**REPORT TITLE:** Beaufort Sea Petroleum Development Scenarios: Summary
of Socioeconomic Impacts.

**STUDY TITLE:** Beaufort Sea Petroleum Development Scenarios: Summary
of Socioeconomic Impacts.

CONTRACT NUMBER(S): BLM: CT6-61; MMS: 14-12-0001-29002

SPONSORING OCS REGION: Alaska.

APPLICABLE PLANNING AREA(S): Beaufort Sea.

FISCAL YEAR(S) OF PROJECT FUNDING: 1977.

COMPLETION DATE OF REPORT: December 1978.

COST(S): FY 1977: \$20,001; CUMULATIVE PROJECT COST: \$20,001.

PROJECT MANAGER(S): J. Lindsay.

AFFILIATION: James Lindsay & Associates.

ADDRESS: 601 West 5th Avenue, Anchorage, Alaska 99501.

PRINCIPAL INVESTIGATOR(S)\*: J. Lindsay.

KEY WORDS: Beaufort Sea; Alaska; socioeconomics; human population;
development; scenarios; impacts; transportation; revenues; employment;
Inupiat; North Slope; Anchorage; Fairbanks; Barrow; Kaktovic; Nuiqsut;
Wainwright; Alaska Region.

ACCESS NUMBER: 29002

**BACKGROUND:** The State of Alaska accounts for more than one-fourth of
the identified oil and gas reserves and more than one-third of the
estimated undiscovered recoverable reserves in the United States. The
importance of the Alaska Outer Continental Shelf (OCS) is considerable,
based on estimates which indicate that 60% of the undiscovered OCS
reserves may lie beneath the nearshore and offshore waters of the Alaska
OCS. Major changes have resulted from petroleum development in the
State; historically, development has created strains on the local
society, economics, and environment. The implications of new projected
development in the Beaufort Sea Region upon Alaskan socioeconomic
processes can only be accurately assessed by an analysis which
incorporates both the unique institutional and technological features as
well as uncertainties surrounding them. The purpose of this study effort
was to summarize the socioeconomic impacts that might occur as a result
of a several levels of OCS petroleum development in the Beaufort Sea.
This study provided a summary of the major substantive findings of six
individual impact studies conducted concurrently for the Beaufort Sea
Region between 1977 and 1978.

**OBJECTIVES:** (1) To summarize the projected growth and development of
Alaska; Anchorage and Fairbanks; the Beaufort Sea Region; and the
communities of Barrow, Kaktovic, Nuiqsut, and Wainwright from 1977
through 2000, based on six individual impact studies completed between
1977-1978 which assumed no OCS development; and (2) To summarize the
significant impacts and substantive conclusions derived from each impact
study, assuming various levels of OCS oil and gas development.

**DESCRIPTION:** Information contained in this summary report has been
taken from six individual impact studies. Analysis of the existing
conditions for the Beaufort Sea Region, Anchorage Region, Fairbanks, and
the State as a whole, together with known future events serve as the
basis for construction of the non-OCS base case. In order to describe
growth and development of each geographic area analyzed, it was assumed
that no new OCS development (other than existing lease sales) occur
between 1977-2000. The categories investigated for the State and each
region included: economic and fiscal issues of each area; population;
urban services; and transportation. Local or community level impacts
focused specifically on the North Slope communities of Barrow, Kaktovic,
Nuiqsut, and Wainwright. Categories investigated include economics,
fiscal structure, population, community services, natural resource base,
and sociocultural systems. Forecasts of OCS development build directly
on the non-OCS base case. The categories were the same for each forecast
of OCS activity in order to determine impacts, either positive or
negative, that may result from each individual scenario.

**SIGNIFICANT CONCLUSIONS:** The Camden-Canning scenario had the second
largest state-wide economic and demographic impact of those studied.
When compared to recent Alaska experience the effects on aggregate
indicators was relatively small, producing the greatest impacts for
freight transport. As in the case of the other OCS scenarios under
study, Borough revenues should be significantly increased. The economics
and demographics impacts associated with development of the Prudhoe-High
scenario were highest of all those studied, but remained relatively
small compared to recent Alaska experience. This scenario produced the
largest overall impact upon urban services within Anchorage, and offered
the most promise in assisting the Borough\'s imminent revenue deficits.
The Cape Halkett scenario had the smallest impact on the economy of the
development scenarios evaluated due to its small size and the absence of
a State share in production. This scenario had the lowest number of
exploratory and development wells which resulted in limited
transportation impacts which were less than those of the other
scenarios. The Cape Halkett scenario was also forecast to produce the
least amount of additional community growth in the Beaufort Sea Region.
However, the potential for negative environmental and subsistence
impacts was highest in the Cape Halkett scenario; it was determined that
this projection had the most volatile potential impact on interethnic
feelings and relationships.

**STUDY RESULTS:** The non-OCS base case assumed no new significant oil,
gas, or other mineral development in Alaska beyond that implied by
current commitments, including Prudhoe Bay and several fields
surrounding Prudhoe, Upper Cook Inlet, Northern Gulf of Alaska OCS,
lower Cook Inlet OCS, and existing coal and mineral developments.
Through utilization of the Man-in-the-Arctic Program (or \"MAP\") Model,
developed by the University of Alaska, Institute of Social and Economic
Research, projections of economic growth in Alaska for the period 1977
to 2000 were expected to be less rapid than in the several previous
years. Impacts upon State transportation were principally of two types:
(1) those resulting from normal or incremental growth; and (2) those
caused by major development. Increases in highway traffic have exceeded
the rate of population growth, particularly within urban areas. Railway
facilities satisfy all foreseeable traffic demands during the study
period. River and marine transportation systems should continue to play
an important role in Alaska. The Federal Aviation Administration has
indicated that the capacities of both Anchorage and Fairbanks
International Airports will be exceeded by the early to mid 1980s, due
to the steady growth forecast. Economic growth does not occur uniformly
throughout the State, but varies by region. Economic interdependence
between regions depends on the strength of four major processes: (1)
government spending; (2) changes in State wage rates; (3) growth in the
regional centers of Anchorage and Fairbanks, which reflect growth in
other regions since they provide many of their goods and services; and
(4) population migration between regions. Employment in Anchorage, the
largest urban center in the State, and its financial, administrative,
and distribution center, more than doubles during the base case period.
Predictions for Fairbanks showed a decline in population over the
period. Employment and population growth forecasts in the North Slope,
or Beaufort Sea Region, showed considerable fluctuations because of the
fact that dominant sources of employment are related to oil and gas
fields at Prudhoe Bay. The three greatest problems which affect regional
and community infrastructures within the North Slope Borough were: (1)
isolation of communities; (2) high costs of capital improvements; and
(3) reduction of property tax. The net result for the Borough was that
it must maintain a very large operating budget to provide even basic
services. Impact of human use on water resources during the base case
corresponded directly to population growth in each village and to
changes in water supply and waste disposal methods. Other natural
resources such as sand and gravel should not be significantly impacted
if no commercial finds of oil and gas are discovered near any of the
communities. Maintenance of the Inupiat sociocultural system is
threatened by disruption of the subsistence complex. The three most
prominent potential threats during the base case included: (1) petroleum
and other developments that negatively affect wildlife resources; (2)
decreased participation and support of subsistence activities; and (3)
subsistence regulations.

Four OCS petroleum development scenarios were chosen from 24 skeletal
scenarios provided by U.S. Geological Survey assessments, and included
Camden-Canning, Prudhoe-High, Prudhoe-Modal, and Cape Halkett. These
areas represent cumulative petroleum development anticipated in the
Beaufort Sea, and included an appraisal of resource discovery
probabilities ranging from 1 to 95%, and indicating that the development
of the central and eastern areas is more likely than western areas. Four
separate types of transportation demands were analyzed to determine the
impacts of each OCS scenario: goods, materials, and supplies to the
Beaufort Sea; transportation of Beaufort Sea personnel; induced
state-wide transportation of persons and goods; and transportation of
oil to markets.

The Camden-Canning scenario contains two major reservoirs within the
lease-sale area, with exploration commencing in 1982, production in
1990, and an estimated life span of 26 to 31 years. The major factor
which moderated the substantial development impacts was the 19‑year
period over which they were projected to occur. This scenario was
expected to have the largest number of exploratory and development wells
(538); consequently producing the greatest impacts for freight
transportation. Impact upon economic and population growth was expected
to double in the case of Anchorage, and increase, but not at a similar
rate, in Fairbanks. The Beaufort Sea Region was expected to receive most
of the direct impact resulting from Camden-Canning OCS development.
Employment and population growth was expected to parallel that of the
non-OCS base case through 1981. Impacts upon community services would be
indirect since it was assumed that oil and gas development would
continue to be based out of industrial enclaves. Borough revenues were
projected to be considerably increased. Direct impacts to North Slope
communities were not likely to be significant.

The Prudhoe-High scenario was expected to commence in 1979, with
production by 1988, and operate for 25 to 33 years. It was assumed to
make use of the Prudhoe Bay infrastructure, therefore not requiring
separate oil facilities, airstrip, harbor, and construction camp.
Economic and demographic impacts from this scenario were highest of all
those studied. Maximum number of oil and gas wells drilled was 48, and
associated transportation requirements were similar to the
Camden-Canning scenario. The largest overall impact on urban services
was projected to be in Anchorage, with relatively minor impacts on
community services in the North Slope Region. This scenario offered the
most promise of assisting the Borough\'s imminent deficits because of
its earlier start-up date. Potential for impacts on wildlife and other
natural resources would require that exploration and development be
considered with extreme care.

The Prudhoe-Modal scenario was estimated to commence in 1980, with
production in 1989 and an expected life span of 28 years. It would
resemble the Prudhoe-High scenario in the placement of facilities. Use
of the infrastructure but not the processing facilities at Prudhoe Bay
was assumed. This scenario was similar in most respects to Prudhoe-High,
and the impact of development supported most of the trends found in the
non-OCS base case. Transportation and urban services impacts were
expected to be minimal, as was projected growth of North Slope
traditional communities. Impacts to the natural physical environment
were assumed to be the same as the Prudhoe-High scenario.

The Cape Halkett scenario was expected to commence in 1984, with
production in 1992 and an estimated life span of 25 years. The field was
located nearly 150 km from the trans-Alaska pipeline, and the resulting
cost of pipeline construction made the economics marginal for a field of
this size. This scenario resulted in the smallest impact upon the
economy of all the scenarios due to the small size of the reservoir and
the absence of a State share in production. This scenario also had the
lowest number of total exploratory and developmental wells, resulting in
limited impacts to transportation which were projected to be less than
those of the other scenarios. Marine and air modes were expected to
provide all transport, due to the total lack of roadways linking up with
the rest of the State. The Cape Halkett scenario was forecast to result
in the least amount of additional community growth in the Beaufort Sea
Region, mainly because of its later start-up date; in addition, this
scenario also results in limited revenues. Subsistence activities in the
Cape Halkett area were considered important to the nearby community of
Nuiqsut. Adverse effects upon wildlife and natural resources, creating
negative environmental and subsistence impacts, was highest in for this
scenario.

**STUDY PRODUCT(S):** James Lindsay & Associates. 1978. Beaufort Sea
Petroleum Development Scenarios: Summary of Socioeconomic Impacts. A
final report for the U.S. Department of the Interior, Bureau of Land
Management Alaska OCS Office, Anchorage, AK. NTIS No. PB-294315. Social
and Economic Studies Program Technical Report No. 23. Contract No.
14-12-0001-29002. xiii + 113 pp.

\*P.I.\'s affiliation may be different than that listed for Project
Manager(s).