Economic Drivers of Oil and Gas

Learning from Best Practices for Possible Regional Implementation

By: Carolyn Hall, Florence Kargi, & Bristan Keller

PADM 628: Public Financial Management

Group Paper

Dr. Greg Protasel

University of Alaska Anchorage

Spring 2018

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Table of Contents

ABSTRACT ................................................................................................................................... 1

INTRODUCTION......................................................................................................................... 2

HYPOTHESIS............................................................................................................................... 2

METHODOLOGY ....................................................................................................................... 2

POLICY ......................................................................................................................................... 3

PROFILE: THE NORTH SLOPE REGION ............................................................................. 4

Map 1.1: North Slope Borough ............................................................................................... 5

PROFILE: THE YUKON-KUSKOKWIM REGION ............................................................... 6

Map 2.1 Yukon-Kuskokwim Delta Region .............................................................................. 7

Table 1.1 National Unemployment Rates ............................................................................. 12

Map 2.2 March Alaska Unemployment Rate ........................................................................ 13

Figure 1.1 Remote Rural Economy ....................................................................................... 14

ALASKA EMPLOYMENT & WAGES FROM OIL AND GAS ........................................... 15

OIL AND GAS IMPACTS ON THE NORTH SLOPE BOROUGH ..................................... 16

Graph 1.1: Equifax Credit Population for NSB.................................................................... 19

SUBSISTENCE AND ENERGY DEVELOPMENT ............................................................... 19

Figure 2: Whales Landed in Kaktovik for Each Year ........................................................... 20

Figure 3: Alaskan Oil Development Histogram ................................................................... 21

Y-K DELTA NEED FOR ECONOMIC GROWTH ............................................................... 21

Table 2.1 (Seasonally Adjusted) ........................................................................................... 22

RECOMMENDATIONS ............................................................................................................ 22

CONCLUSIONS ......................................................................................................................... 23

WORKS CITED.......................................................................................................................... 25

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Abstract

The health of Alaska’s economic landscape varies widely by region. Some regions of

Alaska benefit from a robust, if not complicated, economy; other regions face greater challenges

with economic sustainability. In 2016 when President Trump assumed office, the potential for

resource discovery and development significantly increased with the signing of Executive Order

(EO) 13783 which opened a vast majority of federal waters in Alaska to energy and mineral

development. Cash-poor regions such as the Yukon-Kuskokwim Delta (Y-K Delta) may have a

future ripe for economic growth. By examining the North Slope region’s economic success, the

goal was to learn the economic framework in order to apply best practices to the Y-K Delta in

the event energy and mineral development occurs.

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Introduction

The intention of this paper is to identify how to promote economic benefits to rural

Alaska coastal villages without hindering their Alaskan Native culture and values. For the

purposes of this paper, the North Slope region will be used as a benchmark for best practices due

to its economic benefits, and to learn what practices may be implemented and relevant to the

cash-poor region of the Yukon-Kuskokwim Delta (Y-K Delta). The North Slope region’s

economy is drastically impacted by oil and gas development, whereas the Y-K Delta region does

not largely benefit from the economic infrastructure of fossil fuel development.

Hypothesis

Our first null hypothesis (H01) is energy development will have a negative impact on

subsistence hunting of marine mammals, specifically the bowhead whale. The bowhead whale

was chosen because of its migration pattern, which travels through Y-K Delta area waters to the

waters just north of the North Slope Borough. Our second null hypothesis (H02) is oil and gas

development will not provide many additional jobs to the Y-K Delta region past the beginning of

the production phase (long-run) due to the nature of oil and gas production trends.

Methodology

The North Slope Borough region and the Yukon-Kuskokwim Delta Region will be

introduced by way of census data and government records that outline the demographics and

general scope of the regions’ economy. The regional pulse of how the receptive the residents are

of fossil fuel development will be determined by examining local governmental organizations.

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Current environmental policies dictating the ability to explore, and extract resources will

be reviewed to determine the viability of energy and mineral development for the Y-K Delta

region. Data from Alaska Fish and Game will be analyzed and compared to the height of the oil

boom in the late 1980s in determining H01, and how subsistence hunting was impacted with

increased vessel traffic, production rigs, and seismic surveying. In addition to a literature review,

unemployment and wages earned will be analyzed from the Alaska Department of Labor and

Workforce Development (ADL&WD) during the same time-frame for H02.

Policy

Before President Trump took office in 2016, the previous administration placed

restrictions on development areas in Alaska. Once inaugurated, President Trump revoked EO

13653 which outlined specific requirements allowing industry to tap into undeveloped resources

in federal water and the outer continental shelf (OCS). EO 13653 also reduced carbon pollution

and mitigated impacts on natural resources, climate change and natural security, the Presidential

Climate Change Action Plan, and Climate Action Plan Strategy. President Trump then signed

EO 13783 which opened all of Alaska for development with the exception of the Northern

Aleutian Basin. Section 1 (a) states,

“It is in the national interest to promote clean and safe

development of our Nation’s vast energy resources, while at the

same time avoiding regulatory burdens that unnecessarily

encumber energy production, constrain economic growth, and

prevent job creation. Moreover, the prudent development of these

natural resources is essential to ensuring the Nation’s geopolitical

security” (EO 13783, 2018).

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After EO 13783 was signed, a new Five-Year Program (definitively states what will be allowed

for OCS development for the next five years) was signed even though the previous

administration had signed a drastically different document just months before. With the new

Five-Year Program in place, the potential economic benefit to the Y-K Delta region could

increase local revenues through oil and gas property taxes from processing facilities and other

development-related infrastructure.

Profile: The North Slope Region

The North Slope Borough (NSB) region lies at the northernmost part of the State of

Alaska and is the largest municipality in the United States. North of the NSB is the Arctic Ocean,

to the south is the Brooks Range, to the west is the Chukchi Sea, and to the east is Canada’s

Yukon Territory. According to the 2010 Census, 7,998 people live there (North Slope Borough).

The NSB consists of the following eight villages:

Anaktuvuk Pass Point Hope

Atqasuk Point Lay

Kaktovik Wainwright

Nuiqsut Utqiaġvik (formerly known as Barrow)

Most of NSB residents are Iñupiat Eskimo, who have lived in the region for thousands of

years. Their longevity in one of the harshest climates in the world is attributed to their

adaptability and their use of the land and its resources. This traditional knowledge is passed from

generation to generation and includes how to harvest berries, animals, fish, etc. The close ties

between the Iñupiat and the land, and the Iñupiat and their community members are ingredients

for the deep cultural respect for the environment they live in.

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Map 1.1: North Slope Borough

The subsistence activities developed over the thousands of years are what help the Iñupiat

survive and thrive in the current day. The subsistence activities of harvesting the resources drive

the culture and identity of the population (North Slope Borough, 2010). According to the United

States 2010 Census Report, 98.7 percent of Iñupiat households use subsistence foods. 53.4

percent of households receive half or more of their diet from subsistence foods (North Slope

Borough).

The NSB is a mixed economy of cash and subsistence. The borough recognizes the

importance of the economic health by including it in the Borough Mission Statement: “The

North Slope Borough is committed to having healthy communities, economically, spiritually and

culturally. The Borough works with the tribes, cities, corporations, schools, and businesses to

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support a strong culture, encourage families and employees to choose a healthy lifestyle, and

sustain a vibrant economy” (North Slope Borough). The Iñupiat have adapted their traditional

and cultural values “to the challenges inherent in modernity and the need to develop their natural

resource as well as the need to judiciously determine the application of the revenues that flow

from that development” (North Slope Borough, 2010). The NSB government relies heavily on

the oil and gas industry to fund public infrastructure improvements, such as addressing the water

sanitation systems, building public housing, and a local cultural center (North Slope Borough,

2010).

Profile: The Yukon-Kuskokwim Region

The Yukon-Kuskokwim Delta (Y-K Delta) region lies at the southwest part of the State

of Alaska. It encompasses the areas between the Yukon and Kuskokwim Rivers. The eastern

border lies just shy of McGrath on the Kuskokwim River and the village of Grayling on the

Yukon River, and the western border is the Bering Sea (Indian Health Service). According to the

2010 Census, 24,701 people live in the area (Indian Health Service, 2011). The Y-K Delta is

comprised of about fifty villages, with mostly Yup’ik, Cup’ik and Athabascan residents

(Association of Village Council Presidents). Map 2.1 shows where the Yukon-Kuskokwim Delta

is located in southwest Alaska. It covers 75,289 square miles of wetlands, tundra, and mountains.

The Yukon-Kuskokwim Delta could be compared to as being as big as the state of Louisiana

(Yukon-Kuskokwim Delta Service Area, 2006).

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Map 2.1 Yukon-Kuskokwim Delta Region

The Y-K Delta region has a mixed economy of cash and subsistence activities. As is the

case in the North Slope region, the subsistence activities are a staple of the cultural identity for

the residents. For thousands of years, the Alaska Native peoples have lived off the land and its

resources, relying upon it for survival. Y-K Delta subsistence activities include fishing, hunting,

berry gathering, trapping and crafts production. Several hundred people in the Y-K Delta have

commercial fishing permits, primarily for salmon and herring roe net fisheries. Wage

employment “has not developed enough to fully support residents” (Association of Village

Council Presidents). Bethel, located near the mouth of the Kuskokwim River, is the regional

economic hub.

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In the past, the Y-K Delta economy has not benefited from local fossil fuel development.

With the signing of EO 13783, and subsequent implementation of the five-year National Outer

Continental Shelf Oil and Gas Lease Program, that could change.

There are so many remote places in the world that have not yet been discovered or

developed, this means that there is a potential for development. Whether that development is

economic through natural resources, or a way for them to adapt to the “western world” practices.

Meaning, a place that has natural resources in their region could have some monetary value; all

that is needed is for an organization to extract the resource and teach the local people how they

could benefit from it. Whether it be monetary or through elected local leadership through the

people.

To get an idea of the biggest community within the YK-Delta, the hub is a community

called Bethel, which has a population of 6,378 people according to city-data.com (city-data.com,

2016). Other surrounding remote rural communities’ population surrounding the Bethel area

vary, the biggest remote rural village is Hooper Bay which has a population of 1100, and there

are some small villages such as Platinum, which has a population of 50, and Red Devil, Alaska

that also has a population of 50. Within this vast area of land, it varies.

What natural resources are available in the area? There is the development of the Donlin

Gold mine (which is controversial), commercial fishing (which has declined within the last few

years), National Wildlife Refuge, and subsistence activities that are still very active. Unlike the

areas of the state that are abundant in natural resources like the North Slope, the Yukon-

Kuskokwim Delta makes use of what is in the region.

If there is potential for economic development in the region that has not yet been tapped,

then how can one region learn from a whole different region from in the state to implement their

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best practices utilized over the last 40 years? One of the natural resources that the Y-K Delta is

trying to develop is the Donlin Gold mine, which has a lot of pros and cons that we will evaluate.

What are some of the pros for the development of the Donlin Gold mine, this project

would be big, which could have a total footprint of the proposed mine and all related facilities

would be around 16,000 acres which is equivalent to 16,000 football fields. According to Greg

Lang, Nova Gold CEO, he stated, “the world’s largest known high-grade undeveloped open-pit

gold deposit.” The anticipated labor force that just the construction phase would take is about

2,500 people, which would be locals. But once the mine is up and running the workforce would

shrink to between 600 and 1,000 people. Even though it will shrink by more than half, the mine

while in production would still be the second largest employer in the region following the

Yukon-Kuskokwim Health Corporation which has 1,500 employees (Pros and Cons of Large-

Scale Mining in the Kuskokwim, 2014). This would be a great opportunity for developing and

sustaining economic development and there is a huge potential for a gold mine in this region, so

what are some of the cons?

According to the Environmental Impact Statement process, there are several certainties

that are bound to happen, because of the inevitable, which will have some ecological impacts

which include invasive plant species. According to Alaska botanists and ecologists, their concern

is that the spread of invasive organisms is the second leading cause of the loss of natural

biological diversity, and that the spread is only increasing as human societies become more

mobile. Lassuy and Lewis note that, “Much of that increased risk of invasion may come from

increased shipping, energy development, mineral exploration and associated shore-based

developments such as ports, roads, and pipelines” (Pros and Cons of Large-Scale Mining In The

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Kuskokwim, 2014). Invasive species are not the only things that may come about, what kind of

impact is this going to have on subsistence?

Due to the increased barge traffic, it is believed that this will disrupt subsistence fishing

activities, especially if severe fishing restrictions are put in place to help conserve the dwindling

numbers of fish. Also, it is believed that invasive species reduce biological diversity, and

numerous noxious weeds. If dispersed throughout the region, they have the potential to compete

against some of the local berries and other subsistence food items (Pros and Cons of Large-Scale

Mining In The Kuskokwim, 2014). This may be very hard for this region, because this is part of

the state that still heavily relies on subsistence practices. There is potential for a negative impact

to the land, and subsequently, to the people who harvest the food from the land.

The development for the Donlin Gold Mine has great potential for economic

development in the Yukon-Kuskokwim Delta, with a great opportunity to create and employ a

workforce of 2,500 jobs. The downside of this development are environmental factors that could

introduce invasive species that could create negative biodiversity, that may or may not affect the

berries and fish that locals heavily rely on for feeding them and their families throughout the

year.

The natural resource in the Y-K Delta is the national wildlife refuge which was

established to conserve fish and wildlife populations and habitants in their natural diversity such

as shorebirds, seabirds, tundra swans, emperor, white-fronted and Cackling Geese, black brant

and other migratory birds, salmon, muskox, and marine mammals; to fulfill treaty obligations; to

provide the opportunity for continued subsistence uses; and to ensure water quality and

necessary water quantity. The wildlife refuge is one of the largest in the nation, as it covers a vast

22 million acres. It encompasses an extensive array of nearly unaltered habitats including both

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the Andreafsky and Nunivak Wilderness areas, a thriving delta with extensive tundra and

wetlands interspersed by countless water bodies, hills and mountains that rise up to 3,000 feet in

elevation, and volcanic lands bounded by rocky bluffs and soaring sand dunes (Yukon Delta

National Wildlife Refuge, 2018) This is a huge job for the national wildlife refuge because they

have to protect so many animals within a very large landscape, and this is why it is considered a

natural resource.

The Y-K Delta refuge is a rather important natural resource to the region, because their

duty is to protect the birds of the air and the fish and sea mammals of the waterways to ensure

that they are not over harvested by locals that live within the area. Less than five percent of the

refuge is forested and most of the habitats remain essentially untouched by man. The refuge

supports one of the largest aggregations of waterfowl in the world (Yukon Delta National

Wildlife Refuge, 2018). We’ve established that fish and birds are an important part in this part of

the world, but what about the fish? What does commercial fishing look like in this part of the

state of Alaska.

The last natural resource within the delta is commercial fishing, which has declined

within the last few years. In the summer of 2016, The Coastal Villages Seafood closed its fishing

processing plant in Platinum due to the fact that too few people were benefiting from the

operation (Heimel, S. 2017) The reason the company did not open after 19 years due to the fact

that the onshore plant was never profitable because the conditions were never self-sustaining.

These fishermen were making anywhere between $6,000 a year selling fish and some in

Quinhagak said that in good years expert fishermen could earn more than $20,000 a season

(Cotsirilos, T., 2017) With the closure of a small fishing processing plant, this has impacted

many fishermen whose primary income is through commercial fishing. It has been very hard,

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especially since the economic conditions of the region are already at poverty level. What does

the Yukon-Kuskokwim Delta unemployment rate look like compared to the state of Alaska and

the national level?

According to the National Employment Monthly Update, the national average for

unemployment rate as of March 2018 is at 4.1 percent (National Unemployment Monthly

Update, 2018). The statewide unemployment rate for March 2018 is 7.9 percent, which is almost

two times the national average, but the Kusilvak unemployment rate is at 22.6 percent and the

Bethel area is at 13.9 percent. The rate alone for the Kusilvak area is six times the national

average, and the rate for the Bethel area is almost five times than the national average (March

Unemployment Rate Range, 2018).

Looking at the rate of unemployment, the Yukon-Kuskokwim Delta has two areas that

range from 13.9 percent and 22.6 percent. The area is so large that it is divided between the

Kusilvak and Bethel area, which when you combine both, it comes to 36.5 percent rate, which is

8.9 times the national average.

Table 1.1 National Unemployment Rates

(National Employment Monthly Update, 2018)

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Map 2.2 March Alaska Unemployment Rate

Although the Yukon-Kuskokwim Delta has some of the most impoverished areas in

Alaska, the region of Yup’ik, Cup’ik, Cug’ig, and Athabascan indigenous people have some of

the richest culture and language among the Alaska Native groups. Central Alaskan Yup’ik is the

largest of the state’s Native languages, both in size of its population and the number of speakers.

According to the University of Alaska Fairbanks Alaska Native Language Center, out of the

21,000 Yup’ik people, about 10,000 speak the language. Children still grow up speaking Yup’ik

as their primary language in 17 of 68 Yup’ik villages (Central Alaskan Yup’ik, n.d). As part of

carrying their language and traditional practices what the Yup’ik have learned from their

ancestors who have been practicing the traditions since time immemorial is a true statement in

today’s modern society. What do most of these households in the remote rural Alaska look like?

According to the Institute of Social and Economic Research at the University of Alaska

Anchorage, 78 percent of rural Alaskans combine jobs and subsistence fishing, hunting, and

other activities, 3 percent have no job and no subsistence, 11 percent have job only and 9 percent

is subsistence only as stated in Figure 1 below (Goldsmith, S. 2008). A majority of households in

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remote rural Alaska heavily rely on jobs and subsistence to this day. In fact, as someone who

was born and raised in a rural Alaskan village from personal experience, the women are the ones

who work while a majority of the time to bring in income so that the men could purchase fuel,

ammunition, and supplies for their hunting needs.

Figure 1.1 Remote Rural Economy

(Goldsmith, S. 2008)

Below is a picture of Arnold and Albert Simon II harvesting a walrus during spring

season after the snow has started melting. A majority of the subsistence hunting depends on the

seasons: winter, spring, summer and fall harvests with spring and summer time being the busiest

time of the subsistence calendar year.

(Arnold & Albert Simon II of Hooper Bay harvesting walrus. Photo courtesy of Florence Kargi)

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Alaska Employment & Wages from Oil and Gas

Employment, income, and spending associated with the oil and gas industry are the

State’s main economic engine. The oil and gas industry generate a substantial share in Alaska’s

economy with average earnings of more than two-and-a-half times the average for all Alaskan

industries (Fried, 2017). Oil production started in the 1970s, peaked in the mid to late 1980s, and

has continued to decline in production since. With the Trans-Alaska Pipeline System (TAPS)

now running at 25 percent capacity (44.1 percent total production from Prudhoe Bay)

(Department of Revenue, 2017), Alaska’s share of domestic oil production has fallen to seven

percent, with the State falling from second to fourth in U.S. oil production.

Though the majority of jobs in Alaska come from urban areas, urban and rural Alaska are

jointly dependent on one another. There are three important factors that link the economic bond

between urban and rural Alaska. Many jobs in urban Alaska are traced both directly and

indirectly to natural resource production in remote rural Alaska such as businesses supplying

building materials and services in support of production, in addition to government spending

(Goldsmith, 2008). Other jobs stem from businesses selling to families of workers in resource

development. Thirdly, jobs associated with the delivery of services and products for remote rural

residents are filled by urban Alaskans (Goldsmith, 2008).

In 2015, Alaskan residents working in the oil industry earned $118,092 on average

(Fried, 2017). In 2013, 92 percent of Alaska’s unrestricted revenue came from the oil and gas

industry, and 11 percent of the state’s total wages ($2 billion) (Fried, 2017). Direct employment

related to oil and gas accounts for four percent of the total workforce yet accounted for 11

percent of total wages earned in Alaska in 2015 (Fried, 2017); however, this does not include

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jobs that relate to oil and gas pipelines, transportation companies, refineries, and many

construction companies. Tens of thousands of jobs are excluded across a range of other

industries that quantify the importance of the industry to Alaska’s economy. Therefore, the

statewide effect of oil and gas is even more pronounced on payroll than on employment (BOEM,

2016). Although the oil industry has a large footprint in the state of Alaska, nonresidents

represent 36 percent of the workforce and earned 34 percent of its total wages (Fried, 2017).

Other major economic drivers other than oil and gas include federal government activity and

basic sectors (i.e. tourism, transportation, hospitality, etc.) in both state and local economies

(SRB&A, 2017).

Oil and Gas Impacts on the North Slope Borough

The North Slope Borough (NSB) is a mixed economy, meaning the Iñupiat residents

participate in job(s) and subsistence practices. Both subsistence activities and sharing among

families and friends have substantial economic value. This mixed economy can be viewed as an

economic advantage due to the flexibility of using immediate resources available (i.e. cash and

the natural environment). Most residents (78 percent) do not rely solely on subsistence or wages

earned alone, but depend on both jobs and subsistence (Goldsmith, 2008). The persistence of this

unique mixed economy has been documented for over 44 years (SRB&A, 2017). Engagement in

the mixed economy is perceived as a conscious choice to pursue traditional cultural practices and

to keep alive important cultural values (Kofinas et al., 2015; SRB&A, 2017). Types of household

incomes other than employment include pensions, dividend checks, public assistance,

shareholder dividends, student aid, and disaster relief (SRB&A, 2017).

The North Slope Borough’s (NSB) economy has significantly benefited from oil and gas

development. This has greatly contributed to the borough’s revenues and is why they are

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considered one of the most economically stable regions across Alaska (respectively). Property

tax payments by North Slope oil and gas producers are the main source of revenue for the NSB

and directly support the high percentage of local government jobs (AOGA, 2014). In 2016, oil

property taxes over $347.5 million attributed to two-thirds of the NSB’s budget, and

approximately 96.7 percent of total tax revenues. These taxes help support local services,

programs, and projects. Approximately 1,845 jobs in the NSB are attributed to the oil and gas

industry, generating $105 million in annual wages (AOGA, 2017).

North Slope crude oil production is expected to rise in FY 2017 from 490,300 barrels per

day (BPD) to 523,700 BPD. This is a significant increase compared to the 33,000 BPD

forecasted in the Department of Revenue’s 2016 forecast (Department of Revenue, 2017). The

2017 forecast is based on a revised average oil price forecast of $50.05 per barrel for FY 2017,

up from $46.81 per barrel in the fall 2016 forecast, based on higher than forecasted prices over

the past several months. However, forecast prices over the next ten years are minimal from the

2016 forecast, with nominal per barrel prices expected at $54.00 average in FY 2018 increasing

to $88.00 by 2026.

The vast majority of Alaska oil and gas (66 percent) is developed in the NSB (Fried,

2017). These wages are linked to oil property taxes paid by the industry that support NSB

government operations. More than twenty thousand workers commuted to the NSB in 2014 for

jobs relating to oil and gas. Of those workers, approximately 14 percent were North Slope

residents. Currently, the unemployment rate of the NSB is 8.5 percent, compared to Alaska’s

unemployment rate of seven percent (ADL&WD, 2017). Although a percentage of wages earned

is not being injected into the local economy, the surrounding infrastructure provides jobs to the

communities due to operations, logistics, and maintenance (Fried, 2016).

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In 2015, approximately 3,360 persons were employed in the NSB, including 2,120 in

Utqiaġvik (formerly known as Barrow), 130 in Kaktovik, and 190 in Nuiqsut (ADLWD, 2015).

Local government, which includes schools, is the top employer of North Slope permanent

residents. Nearly 60 percent of persons employed in the NSB were Borough government

employees: 55 percent in Utqiaġvik; 74 percent in Kaktovik; and 59 percent in Nuiqsut

(ADL&WD, n.d.). The high percent of local government employees in the NSB is in contrast to

the State of Alaska (14.3 percent) and the U.S. (3.8 percent). The total wages for workers in the

NSB in 2015 was approximately $151 million (ADLWD, 2015). High unemployment and

underemployment are characteristic of communities of the NSB (Hilcorp, 2015, Appendix A).

Additionally, the NSB appears to have less vulnerability to market conditions when

compared to other cities in the U.S. The exception is the oil and gas market, which further

validates how important this resource is for the NSB. When an economy is healthy, consumers

tend to spend more, and credit ratings are typically higher. Based on the data recorded from the

Federal Reserve Economic Database (FRED), the NSB’s average population credit rating was

not significantly affected (normal peaks and valleys) and did not drastically change until the

significant drop in oil prices in 2014 (see Graph 1.1).

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Graph 1.1: Equifax Credit Population for NSB.

Subsistence and Energy Development

Much like the Y-K Delta and many other Alaska regions (although there have been

social, economic, and technological changes in Iñupiat lifestyles), subsistence hunting continues

to be part of the core in Alaskan Native sociocultural systems. While subsistence is not a source

of income, it is part of the whole economy. Households (HHs) need to purchase equipment used

in the subsistence harvest such as boats, rifles, all-terrain vehicles, etc. With variation from

community to community, sharing of the harvest remains strong. However, the relationship

between subsistence and wage economies and how they integrate into Alaskan socioeconomic

systems are never the same in rural communities and rural socioeconomic systems. One distinct

variable is the ethnic composition of the community, while another is the diversification of the

local economy and the availability of wage employment.

Within the NSB, “communities most active in subsistence activities tend also to be those

highly involved in the wage economy (Kofinas, et al, 2016). Monetary resources are needed to

assist in harvesting subsistence resources, both as they affect individual harvesters (i.e.

purchasing a boat), and as they affect the head of a collective crew (i.e. whaling). However, full

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time employment also limits the time a subsistence hunter can spend hunting. In summer,

extensive hunting and fishing can be pursued after work and without any limitations, but during

midwinter, this window of time is further limited by waning daylight” (MMS, 2008). As one

North Slope hunter observed: “The best mix is half and half. If it was all subsistence, then we

would have no money for snow machines and ammunition. If it was all work, we would have not

Native foods. Both work well together” (ACI, Courtnage, ad Braund, 1984).

Now that the significance of how subsistence living is a major factor in the mixed

economy among the Y-K Delta and the NSB, one may ask how significant the future

development of energy would (renewable and non-renewable) inhibit the subsistence lifestyle,

thus potentially impeding a sustainable economy.

The years associated with being the biggest oil boom in Alaska occurred in the late

1980’s (see Figure 3). Based on subsistence harvest data, there is a positive correlation between

oil development, and bowhead whales harvested (Koski, 2005). This further suggests it is

possible to increase energy development without significantly negatively impacting subsistence

hunting (in accordance with existing policies, laws, and regulations), thus promoting an

improved and sustainable economy for these regions.

Figure 2: Whales Landed in Kaktovik for Each Year

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Figure 3: Alaskan Oil Development Histogram

Y-K Delta Need for Economic Growth

“It’s no secret that many challenges stand in the way of economic growth in the Yukon-

Kuskokwim Delta, among them the high cost of energy and transportation.” (Kyuk, 2018) The

Y-K Delta region has also experienced changes in its population. While there has been a rapid

rise in youth, there has simultaneously been a decrease in workforce-aged adults. While

unemployment is relatively high in the Y-K Delta region (currently at 14.6 percent (FRED,

2018)), not all of the labor force is captured in this data because discouraged workers are not

accounted for.

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Table 2.1 (Seasonally Adjusted)

Discouraged workers are people who are not in the labor force, want to work, are able to

work, and have looked for jobs sometime within the past 12 months. The reason discouraged

workers are not accounted for in unemployment is because they have not searched for

employment in the last four weeks because of a low sense of locus of control. For the state of

Alaska, there were an estimated 2,700 discouraged workers at the end of the fourth quarter in

2017 (FRED, 2018). With the Bethel census area comprising of approximately 2.6 percent

(18,121 in 2016) of the state’s population (ADL&WD, 2016), one can infer the number of

discouraged workers is an estimated 70 discouraged workers (2.6 percent of 2,700) which

accounts for 0.39 percent of the area’s population bringing real unemployment rate up to an

estimated 15 percent based on 2016 data.

Recommendations

There is opportunity for the Y-K Delta region to benefit from potential energy and

mineral development that occurs as a result of President Trump signing EO 13783. Depending

on the amount of natural resources in the area, based on the research conducted on the oil and

gas industry’s economic impacts on the North Slope Borough, this could significantly impact the

Y-K Delta economy. The information outlined regarding the impact of fossil fuel development

on the bowhead whale migration show there was no negative effect of the H01 or of the H02 in

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regards to the long-term employment numbers. There are several recommendations that come

from this report’s examination.

It is recommended that local entrepreneurs and the regional Alaska native corporation

invest in or start subsidiary companies to provide trainings and services for potential natural

resource-related jobs. If not, most of the labor will come from workers not living in the

immediate area, and job increases will be temporal.

The NSB economy has significantly benefited from oil and gas development, and in order

for a region such as the Y-K Delta to mirror that prosperity, it is recommended that property tax

payments by Y-K Delta resource development companies directly support a high percentage of

local jobs. The taxes would help support local services, programs and projects such as schools,

government and local cultural projects. It is imperative for the majority of the hired workforce of

an energy or mineral resource development company to be local hires within the Y-K Delta

region, in order for the cash economy to flow back into the support system of the subsistence

economy.

Now that the significance of how subsistence living is a major factor in the mixed

economy among the Y-K Delta and the NSB, one may ask how significant the future

development of energy would (renewable and non-renewable) inhibit the subsistence lifestyle,

thus potentially impeding a sustainable economy.

Conclusions

Executed well, the economic future of the Y-K Delta with sufficient energy and mineral

development, may bode well. Ultimately, Y-K Delta residents will need to decide what the future

economy will look like between the subsistence activities and cash. Regional non-profit tribal

consortium the Association of Village Council Presidents (AVCP), issued a press release seeking

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withdrawal of the Bering Sea from the Proposed National Outer Continental Shelf (OCS) Oil and

Gas Program, set forth by the Bureau of Ocean Energy Management (BOEM). The AVCP wants

to withdraw the Bering Sea from lease sales in order to preserve subsistence practices, such as

hunting and fishing, in the area. “These traditional subsistence practices are vital to the culture

and economy of the region, alongside commercial fishing. Oil and gas activities will jeopardize

local people’s ability to secure subsistence food and commercial harvests, and would add

ecological stressors on the Bering Sea alongside those brought by climate change” (Association

of Village Council Presidents, 2018). The AVCP also put out a call to Y-K Delta residents to

submit comments on the proposal to BOEM.

In the end, there are potential economic benefits for the establishment and development

of future energy and mineral developments - whether offshore drilling, as allowed by EO 13783,

or with the development of the Donlin Gold mine - in the Y-K Delta. It will be up to the Alaska

Natives’ cultural values and how they choose to balance their subsistence activities with western

economics.

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