Some of the Most Important Things to Know About the Economy of Alaska

by

Gunnar Knapp Professor of Economics Institute of Social and Economic Research University of Alaska Anchorage

April 2007 Subsistence salmon Subsistence drying Subsistence--Alaska’s original economy--remains an important part of the economy of rural Alaska. People in rural Alaska get much of their food from subsistence. Subsistence is a vital part of Alaska Native culture. Subsistence faces challenges, including a limited resource base and growing demands from sport and commercial users. An important debate has been going on for many years over who should have the right to participate in subsistence, and the relative roles the federal and state governments should have in managing subsistence resources.

How important is subsistence? Annual Approximate subsistence cost of buying harvest per the food in a Area of Alaska person (lbs) store Northern, $2,064- Western & 516-774 lbs $2,656 Interior Alaska A woman at a subsistence “fish camp”—an important Anchorage & 16-35 lbs $64-$140 Fairbanks Subsistence harvesting part of summer family life in of Beluga whales much of village Alaska The Rural Alaska Economy The economy of rural Alaska—particularly villages in western and interior Alaska—is very different from that of urban areas that account for most of Alaska’s population. These population of “village Alaska” is overwhelmingly Alaska Native. Residents get much of their food from subsistence. Costs are very high, and basic infrastructure such as housing and water are far below the standards of urban Alaska. There are few jobs, and a very high share of jobs are in local government, education and health care. The economy is heavily dependent on federal and state transfers. A major economic challenge facing Alaska is how to create economic opportunities in these areas. There are no easy or obvious answers.

Two Rural Census Areas Many Alaska villages are Anchorage Wade Yukon- accessible only by small Hampton Koyukuk planes, boats or % Alaska Native (1999) 8.1% 94.7% 63.3% snowmachines. Freight Unemployment rate (2000) 4.7% 17.8% 15.4% costs are heavily Adults Not In Labor Force (1990) 26.7% 44.3% 39.5% subsidized by the U.S. Transfer payments per person (1999) $4,000 $5,900 $7,100 Postal Service’s “bypass % of population below poverty level (1997) 6.7% 39.4% 24.2% mail” program. Alaska Land Ownership Federal government 59% State government 28% Native Corporations Native corporations* 12% In 1971, the United States Congress passed the Alaska Native Other owners 1% Claims Settlement Act (ANCSA) *Native corporations were created by the which was intended to settle the Alaska Native Claims Settlement Act of rights of Native peoples to Alaska 1971. The shareholders of these land. Alaska Natives became corporations are Alaska Natives. shareholders in “Native Corporations,” which were allowed to select lands from land owned by Federal the federal government. Today, lands (white) about 12% of Alaska is owned by State lands Native corporations. (grey) Native lands There are two kinds of Native (blue) corporations: twelve “regional corporations” and hundreds of smaller “village corporations.” There is a regional Native corporation for each of twelve Alaska regions. Some of the regional Native corporations have become very large and profitable businesses with many subsidiaries in Alaska and other states. Some of the most financially successful Native corporations, such as Cook Inlet Regional Corporation (CIRI) and Arctic Slope Regional Corporation have paid large dividends to their shareholders. Others have not been as successful and have paid very small dividends.

Many of the regional corporations have large headquarters office buildings in Anchorage. Geography Alaska’s geography—its location, climate, topography, and resources—have driven Alaska’s economy in the past and define and constrain its opportunities for the future. Alaska has abundant natural resources—oil, minerals, forests, fish. But Alaska’s remoteness from major markets, cold climate, mountainous topography, and permafrost make Alaska a costly place to extract resources compared with other parts of the world. In the twentieth and twenty-first centuries, Alaska’s strategic location has contributed to the role of the military and more recently the international air cargo industry. Another Alaska natural resource--its natural beauty—represents an increasingly important natural resource. Arctic Alaska is a very large state. There are significant differences between different parts of Alaska with respect to climate, natural resources, Native cultures, Northwest population, types of economic activity, Interior and so on. It is useful to think of Alaska in terms of six major regions: Southeast, Southeast Southcentral, Interior, Arctic, Northwest, and Southwest. Southwest Southcentral Alaska’s Population Alaska’s population is about 650,000. Alaska ranks 48th among U.S. States in population. Alaska’s population is about 1/5 of Oregon’s, 1/10 of Washington’s, and 1/50 of California’s. Alaska’s population is about the same as that of Memphis, Tennessee.

Alaska’s population compared Alaska’s population compared with other states with selected cities

California 35 million New York, NY 8 million Memphis, TN 646 thousand Washington 6.1 million Alaska 649 thousand Oregon 3.6 million Seattle, WA 569 thousand Maine 1.3 million Montana 918 thousand Alaska’s population compared with selected countries Alaska 649 thousand Finland 5.2 million Vermont 619 thousand Norway 4.6 million Wyoming 501 thousand Alaska 649 thousand Source: Statistical Abstract of the United Iceland 309 thousand States, 2004-05. Data are estimated populations for 2003. Alaska Population Growth Alaska’s population grew rapidly from about 100,000 just after WWII to about 225,000 at Statehood, about 550,000 in 1986 and about 650,000 today. Alaska’s population growth—like Alaska’s economic growth-- has slowed significantly since the mid-1980s.

Growth in Alaska Population 1964-1974 37% 1974-1984 51% 1984-1994 15% 1994-2004 9% Alaska Population Change Alaska population change is the combined result of natural increase (births minus deaths) and net migration (people moving in minus people moving out.) Alaska’s rapid population growth during the 1970s and early 1980s was driving by net in-migration: people moving to Alaska. The history of booms and busts in Alaska’s economy can be seen by periods of net in-migration and periods of net-outmigration. In most years over the past decade, more people have moved out of Alaska than have moved to Alaska. But the population continues to grow slowly because of natural increase. Alaska’s economy has always depended heavily on natural resources. Before Alaska became a state in 1959, the fishing and mining industries—along with government—accounted for most of the jobs and income in Alaska, directly or indirectly. The discovery of oil on Alaska’s North Slope in the 1960s drastically changed Alaska’s economy. Alaska’s oil production is so valuable that it now dominates Alaska’s economy. The Scale of Alaska’s Economy in Jobs Total Alaska employment is about 320,000. A quick indication of how “big” or significant an industry or project is for the Alaska economy is to compare it with 320,000. Job numbers in the tens of thousands or thousands are “big.” Job numbers in the hundreds are less significant relative to the total economy.

Alaska employment grew from

350 94,000 in 1961 to about Alaska Employment: Relative Magnitudes 320,000 today. Total Alaska employment 321,000 300 Local government 38,000

250 Retail trade 34,000 Seafood processing 7,900 200 Air transportation 6,600 150 Mining employment (excl. oil & gas) 1,400 Wood products manufacturing 300 100

Employment (thousands of jobs) *Note: Data are for 2003. Total includes estimated 50 uniformed military and commercial fishing employment. Data are “annual average” employment; 0 for industries such as fish processing, seasonal employment may be considerably higher.

1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 The Scale of Alaska’s Economy in Dollars Alaska has a $30 billion economy—as measured by the size of it’s Gross State Product.* That’s also about the size of the Alaska Permanent Fund. A quick indication of how “big” or significant a dollar value is for the Alaska economy is to compare it with $30 billion. Dollar values in the billions or hundreds of millions are “big.” Dollar values in the tens of millions or millions are much less significant relative to the total economy.

*Gross State Product is the total value of goods and services produced in Alaska, minus the cost of inputs purchased from outside Alaska.

The Scale of Alaska’s Economy in Dollars: Some Relative Magnitudes Alaska Gross State Product 2002 $29.7 billion Value of Alaska Permanent Fund 4/4/05 $29.9 billion Total Alaska employee compensation 2002 $14.9 billion Total federal spending in Alaska FY03 $7.9 billion Value of Alaska oil production 2002 $7.2 billion Total State investment earnings FY04 $3.5 billion Total State oil revenue FY05 $2.4 billion A million is NOT the same as a billion!!! A billion is 1000 million! Measures of Alaska’s Economy There is no easy or “best” way to measure or describe the Alaska economy. Different measures give different pictures of the structure of Alaska’s economy and the relative importance of different industries.

The best available data are for employment and for Gross State Product—but there are problems with each of these measures. Employment data leave out important parts of Alaska’s economy, such as commercial fishing and self-employed workers, and don’t take account of the fact that many workers are not Alaska residents. Gross State Product (GSP) is the total value of goods and services produced in Alaska. GSP data are highly sensitive to oil prices and don’t take account of profits which flow out of Alaska or the role of Permanent Fund investment earnings. Neither measure takes account of subsistence. Share of Alaska Share of Alaska Employment Gross State Product Oil Industry Along with federal spending, Alaska’s economy is driven by the oil industry. Although a only about 2500 people are directly employed by oil companies, many more work in oil- related jobs such oilfield service activities, oilfield construction projects, and pipeline operations. The State of Alaska is extremely dependent on oil revenues, mostly from oil royalties and severance taxes which oil companies pay to the state. Oil accounts for about 85% of the “unrestricted” revenue available to the State for spending for general purposes. Thus the oil industry pays for a very large share of state government and local government employment. UAA’s Institute of Social and Economic Research (ISER) has estimated that about one-third of Alaska jobs can be attributed—directly or indirectly—to the oil industry.

Prudhoe Bay, on Alaska’s North Slope, is the largest oil field ever discovered in North America—and a huge industrial complex. Oil Prices Oil prices are among the most important factors affecting the Alaska oil industry and state oil revenues. Oil prices affect how profitable oil development is for the oil companies, and their willingness to invest in new development. Oil prices also directly affect how much revenue the State gets from the oil industry. Oil prices have risen dramatically over the past five years—which has been a tremendous benefit for Alaska’s oil industry and for State oil revenues. Average North Slope Oil West Coast Monthly Price

$80.00

$70.00 This graph shows $60.00 average monthly prices for Alaska $50.00 North Slope crude

$40.00 oil. Prices peaked

$/barrel in July 2006 at $30.00 more than $70/barrel. In the $20.00 winter of 2007,

$10.00 prices averaged between $50/barrel $0.00 and $60/barrel.

Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08

Source: through December 2006: Alaska Department of Revenue Tax Division website. www.tax.state.ak.us. Downloaded January 31, 2005 , March 28, 2006, and January 19, 2007. Price for January 2007 is January 19 price reported in Anchorage Daily News. What will happen to oil prices in the future? It would be nice if we could be sure that oil prices will stay high. But we can’t be sure that they will. Historically, oil prices have historically fluctuated widely, and have been very difficult to predict. In the early 1980s, “real” oil prices (adjusted for inflation) were almost as high as they are today. But oil prices fell to very low levels by 1986, leading to a severe recession in Alaska. The bottom line: Oil prices won’t necessarily stay high in the future.

Real and Nominal Oil Prices

Costs of alternative energy forms, such as natural gas, coal, and nuclear energy, set an upper limit on oil prices over the long-term.

Source: The Economist, based on data from Thomson Datastream. Prices are for Arabian Light (1972-75) Forties (1976-84); West Texas Intermediate (1985-2005). Real prices are adjusted by the US CPI. Trends in Alaska Oil Production Alaska’s oil production peaked in 1988 at about 2 million barrels per day. Production has since fallen by half, to less than 1 million barrels per day, as oil is pumped out of existing fields—particularly the giant Prudhoe Bay oil field. Production from new, smaller fields has not been enough to offset the decline—and is not projected to be.

North Slope Actual and Projected Oil Production If Congress allows (from the Alaska Department of Revenue’s drilling in the Arctic Spring 2005 Revenue Forecast) National Wildlife Refuge (ANWR) and if oil is discovered, a rough estimate is that total ANWR production might begin about 2014 and might reach about .38 million barrels per day by the mid 2020’s (about 38% of current North Slope production levels). The decline in Alaska oil production is a major concern for Alaska, because Alaska is extremely dependent on the oil industry to pay for its state government. For the past four years, rising oil prices have brought a big increase in state revenues. But in the future, lower oil production (and maybe lower prices as well) will probably mean the State will have a lot less money.

State General Fund (Unrestricted) Revenues

6000 Oil 5000 Other These are the “official” 4000 future oil revenue

3000 projections for Alaska based on the Alaska

millions millions of dollars 2000 Department of Revenue’s projections of future oil 1000 production and future prices. 0

FY78 FY80 FY82 FY84 FY86 FY88 FY90 FY92 FY94 FY96 FY98 FY00 FY02 FY04 FY06 FY08 FY10 FY12 FY14

Source: Alaska Department of Revenue, Spring 2007 Revenue Sources Book, www.tax.state.ak.us/sourcesbook/index.asp For most of the 1990s, the State of Alaska’s expenditures were higher than its revenues. The State paid for the difference by taking money out of a special savings account, known as the “Constitutional Budget Reserve Fund” or “CBRF.” We haven’t had to take money out of the CBRF for the past few years, because oil prices went up so much and the State earned so much more money. But once the State started earning more money, it also started spending more money. So we may have to take money from the CBRF again within a few years.

State "General" Expenditures and General Fund Revenues Constitutional Budget Reserve Fund Ending Balance

6000 4000

"General" 3500 5000 expenditures General fund 3000 4000 revenues 2500

3000 2000

millions millions of dollars

millions millions of dollars 1500 2000

1000 1000 500

0 0

FY78 FY80 FY82 FY84 FY86 FY88 FY90 FY92 FY94 FY96 FY98 FY00 FY02 FY04 FY06

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005 fiscal year North Slope Natural Gas There are enormous natural gas resources on Alaska’s North Slope— comparable in energy value to Alaska’s oil resources. These gas resources have not been developed because there is no pipeline to bring them to market. Currently there is a lot of talk and excitement about building a gas pipeline.

A gas pipeline is not a sure thing. Building a gas pipeline raises extremely complex economic, financial, political and legal issues.

Building a gas pipeline would be extremely expensive—costing on the order of $30 billion (almost as much as the value of Alaska’s Permanent Fund). Because of the high cost and the great uncertainty about future natural gas prices, developing North Slope natural gas in inherently risky. Anyone taking on this risk—the gas producers, the pipeline owners, gas customers, or the State—will want a large share of the profits. This makes it hard to reach a deal to build a pipeline.

If a gas pipeline is built, it will probably be at least ten years before construction would start. Federal Spending The federal government spent almost $8 billion in Examples of federal spending in Alaska Alaska in FY2003. Alaska ranks first among U.S. in 2003 ($ million) states in federal expenditures per capita. Federal Military procurement contracts $1237 spending plays a critical role in the Alaska economy, supporting not just the military and Salaries and wages $1617 federal civilian agencies, but also many other Medical assistance program $565 industries such as construction and health care. Highway planning and construction $414 About 1/3 of Alaska jobs depend—directly or Indian Health Services Health $399 indirectly--on federal spending. Management Development Program Federal Spending in Alaska: 1981-2003 Alaska Senator Ted Stevens 9000 has used his political power as 8000 one of the most senior Procurement members of the Senate to 7000 greatly increase federal spending in Alaska in recent 6000 Direct Payments years. Federal spending will 5000 to Individuals and likely fall when Stevens retires Others from the Senate. 4000 $ millions Wages and 3000 Salaries

2000 Grants to State

1000 and Local Governments

0

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 The Military The Military has played an very important role in Alaska’s history and economy. During World War II hundreds of thousands of troops were sent to Alaska. The army built the Alaska Highway and many other roads, airfields, and military bases, transforming Alaska’s transportation infrastructure and economy. At statehood 35% of Alaska jobs were military. Since statehood, the number of military has declined, while the rest of the economy has grown. Today there are about 18,000 active duty military in Alaska—representing about 6% of total jobs. WWII: A wrecked P-38 Alaska Employment: Military and Civilian in the Aleutians 350

300

250

200

150 Eielson Air Force Base 35% of 6% of jobs jobs in Civilian in 2001 Employment (thousands of jobs) 100 1961 were were military Military military 50

0

1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 Alaska Seafood Industry Alaska’s seafood industry is very large and very diverse. Many different kinds of boats—ranging from very small to very large—harvest many different kinds of fish. These are processed into many different kinds of products which are sold in markets all over the world. This makes it difficult to generalize about the Alaska seafood industry.

The most important species for the Alaska seafood industry—in terms of volume and value—are pollock, salmon, halibut and crab. There are important differences between these fisheries in resource conditions, market conditions, the types and scale of boats that are used, who participates in the fisheries, and who manages the fisheries. Alaska Seafood Industry Economic Importance Alaska’s seafood industry is world-scale. The value of fish harvests was about $900 million in 2001. About $1.3 billion in value was added in fish processing. The seafood industry is particularly important for rural Alaska. Fishing is the most important source of income, taxes, infrastructure and utilities for coastal communities--and an important part of Alaska culture. However, many fishermen and the majority of fish Average annual fishing processing workers are non-residents, and most of the large employment is about companies in the seafood industry are based outside Alaska. 9000 and average annual fish processing Alaska fish employment is about processing plants 7000. The number of people working in the seafood industry is much higher because many of the jobs are seasonal.

Map source: Alaska Division of Community Advocacy web site: http://www.dced.state.ak.us/cbd/seafood/seafoodprocessors.htm. World Salmon Supply: Wild and Farmed

Seafood Industry Challenges 2,500,000 Unlike many other places, most Alaska fish resources are healthy and 2,000,000 not over-fished. However, lower 1,500,000 prices have caused a sharp decline in Farmed Other wild value for some species. The Alaska metric tons 1,000,000 management of many fisheries is being “restructured” to restrict the 500,000 number of boats participating and to

create fishing rights which may be 0 bought and sold. This process is very controversial, and will significantly 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 affect who participates in and benefits from Alaska fisheries.

Competition from salmon farming led to a sharp drop in Alaska salmon prices between the late 1980s and 2002. Prices have since risen somewhat, partly because some consumers prefer wild salmon. Fish farming is growing rapidly worldwide, but is banned in Alaska. Mining Alaska has several large operating zinc, gold, silver and coal mines, and a number of smaller mines. Several very large mining prospects in southwestern Alaska, including the Pebble and Donlin Creek gold deposits, are under evaluation and may be developed in the next few years. The total annual value of Alaska mineral production is about The Red Dog mine, north of Kotzebue, is $1 billion. Total direct employment in mining Alaska’s largest mine and the world’s largest is about 1500 jobs. zinc mine. The land is owned by an Alaska Native corporation, NANA Regional Although Alaska has significant mineral Corporation. The Red Dog mine employs resources, high costs of extraction and about 500 people, many of them Alaska Natives transportation and volatile prices make it who are shareholders of NANA. difficult for Alaska mining projects to compete in world markets. State revenues from mining are less than $30 million— compared with more than $3 billion from oil.

The Fort Knox mine, north of Fairbanks, is Alaska’s largest operating gold mine. A major new potential mining project in Alaska is the proposed Pebble mine, which would develop gold and copper from a very large deposit in southwestern Alaska. A Canadian company, Northern Dynasty Minerals Ltd, is working to develop the project. This involves extensive studies and a long and complicating permitting process.

This Pebble mine is generating a lot of controversy—and is likely to generate more-- because other resource values in this area, including fisheries and wilderness, are also very high. In particular, the Pebble project is in headwaters of Bristol Bay drainage—home to Alaska’s most valuable salmon fishery and many sport-fishing lodges.

Source: Northern Dynasty Minerals Ltd presentation on Pebble project, downloaded March 14 2006 from: http://www.hdgold.com/i/ndm/NDM_Feb06_BMO_RAD.pdf The debate over the Pebble Mine is similar to many other debates which have occurred in Alaska’s history between advocates of developing Alaska’s resources and advocates of protecting Alaska’s environment. These debates raise fundamental questions about what kind of future we want for Alaska, and whether or not we can develop our natural resources and also protect our environment. Alaska’s constitution says that Alaska’s resources are to be managed for the “maximum benefit” of Alaskans. But not all Alaskans agree about what “maximum benefits” means.

Here are two websites—one from an organization which opposes developing the Pebble mine and one which supports it. Tourism About 1.5 million visitors came to Alaska in 2003, more than half of them on cruise ships. Total employment attributable to tourism is estimated— by various methods—at between 18,000 and 26,000. Tourism is likely to continue to grow— creating demands for new facilities and recreational opportunities for visitors, as well as conflicts over crowding and land use.

Alaska Employment: 1961-2001 350

Traditional basic includes 300 military, federal civilian, mining, oil, fishing, forestry, agriculture and Other 250 manufacturing.

200

150 Tourism

Employment (thousands of jobs) 100

Traditional Basic 50

0

1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 Trade and Services Alaska Employment, 1961-2001 Much of Alaska’s employment growth 350 over the past 40 years has come in All Other Employment support industries—particularly trade 300 Services and services. Trade and service jobs Wholesale and Retail 250 now account for more than 40% of total Trade

Alaska employment. Alaskans are 200 much more likely to work in a retail store or a hospital than on an oil rig or 150 a fishing boat. The growth in trade and

Thousands of jobs services has led to a decline in average 100 Alaska wages—because wages tend to be lower in trade and services than in 50 other industries. 0

1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001

xxx Alaska’s Permanent Fund Since the late 1970s, the Alaska constitution has mandated that part of the state’s oil royalties be deposited in a special “Permanent Fund.” We can’t spend the principal of the Permanent Fund—only the interest. As the Permanent Fund has gotten bigger, the interest earnings have gotten bigger. Between 1998 and 2003, the state earned more from permanent fund investment earnings than from “mineral revenues” (mostly oil royalties and taxes). In the future Permanent Fund earnings will probably keep growing while oil revenues will probably fall. Permanent fund investment earnings pay for Permanent Fund dividends—and have in this way become a significant driver of Alaska’s economy.

2006 $1106.96

Source: Alaska Permanent Fund Corporation, An Alaskan’s Guide to the Permanent Fund. Alaska’s Fiscal Challenge Alaska faces a long-term fiscal problem. As Alaska’s population grows, demand for services will inevitably grow. At the same time, the oil revenues which have paid for most services are likely to decline as oil production declines—regardless of what happens to oil prices.

Alaska’s investment earnings from the Permanent Fund are growing. But Alaskans have come to expect that those earnings will be used to pay for Permanent Fund dividends.

Alaskans have also been unwilling to accept broad-based taxes—such as income or sales taxes—to pay for the costs of government.

Eventually the State will have to reduce spending, impose more taxes, use some of the Permanent Fund earnings to pay for state expenditures—or spend from the capital of the Permanent Fund. Just two years ago, most people expected the State would have to begin to do this soon—but high oil prices have solved the State’s fiscal problem for the short term.

No other state has both high oil revenues and a huge Permanent Fund. Most States would love to have Alaska’s fiscal problem. It is not an economic challenge but a political challenge. The Alaska Disconnect Alaska’s fiscal structure—specifically the fact that Alaskans do not pay any significant broad-based taxes—leads to a problem which has become known as the “Alaska Disconnect.”

If economic developments creates more jobs, Alaska’s population grows. As the population grows, Alaskans need more schools and teachers for their children and the other services that state and local governments provide.

Although the new Alaskans pay local sales and property taxes which support local services, they don’t pay state taxes to cover the cost of state-funded services such as education and roads.

The new jobs create new costs for the state but not corresponding new revenues. As a result, except for oil development (which pays high state taxes), many kinds of economic development make the state’s financial situation more difficult. Alaska Economic Development Policy Alaskans and their politicians and long debated how to bring “economic development” to Alaska. Government can create jobs by spending money—and has done this throughout Alaska’s economic history.

But the federal and state governments have a poor track record in creating sustainable, profitable private-sector economic development by spending money. A number of government-funded projects, such as the Delta Barley and Point McKenzie Dairy agriculture projects, and the Alaska Seafood International plant in Anchorage, ended in complete failure.

Alaskans also exhibit conflict about whether they really want resource development. Almost every resource development opportunity—mining, logging, cruise ships, sport fishing lodges, fish farming—is opposed by local residents or other resource users who prefer to keep things as they are.

The $50 million Alaska Seafood International Plant in Anchorage was sold to a church group after it failed to succeed in producing and marketing high-value seafood products. Alaska’s Economic Future Alaska’s economic future is uncertain. There are positives, negatives and unknowns.

Positives include the potential for Alaska’s large and varied resource base, the growing value of Alaska’s scenic resources, the information revolution, the large and growing earnings of the Permanent Fund, and steady growth in the health care industry as Alaska’s population ages.

Negatives include declining oil production and state oil revenues, the possibility that federal spending in Alaska could decline significantly, and continued competition from other natural resource users.

We don’t know how resource discoveries, market prices, and political and technological changes may affect Alaska’s economic future. Surprises Many of the most important events which have changed Alaska’s economy have been almost completely unexpected. Examples include World War II, the 1964 earthquake, the discovery of the giant Prudhoe Bay oil field, the dramatic rise in oil prices in 1979, and the Exxon Valdez oil spill.

There are probably more surprises in Alaska’s future, which may have similarly unanticipated and dramatic effects. What will they be? ???