see The Alaska Economic Information and Reporting System,
guarterly Report, July 1979, Table 1). After 1981, these components
grow at the historical growth rate of the manufacturing sector, or
4 percent.
75
TABLE 4. AGRICULTURE-FORESTRY-FISHERIES EMPLOYMENT FORECAST
Year Bottomfishing 1 Othe/ Total ---
1977 0 1.1 1.1
1978 0 1.1 1.1
1979 0 1.107 1.107
1980 .015 1.114 1.129
1981 .018 1.121 1.139
1982 .021 1 . 128 1.149
1983 .026 1.136 1.162
1984 .032 1 .143 1.175
1985 .039 1 .150 1.189
1986 .049 1.157 1.206
1987 .062 1 .165 1 .227
1988 .079 1 .172 1. 251
1989 . 102 1.180 1.282
1990 .132 1 .187 1. 319
1991 . 171 1 .195 1 .366
1992 .223 1.202 1. 425
1993 .292 1.210 1 .502
1994 .383 1. 218 1. 601
1995 .505 1. 225 1. 730
1996 .667 1. 233 1. 900
1997 .882 1.241 2.123
1998 1 .169 1.249 2.418
1999 1 . 551 1.257 2.808
2000 2.060 1.265 3.325
1Alaska OCS Office.
2Actual 1978 value, increasing thereafter at .637 percent
annually (see text).
76
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TABLE 5. MANUFACTURING EMPLOYMENT FORECAST
Food
Year Lumber 1 PaEer 1 Bottomfishing 2 Other3 Other 1
1977 2.081 1 .248 0 5.447 1.943
1978 1.684 1 .076 0 5.983 2.852
1979 2.079 1 .135 0 5.906 2.683
1980 1.808 1 .146 .055 6.129 2.791
1981 1. 742 1 .245 .067 6.234 2.818
1982 1 .812 1.295 .081 6.267 2.931
1983 1.884 1.347 .101 6.299 3.048
1984 1.960 1 .400 .126 6.332 3.170
1985 2.038 1 .456 .159 6.365 3.297
1986 2.119 1 .515 .203 6.398 3.429
1987 2.204 1 .575 .261 6.431 3.566
1988 2.292 1 .638 .339 6.465 3.708
1989 2.384 1 .704 .443 6.498 3.857
1990 2.479 1. 772 .583 6.532 4.011
1991 2.579 1.843 .772 6.566 4.171
1992 2.682 1. 917 1 .026 6.6 4.338
1993 2.789 1. 993 1.369 6.635 4.512
1994 2.901 2.073 1.834 6.669 4.692
1995 3.017 2.156 2.463 6.704 4.880
1996 3.137 2.242 3.315 6.739 5.075
1997 3.263 2.332 4.471 6. 774 5.278
1998 3.393 2.425 6.039 6.809 5.489
1999 3.529 2.522 8.168 6.844 5.709
2000 . 3.670 2.623 11 .061 6.880 5.937
1Actual 1978 value, AEIRS forecast through 1981 (see text), historical
4 percent growth thereafter.
2 Alaska OCS Office.
3AEIRS forecast through 1981. After 1981, constant growth rate of
0.52 percent annually (constant rate producing a 15 percent rise in year
2000 employment over 1978 level [see text]).
77
Special Project Assumptions
Upper Cook Inlet. Petroleum sector employment in the Kenai-Cook Inlet
Census Division was 705 in 1977 (4 quarter average employment, taken
from Alaska Department of Labor, Statistical Quarterly, 1977 issues),
consisting of exploration, development, and production employment sur-
rounding the Kenai oil and gas fields. While oil production is expected
to decline drastically over the forecast period in the absence of new
discoveries, gas production is expected to rise even without new dis-
coveries. It is assumed that these increases, coupled with continued
exploration activity and enhanced recovery generated by rising prices,
will be sufficient to keep Upper Cook Inlet employment constant over the
forecast period, as shown in Table 6.
Prudhoe Bay. Prudhoe Bay developments include employment associated
with primary recovery operations from the Sadlerochit formation, second-
ary recovery operations using water flooding of that formation, new
developments of the Kuparuk formation west of Prudhoe Bay, and the per-
manent work force of ARCO and BP at the main Prudhoe base headquarters.
The key assumptions serving as the basis for the forecasts in Table 7
are as follows:
• Five rigs (3 ARCO, 2 BP) continue development drilling
at a rate of 10 wells per year per rig through 1985
(based on estimated activity presented in OGJ 2/26/79).
• The proposed Prudhoe water flooding project begins in
1982. Employment from 1982-84 is 2231, 2917, and 2467
on the project (estimates provided by Phillips, Alaska
Division of Minerals and Energy Management, 3/6/79).
78
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TABLE 6. UPPER COOK INLET EMPLOYMENT FORECAST
Year Petroleum 1
1977 705
1978 705
1979 705
1980 705
1981 705
1982 705
1983 705
1984 705
1985 705
1986 705
1987 705
1988 705
1989 705
1990 705
1991 705
1992 705
1993 705
1994 705
1995 705
1996 705
1997 705
1998 705
1999 705
2000 705
11977 value from Alaska Department of Labor, Statistical Quarterly,
1977 issues.
Assumption of constant employment based on Alaska Consultants, Inc.,
Baseline Conditions and Non-OCS Forecast Lower Cook Inlet Socioeconomic
Systems, OCS Studies Program Technical Memorandum LCI-17.
79
TABLE 7. PRUDHOE BAY EMPLOYMENT FORECAST 1
Year Petroleum
1979 1772
1980 2044
1981 2155
1982 4337
1983 5134
1984 4684
1985 2217
1986 1802
1987 1802
1988 1802
1989 1802
1990 1802
1991 1802
1992 1802
1993 1802
1994 1802
1995 1802
1996 1802
1997 1802
1998 1802
1999 1802
2000 1802
1rncludes development of Sadlerochit and Kuparuk formations.
See text for assumptions.
80
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1 The Kuparuk formation west of Prudhoe is developed,
with drilling of production wells beginning in 1980.
Production at a rate of 60,000 barrels per day begins
in 1982, rising to 120,000 barrels per day by 1984
(OGJ, 4/2/79).
1 Permanent ARCO and BP employment on the North Slope
rises from 1,000 in 1977 to 1,667 in 1983, then remains
constant throughout the period (based on information
contained in Prudhoe Bay Case Study, OCS Studies Pro-
gram Technical Report No. 4).
Trans-Alaska Pipeline Service (TAPS). TAPS employment through 1977
included only the exogenous construction employment engaged in the
initial construction of the pipeline. After completion of the line in
1977, employment is of two types. First, there is additional construe-
tion of four pump stations; and second, there is exogenous transportation
sector employment associated with the operation of the line. These
employment schedules are given in Table 8.
ALCAN Natural Gas Pipeline. ALCAN pipeline construction is assumed to
begin in 1981, with construction of an associated gas conditioning
facility located on the North Slope beginning in 1980. Both facilities
are assumed to be completed by 1985, when a staff of 400 petroleum and
200 transportation workers takes over operation of the facility, as
shown in Table 9.
Lower Cook Inlet OCS Sale CI. For purposes of scenario development, BLM
recommended that in its analysis of the second proposed lease sale in
Lower Cook Inlet (Sale 60)', Dames and Moore should assume that two-
thirds of existing Lower Cook Inlet resources are located on tracts
81
TABLE 8. EMPLOYMENT FORECASTS, TAPS PROJECT
Year Construction 1 TransQortation 2
1977 5,300 1,500
1978 0 1,500
1979 90 1,500
1980 90 1 ,500
1981 90 1,500
1982 90 1 ,500
1983 0 1,500
1984 0 1,500
1985 0 1,500
1986 0 1 ,500
1987 0 1,500
1988 0 1,500
1989 0 1,500
1990 0 1 ,500
1991 0 1,500
1992 0 1 ,500
1993 0 1,500
1994 0 1,500
1995 0 1,500
1996 0 1,500
1997 0 1,500
1998 0 1,500
1999 0 1,500
2000 0 1 ,500
11977 construction estimate by Alaska Department of Labor 1979 to
1982 construction employment based on addition of four pump stations
adding capacity of .15 million barrels per day each, from Beaufort
OCS Development Scenarios, Dames and Moore, 1978.
2operations employment from Alaska Economic Trends, Alaska Department
of Labor, October 1978.
82
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TABLE 9. EMPLOYMENT FORECASTS, ALCAN PROJECT
Construction 1 Construction 2
Year {PiEeline} {Plant} Petroleum TranSEOrtation
1977 0 0 0 0
1978 0 0 0 0
1979 0 0 0 0
1980 0 500 0 0
1981 1 ,795 1,000 0 0
1982 6,823 1 ,000 0 0
1983 6,038 1 ,000 0 0
1984 563 1 ,000 0 0
1985 0 0 400 200
1986 0 0 400 200
1987 0 0 400 200
1988 0 0 400 200
1989 0 0 400 200
1990 0 0 400 200
1991 0 0 400 200
1992 0 0 400 200
1993 0 0 400 200
1994 0 0 400 200
1995 0 0 400 200
1996 0 0 400 200
1997 0 0 400 200
1998 0 0 400 200
1999 0 0 400 200
2000 0 0 400 200
1From Alaska Economic Outlook to 1985, Alaska Department of Labor,
July 1978.
2From Prudhoe Bay Project: Draft EIS, Federal Energy Regulatory
Commission, July 1979.
3same as note 2.
4 rnformal estimate by N.W. Alaska Pipeline Company, August 15, 1979.
83
leased in Sale CI. Based on this recommendation, 400 mmb of oil and
400 bcf of gas are assumed to be discovered on tracts leased in Sale CI.
For their Sale 60 analysis, Dames and Moore have developed a scenario
close to these assumptions (400 mmb oil, 363 bcf gas); and it is this
scenario which is utilized here. The employment estimates associated
with this scenario are shown in Table 10.
Beaufort Sea Federal/State Lease Sale. Development of oil and gas
resources in the Beaufort Sea are assumed to follow the development
scenario described as the 11 intermediate case 11 in the Beaufort Sea Final
Environmental Impact Statement. Such a scenario assumes the discovery
of 750 million barrels of oil and 1.625 trillion cubic feet of gas, with
employment requirements as shown in Table 11.
Northern Gulf of Alaska OCS Sale 55. A second sale of federal OCS oil
and gas leases in the Northern Gulf of Alaska has been proposed for late
1980. The mean development scenario is taken fran employment estimates
supplied by the BLM-Alaska OCS Office for use in the simulations done
for the Draft Environmental Impact Statement for Sale 55 and is shown in
Table 12.
Western Gulf of Alaska OCS Sale 46. In preparing the Draft Environmental
Impact Statement for the proposed federal OCS lease sale near Kodiak in
1980, the BLM-Alaska OCS Office has developed a moderate development
scenario assuming the discovery of 176 million barrels of oil and
5,350 billion cubic feet of gas in the Western Gulf of Alaska. The
84
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TABLE 10. LOWER COOK OCS SALE CI EMPLOYMENT FORECASTS
Year Construction 1 Petroleum 2 Trans~ortation 3 Headguarters
1978 0 196 62
1979 0 160 103
1980 0 169 103
1981 0 166 108
1982 136 132 87
1983 72 61 128
1984 309 226 182
1985 351 898 251
1986 57 1 ,224 196
1987 0 1,239 144
1988 0 1 '1 03 165
1989 0 963 165
1990 0 923 165 .
1991 0 936 165
1992 0 974 165
1993 0 974 165
1994 0 913 151
1995 0 860 137
1996 0 825 135
1997 0 825 135
1998 0 825 135
1999 0 825 135
2000 0 825 135
1Based on 11 High-Find Scenario 11 in Lower Cook Inlet and Shelikof
Strait OCS Lease Sale No. 60 Petroleum Develo~ment Scenarios, Draft
Re~ort, Dames and Moore, March, 1979.
2rncludes drilling, operations, some support, and headquarters
personnel.
3rncludes boat and helicopter support personnel.
85
21
37
32
37
24
24
37
77
134
153
141
135
133
133
133
133
133
133
133
133
133
133
133
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TABLE 11. BEAUFORT SEA EMPLOYMENT FORECASTS 1
[
Year Construction Petroleum l-,
1977 0 0
1978 0 0
1979 0 0 [ 1980 0 0
1981 62 66 [' 1982 188 197
1983 135 197
1984 211 230 r, 1985 150 66
-1986 305 112
1987 383 276 I' 1988 466 479 L
1989 466 616
1990 155 595 [
1991 155 524
1992 77 503
1993 155 432 [ 1994 155 435
1995 77 438
1996 22 440 [
1997 0 417
1998 0 393 c 1999 0 394
2000 0 394
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Year
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
TABLE 12. NORTHERN GULF OF ALASKA OCS SALE 55 1
EMPLOYMENT FORECASTS
Construction Petroleum TransQortation
0 45 17
0 90 35
0 90 35
38 83 26
12 38 9
93 0 0
98 I 90 86
37 179 86
0 340 100
0 333 107
0 343 107
0 292 42
0 305 42
0 307 42
0 310 42
0 310 42
0 310 42
0 310 42
0 310 42
0 310 42
1From BLM-Alaska OCS Office.
87
direct employment requirements for such a development program are shown
in Table 13.
Lower Cook Inlet OCS Sale 60. Dames and Moore have developed scenarios
for use in the OCS Studies Program to describe a moderate level of
development in which 198 million barrels of oil are found in Lower Cook
Inlet and 500 million barrels of oil are found in Shelifkof Strait. The
employment required for such a development program is shown in Table 14.
Alpetco. On June 18, 1978, Alaska Petrochemical Company entered into a
contract with the State of Alaska to purchase a portion of the state's
royalty oil for use in a proposed 150,000 barrel a day petrochemical
facility near Valdez. According to the terms of the contract, construc-
tion is to begin by the end of 1981. Since the contract has been in
effect, several changes have been made in the initial proposal, which
has been modified to a configuration primarily intended for refinery
rather than petrochemical operations (Progress Report from Alpetco to
Commissioner Robert LeResche, March 15, 1979). Once completed in 1983,
current plans call for the employment of a permanent work force of 518,
as shown in Table 15.
Pacific Alaska LNG. Pacific Alaska LNG Associates, a partnership con-
sisting of Pacific Lighting Company and Pacific Gas and Electric Company,
has proposed an LNG facility on the Kenai Peninsula to liquify gas from
the Cook Inlet for shipment to Southern California markets. Construction
is currently scheduled to begin in 1980, with the plant in operation by
1984. Direct employment requirements are as shown in Table 16.
88
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Year
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
TABLE 13. WESTERN GULF OF ALASKA OCS SALE 46 1
EMPLOYMENT FORECASTS
Construction Petroleum Trans~ortation
0 42 8
0 97 59
310 124 224
13 110 128
231 98 62
254 57 46
52 233 173
6 304 217
6 407 261
0 113 192
0 103 192
0 89 192
0 89 192
0 89 192
0 89 192
0 89 192
0 89 192
0 89 192
0 89 192
0 89 192
1scenarios provided by BLM-Alaska OCS Office.
89
Year
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
TABLE 14. LOWER COOK INLET OCS SALE 60 1
EMPLOYMENT FORECASTS
Construction Petroleum Trans~ortation
0 0 0
0 120 62
0 151 82
0 164 82
104 83 43
33 16 0
92 95 128
166 228 74
0 455 19
0 502 55
0 504 55
0 351 55
0 330 55
0 406 55
0 406 55
0 406 55
0 406 55
0 406 55
0 406 55
0 406 55
1Based on 11 medium-find scenario 11 in Lower Cook Inlet and Shelikof
Strait OCS Lease Sale No. 60 Petroleum Develo~ment Scenarios, Draft
Re~ort, Dames and Moore, March 1979.
90
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TABLE 15. ALPETCO PROJECT. EMPLOYMENT FORECAST
Year Construction 1 Manufacturing 2
1979 0 0
1980 900 0
1981 900 0
1982 900 0
1983 0 518
1984 ·o 518
1985 0 518
1986 0 518
1987 0 518
1988 0 518
1989 0 518
1990 0 518
1991 0 518
1992 0 518
1993 0 518
1994 0 518
1995 0 518
1996 0 518
1997 0 518
1998 0 518
1999 0 518
2000 0 518
1construction employment estimates are not currently available
for the new Alpetco proposal. However, the new configuration resembles
a proposed facility found in Alaska Petrofining Corp Proposal for
ytilization of Alaskan State Royalty Oil, Vol. I, from which the
construction estimates are taken.
2operations employment estimated by Alpetco in personal communica-
tion dated 9/17/79.
91
Year
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
TABLE 16. PACIFIC ALASKA LNG PROJECT
EMPLOYMENT FORECASTS
Construction1 Manufacturing 2
146 0
844 0
1 ,323 0
420 0
0 60
0 60
0 60
0 60
0 60
0 60
0 60
0 60
0 60
0 60
0 60
0 60
0 60
0 60
0 60
0 60
0 60
Transportation 3
0
0
0
0
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
1construction employment estimates based on letter to Alaska
Department of Natural Resources from Southern California Gas, dated
3/17/78.
2Plant operation employment from Western LNG Project: Final EIS,
Federal Energy Regulatory Commission, October 1978.
3Pipeline operation employment, also from Western LNG Project:
Final EIS, Federal Energy Regulatory Commission, 10/78.
92
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Susitna Hydoelectric. A major hydroelectric project has been proposed
by the Corps of Engineers for the Susitna Valley, consisting of two dams
(Watana and Devil •s Canyon) construction of which is expected to begin
in 1984. Table 17 presents construction and operations employment for
the project.
Bradley Lake Hydroelectric. The Corps of Engineers plans soon to begin
the award of contracts for engineering and environmental studies for a
$156 million dollar hydroelectric installation near Homer. Table 18
presents employment requirements for the project.
PETROLEUM REVENUE ASSUMPTIONS
Petroleum revenues to the state consist of royalties, production taxes,
property taxes, the corporate income tax, and mi see 11 aneous revenues.
Royalties and Production Taxes
Royalties and production taxes arise from three sources--those associated
with production of oil and gas from Upper Cook Inlet, those associated
with existing and planned production at Prudhoe Bay and vicinity, and
the revenues expected from state-owned properties in the Beaufort Sea.
Royalties are calculated as 12.5 percent of wellhead value (net of field
costs for oil), while production taxes are levied as a fraction of non-
royalty value, with the rate dependent upon the productivity of the average
well in the field.
93
Year
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
TABLE 17.· SUSITNA HYDROELECTRIC PROJECT
EMPLOYMENT FORECAST
Construction 1
164
574
616
854
1 '176
1 '162
1,344
1,400
1 ,414
1,400
812
742
784
854
700
0
0
Oj2eration 2
0
0
0
0
0
0
0
19
19
19
19
19
19
19
19
38
38
1Average annual employment is 1 ,000 over 14-year period (Alaska
Annual Planning Information, FY 1980, Alaska Department of Labor).
Distribution of employment over time based on estimates by U.S. Corps
of Engineers in Suj2plemental Feasibility Report: Susitna Hydroelectric
Project, March 1979.
2operations employment from Upper Susitna River Project Power
Market Analysis, U.S. Department of Energy, Alaska Power Administra-
tion, March 1979.
94
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TABLE 18. BRADLEY LAKE HYDROELECTRIC PROJECT
EMPLOYMENT FORECAST
Year Construction 1 Operation 2
1981 60 0
1982 190 0
1983 300 0
1984 160 0
1985 60 0
1986 0 10
1987 0 10
1988 0 10
1989 0 10
1990 0 10
1991 0 10
1992 0 10
1993 0 10
1994 0 10
1995 0 10
1996 0 10
1997 0 10
1998 0 10
1999 0 10
2000 0 10
1Memo to Mike Scott, ISER, from Alaska Power Administration,
dated 4/6/78.
2Author•s estimate based on installati~n capacity.
95
Upper Cook Inlet. Because assumptions a~ to future development around
Upper Cook Inlet do not vary in any of the cases to be examined and
because such revenues are small relative to other sources, revenue
estimates for Upper Cook Inlet are taken directly from Alaska Department
of Revenue forecasts, as shown in Tables 19 and 20.
Prudhoe Bay Revenues. Because of its size and its relevance to other
assumptions made in both the base case and possibly the OCS scenarios,
Prudhoe Bay revenues are estimated directly rather than taken from
Alaska Department of Revenue computations. To arrive at ~uch estimates,
estimates of production and wellhead value are needed. Production
estimates are those derived by simulations of reservoir behavior by the
Alaska Division of Oil and Gas Conservation for the· Department of Revenue.
Wellhead value of oil is derived explicitly from the following assumptions:
t West coast market price is $21.50 per barrel in FY 1980.
Real market price is assumed to remain constant through-
out the forecast period.
t Tanker costs from Valdez to the West Coast are $1/bbl
in FY 1980. These costs remain. constant in real terms
through 2000.
• Field processing and gathering costs are 75¢/bbl in
FY 1980, also remaining constant in real terms through
2000.
• TAPS pipeline tariff is assumed to be $5.25 in FY 1980.
The nominal tariff is assumed to remain constant through
1990 when increased operating costs are assumed to domi-
nate decreasing capital costs. After 1990, the tariff
remains constant in real terms.
96
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TABLE 19. STATE PRODUCTION TAX REVENUES
[ (Millions of Current Dollars)
[
U~~er Cook Inlet1 Prudhoe Ba,i Beaufort Sea 2 Year Total
[ Oil Gas Oil Gas Oil Gas
[ 1979 14.8 9.7 149.3 0 0 0 173.8
1980 13.2 10.2 399.4 0 0 0 422.8
1981 11.5 10.7 997.9 0 0 0 1 ,020.1
[ 1982 10.2 15.9 1 '164. 7 0 0 0 1 '190. 8
1983 8.9 20.9 1,292.6 0 0 0 1 ,322.4
1984 7.5 31.8 1,417.1 0 0 0 1 ,456. 5
r 1985 6.3 32.5 1 ,549. 5 98.5 0 0 1,686.8
L 1986 5.3 33.7 1 ,695.3 113.2 0 0 1,847.6
[ 1987 4.3 34.4 1 ,846.8 121.8 0 0 2,007.3
1988 3.4 34.1 2,009.7 131.0 0 0 2,178.2
1989 2.5 34.8 2' 184.9 140.9 29.3 1.0 2,393.4
1990 1.7 36.0 2,135.8 151.5 77.9 2.9 2,405.8
b 1991 .9 36.7 2,196.4 163.0 113.1 4.3 2,514.3
1992 . 1 37.8 2,101.0 175.3 123.9 4.6 2,442.7
0 1993 0 36.3 1,763.0 188.6 133.2 5.0 2' 126. 1
1994 0 . 37.5 1 ,563 .4 202.8 143.3 5.3 1,952.4
1995 0 38.2 1,823.9 218.2 151.3 5.7 1,837.2
1996 0 38.2 1 ,320.3 234.7 159.8 6.0 1,758.8 B -1997 0 38.2 1,183.4 252.4 168.6 6.3 1,648.8 ' 1998 0 38.2 1 ,018.3 271.5 167.4 6.3 1,501.6
l~ 1999 0 38.2 821.4 292.0 161.3 6.0 1,318.9
2000 0 38.2 589.0 314.1 153.3 5.8 1 '1 00.4
b
[
1From Alaska Department of Revenue, Petroleum Production Revenue
L Forecast, September 1979.
21979-81 from Alaska Department of Revenue, o~. cit.; thereafter,
I' calculated as explained in text.
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TABLE 20. STATE ROYALTY REVENUES
(Millions of Current Dollars)
Year UEEer Cook Inlet1 Prudhoe BaJ::2 Beaufort Sea 2 Total
Oil Gas Oil Gas Oil Gas
1979 32.2 5.6 295.2 0 0 0 333.0
1980 30.1 6.2 773.9 0 0 0 810.2
1981 27.7 6.7 1 '132. 2 0 0 0 1 '166. 5
1982 25.3 10.7 1,322.7 0 0 0 1 ,358. 7
1983 23.2 16.5 1 ,469.1 0 0 0 1,508.8
1984 21.2 26.2 1,612.0 0 0 0 1,659.4
1985 19.5 27.4 1,763.7 138.5 0 0 1,949.0
1986 17.9 28.3 1,931.0 159. 1 0 0 2, 136A
1987 16.4 29.1 2 '1 04.7 171.2 0 0 2 ,321. 4
1988 15.1 30.1 2,291.6 184.1 0 0 2,520.9
1989 13.9 30.9 2,492.5 198.0 32.3 1.2 2,768.9
1990 12.9 32 .. 0 2,659.1 213.0 93.6 3.5 3,014.1
. 1991 11.9 32.8 2,734.6 229.1 135.9 5. 1 3,149.4
1992 11.0 33.8 2,615.8 246.4 148.9 5.5 3,061.4
1993 10.2 34.6 2,195.0 265.1 160.1 5.9 2,670.8
1994 9.2 35.6 1 ,946.5 285.1 172.3 6.3 2,455. 0
1995 8.3 36.4 1,772.7 306.6. 181.9 6.8 2,312.8
1996 8.3 36.4 1,643.7 329.8 192.0 7.2 2,217.5
1997 8.3 36.4 1,473.3 354.8 202.7 7.5 2,083.0
1998 8.3 36.4 1,267.8 381.6 201.2 7.5 1,902.8
1999 8.3 36.4 1,022.7 410.4 193.9 7.1 1,678.9
2000 8.3 36.4 733.4 441.5 184.3 7.0 1,410.8
1From Alaska Department of Revenue, Petroleum Production Revenue
Forecast, September 1979.
21979-81 from Alaska Department of Revenue, op. cit.; thereafter,
calculated as explained in text.
98
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Wellhead value of gas is derived by the following assumptions:
1 Under the interim rules of the Natural Gas Policy Act
of 1978, the ceiling price of Prudhoe gas as of Decem-
ber 1, 1978, is $1.63 per MMBTU, or $1.78 per MCF.
Since recent sales by Exxon (OGJ, 4/2/79) reflect this
ceiling, the ceiling price, kept constant in real terms,
is assumed throughout the period.
• Prudhoe Bay gas must be treated in a conditioning plant,
at a cost of 80¢/MCF which, according to recent rulings
by FERC, will be deducted from the ceiling price received
by producers for the gas. This cost remains constant in
real terms.
Production taxes are computed as follows. The production tax is a
fraction of nonroyalty value, with the fraction dependent on the pro-
ductivity of the average well in the field. The tax rate on oil is
assumed to equal 12 percent through 1989, after which the rate falls
to 11 percent. For gas, the 12 percent rate is assumed throughout the
period. Production tax·estimates are shown in Table 19.
Royalties for oil are computed as 12.5 percent of the value of produc-
tion net of field costs; while for gas, royalties are 12.5 percent of
wellhead value received by the producer. Royalty estimates are shown
in Table 19.
Beaufort Sea Revenues. Beaufort Sea revenues are calculated as in the
Prudhoe case, with one exception--namely that an additional 60¢ per
barrel for oil and 15¢ per MCF for gas are subtracted from wellhead
value, representing additional transport costs from offshore areas.
99
Furthermore, it is assumed that only 50 percent of such production falls
under state ownership. Royalty and production tax estimates are shown
in Tables 19 and 20.
Property Tax Revenues. The state levies a 20 mill property tax on cer-
tain categories of oil and gas property within the state such as seismic
equipment, drilling rigs, wells, platforms, pipelines, pump stations,
and terminal facilities. Estimates of these revenues are shown by
development in Table 21.
Corporate Income Tax Revenues. In 1978, the state passed new legislation
levying a 9.4 percent tax on net income from oil and gas production and
transportation in the state. While no detailed modeling of this tax has
yet been done by the Department of Revenue, currently available estimates
through FY 1981 project such revenues to be about 10 percent of the level
of estimated production taxes and royalties. It is assumed that this
relationship continues to hold throughout the -forecast period.
STATE FISCAL POLICY ASSUMPTIONS
Past studies of the Alaskan economy conducted within the Man-in-the-
Arctic Program, the OCS Studies Program, and other miscellaneous pro-
grams have indicated repeatedly the key role of state government fiscal
policy as a major determinant of both historical and future state economic
growth.
100
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TABLE 21: STATE PETROLEUM PROPERTY TAX REVENUES
(Millions of Current Dollars)
Lower Cook Northern Lower Cook
Year TAPS ALCAN Inlet OCS I Beaufort.Sea Gulf OCS Kodiak OCS Inlet OCS II Total
1979 161.0 0 0 0 0 0 0 161.0
1980 175.0 0 0 0 0 0 0 175.0
1981 177.3 0 0 .3 0 .4 0 178.0
1982 199.3 0 0 .4 0 .7 0 200.4
1983 204.6 0 0 .7 0 .8 0 206.1
1984 209.6 0 19.7 .7 0 .8 0 230.8
1985 214.2 133.2 19.7 .8 0 .8 0 368.6
0 __,
1986 218.3 137.5 19.6 3.0 0.1 .8 0 379.3
1987 221.7 141.7 19.4 6.2 2.0 .7 0 391.7
1988 224.4 145.8 19.2 11.0 2.4 .7 0 403.6
1989 226.3 149.7 18.9 16.2 7.8 .7 9.8 429.4
1990 227.2 153.4 18.6 18.5 7.8 .7 9.7 435.9
1991 226.9 156.7 18.1 20.7 7.8 .6 9.7 440.5
1992 225.3 159.7 17.5 22.1 7.8 .6 9.6 442.6
1993 221.1 162.2 16.8 24.2 7.8 .6 9.4 443.2
1994 217.2 164.2 15.9 26.4 7.7 .4 9.2 441.0
1995 210.3 165.6 14.9 27.6 7.7 .4 9.0 435.5
1996 201.0 166.2 14.0 28.0 7.5 .4 8.7 425.9
1997 189.2 166.0 13.0 28.0 7.4 .4 8.3 412.3
1998 174.4 164.9 12.0 27.8 7.2 .2 7.9 394.4
1999 156.4 162.5 11.0 27.5 7.0 .2 7.4 372.0
2000 134.5 158.9 10.0 27.1 6.7 . 1 6.8 344.2
Over the period of study, state government will receive revenues from
oil development which far exceed current levels of expenditure. The
rate at which the government chooses to spend these revenues (or to
offset existing revenue sources with them) will serve to determine not
only direct employment in the government sector but, through the multi-
plier effects of such expenditures or tax reductions, will have impacts
on all endogenous sectors, affecting the growth of employment, income,
prices, and migration into the state.
Two factors affect the current framework in which state fiscal policy
will be determined. First, revenues have already overtaken expenditures
as a consequence of the onset of production from Prudhoe Bay and will
continue to increase as a consequence of both increased production and
price increases. Second, the establishment of the Permanent Fund, as a
constitutional amendment in 1976, places constraints on the use of certain
petroleum revenues. It requires 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 be put in
the fund.
These changes in the structure of state spending limit the usefulness of
past fiscal policies in determining the fiscal policy rules to be used.
The rate of state expenditures, because it is a matter of policy choice
within this new framework, cannot be modeled simply from past experience.
Past experience can, however, provide qualitative guidance in formulating
hypothetical fiscal policy options for use in simulation. First, we can
102
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expect that, as in the past, increasing levels of economic activity
generate new demands for government services. As prices and population
rise, increased expenditure is required to simply maintain services at
a constant level. In fact, however, this level will be expected to rise
over time if historical trends continue. As shown in Figure 33, nominal
expenditures have grown at an average annual rate of 15.2 percent over
the 1964-77 period; while real per capita expenditures have grown at
about 5.7 percent annually.
Secondly, historical data gives at least some indication of state fiscal
policy response to surplus petroleum revenues. As shown in Figure 33,
the revenues generated by the Prudhoe Bay lease sale in FY 1970 led to
a rapid jump in both the level and growth of nominal and per capita
expenditures, with nomina 1 expenditures jumping from an average growth
of 8. 9 percent annually prior to the sa 1 e to an average 19. 7 percent
after the sale; and real per capita expenditures jumped from 2.3 per-
cent prior to the sale to 7.7 percent after the sale. Furthermore, the
response appears to be one of strictly increasing expenditure levels,
rather than one of using the surplus to reduce other taxes, as seen in
Figure 34. After the sale, built-in progressivity in the existing tax
structure actually increases nonpetroleum real per capita revenues.
If these qualitative features carry over into future fiscal responses to
surplus petroleum revenues, future real per capita expenditures can be
expected to rise within the bounds set by revenue quantities and statutory
constraints. At a minimum, the state might choose simply to maintain
103
MILLIONS
OF DOLLARS
1000
500
2000
1000
500
64 66 68
1\
I l
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I \
( \
\
\
\
\
\
\ _,.
"'-.,------__ ......
72
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/
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---EXPENDITURES
- --REVENUES
76
Figure 33. Nominal State Expenditures and Revenues
I
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f l
I l
I l
I l
I I
).;:)/; /VW,
I \
I \
I \
' \
----_ _,
I
I . . . . . . . . . . . . . . ....
f ..... . . .
.... ...
..,-.~ -----.,.. ...... --_ _, ................... , .. -.... ---EXPENDITURES
- --REVENUES
64 66 68 70 72
• • ·-• • NON-PETROLEUM
REVENUES
74
Figure 34. Real Per Capita State Expenditures and Revenues
104
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real per capita expenditures at their current levels. At a maximum, it
could choose to spend all but 25 percent of restricted petroleum reve-
nues as they are incurred. Unfortunately, the range of possibilities
within these brackets is very large. While it is foolish to try to
anticipate the actual fiscal policy choices of the state, it is possible
to simulate each of the extremes. As a compromise, for purposes of
simulation, a middle-range policy can then be selected. This is the
strategy followed here.
Having estimated revenues as described above, several forecasts were
made, spanning the range of feasible policies. A rate of growth of
expenditures was then selected to fall approximately mid-way between
the extremes. A 10 percent growth rate in nominal state expenditures
would be approximately the minimum rate which would prevent real per
capita expenditures from falling. A 16 percent rate would represent
close to the maximum allowable spending limit from petroleum revenues.
A 13 percent rate was selected as a middle-range policy which both
appears sustainable throughout the period and permits about 3 percent
growth in real per capita expenditures annually within the range observed
historically. Under such a policy, the state will accumulate 25 billion
dollars by the mid-1990s but will be drawing down this balance rapidly
by the end of the period as declining resource revenues are overtaken
by rising state expenditures.
105
Base Case Forecasts
Using the assumptions comprising the above seen ari o as input, a set of
forecasts through the year 2000 was developed using the MAP statewide
and regional econometric models. This section presents these base case
forecasts which will be used in Technical Memorandum BN-7 as a bench-
mark from which to measure the impacts of proposed federal OCS develop-
ments in the Bering Sea /Norton Sound area.
STATEWIDE
Population
Figure 35 presents the forecast of statewide population growth under the
assumptions described in the above scenario. The post-Prudhoe decline
ends in 1980 as a new "boom" peri ad gets underway in preparation for the
gas pipeline construction from Prudhoe. This new boom peaks in 1984,
with state population reaching over 470,000, over 17 percent higher than
its 1980 level. The post-construction decline, however, like the decline
following the TAPS construction effort, causes little decline in state-
wide population. As shown in Figure 36, net out-migration occurs through
1988 but is overtaken by natural increase by 1986, causing a resumption
in state population growth spurred by a variety of employment expansions
in mining, construction, and state and local government. By the year
2000, statewide population reaches 623,151, a level 55 percent higher
than in 1980, representing an average annual growth of about 2.2 percent.
As shown in Figure 37, continued turnover of the population keeps the
age structure virtually unchanged throughout the forecast period.
106
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700.
600.
FIGURE 35. ALASKAN POPULATION FORECAST, 1979-2000
BASE CASE
(thousands of persons)
[ soo.
[
L
L
8
[
[
r ,
L
r ,
L
L
400.
-=~-------------------------------------------------------------J
1979 1984
SOURCE: MAP Model
1989
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
107
1994
POPTST
402.374
401 .928
414.601
445.52
468.325
470.451
467.301
467 .498"
47·3.881
483.469
494.023
503.309
513.399
523.574
534.978
546.142
557.921
571.402
587.15 9
604.698
623. 15 1
644.595
1999 2004
32.
FIGURE 36. COMPONENTS OF POPULATION GROWTH, 1979-2000
BASE CASE
(thousands of persons)
POPULAT ON GROWTH
Total
Population (DELT)
Change
···~
1:
! .
r-,
Net Migration (MIGNET) I_
( NATINC) [
-16. L-----------------------------------------------------------~
[
L
L
1979 1984 1989 1994
DELT
1979 -2.062
1980 -0.445
1981 12.67 2
1982 30.92
1983 22.805
1984 2.126
1985 -3.15
1986 0.197
1987 6.383
19.88 9.588
1989 10.554
1990 9.287
1991 10.08 9
1992 10.176
1993 11 • 40 4
1994 11.164
1995 11.78
1996 13.481
1997 15.75 7
1998 17.53 9
SOURCE: MAP Model 1999 18.45 2
2000 21 .444
108
1999
MIG NET
-14. 172
-6.869
6.62
24.697
15.708
-5.47
-10.408
-6 .. 547
-0.022
3.246
4.1·34
2.747
3.479
3.459
4.577
4.183
4.66
6.205
8.267
9.76
10.335
12.977
NATINC
7.088
6.395
6.035
6.226
7. 131
7.615
7.24
6.718
6.386
6.334
6.416
6.537
6.605
6.712
6.821
6.977
7. 115
7.272
7.488
7.779
8. 12
8.47
2004
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0.?5
0.50
0.25
FIGURE 37. AGE STRUCTURE OF ALASKAN POPULATION,
1979-2000, BASE CASE
(proportion of total population)
t:;TMJ IT O.TTON OUIEU1" BY DSET
BNSB
-Age
20-65
Age
0-20
Employment
Alaskan employment, as shown in Figure 38, has begun to recover from the
TAPS construction decline by 1980. By 1981, basic sector employment has
begun to rise, peaking in 1983 at over 47,000 workers. This rise, due
largely to the construction of the gas pipeline, triggers a boom-bust
cycle in total employment similar qualitatively to that accompanying the
TAPS construction cycle, although of lesser severity. Total employment
at the peak of construction in 1983 is 22.5 percent above its 1980 level.
The downside of the gasline cycle witnesses a 3 percent drop in total
employment from its peak level by 1985, despite a much more significant
decline (over 18 percent) in basic sector employment. As in the case
of the post-TAPS decline, the resiliency of the economy can be traced
to resiliency in the support sectors, which decline less than 5 percent
from their peak employment levels by 1985. After the gasline cycle,
growth resumes at more or less stable rates resembling historical growth.
However, this entails a significant long-run change in the structure of
the state economy, as the support sector eventually overtakes govern-
ment as the primary source of Alaskan employment by the late 1980s. By
2000, total employment reaches nearly 358,000, 84 percent higher than
its 1980· level, for an average annual growth of 3.1 percent. The support
sector share of employment rises from 36 percent in 1980 to over 44 per-
cent in 2000. This, combined with the growth in basic industries, causes
the government share of total employment to fall substantially, from
nearly 46 percent in 1980 to 35 percent in 2000, as shown in Figure 39.
110
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0.
1979
SOURCE:
FIGURE 38. ALASKAN EMPLOYMENT, 1979-2000
BASE CASE
(thousands of persons)
1984 1989 1994 1999
EM99ST EM98ST EMSIST
1979 193.277 178.421 66.773
1980 193.983 179.099 65.308
1981 203.911 188.645 70.458
1982 225.698 209.626 81.928
1983 237.653 221.157 90.71
1984 234.721 218.328 89.745
1985 230.945 214.686 86.534
1986 231 .19 214.922 85~574
1987 236.406. 219.953 87.782
1988 243.879 227.166 91.588
1989 251.781 234.795 95.849
1990 258.569. 241.354 99.656
1991 265.934 248.473 103.538
1992 273.249 255.548 107-.491
1993 2ar·.395 263.43 111 . 757
1994 289.228 271.012 115.876
1995 297.541 279.063 119.87
1996 307.069 288.295 124.568
1997 318.133 299.022 130.08
1998 330.293 310.818 136. 12
MAP Model 1999 342.93 323.084 142.093
2000 357.688 337.417 148.513
111
Total
Wage and
Salary
(EM99ST)
(EM98ST)
ort Sector (EMSlST)
Government (EMG9ST)
(EMBlST)
2004
EMG9ST EMBlST
82.011 29.638
81.765 32.026
.81 .64 36.547
80.619 47.079
83.223 47.224
87.452 41 . 131
89.523 38.629
90.314 39.034
91.462 40.708
92.966 42.611
94~ 819' 44.128
96.81 44.888
98.656 46.279
100.577 47.479
102.522 4-9.15
104.752 50.384
106.933 52.261
109.056 54.672
111.276 57.666
113.672 51.026
116.393 64.599
118.952 69.951
0.400
0.320
0.240
FIGURE 39. COMPOSITION OF ALASKAN EMPLOYMENT, 1979-2000
BASE CASE
--oL
(proportion of· total employment)
Sector ::::::::=~:-.:::::::::=~--_.-Support
Government
Basic
Sector
r t .
( EMSl • EM)~-
~~
L
(EMG9.EM)
c L
[
(EMBl.EM)L
L
1979 1984 1989 1994 1999 2004
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
----------~sa~O~R~C~E~:~M~A~P~Mrro-dTe~l.--------------;~~~
112
EMSl.EM
0.374
0.365
0.373
0.391
0.41
0. 411
0.403
0.398
0.399
'0.403
0.408
0.413
0.41 7
0.421
0.424
0.428
0.43
0.432
0.435
0.438
0.44
0.44
EMG9.EM
0.46
0.457
0.433
0.385
0.376
0.401
0.417
0.42
0.416
0.409
0.404
0.401
0.397
0.394
0.389
0.387
0.383
0.378
0.372
0.366
0.36
0.353
EMBl.EM
[
0.166
0.179 [ 0.194
0.225 -
0.214
0.188
0.18 L 0.182
0.185
0.188
0.188 [ 0.186
0.186
0-.186
0.187
0. 186 ( -,
o. 187 L 0.19
0.193
0.196 r· 0.2
0.207 I
L
L
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[
Personal Income and Prices
Figures 40 and 41 present the growth of Alaskan personal income over the
forecast period. As shown in Figures 40 and 41, the post-TAPS decline
in real personal income as well as real per capita personal income has
ended by 1979, as the gas pipeline boom sends incomes rapidly to a new
peak in 1983. By the peak, real income is over 50 percent higher than
its 1980 level, and real per capita income is over 29 percent higher than
its 1980 level. Real income drops nearly 13 percent; and real per capita
income, by nearly the same amount by 1985, following the decline of gas
pipeline construction activity. After 1985, a period of steady income
growth brings real personal income to over 10.5 billion dollars in 2000,
over 141 percent higher than its 1980 level, for an average annual growth
of 4.5 percent. Real per capita income, on the other hand, grows by
about 56 percent by the end of the period, reflecting an average annual
rate of growth of 2.2 percent.
Despite the structural changes in employment that reduce the government
share of employment, as shown in Figure 42, government continues to be
the major source of income throughout the period, due to sustained higher
growth in state and local wage rates than in support or basic sector
wage rates, as shown in Figure 43. ·
The tendency toward equalization of Alaskan and U.S. prices continues
throughout the forecast period. As shown in Figure 44, the rate of Alaskan
inflation remains lower than the U.S. rate in all but three years--at the
peak of g·as pipeline construction and in the initial stages of recovery
from the gas pipeline construction decline.
113
FIGURE 40. ALASKAN PERSONAL INCOME, 1979-2000
BASE CASE
(millions of 1979 dollars)
X103
12.0'------------------~~~~~~~~~L-------------~
-4.
1979 1984 1989 1994 1999 2004
PIRST
1979 4147.05
1980 4353.43
1981 4923.46
1982 6195.7
1983 6550.92
1984 5972.05
1985 5719.02
1986 5794.35
1987 6050.2
1988 6388.87
1989 6709.1
1990 6982.95
1991 7300.54
1992 7619.03
1993 7976.68
1994 8284.05
1995 8630.45
1996 9047.86
1997 9529.4
1998 10036.9
----··· 1999 10513.5
SOURCE: MAP Model 2000 11114.4
114
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l .
l
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L.
r-,
L
c
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L
L
[
b
[
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~-.
!
[ 10.
1979
[
[
f' L
FIGURE 41. ALASKAN REAL PER CAPITA INCOME,
1979-2000, BASE CASE
(thousands of 197-9 dollars)
1984 1989 1994 1999
PIRPCST
I, ----------------------
~ SOURCE: MAP Model
1979
1980
1981
198Z
1983
1984
1985
198 6
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
19.98
1999
2000
10306.5
10831 .4
11 875.2
13906.6
13988.
12694.3
12238.4
12394.4
12767.3
13214.7
13580.5
13874.1
14220.
14552.
149'1 0.3-
15168.3
15468.9
15834.5
16229.7
16598.1
16871.6
17242.4
115
FIGURE 42. ALASKAN WAGES AND SALARIES, 1979-2000
BASE CASE
(millions of 1979 dollars)
Xl03
10.0·~----------------~~~~~~~~~E~S~BV~SE~C~T~~---------------,
Total
Government
f '
f
(
(WS99RST) I '
r··
I
L
r, .
L
(WSG9RST) [
Support Se tor(WSSl RST)
Basic Sect r (WSBl RSTL
0.0 L '--------
1979 1984 1939 1994 1999 b
WS99RST WSG9RST WSSlRST WSBlRST
1979 3386.03 1450.57 1146. 28 789.183 t 1980 3559.88 1496.35 1153. 51 910.011
1981 4056.28 1562.85 1316. 13 1177.3
1982 5177.59 1636.8 1674.78 1666.01
1983 5463.94 1747.76 1865.98 1850.21
1984 4915.4 1829.42 1712.86 1373.13 L 1985 4686.4 1881 .48 1596.95 1 207.98
1986 4749.66 1942.7 1580.71 1226.26
1987 4960.82 2019.42 1634.56 1306.85
·1988 5240.43 2109.08 1724.03 1 407.33
1989 5503.79 2206.43 1814.7 1482.65 L 1990 5724.84 2306.82 1894.29 1 523.73
1991 5986.03 2409.66 1980.75 1 595.62
1992 6246.84 2518.17 2069.02 1659.66
1993 6542.17 2631.24 2165.95 1744.98 I . 1994 6795.01 2750.48 2249.75 1 794.78-L 1995 7079.01 2871 .42 2334. 14 1873.45
1996 7421.78 2999.8 2440.4 1 981.58
1997 7817.92 3136.8 2566.45 2114.67
1998 8235.82 3281.77 2701.07 2252.98 I ,
1999 8628.5 3433.75 2822.62 2372.13 I SOURCE: MAP Model 2000 9123.63 3588.91 2962.95 2571.77 L
116 L
[
[
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r~
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t
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r ,
I L..:
[
-~
40.0
FIGURE 43. ALASKAN WAGE RATES, 1979-2000
BASE CASE
(thousands of 1979 dollars)
Basic
Sector (WRBlRST)
Government (WRG9RST)
Support
Sector (WRSl RST)
1989 1994 1999 2004
WRBlRST WRG9RST WRSlRST
1979 26627.5 17687.5 17166.9
1980 28414.4 18300.7 17662.6
1981 32213. 19143.2 18679.7
1982 39635.9 20302.8 20442.
1983 39179.6 21001. 20570.7
1984 33384.3 20919. 19085.9
1985 31271.3 21016.7 18454.6
1986 31414.8 21510.6 18471 . 9
1987 32102.7 22079.3 18620.6
1988 33027.1 22686.6 18823.7
1989 33598.9 23270. 18933.
1990 33944.8 23828.4 19008.2
1991 34478.5 24424.8 19130.5
1992 34955.6 25037.2 19248.2
1993 35502.8 25665. 19380.9
1994 35622. 26257. 19415.2
1995 35848.1 26852.5 19472.3
1996 .36245. 27507. 19590.9
1997 36671.1 28189.4 19729.7
1998 36918.4 28870.6 19843.3
1999 36721. 29501.4 19864.7
2000 36765.3 301i0.9 19950.7 SOURCE: MAP Model
117
0.100
0.080
0·.060
FIGURE 44. ALASKAN AND U.S. INFLATION, 1979-2000
BASE CASE
~~~~~~~~~~~--~~--~~--~~--~~--~ United States
--... ..................... ....,._...,...._,._ .... ...,.-Alaska
'------~
1979 1984 1989 1994 1999
ALASKA u,s.'
1979 0.116 0.109
~980 0.077 0.076
1981 0.073 0.076
1982 0.082 0.076
1983 0.061 0.076
1984 0.069 0.076
1985 0.078 0.076
1986 0.076 0.076
1987 0.072 0.076
1988 0.07 0.076
1989 0.069 0.076
1990 0.068 0.076
1991 0.069 0.076
1992 0.069 0.076
1993 ~~069 0.076
1994 0.069" 0.076
1995 0.07 0.076
1996 0.07 0.076
1997 0.07 0.076
1998 0.07 0.076
1999 0.07 0.076
---=-----:---.....,.,..--..,..-----,...,---200 0 0. 07 0.076
2004
SOURCE: United States
TRENDLONG79
based on long-term trend in Data
forecast; Al~ska from MAP Model.
Resources, Inc.,
118
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--~;
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r L'
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~
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r::: L,
[
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t
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r
L
L
State Government Fiscal Position
The fiscal position of the state government, due to the receipt of petro-
leum revenues from Prudhoe Bay, will be altered radically during the
forecast period. Real general fund revenues peak at over 5.2 billion
dollars annually by 1991, about 153 percent over their 1980 levels, and
over 338 percent above their 1978 levels, as shown in Figure 45. The
traditional mainstay of Alaskan revenues--federal grants-in-aid--become
a nearly insignificant share of total revenues over the period. Petro-
leum revenues begin to decline after 1989, but interest earnings and
other revenues continue to grow throughout the period. By 2000, total
general fund revenues are nearly 4.3 billion dollars, nearly 19 percent
below their peak levels.
Under the assumed fiscal policy described above, state expenditures grow
at 13 percent annually in nominal terms, representing about a 5.5 percent
average annual growth in real terms. In real terms, state expenditures
in the year 2000 reach nearly 4.2 billion dollars, just overtaking reve-
nues by the end of the period, as shown in Figure 46.
The substantial differences between revenues and expenditures are accumu-
lated in the state•s fund balances which, in real terms, peak in 1996 at
over 25.4 billion dollars, as shown in Figure 47.
119
4000.
G000.
FIGURE 45. STATE GOVERNMENT REVENUES, 1979-2000
BASE CASE
(millions of 1979 dollars)
0 -~~~~~::=:!::::::!::!::.!::::!:::!:=:!::::!::::!~==:t::::!=:L~~_J
1979 1934
REVGFR RNDSR RP9SR RFDSR
1979 1287.29 281 . 119 767.2 238.973
1980 2077.54 240.563 1615.21 221.762
1981 2502.44 322.807 1968.82 210.818
1982 2936.02 452.577 2279.01 204.437
1983 3 395.15 692.555 2503.25 199.347
1984 3702.91 935.397 2580.43 187.089
1985 4094.36 1062.55 2859. 172.811
1986 4280.3 1224.56 2895.16 160.579
1987 4480.38 1407.68 2921.58 151.123
1988 4704.63 1607.8 2953.59 143.244
1989 4983.62 1817.91 3029.64 136.013
1990 5129.85 2030.77 2970.06 129.018
1991 5253.86 2235.31 2896.2 122.355
1992 5187.47 2432.88 2638.55 116.04
1993 4890.84 2608.45 2172.2 11 0. 186
1994 4726.11 2742.76 1878.75 104.59
1995 4607.86 2847.73 1660.83 99.302
. 1996 4516.76 2931.89 1490. 41 94.454
1997 4408.6 3007. 1 1311.43 90.073
1.998 4278.99 3069.41 1123.53 86.056
SOURCE: MAP Model 1999 4132.6 3119.04 931.294 82.267
2000 3966.9i• 3i 51 .45 736.634 78.828
120
r-
1
[
t
[
r
L
I
L
---r·
I L
[
r~ . ~ -
r
L
r:
I l_ __
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L
[
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r ~
L
r =
I
L
FIGURE 46. STATE GOVERNMENT FISCAL POLICY, 1979-2000
BASE CASE
(millions of 1979 dollars)
-·-·--
Revenues
(E99SR)
(REVGFR)
1000.L--------------------------------------------------------------~
1979 1984 1989 1994 1999 2004
REVGFR E99SR
1979 1287.29 1371.84
1980 2077.54 1439.57
1981 2502.44 1515.41
1982 2936.02 1583.08
1983 3395.15 1686.3
1984 3702.91 1782.82
1985 4094.36 1869.41
1986 4280.3 1962.34
1987 4480.38 2067.59
1988 4704.63 2184.24
1"989 4983.62 2309.83
1990 5129.85 2442.86
1991 5253.86 2581.72
1992 5187.47 2728.76
1993 4890.84 2883.52
1994 4726.11 3047.65
1995 4607.86 3220.04
1996 4516.76 3401 .82
1997 4408.6 3593.92
1998 4278.99 3797.18
1999 4132.6 4011.83
SOURCE: MAP Model 2000 3966.91 4235.72
121
-I
FIGURE 47. STATE GOVERNMENT FUND BALANCES, 1979-2000
BASE CASE
(mi1Tions of 1979 dollars)
X103
30.0~------------~~~~~~~u_~~~~~~------------~
1984
SOURCE: MAP Model
1989
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
122
1994
861.074
1689.75
2830.04
4248.68
6013.08
7863.71
9856.68
11826.5
13813.2
15830.
17907.5
19892.3
21747.7
23299.8
24327.1
24995.9
25355.7
25450.7
25276.4
24820.2
24075.1
23017.7
1999 2004
[
[
[
f _:
[
L
I
L.
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[
[
[
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[
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[
[
[
[
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l
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I L.
REGIONAL
Anchorage
Population. The decline in Anchorage population as a consequence of
the post-TAPS recession is forecast to end in 1980, to be followed by
three years of rapid population growth in the buildup and construction
of the gas pipeline, with peak population in 1983 reaching over 211,000,
over 16 percent above its 1980 level, as shown in Figure 48. Following
a 2.5 percent drop following completion of the pipeline, steady growth
resumes, with 2000 population reaching over 279,000 person~, for a
2.3 percent average annual growth over the 1980-2000 period. The con-
centration of state population in Anchorage continues over the period,
with the Anchorage share of statewide population remaining nearly con-
stant at 45 percent.
Employment. The pattern of Anchorage employment growth, as shown in
Figure 49, follows closely the pattern of statewide growth, with one
exception--the increased concentration of support sector employment in
Anchorage. As a consequence, as in the past, employment fluctuations
are less severe in cyclical downturns in Anchorage than statewide; and
overall, employment grows slightly faster than statewide.
Basic employment in Anchorage during the forecast period consists of two
components. An exogenous employment component consists of agriculture,
forestry, fisheries, mining, and manufacturing employment. Agriculture,
forestry, and fishery employment rises slowly from 111 persons in 1979
123
1979
FIGURE 48. ANCHORAGE POPULATION, 1979-2000
BASE CASE
1984
(thousands of persons)
1989
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
. 1995
1996
1997
1998
1999
2000
184.41 8
181.613
186.092
200.876
211 • 11
209.796
206.01 8
206.52 2
209.175
213.839
219.035
223.847
228.875
234.256
240.001
245.597
251.175
257.405
264.41 2
271 .922
279.323
287.256
1999
SOURCE: MAP Model
124
2004
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[
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FIGURE 49. ANCHORAGE EMPLOYMENT, 1979-2000·
[ BASE. CASE
(thousands of persons) .
[
[ -
180.
l~
Total ( EM99_R5)
[
120.
F'
L
c Support (EMS1R5)
L Sector
[ 60.
Government (EMG9R5)
[ Basic ( EMBl R5) ·sector
[ 0.
1979 1984 1989 1994 1999 2004
[ EM99R5 EMS1R5 EMB1R5 EMG9R5
1979 85.694 42.208 8.862 34.624
1980 85.638 41.94 .9. 074 34.624 c-1981 89.608 45.494 9.493 34.621
1982 97.975 53.283 10. 361 34 .. 332
1983 104.706 58.701 10.865 35.14
1984 105.101 57.736 10.809 36.556
[ 1985 103.305 55.176 10. 851 37.278
1986 103.713 54.916 11 . 202 37.594
1987 105.909 56.28 11 . 629 37.999
1988 109.368 58.769 12.081 38.518
1989 113.28 5 61.505 12.628 39.153
[ 1990 116.753 63.857 13.064 39.831
1991 120.30 9 66.323 13. 515' 40.471
1992 124.001 68.878 13.994 41 • 1 29
1993 127.929 71.603 14.529 41.797
r~ 1994 131.852 74.216 15.084 42.553
L 1995 135.701 76.761 15.643 43.297
1996 140.002 79.734 16.244 44.023
1997 144.87 83.189 16.898 44.783
1998 150.124 86.935 17.59 45.599
I-1999 155.424 90.589 18.317 46.518
I SOURCE: MAP Model 2000 160.98 6 94.531 19.06 47.395
L
125
L
to 126 in the year 2000. Mining industry employment is held close to
its 1979 level, changing only in response to additions of headquarters
personnel associated with the various petroleum developments in the base
case. From a level of 1,655 in 1979, it rises to 1,873 by the year 2000.
Manufacturing employment, also exogenous, is forecast to grow slowly at
close to its historical trend of less than 4 percent annually, rising
from 2,021 persons in 1979 to 4,157 in 2000. The second component of
basic sector employment consists of endogenous employment in construction.
Construction employment rises from 4,533 in 1979 to 11 ,888 in the year 2000.
As in the past, such employment is the major source of basic sector growth
in the Anchorage area.
Endogenous construction activity and support sector growth are tied
closely to statewide economic activity, with this activity being the
major source of employment fluctuation in Anchorage.
The gas pipeline boom peaks in 1984, with Anchorage employment reaching
a peak of 105,000; it then declines slightly (less than 2 percent)
before resuming a steady rate of growth which brings employment to
nearly 161 ,000 by the year 2000, an average growth of 3. 2 percent
annually over the period.
126
[
[
r·
[
E
E
L
L
L
I '
I
L
L
I'
L
[
[ __
[
Personal Income. Figures 50 and 51 present the growth.of Alaskan real
and real per capita personal incomes. In real terms, personal income
by the year 2000 is over 152 percent higher than in 1980, averaging
4.7 percent annual growth. In real per capita terms, personal income
expands nearly 60 percent, averaging 2.4 percent annual growth.
Norton Sound
Population. The growth of Norton Sound population during the forecast
period is shown in Figure 52. Declining total employment leads to a
decline in regional population which continues through 1982. A rise
in government employment thereafter stabilizes support sector employ-
ment, stimulating population growth through about 1985. After 1985,
growing basic sector employment combines with growth of government
employment to keep population growing throughout the period. By the
year 2000, total regional population reaches 15,180, about 28 percent
above its 1980 level, representing average growth of about 1.2 percent
annually.
Employment. Figure 53 presents the base case forecast of Norton Sound
employment growth. By 2000, total employment reaches 4,588, about
49 percent higher than its 1980 level, for an average annual growth of
2 percent. Virtually all of the growth is due to increased basic and
government sector employment. As in Anchorage, basic sector employment
consists of two components--one exogenous, the other endogenous. Exogenous
basic employment consists of mining and manufacturing employment. Mining
127
4200.
3400.
2600.
1800.
1979
FIGURE 50. ANCHORAGE PERSONAL INCOME, 1979-2000
BASE CASE
{millions of 1979 dollars)
1984 1989 1994 1999
1979 1882.63
1980 1946.97
1981 2120.36
1982 2442.8
1983 2636.94
1984 2579.54
1985 2533.88
198 6 2583.87
1987 2687.52
1988 2826.96
1989 2972.8
1990 3112.14
1991 3256.03
1992 3408.19
1993 3569.08
1994 3721 .22
1995 3880.27
1996 4063.84
1997 4269.12
1998 4484.08
1999 4688.35
2000 4917.95
2004
.· f'
L
l.
r
L
[
[
r·
Lc
[
[
[
L
L
------------------------------------~~~--·-··-----1-
SOURCE: MAP Modei I
L
128
L
[
[
[
L
r·
L
r
L
[
[
[
[
[
X103
18.0
FIGURE 51. ANCHORAGE REAL PER CAPITA INCOME, 1979-2000
(thousands of 1979 dollars)
1984 1989
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
10208.5
10720.4
11 394. 1
12160.8
12490.8
12295.5
12299.3
12511.3
12848.2
13 220.
13572.3
13903.
14226.2
14549.
14871.1
15151.7
15448.5
15787.7
16145.7
16490.3
16784.7
17120.4
1999 2004
r------------------------------------. ~--~-------------' SOURCE: MAP Model L
129
L
·:~:~;·~~
-. , .
. ..... ::_
15.5
FIGURE 52. NORTON SOUND POPULATION, 1979-2000
BASE CASE
(thousands of persons)
2004
:J~
-~r··~
····. ---
-· r_ ·-I
['
[
r
L
r
L
[
[
E
[
[
L
L
--I ,
L
[
employment is assumed to maintain its 1978 level of 100 persons through-
out the period, while manufacturing growth maintains its historical trend
of slightly over 3 percent annually. The remaining basic sector employ-
ment, responsible for nearly all of the growth in such employment, is
endogenous construction. Overall, however, basic sector growth is quite
modest, averaging about 5.1 percent annually, slightly above the histori-
cal rate of about 4 percent annually. Support sector employment declines
in the early years of the forecast period, then stabilizes with the
acceleration of government employment growth in the mid-1980s. As in
the past, government employment, primarily at the state and local level,
is the primary source of employment growth during the forecast period.
Personal Income. Figures 54 and 55 present the forecast growth of
Norton Sound real and real per capita personal income. Incomes fluc-
tuate slightly in response to the gas pipeline boom•s being experienced
in the state, causing a general increase in statewide wages. Personal
income reaches 153 million dollars by the year 2000, growing at an aver-
age 4.1 percent over the period; while real per capita income exceeds
10,000 dollars by the end of the period, growing at an average 2.8 percent
annually.
132
r
L
r-:
L
[
r
[
t
[
[
L
L
[~ ..
r·
f""
l::.
r:
L
[
[
b
[
I'
L
1979
SOURCE:
FIGURE 54. NORTON SOUND PERSONAL INCOME, 1979-2000.
BASE CASE
(millions of 1979 dollars)
~ .:. ·._··:::. : .
1984 1989 1994 1999 2004
1979 67.454
1980 68.593
1981 72.321
1982 76.726
1983 81 .258
1984 83.483
1985 .. 83.379
1986 84.71 2
1987 . 87.398
1988 91.283
1989 95.568
1990: 100.074
1991 104.425
1992 109.117
1993 113.893
1994 118.699
1995 123.531
1996 128.91
1997 134.839
1998 141.072
1999 147.158
2000 153.49
.. ------·----·---·----.. -----
MAP Model
133
19?9
FIGURE 55. NORTON SOUND REAL PER CAPITA INCOME
1984
(thousands of 1979 dollars)
1989
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
5613.5
5790.41
6141.45
6665.42
6914.49
6729.21
6657.02
6767.73
6960.84
7193.58
7416.64
7634.34
7856.39
8086.47
8324.35
8534.13
8757.91
9020.15
9305.27
9591.89
9843.96
~0139.
1999
·r'
[
[~
r~
L
r~
L
[
c
[
~.~
L
I :
~
[
[
--------------~------------------(' SOURCE: MAP Modei I
L
134
L
[
[
[
[
r L~
r L
[
I' I-L
L
IV. STATEWIDE AND REGIONAL IMPACTS OF PROPOSED
FEDERAL OCS DEVELOPMENT IN THE NORTON SOUND AREA
Background
The proposed federal OCS developments in the Bering Sea-Norton Sound
area will have direct effects on the statewide and regional economies
via the creation of new labor demands and the generation of new state
and local property tax revenues. These direct effects will depend upon
the resource quantities discovered, the technology used in the extraction
of the resource, and the timing and logistics of the development plan.
Perhaps even more significantly, these direct effects will induce a
sequence of indirect effects in the remaining sectors of the economy
which will trigger migration and fiscal policy changes by state govern-
ment which further alter the structure of economic and demographic growth.
In this chapter, both effects are examined. First, using a set of
development scenarios prepared by Dames and Moore, the direct impacts
of the proposed developments are assessed. Next, using the same models
used earlier to forecast economic and demographic growth in the base
case, the base case assumptions are altered to include the direct effects
included in the OCS development scenarios, and an alternative set of
forecasts is run. The differences between these forecasts and the base
case forecast are identified as the impacts of the proposed development.
135
. The Bering-Norton OCS Development Scenarios
The development of federally owned oil and gas resources in the Norton
Sound Area will generate direct employment as well as state revenues,
with the magnitude of these direct effects dependent upon,both the
magnitude of resource discoveries and the technology employed in their
production. A variety of development scenarios, prepared by Dames and
Moore, were designed to attempt to anticipate these direct effects.
Four scenarios were developed. In the first, an exploration program
beginning shortly after the sale is unsuccessful in yielding any sig-
nificant discoveries, so that no employment or revenue effects are
generated beyond the exploration phase. Three other scenarios begin
with exploration programs of varying success and yielding varying quan-
tities of resource discoveries. This section describes the various
aspects of these scenarios relevant to their economic impacts.
RESOURCE ASSUMPTIONS
The three scenarios in which commercial discoveries are made correspond
to three estimates of resource quantities for the area as prepared by
USGS. The 11 high-find 11 scenario corresponds to discovery of the maxi-
mum field size estimated by USGS. The 11 medium find" corresponds to the
mean, or expected, discovery size for the area. The "low find 11 cor-
responds to the minimum commercial find expected for the area. The
resource estimates assumed for each scenario are shown in Table 22.
136
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[
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L.
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L
L
[
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E
[
0
L
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[
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p
Li
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[
TABLE 22. RESOURCE ESTIMATES 1
BERING-NORTON OCS DEVELOPMENT SCENARIOS
Oil
(Billions of Barrels)
Gas
(Trillions of Cu.Ft.)
Minimum
(Low Find)
0.38
1.2
Mean
(Medium Find)
1.2
2.3
Maximum
(High Find)
2.6
3.2
1Includes only resources developed in each scenario, rather than
total undiscovered resources.
SOURCE: Dames and Moore, "Norton Basin OCS Lease Sale No. 57 Petro-
leum Development Scenarios," October 1979.
TECHNOLOGICAL ASSUMPTIONS
The exploration-only scenario assumes only eight wells drilled over
three years, conducted primarily in the summer months using both jack-
up rigs and drillships for six of the wells and gravel islands for the
remaining two. No new onshore facilities are required. Nome serves as
the major supply base, with materials stored in freighters and barges
and shipped to the rigs via supply boats.
In the high-find scenario, a similar exploration program yields three
clusters of commercial discoveries--in inner Norton Sound south of Cape
Darby, in the central portion of the Sound south of Nome, and in the
outer Sound about 40 miles southwest of Cape Rodney. Production is
137
brought ashore via pipeline to a crude oil terminal and LNG plant at
Cape Nome. Four gravel islands and eleven steel platforms are used for
production. All production is tankered to Lower 48 markets.
In the medium-find scenario, five fields are discovered--two in inner
Norton Sound, the second two in the central portion of the Sound, and
a final field southwest of Cape Rodney. Six steel platforms and two
gravel islands support production, which is transported to a single oil
terminal and an LNG facility at Cape Nome by pipeline, then transported
to Lower 48 markets via tanker.
The low-find scenario consists of discovery of two marginal oil fields
southwest of Nome and a single gas field south of Nome. Three steel
platforms are installed, and production is transported to terminal and
LNG facilities before being tankered to the Lower 48.
EMPLOYMENT ASSUMPTIONS
The direct employment requirements for each of the four scenarios are
presented in Tables 23 through 26.
The exploration-only scenario requires less than 100 persons at its
peak in 1984, and a 11 activity ends before 1986.
In the low-find scenario, employment peaks at over 1,300 in 1990,
during the development phase, eventually falling to a long-term level
of 847 persons by 1995.
138
r t '
[
[
[
r~
L
[
[
[
[
[
B
[
[
L
r·
I
L
l
TABLE 23. DIRECT EMPLOYMENT REQUIREMENTS: EXPLORATION-ONLY SCENARIO
(Thousands of Persons)
r-----.
l J
TABLE 24. DIRECT EMPLOYMENT REQUIREMENTS: LOW-FIND SCENARIO
(Thousands of Persons)
Year Mining Construction Transportation Manufacturing Headquarters Total
1980 0 0 0 0 0 0
1981 0 0 0 0 0 0
1982 0 0 0 0 0 0
1983 .043 0 .031 0 .010 .084
1984 .067 .005 .046 0 .016 .134
1985 .094 .011 ~099 0 .023 .227
1986 .139 . 011 . 149 0 .029 .327 .......
..p. 1987 .050 .052 .050 0 .013 .166
0 1988 .075 .124 .138 0 .005 .342
1989 . 181 . 192 . 131 0 .014 .518
1990 1.092 .010 . 113 .08 .024 1. 319
1991 1 .110 0 .082 .08 .026 1.298
1992 .828 0 .082 .08 .008 .998
1993 .622 0 .082 .08 .003 .787
1994 .592 0 .082 .08 .003 .757
1995 .682 0 .082 .08 .003 .847
1996 .682 0 .082 .08 .003 .847
1997 .682 0 .082 .08 .003 .847
1998 .682 0 .082 .08 .003 .847
1999 .682 0 .082 .08 .003 .847
2000 .682 0 .082 .08 .003 .847
l J
Year
1980
1981
1982
1983
1984
1985
1986
~ 1987 ...... 1988
1989
1990
199"1
1992
1993
1994
1995
1996
1997
1998
1999
2000
,.........,....
I '' ... '""··J
r--.......
I. '1
TABLE 25. DIRECT EMPLOYMENT REQUIREMENTS: MEDIUM-FIND SCENARIO
(Thousands of Persons)
Mining Construction Trans~ortation Manufacturing Headguarters
0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
.067 0 .046 0 .016
. 153 .005 . 108 0 .036
. 183 .011 .203 0 .042
. 139 . 173 .152 0 .031
.079 .445 .108 0 .021
.254 .233 .347 0 .018
.561 .066 .142 .12 .038
2.031 .175 .249 . 12 .050
2.606 .053 .223 .12 .057
2.441 .035 .219 . 12 .045
1.952 .035 .219 .12 .024
1. 742 .035 .219 . 12 .011
1. 743 .035 .219 . 12 .009
1.803 .035 .219 . 12 .009
1.833 .035 .219 . 12 .009
1.833 .035 . 219 .12 .009
1.833 .035 .219 . 12 .009
1.833 .035 .219 . 12 .009
Total
0
0
0
. 129
.302
.439
.495
.653
.852
.927
2.626
3.059
2.860
2.350
2.127
2.126
2.186
2.216
2.216
2.216
2.216
TABLE 26. DIRECT EMPLOYMENT REQUIREMENTS: HIGH-FIND SCENARIO
(Thousands of Persons)
Year Mining Construction Transportation Manufacturing Headquarters Total
1980 0 0 0 0 0 0
1981 0 0 0 0 0 0
1982 0 0 0 0 0 0
1983 .064 0 .046 0 .016 . 127
1984 . 131 .005 .092 0 .032 .261
1985 . 217 .032 .228 0 .048 .524
_. 1986 .228 .264 .254 0 .053 .799
..J::o 1987 .188 • 777 .235 0 .037 1.236 N
1988 .339 .584 .439 0 .039 1.402
1989 .894 .230 . 515 .20 .056 1.895
1990 3.150 .177 .423 .20 .078 4.029
1991 4.113 .069 .415 .20 .103 4.900
1992 4.273 .022 .415 .20 .082 4.992
1993 3. 772 .003 .395 .20 .061 4.432
1994 3.339 0 .411 .20 .033 3.983
1995 3.282 0 .411 .20 .025 3.918
1996 3.249 0 .411 .20 .025 3.885
1997 3.280 0 .411 .. 20 .025 3.916
1998 3.280 0 .411 .20 .025 3.916
1999 3.310 0 . 411 .20 .025 3.946
2000 3.310 0 .411 .20 .025 3.946
r-·-. ' J l J
-,
J
[
[
u
G
L
B
[
[-,
--
r~
I
L
[
Development in the medium-find scenario requires over 3,000 workers at the
peak of development in 1991. By the late 1990s, a permanent labor force
of over 2,200 workers is in place, primarily in the petroleum industry.
REVENUE ASSUMPTIONS
The only direct revenues received by the state as a consequence of the
Bering-Norton development would be property taxes from onshore facility
construction, such as the Cape Nome oil terminal and LNG facility, and
onshore and nearshore pipelines. As shown in Table 27, by the end of
the period, such revenues amount to between 0 for the exploration-only
scenario to as much as over 80 million dollars annually for the high-
find scenario.
Impacts of the OCS Development Scenarios
STATEWIDE IMPACTS
Population
The effect of the proposed Bering-Norton OCS developments on statewide
population growth is shown in Figure 56.
In the medium-find scenario, year 2000 population reaches a level over
19,000, or about 3 percent, higher than in the base case.
The low-find developments raise year 2000 population by 7,056, or
1.1 percent; while the high find scenario raises population by 33,240
143
[
[
TABLE 27. DIRECT STATE PROPERTY TAX REVENUES:
BERING-NORTON OCS SALE [
(Millions of Current$)
l-~
Exploration-Only Low-Find Medium-Find High-Find
Year Scenario Scenario Scenario Scenario [
1980 0 0 0 0
1981 0 0 0 0 r -
I
1982 0 0 0 0 [_,
1983 0 0 0 0 [ 1984 0 0 0 0
1985 0 0 1.161 2.137
1986 0 0.566 11 . 192 20.561 r-
1987 0 5.457 22.303 40.968 L 1988 0 10.875 28.718 51.424
1989 0 14.555 29.586 58.713 c 1990 0 14.996 39.709 69.086 L
1991 0 15.421 40.804 72.046
1992 0 15.825 41.838 73.852 [ 1993 0 16.201 42.795 75.702
1994 0 16.544 43.658 77.205
1995 0 16.846 44.406 78.502 [j
1996 0 17.099 45.018 79.555
1997 0 17.294 45.469 80.317
E 1998 0 17.421 45.731 80.741
1999 0 17.469 45.772 80.769
2000 0 17.424 45.559 80.341
[
L
L
[
,--
L
r-
I
144 L
[
[
L
[
[ 30.0
r
L
[ 20 0
10.0
[
[
ro
L
r· ----··
I
L
[
SOURCE: MAP Model
FIGURE 56. ALASKAN POPULATION IMPACTS
(Thousands of Persons)
1995
EXPL LOW
1980 0 0 o.
1981 0. Oo
1982 Oo o.
1983 0.095 0.191
1984 0.269 0.426
1985 0 o277 0.76
1986 0.159 1 .182
1987 0.097 1 .073
1988 0.073 1. 508
1989 0.063 2.383
1990 0.057 5.014
1991 0.052 6.429
1992 0.049 6.331
1993 0.045 5.799
1994 0.043 5.573
1995 0.04 5.854
1996 0.038 6.163
1997 0.036 6.419
1998 0.033 6.647
1999 0.031 6.86
2000 Oo03 7o056
145
MOD
0. o.
0 0
0.296
0.875
1 0 494
1. 991
2.976
4.526
5.478
9.928
14. 107
16.031
15.873
15.471
15.657
16.318
17.094
17.798
18.436
19o017
HIGH
o.
Oo
o.
High
Find
Medium
Find
Low Find
Oo289
0.775
1. 635
2.824
5.012
7.619
10.255
16.521
22.758
26.703
27.768
27.627
27.99
28.798
29.896
31.0~9
32.178
33.24
by the year 2000, a 5.2 percent increase over the base case. If no
commercial discoveries are made during exploration, the peak impact on
state population occurs in 1985, at only 277 persons, or 0.1 percent
of the base case population.
Employment
As shown in Figure 57, the peak impact on state employment in the medium-
find scenario occurs at the peak of development phase activity in 1991
when total employment rises 9,896, or 3.6 percent, above the base case
level. As shown in Figure 58, the bulk of this impact occurs in the
support sector, where by the year 2000 employment has risen by 4,399, or
over 47 percent of the total impact. Another 22 percent of total impact
by 2000 is due to increased government sector employment, whiTe 31 per-
cent of the impact is in the basic sector.
In the high-find scenario, employment impact in the year 2000 reaches
16,875, nearly 76 percent higher than the medium-find impact; while the
low-find scenario employment impact reaches only 3,554, or 37 percent
of the medium scenario impact. If exploration yields no commercial
discoveries, then peak employment impact occurs in 1985 at 183 persons,
less than 0.1 percent of statewide employment.
Personal Income Impacts
Figures 59 and 60 present the impacts of the OCS development scenarios on
Alaskan real and real per capita personal income.
146
[
(~
[_
,-
!
L
[ __ -_ L~
l-·_
--
L:
[
L
,-
L
r-
• L
[
[
[
[
[
I' L
r::
L
[
[
[
r~
L
r~
I
L
[
15.0
10 0
5.0
SOURCE: MAP
FIGURE 57. ALASKAN EMPLOYMENT IMPACTS
(Thousands of Persons)
1985 1990 1995
EXPL LOW MOO
1980 0. 0. 0.
1981 o. o. .o.
1982 o. o. 0.
1983 0.072 0.142 0.22
1984 0.194 0.304 0.628
1985 0.183 0.526 1. 034
1986 0.083 0.797 1. 326
1987 0.035 0.66 1. 928
1988 0.01 7 0.935 2.841
1989 0. 01 1 1 . 5 3.298
1990 0.01 3.309 6. 391
1991 0.009 4. 118 9. 031
1992 o.oo8 3.812 9.896
1993 o.oo8 3.243 9. 261
1994 o.oo 7 2.96 8.563
1995 0.007 3.079 8.383
1996 0.007 3.216 8. 591
1997 0.007 3.318 8.902
1998 0.007 3.406 9. 172
1999 0.006 3.484 9.405
2000 0.005 3.554 9.606
Model
147
.High
Find
Medium
Find
Low Find
2000.
HIGH
0.
o.
o.
0.215
0.556
1 .146
1. 932
3.353
4.864
6.338
10.548
14.454
16.506
16.42G
15.584
15.25
15.322
15.661
16.051
16.491
16.875
2.5
FIGURE 58. ALASKAN EMPLOYMENT IMPACTS, BY SECTOR,
MODERATE CASE [
1985
SOURCE: MAP Model
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
(Thousands of Persons)
,~
T ota 1 <EMssLl
Wage and
Sa 1 ary [--
<EMsssT>
Support
Sector
(EMSlST)
r:
L
[
Basic --._._,..._.._...,....,___._1 Sector r:
(EMBlST) L
;-..... -.-.... ------~Government ·
(EMG9ST)
EM99ST EM98ST EMB1ST EMS 1ST EMG95T E
0. 0. o. o. 0. B o. o. o. o. 0. o. 0. o. o. o.
0.22 0.212 0. 101 0.094 0.018 0.628 0.606 0.24 0.289 0.077 [ 1 .034 0.997 0.307 0.542 0.147 1 .326 1 .279 0.44 0.689 0.15
1 .928 1.86 0.701 1. 041 0.119 2.841 2.743 0.725 1. 704 0.314
3.298 3.186 1. 029 1.608 0.548 [ 6.391 6.178 2.9 2.399 0.879 9.031 8.734 3.564 3.697 1.472
9.896 9.576 3.429 4.329 1 .818 9.261 8.965 2.869 4.269 1 .827
8.563 8.294 2.604 3.951 1.738 r-,
8.383 8.122 2.607 3.795 1. 719 L 8.591 8.328 2.702 3.849 1.778
8.902 8.635 2.772 4. 1.863
9.172 8.902 2.808 4.152 1.942 .~ 9.405 9.133 2.841 4.282 2.01 --, 9.606 9.334 2.871 4.399 2.064 L
148
[
[
[
[
[
[
[
r L~
[
[
[
c
[
[
i'
L
r,
I
L
L
400.
200.
0 .
. 1980
--·~------
SOURCE:
FIGURE 59. ALASKAN PERSONAL INCOME IMPACTS
(Millions of 1979 Dollars)
EXPL LOW
1980 o. o.
1981 0. o.
1982 0. 0.
1983 2.402 4.844
1984 6.324 9.516
1985 5.453 15.914
1986 2.07 23.754
1987 0.828 21.672
1988 0.445 37.172
1989 0.301 62.699
1990 0.27 115.547
1991 0.245 130.582
1992 0.25 116.711
1993 0.254 98.609
1994 0.246 92.457
1995 0.23 100.137
1996 0.219 105.848
1997 0.234 110.789
1998 0.223 115.383
1999 0.246 119.73
2000 0.207 123.91
MAP Model
149
MOD
0.
0.
0.
7.523
19.742
30. 168
49. 109
90.781
110.84
105.508
225.57
303.305
319.652
294.535
275.566
276.18
289.324
304.715
318.223
330.41
342.215
H·IGH
0.
0.
0.
7.32
17.402
35.414
74.113
159.
204.406
214.176
361.336
479.297
535.473
525.508
499.348
498.227
509.406
530.277
551.742
575.234
596.867
Medium
Find
Low Find
---~----·
SOURCE: MAP
FIGURE 60. ALASKAN REAL PER CAPITA INCOME IMPACTS
(1979 Dollars)
EXPL LOW MOD
1980 o. 0. o.
1981 o. o. o.
1982 o. o. o.
1983 2.293 4.637 7.211
1984 6.184 8:719 18.324
19.85 4.41 4 14.121 25.352
1986 0.207 19.41 52.035
1987 -o .875 16.801 110. 711
1988 -1.086 35.539 104.566
1989 -1 .1 05 61 .105 62.297
1990 -1.02 90.469 171.117
1991 -0.961 75.34 194.691
1992 -o .879 46.395 160.043
1993 -o. 785 22.469 105.066
1994 -o. 734 14.371 72.832
1995 -0.703 17.004 59.234
1996 -0.66 14.305 52.648
1997 -0.59 11.141 45. 172
1998 -0.535 8.266 36.629
1999 -0.457 6.344 30. 176
Model 2000 -0.473 3.461 21.59
150
[
r
[
[
[
r L,
[
r L
[
[
High Find E
Medium [ Find
Low Find
2000
HIGH
[
o. B o. .
0.
6.996
16.039
32.832 [ 83.172
198.383
211.211
148.535 [ 254.172
290.363
266.934
198.102
139.926 I
111.363 L 88.992
73.07
58.027 r 49.352
35.004 I
L
L
[
[
[
[
[
[
[
r
L
[
[
[
~ L
[
[
r ,
L
[
In the medium-find scenario, personal income rises by over 342 million
dollars, or 3.1 percent, by the year 2000 as a consequence of OCS
developments in the Bering Sea. In real per capita terms, there are
two peaks--one during the early development (construction) phase in
which real per capita income rises by over $110, or about 1 percent, in
1987; and later a larger peak during the late stages of development in
which real per capita income rises by nearly $195, or 1.4 percent, in
1991. By the end of the period, however, the influx of new population
has largely offset the growth in income, so that real per capita income
impacts by the year 2000 are negligible (about 0.1 percent).
In the high-find scenario, real personal income by the year 2000 reaches
a level nearly $597 million higher than in the base case, a 74 percent
greater impact than in the medium-find scenario. Real per capita income
impacts follow the same pattern as in the medium-find scenario, although
the impact peaks at 91 percent higher during early development and
49 percent higher during later development.
In the low-find scenario, real personal income impacts are only 36 per-
cent of their medium-find levels; and the impact on real per capita
income has a single peak, occurring in 1990, at less than 47 percent
of the peak impact of the medium-find scenario.
If exploration yields no commercial discoveries, real income impacts
peak at 6.3 million dollars in 1984, well under 0.1 percent of state
real personal income; and real per capita incomes rise by a mere $6.20
in the same year.
151
Fiscal Effects
In the medium-find scenario, state government revenues rise by nearly
65 million dollars annually by 1993 as a consequence of the development,
as shown in Figure 61. Expenditures, on the other hand, required to
maintain real per capita services at their pre-development level, rise
by as much as 125 million dollars by the end of the period, as shown
in Figure 62. Because the expenditure impacts quickly overwhelm the
effect on state revenues, the fund balance held by the state is drawn
down by the development by about 200 million dollars, or nearly 1 percent,
by the year 2000, as shown in Figures 63 and 64.
The high-find scenario, while generating 69 percent higher state revenues
at the peak of development, induces sufficiently higher population growth
to require 75 percent greater expenditures by the year 2000, thus drawing
down state fund balances by nearly 344 million dollars by the year 2000,
72 percent more than in the medium scenario.
The low-find scenario generates only 42 percent of the peak level revenues
of the medium-find scenario but also requires only 37 percent as much of
an increase in expenditures .as in the medium-find scenario, so that the
drawdown of state fund balances is only 42 percent as severe as in the
medium-find scenario.
152
[
[
[
[
[
[
[
r L~
C
·[·
~
c
[
[
E
[
L
L
r~
I .
L
[
[
[
[
[
[
r
L
1:
L
[
[
[
,~
L
r
I
L
L
-10.
1980
FIGURE 61. STATE GOVERNMENT FISCAL IMPACTS: REVENUES
(Millions of 1979 Dollars)
1985 1S9e 1995
EXPL LOW MOD
1980 0. 0. o.
1981 o. 0. 0.
1982 o. 0. 0.
1983 -o. 08 s -o .167 -0.259
1984 0.4 0.646 1. 285
1985 0.869 1 .609 4.248
1986 0.523 3.57 12.906
1987 0.043 7.312 22.102
1988 -0.188 9.977 29.723
1989 -0.297 13.602 33.879
1990 -o .348 16.957 39.234
1991 -o .38 3 24.852 53.582
1992 -0.41 27. 117 64.344
1993 -0.418 24.223 64.992
1994 -o .434 20.535 59.145
1995 -0.449 1 8. 461 53.754
1996 -0.473 18.082 50.594
1997 -o .492 17.652 48.937
1998 -0.5 16.926 47.41
1999 -0.512 16. 1 OS 45.598
·~-------------·-2000 -0.525 15.228 43.576
SOURCE: MAP Model
153
High
Find
Medium
Find
Low Find
2000
HIGH
o.
o.
o.
-0.25<3
1 .149
4.83
20.824
38.543
53.258
63.723
71.594
89.816
105.234
109.871
104.551
96.652
90.937
86.723
83.109
79.547
76.166
150.
75.
0.
1980
----·-----·------
SOURCE:
FIGURE 62. STATE GOVERNMENT FISCAL IMPACTS: EXPENDITURES
(Millions of 1979 Dollars)
1985 1S90 1995
EXPL LOW MOD
1980 0. o. o.
1981 0. o. o.
1982 0. 0. o.
1983 0.346 0.69 1. 071
1984 1.02 1 .614 3. 311
1985 1.10 3 3.037 5.973
1986 0.664 4.96 8.358
1987; 0.421 4.676 12.981
1988 0.329 6.81 20.444
1989 0.295 11. 14 25.607
1990 0.271 24.333 48. 189
1991 0.259 32.323 70.942
1992 0.253 32.989 83.554
1993 0.243 31 .252 85.548
1994 0.232 31.094 86.335
1995 0.231 33.782 90.368
1996 0.222 36.691 97.139
1997 0. 21 1 39.295 104.617
1998 0.214 41.743 111 . 765
1999 0.188 44.153 118.681
2000 0.184 46.367 124.965
MAP Model
154
Medium
Find
Low Find
2000
HIGH
o.
0.
o.
1.045
2.939
6.539
11.847
21.865
34.419
47.948
80.189
114.447
139.162
149.668
154.165
161.545
171.447
182.98
194.782
207.146
216.43
[
[
[
r
L
r
L
[
p
L
[
[' -·
~
B
[
L
r
L
r--
I
L
[
I,
[
I'
L
60.
-80.
-220.
FIGURE 63. STATE GOVERNMENT FISCAL IMPACTS:
FUND BALANCES
(Millions of 1979 Dollars)
Low Find
High -:-460. ~----------------------------------------------~ Find
~
[j
[
[
r~
L
1980
r------·----·· L SOURCE: MAP Model
[
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
)990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
1$)90
EXPL LOW
o. o.
o. 0.
o. o.
-0.504 -1.
-0.445 -0.852
0.078 -0.496
-0.469 1 .645
-1.395 6.551
-2.078 9.285
-2.625 14.273
-3.07 13.266
-3.488 25.602
-3.914 30.562
-4.301 23.707
-4.652 10.77
-4.984 -2.934
-5.324 -15.027
-5.672 -28.953
-5.945 -45.234
-6.273 -63.516
-6.504 -83.172
155
1995 2000
MOD HIGH
0. o·.
0. o.
o. o.
-1.555 -1 .52'
-1.375 -1.332
0.699 0.992
10.437 19.00.8
23.77 44.285
38.219 73.965
54.699 101.809
49.203 103.09
62.598 117.238
75.887 129.918
71.883 123.375
46.793 87.703
14.496 34.301
-20.289 -25.301
-58. 176 -92.727
-100.691 -168.191
-148.574 -252.984
-200.379 -343.906
FIGURE 64. STATE GOVERNMENT FISCAL IMPACTS:
MODERATE CASE
(Millions of 1979 Dollars)
50. Revenues
-50.
-150.
-~0.
1980 1985 1990 1995
E99SR REVGFR FUN OR
1980 o. o. 0.
1981 0. o. 0.
1982 o. o. 0.
1983 1.071 -0.259 -1.555
1984 3. 31 1 1 .285 -1.375
1985 5.973 4.248 0.699
1986 8.358 12.906 10.437
1987 12.981 22.102 23.77
1988 20.444 29.723 38.219
1989 25.607 33.879 54.699
1990 48.189 39.234 49.203
1991 70.942 53.582 62.598
1992 83.554 64.344 75.887
1993 85.548 64.992 71.883
1994 86.335 59.145 46.793
1995 90.36a 53.754 14.496
1996 97.139 50.594 -20.2a9
1997 104.617 4a.937 -sa. 176
199a 111.765 47.41 -100.691
1999 1 1 a. 681 45.59a -14a.574
··---------· ·-. 2000 124.965 43.576 -200.379
SOURCE: MAP Model
156
(REVGFR)
(FUNDR)
[
[
[
[
[
[
[
r
L
[
[
c
E
b .
~
[
L
l
f .
I
L
L
r
[
[
[
[
r:
L
[
[
[
c
[
Ll
[
[
f'
L
r-:
I
6
[
REGIONAL IMPACTS
Anchorage
Population. In the medium-find development scenario, Anchorage population
is increased by 7 ,087, or 2.5 percent, by the year 2000 over its base
case level, as shown in Figure 65. This amounts to 37 percent of the
total statewide population impact.
High-find scenario developments raise Anchorage population by 12,262 in
2000, a 73 percent greater impact than associated with the medium find.
Low-find scenario impacts on population reach only 2,623, or 37 percent
of the medium-find impact. If exploration is unsuccessful, peak Anchor-
age populatio·n impact of 94 persons occurs in 1985.
Employment. As shown in Figure 66, medium-find OCS development raises
Anchorage employment by 3,541 by the year 2000, 36 percent of the state-
wide employment impact. As shown in Figure 67, the bulk of this impact
(76 percent) occurs in the support sector, and less than 5 percent
occurs in the basic sector, with the remainder due to increased govern-
ment employment.
In the high-find scenario, employment rises by 6,180 persons by the year
2000, 74.5 percent higher than the medium-find impact. In the low-find
scenario, employment by the year 2000 is 1,294 higher than in the base
case, less than 37 percent of the medium-find impact. If exploration
is unsuccessful , total employment impact in Anchorage peaks at only
70 persons in 1985.
157
FIGURE 65. ANCHORAGE POPULATION IMPACTS
(Thousands of Persons)
10.0
5.0
0.0
1980 1985 1990 1995
EXPL Lm~
1980 0. o.
1981 o. o.
1982 0. o.
1983 0.01 5 0.031
1984 0.064 0.108
1985 0.094 0.177
1986 0. 073 0.284
1987 0.046 0.413
1988 0.035 0.477
1989 0.03 0.856
1990 0.027 1. 512
1991 0.024 2.079
1992 0.023 2.159
1993 0.021 2.054
1994 0.02 1 . 991
1995 0.018 2.073
1996 0.01 7 2.213
1997 0.016 2.332
1998 0.01 5 2.437
-----~ 1999 0.01 4 2.535
SOURCE: MAP ~1ode 1 2000 0.01 4 2.623
158
MOD
0.
0.
o.
0.051
0.2
0. 328
0.656
1. 233
~.54
2.052
2.992
4.468
5.319
5.505
5.47
5.584
5.865
6.208
6.533
6.826
7.087
[
[
High r ..
Find L_
r
L
Medium C
Find L.
[
Low Find c
[ 2000
HIGH
o.
o.
o.
0.049
0.185
0.346
0.872
, .951
2.866
3,598
5.117
7.213
8.709
9.433
9. ::·91
9.327
10.245
10.748
11.269
11 . 785
12.262
[
[_~
L
[
[
r'
L
----r·
I
L
[
FIGURE 66. ANCHORAGE EMPLOYMENT IMPACTS
(Thousands of Persons)
r-,
I
[
r 5.0
L_::
~~
L~
[~" 2.5
c:~
g
LJ
0.
1980 1985 1990 1995 D
c EXPL LOW MOD
1980 o. o.
1981 0. o.
1982 0. o.
1983 0.021 0.041
§
1984 0.062 0.101
1985 0.07 0.'169
1986 0.04 0.257
1987 0.01 7 0.263 [
1988 0.008 0.315
1989 0.005 0.534
1990 0.005 0.999
19~1 0.0.04 1 . 381
1992 0.004 1 .358
[
1993 0.004 1. 182
1994 0.003 1.057
1995 0.003 1.066
199.6 0.003 1 .132
1997 0.003 1 .182
I o
L
1998 0.003 1.224
1999 0.003 1. 261
SOURCE: MAP Model 2000 0.003 1 .294
r---------
I u
[ 159
o.
0.
0.
0.065
0.2
0.329
0.464
0.736
1. 052
1. 231
1. 895
2.941
3.425
3.343
3.095
3.
3.067
3.201
3.332
3.443
3.541
High
Find
Medium
Find
Low Find
2000
HIGH
o.
0.
o.
0.064
0.181
0.352
0.651
1.226
1 .884
2.312
3.26
4.707
5.595
5.799
5.559
5.42
5.465
5.611
5.799
5.994
6.18
3.00
2.00
1.00
------·-· ------
SOURCE:
FIGURE 67. ANCHORAGE EMPLOYMENT IMPACTS, BY SECTOR,
MODERATE CASE
(Thousands of Persons)
EM99R5 EMB1 R5 EMS1R5
1980 o. o. o.
1981 0. o. 0.
1982 o. o. 0·.
1983 0.065 0.018 0. 041
1984 0.2 0.043 0. 132
1985 0.329 0.053 0.227
1986 0.464 0.06 0.352
1987 0.736 0.081 0.608
1988 1 .052 0.081 0.862
1989 1. 231 0.112 0.933
1990 1 .895 0.107 1. 482
1991 2.941 0.139 2.301
1992 3.425 0.155 2.655
1993 3.343 0.15 2.576
1994 3.095 0.132 2.376
1995 3. 0.128 2.292
1996 3.067 0.132 2.335
1997 3.201 0.142 2.433
1998 3.332 0.152 2.528
1999 3.443 0.158 2. 61 MAP Model 2000 3.541 0.168 2.681
160
Total
(EM99R5)
Support
Sector
(EMS1R5)
EMG9R5
o.
o.
o.
0.005
0.026
0.049
0.053
0.048
0.108
0.186
0.306
0.501
0.615
0.617
0.587
0.58
0.599
0.627
0.652
0.675
0.692
[
[
[
[
r·~
L.
[
r·
r~
L
[
[
L
L
[
L
r-
L
r-
I
L
[
r-
!
I
[
E
[
[
t'
L
r,
L
L
Personal Income. As shown in Figure 68, the impact of the medium-find
OCS development scenario on Anchorage personal income occurs in the year
2000 and amounts to over 122 million dollars, or a 2.5 percent increase
representing 36 percent of the total statewide impact. In real per
capita terms, as shown in Figure 69, there are two peaks--an early
development peak of 94.7 dollars in 1988 and a later peak of 167 dollars
in 1991, followed by an almost complete dissipation of the growth by an
expanding population.
High-find impacts peak at nearly 50 percent higher than in the medium-
find scenario, and low-find impacts reach only 39 percent of the impacts
of the medium-find case. If exploration yields no commercial discoveries,
real income impacts peak at 2.3 million dollars· in 1984, when real per
capita incomes go up by a mere $7.20.
Norton Sound
Population. Unlike the impacts in Anchorage and the state as a whole,
the effect of medium-find developments on the Norton Sound population
occur during the drilling rather than production phase of the project.
As shown in Figure 70, population impact peaks in 1991 at 5,310 persons,
a nearly 40 percent increase in Norton Sound population. By 2000,
however, as direct employment declines to a stable operating force,
total population impact falls to 3,688 persons, a 24.4 percent increase
in the region•s population. While this is only 19 percent of the state-
wide population impact, its concentration in the small Norton Sound area
makes it perhaps the most significant impact.
161
150.
75.
0.
1980
--------------. --------
SOURCE: MAP
FIGURE 68. ANCHORAGE PERSONAL INCOME IMPACTS
(Millions of 1979 Dollars)
1985 1gsl0 1995
EXPL LOW MOD
1980 0. 0. 0.
1981 o. o. o.
1982 0. o. 0.
1983 0.852 1. 727 2.702
1984 2.305 3.548 7.302
1985 2.11 5 5.889 11 . 085
1986 0. 91 1 8.734 17.861
1987 0.371 8.353 33.069
1988 0.202 13.03 40.761
1989 0.142 22.523 39. 42.8
19"90 0.128 38.404 73.859
1991 0. 11 5 44.824 102.585
1992 0.11 6 41.115 110.833
1993 0.122 35.235 104.284
1994 0.11 8 32.823 97.853
1995 0.11 2 34.963 97.718
1996 0.109 37.248 102.166
1997 0.11 7 39.148 107.812
1998 0.10 9 40.895 113. 02
1999 0. 121 42.613 117.875
Model 2000 0.105 44.117 122.166
162
[
[
[
[
r
High r··
Find L
Medium
Find L
[
Low Find c
2000 t
HIGH L
o.
0. E o.
2.647
6.488
12.787 [ 26.703
56.933
75.882
78.922
120.117 L 161.804
183.178
183.344
175.64
174.942
, ..
179.252 L 186.719
194.848
203.836 r· 211.766 ----
I
L
L
[
[
l~
[
[
[
[
I
I L;
[
e00.
125.
50.
FIGURE 69. ANCHORAGE REAL PER CAPITA INCOME IMPACTS
(1979· Dollars)
-25. Low Find
L-----------------------------------------------------~
1980 1985 1~ 1995 2000
EXPL LOW MOD HIGH
1980 o. 0. 0. o.
1981 o. 0. 0. 0.
1982 o. 0. 0. o.
1983 3.164 6.367 9.805 9.621
1984 7.203 10.574 23.066 20.09
1985 4.633 18.012 34. 195 41 .316
1986 -o. 01 6 25.055 46.57 76.125
1987 -1 .059 14.566 81.902 150.922
1988 -1 .238 31.375 94.715 175.32
1989 -1 .203 49.582 52.355 135.117
1990 -1.09 77.113 142.207 213.926
1991 -1.012 66.023 167.258 250.73
1992 -0.91 8 41.023 139.582 232.437
1993 -o. 785 19.352 91.316 172.633
1994 -0.73 10.734 59.645 118.805
1995 -0.676 11.605 44.59 88.625
1996 -0.625 8.93 36.332 65.414
1997 -0.57 5.637 27.992 47.941
1998 -0.5 2.543 18.965 31.816
1999 -0.395 0.223 11 . 574 20.734
SOURCE: MAP Model 2000 -0.465 -2.758 2.863 6.098
163'
7.5
50
2.5
FIGURE 70. NORTON SOUND POPULATION IMPACTS
(Thousands of Persons)
~.....,....,._+-....... ~~-...J. High
Find
Medium '-....,._,...._,.._..__...,._-+ Find
0.01_._~~~~--~~--~==~------~~------~~
1980 1985
SOURCE: MAP Model
[
[
[
L
[
[
[
r,
r~
L
[
[
[
In the high-find scenario, Norton Sound population rises by 8,874 at the
peak of development in 1992, a 65.8 percent rise in regional population,
and falls eventually to a long-term impact of 6,747, a 44.6percent rise
in regional population over the base case. In the low-find scenario,
population impact peaks in 1990 at 2,265 persons, a 17.3 percent increase
in regional population, falling to a long-term impact of 1,341, or an
8.9 percent population increase. If exploration is unsuccessful, popu-
lation impact peaks at 198 persons in 1984.
Employment. As shown in Figure 71, the OCS developments of the medium-
find scenario have impacts on Norton Sound employment which peak during
drilling operations in 1991 at 3,731 persons, representing a more than
doubling of regional employment.· By the year 2000, this impact has
declined to 2,853 persons, a 62 percent increase in regional employment,
constituting 29 percent of the statewide impact of such development. As
shown in Figure 72, this employment impact is far different from that
associated with Anchorage or the state as a whole, inasmuch as the bulk
of the impact is in the basic sector, primarily the direct employment
engaged in OCS operations. By 2000, 86 percent of the regional employ-
ment impact is in the basic sector. Only 13 percent of the employment
impact is in the support sector, reflecting both the enclave nature of
development and the traditional propensity for income in the region to
be spent elsewhere in the state. The remaining 1 percent of total
impact is due to increased government employment.
165
7.5
5.0
a.s
0.0
1980
SOURCE: MAP
FIGURE 71. NORTON SOUND EMPLOYMENT IMPACTS
1985
-·------· -----
Model
(Thousands of Persons)
1990
EXPL
1980 0.
1981 o.
1982 o.
1983 0.047
1984 0.104
1985 0.058
1986 o.oo 1
1987 0.001
1988 0.
1989 o.
1990 0.
1991 o.
1992 o.
1993 0.
1994 o.
1995 o.
1996 o.
1997 0.
1998 0.
1999 o.
2000 0.
166
High
~~~~~~--~-tFind
--..,_.,_._....-.,_ .... ......,._1 Med i urn
Find
Low Find
1995 2000
LOW MOO HIGH
o. 0. o.
o. 0. o.
o. 0. o.
0.094 0.144 0.14
0.152 0.343 0.295
0.259 0.508 0.601
0.377 0.542 0.877
0.18 0.694 1 .342
0.389 0.998 1 .599
0.586 0.978 2.051
1 .558 3.094 4.773
1 .557 3. 731 5.964
1.206 3.539 6.198
0. 941 2.927 5.553
0.902 2.659 5.027
1. 021 2.664 4.961
1. 028 2.754 4.938
1 .034 2. 811 5.006
1. 04 2.828 5.036
1 .045 2.842 5.1
1.049 2.853 5.121
[
[
,~
t
! -
[
I L~
[
,-
L.
c
[
[
E
[
L
,~
L
f -
I
L
[
I
L~
[
r
L
[
[
[
[
a.s
1 8
. 0.8
FIGURE 72. NORTON SOUND EMPLOYMENT IMPACTS, BY SECTOR,
MODERATE CASE
(Thousands of Persons)
Total
__ ....,._..._...___, ( EM99R8)
Support
(ector EMS1R8)
G?vernmert EMG9R8
1990 199S 2000
-0.3L-------------------------------------~~~--------~
1989 1985
EM99R8 EMBfJ(8 EMS1R8 EMG9R8
1980 o. 0. o. 0. 1981 o. 0. o. o. 1982 o. 0. 0. o. 1983 0.144 o.oa8 0.056 0. 1984 0.343 0.206 0. 137 -o. 1985 0.508 0.26 0.246 0.002 1986 0.542 0.36 0.185 -0.002 1987 0.694 0.563 0.14 -0.009 1988 0.998 0.588 0.405 0.004 1989 0.978 0. 776 0. 198 0.004 1990 3.094 2.695 0.408 -0.009 1991 3.731 3.298 0.429 0.0"04 1992 3.539 3.103 0.<122 0.014 1993 2.92 7 2.519 0.391 0.018 1994 2.659 2.272 0.372 0.015 1995 2.664 2.282 0.368 0.013 1996 2. 754 2.367 0. 373 0.014 1997 2.811 2.416 0.377 0.017 1998 2.828 2.429 0.38 0.019 1999 2. 84 2. 2.444 0.38 0.019 2000 2.95j ~.451' 0.38 0.021 SOURCE: MAP Model
167
In the high-find scenario, peak employment impact occurs in 1992 and is
66 percent larger than in the medium-find scenario. In the low-find
scenario, the peak occurs in 1990, at less than 42 percent the level
of the medium-find scenario. Should exploration prove unsuccessful,
maximum employment impact of 104 persons occurs in 1984.
Personal Income. Figures 73 and 74 present the impacts of Bering-Norton
OCS development on Norton Sound real personal income and real per capita
income, respectively.
In the medium-find scenario, personal income increases by 95.2 million
dollars, or 91 percent, at the peak of development, falling to a long-
run impact of 85.1 million dollars, or a 55.5 percent gain in regional
income, constituting about 25 percent of the statewide income impact.
In real per capita terms, income rises 2,877 dollars at the peak in 1991,
a 36.6 percent rise in real per capita incomes. Unlike the statewide
and Anchorage impacts on real per capita income, however, the Norton
Sound gains are not dissipated over time for two reasons. First, the
excess migration into the region in response to the new employment is
much less significant in an isolated area such as Nome than a more open
area such as Anchorage. Second, because both the initial peak and the
long-run impact consist of highly paid basic sector workers, there is
no gradual shift over time toward an increased dominance by lower-paid
support sector and government workers in total impact, as is the case
both statewide and in Anchorage.
168
[
[
~~
[
[
[
[
r:
L
[
c
E
[
E
[
L
L
[
150.
r
I
100.
L:
L
[ 50.
[
[
[
SOURCE: MAP
t
FIGURE 73. NORTON SOUND PERSONAL INCOME IMPACTS
(Millions of 1979 Dollars)
High
Find
___ _. __ .-_,Medium
Find
1985 1995 2000
EXPL LOW MOD HIGH
1980 0. o. 0. 0.
1981 o. o. 0. o.
1982 o. o. 0. o.
1983 .1 .082 2.166 3.345 3.249
1984 2.236 3.24 7.218 6.226
1985 1.23 5.085 9.791 11 . 902
1986 0.033 7.377 12.846 20.658
1987 0. 01 4 4.267 20.145 38.267
1988 o.oo 7 9.344 23.574 41.731
1989 0.005 15.169 23.486 48.653
1990 0.005 38.353 77.735 119.591
1991 0.004 39.204 95.226 152.586
1992 0.004 30.792 91.876 161 .627
1993 0.004 24.316 77.074 147.139
1994 0.004 23.637 70.792 134.274
1995 0.004 27.32 72.012 134.454
1996 0. 004 28.081 76.113 136.59
1997 0.004 28.925 79.522 14~.74 15
1998 0.003 29.738 81.743 145.669
1999 0.004 30.315 83.311 149.718 ----
Model 2000 0.003 30.985 85. 128 153.021
169
2500.
FIGURE 74. NORTON SOUND REAL PER CAPITA INCOME IMPACTS
(1979 Dollars)
SOURCE: MAP Model
Medium
Find
[
[
[
[
r
L
r
L
[
r
I
[
r
L
r
L
! •
L.>
In the high-find scenario, personal income impacts peak nearly 70 percent
higher than in the medium-find case; while real per capita impacts peak
some 40 percent higher than in the medium-find scenario. In the low-
find scenario, real income impacts peak at only 41 percent of their
medium-find levels; and real per capita incomes rise by less than half
the amount in the medium scenario.
171
[
r L
I, L
c
[
[
r
L
[
V. SUMMARY
The direct effects of the development of OCS resources in the Norton
Sound area are twofold--the generation of direct employment and the
generation of state property tax revenues. The magnitude of these
effects depends primarily on the size of the resource discovery.
Employment requirements vary from a peak of less than 100 persons if no
resources are discovered to a peak of nearly 5,000 persons if a maximum
level of resources is discovered. State revenues may amount to zero in
the case of an unsuccessful exploration program to as much as 80 million
dollars annually for a high level of discovery.
Generally, the indirect effects of such developments can be expected to
constitute the major shares of total impacts, .both statewide and in
Anchorage, because of the responsiveness of the support sector to such
development and the propensity for migrants to enter the s.tate in response
to such development. However, such is not the case in the Norton Sound
region, where total impact is dominated by the direct employment effects.
Moreover, while such impacts are small relative to the economies of
Anchorage and the state as a whole, they are by no means insignificant
with respect to the Norton Sound area. Such developments may very well
double employments and incomes in the region within a very short time
span. Furthermore, such radical change may substantially alter the
structure of the regional economy in Norton Sound. Such structural
changes, to the extent they occur, will almost certainly be in the
173
direction of increasing the responsiveness of the regional support
sector to basic employment and would consequently attract an even larger
share of the statewide impacts to the Norton Sound area than is estimated
here. While an analysis of such structural change is far beyond the
scope of this analysis, the results presented here do clearly signal an
impending major change in the character of the Norton Sound economy and
population as a consequence of the development.
174
[
[
[
[
[
[
[
n L
r
L
[
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E
E
6
L
L
[
r L
r u
I
b
~
I d
c u
c
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I'
I w
= I-
L
REFERENCES
Alaska Consultants. 1979. Baseline Conditions and Non-OCS Forecasts:
Cook Inlet Socioeconomic Systems, Lower Cook Inlet Impact Analysis.
Alaska Department of Commerce and Economic Development. 1979. The Alaska
Economy: Year-End Performance Report 1978.
Alaska Department of Commerce and Economic Development. 1979. Alaska
Economic Information Reporting System, Quarterly Report, July 1979.
Alaska Department of Labor. Various Years. Population Estimates by
Census Division.
Alaska Department of Labor. Various Years. Statistical Quarterly.
Alaska Department of Labor. Various Years. Alaska Economic Trends.
Alaska Department of Labor. 1978. Alaska's Economic Outlook to 1985.
Alaska Department of Labor. 1979. Alaska Annual Planning Information:
FY 1980.
Alaska Department of Revenue. 1979. Petroleum Production Revenue Fore-
cast: Quarterly Report, September 1979.
Alaska Department of Revenue. 1979. Alaska's Revenue Sources.
Alaska Department of Revenue. 1979. Revenue Sources FY 1979-1981:
Quarterly Update Addendum, July 1979.
Dames and Moore. 1979. Lower Cook Inlet and Shelikof Strait OCS Lease
Sale No. 60 Petroleum Development Scenarios.
Dames and Moore. 1979. Norton Basin OCS Lease Sale No. 57 Petroleum
Development Scenarios.
Data Resources, Inc. 1979. U.S. Long Term Review.
Scott, M. 1979. Southcentral Alaska's Economy and Population, 1965-2025:
A Base Study and Projection.
U.S. Department of Energy, Federal Energy Regulatory Commission. 1978.
Final Environmental Impact Statement: Western LNG Project.
U.S. Department of Energy, Federal Energy Regulatory Commission. 1979.
Prudhoe Bay Project: Draft Environmental Impact Statement.
175
,·
U.S. Department of Energy, Alaska Power Administration. 1979. Upper
Susitna River Project Power Market Analysis.
U.S. Corps of Engineers. 1979. Supplemental Feasibility Report:
Susitna Hydroelectric Project.
U.S. Department of Interior, Bureau of Land Management. 1979. Beaufort
Sea Final Environmental Impact Statement.
U.S. Department of Interior, Bureau of Land Management. 1980. Western
Gulf of Alaska Draft Environmental Impact Statement.
U.S. Department of Interior, Bureau of Land Management. 1979. Eastern
Gulf of Alaska Draft Environmental Impact Statement.
U.S. Department of Interior, Bureau of Land Management, Alaska OCS Office.
1978. Prudhoe Bay Case Study.
U.S. Department of Interior, Geological Survey. 1979. Outer Continental
Shelf Statistics.
U.S. Department of Interior, Geological Survey. 1975. Geological Esti-
mates of Undiscovered Recoverable Oil and Gas Resources in the
United States, GS Circular 725.
U.S. Environmental Protection Agency. 1980. Alaska Petrochemical
Company: Draft Environmental Impact Statement.
176
D
r
[
[
r: L
[
[
E
f~
C
L
r-' . L
[