Technical Report Number 122
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OCS Study MMS 86-0036 U.S. Department of the Interior Technical Report Number 122 . - I . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. Social and Economic .:::::::::::.::::::: ::::::::::: ~ i:=::::::::::::::::::.:.:.:.:.:.... Studies Program .:.:.:.:.:.:.:.X.:.:.:.:.:.:.:.:.7..:.:.:.:.:.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..%.. .. .. .. .. .. .. .. .. .. .. .. .. .. Sponsor: .:.:.:.:.:.:.:.:.:.:.:.. :.:.:.:. Minerals Management .:.:.:.:.:.:.:.:.:.:.. ..%%..% . *.:.:... :.:.:.:.:.:.:.:.:.:.:.:.:.:.:.:. Service :.:.:.:.:.. .%....%%..%.. .. .:.:.:.::.:.:.:.: . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. Alaska Outer Continental Shelf Region +?3 A Description of the Social and Economic Systems of the Kodiak/Shumagin Region. TECHNICAL REPORT CONTRACT NUMBER NUMBER 122 14-12-0001-30186 A DESCRIPTION OF THE ECONOMIC AND SOCIAL SYSTEMS OF THE KODIAK-SHUMAGIN REGION Prepared for MINERALS MANAGEMENT SERVICE ALASKA OUTER CONTINENTAL SHELF REG1ON LEASING AND ENVIRONMENT OFFICE SOCIAL AND ECONOMIC STUDIES PROGRAM by CULTURAL DYNAMICS, Ltd. 719 N Street, Suite 3 Anchorage, Alaska 99501 November 25, 1986 NOTICE This document has been prepared under the sponsorship of the United States Department of the Interior, Minerals Management Service, Alaska Outer Continental Shelf Region, Leasing and Environmental Office, Social and Economic Studies Unit. The United States government assumes no liability for its contents or the use thereof. A Description of the Social and Economic Systems of the Kodiak/Shumagin Region. Social and Economic Studies Program, Alaska Outer Continental Shelf Region, Minerals Management Service, U. S. Department of the Interior, Anchorage, Alaska. Technical Report No. 122. OCS Study MMS-0036 This document is available to the public through the National Technical Information Service, 5285 Port Royal Road, Springfield, Virginia 22161 The Chapters in this volume were prepared by Stephen J. Langdon, Ph.D. (Fisheries and Subsistence) T. Lee Huskey, Ph.D. (Regional Economy) Dona K. Lehr, Ph.D. (Public Sector Finances) Richard Krause, M.A. (Tourism and Recreation) P. J. Hill, Ph.D. (Infrastructure Investment) James Payne, Ph.D. (Kodiak city Sociocultural) William E. Davis, Ph.D. (Project Manager and editor) Cultural Dynamics, Ltd. N. Y. Davis, Ph.D., President 719 N Street, Suite 3 Anchorage, Alaska 99501 (907) 258-6680 ii ABSTRACT Seven studies are presented on social and economic topics imprt ant to the Kcdiak-Shumagin area of the cen- tral North Pacific, a rrajor coastal region of Alaska. Data is examined for a period ficm the 1970s to the early-1980s. Thems underlying the research include change in the socioeconomic framwork of the regional city (Kodiak) and in the unique econanic patterns of eleven smaller Koniag villages in the Kodiak Island archipelago and on the Alaska Peninsula. Limited information is given for Cold Bay, an enclave cammmrlty in the Aleutians. Ccmercial fishing has long been a key sector of the econcmy. Of the finfish, five species of sahn are imqxxtant to local fishermn; these species generally increased in abundance between 1975 and 1983. Pollock are @ortant to non-local f ishe-;- their ~bundance in the Shelikof Strait peaked in 1983. Shellfish s@es include king, t armer, and dungeness crab; and shrimp. King crab have declined precipitously since 1981. Tanner crab have increased while dungeness are thought to be stable. Shrimp were reduced to low levels of abundance in the mid-1970s and have not yet recovered. The harvesting sector of the Kodiak ~rcial fisheries industry was extensively transfoti between 1975 and 1984; the Chignik harvesting sector remined relatively unchanged. The value of the Kodiak fisheries increased from 1975 to 1981 as a result of crab prices, but declined as stocks fell. Fishermsn responded by diversifying into tanner crab, halibut, sablefish and groundfish. Cl@nik region fishermen cent inued to take salnmn, with little entry into other fisheries. The processing sector also had to adjust. A number of American processors have gone out of business causing a sharp reduction in employmnt. Japanese firm have becoms major or part-owners of umt of the plants still operating in Kodiak city. Firms are attempting to diversify by producing quality groundfish products. Kodiak area f ishermn have had to adjust constantly to the changes in the resources. The nuder of Kcdiak fisherum, both city and rural, reached a high in 1981. From 1975 to 1980, state loans helped underwrite an expansion in size and number of vessels. Average gross earnings of Kodiak city f ishenmn peaked in 1978 at nearly $130 ,000; by 1983 they had drop~d to just under $70,000. Average gross earnings for rural Kodiak fishermen were less than half these amnts. Chignik fishermn faced less change; the limited nunber of permits does not allw additional people to enter the fishery. Their average gross earnings between 1977-83 (except for 1980) were over $100,000. Subsist ence activities t&e place throughout the area. Salnrm, halibut, and deer are the major resources in the Kodiak region; salmm, caribou, umose, and halibut in the Chigniks. The average per-household subsis- tence harvest for Kodiak Island villages is 83% mrine and 17% terrestrial. These villages have higher har- vest levels, higher proportions of households participatiqq, a wider variety of species taken, and greater quantities of distnbut ion than the road-connected parts of the Island. Although data is sparse for the Chignik area, subsistence patterns are similar to the Kodiak rural villages; however, there is a wider vari- ance in per-household subsistence harvests in the Chigniks. The village of Chignik lake has a higher har- vest level than any Kodiak Island village, whereas Chignik Bay and Ch@ik Lagoon have lower ones than any Kodiak village. Economic change during the study pericd involved relatively rapid growth from increased fishing production and an expansion of governmmt al expsndit ures. Major forces causing change were external: increased pur- chases of fishing and tourist resources and increased state and federal expenditures. l@loyment in these sect ors grew by alnr)st 40% during the period; inccmes earned expanded even nmre. Responses to the externa- lly generated act ivit ies occurred in the lccal support and household sectors. The local supprt sector response is described by the multiplier; between 1975 and 1980 it increased over 20% The supFort sector ex- panded nme rapidly than the external sector. This response was the result of an increase in the size of the market. The household sector responded in two ways. First, residents expanded their part icipat ion in the market economy; labor force participation rose. Second, the region esqerienced in-migration. iii If the regional economy were to respond to CCS development in a similar way to that found in this analysis, then oil and gas activities would result in an expansion of support sector employment, which nnst likely would be nmr~ than proportional to the level of &S activity. -- However, the validity of the assumption that this study’s patterns of change can be used to project the ef feets of OCS development needs additional con- firmation. Fublic sector expenditures and activities are crucial to the regional econcttry. Despite data inadequacies, SUDWXY info~tion gives a ~=~e of the relative level of Wblic sector spending. FY1983 was chosen as a benchmark because state expenditures were at or near their peak in real term. Together, identified state and federal expenditures in the region (including Cold Bay) totaled close to $127 million. This nuuber is probably conservative since data availability tended to exclusions rather than additions. The funds were largely generated outside the region and thus are an injection into the local econcmy. The state/federal split is 51% state and 49% federal expenditures. Although the latter tend to beumre stable, they have a tiler local impact because of leakages assodated with a Coast Guard installation. Any analysis of future econmic trends must carefully consider changes in the levels of govermmnt spending. Outdoor recreation and tourism are important aspects of the local econciny, although data shortcomings & it hard to determine their effects. The best estimates suggest that one-quarter of the sales, wages, and employumt in the town of Kodiak are generated from outdmr activities and nonresident tourism. Residents place a high value on outdoor undertakings, but are concerned about conflicts they perceive surrounding them. Much of the land in the study area is federally managed, primarily as wildlife refuges. Agency man- agemnt plans were being prepared at the sam tine data was being gathered for this study. The policies es- tablished by these plans, along with the regulations implementing them, will influence ppular activities such as sport fishing, hunting, sightseeing and camping. State fish and gam regulations also impact out- door recreation in the area. Infrastructure investmnt, both public and private, in the town of Kcdiak was higher during the study period than historically. Extensive changes in the physical capital of the town’s econmy were made in the late 1970s and early 1980s. Major public investments included a power project, larger harkor facilities, and expanded water and sewer systems. The private econony matured, with greater competition in the consumsr sect as. ThiS investment growth came p~ ly from the